Weekend Reading: Breaking Markets - Season II
Submitted by Lance Roberts via RealInvestmentAdvice.com,
Last week, I started the weekly reading list by stating:
“This week has certainly been interesting with the Dow Jones Industrial Average having the worst start to a year…well…ever.”
This week was not much difference as the markets continued their slide into the “worst-start-of-the-year-everer.”
However, with the markets roughly down 7% since the beginning of this year, it certainly has seemed painful as investors have been slammed from all angles. However, as I addressed earlier this year with respect to January statistics, this is well within historical norms. To wit:
“Furthermore, while January’s maximum positive return was just 9.2%, the maximum drawdown for the month was the lowest for all months at -6.79%.”
“However, given the length of the current bull market run from 2009 to present, the risks are mounting that January will likely have consecutive negative performance years which would confirm the ongoing market topping process I discussed previously. Such an outcome would suggest a more conservative approach to investment allocations.”
With the markets now extremely oversold on a short-term basis, it is quite likely that a bounce will occur in the days ahead. Such a bounce will likely be met by sellers wanting to reduce risk of a more substantial correction. But will they be right?
This weekend’s reading list is a collection of articles on the current state of the market. Is the bull still alive or is it being hunted by the bear?
1) Death Throes Of A Bull Market by Anthony Mirhaydari via Fiscal Times
“Fed Chair Janet Yellen will be forced to either acknowledge labor market tightening as reason to continue with the four-hike schedule for 2016 or risk her credibility, belittle job market stability and sound a warning about the risks of lower oil prices and cheap gasoline (sacrilege to regular Americans) by slowing the hiking pace after a single 0.25 percent increase last month.
If she gets it wrong, things could get ugly fast.
The Russell 2000 has dropped all the way back to levels last seen in October 2013 as it has dropped below its 200-week moving average for the first time since 2011.”
But Also Read: It’s Too Early To Call The End Of The Bull by Andrew Bary via Barron’s
2) Market Dive Explained In One Chart by Daniel Alpert via CNBC
“But here’s the brutal bottom line: The non-energy portion of the U.S. current account deficit, relative to GDP, has ballooned by 236 percent since its low in December 2013, during which period the energy deficit fell by 57 percent.”
But Also Read: The U.S. Is Teetering On Edge Of Recession by Robert Reich via TruthDig
Opposing View: No Recession Yet by Caroline Baum via MarketWatch
3) The Bear Comes Out Of Hibernation by Michael Snyder via Zero Hedge
“According to the Bespoke Investment Group, the average stock on that index is down a staggering 26.9 percent from the peak of the market…
Indeed, the Standard & Poor’s 1500 index – a broad basket of large, mid and small company stocks – shows that the average stock’s distance from its 52-week high is 26.9%, according to stats compiled by Bespoke Investment Group through Friday’s close.
‘That’s bear market territory!’ says Paul Hickey, co-founder of Bespoke Investment Group, the firm that provided USA TODAY with the gloomy price data.
So if the average stock has fallen 26.9 percent, what kind of market are we in?
To me, that is definitely bear market territory.”
But Also Read: What Is Jeff Gundlach Predicting For 2016 by John Gittelsohn via Bloomberg
4) We Are Entering “Irrational Pessimism” by David Rosenberg via Financial Post
“’If you can keep your head when all about you are losing theirs and blaming it on you.’
Thank you, Mr. Kipling. Keep saying it over and over.
I have three pieces of advice to all the Nervous Nellies out there: Turn off the TV, focus on the big picture, and review your asset mix so as to use this corrective phase and radical repricing of relative asset prices as an opportunity to rebalance the portfolio.”
But Also Read: RBS Cries “Sell Everything” by Ambrose Evans-Pritchard
Further Read: Big Bad China by Shane Obata via THA Business
5) What Is A Reveral Vs. A Correction by Simon Constable via WSJ
“For the past 12 months the S&P 500 index of large stocks has bounced around, neither continuing the trend upward nor starting a new one downward.
That “sideways” movement is making some market strategists worried that a reversal may occur in which a new downward trend starts. If such a trend does start, these strategists will want to warn investors earlier rather than later.”
But Also Read: Smart Money Turning Bearish by Julia La Roche via Business Insider
And: The Future Ain’t What It Used To Be by Doug Kass via Yahoo Finance
MUST READS
- The Last Hurrah For Job Growth by Louis Woodhill via Real Clear Markets
- US Real Estate 25-60% Overvalued by Chris Matthews via Fortune
- Retired Until No Other Job Available by Salil Mehta via Statistical Ideas
- SNAFU – Situation Normal All ‘FANGed Up by Cliff Asness via AQR
- The Payoff Pitch by Michael Liebowitz via 720 Global
- A 40-55% Reversal Return To Norms by John Hussman via Hussman Funds
- Predicting The Future Is Impossible by Joe Calhoun via Alhambra Partners
- Peak Pessimism: S&P Will Fall By 75% by Tyler Durden via Zero Hedge
- 3 Charts Every Investor Must See by Jesse Felder via The Felder Report
- Complacent Correction Cause For Concern by Dana Lyons via Tumblr
“Better to preserve capital on the downside rather than outperform on the upside” – William J. Lippman
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6) Global Credit Risk
https://www.linkedin.com/pulse/global-credit-risk-john-m-cunningham?trk=...
Hillary needs to use the bathroom and Yellen is occupying it.
lord god man, have you no shame? burning such horrific images indelibly in my mind; oh the pain
I'm peddling fiction.
It's no worse than actual fiction created by Hillary's Kool Aid Brigade:
http://issuu.com/harpercollinschildrensbooks/docs/hillary-rodham-clinton...
Against my better judgement I think I'm going to store a copy so that future generations know exactly why the US cratered. It's because there really were people with this deep a level of moronism.
yep... why "smart" people ignore the limits to growth is bizarre.
Chipotle patrons?
Sick and tired of all this Fed boogeyman stuff on CNBC. They blame them for what is happening after a 25 basis point raise when every other Central Bank on earth is cutting rates. Yeah, the rest of the world is doing great, aren't they???
After the Yellen announcement...Interest rates DECLINED.
EVERYTHING is predicated on a lie.
Most that you hear on CNBS...is a lie.
Stop watching it. Stop watching TeeVee you purveyor of fiction.
But remember. What I write, according to the President, is fictional.
Raise those rates again Yellen.
Pleeeeze...
Except do it this time and do not just jawbone it....as rates have declined since your announcement.
What?!? What do you mean that you are powerless? Have you no...credibility?
Here are some signs of a coming recession.
1. Investors in high-yield bonds are expecting to see their first negative return since the start of the credit crisis in 2008.
http://www.marketwatch.com/story/deteriorating-junk-bonds-flash-warning-signs-for-stocks-2015-12-07?dist=afterbell
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
6. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
there you go again bringing fundamentals into the conversation.
QUESTIONS WE ALL NEED ANSWERED OH MIGHTY FEDERAL RESERVE:
So Janet, please answer these pressing questions:
1) if the gambling public loses everything in their 401ks, will they be able to depend on Social Security in a few years?
2) Does it matter that the National Debt is flying past $20 Trillion and doubled in 7 years?
3) Will the new trillions that you are printing be able to buy things?
4) Will you be able to print enough to keep-up with new debt that is piled on going forward?
5) Will your hubris run out before or after the dollar crashes?
6) Who will replace you when the gig is up and you are put behind bars where you belong?
Here are Janet's answers:
1. You're funny.
2. Not to anybody whose opinion matters to me.
3. Yes, for the moment. That's why you can't have any.
4. Silly prole. Paying the debt is your problem.
5. The dollar's not going to crash short of the South rising again. We have nukes to make sure they don't.
6. Behind bars? Maybe if I worked for the Bank of Israel. Why do you think Stanley came back to the States?
It's been a long day on a long week - at first quick glance on my little iPod Touch screen - I thought the photo icon for this article was one of those Swedish chicks! Yuck! Now I know I need a drink...
This is a staircase to the bottom, and we have a long way down to go...
Aliens. Remember what Hudson yelled out just before the shuttle released and descended to the planet's surface?
"Elevator to Hell, goin' DOWN!"
Has anyone seen Mr. Yellen recently? I haven't... kinda' weird...
In the lead, you included this phrase: "...if she gets it wrong...."
Sir, may I inquire what you believe she has gotten right? From my outsider, uneducated stupid American citizen vantage point, this half man/half woman beast has demonstrated NO ability to improve or correct anything within the domain of her legal responsibility.
Yes, but they are still managing to 'hold the line' at roughly the August lows. They are liquidating everything they have to do it, but they are still managing. Wonder how long it is going to take for the bottom to really fall out? In 2008 it took months until that final 3 days of massive selling.
This is how central planners lose control, it's why China is failing, Japan fails, Euro fails and now the U.S. fails . . . academics hate free markets.
Will she admit that she got it wrong after a 10,000 point drop.
The front page abstract for this article is gibberish, but doesn't seem to appear in the article itself.
This market also appears to be gibberish.
Individual charts look horrible, yet some prices seem very low.
I don't see that fundamentals have changed recently, unless you count Europe being taken over by ISIS news. China has bogus finances? News?
Bill and bond rates *down* in spite of Fed's short term raise, so can't really see to blame them for anything.
I suspect that Yellen has hit the pause button on the market ramp and has switched on the volatilty simulation mode.
This would be done to instill proper sense of risk and fear in the market.
In light of what appears to be gross incompetence, why hasn't she been removed?
I don't think that The Fed sees it that way. You have a group of lackies that follow a dictator like sheep.Yellen follows Bernanke who followed Greenspan. It's the same bullshit.She uses her Stochastic/Equilibrium Models and nothing will change that. It's old and out of date,it was built for an old industrial age.It's like James Rickards says, if you're using the wrong economic models all along, you're not going to see what's wrong. And when you do, it's too late because The Fed doesn't want to and has no desire to understand that the current economic situation is a structural/demographic problem.The NeoCons that control Government are taking the Nation down a path of insolvency at any cost.It will maintain its' military/industrial/prison complex until it is dead bust.