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5 Things To Ponder: Labor Day Edition

Tyler Durden's picture




 

Submitted by Lance Roberts of STA Wealth Management,

The financial markets are set to wrap up the month with roughly a 3.5% gain, depending on where today's action ends, which is historically on the positive end of returns for the month. The histogram below shows the annual percentage change for the month of August.  Since 1930, there have been a total of 47 positive months versus 38 negative (55% win ratio) with an average return of 1.47%.  However, if we strip out the 37.7% gain in 1932, the one outlier, the average monthly return falls to just 1.04%.

 

September's prospects improve a bit from August with the overall win ratio improving to 58.3%. However, unlike August there is bigger propensity of market declines of between 5-10%.

 

With the Federal Reserve ending their support of the markets by October, and as discussed yesterday, corporate share buybacks on the decline; two of the biggest supports of asset prices over the last couple of years is fading.  What does this mean for investors going forward? That is the subject of this Labor Day Edition of "5 Things To Ponder."

 

1) A Classic Warning For Investors by Michael Mackenzie via Financial Times

"A look at the growing and already large divergence between the S&P 500 and the 10-year government note yield illustrates how the two big US markets are not only not cheap, but are also sending conflicting messages.

Here, equities and bonds can probably prosper in the near term until economic data conclusively settles the issue. Only then will the huge divergence between the S&P and 10-year yields snap shut with serious repercussions for some investors."

Financial-Times-082914

 

 

2) The Fed Has Become The Fundamentals by Jeffrey Cooper via MinyanVille

"A bull market will always find the silver lining, no matter how insignificant. Mirror image of human emotions and hysteria." - Marc Eckelberry

 

"There is a notion out there that the bull market has a long way to go since there is no sign of elation, such as in the months leading up to the top in March 2000.  Fear is driving the market, not greed.  Equities are up out of lack of choice, not out of reason.

 

Ebullience has not been a hallmark of the advance at any point in the last 5.5 years. Does a grand top require a manic phase? The top floor can be reached by an escalator just as well as an elevator."

Minyanville-SPX500-082914

 

 

3) It's Time To Be Defensive, Very Defensive via ZeroHedge

"What is wrong with changing your mind because the facts change? But you have to be able to say why you changed your mind and how the facts changed." - Lee Iacocca

"It’s important to underline that major US investment houses, and certainly every single sales person I talk to, believe US is about to accelerate in growth not slow down. Q3 could be ok but the real damage will come in Q4 as the lead-lag factor of geopolitical risk, lack of reforms and excess global supply leads to low inflation. Despite recent Fed optimism about an exit strategy the fact remains that few institutions are worse than the Fed in projections as even its simple target goals show."

Saxo-Bank-GDP-Projections

Read Also: The Bubble Of All Bubbles - European Bonds by EconMatters

 

4) Equity Markets Running On Fumes by Izabella Kamins via Financial Times

"It is widely accepted the Fed’?s QE programme has inflated asset prices way above fundamental values (higher inequality being one unwelcome by-product). Andrew Lapthorne has identified the mechanism whereby QE, by shrinking the available stock of investable government bonds, has encouraged investors to instead gobble up other debt assets all along the risk spectrum. Companies issuing at low yields into this buying frenzy are doing what they always like doing with debt in the final throes of an economic cycle they issue cheap debt to buy expensive equity. Decent profit (cashflow growth) may be more than sufficient to cover capital expenditure and dividends, but a gargantuan funding gap emerges as companies also undertake their corporate finance zaitech activities (see chart below, Andrew also calculates that currently almost a third of all buybacks are to cover the expense of maturing management share options QE is indeed making the rich richer!)."

Soc-Gen-Valuation-082914

 

5) Get Ready For S&P 500 2150 by Mark Hulbert via WSJ MarketWatch

"This incredible bull market, which pushed the S&P 500 above 2,000 earlier this week, is still alive and well. By the end of the year, the benchmark index may rise to around 2,150, about 8% higher.

 

So says Sam Eisenstadt, who has more successfully called the stock market in recent years than almost every other market timer I can think of — including many who I have featured in this column.

 

Eisenstadt, for those of you who don’t know of him, is the former research director at Value Line Inc. Though he retired in 2009, after 63 years at that firm, he continues in retirement to update and refine a complex econometric model that generates six-month forecasts for the S&P 500."

Bonus Read: Because There Is An Extra Day This Weekend

 

The Greater The Stock Bubble, The Less Monetary Theory Holds by Jeffrey Snider via Alhambra Partners

"I think the full answer lies in monetarism not being a flow of “money” and funds but rather a corruption of expectations, and thus activity. The idea of “easy money” now spans not just some marginal speculators touring the contours of the pink sheets for grand slams, but rather it has taken hold of everyone from the should-be-conservative retirees looking to regain their balances from even two bubbles ago to corporate boardrooms looking to get paid as much as possible before reality closes in once more and the bottom falls out. In trying to gear marginal economic activity toward financial means, central banks have instead totally financialized the entire affair to the point that far too much psychology, and thus attendant flow, goes only in that direction. In other words, instead of enhancing marginal economic activity it directly suffocates it."

ABOOK-Aug-2014-Fischer-Buybacks

Also check out my post from earlier this week: "Next Stop 2100"


Wishing you a happy and safe Labor Day weekend.

"My therapist told me the way to achieve true inner peace is to finish what I start. So far I’ve finished two bags of M&Ms and a chocolate cake. I feel better already." - Dave Barry

 

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Fri, 08/29/2014 - 16:36 | 5160161 Hohum
Hohum's picture

Answer: BTFATH!

Fri, 08/29/2014 - 20:31 | 5160973 max2205
max2205's picture

What's an investor? 

Fri, 08/29/2014 - 16:46 | 5160185 Squid Viscous
Squid Viscous's picture

Another bearish ZH post, #15,213 since mid 2009... lol,  this one is really good though I'm finally convinced!

Fri, 08/29/2014 - 16:46 | 5160190 NOTaREALmerican
NOTaREALmerican's picture

It a site for pathological pessimists.    What else could there be but bearish posts?

Fri, 08/29/2014 - 18:10 | 5160492 Dick Buttkiss
Dick Buttkiss's picture

The only thing we Red Pill Realists have been wrong about is TPTB's ability to "extend & pretend," their propaganda machine being so efficient and effective that the Hopium-drugged masses march dutifully toward an abyss that only gets deeper the longer reality is pushed into the future. For as Ayn Rand said, "We can evade reality, but we can't evade the consequences of evading reality."

So get ready: http://readynutrition.com/resources/52-weeks-to-preparedness-an-introduc...

 

Fri, 08/29/2014 - 19:51 | 5160816 Consuelo
Consuelo's picture


"Damn it. What's wrong with you two? We've been in school over seven months now and every single day when I call Daniel Buttkiss' name, you guys have to laugh.

[Beavis and Butt-head continue laughing]

Mr. Stevenson: Is it really still that funny? Doesn't it ever get old? Are you going to laugh for the rest of your lives every time someone mentions the name "Buttkiss"?

[Beavis and Butt-head continue laughing]

Mr. Stevenson: That does it, principal's office now!

Fri, 08/29/2014 - 16:45 | 5160186 NOTaREALmerican
NOTaREALmerican's picture

The market keeps going up until somebody big doesn't get paid (and bitches about it).  

Fri, 08/29/2014 - 16:46 | 5160192 observer007
observer007's picture

Must READ:

Russian Aggression Prevention Act of 2014

Directs the President to establish a United States-German Global and European Security Working Group to focus on areas of mutual concern, including the situation in Ukraine, and increasing political, economic, and military cooperation between the two states.

 

More:

http://homment.com/usarussia

Fri, 08/29/2014 - 17:06 | 5160253 NOTW777
NOTW777's picture

heres something to ponder - who believes this:

"With the Federal Reserve ending their support of the markets by October"

Fri, 08/29/2014 - 17:20 | 5160297 enforcer92677
enforcer92677's picture

Everytime Tyler posts about the Ukraine Putin pulls back his troops and de-escalates.  Just like how the S&P spikes every day that he calls a bottom. 

 

Co inky dink?  I think not!!!!

Fri, 08/29/2014 - 17:23 | 5160307 honestann
honestann's picture

With the Federal Reserve ending their support of the markets by October...

Geez!  Don't be such a willing sucker!  As ZH and other somewhat observant folks have noted over the past months, the federal reserve has simply been shifting their manipulations from semi-transparent sources and forms to almost completely opaque sources and forms.

The reason?  To PRETEND the economy is getting better, with the hope people will borrow and spend more, companies will borrow and hire more, and somehow magically this extra excess debt will somehow magically obscure the fatal damage the central banks of the world have done to the people and economies of planet earth.  In other words, kick the can a bit further down the road to delay the day of reckoning (and make that reckoning worse).

 

Fri, 08/29/2014 - 17:39 | 5160319 Rusty Shorts
Rusty Shorts's picture

 

 

Banker left Speechless by Irish Journalist!

https://www.youtube.com/watch?v=pCHu1kRT6hU

Fri, 08/29/2014 - 17:31 | 5160338 Agent P
Agent P's picture

I think I'll ponder some beer this weekend. 

Fri, 08/29/2014 - 18:31 | 5160406 earleflorida
earleflorida's picture

September 5, 1914 (9/5/1882 Labor Day and 32 yrs.later?) Mr. Rockefeller is under investigation  by LABOR!?!

nothing changes with trillionaire families regarding Rockefeller's and Rothschild's... 'What's a hundred million got to do with it$'      

http://archive.org/stream/independen79v80newy#page/n46/mode/1up

scroll down page:: Oct.12,1914 edition 

Fri, 08/29/2014 - 17:53 | 5160417 cart00ner
cart00ner's picture

Labour day? Who's pregnant?... Oh thats right, the US was f***ed 9 months ago...

Fri, 08/29/2014 - 18:32 | 5160575 Squid Viscous
Squid Viscous's picture

more like 900 months ago,

Fri, 08/29/2014 - 18:49 | 5160630 Yancey Ward
Yancey Ward's picture

Buy now or be priced out forever???

Sat, 08/30/2014 - 11:00 | 5162214 AdvancingTime
AdvancingTime's picture

Much of the economic landscape is beginning to look like something out of  "Alice And The Looking Glass" A bizarre  and unrecognizable land, a land that is distorted and papered over by ream after ream of paper. This paper has been rolling off the printing presses of central banks all across the world in an attempt to mask reality.

Peter Schiff says, printing money is to the economy what taking drugs is to a drug addict. In the short term it makes the economy feel good, but in the long run it is much worse off. What was once the "long run" or "distant future" may be getting much closer. More on what happens when the momentum ends in the article below.

http://brucewilds.blogspot.com/2013/01/what-happens-after-momentum-ends_...

Sat, 08/30/2014 - 19:55 | 5163507 fibonacci's claus
fibonacci's claus's picture

How about we ponder why we celebrate a commie pinko holiday in this country?  Why not replace labor day (hideous name for a holiday if I may add) with liberty day and bring back the gold standard

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