It’s a confidence game
by ilene - May 23rd, 2013 11:47 am
Paul Price discusses the "Confidence Game" being played in the stock market and how to read the indicators. Some commonly used indicators are contrary indicators (e.g. individual investors' sentiment).
Paul made this video for Real Money Pro about a year and a half ago, so his closing thoughts on the market are out-dated.
It's a confidence game
Courtesy of Paul Price
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Japanese Bond Rout Continues; BoJ Vows to Curb Bond Turbulence; Curbing Turbulence is Theoretically Easy
by ilene - May 23rd, 2013 11:42 am
Courtesy of Mish.
Curve Watchers Anonymous has been watching a major selloff in Japanese bonds. Here are a couple charts to consider.
10-Year Japanese Government Bond Yield
5-Year Japanese Government Bond Yield
Since March 4, the 5-year yield has gone from 0.1% to 0.43%. Although a mere .33 percentage points, the move represents a 330% percent rise in in yield.
One Month Changes
Charts courtesy of Bloomberg
Note: Those charts were snapshots taken last evening. This morning, yields have settled down, for now.
Bank of Japan Vows to Curb Bond Turbulence
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Nikkei Plunges 1,143 Points (7.32%); Global Equities Hammered; Start of Reflation Bubble Bust?
by ilene - May 23rd, 2013 2:49 am
Courtesy of Mish.
The Nikkei plunged a whopping 1,143 points as the following chart shows.
Global Equities Hammered
It’s not just the Nikkei that’s being hammered. Asia-Pacific is in a rout as well.
click on chart for sharper image
Start of Reflation Bubble Bust?
Is this the start of the great reflation unwind? I don’t know, but we should all hope so.
The bigger the bubble the bigger the crash, and this Fed (central bank in general) sponsored equity and corporate bond bubble is enormous.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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China Manufacturing Slips Back Into Contraction
by ilene - May 23rd, 2013 1:15 am
Courtesy of Mish.
The HSBC Flash China Manufacturing PMI™ shows China Manufacturing Slips Back Into Contraction.
Key Points
- Flash China Manufacturing PMI™ at 49.6 (50.4 in April). Seven-month low.
- Flash China Manufacturing Output Index at 51.0 (51.1 in April). Three-month low.
click on chart for sharper image
Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said: “The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of 2Q, casting downside risk to China’s fragile growth recovery. Moreover, the further signs of labour market slackness call for more policy support. Beijing still has fiscal ammunition to do so.“
Comment on the Comment
Economic illiterates call for more “policy support” month after month. Such “support” is about to wreck Japan and the fools do not see it.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Most investors underperform their already underperforming funds
by ilene - May 22nd, 2013 10:39 pm
Interesting article by Joshua Brown on investors performing worse than the funds they trade in and out of. It's the same principle at play that Paul Price describes in his article: March Madness and Your Trading Decisions.
Most investors underperform their already underperforming funds
Courtesy of Joshua M Brown, The Reformed Broker
At my shop we spend more of our time thinking about how we can succeed through behavior rather than through trying to find the next hot stock or fund manager.
We're always fascinated by those who choose the other, less rational route and we typically find that they do so because their job depends on it or they're not familiar with what the data says.
Jeff Fisher had a rather devastating post at the Motley Fool this week in which he cites Davis Advisors on the Behavior Gap.
For the uninitiated, there is a gap between what investment markets return versus what individual investors end up coming home with and that gap can easily be explained by the investors' highly predictable behavior. Investors have a remarkably consistent tendency to buy funds at peaks, sell out at lows, trade too often, sell winners, double down on losers and pay exorbitant trading and management costs, most unaware of the repeated damage they do to themselves. I'd call it an anomaly – but it's so permanent and unfixable, through every era, that to refer to it as a exception would be wishful thinking.
You already know that most mutual funds and active managers underperform – but did you know that their investors somehow manage to even underperform the underperformers!?! (my emphasis)
They do. Here's Fisher:
According to an investing study from Davis Advisors, the average stock-holding mutual fund returned 9.9% annualized from 1991 to 2010, but the average fund owner earned only 3.8% on average per year.
Not pretty. And it hurts even more if we put this performance into dollars. By trading in and out of funds, the average fund owner increased a $10,000 investment to just $21,200 over nearly two decades — while the average fund turned that $10,000 into $66,300. Now imagine the continuing effects of compound returns on both of those amounts and the growing difference between them over a lifetime. Feel the pain. Remember it next time you're tempted to make a trade. Davis also finds that the less trading a fund
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Chasing Like a Pro
by ilene - May 22nd, 2013 8:56 pm
Chasing Like a Pro
Courtesy of Joshua M Brown, The Reformed Broker
Put it this way, this is not the sign of a bottom or a young bull market…
From Barron's:
Major hedge funds are reportedly buying, or have bought, massive amounts of Standard & Poor's 500 index calls in the over-the-counter options market. The calls would increase in value if the index, now at about 1,664, rises to 1,725 by year's end. The funds reportedly missed the stock market's rally and are playing a vicious game of catch-up.
Though it is difficult, if not impossible, to penetrate the veil of secrecy that surrounds the OTC markets, evidence in the listed options market suggests investors are clamoring to buy bullish calls.
Desperation is hilarious, until it gets carried away. I'm glad my money isn't being thrown at 1725 calls in a two-and-twenty vehicle right now.
re: the title of this post, yes I am fired up for The National's new record this summer.
Source:
Big Hedge Funds Suddenly Bullish (Barron's)
Fine, here:
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PragCap’s Strategy Cycle Chart
by ilene - May 22nd, 2013 8:39 pm
The best time for the buy-and-hold strategy is when people are swearing off it. The worst time is when it's back in vogue….
PragCap’s Strategy Cycle Chart
Courtesy of Joshua M Brown, The Reformed Broker
I love this so much I had to nick it from my friend Cullen's site. You're not completely immune to this kind of behavior nor am I, keep it real.
The key is to recognize this happening and to be bigger than it, above it:
- In 2009 buy and hold died.
- Almost everyone became a trader at the trough of the crisis.
- Then it was “buy the dips, sell the rips”.
- Then it was all about high quality dividend names.
- Then it was a “stock pickers market”.
- Now buy and hold is all you hear about from anyone.
- “Stocks for the long run!”
- Then long only via defensive names will be the only game in town.
- Then buy and hold will die.
- Then short strategies dominate.
- Then tactical approaches win, hedge funds are your only savior, etc, etc.
Source:
The Portfolio Manager Strategy Cycle (PragCap)
Cullen: "Although the financial crisis might feel like it was a lifetime ago, the cycle of various strategic approaches to this market is fresh on my mind. We all know the cycle of emotions. You tend to feel euphoric at the peak, panicked at the trough and generally confused all the way inbetween. Don’t worry – portfolio managers are no better. They just express their emotions in varying degrees of active portfolio management with fancier sounding ways to express the rollercoaster ride they’re on."
via PragCap’s Strategy Cycle Chart | The Reformed Broker.
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MARKETS FALL ON FEARS OF ‘THE TAPER’
by ilene - May 22nd, 2013 8:20 pm
MARKETS FALL ON FEARS OF 'THE TAPER': Here's What You Need To Know
Courtesy of Sam Ro at Business Insider
First the scoreboard:
Dow: 15,307, -80.4 pts, -0.5%
S&P 500: 1,655, -13.8 pts, -0.8%
NASDAQ: 3,463, -38.8 pts, -1.1%
And now the top stories:
- In recent weeks, there has been chatter about a tapering of the Federal Reserve's quantitative easing program. Specifically, the Fed has been buying $85 billion worth of bonds each month in its effort to lower interest rates, stimulate lending activity, and boost the economy. Many have argue that this has also caused bond investors to flee the bond market and head to the stock market. With the economy showing signs of improvement, people think that it has become increasingly likely that the Fed will slow down its easy monetary policy.
- At 10:00 AM ET, Federal Reserve Chairman Ben Bernanke testified before the Joint Economic Committee of Congress. He tried to make the point that premature tightening (or tapering) would risk slowing or even ending the economic recovery.
- But during the Q&A, Bernanke said that the Fed could taper bond purchases in the next few meetings if the economic data supported it. This may seem like an obvious statement. But it spooked the markets, and it marked the highs of the day.
- At 2:00 PM ET, the Fed released the minutes from its recent Federal Open Market Committee (FOMC) meeting. Like Bernanke said during his testimony, the Fed reiterated that more progress would be needed before it would slow quantitative easing. However, some FOMC members expressed a willingness to begin tapering as early as June.
- "FOMC minutes show a willingness to taper asset purchases this year," tweeted Deutsche Bank's Joe LaVorgna. "We expect the taper will begin in either late Q3 or early Q4."
[Photo credit: flickr/Steve Bowbrick]
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The Great Jobs Disaster
by ilene - May 22nd, 2013 7:54 pm
The Great Jobs Disaster
By C.P. Chandrasekhar and Jayati Ghosh
In the desperate search for evidence that the global recession has bottomed out and the recovery has arrived, the story told by the long-term trend in unemployment levels and rates is being missed.
Early this year, the International Labour Organisation (ILO) had noted that the global unemployment rate was close to 6 per cent, implying that 197 million people were unemployed, even ignoring the 39 million who had dropped out of the workforce, discouraged by persistent failure in job search.
But that aggregate figure concealed a picture that was far worse in the advanced economies where the crisis had originated and spread. There were at least 12 advanced economies where the unemployment rate was 8 per cent or more, and seven in which the rate was 10 per cent or more.
In fact the rate varied widely, peaking at 25 per cent or close to that in Spain and Greece. That is the level unemployment had touched in the US at the bottom of the Great Depression.
What is more, during the years in which the world had ostensibly put the crisis behind it, unemployment has risen in many.
There are three countries (Spain, Greece and Ireland) in which the unemployment rate has risen by 10 percentage points (pp) or more between 2007 and 2012, and another three (Cyprus, Portugal and Estonia) where the increase between those dates was between 5 and 10 pp (Chart 4).
Keep reading: The Great Jobs Disaster » TripleCrisis.
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IRS’ Lois Lerner Re-Subpoenaed After Accidentally Waiving Her Right To Plead The Fifth
by ilene - May 22nd, 2013 7:52 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
"Never attribute to malice that which is adequately explained by stupidity"
Robert Hanlon
Perhaps, when one gets down to it, there was no actual intent of malice or ill-will on behalf of the IRS to persecute conservative groups (there was of course), and the bottom line is that all of the administration's IRS apparatchicks were just bloody stupid.
Such is the conclusion one derives after watching today's attempt by embattled IRS official Lois Lerner to plead the Fifth before the House Oversight Committee, which blew up spectacularly in her face, after she made an actual statement protesting her innocence, which it appears, was in itself a waiver of the waiver.
As a result, committee Chairman Darrell Issa has ordered Lerner to be hauled back, and to answer the questions she evaded earlier today, after now having effectively waived her Fifth Amendment right in retrospect, or else be charged with contempt!
The farce is becoming so blatant it is almost as if someone is utterly desperate to make a complete mockery of the entire IRS scandal, and in the process shake the administration to the core, which more than anything is being exposed as utterly incompetent to boot. Of course, the real question is what is the public's attention being distracted from.
The California Republican said Lerner’s Fifth Amendment right to avoid self-incrimination was voided when she gave an opening statement this morning denying any wrongdoing and professing pride in her government service.
“When I asked her questions from the very beginning, I did so so she could assert her rights prior to any statement,” Issa told POLITICO. “She chose not to do so — so she waived.”
She appeared before Issa’s committee this morning under the order of a subpoena and surprised many by reading a strong statement to the panel.
“I have not done anything wrong,” she said. “I have not broken any laws. I have not violated any IRS rules or regulations, and I have not provided false information to this or any other committee.”… the committee may ultimately pursue a contempt charge if Lerner continues to refuse to talk.
And just so there is no confusion:
During the incident, Issa did not flat-out say whether or not Lerner had indeed waived her rights
…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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