Sunday, April 22, 2018

4/22/18 The Next Cyclical Boom

One advantage of sticking to my own view of the markets is that it allows me to tune out the noise, and there's plenty of noise to tune out.

Are markets really extended either in terms of time or valuation?  I don't think so.  If we use January 2016 (rather than March 2009) as the beginning of the current bull, then we're still in the early innings.  Valuations in the US may be somewhat extended, but the valuation of global markets (as a whole) is not.

In my opinion, the world economy is still in expansion mode, with its 'boom' period still ahead.  Sitting out the remainder of the current cycle (easy to do if we read media headlines re an imminent global trade war, an inverted yield curve, or predictions of the next crash) may turn out to be an expensive mistake.

April 22, 2018?  I think it's a great time to be long the global market!    

Friday, March 16, 2018

3/16/2018 Buy The Changeup

I'm not really sure what to make of today's market action.  Another strong open that weakens into the close (the Nasdaq in particular).  Still bullish, and my conviction is strongest with regard to Emerging Markets.  Here's an interesting comparison-> over the past five years, the SPX is up +79%, the world index (VT) is up +47%, yet Emerging Markets (VWO) is up just +13%.  That's due to a brutal bear in both commodities and emerging economies in 2015/2016.

The pitch is still good, but perhaps it's time to view it as a changeup-> one that appears to be a fastball but arrives more slowly to the plate.  

VT (world index) currently +0.11%, VWO (emerging markets) -0.33%.  Both sectors have given back between 74% and 78% of their gains since the breakout on March 9.  I plan to swing for the fences at the close by reopening VEIEX (Vanguard Emerging Markets).  

Sunday, January 28, 2018

1/28/18 Catch Up Trading

2018 thus far is 2017 on steroids.  Currently running behind, at around half the YTD average for my benchmarks.  There is an alternative benchmark-> the 60/40 (60% stocks, 40% bonds), for which FASMX (Fidelity Asset Manager) acts as proxy.  FASMX currently also up +3.5% YTD, compared to +7.37% for VTWSX (world market).

According to The Fat Pitch-> (i) January 2018 ranks tenth in out-of-the-gate performance.  So not unprecedented.  (ii) In addition, eight of the previous nine January rockets ended the full year higher.  So also not unsustainable.

I need to keep the above in mind when planning my catch up trading.

Friday, January 12, 2018

1/12/18 Stealth Rally Underway in Gold

I'm now sensing a breakout in commodities and miners (along with a breakdown in the $USD).

(a) Spot gold currently 1338-> I think it may quickly head to 1390.
(b) $USD spiking down to a one-year low.
(c) Oil prices @ 64.
(d) Traders are overly-focused on stock indexes, bitcoin and cannabis.  Absolutely no one is looking at gold/miners.

Despite today's +2.4% move in GDX, I think it's the beginning of a serious leg up.

If there's one sector that can run on a breakout, it's miners.  Reopening RYPMX (Rydex Precious Metals) at the close.

Saturday, December 30, 2017

12/29/17 Late Session Take-Down/ The Cymbal Crash

Each day of my senior in high school ended with Music Appreciation, taught by a talented guy who also directed the school's Jazz Band.  We spent a great deal of time analyzing compositions from the late Nineteenth/ early Twentieth centuries (Dvorak, Prokofiev, Copland).  Quizzes would be given every Friday, which included an essay question that he would announce on the spot.  I can't recall the composer (probably Dvorak) or the symphony, but one essay question asked us to compare and contrast the first and second movements.  I focused on the transition between the movements, which took the form of a single cymbal crash (either at the end of the first or the beginning of the second).  In fact, I spent the entire essay bullshitting about the brilliance of using a single percussive note to simultaneously end the 'adagio' feel of the first and set up the 'largo' tone of the more somber second.  (He not only gave me an 'A,' he read the entire essay to the class on Monday- haha!).

So what's the point?  In my opinion, the Market hit that percussive note in the final five minutes of Friday's trading.  I may be entirely wrong (as I am about 50% of the time).  But it sure sounded that way to me.  In the end, it's all good.  The third movements of most symphonies are generally pretty upbeat! 

Friday, December 15, 2017

12/15/17-> Raging Bull!

The overnight bump in futures apparently presaged Marco Rubio's 'No'->'Yes' turnaround on the tax bill.  It's amazing how quickly markets price in these types of things.

That's a game changer, one which I don't think the subsequent +160-point rally in the DJIA fully prices in.  Sure, it's possible the relatively tame reaction means the market has incorporated a 'sell the news' effect into tax reform, but the effect of tax reform (and deregulation) is vastly understated.  Here's a great WSJ opinion piece penned by Maria Bartiromo last night:

Here's the correct link to the Maria Bartiromo article:

A thoughtful and though-provoking argument re the Trump effect on markets.  Here's the paragraph I like most (note the last sentence!):

Year One has been nothing short of excellent from an economic standpoint. Corporate earnings have risen and corporate behavior has changed, measured in greater capital investment. Business people tell me that a new approach to regulation is a big factor. During President Obama’s final year in office the Federal Register, which contains new and proposed rules and regulations, ran to 95,894 pages, according to a Competitive Enterprise Institute report. This was the highest level in its history and 19% higher than the previous year’s 80,260 pages. The American Action Forum estimates the last administration burdened the economy with 549 million hours of compliance, averaging nearly five hours of paperwork for every full-time employee.

Back to leaning bullish.  That's why they call it a market dance-> I'll make as many U-turns as necessary based on crowd behavior/ price action, which can change on a dime multiple times within short periods of time.

(a) Reopened both FXI ('H' Shares) and ASHR ('A' Shares) on the news, at approximately -1% discounts to Thursday's exits.

(b) The harder decision is reopening VEIEX/ VTWSX at the close.  Based on current prices for EEM/ VT, my reentry price for VEIEX will still lie below Wednesday's exit, but there's no question I'll be buying back into VTWSX at a premium (also no question that having exited on Wednesday rather than Thursday makes it easier, as the premium over Wednesday's close may be less than 0.2%.

Investors will digest the news over the weekend.  I think they'll return on Monday to drive prices much higher.

Sunday, December 3, 2017

12/3/17 December Blueprint

No certainties in the market, for sure.  But it helps to have a rough idea re what lies ahead (based on historical precedent and/or recent precedent).  My best composite take (after reading through the stuff I follow):

(a) Likely to rally hard next week.  I don't believe tax reform has been priced in.  Now that the Senate has voted to pass a tax overhaul bill, both chambers will vote next week on a motion to 'go to conference' on working out the details.  It's estimated that passage will add +10% to corporate profits next year (or the year after, depending on when the bill takes effect).  Michael Flynn?  I have no idea re market reaction to Flynn's plea deal, but hey-> traders who have bet against Trump on any number of issues have been wrong for over a year.

(b) Pullback mid-December.  December tends to start out strong, stall mid-month, then rally hard into year end.  Paul Ryan is saying he'll keep Congress in session beyond its December 15 adjournment if necessary to pass tax reform this year.  We can count on the usual last-minute political drama taking the vote down to at least December 15.  Perhaps as good a catalyst as any for the pullback.

(c) +7% into January 2018.  7% is probably conservative.  A strong outlook for 2018 will become even stronger as investors begin to seriously weigh the effects of tax reform on global growth.

(d) Sharp rebound in emerging markets.  You may recall the cover story in Barron's last Sunday, which can be summarized as 'Barron's likes EEM!'  Thus no surprise that EEM declined -4% last week.  As you know, I believe it was a buying opp.