Tuesday, September 6, 2016

9/6/16 The 2016 Global Rally/ This Masquerade

https://www.youtube.com/watch?v=TlJ6m21AQDY


The late, great Esbjorn Svensson constructs (as was his wont) a perfect piano solo!  

New 52-wk highs today include: EWZ (Brazil) +1.72%, RSX (Russia) +2.53%, EEM (emerging markets) +2.11%, VT (total world stock market) +0.63%.

The media appears preoccupied with the length of the current rally.  By their count, it's over 7 years since the March 2009 low.  

I would offer an alternative take.

In my opinion, the market has constructed (as is its wont) a perfect masquerade.  It's certainly true that large-cap US stocks never really entered bear market territory over the past seven years.  Less apparent was the resounding bear market in almost any other sector.  Energy + commodities + emerging markets (heavily weighted in both energy and commodities) + micro/ small/ mid- cap stocks were pounded for up to -90% losses between 2014 and early 2016.  If that isn't a bear market, what is?  You will recall that I moved the entire portfolio into a version of the global stock market (weighted towards the suddenly out-of-favor BRIC stocks) on January 21, 2016.  It's enjoyed a pretty decent run.  Would it be prudent to pare back?  I don't think so.  Sure- if we look only at the US indexes, 'the market' appears overdue for a correction.  However, if we look at the total world stock market, it's really just 'early days' for the current rally.   

33 comments:

  1. From some reasing I was doing on why Value type stocks should outperform going forward:

    "Some investors express concern about the overall market valuation as a potential reason why we may not experience Value’s recovery. Consider this fact -On January 1, 2000 at the height of the tech bubble, the S&P500 began the year trading at a PE of 29x.
    Technology stocks cratered thereafter. Between 2000 and 2006, the Growth declined 34.7% (-6.9% per year) and over the same time, Value was up 2 3 98.4% (19.7% per year)."

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  2. David,

    We were in Welland for the weekend and biked the Welland Canal from Lake Erie to Lake Ontario. It's a route just west of Niagara Falls that the big ships take to avoid the falls. It's a great ride, about 50 KM each way, and it is a wide, paved traffic free route, flat for 95% of the trip, then really steep when the locks are that lift the ships, Fun to see the big tankers. But still really hot here, around 85 during the day. Nights are starting to cool and getting down to the high 50's, but still some hot ones and a low of 75 tonight.

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    Replies
    1. Biking is surely faster thank hiking! :) And you get to see a lot more along the way!

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    2. Looking forward to getting out and doing more hiking soon. We are coming into the best hiking season, in my opinion, up here in Ontario now. No bugs, heat normally gone and will be in a few days, leaves are just starting to change, air is crisp.

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  3. Frigging MTL! Just when I lost confidence in this stock and sold out of it, it staged a major rally!

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  4. I like the 5-day price chart for FCX. Just bought more at $10.63 and placed a sell stop at $9.98.

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  5. DJIA -200 points. There are few straight line moves in an uptrend, and a significant decline was way overdue. I don't think it will be a one-day event.

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  6. Interest rates jumping today (prices down). Things like TLT down sharply and out of the upper range it has been in for the last couple months since the Brexit vote. Still 10% downside in TLT to just get back to where it was at the start of the year. A lot of the financials down less than the market today as this should be good for financials and ones with more exposure like VOYA up today.

    If this continues, still may be a chance to salvage my year.

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  7. The charts can be deceptive -- all commodities looked yesterday like they were about to rally, and they are all smashed today. Got stopped out of SEDG again at $16.70. This will probably turn out to be one of those stocks that stages a major rally only after I give up on it...

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  8. Rotated that money into HLX now at $7.09.

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  9. Interest sensitive stocks getting hit - utilities, telcos big losers.

    Financials having lost drop and regional banks (KRE) down less than half a percent.

    Think the interest rate substitute stocks - utilities, reits, consumer staples, dividend aristocrats are all very risky at this time.

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  10. Got stopped out of FCX and BHP this morning, but now that FCX is back up above the $10 support and even up above $10.50, decided to give it another chance. Maybe third time will be a charm? :)

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  11. Replies
    1. Yep, that's how it happens nowadays -- first run all stops, and then surge up. Should have known that and not placed the stop so close to the "obvious level".

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  12. Just bought more BTE at $4.48. The commodities might be done going down.

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  13. I haven't done much in a while. Been swamped with my new business which is a good thing. Not a ton of interest in wasting my time trading in circles.

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    1. Don't blame you. Been a tedious time.

      Maybe things are finally starting to change though.

      Reminiscences guy out with a report today saying he's sensing it might be time.

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  14. Wow, THAT is an unexpected turn of events -- a complete reversal of yesterday's huge jump in FCX...

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  15. September is living up to its 'rep' for volatility, as the DJIA gives back all of Monday's gains.

    It's always a challenge to look at selloffs in a positive light (if you're long), but (using Brexit as one example) it's the pullbacks that 'set up' each successive set of new highs.

    It may take another few percentage points on the downside to rebuild the wall of worry.

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  16. Reloaded my trading shares at 15.60. 2X normal size.

    Preordered the new 7.

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  17. Copper is up a lot today. Looks like it broke out of the base it was building for the past month. Can't figure out why FCX is not up huge. Probably because oil is down. But that is temporary. So I just bought some FCX Jan 2018 $8 calls for $3.55.

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  18. David, this might have been partially responsible for the FCX hit too:


    Robert Bishop (Impala Asset Management): Best idea was Teck Resources (TCK): improving China demand, management has cut costs, end of metals 5-year downtrend. Says Freeport McMoran (FCX) still has a worrisome debt picture.

    Read more: http://www.marketfolly.com/2016/09/delivering-alpha-conference-notes.html#ixzz4KHJTxV7H

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  19. Carl Futia says possible retest of Brexit lows. Gotta wonder if this has something to do with the issues around Hillary's health.

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    1. That would be a bummer. Best scenario for bulls right now is another gap up on Thursday. Most traders currently expect that indexes will remain range-bound heading into next week's Fed announcement. Thus max frustration might be a rally that takes indexes just short of August highs heading into the vote, followed by another rally that takes indexes to new highs following the vote. (Followed by a Carl Futia post along the lines of 'I now think we've put the Brexit lows behind us indefinitely, with the ES headed toward 2300.')

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    2. Correction. Tomorrow is Friday, not Thursday!

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  20. FCX doing its best to dump investors prior to the next +20% move.

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    1. I decided not to stop myself out the third time around and still holding the shares I purchased at 10.60. Only because copper surged up yesterday. Otherwise, I would have stopped myself out...

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  21. ENPH hits an air pocket this morning. Don't touch it, I think they wont make it.

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  22. APPL phone I want doesn't ship until NOVEMBER!!!

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  23. I'd be surprised if we see a move down last very long. INTC just raised guidance and I think that's the name of the game across the board. Lots of stuff coming out of big bases. Bought some WYNN today at $108.

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  24. Good comment on the markets"

    Many people have described current markets as “complacent.” That is not what I see. The fact that the trading range is tight can occur when there are intense feelings in a rough balance.

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