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You Tell Me…

Where is the stock market on the collective emotions chart? Approaching greed seems about right. 

You Tell Me…

Courtesy of 
 
In my recent public comments, I’ve been referring to the current phase of the bull market as the “acceptance phase” – in which it is widely acknowledged that we are in a bull market and bull market behavior begins to be felt outside of the markets themselves. See: Everything is Awesome for a visceral take on what this feels / looks like.

The word “acceptance” does not appear in the classic bull market phases chart below, I’d say we’re currently somewhere between Enthusiasm and Greed, possibly at the higher end. I talked about the dangers of this phase this morning in my post Rule Number One: Don’t Blow Up.

But you tell me – are we further along than I think we are? or are we not quite even at Enthusiasm yet? Admittedly, this is unquantifiable and totally not scientific, but where you believe we are will somewhat govern how you’re investing these days…

 

phases

 





Investing, Housing, and Speculating

Investing, Housing, and Speculating

Courtesy of Wade of Investing Caffeine

House Dollar Sign

We all know there was a lot of speculation going on in the housing market during 2005-2007 as risk-loving adventurists loaded up on NINJA loans (No Income, No Job, and No Assets) and subprime CDS (Credit Default Swap) securities. But there is a different kind of speculation going on now, and it isn’t tied directly to housing. Instead of buying a house with no down payment and a no interest loan, speculators are leaping into other hazardous areas of danger. Like a frog jumping from lily pad to lily pad, speculators are now hopping around onto money-chasing industries, including biotech, social media, Bitcoin, and alternative energy.

As French novelist Jean-Baptise Alphonse Karr noted, “The more things change, the more they stay the same.” Irrespective of the painful consequences of the bubble-bursting aftermaths, human behavior and psychology addictively succumb to the ever-seductive emotion of greed. Over the last 15 years, massive fortunes have been gained and lost while chasing frothy financial dreams in areas like technology, housing, and gold.

Most get-rich-quick dream chasers have no idea of how to invest in or value a stock, but they sure know a good story when they hear one. Chasing top performing stocks is lot like jumping off a bridge – anyone can do it, and it feels exhilarating until you hit the ground. However, there is a better way to create wealth. Despite rampant speculation, most individuals understand the principles behind buying a house, which if applied to stocks, can make you a superior investor, and assist you in avoiding dangerous, speculative investments.

Here are some valuable housing insights to improve your stock buying:

#1.) Price is the Almighty Variable: Successful real estate investors don’t make their fortunes by chasing properties that double or triple in value. Buying a rusty tool shed for $1 million makes about as much sense as Facebook paying $19 billion (1,000 x’s the estimated 2013 annual revenues) for a money-losing company,WhatsApp. Better to buy real estate when there is blood in the street. Like the stock market, housing is cyclical. Many traders believe that price patterns are more important than the actual price. If squiggly, technical price moving averages (seeTechnical Analysis article) make so…
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Inequality and Opportunity

 

Thoughts from the Frontline: Inequality and Opportunity

By John Mauldin

“Nothing is more dangerous than a dogmatic worldview – nothing more constraining, more blinding to innovation, more destructive of openness to novelty.”

– Stephen Jay Gould

My letters the last few weeks on income inequality (here and here) brought more response from readers than any topic I’ve written on in the history of this letter. And there was certainly no unanimity of viewpoints. Some of you strongly agree with me; some of you aggressively disagree and think I’m full of it; and others see the issue in an entirely different light. Many of you offered links to other research, which I have spent a great deal of time reading. Today we will continue our thinking about income inequality, and I will respond to some of your letters, as they make good launching points for further discussion of the topic.

Income inequality is going to be a central theme in political campaigns for the rest of the decade, so what I want to try to do is simply get some facts on the table so that at least we know what the research says and doesn’t say. A lot of emotional content is offered under the guise of economic research in order to support various political positions. The data suggest that the problem is both worse than we might think when viewed through one lens, and not that big a problem – or at least a very different problem – when viewed through another. I suggest that we look as objectively as possible at all of the data and not just cherry-pick the data that supports our views.

But before we jump back in, I am really pleased to announce that I’ve persuaded George Gilder, one of the finest thinkers and philosophers I know, and Stephen Moore, contributing editor to the Wall Street Journal, along with Grant Williams of Things That Make You Go Hmmm… fame to speak at the 11th annual Strategic Investment Conference in San Diego May 13-16. They will join Niall Ferguson, Kyle Bass, Newt Gingrich, Ian Bremmer, David Rosenberg, Dr. Lacy


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Stock World Weekly

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Why did the stock market sell off today?

Hilarious. 

Why did the stock market sell off today?

Courtesy of 

Wall Street Journal: Tensions in Ukraine and the Crimean peninsula

Yahoo Finance: Russians

Fox Business: Obamacare

CNBC: It didn’t sell off at all, it was actually a reverse rally

Forbes: Taxes are too high

Huffington Post: Taxes are too low

Fox News: Gay marriage

Motley Fool: Sign up here to find out!

Bloomberg TV: The opposite of whatever CNBC said.

Quartz: Chinese shadow-banks

FT Alphaville: Chinese derivatives

Washington Times: Fallout from explosive Benghazi revelations

StockTwits: Here’s a chart

USA Today: Let’s take a poll

DealBook: lack of M&A

Zero Hedge: Better question, why would it have gone up?

MSNBC: I’m not sure I’m comfortable with the term “stock market” per se…

Business Insider: Ten reasons, actually (view as single page?)

Financial Times: Please take a moment to register and accept cookies

MarketWatch: 1929

The Reformed Broker: More sellers than buyers

Buzzfeed Business: It’s like that time on Party of Five when Charlie was giving Julia the silent treatment…

Reuters: HFT

Barron’s: Valuations got ahead of themselves

Investors Business Daily: drop in momentum. And record deficits.

History Channel: Ancient Aliens





The Problem with Keynesianism

 

Thoughts from the Frontline: The Problem with Keynesianism

By John Mauldin

“The belief that wealth subsists not in ideas, attitudes, moral codes, and mental disciplines but in identifiable and static things that can be seized and redistributed is the materialist superstition. It stultified the works of Marx and other prophets of violence and envy. It frustrates every socialist revolutionary who imagines that by seizing the so-called means of production he can capture the crucial capital of an economy. It is the undoing of nearly every conglomerateur who believes he can safely enter new industries by buying rather than by learning them. It confounds every bureaucrat who imagines he can buy the fruits of research and development.

“The cost of capturing technology is mastery of the knowledge embodied in the underlying science. The means of entrepreneurs’ production are not land, labor, or capital but minds and hearts….

“Whatever the inequality of incomes, it is dwarfed by the inequality of contributions to human advancement. As the science fiction writer Robert Heinlein wrote, ‘Throughout history, poverty is the normal condition of man. Advances that permit this norm to be exceeded – here and there, now and then – are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of society, the people slip back into abject poverty. This is known as bad luck.’

“President Obama unconsciously confirmed Heinlein’s sardonic view of human nature in a campaign speech in Iowa: ‘We had reversed the recession, avoided depression, got the economy moving again, but over the last six months we’ve had a run of bad luck.’ All progress comes from the creative minority. Even government-financed research and development, outside the results-oriented military, is mostly wasted. Only the contributions of mind, will, and morality are enduring. The most important question for the future of America is how we treat our entrepreneurs. If our government continues to smear, harass, overtax, and oppressively regulate them, we will be dismayed by how swiftly the engines of American prosperity deteriorate. We will be amazed


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Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Please click on the new Stock World Weekly and sign in with your user name and password.

We discuss the Ukraine/Russia conflict, Bitcoin, and more. We also share some new trade ideas from Phil. 

Screen Shot 2013-10-26 at 10.03.28 PM?

 





Phil on the Money Talk Show

Watch Phil Davis on the Money Talk Show at Business News Network. 

Part 1: Market Outlook: Cashy and Cautious

Phil explains why low volume market rallies are unconvincing--and gets a medal for his explanation! He also discusses the "be the house and not the gambler" approach to trading options and his thoughts on an upcoming market correction. 

 

Part 2: Option Plays for 2014

Specific ideas for 2014. 

 





Black Swans and Endogenous Uncertainty

Thoughts from the Frontline: Black Swans and Endogenous Uncertainty

By John Mauldin

John is in Florida and feeling a bit under the weather, so this week we’re bringing back one of his most popular letters, from December 2007. In the letter he discusses the work of Professor Graciela Chichilnisky of Columbia University, one of whose key insights is that the greater the number of connections within an economic network, the more the system is at risk. Given the current macroeconomic environment, it is important to remind ourselves of how complacent we were back in 2007 and how it all fell apart so quickly, just as John outlined in this rather prescient piece.

This is a theme to which John has returned again and again, pointing out that reforms such as Dodd-Frank (the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010) fell well short of solving the problem of excessive interconnectedness among global financial players. It shored up the big “sandpile” rather than breaking it up into smaller, more manageable sandpiles. Now, if the Chinese, Japanese, and/or European sides of the sandpile should avalanche, the whole US side is likely to go, too.

John will be back next week with a report from Washington DC and the next installment of his series on income inequality.

How does the risk of default in California or Thailand get spread throughout the world, causing problem in money market funds in Europe and Florida? Yes, we can trace the linkages now, but was it possible to predict the crisis beforehand? And can we use what we learn to predict and hopefully hedge ourselves from the next crisis? Why do these things seem to be happening with more frequency? This week we are going to look at some economic theories that will give us some insight into the above questions. As it turns out, the more that individuals hedge their risk in economic markets – the larger and more interconnected the network – the more the entire system is put at risk. There is a lot of ground to cover, so we will jump right in.

Before we get to the economic theory, let’s review part of a letter I wrote in April of


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Stock World Weekly

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Zero Hedge

"Hillary For President" Fundraiser Busted For Illegal Campaign Contributions

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

If you listen carefully, you can hear the stampede of politicians distancing themselves from their once best-friend - Hotel magnate Sant Singh Chatwal - as AP reports, he plead guilty Thursday to charges he secretly funneled more than $180,000 in illegal campaign contributions to three unnamed candidates and coached someone to lie about it. Without the contributions "nobody will even talk to you," Chatwal said. "That's the only way to buy them, get into the system." Welcome to the ugly truth of American politik.

 

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Market Shadows

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

Two guest authors, David Stockman and long-time contributor John Rubino, write about the current state of Abenomics. 

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

By  

This one matters a lot. Abenomics was predicated on a lunatic notion—namely, that the economic ills from Japan’s massive debt overhang could be cured by a central bank bond buying spree that was designed to be nearly 3X larger relative to its GDP than that of the Fed. Yet anyone with a modicum of common sense and market...



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Chart School

Historical Market Comparisons Are Meaningless

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

As Chief Strategist for STA Wealth Management, I start each and every day by consuming copious amounts of a heavily caffeinated beverage and a data feed from a litany of web and blog sites. Over the last couple of days in particular, they have been numerous articles on whether the market is currently in a bubble. Here are a few as an example that I just grabbed from RealClearMarkets.com:


Is This a Bubble Market? There's One Way to Tell

...



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Option Review

Wild Ride For Chipotle

Shares in Chipotle Mexican Grill Inc. (Ticker: CMG) opened higher on Thursday morning, rising more than 6.0% to $589.00, after the restaurant operator reported better than expected first-quarter sales ahead of the opening bell. But, the stock began to falter just before lunchtime on concerns the burrito-maker will increase menu prices for the first time in three years. The price of Chipotle’s shares have since fallen into negative territory and currently trade down 3.5% on the session at $532.89 as of 1:50 p.m. ET.

Chart – Shares in Chipotle cool by lunchtime

...

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Phil's Favorites

The Best of TRB 2014 - Investing and Psychology

 

The Best of TRB 2014 – Investing and Psychology

Courtesy of 

This week I’m in Disney World with the family, our first proper vacation all together in years. As such, I’m off the grid and away from computers of any kind (I’m trying to stay married, you guys). But while I’m gone, I’ve left you some stuff to catch up on…

These were the biggest posts – as read and shared by you – during the first quarter of this year. The theme of today’s collection is good investing and understanding the psychological forces at work when we commit capital. No matter how long I’m doing this...



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All About Trends

Mid-Day Update

Reminder: David 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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Insider Scoop

Benzinga's M&A Chatter for Thursday April 17, 2014

Courtesy of Benzinga.

The following are the M&A deals, rumors and chatter circulating on Wall Street for Thursday April 17, 2014.

Post Holdings to Acquire Michael Foods for $2.45B

The Deal:
Post Holdings (NYSE: POST) confirmed Thursday it will acquire Michael Foods from its owners, which include GS Capital Partners and affiliates of Thomas H. Lee Partners for $2.45 billion. It was rumored Wednesday that Post had beat out rival Tyson Foods (NYSE: TSN) for the right to acquire Michael Foods.

The deal is expected...



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Sabrient

What the Market Wants: Positive News and Stocks at Bargain Prices

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Last week’s market performance was nasty again, especially for the Small-cap Growth style/cap, down 4%.  Large-caps faired the best, losing only 2.7%.  That’s ugly and today’s market seemed likely to be uglier today with escalating tensions over the weekend in Ukraine. 

But once again, positive economic trumped the beating of the war drums. Retail Sales jumped up 1.1% over a projected 0.8% and last month’s tepid 0.3%, which was revised up to 0.7%.  While autos led, sales were up solidly overall.  Business inventories were about as expected with a positive tone.  Citigroup (C) handily beat estimates to add to the morning’s surprises.  As a result, the market was positive through most of the day, led by the DJI, up 0.91%, and the S&P 500, up 0.82%.  NASDAQ had a less...



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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



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OpTrader

Swing trading portfolio - week of April 14th 2014

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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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here is the new Stock World Weekly. Please sign in with your user name and password, or sign up for a free trial to Stock World Weekly. Click here. 

Chart by Paul Price.

...

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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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Pharmboy

Here We Go Again - Pharma & Biotechs 2014

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

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



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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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