Archive for the ‘High Mailing Priority’ Category

Fund Managers’ Current Asset Allocation – October


Fund Managers' Current Asset Allocation – October

Courtesy of , The Fat Pitch

Summary: Throughout 2013, 2014 and early 2015, fund managers were heavily overweight equities and underweight cash and bonds. Those allocations have entirely flipped in 2016, with investors persistently shunning equities in exchange for holding cash.

Global equities are more than 15% higher than in February. A tailwind for this rally has been the bearish positioning of investors, with fund managers' cash in October rising to the highest level since 2001. Similarly, their equity allocations are now like those in February, mid-2010 and mid-2012, periods which were notable lows for equity prices during this bull market. Overall, fund managers' defensive positioning supports higher equity prices in the month(s) ahead.

Allocations to US equities had been near 8-year lows over the past year and half, during which the US outperformed most of the world. After rising for two months during the summer, allocations fell again to underweight in both September and October. Bearish sentiment remains a tailwind for US equities.

European equity markets, which had been the consensus overweight and also the world's worst performing region, are now underweighted relative to their long term mean.  Investors are chasing the world's best performing region – emerging markets – which now have their highest overweight in 3 1/2 years. Emerging markets may rise further but note that the contrarian long trade is now over.

* * *

Among the various ways of measuring investor sentiment, the BAML survey of global fund managers is one of the better ones as the results reflect how managers are allocated in various asset classes. These managers oversee a combined $600b in assets.

The data should be viewed mostly from a contrarian perspective; that is, when equities fall in price, allocations to cash go higher and allocations to equities go lower as investors become bearish, setting up a buy signal. When prices rise, the opposite occurs, setting up a sell signal. We did a recap of this pattern in December 2014 (post).

Let's review the highlights from the past month.

Cash: Fund managers' cash levels at the equity low in February were

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Weekend Reading: Time To Be A Contrarian?

Courtesy of Lance Roberts of

In yesterday’s post, I discussed Howard Mark’s view on being a contrarian:

“Resisting – and thereby achieving success as a contrarian – isn’t easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, particularly when momentum invariably makes pro-cyclical actions look correct for a while. (That’s why it’s essential to remember that ‘being too far ahead of your time is indistinguishable from being wrong.’)

Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian.”

The important point of his comment is that being too far ahead of a turning point (either bullish or bearish), even though ultimately being proved right, is still “indistinguishable from being wrong.”

However, there is a huge difference between being making the right call early, particularly when the trend is changing from bullish to bearish, and making no call at all. 

The “buy and hold” mantra is essentially based on the premise that stocks rise much more often than they fall, and since you are either too stupid or lazy to actually understand how investing actually works, you are just better off making investments and forgetting about them. Hopefully, you will win.

This is the equivalent of saying: “Since 8 out of 10 people who play ‘Russian Roulette’ survive the first pull of the trigger, the odds are in your favor of winning.”

While that is entirely true, it is the 20% of the time you lose that matters most.

The chart below shows the long-term view of the market, going back to 1920, as compared to GAAP valuations. This is a QUARTERLY price chart which also shows the points in history where valuations have collided with extreme overbought conditions. 


While hindsight is pretty clear about what happens given the current environment of weak economic and profit growth combined with high valuations and deteriorating technical underpinnings, the ultimate outcome took months to develop. Just as with the “boy who cried wolf,” warnings eventually fell on “deaf ears” at the point those warnings actually mattered. 

It is here that being…
continue reading Weekly Trading Webinar Weekly Trading Webinar – 10-19-16

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here!

Major Topics:

00:02:31 Trade Charts
00:03:51 Petroleum Status Report
00:11:01 Checking on the Markets
00:12:05 Top Components
00:13:49 AXP
00:17:14 AXP Trade Ideas
00:23:15 JNJ
00:24:06 Checking on the Markets
00:25:13 ES Trade Ideas
00:30:06 Energy Charts
00:30:16 Oil Charts and Trade Ideas
00:34:58 COST Call
00:35:19 COST Charts
00:38:23 COST Trade Ideas
00:40:46 More Trade Ideas
00:46:06 China's GDP
00:52:53 Media Consolidation
00:54:03 OOP
01:10:15 COST Trade Ideas
01:14:16 Beige Book
01:26:15 More Trade Ideas
01:31:24 Reserve Currencies
01:32:14 Short-Term Portfolio
01:34:54 Long-Term Portfolio
01:37:50 Butterfly Portfolio
01:43:21 Long-Term Portfolio
01:47:32 More Trade Ideas
01:54:36 SPWR Charts
01:57:16 AAPL Trade


Phil's Weekly Trading Webinars provide a great opportunity to learn what we do at PSW. Subscribe to our YouTube channel and view past webinars, here. For LIVE access to PSW's Weekly Webinars – demonstrating trading strategies in real time – join us at PSW — click here!

Here’s Why Technical Analysis Gets a Bad Rap


Here’s Why Technical Analysis Gets a Bad Rap

Courtesy of , The Irrelevant Investor

There are a lot of people who don’t believe in the merits of technical analysis. It doesn’t make sense to them that you can look at past price movements and determine future price movements. If stock prices are driven by earnings, how can a chart provide any insight? Well, yeah, stocks are driven by earnings in the long-run, but in the short-run they’re driven by sentiment, which can be observed by measuring supply and demand.

Anecdotally, nonsensical forecasts seems to permeate from technical analysis way more than fundamental analysis, which is the main reason it often gets ridiculed. (By the way, I’m not suggesting nonsensical forecasts aren’t ever driven by fundamental analysis, Dow 36,000 is a great example.) These outrageous claims are provided by technicians that abuse the charts. They’ll draw a few dozen lines, waves and retracements, and use a handful of oscillators. In addition to some of the crazy artwork, the patterns they’ll cite have names that sound ridiculous to the laymen; a rising wedge, head and shoulders, three peaks and a domed house, etc. 

Here’s a recent “Red Alert” example from HSBC:


The Head & Shoulders Top with the neckline acting as resistance comes on top of a potentially bearish Elliot Wave irregular flat pattern and the fact that the index is now backing off from the old 2015 highs. A close below 17,992 would be very bearish. Pressure would ease above 18,449.

Lol, what?

Here is another example from an article yesterday in the Wall Street Journal with the headline “Technical Analysts are Getting Nervous About This Market.” It included the following statement:

Those who owned S&P 500 stocks only when both the index and its cumulative advance-decline line were below their 50-day moving averages, as is currently the case, would have lost about 50% since 2012, according to FBN Securities.

What does this actually mean!?!

And finally, stuff like this exists, which shows stocks vs. regional surface temperature of the Pacific Ocean…


Requires no further commentary.

To me, technical analysis is…
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How Do Indexers Do Better Than Average?


How Do Indexers Do Better Than Average?

Courtesy of Cullen Roche, Pragmatic Capitalism

One of the more common investing myths is the idea that indexing is necessarily “average”.¹ It makes sense at first. If you bought all of the stocks in the market then you’d generate the average return.  It would be like playing fantasy football and picking all of the players in the NFL. You would lose more often than not because there is no way you’re going to beat the team that has Tom Brady, Adrian Peterson, Antonio Brown or, well, any of the above average players in the league. But the problem is that this isn’t at all how investing works because there are frictions in investing that make these sorts of comparisons apples and oranges.

Using our fantasy football analogy – imagine that the average team has 10 positions and the average player scores 10 points. If you own “the market team” then you score 100 points on average because you generate the average weekly points at each position. But the best teams in the league score 120 points on average because they are loaded with top performers. By being able to pick the best players you “beat the average”. But the problem with investing is that we don’t earn the average return of the best performing financial assets. We earn the after tax and fee returns of these instruments. And this is where the idea of “average” gets muddled.

So, what happens to the fantasy football team with the best players when you add in frictions?  Well, imagine that your league commissioner docked you 10 points for “fees” every week and docked you another 15 points for “taxes” as a result of your extra activity. Suddenly, your “above average” score drops to just 95! You’re actually losing to the average. And this is precisely what happens to most highly active fund managers and traders. Because they’re more active they tend to churn up more short-term capital gains. But they’re also charging you 1% or so per year. So, if the average return on stocks is 10% per year and the average top tier manager earns 12% per year then they’re beating the average before taxes and fees. But once you lop off their…
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Taking a Wrench to Healthcare


Taking a Wrench to Healthcare

Courtesy of John Mauldin, Thoughts from the Frontline

“The US has the most dysfunctional healthcare system in the world.”

– Elizabeth Holmes

“Healthcare is the cornerstone of the socialist state.”

– Monica Crowley

“You’ve got this crazy system where all of a sudden, 25 million more people have health care and then the people that are out there busting it – sometimes 60 hours a week – wind up with their premiums doubled and their coverage cut in half.”

– Former President Bill Clinton last week in Flint, Michigan

Cassius: “The fault, dear Brutus, is not in our stars, but in ourselves…”

– Julius Caesar (I, ii, 140-141)

No matter what happens on Election Day, we know one thing for sure: Barack Obama will stop being president on January 20. He will leave behind the signature accomplishment of his eight years in office: Obamacare. His name is on the program forever. It will be his legacy. Some of my readers see it is a disaster, and others see it as a triumph, but I think everybody agrees that there need to be some changes.

Yes, millions more people now have access to health insurance. That’s a very good thing – but access to health insurance is not the same as access to healthcare. And access to healthcare is not the same as access to affordable healthcare.

When 2017 open enrollment begins on Nov. 1, many people whom the Affordable Care Act is supposed to serve will find that unaffordable non-care is all they can get. As we will see, there are many places in the US where premiums will rise by 30 to 40% or more in just one year.

It’s not just Obamacare. In fact, the problems I am describing would have happened with or without Obamacare. The financial problems would have happened if we had Paul Ryan’s version of healthcare; they just would have come a few years later. The problems are demographic and personal in nature. For my Canadian and European readers and others who live in countries with universal healthcare, you will be able to read the first half of…
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Sweating Your Way to Investment Success


Sweating Your Way to Investment Success

Courtesy of Wade of Investing Caffeine

There are many ways to make money in the financial markets, but if this was such an easy endeavor, then everybody would be trading while drinking umbrella drinks on their private islands. I mean with all the bright blinking lights, talking baby day traders, and software bells and whistles, how difficult could it actually be?

Unfortunately, financial markets have a way of driving grown men (and women) to tears, usually when confidence is at or near a peak. The best investors leave their emotions at the door and follow a systematic disciplined process. Investing can be a meat grinder, but the good news is one does not need to have a 90% success rate to make it lucrative. Take it from Peter Lynch, who averaged a +29% return per year while managing the Magellan Fund at Fidelity Investments from 1977-1990. “If you’re terrific in this business you’re right six times out of 10,” says Lynch.

Sweating Way to Success

If investing is so tough, then what is the recipe for investment success? As the saying goes, money management requires 10% inspiration and 90% perspiration. Or as strategist and long-time investor Don Hays notes, “You are only right on your stock purchases and sales when you are sweating.” Buying what’s working and selling what’s not, doesn’t require a lot of thinking or sweating (see Riding the Wave), just basic pattern recognition. Universally loved stocks may enjoy the inertia of upward momentum, but when the music stops for the Wall Street darlings, investors rarely can hit the escape button fast enough. Cutting corners and taking short-cuts may work in the short-run, but usually ends badly.

Real profits are made through unique insights that have not been fully discovered by market participants, or in other words, distancing oneself from the herd. Typically this means investing in reasonably priced companies with significant growth prospects, or cheap out-of-favor investments. Like dieting, this is easy to understand, but difficult to execute. Pulling the trigger on unanimously hated investments or purchasing seemingly expensive growth stocks requires a lot of blood, sweat, and tears. Eating doughnuts won’t generate the conviction necessary to justify the valuation and excess…
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The U.S. economy is in desperate need of a strong dose of fiscal penicillin


The U.S. economy is in desperate need of a strong dose of fiscal penicillin

By Christian Weller, University of Massachusetts Boston

Despite six years of “recovery” from the Great Recession, America’s middle class still struggles financially amid sluggish economic growth and middling job creation.

The Federal Reserve’s near-zero interest rates have helped stabilize the economy after it nearly went into freefall in 2008 and 2009, but that policy is coming to an end, with at least one quarter-point hike expected this year and more in 2017 and 2018.

So what will support the economy once the Fed’s largesse begins to disappear?

I’ve been exploring the key economic data – from productivity and housing to wage growth and consumer spending – to better understand where we’re headed and what is needed to get out of this no-to-low growth environment, a pernicious state some economists call secular stagnation. The data show clearly why serious attention is needed to foster faster growth, a more competitive economy and more opportunities for American families.

And only one institution, I would argue, is able to do something about it: Congress.

Stagnant growth and productivity

For most of the recovery, economic growth has been lackluster.

Gross domestic product has expanded at an average annual inflation-adjusted rate of just 2 percent since the recession ended in the second quarter of 2009, far below the rate of 3.4 percent from December 1948, when the first recession after World War II started, to December 2007, when the most recent recession began. And in just the past three quarters through June, the economy has barely budged, growing at an anemic 1 percent or so.

Productivity growth, measured as the increase in inflation-adjusted output per hour, is key to propelling strong economic growth because it means that workers are getting better at doing more in the same amount of time. Yet productivity rose only a total of 6.6 percent from the second quarter of 2009 to the second quarter of 2016. That amounts to an average rate of 0.9 percent a year, a fraction of the 2.3 percent we experienced from 1948 to 2007.…
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Phil Davis Does Money Talk

In Part 1, Phil discusses oil prices, the S&P, the election for US Prez and Congress members, and the consequences of different election outcomes. In Part 2, he discusses Samsung and Apple, and in Part 3, Phil introduces his top candidate for Next Year's Trade of Year!

Money Talk: Options trader Phil Davis on election implications

Options trader Phil Davis discusses possible outcomes of the U.S. presidential election and the potential implications for markets.



Money Talk is Canada's premier personal finance show. Every Wednesday, we talk to industry players who provide you with important personal finance information that you need – from investment strategies to financial planning. Weekly Trading Webinar Weekly Trading Webinar – 10-12-16

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here!

Major Topics:

00:01:51 Checking on the Markets
00:04:14 Indexes Status
00:09:33 Daily Indices Charts
00:13:10 AAPL
00:15:38 AAPL Long-Term Portfolio
00:17:09 AAPL Trade Ideas
00:24:07 Ericsson
00:26:12 Ericsson Trade Ideas
00:29:56 Long-Term Portfolio
00:30:06 Short-Term Portfolio
00:34:57 SHLD
00:39:51 SHLD Trade Ideas
00:41:10 More Trade Ideas
00:43:56 AAPL
00:49:;25 SHLD Trade
00:51:42 DXD
00:52:46 LL
00:54:24 FOMC Meeting
00:59:55 $WTIC
01:03:05 FOMC Minutes
01:07:48 Checking on the Markets
01:11:32 Trade Ideas
01:18:22 Mortgage Market
01:19:51 USD
01:21:17 USD Trade Ideas
01:24:16 Checking on the Markets
01:27:11 Profit Squeeze
01:29:37 Energy Consumption
01:36:37 Natural Gas
01:37:20 Coffee
01:38:35 JO
01:45:10 Coffee


Phil's Weekly Trading Webinars provide a great opportunity to learn what we do at PSW. Subscribe to our YouTube channel and view past webinars, here. For LIVE access to PSW's Weekly Webinars – demonstrating trading strategies in real time – join us at PSW — click here!


Zero Hedge

Paul Craig Roberts Roars "Rigged Elections Are An American Tradition"

Courtesy of ZeroHedge. View original post here.

Authored by Paul Craig Roberts,

Do Americans have a memory? I sometimes wonder.

It is an obvious fact that the oligarchic One Percent have anointed Hillary, despite her myriad problems to be President of the US. There are reports that her staff are already moving into their White House offices. This much confidence before the vote does suggest that the skids have been greased.

The current cause celebre agai...

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What Millennials Reject Is Mutant Capitalism

By The Foundation for Economic Education. Originally published at ValueWalk.

It’s not exactly news that capitalism has an image problem. Say the word “capitalist” and the image that comes to mind is of a rapacious, self-interested robber baron – less Steve Jobs or Warren Buffett, more Charles Montgomery Burns.

Among young people, the problem is even more severe. For the generation who came of age during the financial crisis, argues George Koopman of the Mercatus Centre in the Wall Street Journal:

“…capitalism isn’t about free enterprise, nor is it about the startups and innovation. When they hear the term, millennials think about Wall Street bailouts, corporate greed, political scandals and tax codes riddle...

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Phil's Favorites

Another Lehman Blunder Coming Up?

Courtesy of Mish.

Telegraph writer Ambrose Evans-Pritchard says the Fed risks repeating Lehman blunder as US recession storm gathers.

The key problem with Pritchard’s superficial analysis is the Lehman bankruptcy is about the only thing the Fed got right.

Liquidity is suddenly drying up. Early warning indicators from US ‘flow of funds’ data point to an incipent squeeze, the long-feared capitulation after five successive quarters of declining corporate profits.

Yet the Fed is methodically draining money through ‘reverse repos’ regardless. It has set the course for a rise in interest rates in December and seems to be on automatic pilot...

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Market News

Morning Reads from Bill Moyers


Morning Reads: McCain Tells Trump to Respect Democratic Process; Hurricane Matthew Was 6th Thousand-Year Storm in 1 Year

This post first appeared on

Doubling down --> Donald Trump says he will accept the result of the election... if he wins it.

The GOP is largely silent on their candidate's unprecedented anti-democratic stance — with a few ...

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Kimble Charting Solutions

Bio-Tech; In more trouble if this fails, says Joe Friday

Courtesy of Chris Kimble.

At one point in time, actually for years, Bio-Tech (IBB) was a market leader. From the 2009 lows to 2015, IBB out gained the S&P by more than 250%. Since the summer of 2015, Bio Tech has remained a leader, a “downside leader!” IBB has lagged the S&P by over 35% in the past 15-months.

Is the downside leadership over for IBB? Below updates the pattern on IBB


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Chart School

SP500 Status Pre US 2016 Elections

Courtesy of Read the Ticker.

Where have we been, what does the future look like?

More from RTT Tv

NOTE: does allow users to load objects and text on charts, however some annotations are by a free third party image tool named

Investing Quote...

..."There is what I call the behaviour of a stock, actions that enable you to judge whether or not it is going to proceed in accordance with the precedents that your observation has noted. If a stock doesn’t act right don’t touch it, because, be...

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Members' Corner

The Orlando Massacre Part 3

Courtesy of Nattering Naybob.

A continuation of a Naybob of IT's Natterings from Part 1 and Part 2...

While many Christian churches expressed grief and offered free funeral services for the victims of the Orlando shooting, the fundamentalist Westboro Baptist Church held an anti-gay protest during the funeral of the victims.

But the Westboro Baptist Church's protest rally was blocked by about 200 people who formed a human barricade on the main street in downtown Orlando, ...

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Swing trading portfolio - week of October 17th, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Mapping The Market

The Most Overlooked Trait of Investing Success

Via Jean-Luc

Good article on investing success:

The Most Overlooked Trait of Investing Success

By Morgan Housel

There is a reason no Berkshire Hathaway investor chides Buffett when the company has a bad quarter. It’s because Buffett has so thoroughly convinced his investors that it’s pointless to try to navigate around 90-day intervals. He’s done that by writing incredibly lucid letters to investors for the last 50 years, communicating in easy-to-understand language at annual meetings, and speaking on TV in ways that someone with no investing experience can grasp.

Yes, Buffett runs an amazing investment company. But he also runs an amazing investor company. One of the most underappreciated part of his s...

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Digital Currencies

Gold, Silver and Blockchain - Fintech Solutions To Negative Rates, Bail-ins, Currency Debasement and Cashless

Courtesy of ZeroHedge. View original post here.

By Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.


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Epizyme - A Waiting Game

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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PSW is more than just stock talk!


We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more! features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...

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FeedTheBull - Top Stock market and Finance Sites

About Phil:

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...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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