The Nikkei chased to record highs today following yesterdays national holiday. Closing at 26year high (+0.6% on the day) was an impressive performance made even more-so, by the fact the Yen strengthened. Trading around the mid 112’s looks comfortable this week but looks to be moving higher beginning February. Shanghai and Hong Kong were both firmer again closing around +0.3% better. Currency looks to be edging a smidgeon weaker again but looks a little early for that play ahead of the February holidays. Inflation was a lot of the talk in Asia following the purchase size from the BOJ. It hit treasuries more than JGB’s, but that is probably...
It has been well-documented that value stocks have provided higher expected returns than growth stocks. However, there is a great debate about the source of that premium: Is it risk-based or is it related to behavioral errors that create persistent mispricings? There are many papers presenting arguments on both sides. Hence the debate. Cathy Xuying Cao, Chongyang Chen and Vinay Datar contribute to the literature with their study, “Value Effect and Macroeconomic Risk,” which appears in the Fall 2017 issue of the Journal of Investing. They examined to what extent the value effect reflects macroeconomic risk — in other words, how the re...
Q4 Earnings Estimates Look Great This has been a remarkable pre-earnings period because the estimates have only moved down 0.3%. As you can see from the chart below, the earnings estimate change has been the best since when they were increased by 0.6% in Q4 2010. Q4 2010 was when the economy was just recovering from the financial crisis which explains why estimates were increased as analysts started out cautious. You can see last quarter wasn’t great because analysts had to scramble to adjust for the negative impacts the hurricanes brought. This great Q4 pre-earnings period has occurred because 4 sectors saw an increase in expectations. The...
Doc joins me today to address the move in long-term yields. The Bank of Japan made a slightly surprise move last night by trimming its purchases of longer-dated JGBs. This is causing the US yields to spike with the 10 year now above 2.50%. However, 2.60% is the crucial level to watch. We also touch on the continued rise in US markets and the USD. (Audio length 00:11:54)...
Our son was born in December 1999, three months before the ‘irrationally exuberant’ stock market peak of March 2000. When he was young, we used to tell him that he was born at the top of the greatest stock market bubble of all time. Apparently we were mistaken. Celebrating his 18th birthday last month, we had to change the story: now he was turning 18 at the peak of the greatest financial bubble of all time. His short life has now had the distinction of spanning the most destructive and reckless financial era ever. Lest anyone try to delude themselves that the present run is just excesses in the tech sector, my partner Cory Venable’s ch...
Stocks tried to rally higher today, and tended to fall back a bit into the afternoon, finishing with modest increases. It is too early to say with any certainty, but this is starting to look like a blow off top. No need to guess; we will know it, when it confirms. It would most likely experience a two step decline. There will be a drop, a big rebound on dip buying, and then a turn and a loss of confidence. Is The Donald mouse-trapping himself? He keeps pointing to stocks as the evidence of his policy success. What if the markets turn lower, and there is another financial crisis? Do we have any confidence that the Trump Admin will know what to...
With WTI Crude futures topping $63, at the highest level since Dec 2014, it seems the market has convinced itself that everything is fixed thanks to OPEC, inventory overhangs are a thing of the past, and Aramco’s IPO can go ahead on its glorious fee-proving crescendo… However, as OilPrice.com’s Tsvetana Paraskova points out, 2018 may not be as easy a year for the cartel to stick together. OPEC and its Russia-led non-OPEC allies in the deal managed to stay together for a full year of high compliance with the oil production cuts and have agreed to extend the pact for a second year to the end of 2018. This year, however, the...
Once upon a time, we worried about oil and other energy. Now, a song from 1930 seems to be appropriate: Video length: 00:03:20 Today, we have a surplus of oil, which we are trying to use up. That never happened before, or did it? Well, actually, it did, back around 1930. As most of us remember, that was not a pleasant time. It was during the Great Depression. A surplus of a major energy commodity is a sign of economic illness; the economy is not balancing itself correctly. Energy supplies are available for use, but the economy is not adequately utilizing them. It is a sign that something is seriously wrong in the economy–perhaps too much wa...
The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings again declined. The headline view also shows a decline. Analyst Opinion of JOLTS Data JOLTS had been showing little change year-over-year job openings growth – and this month the rate of growth remains just below average for the growth seen in the last 2 years. Market expectations from Bloomberg / Econoday was 6.000 M to 6.200 M (consensus 6.038) versus actual of 5.879 million. The graphs below uses year-over year growth...
My Swing Trading Approach I’m not against adding new positions to the portfolio, but right now, the risk is not in the bulls favor. A near-term pullback at some point is likely, which will create better entry prices. Keep moving up those stops! Indicators VIX – Popped again yesterday for a third straight day, but gave up a large portion of the day’s gains. Currently at 9.52. Coin toss on what it does from here. T2108 (% of stocks trading below their 40-day moving average): Up five straight days, but hardly moving higher. Still in the 67% range. Moving averages (SPX): Currently trading above all the major moving average...