Market Timing

Shiller Warns: Stocks Are Partying Like Its 1929!

"I hate to rain on this parade. But the latest lurch upwards in stock prices has just taken market valuations up into the skybox levels, according to the market timing measure with the longest pedigree on Wall Street. It’s just gone from flashing amber to flashing red - meaning, if it’s right, that there is now a significant and rising risk of a crash, and a bigger risk of simply very poor returns."

"We Decided To Close Our Firm" - A Hedge Fund's Lament

"We decided to close our firm," read the email from a friend. Been a brutal year in an unforgiving industry. Industry redemptions this year are $60bln; on track to match the 2009 record. Back then outflows were driven by losses. Now they’re driven by insufficient profits, high fees, and a general aversion by hedge fund managers to take enough risk to earn 8% annual returns.

Stocks Are On The Wrong Side Of A Rate Hike

The problem with being a contrarian is the determination of where in a market cycle the “herd mentality” is operating. The collective wisdom of market participants is generally “right” during the middle of a market advance but “wrong” at market peaks and troughs. There are plenty of warning signals that suggest that investors should be getting more cautious with portfolio allocations. However, the “herd” is still supporting asset prices at current levels based primarily on the “fear” of missing out on further advances.

China As A Leading Economic Indicator

Unlike its OECD counterparts, recent readings of China’s CLI have been at depressed levels – only seen during recent financial crises and recessions. This is somewhat at odds with official GDP growth statistics, but not with the correction we have seen in commodity prices

Just 3 Things

Based on the fact that the P/S ratio has been steadily rising and has eclipsed prior peaks, we are left to select from one of two conclusions: that investors are extremely optimistic about the potential for revenue growth; or investors are once again caught in the grasp of bubble mentality and willing to pay huge premiums to avoid missing out on further gains. However, the means of magically boosting these asset prices are 'finite' in nature and eventually the "devil will be paid his due."

"I've Never Felt So Resigned To The Fact That We Are All Stuck..."

"I’ve never felt so ... resigned ... to the fact we are ALL well and truly stuck. The Fed is stuck. The ECB and the BOJ are stuck. The banks are stuck. Corporations are stuck. Asset managers are stuck. Financial advisors are stuck. Investors are stuck. Republicans are stuck. Democrats are stuck. We are all stuck in a very powerful political equilibrium where the costs of changing our current bleak course of ineffective monetary policy and counter-productive regulatory policy are so astronomical that The Powers That Be have no alternative but to continue with what they know full well isn’t working."

Fed Finds "The End Of The Road"

The big risk for the Fed has always been the market would “call their bluff”  be unwilling to buy into the “forward guidance.”  It is currently too soon to know for certain but reactions following yesterday’s announcement are not promising.

Another Real Estate Crash Looms: Sam Zell Dumps Holdings, Warns "The Fed's Deferred Reality For Too Long"

Everything seems to be booming again – easy money, easy lending, rising prices, and a bread and circused populous. But appearances can be deceiving and highly acclaimed billionaire investor Sam Zell isn’t buying the hype... noting the nearly 50 million Americans on food stamps, the six million millennials living in their parents’ basements, or the massive spike in business debt delinquencies.

Visualizing The Market Cycle

Like many controversial topics in investing, there is no real professional consensus on market timing. Academics claim that it’s not possible, while traders and chartists swear by the idea. That said, as VisualCapitalist's Jeff Desjardins notes, one thing that everyone can probably agree on is that markets are cyclical and that securities do have recurring chart patterns. They aren’t predictable all of the time, but learning the fundamentals around market cycles can only help an investor in furthering their understanding of how things work.

Cycles, Bounces, & The Only Question That Matters

Unfortunately, when central-planners "drag forward" future consumption today, you leave a "void" in the future that must be filled. That future "void" continues to expand each time activity is dragged forward until, inevitably, it can not be filled. This is currently being witnessed in the overall data trends as seen in the deterioration in corporate earnings and revenues. The only question is whether Central Banks can continue to support asset prices long enough for the economic cycle to catch up. Historically, such is a feat that has never been accomplished.

The New New 'Deal' - "Markets Are Too Important To Be Left To Investors"

In the same way that FDR had an existential political interest in generating inflation and preventing volatility in the US labor market, so does the US Executive branch today (regardless of what party holds the office) have an existential political interest in generating inflation and preventing volatility in the US capital markets. Transforming Wall Street into a political utility was an afterthought for FDR; today the relative importance of the labor markets and capital markets have completely switched positions. Today, the quote would be "markets are too important to be left to investors."

"Buy High, Sell Low" - The Psychology Of Loss

The reality of loss will be more than most can stomach and sentiments of “time in the market” will go mostly unheeded. This is, of course, why many of the coveted millennial investors have already rejected much of the Wall Street rhetoric after watching the devastation that wrecked their parents over the last 15 years.

Is Shorting The Yuan Dangeorus?

The announcement that China will start targeting the yuan against a basket of currencies and not the dollar is consistent with the strategy of undermining the dollar's value. While the view of a looming Yuan devaluation seems almost universal, GoldMoney's Alasdair Macleod warns instead that something else may be a foot - China will sell her dollars not to protect the yuan, but to dispose of an overvalued currency.