Wednesday, July 19, 2017

This Week's Video: A Quick Technical Indicator Update

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, July 18, 2017

Quote of the Day

Edwin LeFevre, in his timeless 1923 classic Reminiscences of a Stock Operator (the reputed story of Jesse Livermore, and perhaps the greatest book on trading of all time), spoke facetiously to why we so consistently question herein the motives of the tipsters and prognosticators the financial media trots out to steal your attention (if not your money):

Sunday, July 16, 2017

Charts of the Day: Small businesses are getting a little impatient with Washington...

While the factors that underpin the continuing bullish setup for stocks can be debated, the one area where I have found last year's election to have been unambiguously positive is the NFIB's monthly small business survey (aka Small Business Optimism Index).

Quote of the Day

The siren song of populism can be very hard to resist (btw, I'm not entirely unsympathetic to the independence the folks in Great Britain were after). When, however, and alas, it wins what it plays for, it can be costly for the populace:

Friday, July 14, 2017

This Week's Message: On the ground, things look good...

Fed Chair Janet Yellen gave her 2-day semiannual report to Congress this week and offered up what you might say was a moderately optimistic view of the economy going forward. Like us, the Fed tracks an array of published economic data to gauge its view of general conditions.

The Fed's overall assessment is what guides its monetary policy moves. Our overall assessment influences (technical data plays prominently into our view as well) the sector and regional weightings within our portfolios' equity exposures, and -- along with our technical market assessment -- guides our approach to the fixed income allocation.

Wednesday, July 12, 2017

Quote of the Day: Stealing the benefits of a steel glut...

Driving by Clovis Community Hospital yesterday evening I noticed a large construction project on the south-end of the complex. The setting sun reflected brilliantly off of the building-to-be's dense steel skeleton. I suddenly found myself pondering the current threat of what I consider to be the most destructive government act of cronyism imaginable -- the tariffing of foreign imports.

Monday, July 10, 2017

Chart of the Day: China Risk

To the dismay of those who've been betting big that China's gotten too far out over its skis, its economy remains unwilling to buckle under the weight of a rapidly expanding credit system.

Friday, July 7, 2017

Charts of the Day: Who Buys U.S. Exports?

As we all know (right?), political narratives (influenced dictated by political incentives) often stray far from reality.

Amazingly, two countries that combined account for less than 4% of the world's economy (ex the US) buy an astounding 1/3rd of U.S. exported goods!

Thursday, July 6, 2017

This Week's Message: Trade Data Says Global Economy Growing -- which has to have (some) short-term traders wary...

Thursday morning we added two charts (U.S. and Australian trade data) to our current trends file. Both speak positively about the current state of the global economy.

While we believe the U.S. trade deficit receives far too much, and ill-conceived, attention, we do look into the data to help gauge our view of the global economy. We agree with Bloomberg's note below that American export growth speaks positively:   click charts to enlarge...

Wednesday, July 5, 2017

This Week's Video: The U.S./Foreign Equity Setup Vs A Year Ago

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Sunday, July 2, 2017

Quote of the Day: Know the risk before you go chasing the return!

Highly respected money manager Colm O'shea, in his interview for the Market Wizards series, explains why he bought beaten down Berkshire Hathaway amid the late '90s dotcom mania:   (emphasis mine)

Friday, June 30, 2017

Quote of the Day: Know the difference between the wind and the tide!

In an interview for Jack Schwager's Market Wizards series, uber-successful money manager Colm O'shea offers the perfect analogy for why -- as we continue to illustrate herein -- we focus on prevailing long-term trends and the fundamental backdrop:

Thursday, June 29, 2017

This Week's Message: How's the present look compared to what we presented in our 2016 year-end letter?

Well, we're halfway through 2017, and so far so good. In this week's message we're going to take a look back at our 2016 year-end commentary and compare the signals we illustrated then against the progress 6 months hence.

Wednesday, June 28, 2017

Quote of the Day: The Key to U.S. Business, and Investor, Success in the Years to Come!

Sticking with this morning's theme (globalization), here are a few excerpts from yesterday's Bloomberg Economics Asia brief:     emphasis mine...
China's transformation from rags to riches isn't over quite yet.
... the China miracle is set to continue with its per capita GDP seen rising to 64th out of 166 countries by 2022, up from being the 133rd-poorest in 1992 — on par with Haiti and with over half its population living on less than $2 a day. The current $16,676 per capita GDP level is already higher than Brazil's when adjusted for purchasing power, according to a Bloomberg analysis of International Monetary Fund data.

This Week's Video: Investing Globally

One point we've made consistently herein over the past year+ is our view that the rest of the world, particularly Europe, lags the U.S. in terms of the economic cycle. We've also noted via video(s) that global equities (again, particularly Europe's) have underperformed the U.S. for an unusually long stretch. Hence, our persistent optimism over European equities.

Tuesday, June 27, 2017

Friday, June 23, 2017

Is The Eurozone's 'Recent' Underperformance Something to Sweat?

While our core Eurozone ETF (FEZ) has produced a substantially higher year-to-date return versus the U.S. market (5.9% better as of this morning), the past few weeks have been an altogether different story (FEZ was better by a whopping 11.4% on 5/19).

Click to enlarge...

Thursday, June 22, 2017

Stat of the Day: Abnormal Volatility

While the headlines have indeed been volatile thus far in 2017, the U.S. stock market has been anything but. The S&P 500's largest drawdown year-to-date has been a measly 2.8%! While applying that percentage to the Dow would be -600+ points, in the historic scheme of things, make no mistake, that's measly!

Wednesday, June 21, 2017

This Week's Message: Eeyore Would Be a Star!

In two recent blog posts I touched on the seemingly popular notion that a market at all-time highs is doomed to collapse under the weight of its all-time-highness, and on the dire prognostications of a gentleman who -- despite his dismal track record -- receives a visionary's welcome by the mainstream financial media.

As regular readers/viewers know, we prefer to let the somewhat slow-moving, generally boring and often redundant data do the talking. No wonder CNBC never calls us for an interview!

Tuesday, June 20, 2017

Charts of the Day: Embracing (as an investor) Globalization!

In my June 3rd blog post I suggested that Western investors would be ill-advised to ignore China's Belt and Road Initiative.

Monday, June 19, 2017

Quotes of the Day: Stockman Strikes Again -- Or, Perhaps -- Stockman Strikes Out Again (time will tell)

David Stockman -- a man who has leveraged his tenure with the Reagan administration to the absolute hilt -- has a warning for all investors:
"This is one of the most dangerous market environments we've ever been in. It's the calm before a gigantic, horrendous storm that I don't think is too far down the road."

Friday, June 16, 2017

Chart of the Day: Financial Sector Breadth

The financial sector -- our presently highest target weighting -- seems to be finding its legs.

Thursday, June 15, 2017

This Week's Message: The Fed's Green Light -- And Its Implications

In last week's message I shared an email conversation where I suggested that despite present yield spreads denoting a low financial risk environment (essentially paving the road to higher interest rates), folks were nonetheless willing to buy bonds. Here's that part:

Wednesday, June 14, 2017

How to Sleep Well Amid Uncertainty

As the market traverses present-day domestic politics, geopolitics, central bankers, corporate earnings and economics, it's incumbent upon you (the investor) and us (the investment counselors) to keep our thinking above the fray.

Tuesday, June 13, 2017

That the-market's-gotta-come-down-because-it's-at-an-all-time-high attitude...

Last year, when the S&P 500 moved into all-time high territory with momentum, a trader friend or two asked for my view on what to short. It wasn't "if" to short, it was literally "what" to short. The sentiment there was that the market surely couldn't sustain that level and, therefore, virtually had to come crashing down. Since the data we track suggested otherwise, I had nothing to offer in response.

Monday, June 12, 2017

This Week's Video: Putting Recent Volatility Into Context

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Saturday, June 10, 2017

What the &$#! Happened Yesterday?

Really rough day for tech stocks yesterday:    click charts to enlarge...

Quote of the Day

The great challenge as a market participant is of essentially the same mental character that has us interpreting the world around us in a manner that fits what we desire, and/or supports our personal biases.

Friday, June 9, 2017

This Week's Message: The Age of the Machine Has NOT Risen -- OR -- The Effects of Little League Games and Piano Recitals

I need to preface the following with the acknowledgement that, as with virtually everything else in life, future market prices are undeniably uncertain. Stocks can fall out of bed at anytime for any reason -- whether they've enjoyed an uptrend lasting 8 years, 8 months, 8 weeks, 8 days or 8 minutes. They can fall from what some construe as great heights, they can fall from any number above zero... 5,000 was considered a great height when the Dow reached that milestone back in November 1995:

Wednesday, June 7, 2017

This Week's Video: Sectors Sending Mixed Signals

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Saturday, June 3, 2017

While Western Leadership May (or may not) Resist Belt and Road, Western Investors Absolutely Should Not!

From Bloomberg's May 12, 2017 Economic Brief:
China is one of the few countries in the world today with money to spend, and Xi Jinping is ready to write some checks.
Those checks would be written to fund China's "Belt and Road Initiative".

Friday, June 2, 2017

Quote of the Day: Really? Tax reform in the face of such perverse incentives??

All in favor of tax simplification say "aye". AYE!!! All opposed say "nay". ..................

I know that all of you, umm, well....., we do have a client/subscriber or three in the tax-planning business (each of whom I respect and admire [sincerely!])..... so let's say most of you sympathize with my AYE!!

Thursday, June 1, 2017

This Week's Message: Are Stocks Dangerously Expensive? -- AND -- Highlights of our in-house study on the financial sector

Here's a look at our tracking of current-year price to earnings ratios for the S&P 500 (spx), major U.S. sectors, and much of the rest of the world -- along with our target allocation percentages:   click charts to enlarge

Sunday, May 28, 2017

Quote of the Day

As you've gathered, our chief aim herein is to help our readers/clients keep the day-to-day world of markets in proper perspective, and to keep their eyes on the long-term ball.

Saturday, May 27, 2017

Quote of the Day

I can virtually assure you, any ad for a sure fire investing/trading system isn't worth the cost of whatever medium utilized to bring it to you (in the olden days we said "the paper it's printed on").

Thursday, May 25, 2017

This Week's Message: What Motivates the Seers

RBC's guy feels very good about the market these days:              emphasis mine...
(Bloomberg) -- Risk assets should continue higher amid an economy that’s in good shape, barring “some exogenous event,” and “bearish arguments appear to be increasingly contrived,” RBC strategists led by Jonathan Golub write in a note. * Drivers of market upside include: synchronized global pickup, easier lending conditions, improving consumer situation, renormalization of rates and corporate profits.....
And, clearly, he's in no mood for dissenting opinions.

Sunday, May 21, 2017

Four Types of Investments -- AND -- This Week's Video

I play a lot of basketball, and, as my son and the dudes I play with will attest, I like to attempt three-pointers. In that success enhances the enjoyment of virtually any endeavor, I knew from the start (my late start [not surpassing the 5'5" mark till after highschool and, thus, being a wrestler during my formative years]) that if I was to score enough to justify my itchy trigger finger, I had to learn good shooting fundamentals. While I'm fully aware that 100% from the field is infinitely beyond my reach, I know that if I can stay in rhythm, if my form is sound and if I practice good shot selection, my odds of maintaining a respectable enough percentage to keep me from being the lowly last pick come time to select the teams increase dramatically.

America: A Talent Magnet!

Edward O. Thorp, one of history's great investors, has lived a fascinating life! While nearing the end of his amazing, and instructive, autobiography A Man For All Markets, I found myself pondering the heightened nationalist sentiment that (recent French election notwithstanding) seems to be gaining traction throughout the developed world.

Friday, May 19, 2017

This Week's Message: The Cure Can Hurt a Little - OR - The Unavoidable Fact - OR - They Come and They Go

I sense a little hesitation among some clients these days -- that is, a hesitant feeling about global markets. This, frankly, I welcome, especially during a bull market. It speaks to our clients' understanding that stock prices forever fluctuate. It says that they're not the typical bleary-eyed individual investors who tend to embrace the prevailing emotion of the crowd.

Wednesday, May 17, 2017

Bonus Video: This Morning's Selloff and Past Presidential "Panics"

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Quote of the Day: The term "Watergate" got you jumpy?

From Bespoke Investment Group's morning commentary (also, I shot a 5 minute video on past US political turmoil and the market that I'll be sending shortly [the YouTube upload is very slow this morning]):

Tuesday, May 16, 2017

This Week's Video: Potential Fuel Going Forward

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Chris Ciovacco's recent excellent analysis inspired this week's message...

One minute of pure inspiration for our kids and grandkids!

Thursday, May 11, 2017

This Week's Message: Why Didn't Brexit, or Trump's Victory, Derail the Market?

The great conundrums of the past year have been Brexit and Trump. Pundits, en masse, had global markets tanking should either, let alone both, succeed. Well, as you know, both succeeded and, go figure, a number of the world's equity markets marched to all time highs in the aftermaths.

So, is it that Brexit and the President's proposals/policies/positions are -- contrary to early "expert" opinion -- inherently good for markets? Or is it something else altogether?

Wednesday, May 10, 2017

This Week's Video: Trend Line Perspective

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, May 9, 2017

Chart of the Day: Housing Stats

Have you been thinking that since, in some areas, home prices have moved back into record territory, that there exists yet another housing bubble just waiting to pop? Well, trust me, you're not alone. Although, while I completely understand, I wouldn't be one who presently shares your concern.

Monday, May 8, 2017

Chart of the Day: Not rethinking our bullish Euro Zone view just yet...

Just a quick note regarding market action immediately following the French election -- which yielded the result the market was hoping for.

So, if the market was hoping for a Macron victory, which it got in landslide fashion, why would Euro Zone stocks be trading down 1.6% as I type? And why would the Euro trade notably lower as well (recall that I hinted in yesterday's blog post that the initial spike higher could've simply been a knee-jerk reaction)? I mean, yesterday's financial news offered up pieces that, for example, talked of the Dow stocks to own in a rising Euro environment.

Stat of the Day: Industrials Look Compelling

The industrials sector ties for the 2nd largest (along with tech and materials) target weighting within our portfolios. Obviously, we believe the setup (technically and fundamentally) to be presently quite favorable.

During each earnings season Bespoke Investment Group produces a periodically updated list of the companies they call "triple plays". These are the ones that beat analysts' estimates on earnings, revenue and forward outlook. Last week they refined the list to 14 names that they see as showing unusual technical strength as well.

Here's a look at the sectors that house each name:

While tech actually takes the top spot on the unrefined triple play list, I found it interesting (although not surprising) that industrials dominate the best-trending list.

Sunday, May 7, 2017

Charts of the Day: French Election Exit Polling and the Euro

Two weeks ago, herein, we focused a bit on round 1 of France's presidential election. In our view (totally based on the polls and the odds makers), the election was essentially decided in the first round. Any divergence from the trend in polling and/or in the odds would've inspired additional commentary from me.

Friday, May 5, 2017

Stats of the Day: What's up (or down as the case may be) with the dollar?

One of 2017's conundrums has been the non-rally in the U.S. dollar.

Here's a look at the net long position among futures speculators in the U.S. Dollar Index over the six months leading into this year:

Traders were the definition of bullish on the dollar to start the year.

Thursday, May 4, 2017

Economic Update Part 3 and Your Weekly Message: Levels of Stress in the System

We'll make part 3 of this week's look at the economy our weekly message as well. As you noticed in the previous two updates (here and here), U.S. consumer and business activity is not sending signals that we should be fretting the next great recession just yet.  

As I've stated here before, there's no better place to look for stress in the system than in the credit markets -- so we'll explore some key indicators to paint the present picture. 

Wednesday, May 3, 2017

Quote of the Day

When you find yourself stressing over market volatility, think the following:
By their actions, negative feedback traders provide a check on positive feedback and, in effect, regulate the trend. Without constraints introduced by contrarians, the market would be at risk of runaway, and possibly terminal, positive feedback.
Gary E. Anderson. The Janus Factor: Trend Follower's Guide to Market Dialectics

Tuesday, May 2, 2017

Economic Update Part 2: The Business Outlook

In part 2 of this week's look at the economy, we'll highlight a few key indicators that point to the general state of business in the U.S.

The following charts (click to enlarge) go back as far as the data allow. Note the trends leading into past recessions (red-shaded bars) and compare to the present. I highlight each title green, yellow or red to reflect my view of the prevailing trend.

Monday, May 1, 2017

Quote/Message of the Day: We'll defer to the market...

Just finished James Owen Weatherall's The Physics of Wall Street. I found it fascinating, although I suspect others more tightly wed to Wall Street dogma have a number of understandable bones to pick with the brilliant young physicist, mathematician and philosopher.

I will say that I'm glad I didn't read the book back when it was published in January 2013. For, being so impressed with the author's intellect, I might have been swayed by his gloomy assessment of the global economy at the time. Per his epilogue:

Economic Update Part 1: The Consumer

This week we're focusing on the economy. In that we track too many data points to bury you with one blog post, we'll break it up. I'll summarize at the end of the week.

Today we'll highlight a few of the key indicators that speak to the health of the consumer (consumption btw is 2/3rds of the U.S. economy):

The following charts (click to enlarge) go back as far as the data allow. Note the trends leading into past recessions (red-shaded bars) and compare to the present. I highlight each title green, yellow or red to reflect my view of the prevailing trend.

Sunday, April 30, 2017

Quote of the Day: A Silver Lining in the GDP Report

As I stated yesterday, we'll be focusing more on the economy this week here on the blog. Here's a little appetizer via Bespoke Investment Group:
• The rebound in business investment (strongest contribution to growth since Q3 2014) is extremely encouraging, and suggests that the soft patch in US business investment driven by declining Energy sector capex is ending. Business non-energy structures investment was a bit weak but equipment investment was very strong, as were housing-related series.
Capital investment has been something that, on balance, has been sorely missing -- even before the huge decline in oil prices -- during the present expansion. The past several months have seen a pickup, as confirmed by the GDP report. While much of the recent surge in structures owes to the energy patch, the strong equipment numbers (not to mention housing) speak positively about economic prospects going forward...

Saturday, April 29, 2017

A Letter from China Inc.

In the following, I stray into sensitive territory I know for some of my readers. While I expect a little keep-it-on-the-markets-Marty feedback from an unsympathetic soul or two, I must -- in my own defense -- express my own humble view (one shared by economists not captured by political interests) that a true free trade policy (unilateral even) would be the most market (not to mention consumer at all rungs [especially the lower] of the economic ladder) friendly endeavor Washington could pursue.

If you read this with an open mind you may find yourself embarrassed by its simplicity. But, please, don't be too hard on yourself. Most of us simply don't have the time to scratch beneath the surface of economics and we, therefore, take verbatim the stuff couched in ways that make sense at the first, and, alas, only, blush. Truly, the couchers are adept at identifying and exploiting our grandest misconceptions.

Quotes of the Day: Europe's bullish narrative intact...

My quote of the day last Thursday spoke to an improving Euro Zone economy. Looks like earnings support the narrative, as do investment flows:
Europe Starts Earnings Season With a Bang, Leaving U.S. Behind(Bloomberg) -- No false dawn this time. After years of disappointments, European companies are finally living up to market expectations, enjoying their best season in almost seven years as earnings per share grow at more than twice the pace of their U.S. counterparts. About a third into Europe’s first-quarter earnings season, companies listed on the Stoxx Europe 600 Index have so far reported a 24 percent jump in EPS year over year ... 
Investors Are Pouring Money Into European Stocks Like It’s 2015{Bloomberg) -- The evaporation of political risk in Europe is seeing money managers rush into the region’s stocks at a clip not seen since the year the equities last surged to an all-time high. Buoyed by relief over the outcome of the French first-round vote, investors poured $2.4 billion into European equity funds in the week through April 26, the most since December 2015 ...

Friday, April 28, 2017

This Week's Message: To be successful at investing, imitate The Great One. And I don't mean Warren Buffett

Yesterday evening I found myself in deep discussion with a gentleman who, among other things, builds basketball courts. Other than his stated belief that his company is "the Rolls Royce" -- as opposed to "the Volkswagen" -- of court construction, I found him to be generally humble. He told me about a man he once worked for, when he was learning the demolition business (he later founded his own such business), who acted as if he was the inventor of everything having to do with structure destruction. While sharing his story, he chuckled, and said "I wonder how people knocked stuff down a hundred years ago without this genius telling them how to do it". His boss's bravado aside, he admitted that he indeed learned a great deal by watching the man work.

Thursday, April 27, 2017

Bonus Quote of the Day: Yes -- for now -- The Euro Zone is Looking Up!

Despite the Euro Zone's usual geopolitical risk (I say "usual" because the place has been a hotbed of political risk for the past several years), I've been talking up its prospects -- both in terms of its economy and its equity markets -- to clients for months.

Here's Bespoke Investment Group on the EZ's most recent economic data:
Economic data today in Europe has been broadly good as prelim April Spanish CPI beat estimates, Germany consumer confidence beat, CBI reported retail volumes surged (though the more predictive 3m average remains subdued, chart), and Eurozone survey data surged. Consumer confidence matched the cycle high of -3.6, industrial confidence made a new local high and signals industrial production growth of over 6% YoY, and economic confidence suggests GDP growth of 2.5% YoY which would be near 2011 highs. The big disappointment was Spanish unemployment, where the rate missed estimates.
And here's a look at how well Euro Zone equities (using our preferred Euro Zone ETF) have performed relative to the U.S. so far this year:     click to enlarge...

Wednesday, April 26, 2017

This Week's Video: The Not-So-Great Bond/Stock Debate

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, April 25, 2017

Quote of the Day: Worthless White Noise

I swear, not a day goes by where I don't catch a headline, or a passing comment from someone who truly ought to know better, that has me thinking precisely what Michael Covel points out in today's quote.

Yesterday, for example, I walked into my office to find my television on. I was surprised, for two reasons: 1. I didn't know it still works (that's how long it's been since I've had it on). And 2. It was turned on.

At the time, Nick was setting up my computer (we're remodeling and last weekend the new carpet happened), he swore it wasn't him. My best guess is that the folks who reassembled the hutch upon which the TV sits tested to make sure they plugged it back in properly and forgot to turn it off. What made it particularly annoying was the sight and sound of CNBC's Rick Santelli (I recall him from years past while I was learning that there was absolutely nothing to learn by watching financial television) working a dry erase board and describing some dynamic about the dollar that deserved hollering at the camera in the most condescending fashion. The problem I have (my palpable annoyance, that is) is my recollection of past rant-filled predictions -- the majority of which of course turned out to be utter intellectualized rubbish.

Not to single out Mr. Santelli (he just happened to be the one on the tube when I walked in), for he's just one of the many whom the media trots out who apparently can't (we know this, trust me, otherwise they'd be trading, never talking at cameras, during the trading session), therefore they teach, or, as the case may be, they preach.

From Covel's The Little Book of Trading (an insightful read, by the way):
White Noise
Watching the news, reading the financial news and listening to the President is not how you make money in the markets. You don't make money by explaining what just happened or by guessing what's going to happen in the future. You don't know what's going to happen in the future, the things that occur in the future that make you money are all things you couldn't figure out were going to happen.
It always makes for an interesting story to say "well this is going to happen because this or that'; that is information everybody already knows, it's already baked into the market price. 

Sunday, April 23, 2017

Quotes of the Day: The predicament of investing...

Early in my career I was fed large helpings of "Modern Portfolio Theory (MPT)". We had this wonderful optimizing software that would place a portfolio on the "Efficient Frontier" and score it based on a variety of risk and return measures. The "Efficient Market Hypothesis (EPH)" is the cornerstone of MPT. It goes like this:
The efficient market hypothesis (EMH) is an investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

Friday, April 21, 2017

Don't (at this point) Fear Frexit...

I want to get out in front of the French election for you, just in case. Why? Because probabilities suggest that should Marine Le Pen and Jean-Luc Melenchon (the nutcase I referred to in this week's message) emerge the victors in Sunday's first-round voting, global markets will take notice -- in un-pretty fashion.

This Week's Message: All You Need To (or Can) Know...

France's first round of voting -- Sunday -- appears to loom over the market this morning. In a nutshell, the legit contenders consist of one candidate who is, frankly, nuts, another who appears to be a Kremlin crony (leave the Euro, anti-NATO, pro-Moscow, campaign funded by loan from Russian bank, and -- unlike her competition -- has been left alone by alleged Russian hacking attempts and "fake news" stories galore) and two relative mainstreamers. Either of the former two taking the first round would likely have European and U.S. markets flashing red at the open come Monday morning. Either of the latter two could have markets in rally mode. Odds makers see Macron (a mainstreamer) the ultimate (involves two rounds) winner, but recent history, to put it mildly, has not been kind to the odds makers.

That's all I have to offer on France for now. Possibly more next week depending on Sunday's outcome.

A personal story:

Growing up, duck hunting and trout fishing were my things -- the latter still is. As it happens, football season and duck season coincide each year. So, back in the mid-70s, every Friday night after playing for the legendary Kerman High Lions -- rather than doing whatever high school football players did on Friday nights -- I'd hop into my oldest brother's heavily-speakered VW Beatle (Dad called it a stereo on wheels) and we'd head out to the Mendota Wildlife Preserve (rockin the whole way to Aerosmith, Neil Young and Ronny Montrose on the 8-track) to get in line with all the other crazies. We'd sleep in the car till 4 a.m. then, after flashing our hunting licenses and paying our ten bucks each at the booth, we'd race to whatever flooded field had been working for us the prior weeks, or to one we had noticed the week before was attracting more birds.

Tuesday, April 18, 2017

This Week's Video: Pound shorts got pounded today...

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Monday, April 17, 2017

Quote(s) of the Day: Just the Facts Ma'am...

During client review meetings -- along with performance results, sector weightings, etc. -- I generally offer up a bit of the data that influence my view of the current market setup. In virtually every instance I follow my assessment with words to the effect: "my view is based entirely on the data I presently have at my disposal. Ask me tomorrow and, as the data may have changed, I may have changed my view."

In other words, I never tell it like you might think I'd like it to be. In fact, I am agnostic when it comes to market direction. Truth be told, I really don't care if the trend is up or down, I only care about recognizing it.

William Dunnigan in New Blueprints for Stocks and Grains had it right back in 1956:
"Let us believe that it is possible to profit through economic changes by following today's trend, as it is revealed statistically day-by-day, week-by-week, or month-by-month. In doing this we should entertain no preconceived notions as to whether business is going to boom or bust, or that the Dow-Jones Industrial Average is going to 500 or 50. We will merely chart our course and steer our ship in the direction of the prevailing wind. When the economic weather changes, we will change our course with it and will not try to forecast the future time or place at which the winds will change."
As did Joe Friday:
"Just the facts ma'am."

Sunday, April 16, 2017

Quote of the day: "Knowing" is Utter -- and Dangerous -- Fantasy!

As I'm sure some of you've noticed, my 'quotes of the day' often run in spurts from the same source. I.e., you're getting slices of whatever I'm currently reading, or of some source that I've gone back to; skimming through my old highlights, hoping to find a worthy 'quote of the day'.

Saturday, April 15, 2017

Quote(s) of the day: Beware the Knowers!

Long-time readers and clients know that we painstakingly, and on-goingly, weigh a wide array of data as we assess the present global long-term setups that guide our asset allocation decisions. How can we not, given our responsibility to our clients!

Friday, April 14, 2017

Should we sweat slumping optimism?

The market action lately has been, as always, interesting. I've stated herein numerous times how a market in bull-mode can shrug off a lot of issues that might otherwise send it reeling.

Considering all that's occurred (I'm assuming you don't need a list) of late, I'd say that the stock market has held up relatively well. So, yeah, nothing in terms of recent market action would have us questioning the prevailing trend.

Thursday, April 13, 2017

This Week's Message: What's Gold Trying To Tell Us?

So much for me dissing the gold bulls! Of course while I've been pointing out less than ideal technicals for the metal, I always disclaim that I make no price prediction -- just talking probabilities. Markets themselves of course don't give a rip about charts. The reason you and I do is because they give us a glimpse into trends in human action/emotion (i.e., what moves markets).

Here's a headline from this morning:
"As a flight to safety into U.S. Treasurys comes in and yields continue to compress, gold becomes a lot more attractive," Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management said.
Schlossberg's a guy worth listening to. At least I think so, but that's only because his name was referenced a bunch of times in a book I once read on currencies. 

Tuesday, April 11, 2017

This Week's Video: Comfortably above the danger zones...

In this week's video I illustrate that, from a technical perspective, the market rests comfortably above key areas that, were they breached, might have us re-thinking our allocation strategies going forward.

Now, as I type the Dow's off 120+, while bonds, gold and the VIX (tracks implied volatility in options contracts) are rallying hard. Of course the headlines suggest that this is due to heightened geopolitical risk from the Korean Peninsula to the desks of French-election odds makers -- and I'm certainly not suggesting otherwise. However, if it weren't missiles and Marine Le Pen, I promise you there'd be other headline explanation(s) for the triple-digit Dow declines that occur time and again during the course of every year (be it a bullish or bearish setup).

My point? Healthy markets rest (consolidate) from time to time -- the operative word being "healthy" -- regardless of the presumed catalyst for the pause. And, for the moment, the data tell us that that's the proper characterization...

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Sunday, April 9, 2017

Missiles, the Jobs Miss, and Gold's Signal

Last week I challenged (by parsing some data) one economist's assertion that stocks were doomed and bonds and gold would be the best places in which to hunker down. Looks like Ms. Pomboy has company -- at least with regard to gold:
BARRON’S ROUNDUP: Gold to Rally (Bloomberg) -- Gold has rallied almost 10% this year and it’s likely to keep climbing as market  volatility picks up and real interest rates remain subdued, Barron’s reports... 
My interest in gold at the moment is not in whether it'd be a viable long position in client portfolios (being that it technically remains in a down trend), but in its inherent qualities as an economic barometer.

Friday, April 7, 2017

This Week's Message: Ironically Ironic

Here's an article I wrote back on August 27, 2013. Ironically, the stuff the market was weighing then is essentially the same stuff it's weighing today. What's ironically ironic is that my 2013 article pointed out that the issues then happened to be the issues of 2011 as well.

The red type is me simply updating where needed for 2017. The numbers/returns in red reflect the move from 2013 to current. Feel free to do the math from 2011 to current if you like.

As for the excerpt from our December 2012 letter, I wouldn't change a word (please read it in its entirety)!

Have a great weekend!

P.s. Last week's events deserve a more technical assessment, which I'll follow up with shortly...

Wednesday, April 5, 2017

This Week's Video: Is the bond market's recent outperformance a harbinger of bad things to come?

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, April 4, 2017

Quote of the Day: U.S. energy producers need you to keep buying stuff from China...

As you're deafened by the rhetoric, understand this basic reality: if Chinese producers desire to make stuff to sell American consumers at prices much lower than the same stuff made in America would demand, Chinese producers really want U.S. dollars. Which means Americans produce stuff Chinese folks want to consume, and/or assets they want to invest in.

So, as you eyeball the made in China label on your next physical purchase, understand that there's no need to suppress those patriotic impulses. For, in buying that China-made item you'll be supporting the U.S. energy industry. Not to mention all of the other U.S. merchants who'll capture a slice of what you saved in the process.
 China Surpasses Canada as Biggest U.S. Crude Oil Customer: China's imports of crude oil from the U.S. quadrupled in February, vaulting the nation past Canada to the top of the list of American oil customers. Bloomberg....

Sunday, April 2, 2017

A Blah Energy Picture and Its Silver Lining

Energy stocks (10% of our typical equity portfolio) have been a tough place to be -- in an otherwise favorable market -- so far this year. The setup, from a purely cyclical standpoint, makes a lot of sense to me. The "tough place to be" aspect clearly speaks to the fundamental supply setup. However, the setup from a fundamental demand standpoint is bullish and speaks to the optimism screaming from much of the recent economic data.

Saturday, April 1, 2017

Quote of the Day

As you've noticed, I take every opportunity to express the fact that I shun much of the financial news and virtually all mainstream investment opinion pieces.

My view mirrors that of Jack Schwager, the author of the excellent Market Wizards series:
If you listen to anybody's opinion, no matter how good they are or how smart they are, I guarantee you it's going to blow up in your face. You just cannot get ahead by listening to other people's opinion, you have to generate your own ideas.
Of course the above is advice for those who manage portfolios: I.e., the one exception -- for you subscribers who happen to be our clients -- would be the opinion of your adviser!👴

Friday, March 31, 2017

This Week's Message: Gotta let the data speak for itself...

So, I virtually never read articles anymore with sensational titles (actually, I seldom read any 'articles' anymore). However, I can't help but read a headline when it somehow sneaks onto my screen.

This title caught my attention this morning:

Wednesday, March 29, 2017

This Week's Video: The Weight of the Evidence

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, March 28, 2017

Quote(s) of the day: Wisdom of a great speculator....

As I preach here incessantly, to be successful at investing one must develop a sense for the macro, and diligently dull the senses that might otherwise be piqued by the sensationalizing media.

Dixon G. Watts, the 19th Century speculator (one of history's best and most respected), was a man of great wisdom:
It is better to act on general than special information (it is not so misleading), viz., the state of the country, the condition of the crops, manufacturers, etc. Statistics are valuable, but they must be kept subordinate to a comprehensive view of the whole situation.
A man must think for himself, must follow his own convictions. George MacDonald says: “A man cannot have another man’s ideas any more than he can another man’s soul or another man’s body.” Self-trust is the foundation of successful effort.
That equipoise, that nice adjustment of the faculties one to the other, which is called good judgment, is an essential to the speculator.

Monday, March 27, 2017

Move along...

Dow's down 165 as I type. All the headlines blame Congress's failure to replace the Affordable Care Act. The market dipping for that particular reason is curious, given this S&P 500 chart that begins the day the ACA was enacted:    click any chart to enlarge...

Friday, March 24, 2017

This Week's Message: Good traders and good investors have more in common than you think...

In Tuesday's video we took a look at that day's pummeling of the sectors we favor:     click any chart to enlarge

Ugh! All things cyclical took a bath, while the defensive stocks (the stocks you buy when nobody's buying cars and computers) fared just fine.

So, clearly, the market was signaling that all's not as it may appear. Right? Well, yeah, you'd have to conclude that if the stocks of companies that benefit from a growing economy, higher interest rates, a little inflation, etc., are getting creamed, we maybe have issues. Now, of course one day's action does not a trend make. However, when we're talking a 3% hit to the sector, financials, that stands to perhaps benefit the most from higher rates, etc., we simply can't ignore it. Or can we?

Tuesday, March 21, 2017

This Week's Video Commentary: How meaningful -- for you and me -- was today's selloff?

Once playing, click the icon in the lower right corner for full screen. Focus occurs after a few seconds:

Quote(s) of the Day: A thing in motion...

As is forever the case, the financial media isn't wanting these days for characters who would have us believe that they can foretell the stock market's future. Which, of course -- as markets are people -- requires that they possess some magical insight into the coming collective decisions of the world's consumers, investors, traders, politicians, etc.. Ironically, the proof that they unequivocally lack such skill is the simple fact that they claim to have such skill. That is, such skill, kept to oneself, would make one far and away the richest self who's ever lived. And, yes, while ego by itself is no doubt at play, make no mistake, these would-be seers desire to be rich.

Saturday, March 18, 2017

History likes what we've seen so far...

The following from Bespoke Investment Group speaks to the setup we've been discussing here on the blog:

Knowing yourself can be tough...

Of all of the painstaking research and analysis we do here at PWA, there's an area of interest that holds huge sway over our approach to individual client portfolio management. An "area" that we believe has major implications in terms of the prospects for favorable long-term results on a client-specific basis. Call it risk tolerance, or perhaps behavioral finance, if you like; I think of it in terms of client predilections, preconceptions and degrees of impressionability.

Friday, March 17, 2017

Quote of the Day -- AND -- The Budget Cut/Border Tax Contradiction...

Here's Don Boudreaux responding to a reader who can't see through the understandably-presumed negative effects of a government budget cut on certain groups to the positive effects on others:
When budgets are cut, it’s easy to see the likes of government employees who lose jobs, farmers who get smaller subsidy checks, arts exhibitions that must now survive exclusively on private contributions, and poor people whose welfare payments fall.  But the analysis and conversation nearly always stop there.  If cutting funding for some government-funded activity is found to cause some hardship (and which such activity isn’t so found?), cutting government funding of that activity is typically deemed cruel and wrong.  But what is too-seldom asked is: As compared to what?  What will those who now keep more of their incomes spend this money on?  In what ways will the money now left in the private sector be invested?  What new products, businesses, and economic opportunities might be created now that the state no longer seizes these resources from those who create or earn them?  And how will system-wide incentives change when government reduces taxes and spending?
I know for certain that no small number of my readers sympathize, passionately, with Don. I also strongly suspect that no small number of that no small number will fail to apply the very same logic to a proposal that would levy an across-the-board tax on foreign imports.

If you believe that society is harmed when government taxes one group to subsidize another, how in the world can you believe that society benefits when government forces higher goods prices (via a border tax) on all groups to subsidize a few ginormous politically-powerful corporations?

This Week's Message: The Fed Funds Rate Reaction

On Wednesday, on cue, the Fed raised its benchmark interest rate a quarter-point. However, the members effectively signaled in their commentary -- and Yellen in her press conference -- that while things are improving, they're doing so at a pace that does not warrant what would be deemed aggressive monetary tightening.

Perfect! That allows bonds to rally, gold to rally, developed foreign markets to rally, emerging markets to rally, staples to rally, cyclicals to rally, utilities to rally and REITs to rally. Man Oh Man!

Wednesday, March 15, 2017

This Week's Video Commentary

Once playing, click the icon in the lower right corner for full screen. Focus occurs after a few seconds:

Tuesday, March 14, 2017

The Market Does What It Wants...

As I type, it's virtually 100% certain that the Fed is going to bump up its benchmark interest rate tomorrow. This morning the NFIB Small Business Optimism Index for February was released. Here's from Bloomberg:
...the index remaining above 105 for three consecutive months indicates the continuation of a very high level of optimism for small business owners.
Also this morning we saw the release of the February Producer Price Index. Bloomberg again:
Year-on-year, overall producer prices are up 2.2 percent for the hottest rate in nearly 5 years.
Today's releases jibe perfectly with the balance of indicators that suggest the economic outlook is bright, and with the to-be-expected attendant (albeit moderate ["the hottest" in a remarkably low-inflation five years]) inflation pressure, the Fed has a very green light to push the needle on interest rates.

So then, with upbeat economic prospects and naturally higher interest rates, you should bet the farm today that the interest rate-sensitive sectors are selling off and the cyclicals are soaring. Right? Well, nope...

At this moment, bonds are up half a percent (in price, meaning yields are lower), utilities are break even and gold's up 2 bucks.

As for the stuff that's supposed to rise with a good economy and higher interest rates, financials, industrials, energy, materials and technology are down .80%, .93%, 1.44% and .50% respectively. Go figure!

Jesse Livermore, whose story is arguably one of Wall Street-history's most fascinating, and instructive -- he literally made millions in the early 1900s when he followed his own rules, and blew up time and time again when he didn't -- spoke to the wisdom that ultimately told of his own undoing:
The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.
While we can't know that this go-round the stuff that makes sense -- given the perceived conditions we find ourselves in -- will ultimately be the stuff of reality, one thing's for sure, in the near-term the market will do whatever it wants, for whatever its reasons.

My best guess is -- given the present setup -- that a little (or a lot) selling into the news may prove healthy in the weeks/months following it.

Sunday, March 12, 2017

Quotes of the Day: Border Tax Winners and Losers

Like virtually any other government proposal, Congress's "Border Adjustment Tax", in terms of its ultimate impact on U.S. individuals and institutions, is, at best, difficult for discerning folks to frame. I have to qualify with "discerning" because of course there are those who immediately presume that taxing foreign imports is good because "they do it us", "it'll inspire us to buy American", "it'll create jobs" and so on. Of course if all that were true, it would be reality, as opposed to what it's mostly been for eons -- campaign-stump rhetoric. In reality, there's much more negative potential and, therefore, political risk than meets the eye. 

Without delving into currency fluctuations, retaliation from foreign trading partners, crony capitalism, etc., one way to handicap who the winners and losers of the taxing of imports by 20% would be is to simply look at the players who are for and against it. 

Keep in mind, the U.S. -- with two-thirds of its GDP owing to consumer spending -- is a resoundingly consumer-driven economy. 

Here's what Americans for Affordable Products (a coalition of 120 retailers [make their money via the consumer], which includes the likes of Best Buy, Dollar General, Macy's, Rite Aid and Walmart) think of the proposal:
We oppose any border adjustment tax (BAT) because it will increase the cost of clothing, food, medicine, gas, and other essential items that Americans rely on," the group says on its website. "Consumers shouldn’t bear the burden of this new tax while some corporations get a tax break.
And here's from a Knowledge at Wharton interview with Wharton's own Ann Harrison and Penn Law's Michael Knoll:
... big exporters, including technology companies and large industrial companies like General Electric could have nil or even negative tax liability, he said. Indeed the chief executives from 16 companies, including GE, Oracle and Pfizer, sent a letter to congressional leaders this week in support of the GOP tax plan.
Careful what you ask for...

P.s., I feel the need to qualify the "winners" column: The advocating by the GEs, etc., is, in my view, simply the result of CEO myopia (fixation on near-term quarterly earnings results). The ultimate ramifications of hammering the U.S. consumer to maybe balance Washington's this or that has to ultimately bode poorly for the would-be-winner as well.

Saturday, March 11, 2017

Quote of the day: How not to book a 50% gain...

A relatively new client -- one with whom we've yet to experience a true down market -- asked me yesterday how we'd handle things when the market experiences its next big selloff. I love such questions, for two reasons. One: they affirm for me that my client understands the nature of things; i.e., that stocks will forever experience draw downs and bear markets. And two: they give me the opportunity to outline the ills of market timing for long-term investors.

I explained that we'd maintain our equity/fixed income mix which we previously determined -- and confirmed yesterday -- was, for him, an emotionally-palatable position. We then discussed how we meld fundamental and technical analyses to determine what we believe to be the most prudent sector and regional equity mix. As the cycle evolves and the data offer their signals (dictating whether our tilt/bias is toward cyclical vs defensive sectors), our sector allocation evolves as well.

Again, the notion that the long-term investor can or should attempt to play the price swings is a dangerous notion indeed -- as I illustrated with this chart in last week's video:   click to enlarge...

And as Chris Ciovacco stated in his weekly presentation:
It is not possible to ever book a 50% to 80% gain if we over-trade and overmanage during a strong bullish trend...

Friday, March 10, 2017

The Week's Message: Only heed those with skin in the game...

Reagan budget director David Stockman has a knack for getting himself in the headlines. Seriously, take a look at his latest work (this is just me Googling for a few minutes):

Wednesday, March 8, 2017

Market Commentary: So far, a lot like 2013 (video)

This week's video is short and simple. Ironically, I've always found the basic stuff to be the stuff most critical to long-term investment success. Be sure to watch this one.

After clicking the play button click the icon in the lower right corner for full screen. Focus will occur a few seconds later.

Quote of the Day: Death Wishes -- or -- Deficit Spending

As I've expressed herein a thousand times and in a multitude of ways, markets are people. Famed trader, Richard Dennis, who, in his heyday was far more interested in David Hume than he was the details of any employment report, while expressing where his interests lied, spoke to the force that inspires markets and moves investors/traders to all manner of self-destructing behavior:
I think it's far more important to know what Freud thinks about death wishes than what Milton Friedman thinks about deficit spending.

Monday, March 6, 2017

There's Certainly Uncertainty Around the Impact of Higher Interest Rates

The Federal Open Market Committee meets next week, and futures pricing says a rate hike is a virtual certainty:     click charts to enlarge...

What's is clearly uncertain on Wall Street is the impact higher rates will have on the economy. The chart below shows us that futures speculators are heavily short treasury bonds (betting rates are going up and bond prices are, thus, going down) -- and that asset managers who trade futures are, on the other hand, heavily long (suggesting rate hikes will be considered virtually out of the blocks as constraining, and leading to lower yields and, thus, higher bond prices):

While markets can forever surprise us, my best guess is that the speculators are ultimately on the right side of this particular trade. The economic data generally supports their position, and, while showing a slightly stabler picture of late, on balance, the technicals are in their favor as well:

Sunday, March 5, 2017

Beware the Junior-High-Genius! -- And -- Pain is Essential

"If Washington rolls back financial regulations, could we see a replay of 2008?" That (words to that effect) was a question posed to me during a meeting last week. My immediate response was
"no. Not, that is, with the current players in the banking system. Not that shenanigans of the sort -- regardless of the prevailing regulatory regime -- aren't indeed likely to repeat, it's just that I suspect the likes of 2008 (a financial sector meltdown spawned by careless securitization of mortgages, and layers of speculation on those securities) will have to come at the hands of future geniuses who now attend junior high school, and who are, thus, oblivious to the happenings of 9 years ago" (words to that effect). I then proceeded to ramble on about the history of bailouts and my belief that had the powers-that-be not rescued the politically-powered bankers/investors of old from their folly, Wall Street's (I generalize) confidence that it could privatize its gains (it keeps em) and socialize its losses (taxpayers forced to come to its rescue) would never have been ingrained in its psyche.

Saturday, March 4, 2017

This Week's Message: I'm not feeling late- '90s euphoria right about now -- And -- The Prudence in Political Agnosticism...

It's interesting, I keep hearing "experts" suggest that investors are way too giddy about the stock market these days. But, honestly, that's not my observation. While, sure, folks have to be feeling good about the present state of affairs, I'm certainly not sensing giddiness in our clients as we conduct our semi-annual reviews. Again, not that they're not liking their results these days, but nobody's threatening to mortgage the farm and throw it all at the stock market. I'm definitely not feeling the late-'90s right about now.

Friday, March 3, 2017

My Friend Dick

There's a school of thought that says if you want to be successful in business, discover what it is that truly sets you apart from the competition; the one thing that you can do better than virtually anyone else. I have this friend who embodied that concept. This gentleman, either through thoughtful self-analysis or instinct (I suspect the latter), discovered at an early stage that he indeed possessed a one thing that made him unique in his business. And this gentleman, my dear friend Dick Wetnight, exploited his one thing to the fullest -- while he outsourced virtually all of the minutia and the mundane to others. I've often referred to him as a master delegator; a mastery that I've come to understand is absolutely essential to success in business.

Wednesday, March 1, 2017

Market Commentary: What does breadth say about the current trend?

Click the icon in the lower right corner for full screen. Wait a few seconds for focus:

Quote of the Day

Big rally today! As I type the Dow's up 330. Per last week's message, some on Wall Street, as well as main street, are wondering when the inevitable fall will come.

Yep, for sure, there'll be a fall. In fact, there'll be many this year -- I'm certain. That said, as I continue to chart for you, there's also the current trend, and, per Jesse Livermore below, that's what smart investors focus on:
The big money is not in the individual fluctuations, but in the big movements. That is, not in reading the tape, but in sizing up the entire market and its trend.

Thursday, February 23, 2017

This Week's Message: Is Over-Optimism About To Derail The Market?

Investors are at 'maximum optimism' and have a letdown coming.
My client, we'll call him Bob (because that's his name), says:
This thing has to come down. It just can't keep going up like this.
My other client, we'll call him Pete ("), says:
It's got to come crashing down.

Wednesday, February 22, 2017

Saturday, February 18, 2017

Quote of the Day: Two Things -- The Market and Human Nature -- Never Change

While the world evolves; while advances in technology change the way we work, play and interact -- and while untold time and expense is wasted on trying to predict markets, two things never change.

From Richard Smitten's excellent Jesse Livermore biography:
...human nature never changes. Therefore, the stock market never changes. Only the faces, the pockets, the suckers and the manipulators, the wars, the disasters, and the technologies change. The market itself never changes. How can it? Human nature never changes, and human nature runs the market-not reason, not economics, and certainly not logic. It is our human emotions that drive the market, as they do most other things on this planet.

Be VERY Careful What You Ask For!!

I happen to know that a good number of my clients and friends are not sympathetic to my resistance to the present protectionist (call it America first, if you like) tone.

And while I suspect that those who I'm new to (who don't know my political bents) see my position as somewhat political, I assure you, it's not! It's about business and, frankly, it's about freedom.

Thursday, February 16, 2017

This Week's Message: All About Trump? -- OR -- Not Sitting On Pins and Needles...

If you're like me, and the oddsmakers, you thought the notion that Donald J. Trump would win the presidency was the definition of a long shot. And, if you're like me -- and 90% of the pundits, and 100% of the just-in-case put buyers -- you thought the idea that, should the unlikely happen, the market would rally right out of the gate was the definition of the definition of a long shot.

Wednesday, February 15, 2017

Market Commentary: Trend Intact (video)

Click play button then icon in lower right corner for full screen. The video will come into focus after a few seconds:

Tuesday, February 14, 2017

Thought of the Day: Pursuing Pay

I think it's safe to say that, save for independently wealthy philanthropists, the majority of the world's working-age population spend their workdays in pursuit of pay.

Are you ever tempted by the internet ad, TV infomercial or Bloomberg/CNBC TV/Radio spot touting some genius's sure-fire trading program?

Every once in awhile a client will ask me what I think about so-and-so, the guy who says he made X million trading stocks in a tough market, and is eager to teach the world how he did it.

Now, ads aren't cheap, and I never see the guy-in-question's name atop the list of the world's richest traders. Hmm...

So, is it true that the gent is so incredibly generous that he would spend his own money to make you and me richer? Of course not, his program is for sale. He hopes to make more money selling his strategy than it costs him to run the ads.

Okay, so the guy, like virtually everyone else, is spending his days in pursuit of pay. So, you tell me, what are the odds that his strategy works? You got it, exactly zero! For one, he'd not need to sell his strategy to make money if his strategy really made money. And two, under no circumstances would a pursuing-pay trader ever share his successful strategy with the world; at least never while it's working. He has to have the rest of us buying and selling into his sells and buys for his strategy to work.

Saturday, February 11, 2017

It's Future Performance We're After

I have this good friend and client who's a bit a more active than your everyday investor. Every now and again he'll present an idea, typically a stock, tell me what he thinks, solicit my opinion, and more often than not have me see where we can generate a little cash to take the position.

If he's not already over-weight a particular sector, I generally recommend that we take from an area I'm presently under-weighting. Upon making my recommendation, he often asks for an accounting of the past performance of the position I'd draw from. I then remind him that past performance has absolutely nothing to do with my recommendation. My choice is all about the setup for that particular position going forward, which, in my view, is less favorable than that of his other positions. As it happens -- as seasons, and trends, change -- it's not at all unusual for the position I'd exit to indeed be one of the better performers over the recent past; it's just that I now see the trend changing. 

Friday, February 10, 2017

This Week's Message: What Jobless Claims Say About Stocks

I've heard Neil Dutta (Renaissance Macro's head of economic research) say numerous times that if businesses are hiring he doesn't need much more to tell him that the economy's in good shape.

As you may know, January's jobs number surprised to the upside. As you may or may not know, weekly jobless claims are on a below-300k streak not seen since the 1970s. And, by the way, that does not adjust for population growth: I.e., the U.S.'s population has grown by nearly 60% since 1970,      (click any chart to enlarge)

Tuesday, February 7, 2017

Get Ready for the 1% One-Day Plunge!

It's been an unusually long-time since the market took a 1% one-day hit. Here's Bespoke Investment Group:
The lack of a 1% decline through Monday is notable for the fact that it has now been 80 trading days since the S&P 500 last saw a one-day decline of 1%+.
So, when the S&P sees a one-day 20+ point decline (-200ish on the Dow), we'll try and resist the temptation to blame this or that -- it is normal phenomena. What's abnormal is the fact that we've gone this long without one:
  ...the current streak represents the first 80+ trading day streak without a 1% decline since 2006, and before that you have to go back to 1995 to find the next one. 
And when it happens we won't panic (we never do anyway), for, historically-speaking, they've not -- when ending a long streak without one -- been harbingers of bad things to come:
Once the 1%+ down day finally comes and ends the streak, investors have used it as an opportunity to reload as the average one week, one month, and three month returns are better than the average for all periods since 1928. 

Monday, February 6, 2017

Quotes of the Day

Economist Arnold Kling, in The Three Languages of Politics, speaks directly to me when it comes to free market economics -- I absolutely know that I instinctively scrutinize and dispute any evidence that contradicts it. And, for whatever reason, I allow myself such luxury:
When we engage in motivated reasoning, we are like lawyers arguing a case. We muster evidence to justify or reinforce our preconceived opinions. We are open and accepting when it comes to facts or opinions that support our views, while we carefully scrutinize and dispute any evidence that appears contradictory.
When it comes to the financial markets, however, it is essential that I not wish for anything, nor argue on behalf of bulls or bears. I have to assess conditions as the market presents them, like them or not. In this regard I must heed the advice of Nassim Taleb:
The problem is that our ideas are sticky: once we produce a theory, we are not likely to change our minds—so those who delay developing their theories are better off.  When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate.

Friday, February 3, 2017

Quote of the Day: History Tells How to Create a Safer World -- And -- Protectionism Owes to No Political Party

Michael Shermer, in his thought-provoking book The Believing Brain, makes the point that I've made countless times over the years herein (throughout both "liberal" and "conservative" Washington regimes):

Thursday, February 2, 2017

This Week's Message: What the Market Is -- And -- The Making of an Investment Adviser

Nick, feeling the momentum from recently completing the rigorous CFP (Certified Financial Planner) curriculum, is contemplating his next academic challenge. He has determined that it'll either be the CFA (Chartered Financial Analyst [the pinnacle designation of portfolio managers]), or the CMT (Chartered Market Technician [the preeminent credential for technical analysts]).

Tuesday, January 31, 2017

Quote of the Day

Nassim Taleb in his excellent book Antifragile stresses the point that I constantly stress herein about the market (did just yesterday in fact):
In the complex world, the notion of “cause” itself is suspect; it is either nearly impossible to detect or not really defined— another reason to ignore newspapers, with their constant supply of causes for things.

Monday, January 30, 2017

Quote of the Day: What the tape is 'presently' telling...

Jonathan Krinsky, chief market technician at MKM Partners, echoes the last sentence in my morning blog post:

The long-term bullish case is still intact. The bumpy policy road was expected with Trump in charge. Investors are betting once Trump is done pleasing his base with executive orders, he'll become the dealmaker-in-chief on taxes and infrastructure and the other market-pleasing policies. Krinsky says the tape is telling you this much.
"The evidence for a meaningful top is lacking," wrote the technical analyst. "We would welcome any weakness as a buying opportunity, rather than viewing it as the start of something bigger."

The Administration's 'Market' Faces Face-Off

As I've suggested here a number of times since the election, from an economic/investment standpoint, the new administration wears two distinct faces.

Its pro-market face expresses a desire to deregulate industry, demystify the corporate tax code and rebuild some infrastructure. Its anti-market face expresses a contempt for existing trade agreements and a defiance of international protocol.

Sunday, January 29, 2017

Quote of the Day: Declining Bullishness is Bullish

Like the folks at Bespoke Investment Group, I feel better about the market when the majority of individual investors don't:
While consumers continue to feel more and more positive about the economy, the post-election jump we saw in bullish stock market sentiment has faded quickly. This week’s AAII bullish sentiment reading of individual investors dipped down to 31.58%. It has now given up nearly all of its post-election bump. As we always mention, this constant skepticism about the market from individual investors is actually a good thing for the long-term health of stocks in our view.
In case you missed it, here's the link to my January 14 post, where I dug into the topic. Here's a snippet:
Fascinating! In all nine instances when bullishness was reaching its lows -- and yes it was indeed low in those instances (under 40%) -- the market was either beginning. or in the midst of, an impressive upward run. So, apparently it does indeed pay to be the contrarian -- just more so when the crowd's the most gloomy.  

Saturday, January 28, 2017

Thinking on Protectionism

Aside from the monster problems with protectionism (like the hit to our small local businesses who employ 2/3rds of our workforce, and exist largely because you and I can buy items from countries who produce them the cheapest [saving money with which to lavish onto our local employers] -- not to mention the subtle robbing of our ability/freedom to do business wherever and with whomever we choose), it threatens the stories behind the headlines below (save for the last one). Stories, by the way, that (save for the last one) not only make America richer, they make it safer. Per (it's believed) Frederic Bastiat:
Where goods don't cross borders, soldiers will.

Thursday, January 26, 2017

This Week's Message: Should You Fade the Rally?

I've been asked a few times lately if, from a trading (as opposed to a long-term investing) perspective, I'd fade this rally. Meaning, at these levels, could a trader make money betting on a fall?

The thing about the market is that it can fall from any height, be it Dow 20,000 or Dow 2,000. And whether it hits that level from above or below doesn't help us all that much in terms of guessing where it goes from there.

Quote of the Day: "I Ain't Worried"

Douglas Merlin Carlson -- the man famous for his Rustic Rub seasoning -- shared his sage wisdom with me today:
I ain't buyin', I ain't sellin', so I ain't worried about it!