Archive for August, 2019

Calibrating Your Risk Tolerance

 

Calibrating Your Risk Tolerance

Courtesy of 

You can learn a lot about yourself as an investor on a single day. For many, Friday was one of those days. With trade war rhetoric heating up and the stock market melting down, you likely experienced some internal turbulence.

If the drop on Friday made you nervous about your portfolio to the point where you felt like pushing a button, you’re probably taking too much risk. If you felt calm and relaxed, chances are you could afford to take a little more of it. And if you experienced moderate discomfort without feeling the need to log on and check your balance, you’re doing it right.

Making decisions based on the news of the day is almost never a good idea. But if you recently discovered that your risk tolerance wasn’t properly calibrated, now might be an okay time to get to a place that lets you sleep at night, especially with the S&P 500 just 6% off its all-time high.* Good investing, I always say, isn’t about maximizing returns; It’s about maximizing returns you could reasonably expect to achieve.

With the ups and downs of the stock market tied to a single Twitter account, it feelslike there is more risk** than normal because we can identify exactly where it’s coming from. But don’t kid yourself, stocks are never more or less risky, they always have the potential to do what they do.

There are two ways that risk can ruin you: by taking way too much of it or taking way too little. The sooner you can properly calibrate your true risk tolerance, the better off you’ll be.

*”But Michael, I thought market timing was bad.” That’s not what I’m saying. I’m saying that in a decade of mostly rising prices, it’s easy to bite off more risk than you can chew. If you recently found yourself in that place, then it’s okay to do something about it. Now, if you take your stock exposure down and then back up should a trade deal be announced, then that’s something else entirely. That’s one of the worst forms of speculating.

**Sometimes, most of the time, risk=volatility.





Bulls & Bears Enter The Thunderdome

Courtesy of ZeroHedge View original post here.

Authored by Sven Henrich via NorthmanTrader.com,

Bull and bear are entering the Thunderdome in September and October and only one will emerge victoriously. Both have 5 known developments to contend with inside the dome: The Fed, the ECB, the China trade deal, earnings and Brexit, all of which can and will throw curveballs as neither bull nor bear can be certain how either of these developments unfold nor what the reactions to them may be.

It’s a time of extreme uncertainty and before you accuse me of saying markets can either go or up or down I will come straight out and say markets can go either up or down, it really depends on how these developments shake out. I’m not a fortune teller, I’m a realist and I analyze technical structures in context of a complex macro picture.

And so everyone is clear: Charts are always evolving and markets are a journey, some don’t seem to grasp that concept. Markets are always shifting and our job is to evaluate risk and reward as charts evolve, especially in a time of great uncertainty.

For purposes of this article I want to focus on the immediate developments in front of us in September, the Fed, the ECB, and the China trade deal and I’ll outline what I see to be the key technical decision nodes as they present themselves right now.

On Thursday I had an opportunity to discuss some of the technical and macro considerations on CNBC Fast Money and I wanted to offer some more detail behind the discussion in today’s article.

For reference here’s the discussion from Thursday:

To me the central questions going into the next two months are these: 1. Will there be a China deal or not? 2. Will central banks remain in control, can their coming actions kick the can further down the road and help avert a global recession or not?


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Which Universities Have The Richest Graduates?

Courtesy of VisualCapitalist.com

Higher education is often considered the first rung in the ladder of success.

That’s why thousands of students flock to top-tier universities around the world, hoping to translate their degrees into financial outcomes. After all, a degree from specific institutions can often mean that a wealthy and secure future is in the books.

With a new fall term just around the corner, today’s chart relies on the third annual Wealth-X report ranking of global universities with the most ultra-high net worth (UHNW) alumni. We’ve also tracked their combined wealth, and how much each UHNW alumni makes on average.

Analyzing UHNW Riches

The Wealth-X database defines ultra-high net worth alumni as those who own at least $30 million in assets. In addition, the alumni figures are based on the actual known UHNW individuals from each university, then projected based on the sample size to predict total alumni within the global UHNW population.

One caveat to note is that both bachelor’s and master’s degree-holders have been considered, while UHNW individuals who may have attended more than one university have been counted twice. With that in mind, let’s dive in.

Upholding a Stellar Reputation

It’s immediately noticeable that a majority of universities on the list are located in the United States, with a high concentration on the East Coast—including the elite Ivy League.

Established in 1636, Harvard dwarfs all its Ivy League counterparts for the richest graduates. Its 13,650 UHNW alumni is double that of second-place Stanford (5,580 UHNW alumni), with twice the total wealth to boot.

One way that Harvard falls short is when average UHNW alumni wealth is considered in this chart, with Stanford beating it by a difference of $170 million per graduate. Regardless, it’s clear Harvard graduates go on to have a significant impact on the world. Notable alumni include political leaders such as former U.S. President Barack Obama, and billionaires such as Michael Bloomberg.

Interestingly, Princeton climbs the charts for total alumni wealth ($1.1 trillion), despite a lower UHNW alumni count of just over 2,000—but this also puts its wealth per graduate at a high of $516 million. Notable alumni from Princeton include Jeff Bezos and Steve Forbes. Meanwhile, Brown…
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“Money For Nothing And Growth For Free”: Dutch Considering €50BN Growth Fund Financed With Negative Rate Debt

Courtesy of ZeroHedge View original post here.

Authored by Menno Middeldrop and team, from RaboBank Research

  • The Dutch coalition government is reportedly considering a EUR 50 bn investment fund to support economic growth, to be financed by borrowing at negative rates
  • Many details are yet to be determined, but the Netherlands should have sufficient fiscal space to finance additional investment spending on this scale in the years ahead
  • This represents a notable shift from the debt-averse political consensus in the Netherlands and it could increase pressure on Germany to use fiscal policy to support growth.

News leaked last week that the Dutch coalition government is considering setting up a fund for investing in economic growth. Details are scarce, but media reports suggest a fund of up to €50 bn that would most likely be announced along with the rest of the Dutch budget in mid-September. It could be financed by borrowing from the market and spent on growth-friendly initiatives in areas such as infrastructure, innovation and education. Policy makers appear keen to capitalize on negative rates along the entire Dutch state yield curve.

Despite potential new borrowing, Dutch state debt levels would still be modest compared to other European countries and below the 60% Maastricht debt limit. The degree to which the fund actually results in additional investment and whether this will help growth, will depend on the governance around it.

From an international perspective, the idea of a government investment fund could impact the debate about the role of fiscal policy in supporting growth, in particular the special role of investment (in contrast to spending on (re-)current items). With limited space for additional ECB stimulus, the central bank has called on countries with available fiscal space to use their budget to support growth. The central bank’s policies have also made negative yields possible, giving governments an opportunity to finance such policies. The Netherlands has always been seen as squarely in the debt-averse camp, along with Germany. So this initiative could increase pressure on Germany to use its fiscal policy more actively, especially as the need for investment in infrastructure and digitalisation are seen as more acute there

Government investment fund: more questions than answers

The investment fund was initially reported by…
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Check-Mate For Central Banks: Negative Rates & Gold

Courtesy of ZeroHedge View original post here.

Authored by Alasdair Macleod via GoldMoney.com,

The reason for persistent strength in the price of gold can be found in the changing relationship between time preference for monetary gold, and a new round of interest rate suppression for the dollar. Evidence mounts that the forthcoming recession is likely to be significant, even turning into a deep slump. Bullion bank traders are waking up to the possibility that dollar interest rates are going to zero and that pressure is likely to be put on the Fed to introduce negative rates. The laws of time preference tell us bullion banks must urgently cover their short bullion positions in anticipation of a dollar rate-induced permanent backwardation for gold, silver and across all commodities.

This article dissects the moving parts in this fascinating story.

Introduction

For some time now, I have maintained the wheels are likely to fall off the global economic wagon by the year-end. Furthermore, for many of my interlocutors, the recent rise in the gold price is just evidence of an impending cyclical crisis, anticipating and discounting the certain inflationary response by central banks. But in this, we are describing only surface evidence, not the underlying market reality.

In the combination of trade protectionism and an emerging credit crisis we face a problem upon which almost no formal research has been done, so it is not something that even far-thinking analysts have considered. To my knowledge, no mainstream economist has pointed out the lethal mix these two dynamics together present. Very few even recognise the existence of a credit cycle, traditionally called a trade or business cycle. Not even the great von Mises called it a cycle of credit, having identified and described it with great accuracy in his The Theory of Money and Credit, first published in 1912. But a spade must be called a spade: it is in its fundament a credit cycle.

There are many Austrian economists who fully understand the credit cycle. But to it we must add the destructive synergy of American trade policy aimed at China. Much economic research has been conducted on the causes of a credit cycle, trade cycle, business cycle, whatever it may be…
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Firebombs, Teargas And Mayhem; Hong Kong Rages After Protest Leaders Arrested

Courtesy of ZeroHedge View original post here.

Protesters in Hong Kong returned to the streets in what Bloomberg has called "one of the city's most violent days in its 13th weekend of social unrest," after several top organizers were arrested and then released, including Joshua Wong, Agnes Chow and Andy Chan. 

Hong Kong police fired tear gas and sprayed protesters with blue dye from pepper-spray filled water cannons, while charging other protesters with shields and batons. 

Tens of thousands participated in an unauthorized demonstration - many of whom threw objects and gasoline bombs over barriers at the government's headquarters. After initially retreating in response to the crowd control measures, protesters returned to a nearby suburb and set fire to a wall on Hennessy Road in the city's Wan Chai district. 

While others marched back and forth elsewhere in the city, a large crowd wearing helmets and gas masks gathered outside the city government building. Some approached barriers that had been set up to keep protesters away and appeared to throw objects at the police on the other side. Others shone laser lights at the officers.

Police fired tear gas from the other side of the barriers, then brought out a water cannon truck that fired regular water and then colored water at the protesters, staining them and nearby journalists and leaving blue puddles in the street. -AP


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Iranian Tanker Still Bound For Syria; US Working To “Disrupt” Oil Transfer: Report

Courtesy of ZeroHedge View original post here.

As the Iranian oil tanker Adrian Darya 1 still appears to be circling in Mediterranean waters off western Cyprus after it turned away from approaching Turkey's coast this week, a new Wall Street Journal report says it will ultimately attempt to offload its 2.1 million barrels of oil to Syria after all, in contravention of EU sanctions. 

The WSJ report issued late Friday cites US officials who describe a plan already in place to disrupt any ship-to-ship transfer that would get the oil into Syrian hands — precisely what UK/Gibraltar authorities detained the ship for in the first place, at the request of the United States

The U.S. State Department is working to disrupt what it sees as the vessel’s Syrian plan, according to a U.S. official. The State Department has been monitoring two other Iranian tankers in the Mediterranean that could pick up the cargo

As we observed before, all the erratic maneuvering and circling by the Adrian Darya 1 in the past two days between Turkey and Cyprus has actually put the vessel in the vicinity of its original suspected destination for which it was accused of busting EU sanctions in the first place  the Syrian port of Baniyas.

As Reuters described based on tracking data, the vessel "made a U-turn on Friday and headed for Turkey's Iskenderun port – 200 km (124 miles) north of Syria's Baniyas refinery, the tanker's suspected original destination."

"The vessel’s plan, the people said, is to deliver its crude to
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No Idea What’s Going On With Brexit? Here Is The “Simplified” Flow Chart

Courtesy of ZeroHedge View original post here.

MPs who oppose a no-deal Brexit have joined together across party lines to try and stop Prime Minister Boris Johnson from 'proroguing' (a fancy term for suspending) Parliament. And as several legal challenges to Johnson's plan make their way through British courts, Wall Street analysts are trying to parse the most likely outcomes.

One team of analysts at Deutsche Bank, who have been closely following the increasingly convoluted Brexit process for more than a year, has updated their odds for various Brexit outcomes, along with a "simplified" flow chart that is almost comical.

According to the latest 'Brexit Update', entitled "Constitutional Warfare," the team, led by Macro Strategist Oliver Harvey, examined several potentialities for how the Brexit process might play out between now and 'Brexit Day' (Oct. 31).

As we noted earlier, PM Boris Johnson on Friday warned that MPs who have joined in the legal or political challenges to Johnson's plan have ironically increased the odds that the UK will leave the EU without a deal on Oct. 31.

Should all of the legal challenges to proroguing fail, MPs could opt to pursue a vote of no confidence in the government, or legislation to prohibit a 'no deal' exit. But if the past is any guide, the legislative approach would likely take too long, leaving the motion of no confidence and the formation of a government of national unity as the more likely option.

But an all-out rebellion against Johnson carries its own risks. For example, picking a leader for a national unity government could become a serious sticking point, as anti-no-deal Tories would vehemently oppose installing Labour leader Jeremy Corbyn as interim prime minister.

Already, several opposition MPs have ruled out supporting Corbyn as interim Prime Minister, leaving the question open as to who could lead the interim government. And there is also disagreement about whether the interim government should request an Article 50 extension from the EU27, as well as whether the UK should seek to revoke Article 50 altogether, effectively cancelling Brexit.

While most observers have effectively given up on the possibility that the withdrawal agreement…
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Something Is Negative In The State Of Denmark

Courtesy of ZeroHedge View original post here.

Submitted by Danielle DiMartino-Booth

  • According to the MBA, the benchmark 30-year fixed mortgage rate broke below the 4% level in August, repeating what’s occurred three other times since 2012; in the first two episodes, purchase applications jumped by double-digits while in the third and current, activity slowed
  • Consumer expectations for lower interest rates spiked to a ten-year high in August; though falling rates have flowed through to a bump in new and existing home sales, the lack of urgency communicated in falling rate expectations will likely pressure housing activity
  • In Q2, ‘tappable’ home equity rose to a record $6.3T suggesting refinancing activity, up 167% over the last year, should continue to benefit; while refinancing bolsters consumption, a six-month low in perceived job availability and the trade war could crimp home sales

“Something is rotten in the state of Denmark,” is one of the most recognizable lines of all time. What’s key is that Shakespeare wrote this line into Hamlet, but it was not spoken by Hamlet. Marcellus said it to Horatio after the ghost of Hamlet’s father appeared and Hamlet exited stage left with his dear old floating dad. The iconic phrase called out political corruption, a subtlety that high school students must glean from their required reading. Or, if you prefer the obvious, it flags something that’s gone awry.

Today, something really is negative in the State of Denmark. As per this CNBC headline: “Danish bank offers mortgages with negative 0.5% interest rates – here’s why that’s not necessarily a good thing.” On Monday, August 5, Jyske Bank A/S, Denmark’s third-largest bank, announced that big carrot on a 10-year mortgage. Banks offering negative mortgages are willing to take a smaller loss compared to lending at higher interest rates where they risk less creditworthy borrowers that may not be able to pay them back in the future.

The good news? Something is positive in the State of America. Positive mortgage rates are still all the rage in the good ole U.S. of A. That doesn’t make lenders any less nervous. According to the latest weekly report from the Mortgage Bankers Association (MBA), in August, the benchmark 30-year fixed rate made its fourth foray into
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Burgundy’s Vineyards Haven’t Been This Hot And Dry Since “The Black Death” In The 14th Century

Courtesy of ZeroHedge View original post here.

Vintners in France haven't seen such a succession of hot weather and dry harvest since the 14th century, during a time called "the Black Death", according to Bloomberg. Has a nice ring to it, doesn't it?

Though these weather extremes may seem normal to those under the age of 30, they are unprecedented by historical standards, going all the way back to when Europe was recovering from the pandemic that trounced its population. This is the conclusion of researchers who examined temperature, grape harvest and wage data dating back to 1354.  

In their paper, the authors led by Thomas Labbe conclude: 

“Outstanding hot and dry years in the past were outliers, while they have become the norm since the transition to rapid warming in 1988. Hotter temperatures over the last three decades have resulted in Burgundy grapes being harvested on average 13 days earlier than they were over the last 664 years."

The study underscores how the effects of climate change are forcing some populations to adapt to new cycles.

Comparing land surface temperatures from June to July 2019


 

The hotter temperatures have an effect on Burgundy's farmers tending to their vineyards, itinerant harvesters, merchants and consumers. 

Through looking at about 300 documentary weather reports, the researchers looked at the legendary hot summer of 1540 that dried up the Rhine River. That year, workers harvested grapes that looked like "withered raisins" and “yielded a sweet sherry-like wine which made people rapidly drunk.”

Doesn't sound that bad to us…

Regardless, Hugh Johnson, a well known wine critic, said tasting the 1540 vintage was "one of the most memorable moments of his career". 

High temperatures don't necessarily guarantee quality harvests, according to the research, which notes that the duration of ripening and winemaker styles are also important inputs.





 
 
 

Zero Hedge

European Carmakers Face Perfect Storm

Courtesy of ZeroHedge View original post here.

Authored by Irina Slav via OilPrice.com,

European carmakers are facing what could turn out to be a major crisis cooked up by EU regulators, and it’s all about EVs and emissions. The former are supposed to help solve the problem with the latter, but the likelihood of success is uncertain because there are literally millions of variables: car buyers.

The EU has been enforcing emission ...



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Phil's Favorites

Black Hole Investing

 

Black Hole Investing

Courtesy of John Mauldin, Thoughts from the Frontline 

Scientists say the rules change in a cosmic “black hole” at what astrophysicists call the event horizon. How do they know that? Not by observation, since what happens in there is, by definition, un-seeable. They infer it from the surroundings, which say that the mathematics of the universe as we understand them change at the event horizon.

Or maybe not. One theory says we are all inside a black hole right now. That could possibly explain a few things about central bank policy. ...



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The Technical Traders

Crude Oil Setting Up For A Downside Price Rotation

Courtesy of Technical Traders

Crude Oil has been trading in a fairly narrow range since mid-August – between $52 and $57 ppb.  Our Adaptive Dynamic Learning (ADL) predictive modeling system suggested the downside price move in late July/early August was expected and the current support aligns very well with our ADL predictions of higher price rotation throughout most of September/October.  Please take a minute to review the original research post below :

July 10, 2019: ...



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Insider Scoop

The Street Reacts To Kroger's Q2 With Mixed Takeaways

Courtesy of Benzinga

Kroger Co (NYSE: KR) reported second-quarter results that came in better than expected. The earnings beat may have been overshadowed by management's decision to remove its prior guidance of $400 million in incremental EBIT by fiscal 2021.

Q2 A Mix Of Positives And Negativ...

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Chart School

Dow to 38,000 by 2022

Courtesy of Read the Ticker

President Trump said the Dow would be 10,000 points higher if it was not for the FED. In truth if the Dow breaks to new all time highs the next stop is 38,000 and he may be proven correct. Is there an election on? 

Of course who knows? But lets continue. 

The fundamentals behind this may be:

  • A good deal with China.
  • The FED turning on easy money with further rate cuts (very strange with a market near all time highs). FOMC Sept 17th well tell us more.
  • The above turbo charging stock buy backs.
  • Off shore money running out of foreign equity markets in to US markets (see note1).

Note1: Of course this has happened before, one particular time was just before O...



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Kimble Charting Solutions

Bond Yields Due For Rally After Declining More Than 1987 Stock Crash

Courtesy of Chris Kimble

U.S. Treasury Bond Yields – 2, 5, 10, 30 Year Durations

The past year has seen treasury bond yields decline sharply, yet in an orderly fashion.

This has spurred recession concerns for much of 2019. Needless to say, it’s a confusing time for investors.

In today’s chart of the day, we look at a longer-term view of the 2, 5, 10, and 30-year treasury bond yields.

Short to long term bond yields are all testing 7 to 10-year support levels as momentum is at the lowest levels in a decade.

A yield rally is likely due across the board after a recent decline that was bigger than the stock crash in 1987!

If yields fail to ral...



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Lee's Free Thinking

Nonfarm Payrolls Not Seasonally Adjusted Tell the Real Story - Unspinning Wall Street™

Courtesy of Lee Adler

Not seasonally adjusted nonfarm payrolls, that is, the actual numbers, give us a truer picture of the jobs market than the seasonally adjusted garbage that Wall Street spews.

Friday’s seasonally adjusted nonfarm payrolls jobs headline numbers disappointed investors with slower than expected growth. But was it really that bad?

Here’s How The Street Spun It – Wall Street Journal Modest August Job Growth Shows Economy Expanding, but Slowly

Employers added 130,000 nonfarm jobs, jobless rate held steady at 3.7%

U.S. employment grew only modestly in August, suggesting that a global economic slowdown isn’t driving the U.S. into recession but has dente...



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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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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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