John Mauldin believes we have just seen a pretty amazing trading rally aka cyclical bull/bear market rally. Stocks are more than 60% above March lows. But many stocks are at “nosebleed” valuation levels and that makes him suspect this is not an opportune entry point for stock market investors.
He counsels utilities (like Bill Gross) or fixed income (like me). Gold is another market I like (though the run-up of late and the violent pullback should have you concerned).
See the video below for John’s comments in full (Hat tip Barry Ritholtz).
How long, O Lord, how long? It’s always good to remember that the stock market is not the economy. Every day I come into the office to find literally dozens of emails complaining that the market is ignoring the relentlessly bearish news flow. But that doesn’t bother me. What will bother me is when we start getting good news. Markets tend to reach exhaustion on good news, not bad. And these days it’s hard to discern between what’s merely bad and what’s actually disastrous. So, let’s take a look at what the difference between the two really is, and what it means going forward.
A recently released Societe Generale report outlined a "Worst-Case Debt Scenario," one which they believe is a very low probability. Their central scenario assumes a slow global recovery, with private debt being transferred to governments. Fair enough. We’re well on our way there.
Comparing US and Japan, albeit from SocGen’s more sanguine standpoint, there’s some reason to believe the US could feasibly accommodate a Japan-esque 200% of GDP debt burden, which would essentially double 2010′s projected 100% of GDP debt burden. The reason this might not collapse the dollar is because there are no attractive alternatives. Government debt is a global problem, and when you look at the US government debt on a comparative basis, the figures, while high, aren’t extraordinary — at least within that context. More on this momentarily.
As a brief digression, I don’t believe that all government debt is bad by definition. Some are dogmatic on that point. While I do find a framework for understanding economics through the Austrian school, the reality is that no one is going to be able to squeeze pure, free-market toothpaste back into the tube. In fact, Ron Paul’s quixotic quest to end the Federal Reserve could actually succeed… only I can promise you it would soon be replaced by a similar central bank mechanism with a different name, slightly altered agenda, and new cast members. In other words, more of the same; let’s be realistic.
Also, remember that governments worldwide have a long history of supporting failed industries only to turn around and re-privatize them at a later date. It’s the government version of the private-equity game (buy ‘em, repackage ‘em, sell…
The six-month long global stock market is losing steam, which begs the question: how low can we go?
Is this a new Bull market or just another typical Bear Market rally? Let’s look at two charts for clues.
First, read the HUGE GIANT BIG FAT DISCLAIMER below: these are the free rantings of an amateur ignoramous, etc. etc.
Before we glance at the charts, let’s ask: has anything really been fixed in the global financial markets and economy, or have all the problems just been papered over with trillions in central bank bail-outs, loan guarantees, stimulus and bogus accounting/statistical lies?
The VIX is one measure of volatility or what is sometimes called "the fear index." When confidence reigns supreme (with an emphasis on the "con") then the market players see no reason to bid up options to protect themselves from potential drops into the abyss. So when confidence is high then the VIX is low and stable:
When the wheels finally fell off the MSM/central bank fantasy that "subprime is under control" then fear sprouted wings and the VIX soared.
Judging by the VIX’s return to the low-to-mid 20s, then confidence has returned in full force and the fears of a global meltdown have vanished.
Nice, but what if nothing has really been fixed? What if market participants sniff out that everything’s just been swept under the rug? What if the $7 trillion commercial real estate market in the U.S. is about to slip into the abyss of domino defaults?
The Shanghai market’s sudden 10% drop in only two days suggests not all global players are convinced.
The MACD on the VIX is crossing at a very low level, suggesting a lengthy period of rising volatility could be upon us. The stochastic has been rising for awhile now, having made a bullish cross last month.
In sum: the VIX seems to be warning us low volatility may be giving way to higher volatility.
Here’s a chart of the Dow Jones Industrial Average:
One fairly predictable pattern in any market chart is that price tends to oscillate between the upper and lower Bollinger band. I’ve marked this trait with small blue lines.
When markets are trending strongly, they can ride the Bollinger bands up or down. But if this is once again…
Every election needs an organizing catchphrase and that goes doubly for the Republican presidential race, with 16 candidates having entered the fray and more on the way. I think I have the perfect one for the moment: “You’ve been Trumped!” After all, one striking thing about the Republicans, now that th...
In a rather stunning note, CyberBerkut, a Ukrainian group of hackers, claims to have hacked John McCain’s laptop while he was in the Ukraine, and as Techworm reports, what they have released from his June visit appears to be a fully staged production of an ISIS execution video...
By Clayton Browne. Originally published at ValueWalk.
Herbalife Ltd. (NYSE:HLF) notched another court victory on Tuesday as a federal judge in LA threw out an investor lawsuit against the much loved and reviled nutritional supplements maker. In the ruling announced today, the beleaguered firm won a second dismissal of an investor lawsuit claiming it was lying about the legitimacy of its business operations.
The lawsuit filed by the Oklahoma Firefighters Pension and Retirement System and others argued that Herbalife shareholders lost money after hedge fund activist ...
Another round of buying swept through Large Cap indices, but other indices didn't enjoy the same level of interest.
The S&P had the best of it. Since the middle of July it has enjoyed a strong advance relative to Small Caps and Technology indices, but it may be time for it to revert to mean. Technicals are a little scrappy, but are holding to the bearish side, but one more day of gains could swing it back in bulls favour.
The Nasdaq banked a small gain, but it's up against the big red candlestick from last week. The 'bull trap' is still in play. Technicals are mixed here too.
If the monthly rent check is already painful to write, brace yourself.
The Census Bureau's U.S. rental vacancy rate, which tracks the share of properties that are unoccupied, fell to 6.8 percent in the second quarter. That's the lowest level using comparable data since 1985.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.
Corporate earnings reports have been mixed at best, interspersed with the occasional spectacular report -- primarily from mega-caps like Google (GOOGL), Facebook (FB), or Amazon (AMZN). Some of the bul...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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