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5 Things To Ponder: Through The Looking Glass
Submitted by Lance Roberts of STA Wealth Management,
“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn't. And contrary wise, what is, it wouldn't be. And what it wouldn't be, it would. You see?”?Lewis Carroll, Alice's Adventures in Wonderland
Is this the beginning of a bigger correction, or just a respite before the next advance? This is the first correction, since the beginning of the Federal Reserve’s latest round of quantitative easing, where the market has broken decisively through its shorter term moving average as shown below.
As I discussed yesterday, the Federal Reserve is unlikely to raise rates soon. With spreading global weakness due to the recession in Japan, the Eurozone and slowdown in China and U.K the global wave of “deflationary” pressures will likely weigh on domestic growth in coming quarters. Such would prove a disappointment to market bulls.
Wednesday’s performance (S&P +33 pts) raised the question as to whether it was the start of a return to recent highs, or just another counter-trend rally within a still-developing downtrend? Thursday’s collapse through critical moving average support at 1945 puts the current bullish trend in danger.
Walter Murphy points out that: “Our focus in coming days will be on 1977-1986 for the S&P 500. This range represents a significant amount of chart resistance and important Fibonacci resistance. The inability to break this benchmark will indicate that the downtrend is still in force and that bears are in control. Conversely, a decisive breakout will open the door for at least a temporary challenge of the S&P’s all-time high.”
This week’s “5 Things To Ponder” will peer through the “looking glass” for insights as to what we may expect next and things that we should be considering.
1) A Remembrance Of 2014 by David Hay via Investor Insight
“Do you remember back in 2014 when the stock market was as hot as napalm? When it just never went down? When millions believed the Fed could control stock prices by whipping up a trillion here and a trillion there?
Looking back from the vantage of today, it all seems so obvious. We should have known better than to believe that the S&P 500 had years more of appreciation left in it after having already tripled by the fall of 2014 from the 2009 nadir. The warning signs were there. But, before we rehash what went wrong, let’s focus on the upside of what some are calling “The Great Unwind” – the hangover after years and years of the Fed recklessly driving asset prices to unsustainable heights.”
2) Echoes Of 2011 – Wild Stock Swings Are Backby Steven Russolillo & Kevin Kingsbury via WSJ
“Investors might find the recent action reminiscent (on a smaller scale) of what transpired in August 2011, when Europe’s debt crisis was in full throttle, and S&P downgraded the U.S. from its AAA rating. That downgrade, announced late Friday Aug. 5, prompted the Dow to slump 635 points the following Monday. It then rebounded by 430 points on Tuesday before skidding 529 points the next day and then rallying 423 points that Thursday.
The cumulative four-day move was just 301 points, but it surely didn’t seem like it at that time. And of course, the declines in the wake of the U.S.’s credit downgrade proved to be quite the buying opportunity; the Dow and S&P 500 bottomed in October that year and haven’t suffered 10% pullbacks since.”
3) Companies Poised To Spend 95% Of Earnings On Buybacks by Lu Wang & Callie Bost via Bloomberg
“They’re [companies in the S&P 500] poised to spend $914 billion on share buybacks and dividends this year, or about 95 percent of earnings, data compiled by Bloomberg and S&P Dow Jones Indices show. Money returned to stock owners exceeded profits in the first quarter and may again in the third. The proportion of cash flow used for repurchases has almost doubled over the last decade while it’s slipped for capital investments, according to Jonathan Glionna, head of U.S. equity strategy research at Barclays Plc.
‘You can only go so far with financial engineering before you actually have to have a business with real growth,’ Chris Bouffard, chief investment officer who oversees $9 billion at Mutual Fund Store in Overland Park, Kansas, said by phone on Oct. 2. ‘Companies have done about all that they can in terms of maximizing the ability to do those buybacks.’”
4) Carl Ichan Warns A Big Correction Is Coming via Zero Hedge
5) Stocks Are Artificially Priced – Bill Gross’ First Letter From Janus Capital
“Financial markets are artificially priced. In the bond market, there is nothing normal about a three year German Bund yielding a “minus” 10 basis points. Similarly, UK Gilts and U.S. Treasury’s have in recent years never experienced such low yields and therefore high prices. The same comparison can be applied to stocks.
While profits in many cases are at record highs, the discounting of future profit streams by an artificially low interest rate results in corresponding high P/E ratios. Real estate cap rates, which help to price homes and commercial shopping centers, are affected in the same way. While monetary policy with its Quantitative Easing and forward guidance for low future interest rates have salvaged a semblance of growth and job gains – especially in the U.S. – they have brought prosperity forward in the financial markets.
If yields can’t go much lower, then bond market capital gains are limited. The same logic applies in other asset categories. We have had our Biblical seven years of fat. We must look forward, almost by mathematical necessity, to seven figurative years of leaner: Bonds – 3% to 4% at best, stocks – 5% to 6% on the outside.
That may not be enough for your retirement or your kid’s college education. It certainly isn’t for many private and public pension funds that still have a fairy tale belief in an average 7% to 8% return for the next 10 to 20 years! What do you do?”
Bonus: Saving Investors From Themselves by Jason Zweig via WSJ
“I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.
That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good."
“If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” JP Getty.
Have a great weekend.
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i see Mr "10yr @ 4% in 2015" is OK ... and his check didn't bounce
Ponder fatigue fever, Bitchez........
Lewis Carroll would be considered a pedophile today.
Convicted of downloading kiddy porn, or some such nonsense.
Jimmy Saville? (So-Evil) - Free pass from the BBC and Queen for YEARS.
"It is true that the Reverend Charles Lutwidge Dodgson, otherwise known as Lewis Carroll, author of the inimitable classics Alice in Wonderland and Alice Through the Looking Glass, liked little girls. Or, as he once wrote: "I am fond of children (except boys)." He took exquisite, melancholy photographs of little girls. He befriended little girls on trains, and beaches, and in the houses of friends. And one particular little girl, Alice Liddell, came to be his muse and great passion."
Was Lewis Carroll's interest in Alice sinister? - The GuardianI'm starting to suspect that anyone who's ever watched The Professional (LEON) is now considered a pedophile. Goal posts are so easy for the moronicrats to move.
so hot she is.
Things keep sludging further into the shit heap we will all need some of the good shit Carroll was privy to...
I would love to see a Jabberwocky. Without having to travel to Barsoom, that is.
No more snark. For the Snark *was* a Boojum, you see.
His Name was Fonzanoon, he was Beta Long...... I want the deer....LOL
1 song to ponder:
https://www.youtube.com/watch?v=jItz-uNjoZA
Ponder this, artificial tits are fake tits!
And so are asset valuations!
Fake!
Yeah, so; your point is, what ?
I didn't know the dos equis guy was in finance. Makes sense, gotta make the big bucks to travel all over the world living the high life.
Stay thirsty my friends.
What ! The Good Old Days ?
When men were men and bicycles had wheels ?
http://andreswhy.blogspot.com/2013/08/the-good-old-days.html
And don't despise rabbit holes .
Rabbits live there .
See http://andreswhy.blogspot.com/2009/07/rabbits-and-singularity.html
At least those monks had a vertically integrated estate to seek refuge in .
Okay; so this must be the place to discuss the price behaviour of the S&P500. it went down below the low bar of its channel. it's tempting to buy this dip; but I'm going to refrain. If they can get the muppets to buy it up again next week then we can short it again. I'm pretty sure you can short the Long bond right now where it sits; thats ZB contract. But; it's a gut instinct. I try to thing about it the way a major bank trader would. I used to have a guy in London I could call who was a major bank trader; I used to send him 100$ bills in envelopes to his home address. What , that's illegal ? oh, well, whatever. anyway; I did get a feel for what they like to do; oh; they're the people who move the long bond market, right;? I suppose that's obvious. It's in a strong up channel; the very top of the up channel; so it seems kind of crazy to short; but it's a market that likes to reverse on a point; and the price is just too high. So, for the wild and crazy people out there, you can short ZB, basis Dec.'14; for a quick buck next week; I would say it's 60/40 in your favor; and you can have a tight stop; cause there's no reason for it to go any higher. But it might; this is an educated guess. Futures; in general; it's not too late to short the Mar. or Apr. '15 Feeder Cattle; FC contract. it'll be going down for months and months as mentioned previously. don't take any kind of short position on the stock market based on the breaking of this line, or that magic number, or anything. Just say no. It's too dangerous. Wait and see if they get it up again; because then you have the 90/10 bet; that's the one you want. most of this business is waiting; kind of like being a sniper. And never mind how I know that.
/es and aud/jpy correlate pretty well..and retail traders are pretty much long on this cross (aud/jpy)
retail is always wrong in forex as they buy into down trends and sell into uptrends
i think we're going to see it tumble (sp500), albeit slowly.
~dipshitmiddleclasswhitekid
Oh man. I actually read some of this stuff. I did it for you, my brothers and sisters on ZH. It's dangerous stuff, people. This guy, who's talking about the market says, "it's bullish trend is threatened"--whoo. it has to be traded like a bear market now. it's no more bullish trend. Reading this stuff can be dangerous for your equity. I make it a point to never read commentary. If the guy understood the market would he have time to comment? My Mentor didn't; he retired when he was 36. but he was a futures trader. The worst single thing you face when you open a futures trading account is the guys that are going to call you on the phone and smooze you; and they're good at it; they may take the t ime to listen to all your troubles, they may know your kid's name, and how he's doing in soccer; but then they want to tell you about this great opportunity in Orange Juice Futures. Every house has these guys; and you actually have to be rude to them; you may have to ask to speak to their supervisor and tell him you're going to change the accouint to another company if they make one more phone call. If the guy could trade futures, would he be on the phone all day, trying to sell you something? Well, would he? nOOO. He would not. You've been warned.
Paul Murphy; says----fibonacci numbers---oh, oh. This has been studied by a major professor of statistics at Stanford. There aren't any fibonacci numbers in markets; by which I mean, obviously, this type of thing doesn't work; you can't make money with it. it's part of the 99%; t he noise. I wish I could post the chart here on t he page for you. just a simple daily bar chart; you lay a straight edge along t he top prices, then along the bottom prices; what's in between is the channel. In this case, it's a 45degree down channel. that's as far as you go with technical analysis; channels. no heads and shoulders, that's a shampoo, no inverse triangles; just the channel. look at the daily volume and the open interest by all means; it get's alittle complicated interpreting it but ast least it's information from the market; not someones opinion. Well, I need to write a book, and I can't do it here. just remember, no fibonacci numbers, no magic numbers. not to make decisions on involving your money. And don't go short because the market is going down ! ONly go short if it's temporarily at the top of the channel. ie; sell high, buy low. So for instance, today; big significant breakout, breakdown, etc, etc, what do you do? NOthing. you don't do anything today.