One can finally put all references to “cash on the sidelines” in the trash can, not only for purely logistical reasons (when someone buys a stock, the seller ends up with the cash), but also from a purely cash allocation basis. According to the latest BofA flow show report, Michael Hartnett writes that as of the latest week, private client cash – i.e., high net worth individuals, or those who still allocate capital to single-stocks and ETFs on a discretionary basis (unlike the broader US public which has long ago given up on the stock market), is now at a record low, taking out the cash levels observed in the period just pri...
Tech Isn’t A Bubble I have made it clear that the current stock market isn’t like the technology bubble of the 1990s. The biggest reason is because technology stocks aren’t overvalued compared to their earnings. The most misleading chart that bears show is the chart of the Nasdaq which makes it look like we are in another bubble just because it has surpassed the 2000 high. It matters what you’re getting when you purchase the Nasdaq; price doesn’t indicate value. Now you’re getting stronger companies with more earnings. There are expensive stocks on a P/E ratio like Netflix and Amazon, but Apple, Alphabet, Microsoft, and Facebook h...
Review & Update Analyzing The Bull Market Thesis Sector & Market Analysis 401k Plan Manager Stocks Rise Following Breakout In last week’s missive “Bulls Run On Yellen’s Easy Money,” I addressed the breakout and why we increased equity exposure modestly in portfolios. “However, this changed this past week as Yellen uttered the two magic words: ‘EASY MONEY.’ Okay, it wasn’t exactly two words. It was actually: ‘Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance.’ In other words, by saying ...
Deals and Financings C-Bridge Capital, a China private equity firm with a life science focus, closed its second fund, C-Bridge Healthcare Fund II, at its $400 million cap (see story). C-Bridge plans to invest in late-stage companies in the fields of bio-technology, pharmaceuticals, medical devices and health care, particularly those with cross-border ambitions. C-Bridge is active in Asia-Pacific — especially China — the US and Israel. Its first healthcare fund closed in 2014 after raising $200 million. iKang Healthcare (KANG) will form an investment partnership with China Industrial Asset Management to build and/or buy more C...
Financial markets have been defined by fading Fed rate hike bets in recent weeks. An FOMC rate decision and second-quarter US GDP data now threaten that narrative. Euro Forecast: Can the Euro Continue to Defy a Dovish ECB and Soft Data Flow? The Euro faces a telltale period ahead as the bulls’ defiance of a dovish ECB is tested with the passage of top-tier economic data and official commentary. British Pound Forecast: British Pound Falls as Inflation Disappoints, but Will GDP Revive the Trend? The British Pound came into this week with legitimate prospects for bullish continuation. But with inflation printing below expectations, that bu...
In life, if you really want to achieve something — set a goal. Most people start out the New Year by resolving to lose weight or get in shape and fail miserably at those tasks. If on the other hand, everyone resolved to lose just 5 pounds or to walk briskly for 20 minutes twice each week, many of those resolutions would be kept. In order to make goals viable and achievable, they have to be concrete and realistic. As human beings, we are very bad at abstract targets but set a hard number in front of us and we will go after it like a bloodhound on a hunt. Yet when it comes to trading, many gurus will tell you NOT to set goals. The markets...
The broader indices ended mixed while small cap stocks tried to breakout last week as earnings season officially began. Just to recap the first full week of earnings, the data is mixed. So far, nearly all of the big banks reported earnings, and nearly all of them, except for Morgan Stanley, fell on the day they reported. That weighed on the Dow and S&P 500 as investors digested the data. Elsewhere, Netflix jumped to a fresh record high after reporting a big jump in subscribers. Meanwhile, Qualcomm, Microsoft, and eBay all fell after reporting earnings. The good news for the bulls is that the market remains exceptionally strong and the maj...
In this week’s column by Mike Burk, he mentions that the trend in new 52-week highs is not confirming the new highs in the major stock market indexes. Reading between the lines, I think he is suggesting that there is a limit to how high the stock market can go without new 52-week highs for individual stocks. But I don’t think he is suggesting a significant decline in the market. The Longer-Term Outlook The ECRI index finally ticked higher, and M2 growth has bounced. These are good signs, but they still have some work to do before I can say that this chart favors higher stock prices. The Dow Theory indicators are mixed. The Industr...
I think we need to focus on what is happening to the dollar. The intermediate cycle is now 63 weeks long. Clearly that isn’t normal. I’ve maintained for several years that the end game was going to play out in the currency markets. There has to be consequences to printing trillions and trillions of currency units, and leaving interest rates at 0 for 8 years. I don’t think the consequences are going to be deflation. I think the end game will be inflation, just like it was in the 70’s, and just like it was in 2007 and 2008. It’s taken a while to manifest as other countries have jumped into the game and turned on their printing presses...
Let’s take a closer look at recent activity in US Treasuries. The yield on the 10-year note ended the day at 2.24% and the 30-year bond closed at 2.81%. Here is a table showing the yields highs and lows and the FFR since 2007 as of Friday’s close. The 2-10 yield spread is now at 0.88%. The chart below shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since the pre-recession days of equity market peaks in 2007. A Long-Term Look at the 10-Year Note Yield A log-scale snapshot of the 10-year yield offers a more accurate view of the relative change over time. Here is a long look since 1965, starting well be...