Posts Tagged ‘Mean Reversion’

Rosie On The Fed’s Intent To Get Everyone Onboard Its All-In Bet On Stocks

Rosie On The Fed’s Intent To Get Everyone Onboard Its All-In Bet On Stocks

Courtesy of Tyler Durden at Zero Hedge

Just in case there is someone living in a cave who still doesn’t understand that the Fed’s one and only mandate (forget that crap about inflation and jobs) is to give everyone one last shove into the all inponzi before the diarrhea hits the HVAC, here is David Rosenberg explaining, for the cheap seats, what the Fed’s terminal intent is.

The Fed’s intent is not to create consumer inflation, but rather asset inflation — primarily in the equity market. By pulling longer-term bond yields lower, the Fed hopes that this will alter how investors value equities relative to the fixed-income market. Moreover, the Fed will be actively pushing up the value of bonds that exist in investor portfolios, and as such the intent is to induce these investors to rebalance their asset mix towards equities in order to maintain their current allocation. The Fed is also trying to incentivize fund flows into the equity market. This in turn would theoretically boost household wealth and as such make consumers, who now feel richer, to go out and spend more. So the theory goes — we shall see how it works in practice.

The Fed’s intent is also to lower both the debt and equity cost of capital so that companies will, at the margin, compare that to expected returns on newly invested capital and begin to spend more on new plant and equipment. The hope here is that the investment spending multiplier will kick in and that stepped-up job creation would occur in tandem with the renewed capex growth.

In essence, the Fed wants to avoid what happened in Japan over the last two decades — have a look at Japan Goes from Dynamic to Disheartened on the front page of the Sunday NYT. The comment in the article to the effect that back in 1991, the consensus was looking for the Japanese economy to begin surpassing the U.S. economy in size by 2010. Nice call. Instead, Japan’s economy has not expanded at all since that time whereas the U.S. economy, despite all its problems, has grown 65%.

That said, the U.S. has already experienced a lost decade in many respects, especially as it pertains to the labour market, while Japan has lost two decades. Also have a


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Tim Backshall On Europe: “Default Now Or Default Later” As EuroStat Complains That Greece Is Still Withholding Critical Data

Tim Backshall On Europe: "Default Now Or Default Later" As EuroStat Complains That Greece Is Still Withholding Critical Data

Courtesy of Tyler Durden

There is one major problem with putting houses of card back together – they tend to fall…over and over. And while abundant liquidity in May and June served as an artificial prop to return European core and PIIGS spreads to previous levels merely as mean reversion algos took holds, the second time around won’t be as lucky. CDR’s Tim Backshall was on the Strategy Session today, discussing the key trends in sovereign products over the past few months, noting the declining liquidity in both sovereign cash and derivative exposure (we will refresh on the DTCC sovereign data later after its weekly Tuesday update). Yet the most interesting observation by Backshall is the declining halflife of risk-on episodes, which much like the SNB’s (now declining) interventions, are having less of an impact on the market, as ever worsening fundamentals can only be swept under the carpet for so long before they really start stinking up the place, and indeed, as Tim points out at 5:30 into the interview, even the IMF now realizes that soon the eventual second domino will fall, and it is better the be prepared (via the previously discussed infinitely expanded credit line), than to have to scramble in the last minute as was necessary in May. In other words, the storm clouds are gathering and only fools will invest in risk asset without getting some additional clarity on what is happening in Europe. The bottom line as Backshall asks is: "do they default now or default later." And that pretty much sums it up. Buy stocks at your own peril.

Incidentally all this is happening as we read in an exclusive Bloomberg piece that "four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt" and that EuroStat still has not received the required disclosure about just how fake (or real) the Greek debt situation truly is. When one steps back and ponders just how bad (and unknown) the situation in Europe is, and that stocks are unchanged for the year, one must conclude, as Dylan Grice does every week, that the lunatics have truly taken over the asylum.


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Zero Hedge

As Bitcoin Surges To New Record Highs, 5 Lessons For Every Crypto Investor

Courtesy of ZeroHedge. View original post here.

Once again the stories of the death of Bitcoin appear to greatly exaggerated.

image courtesy of CoinTelegraph

Overnight Asian demand sent the cyrptocurrency to a new record high at $17,934 (Bitstamp).

...



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Insider Scoop

Attention Contrarians: This Analyst Says JD.com Set Up Could Be In Your Favor

Courtesy of Benzinga.

Related JD Want Some Exposure To China's Growth? Stifel Says Buy JD Or Alibaba Q3 13F Roundup: How Buffett...

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Biotech

Designer proteins that package genetic material could help deliver gene therapy

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

 

Designer proteins that package genetic material could help deliver gene therapy

Courtesy of Ian HaydonUniversity of Washington

Delivering genetic material is a key challenge in gene therapy. Invitation image created by Kstudio, CC BY

If you’ve ever bought a new iPhone, you’ve experienced good packaging.

The way the lid slowly separates from the box. The pull...



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Chart School

Rallies Slow As Semiconductor Selling Eases

Courtesy of Declan

Markets experienced early gains but gave them back by the close of business. Given the mini-rally of the past five days, some of the indices are looking vulnerable to a new round of selling.

The S&P finished with a narrow inverted hammer on low volume but at new highs. A move back to the newly accelerated channel is looking favored.
 


The Nasdaq also finished with a narrow doji but wasn't able to make new highs.  It's already close to one channel but looks more likely to reach down to th...



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Digital Currencies

Not A Bubble?

Courtesy of ZeroHedge. View original post here.

Meet The Crypto Company - up almost 20,000% since inception in September...

To a market cap of over $12.6 billion...

Grant's Interest Rate Observer drew the world's attention to this 'company' yesterday.....



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ValueWalk

Tax Bill May Spark Exodus From High-Tax States

Courtesy of FinancialSense.com via ValueWalk.com

The following is a summary of our recent podcast, “Exodus – The Major Wealth Migration,” which can be listened to on our site here on on iTunes here.

It’s looking increasingl...



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Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...



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Mapping The Market

Puts things in perspective

Courtesy of Jean-Luc

Puts things in perspective:

The circles don't look to be to scale much!

...

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OpTrader

Swing trading portfolio - week of September 11th, 2017

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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Promotions

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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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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