Wednesday, February 3, 2016

2/3/16 Some Kind of Wonderful



Back to the late session turnarounds.  (Yet another) -200-point plunge in the DJIA
is now a +200-point rally.  Classic
market action.  This morning's decline
was actually the culmination of a volatile overnight futures session, and in my
opinion when combined with Tuesday's sharp decline was quite successful at
shaking out the last of the weak hands. 
I think we're cleared for takeoff!


Grand Funk was the quintessential Seventies party
band.  It may have been at the Civic
Arena in Pittsburgh when I caught them live in 1970.  I can't remember exactly! 

EEM (Emerging Markets) +2.8%.  EWZ (Brazil) +5.73%.  USO (crude oil) +8.5%! (following yesterday's
-5% drop, classic reversals both times on a dime).

Friday, January 29, 2016

1/29/16 Rock Around The Clock



Global markets wasted no time building on Thursday's rally in US indexes.  Japan's Nikkei +2.8%, Shanghai +3.09%, Hong Kong +2.54%, India +1.64%, Euro Stoxx 50 +1%, Brazil +2.32%.  An impulse rally around the clock across all time zones!

Thursday, January 28, 2016

Thursday, January 21, 2016

1/21/16 Society's Child



The remarkably talented Janis Ian penned 'Society's Child' in her early teens, complete with a few slick key changes and a defiant closing organ riff.  Banned from radio play in much of the country, it nevertheless hit the top of Bay Area charts in 1967.  My freshman year at Menlo-Atherton coincided with a district decision to begin busing students in from East Palo Alto.  A 'race riot' on campus closed the school for four days!

Asian markets rising an average of +2% in early trading.


Tuesday, January 19, 2016

1/19/16 The Last Trade



DJIA futures were up as much as +260 points
pre-market.  The DJIA opened +160 points,
then dipped to +73 points.  At that
point, I opened the following positions:
VT (Vanguard Total World Stock Market) @ 52.67 + BND (Vanguard Total
Bond Fund) @ using an allocation weighting of 65%/ 35%.

At today's close, I will transition that part of my
portfolio which allows only mutual fund trades into VTWSX (Vanguard Total World
Stock Market) + VBMFX (Vanguard Total Bond Market Index) using the same
weighting.

The above transactions will likely be the last I execute
prior to retirement.

If I had to guess, the SPX (S&P500) will squeeze
shorts up to its LT trend line around 1960, then drop to 1750 before we see a
durable low.  In other words, I'm still
bearish.

I wrote the paragraphs below last night, and decided to
'sleep on it' before making the decisions above.

I've often envisioned returning to playing the piano and
composing when I retire at age 67 (about five years from now).  That should give me 20+ years to see what I
can do.  Last week, David Bowie succumbed
to cancer at 69, and yesterday Glenn Frey passed away at 67.  How much time do any of us really have?

In 1979 I submitted a recording of a composition titled
Mill Street + two letters of recommendation (one from another pianist, one from
a composition professor at Michigan) and was admitted to the Berklee College of
Music in Boston.  I drove east the
following August, and stayed briefly with Lin and his wife (Lin was a
graduate student in meteorology at MIT and his wife a law student at
Harvard).  I spent a great deal of time
with them debating the pros and cons of a career in music.  Lin was quite adamant that I should take the
leap.  I've rationalized over the years
my decision to turn around and ultimately become a pharmacist, but the truth is
I didn't have the confidence to stake it all on 'black.'  It's a tough career that depends far too much
on being in the right place at the right time.

Given another five years, what really matters?   Going forward, we’ll be discussing ‘things
that [really] matter,’ and talking very little about the capital markets.  

Friday, January 15, 2016

1/15/16 To Everything a Season



Probably the one song that most quickly takes me back to the Sixties!  

The DJIA is currently down -371 points, but that’s following a
+166-point rally off its intraday low of 15842 (-537 points). 

My thoughts here:

(a)  
Markets rarely bottom on a Friday.  More likely to occur on a Monday or Tuesday.  They rarely bottom in January, for that
matter.
(b) 
When long-term trend lines are breached to
the downside, the ‘correct’ trade becomes shorting the belly of the beast
(trend line).  We typically see fierce
rallies that fail either at the trend line, or just above (small stab into the
belly).
(c)  
It’s nice to see a larger percentage
decline in the FANG stocks than in the indexes.
For a change!
(d) 
There’s nothing wrong with a falling market!
It’s what markets do after an extended rise.  Nature (which absolutely includes human
nature) operates in cycles.
(e) 
If you’re a long-term investor, embrace the
cycle.  Add to your positions on
weakness. 
(f)   
I’m a short-term trader who dislikes
participating in declines.  I also plan
to embrace the cycle, for the opportunities that lie ahead.



To everything there is a season.

Saturday, January 9, 2016

1/9/16 It Never Rains in Southern California/ Risk Happens Fast



January 1974.  Rain fell hard all month in San Bernardino.  I finally left the city, crashed overnight in Crestline, and headed for the high desert town of Hesperia.  It continued to rain.  After another night in an abandoned barn off Highway 138 I turned around and headed for Los Angeles.  I recall hitching under an overpass during a downpour in East Hollywood.  An overnight trip in a blue Camaro (or something similar) ultimately got me to clear skies in the Bay Area.

Risk to the downside has increased markedly the first week of 2016.  There's nothing more bullish than higher prices, and nothing more bearish than lower prices.  Price weakness leads to pessimism.  Extreme price weakness?   Extreme pessimism has already driven oils, commodities and emerging markets deep into bear market territory.  It's been bad enough to kill most contrarian trades.  Are all traders now contrarians?  I'm going to fade the contrarian consensus and place a bet on the 'Don't Pass' line.  A few years ago I watched a game clean out a packed table of shooters.  The stickman called 'seven out, line away' to end each and every series for over two hours (not even the occasional come-out 'seven, pay the line' to break the boredom).  Don't think it can't happen in the markets.  Wait for the blue Camaro.