Posts Tagged ‘bond yields’

Are Stocks Overvalued By $4+ Trillion? Quantifying The Fed’s Impact On The Stock Market

Are Stocks Overvalued By $4+ Trillion? Quantifying The Fed’s Impact On The Stock Market

Courtesy of Tyler Durden, Zero Hedge 

A few months ago we penned an article titled: "Bond Yields Imply The Fair Value Of The S&P Is 750" and this was when the 10 Year was still above 3.00%. It is now around 40 bps tighter, meaning the fair value of stocks is even lower based on the historical 75% regression pattern we indicated back in June. Today, David Rosenberg also chimes in on this ridiculous divergence between the S&P and bonds, and in graphic form shows that should the gap ever close, it would lead the stock market to its fair value, which ironically, is just around the March 2009 lows of 666.

Folks — something has to give … yields on the 2-year T-note (thin line, right hand side on chart below) has a 75% POSITIVE correlation with the S&P 500 and just hit a cycle low. Either it’s a short or the equity market is … take your pick.

As a reminder, historically bonds are right… about 100% of the time.

And with the S&P’s market cap at $10.5 trillion, meaning each S&P point is equivalent to about $9 billion dollars, the impact of the Fed’s intervention on stocks is roughly $4.4 trillion. Alterantively, one can argue that stocks are right, and bonds are wrong. Since the bond market is double the size of its smaller stock cousin, it would means that the Fed’s endless interventions have mispriced just under $9 trillion worth of fixed income assets.

And people want to play in a market that is as ridiculously out of sync with reality as either of these?

Good luck.


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‘I Love the Delusion of the Markets at this Point in the Cycle’

‘I Love the Delusion of the Markets at this Point in the Cycle’

Courtesy of Michael Panzner at Financial Armageddon 

Since I started publishing Financial Armageddon in late-2006, I’ve often railed against the incompetence and tomfoolery of highly-paid Wall Street "strategists" (note the double quotes). Many of these so-called experts are clueless data-regurgitators or ivory tower economists with above average communications skills. Indeed, it seems to me that most of the "stars" of the forecasting game are simply being rewarded for having the gift of gab, rather than their ability to look past the trees and size up the layout of the forest.

But as with most generalizations, there are exceptions. Surprisingly — yes, I am cynical — a very small number of those who know what they are talking about, have something intelligent to say, and know how to translate their insights into clear and interesting prose have been recognized as such. I am referring in particular to Albert Edwards, the number-one ranked global strategist for I-don’t-know-how-many-years running, and his sidekick Dylan Grice, who placed second overall in the 2010 Thomson Reuters Extel Survey, both of whom are members of the strategy team at Societe Generale.

In his most recent Global Strategy Weekly, Mr. Edwards touches upon two topics near-and-dear to my heart: the real state of the economy and the utter cluelessness of most equity investors [italics mind]:

The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%! The recent reaction to data suggests the market is in a similar deluded state of mind. Yet again, equity investors refuse to accept they are now locked in a Vulcan death grip and are about to fall unconscious.

The notion that the equity market predicts anything has always struck me as ludicrous. In the


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Albert Edwards Sees Stocks Under March Lows As Bond Yield Go Below 2%

Albert Edwards Sees Stocks Under March Lows As Bond Yield Go Below 2%

Courtesy of Tyler Durden

Just in case there was any confusion which way SocGen’s Albert Edwards may be leaning after the recent however many percent rally in the AUDJPY, sometimes known affectionately as stocks, it is hereby resolved: "My views on the outlook could not be clearer. They may be wrong, but at least they are clear. We still call for sub-2% 10y bond yields and equities below March 2009 lows." In other words, according to AE the market is well over 50% overvalued.

In a surprisingly pithy note, the strategist reverts back to his favorite formulation of the economic New Normal, which he calls the Ice Age, and specifically the current phase which he compares to the period where the Nikkei used to enjoy 40-50% rallies on no news, even as the general market continued its long term collapse over a span of 20 years:

We are at the most dangerous stage in the Ice Age – the ‘post-bubble cycle’. For although it is clear that leading indicators have turned downwards, the choir of sell-side sirens is singing its song of reassurance. The lesson from Japan was that once the cyclical rally is over, any downturn in the leading indicators should find you stuffing beeswax in your ears to block out that lilting melody so as to avoid the jagged rocks of recession.

In addition to remarking on the recession certainty now implied by the ECRI index (which we are confident will post an uptick this Friday just to plant some seeds of doubt in all those who look to forward looking instead of lagging indicators, A.E. notes the change in analyst optimism, which is also signifying a recessionary advent:

 

Although the closely watched ECRI weekly leading indicator (WLI) is now in the ?recession? zone, other leading indicators such as the OECD and Conference Board are weakening at a far more moderate, reassuring pace. Yet one of our favourites and most over-looked of leading indicators is the change in analyst optimism. Like the ECRI WLI this too is in recession territory and suggests the OECD and Conference Board measures will also be soon! Appealing as the siren song is, we should all know full well that the sell-side will only call the recession long after it has begun and


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Phil's Favorites

Don't Fear the Reaper

 

Don’t Fear the Reaper

Courtesy of 

In a recent Bloomberg article, Luke Kawa writes how investors are positioning themselves as interest rates rise:

Cumulative inflows into the iShares Short Maturity Bond ETF (NEAR), Floating Rate Bond ETF, SPDR Bloomberg Barclays Short Term High Yield Bond ETF, PowerShares Senior Loan Portfolio , and the Vanguard Short-Term Corporate Bond ETF  topped $400 million in total for the first session of the week, the highest since the inception date of the most recent member of this product group. One thing all these offerings have in common: low duration.

Anecdotally...



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Zero Hedge

Buy The F**king All Time Highs: Stocks Melt-Up

Courtesy of ZeroHedge. View original post here.

Extreme Greed...

Squeeeeze....

Bonds Up, Stocks Up, Gold Up, VIX Up...

Dow, S&P, Small Caps and Trannies all hit a record high today

The European close once again seemed to trigger another buying algo (although Trannies were already on their way)...but what looked like a vertical melt-up went even more vertical-er... (two words - "random walk"?)...



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ValueWalk

Warren Buffett & Charlie Munger - 2016 Berkshire Hathaway Shareholder Meeting Highlights

By VW Staff. Originally published at ValueWalk.


Warren Buffett & Charlie Munger – 2016 Berkshire Hathaway Shareholder Meeting Highlights

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Kimble Charting Solutions

Gold Bugs testing support cluster at this time!

Courtesy of Chris Kimble.

Gold Mining stocks started off the year like a rocket ship. Over the past 20-weeks, the popular Gold Miners ETF (GDX) has declined nearly 35%. This is one of its larger 20-week declines in its history! Create an opportunity? We think so!

This decline has the Gold Bugs Index (HUI) at a rare price point in the chart below.

CLICK ON CHART TO ENLARGE

...

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Market News

Breaking News And Best Of The Web

Courtesy of John Rubino

Renzi loses Italian vote, government begins bailing out banks. US stocks at record highs, gold rising. Signs of stress abound, including state and local pensions, auto sales, restaurant receipts. Incoming Treasury secretary hints at introducing 100-year Treasury bonds. India’s war on cash may turn into war on gold. Political class still searching for an explanation (see “Best of the Web”). Trump’s cabinet takes shape, with mostly old and a few new faces.  

Best Of The Web

Our “gaslight” financial system – Charles Hugh Smith

Cycles – ...



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Chart School

Russell 2000 in Take Profit Territory

Courtesy of Declan.

The Russell 2000 pushes again into the 10% zone of historic high prices (1,388 would be enough for the 5% zone last seen in February 2011). Back in 2011 the index rallied for another couple of months before it lost 30% from its high.  The next few weeks would be a good opportunity to take some money off the table to use on the next swing low.


On the Daily chart the 'sell' trigger in MACD reversed with a new 'buy' trigger.

...

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Members' Corner

Trump, Meet The New Boss?

Courtesy of Nattering Naybob.

Over at Philstockworld... High Finance for Real People - Fun and Profits... 

StJL - "Once again, I think that the middle class voters who turned in great numbers for Trump will soon realize that they voted against their best economic interest. Trump will only be part of the equation – the GOP Congress can't wait to weaken the social safety nets that are so needed by the same people who are so happy today. But too late now I guess"
No surprises here as all along we maintained the memory of what happened in 2000. With that fresh in mind, rather than forgotten in the past, we knew that given the indoctrination of the electorate, anything was possible and history keeps repeating itself...

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Promotions

Phil's Stock World's Las Vegas Conference!

 

Come join us for the Phil's Stock World's Conference in Las Vegas!

Date:  Sunday, Feb 12, 2017 and Monday Feb 13, 2017.            

Beginning Time:  8:00 am Sunday morning

Location: Caesar's Palace in Las Vegas

Notes

Caesar's has tentatively offered us rooms for $189 on Saturday night and $129 for Sunday night. However, we have to sign the contract ASAP. We need at least 10 people to pay me via Paypal or we may lose the best rate for the rooms. (Once we are guaranteed ten attendees, I will put up instructions to call the hotel for individual rooms.)

The more people who sign up,...



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OpTrader

Swing trading portfolio - week of December 5th, 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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Digital Currencies

Largest US Bitcoin Exchange Is "Extremely Concerned" With IRS Crackdown Targeting Its Users

Courtesy of ZeroHedge. View original post here.

Last Thursday we reported that in a startling development seeking to breach the privacy veil of users of America's largest bitcoin exchange, the IRS filed court papers seeking a judicial order to serve a so-called “John Doe” summons on the San Francisco-based Bitcoin platform Coinbase.

The government’s request is part of a bitcoin tax-evasion probe, and se...



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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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Biotech

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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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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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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