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BofA Pushes The Panic Buttton: "Dow Theory Sell Signal, Key Supports Broken, Semis Sinking, No Capitulation"

Tyler Durden's picture




 

To think it only took an unprecedented surge in volatility as the market suddenly realized that central banks are losing control in a world where secular stagnation is a direct function of 7 years of failed central bank policy, to get the banks out of permabullish hibernation and to slam the "sell everything" alert.

Here is BofA's new chief technical research strategist Stephen Suttmeier telling his clients "Dow Theory flashes Sell Signal"

  • Dow Theory flashes sell signal. S&P 500, NYSE & Russell 2000 all closed below key supports.
  • No tactical capitulation. Not 90% down. ARMS below 2.0. 10-day total put/call ratio not showing panic. But VXV/VIX oversold.

Some more details from BofA with charts and what not that our readers have, as usual, known for weeks in advance.

Red light: Dow Theory flashes Sell signal as of August 20

The Dow Theory flashed a sell signal yesterday. The Dow Industrial Average (INDU) closed below its January 30 closing basis low of 17,164.95 on August 20 to confirm the Dow Transportation Average (TRAN) close below its January 30 closing basis low on April 2. This reverses the Dow Theory buy signal from January 18, 2013 and moves the Dow Theory to a sell signal. The message from Dow Theory is that the primary trend for US equities has turned down.

This Sell signal occurs with the Fed looking to be less accommodative

The last two Dow Theory sell signals from May 17, 2012 and August 8, 2011 both saw continued near-term downside into June 2012 and October 2011, respectively, but both quickly reversed into Dow Theory buy signals. The prior two sell signals occurred with the backdrop of accommodative Federal Reserve policy, while yesterday’s sell signal occurs with the Fed looking to begin a tightening cycle.

 

Semiconductors keep sinking

While not part of the Dow Theory, the Philadelphia Semiconductor Index (SOX) broke below its January 30 closing low in early July and has remained weak. Both the Transports and Semiconductors are important economically sensitive groups (canary groups). Both are also prior strong leadership groups that have broken down.

 

 

Key supports broken on SPX, NYSE & R2K

The S&P 500, NYSE Comp, and Russell 2000 all closed below their key supports highlighted in Chart Talk: 20 August 2015. These supports are 2052-2040 on the S&P 500, 10,600 on the NYSE, and 1200 on the Russell 2000. Sustaining the break below 2052-2040 on the S&P 500 suggests deeper risk to 1980-1972 (Feb/Dec lows) and 1940 (pattern projection). This means that weekly uptrend support from late 2011 near 2028 is at risk. A failure to regain the 200-day MA near 2078 on rallies keeps the bears in immediate control.

 

A quick reminder on Dow Theory:

The Dow Theory was created by Charles Dow over 100 years ago. The theory uses the Dow Jones Industrial (INDU) and Transportation Averages (TRAN) as a gauge of the US equity market's primary trend.

 

When both the INDU and TRAN are rallying to new highs, the Dow Theory is on a confirmed buy signal and the primary trend is up. When both the INDU and TRAN are declining to new lows, the Dow Theory is on a confirmed sell signal and the primary trend is down.

 

The INDU and TRAN must confirm. When they do not, the existing Dow Theory signal enters into a nonconfirmation phase. This is either a secondary correction ahead of a reconfirmation of the existing signal or a transition period ahead of a reversal of the existing signal

* * *

So what does this mean? Well, if this report had been authored by BofA's former chief technician MacNeil Curry whose Gartmanesque track record was almost as good as that of Tom Stolper, we would say the time to buy has arrived (Curry is gone as of this month - he, like Stolper, just couldn't take it). However, in this case we will give it the benefit of the doubt: maybe, just maybe, a sellside "strategist" is actually right for once.

 

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Fri, 08/21/2015 - 12:35 | 6451988 Shizzmoney
Shizzmoney's picture

Keep selling, assholes!

Fri, 08/21/2015 - 12:36 | 6451995 HonkyShogun
HonkyShogun's picture

Jump, you fuckers!

Fri, 08/21/2015 - 12:39 | 6452006 knukles
knukles's picture

Amazing the BS on the MSM.  The CBS radio guy yesterday late said that it's just some early selling and the buyers will likely come back in later in the day after it's settled down, so don't panic, etc., etc., etc.
Nothing to see here, move along
Margin calls and collateral postings, anyone?  (The latter demands UST's or similar in most cases, folks)

Fri, 08/21/2015 - 13:00 | 6452083 Fester
Fester's picture

The roof, the roof, the is on fire...

Fri, 08/21/2015 - 13:04 | 6452100 Tom Servo
Tom Servo's picture

It will have to finish "well off the lows", doesn't it ???

 

lol

 

Fri, 08/21/2015 - 13:04 | 6452101 Never One Roach
Never One Roach's picture
5 States Where Foreclosures Heated Up in July

 

http://finance.yahoo.com/news/5-states-where-foreclosures-heated-0930464...

Fri, 08/21/2015 - 12:37 | 6452000 Ruffmuff
Ruffmuff's picture

Dow theory:  When you start shitting your pants then hit the sell button.

Fri, 08/21/2015 - 12:40 | 6452010 knukles
knukles's picture

So that's where the phrase "How now brown Dow" camr from!  Learn somthing useful every day on the Hedge.

Fri, 08/21/2015 - 13:00 | 6452082 Tinky
Tinky's picture

I like it! And I hope all of the London-based traders end up living in Slough.

Fri, 08/21/2015 - 12:41 | 6452012 This is it
This is it's picture

No seriously, enough with smart witty comments.

Is this where the fan hits the shit?

Fri, 08/21/2015 - 12:45 | 6452023 Sanity Bear
Sanity Bear's picture

The fan hit the shit years ago. This is where the motherfuckers on Wall Street who caused it to happen start getting what they have so rightfully earned.

 

Get out of the mentality that it's only serious when Wall Street bonuses are at risk.

Fri, 08/21/2015 - 13:09 | 6452122 upWising
upWising's picture

PLEASE, PLEASE, people!    Decorum!

When the fæces hit the whirling blades...

 

That is so much more poetic, though I do like BLOODBATH & BEYOND......

Fri, 08/21/2015 - 15:00 | 6452587 mouthbreather
mouthbreather's picture

Who made you Judge Judy and executioner? - Homer (S.)

Fri, 08/21/2015 - 12:44 | 6452020 iinthesky
iinthesky's picture

So I should buy more stoxx right? Its the patriotic thing to do!

Fri, 08/21/2015 - 12:37 | 6452001 Consuelo
Consuelo's picture

 

 

So what do you think they'll put a few $$$planks under...?   10% slide?   More?  Or does it have to be a Fucking cascade shitstorm down a mountainside...?

Fri, 08/21/2015 - 12:47 | 6452027 Ruffmuff
Ruffmuff's picture

Damn too early to tell consiggo. Usually turns to a fenzy of high volitility and whipsaws and a shitload of grinning BEARS!!!

Fri, 08/21/2015 - 12:50 | 6452038 Government need...
Government needs you to pay taxes's picture

Maybe they are doing some real price discovery, and wont support equity markets til they are down 40%.

Fri, 08/21/2015 - 13:13 | 6452143 upWising
upWising's picture

PRICE DISCOVERY?    Wait I found it!

[Back in the early 70's, when bumper stickers were all the rage, an interesting campaign was launched by a Christian organization.   "I FOUND IT" bumper stickers proliferated but initially no one knew what it referred to.  Later it turned out that it was SALVATION that had been found.

Another bumper sticker soon followed which stated "I FOUND IT and now my finger stinks."]

 

Sums up this market.

Fri, 08/21/2015 - 13:18 | 6452161 Ruffmuff
Ruffmuff's picture

Below the I found it sticker was shit happens sticker, that's why your fingers stink.

Fri, 08/21/2015 - 12:38 | 6452004 KnuckleDragger-X
KnuckleDragger-X's picture

And here I thought it was the markets giving them the finger. It's gonna be tough for the BofA crowd to justify their bonuses after this bit of fun.....

Fri, 08/21/2015 - 12:53 | 6452057 Government need...
Government needs you to pay taxes's picture

Unless the big banksters have been tipped off by the former BalSach Fedsters.  If the tip was given, then bonuses will be excellent again this year, and those dollars would buy more in a deflation (i.e. the market clears ~50% down).

Fri, 08/21/2015 - 13:06 | 6452109 KnuckleDragger-X
KnuckleDragger-X's picture

Your assuming evil intentions, but incompetence is more likely.......

Fri, 08/21/2015 - 15:47 | 6452853 Government need...
Government needs you to pay taxes's picture

Of course the BalSach Fedsters never, and I do mean NEVER, tip off their active Golden Balsack colleagues.

Fri, 08/21/2015 - 13:06 | 6452107 NoVa
NoVa's picture

Keep?

Sell?

 

I own SPXU. up 12% in last two days - advice please.

Thx,

NoVa

Fri, 08/21/2015 - 13:32 | 6452241 CrimsonAvenger
CrimsonAvenger's picture

My advice: Don't ask anonymous people on the internet for trading guidance, especially when some of them think that you losing your shirt would be hilarious.

Fri, 08/21/2015 - 13:41 | 6452292 Smiddywesson
Smiddywesson's picture

Nobody can know, but I ask myself, what's to stop them from running the market back up this weekend? 

Fri, 08/21/2015 - 12:39 | 6452007 tocointhephrase
tocointhephrase's picture

Come on guys and girls (and bots) its different this time!

Fri, 08/21/2015 - 12:49 | 6452032 Urban Redneck
Urban Redneck's picture

That depends on one's perspective, and the framework of their own normalcy bias.

To recycle what I posted this morning-

... The most important line is the 20-month moving average, which actually (with one minor exception) correctly identifies the trend (bull or bear) over the last hundred plus years of NYSE data.  

We are at the crux, and the name of the game for those who seek Profit! in perpetually rigged equity markets will change from BTFD® to STFU®  -- (Sell The Fucking Uptick) if we don't change course soon.

Fri, 08/21/2015 - 13:35 | 6452258 Wahooo
Wahooo's picture

By the time it hits the 600-day moving average how much is left to fall?

Fri, 08/21/2015 - 13:46 | 6452318 Urban Redneck
Urban Redneck's picture

A lot.  Except in the one instance... where they intervened forcefully and quickly, which didn't leave much opportunity for anyone other than a (intra) day trader being on the wrong side of the trend.  

I think they have the weekend to get their act in order, or the changing sentiment might move markets markets in excess of their containment abilities, which would make for a volatile end to Bankster Recovery Summer VI, which would setup for an eerie rinse, repeat of the fall of 2008.

Fri, 08/21/2015 - 14:08 | 6452400 Wahooo
Wahooo's picture

I'm not sure market sentiment will give them much slack. If they decide not to raise rates, that's a signal that all is not well. If they do raise rates, stocks are screwed.

Fri, 08/21/2015 - 12:39 | 6452008 silverer
silverer's picture

It's so bad, not even any dead cats to bounce.

Fri, 08/21/2015 - 12:48 | 6452029 Consuelo
Consuelo's picture

 

 

Bloated carcasses tend to explode in impact...

 

 

Fri, 08/21/2015 - 12:49 | 6452033 Ruffmuff
Ruffmuff's picture

Fat cats always bounce well.

Fri, 08/21/2015 - 12:41 | 6452011 Xatos
Xatos's picture

I guess we've arrived? I was half expecting a Stawkshank Redemption today.

Fri, 08/21/2015 - 15:27 | 6452714 zeroaccountability
zeroaccountability's picture

Funny, I know a guy named Shaw who started a business buying and selling pork and beef products, you know, like loins and shoulders, etc.

 

Ended up naming the company, "Shaw's Shank Redemption".TM

Fri, 08/21/2015 - 13:08 | 6452018 H H Henry P P P...
H H Henry P P P Paulson's picture

Does anyone else think we're witnessing a massive bear trap?  The markets will face a 20%+ correction, and everybody will believe THAT was the big kahuna and jump in thinking the worst is now over.  This will flush out the general negativity the traders have on this 6-year rally, CNBC/Fox Business/Times will all start talking green shoots again and everybody will be singing kumbaya while holding hands around the fire pit while we rip to a retest of 2130 throughout next year... AND THEN the REAL crash hits this time next year... just in time for us to blame it on Obama.

I wish we rather see another 1987 Event and Asian futures crash this Sunday afternoon.

Fri, 08/21/2015 - 14:22 | 6452453 New_Meat
New_Meat's picture

+1929

oops +1932

Fri, 08/21/2015 - 15:29 | 6452742 zeroaccountability
zeroaccountability's picture

No, this will end up leaving everybody's face ripped off like that one left lying inside the tank in the movie 'Fury'.

Fri, 08/21/2015 - 12:42 | 6452019 Bill of Rights
Bill of Rights's picture

In other news

City of Hillview, Ky. files for bankruptcy

http://www.whas11.com/story/news/local/2015/08/20/city-hillview-ky-files...

Fri, 08/21/2015 - 13:03 | 6452091 insanelysane
insanelysane's picture

There is some crony capitalism going on there.  The city owes $15 million for 40 acres to some company???  I did the calc and that is $375,000 per acre.  $3,750 per acre would be on the high side.  Methinks the gov person agree to the purchase got a little kick back, I mean donation to their favorite charity.

Fri, 08/21/2015 - 12:45 | 6452021 Squid Viscous
Squid Viscous's picture

thanks for the heads up, assholes

Fri, 08/21/2015 - 12:45 | 6452022 I Write Code
I Write Code's picture

Butterfingers Yellen.

Fri, 08/21/2015 - 12:47 | 6452025 polo007
polo007's picture

http://www.reuters.com/article/2015/08/21/us-usa-fed-inflation-idUSKCN0Q...

US Federal Reserve tightening cycle scenario involves risky bet on inflation

By Howard Schneider

August 21, 2015

Federal Reserve officials planning to lift interest rates as soon as September have been encouraged by solid U.S. jobs growth, but inflation holds the key to how far the Fed can go in moving rates away from zero.

Fed officials have said that they do not need to see prices accelerate to start raising rates after six years near zero, and "lift-off" appears nearly ordained by a 5.3 percent unemployment rate, the lowest since April of 2008.

But it would be a leap of faith to move any further without proof that prices are on the rise, say current and former officials familiar with the central bank's debate and the current state of inflation research.

If prices remain stalled as the Fed tightens, inflation-adjusted "real" rates would rise faster than the Fed wants, and threaten the recovery. Given the uncertainty among economists about how inflation works in the post-crisis world, it may be risky to assume higher prices will necessarily follow a tightening job market.

"There is a big component of inflation that is just going to be idiosyncratic and unexplained," leaving policymakers to take their best guess about it, said former Fed research director David Stockton.

He said that after an initial rate increase, Fed Chair Janet Yellen would lead her colleagues on a "cold, dispassionate examination" of what the inflation data are actually showing.

"If inflation is not moving back to target ... then she can argue for a go-slow approach."

NEW DYNAMICS

Inflation will be the key topic at the Fed's annual Jackson Hole economic conference on Aug. 27-29 and the gathering is likely to highlight how little policymakers and economists feel they understand about the behavior of something so central to monetary policy.
 
Inflation did not fall as much as expected during the 2007-2009 recession, it has not risen as much as expected during the recovery, and there is suspicion it may remain hard to budge, said Michael Owyang, an assistant vice president at the St. Louis Federal Reserve Bank.

"There has been a lot of new research. Volumes of new research. And I am not sure there is a consensus about how policy affects inflation at the zero lower bound," Owyang said, referring to the fact that the Fed's benchmark has been held near zero since late 2008. "Inflation dynamics have changed."

The rest of the world is not helping. A weak global economy has depressed world commodity prices. The prospect of the Fed raising rates has boosted the dollar, further undercutting inflation through lower import prices.

That has confounded the Fed's forecasts for a year now, and according to minutes of its July meeting remains a central concern - and one of the risks that could delay an initial rate hike beyond the Sept. 16-17 policy meeting. After the minutes laid out the internal debate about inflation, investors cut their expectations for a September "liftoff" in favor of December.

The Fed, keen to move away from zero and create some policy wiggle room, may still move. But at some point it needs inflation to do so as well.

Fri, 08/21/2015 - 12:51 | 6452045 Consuelo
Consuelo's picture

 

 

"Federal Reserve officials planning to lift interest rates as soon as September have been encouraged by solid U.S. jobs growth"

 

They know good & Gawd-damned well what that 'solid U.S. jobs growth' is all about - which quite neatly explains their ongoing consternation (or is that, Constipation?) of whether to $Shit, or get off the pot...

Fri, 08/21/2015 - 13:02 | 6452088 Rock On Roger
Rock On Roger's picture

Thomson Rueters is Rothschild zio-prop.

Fri, 08/21/2015 - 13:14 | 6452144 Tall Tom
Tall Tom's picture

I hope that they raise those rates.

 

Mr. Yellen...Raise those rates and crater this Financial System once and for all. Pleez...For the children.

Fri, 08/21/2015 - 13:51 | 6452335 Pareto
Pareto's picture

Every word of this is fucking garbage!!  "Inflation dynamics have changed." "Create some poicy wiggle room."

 

FUCK OFF

 

Stop the insanity and END THE FUCKING FED!

Fri, 08/21/2015 - 12:51 | 6452047 Yen Cross
Yen Cross's picture

 I wondered why the pages of Z/H haven't been blessed with MacNeil Curry ramblings, as of late.

  Have fun at the glue factory MacNeil.

Fri, 08/21/2015 - 12:54 | 6452056 medium giraffe
medium giraffe's picture

“The flame that burns twice as bright burns half as long.”

- Some old chinese guy.

Fri, 08/21/2015 - 13:02 | 6452087 Consuelo
Consuelo's picture

Wasn't that Mr. Tyrell...?

Fri, 08/21/2015 - 12:54 | 6452058 Squid Viscous
Squid Viscous's picture

ok down another 325, i'm turning on CNBS for the first time in months just for the laugh...

Fri, 08/21/2015 - 13:06 | 6452108 breakyoself
breakyoself's picture

and laughs you shall get. The so-called journalists seem perplexed. It's time for Brian to cry about the falling oil.

Fri, 08/21/2015 - 12:54 | 6452060 Thisisbullishright
Thisisbullishright's picture

What are these theories and signals with which you speak of?

None of that matters anymore, just BTFD!

 

Fri, 08/21/2015 - 13:01 | 6452084 Heywood Jahblohmee
Heywood Jahblohmee's picture

OKay, dipshit go for it.  ROFLMAO

Fri, 08/21/2015 - 13:17 | 6452150 Thisisbullishright
Thisisbullishright's picture

Down-voters....that was me being SNARKY!

 

Fri, 08/21/2015 - 13:31 | 6452205 Tall Tom
Tall Tom's picture

Do you neeeeed validation...like a WOMAN?

 

Why do you care about the damned arrows?

 

I understood your snark above.

 

But I am puking at reading this crap from you...whining like a little bitch.

 

Perhaps you do not need to be at Fight Club.

 

Perhaps Validation Club or Agreement Club will suit your tastes better.

 

And as I do not know where they are at, nor, do I want to know, you will have to seek those out for yourself..I know...I know...Too much personal responsibility.

 

Grow a pair of balls and a skin.

Fri, 08/21/2015 - 13:36 | 6452261 Heywood Jahblohmee
Heywood Jahblohmee's picture

August 21, 2015 
Rome, Italy

I grew up in Texas in a middle class household to two very hard-working parents.

And to say we were middle class may even be a stretch. We were definitely clinging to the bottom rung of middle class.

Money was always a problem. And my parents each held multiple jobs in addition to making a go of their own business in order to make ends meet.

I never missed a meal. But the constant stress and worry about how we were going to pay the bills that month was palpable.

We didn’t have medical insurance or any savings, meaning we were just one illness or urgency away from being wiped out.

There always seemed to be too much month at the end of the money. So every penny mattered.

We didn’t buy anything unless it was (a) necessary, and (b) a major bargain.

Things eventually got better, as they tend to do. My parents found their financial footing and became more successful. And I’ve done well in life.

But I’ve taken those middle class values with me into the world, and they’ve deeply impacted my own investment ethos.

Just like what was drilled into me when I was a kid, I can’t stomach overpaying for anything. Even when investing, I’m only interested in a major bargain.

This happens occasionally in investment markets, though it’s extremely rare today.

There are plenty of profitable, well-managed companies out there. But they’re incredibly expensive. Twitter, for example, has a valuation of $17 billion. Yet it lost nearly $600 million last year.

Netflix manages to grind out a profit; but the company is valued at more than 200 times its earnings.

AirBnB is a private company. Yet its value is at least $25 billion even though it doesn’t own a scrap of real estate or turn a profit.

These all strike me as extremely expensive. And ludicrous.

But it’s unfortunately the norm these days.

Most financial assets are in major bubbles, whether it’s real estate (yes US housing is at that point again), stocks, bonds, private equity, etc.

So it’s very difficult for anyone with middle class values to invest... unless you expand your thinking to the whole world.

There are pockets of value out there if you look hard enough-- like mining companies and developing markets.

Let me give you an example of something that I bought recently, and talk you through my thought process. As a caveat, I should tell you that I generally dislike stocks.

Stock markets are a rigged game designed to extract wealth from the little guy and put it in the pockets of investment banks and high frequency traders.

So for me to be interested, there better be some serious value on the table.

Royal Dutch Shell, one of the world’s largest oil and gas companies, is a good example.

Thanks to the slide in oil prices down to $40 (and perhaps lower), Shell’s stock price has been hammered.

So the company is trading right now at the value of its net tangible assets.

In other words, by buying Shell stock, I’m purchasing every asset the company owns at COST.

Yet on top of that, they pay a 7% dividend yield.

In real estate, it’s like being able to purchase a beautiful house in the best part of town at a price that barely meets the cost of construction.

And on top of that, there’s built-in rental income that starts putting money in your pocket right away.

This is a solid deal in my mind, especially for a company that has a long-term history of consistently growing its dividend yield.

(By the way, I can reinvest the dividends that they pay me into more shares, so I’ll be continually adding to my position over time.)

The added benefit is that Shell is not a US company.

I bought the stock overseas (I’ll explain why next week) and paid in British pounds.

So I could make money off the dividend. Or if the stock price goes up. Or if oil prices go up. Or if the pound appreciates against the dollar.

That’s one of the primary benefits of investing internationally: there are a LOT of different ways to make money.

And it makes a ton of sense to do this now that the dollar is at a 10+ year high against nearly every major currency out there.

(Again, developing markets are looking especially cheap, and I also bought into some of them as well, including Russian and Colombia.)

To be clear, I’m not recommending that you follow me into this.

It’s entirely possible that Shell’s stock gets cheaper. In fact, I’m expecting it. I also expect it will stay cheap for a very long time.

I just have the willingness to wait, because I know that it’s hard to lose when you buy profitable assets so cheap. Plus, Shell has seen worse in its history.

During World War I, for example, German forces wiped out over 20% of Shell’s production capacity.

So I’m confident they’ll be able to weather $40 oil without collapsing.

Have a good weekend, 
 
Simon Black 
Founder, SovereignMan.com  
Fri, 08/21/2015 - 12:58 | 6452072 Sturm und Drang
Sturm und Drang's picture

Did they install a dive klaxon at the exchange?

Fri, 08/21/2015 - 13:07 | 6452104 jellen
jellen's picture

"SHEMITAH" Motha fuckas, I believe this to be a self fulfilling prophecy. All the jews will pull there money out of the markets before Sep 15

Fri, 08/21/2015 - 13:10 | 6452117 polo007
polo007's picture

According to MacNeil Curry's LinkedIn profile, he is currently employed by Stone Milliner Asset Management as a portfolio manager.

https://www.linkedin.com/pub/c-macneil-curry-cfa-cmt/7/a87/94a?trk=seokp...

C. MacNeil Curry, CFA, CMT

Portfolio Manager

Zürich Area, SwitzerlandFinancial Services

Current

Stone Milliner Asset Management

Previous

Bank of America Merrill Lynch, Barclays Capital, IDEAglobal

Education

University of Pennsylvania

Experience

Portfolio Manager

Stone Milliner Asset Management

August 2015 – Present (1 month)

Macro investment manager

Head of Global Technical Strategy

Bank of America Merrill Lynch

April 2013 – August 2015 (2 years 5 months)

head of foreign exchange, fixed income, and commodity technical strategy

Head of foreign exchange and interest rate technical strategy

Bank of America Merrill Lynch

January 2011 – April 2013 (2 years 4 months)

head of global technical strategy with a focus on macro markets

Director, Technical Strategy

Barclays Capital

February 2005 – January 2011 (6 years)

North American technical strategist with a focus on foreign exchange, fixed income and commodity markets

FX Technical Strategist

IDEAglobal

1999 – 2005 (6 years)

Foreign exchange technical analyst

Trader

Refco

1999 – 1999 (less than a year)

commodity trader

http://stonemilliner.com/index.html

About Stone Milliner

Stone Milliner is a London and Zug based global alternative asset management company.

Founded in 2012, the strategy is discretionary, directional global macro across all asset classes with focus on liquidity.

Fri, 08/21/2015 - 13:37 | 6452269 Heywood Jahblohmee
Heywood Jahblohmee's picture

August 21, 2015 
Rome, Italy

I grew up in Texas in a middle class household to two very hard-working parents.

And to say we were middle class may even be a stretch. We were definitely clinging to the bottom rung of middle class.

Money was always a problem. And my parents each held multiple jobs in addition to making a go of their own business in order to make ends meet.

I never missed a meal. But the constant stress and worry about how we were going to pay the bills that month was palpable.

We didn’t have medical insurance or any savings, meaning we were just one illness or urgency away from being wiped out.

There always seemed to be too much month at the end of the money. So every penny mattered.

We didn’t buy anything unless it was (a) necessary, and (b) a major bargain.

Things eventually got better, as they tend to do. My parents found their financial footing and became more successful. And I’ve done well in life.

But I’ve taken those middle class values with me into the world, and they’ve deeply impacted my own investment ethos.

Just like what was drilled into me when I was a kid, I can’t stomach overpaying for anything. Even when investing, I’m only interested in a major bargain.

This happens occasionally in investment markets, though it’s extremely rare today.

There are plenty of profitable, well-managed companies out there. But they’re incredibly expensive. Twitter, for example, has a valuation of $17 billion. Yet it lost nearly $600 million last year.

Netflix manages to grind out a profit; but the company is valued at more than 200 times its earnings.

AirBnB is a private company. Yet its value is at least $25 billion even though it doesn’t own a scrap of real estate or turn a profit.

These all strike me as extremely expensive. And ludicrous.

But it’s unfortunately the norm these days.

Most financial assets are in major bubbles, whether it’s real estate (yes US housing is at that point again), stocks, bonds, private equity, etc.

So it’s very difficult for anyone with middle class values to invest... unless you expand your thinking to the whole world.

There are pockets of value out there if you look hard enough-- like mining companies and developing markets.

Let me give you an example of something that I bought recently, and talk you through my thought process. As a caveat, I should tell you that I generally dislike stocks.

Stock markets are a rigged game designed to extract wealth from the little guy and put it in the pockets of investment banks and high frequency traders.

So for me to be interested, there better be some serious value on the table.

Royal Dutch Shell, one of the world’s largest oil and gas companies, is a good example.

Thanks to the slide in oil prices down to $40 (and perhaps lower), Shell’s stock price has been hammered.

So the company is trading right now at the value of its net tangible assets.

In other words, by buying Shell stock, I’m purchasing every asset the company owns at COST.

Yet on top of that, they pay a 7% dividend yield.

In real estate, it’s like being able to purchase a beautiful house in the best part of town at a price that barely meets the cost of construction.

And on top of that, there’s built-in rental income that starts putting money in your pocket right away.

This is a solid deal in my mind, especially for a company that has a long-term history of consistently growing its dividend yield.

(By the way, I can reinvest the dividends that they pay me into more shares, so I’ll be continually adding to my position over time.)

The added benefit is that Shell is not a US company.

I bought the stock overseas (I’ll explain why next week) and paid in British pounds.

So I could make money off the dividend. Or if the stock price goes up. Or if oil prices go up. Or if the pound appreciates against the dollar.

That’s one of the primary benefits of investing internationally: there are a LOT of different ways to make money.

And it makes a ton of sense to do this now that the dollar is at a 10+ year high against nearly every major currency out there.

(Again, developing markets are looking especially cheap, and I also bought into some of them as well, including Russian and Colombia.)

To be clear, I’m not recommending that you follow me into this.

It’s entirely possible that Shell’s stock gets cheaper. In fact, I’m expecting it. I also expect it will stay cheap for a very long time.

I just have the willingness to wait, because I know that it’s hard to lose when you buy profitable assets so cheap. Plus, Shell has seen worse in its history.

During World War I, for example, German forces wiped out over 20% of Shell’s production capacity.

So I’m confident they’ll be able to weather $40 oil without collapsing.

Have a good weekend, 
 
Simon Black 
Founder, SovereignMan.com  
Fri, 08/21/2015 - 14:27 | 6452470 New_Meat
New_Meat's picture

I was a young piglet before the FIRST time you posted this crap. - Ned

Fri, 08/21/2015 - 13:10 | 6452125 youngman
youngman's picture

I am feeling pretty good...I bought gold and silver one day before the bottom was hit...that is pretty good for me.....I am usually on the wrong side of the deal...

Fri, 08/21/2015 - 13:21 | 6452179 Tall Tom
Tall Tom's picture

The bottom in Gold has not hit. Do not misuderstand. I suggest substantial God ownership in Physical.

 

Gold will see $1000 by November. Silver will visit $10. Oil will test $22. And the DJIA will be at 5000.

 

No sir. This shitstorm is just beginning.

Fri, 08/21/2015 - 13:48 | 6452326 Pareto
Pareto's picture

+1 Tom, except I would add the caveat that the lower the GLD OR THE SLV head, the higher the premium to get it in your hand.  While gld might go to $1000, it will still cost you almost the same as right now to get it in your hand.  I think silver could go to $5.  It will still cost me $20 CDN to get it in my hand.

Fri, 08/21/2015 - 13:13 | 6452139 I Write Code
I Write Code's picture

Did someone wipe the Dow, with a cloth?

Fri, 08/21/2015 - 14:28 | 6452472 New_Meat
New_Meat's picture

Hills did, after she finished in the bathroom.

Fri, 08/21/2015 - 13:13 | 6452140 Quinvarius
Quinvarius's picture

We will see if Goldman uses the same algo they used in 2009 at the end of every day to crash the market.  In hindsight, it is so obvious what was really going on back then.  Last 15 minutes of every day, down 20 S&P points.  Middle of the night, Down 20 S&P points.  Then GS tries to have some guy arrested over a market crashing algo they think he stole.  So lets see if this crash is banker approved or not.

Fri, 08/21/2015 - 13:13 | 6452141 Chuck Knoblauch
Chuck Knoblauch's picture

This is war, boy!

Fri, 08/21/2015 - 13:15 | 6452147 MauritiusGold
MauritiusGold's picture

I suspect QE4 or some bollocks announcement tonight to try and take this green..... more soothing words from the pricks in charge.
It'll fail even if they do, and I reckon the next rally wherever it emerges will be the short of the century.....
Perhaps the weekend will have a Nixon style gold standard announcement except in reverse to what he did.... :)

Fri, 08/21/2015 - 13:17 | 6452156 bnbdnb
bnbdnb's picture

10 days left.

Fri, 08/21/2015 - 13:26 | 6452211 JDFX
JDFX's picture

Has the STOPLER indicator issued a sell reco, yet ?  Buy when his spidy senses scream SELL. Which is likely many points lower , just before the liquidty tidal wave comes crashin in !  ;)  

 

CNBC talkin heads, sounds like they're snorting crack off camera. Their voices are wavering a bit........

Come on Leisman, tell us the feds hiking rates cos you heard Yellen fart out SOS of a rate hike.  

:)  

Fri, 08/21/2015 - 13:35 | 6452259 Heywood Jahblohmee
Heywood Jahblohmee's picture

August 21, 2015 
Rome, Italy

I grew up in Texas in a middle class household to two very hard-working parents.

And to say we were middle class may even be a stretch. We were definitely clinging to the bottom rung of middle class.

Money was always a problem. And my parents each held multiple jobs in addition to making a go of their own business in order to make ends meet.

I never missed a meal. But the constant stress and worry about how we were going to pay the bills that month was palpable.

We didn’t have medical insurance or any savings, meaning we were just one illness or urgency away from being wiped out.

There always seemed to be too much month at the end of the money. So every penny mattered.

We didn’t buy anything unless it was (a) necessary, and (b) a major bargain.

Things eventually got better, as they tend to do. My parents found their financial footing and became more successful. And I’ve done well in life.

But I’ve taken those middle class values with me into the world, and they’ve deeply impacted my own investment ethos.

Just like what was drilled into me when I was a kid, I can’t stomach overpaying for anything. Even when investing, I’m only interested in a major bargain.

This happens occasionally in investment markets, though it’s extremely rare today.

There are plenty of profitable, well-managed companies out there. But they’re incredibly expensive. Twitter, for example, has a valuation of $17 billion. Yet it lost nearly $600 million last year.

Netflix manages to grind out a profit; but the company is valued at more than 200 times its earnings.

AirBnB is a private company. Yet its value is at least $25 billion even though it doesn’t own a scrap of real estate or turn a profit.

These all strike me as extremely expensive. And ludicrous.

But it’s unfortunately the norm these days.

Most financial assets are in major bubbles, whether it’s real estate (yes US housing is at that point again), stocks, bonds, private equity, etc.

So it’s very difficult for anyone with middle class values to invest... unless you expand your thinking to the whole world.

There are pockets of value out there if you look hard enough-- like mining companies and developing markets.

Let me give you an example of something that I bought recently, and talk you through my thought process. As a caveat, I should tell you that I generally dislike stocks.

Stock markets are a rigged game designed to extract wealth from the little guy and put it in the pockets of investment banks and high frequency traders.

So for me to be interested, there better be some serious value on the table.

Royal Dutch Shell, one of the world’s largest oil and gas companies, is a good example.

Thanks to the slide in oil prices down to $40 (and perhaps lower), Shell’s stock price has been hammered.

So the company is trading right now at the value of its net tangible assets.

In other words, by buying Shell stock, I’m purchasing every asset the company owns at COST.

Yet on top of that, they pay a 7% dividend yield.

In real estate, it’s like being able to purchase a beautiful house in the best part of town at a price that barely meets the cost of construction.

And on top of that, there’s built-in rental income that starts putting money in your pocket right away.

This is a solid deal in my mind, especially for a company that has a long-term history of consistently growing its dividend yield.

(By the way, I can reinvest the dividends that they pay me into more shares, so I’ll be continually adding to my position over time.)

The added benefit is that Shell is not a US company.

I bought the stock overseas (I’ll explain why next week) and paid in British pounds.

So I could make money off the dividend. Or if the stock price goes up. Or if oil prices go up. Or if the pound appreciates against the dollar.

That’s one of the primary benefits of investing internationally: there are a LOT of different ways to make money.

And it makes a ton of sense to do this now that the dollar is at a 10+ year high against nearly every major currency out there.

(Again, developing markets are looking especially cheap, and I also bought into some of them as well, including Russian and Colombia.)

To be clear, I’m not recommending that you follow me into this.

It’s entirely possible that Shell’s stock gets cheaper. In fact, I’m expecting it. I also expect it will stay cheap for a very long time.

I just have the willingness to wait, because I know that it’s hard to lose when you buy profitable assets so cheap. Plus, Shell has seen worse in its history.

During World War I, for example, German forces wiped out over 20% of Shell’s production capacity.

So I’m confident they’ll be able to weather $40 oil without collapsing.

Have a good weekend, 
 
Simon Black 
Founder, SovereignMan.com  
Fri, 08/21/2015 - 13:41 | 6452294 DowTheorist
DowTheorist's picture

bofa Dow Theory reading corresponds to the so called "classical/Rhea" Dow Theory.

 

This signal has been also confirmed by an alternative reading of the Dow Theory which included the S&P 500, as explained here:

http://www.dowtheoryinvestment.com/2015/08/dow-theory-update-for-august-...

 

So, any way we cut it, it seems that the odds favor lower prices.

Fri, 08/21/2015 - 13:45 | 6452315 Pareto
Pareto's picture

+100 for the reference to Rhea.  And in any event, while you might not want to short here - why would one ever buy?  you know the sellers are goin gto step it up once stocks approach resistance.  I agree.  Odds favor lower prices.  Even if there is the 3:00PM ramp job, the trend has been redefined - unequivocally.

Fri, 08/21/2015 - 15:35 | 6452773 Panafrican Funk...
Panafrican Funktron Robot's picture

Oil-based sovereign wealth funds:  Norway, UAE, Saudi Arabia, Kuwait = $2.9 trln in assets

Two largest Chinese SWFs:  $1.3 trln in asssets

$4.2 trln investment market, their backing countries are doing pants-shittingly bad at their primary sources of income.  Who's going to be able to come and save the day in size?

 

Fri, 08/21/2015 - 16:51 | 6453200 DowTheorist
DowTheorist's picture

While it is true that the primary trend has turned bearish, with all due respecto to BofA, I feel that under classical/Rhea Dow Theory no primary bear market signal has been signaled yet.

 

BofA confuses "important lows" with "secondary reaction lows". The latter are the only relevant lows the be violated so that we can declare a primary bear market.

 

Under classical Dow Theory the January 2015 did not qualify as secondary reaction lows, just "lows".

 

More about this here:

 

http://www.dowtheoryinvestment.com/2015/08/dow-theory-special-issue-was-...

 

However, it is true that under Schannep's Dow Theory (which is clearly superior to the "classical" one), a primary bear market has been signaled.

 

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