Wkly Market Round-Up thru Sept 15th 2018; Wolf of Wall Street

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Sep 162018
 

Well, the Wolves will begin to howl in the coming months! Is that a good thing or a bad thing? Well, it depends; –wolves howl when calling for the pack to come together, when they are hungry and when they are ready to hunt! So is howling a good thing or a bad thing? We have a lot of geopolitical risks laying in wait mostly in Asian Pacific and Emerging Markets but thus far it is not affected US markets. We have seen a large divergence in the Global Economy vs the US Markets. I believe it is unsustainable and will most likely move back towards more established levels. Get my take in this week’s Weekly Round-Up

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Sept 7th 2018; Trouble Everywhere but Here

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Sep 082018
 

Hey Folks, it seems in this holiday shortened week Global Indexes are having performance anxieties! And even though we saw red candles each day to kick off the month of Sept, the US markets are one of the best global performing markets. Here are some of my other thoughts…

• S&P up 5 months in a row and first 4 trading days in Sept saw red each day…as the calendar shifts from August to September, so will market themes and moods. Positioning over the last week continued to see emerging market pain and the culmination of the crisis in Argentina with the ARS off 25% and rates rising to 60% despite IMF aid plans. This typified the summer. Emerging markets suffer from idiosyncratic stories – from South African capital flight linked to government policies – land reform and new corporate structures, to Turkey and its ongoing battle with the US…Brazil Political issues…Sept usually brings with it higher Volatility and Index under performance…

• Since the US FED begin QE equity values post 2009 have risen by 27.8 Trillion (337%) and the combined balance sheets of the FED, ECB and BOJ moved from about $4 Trillion to about $15 Trillion which closely parallels the S&P Growth…As the FEDs now are removing monies from the Balance Sheet pains are emerging from Emerging Markets to start (Turkey, Argentina & South Africa)…Italy could also be the potential undoing of Europe with their massive Bond Debt…US Corporations have also taken on loads of Debt to sell over $9.2 Trillion Bonds and are now on record to see over $850 Billion in Stock Buybacks…and let’s not forget about the Public Retirement Funds trying to maintain their assumed annualized returns of 7.6% by moving into additional asset classes like Private Equity…and Pension Funds have over $4 Trillion in unfunded liabilities that dwarfs the $500 Billion in underwater housing that help set off the great financial recession in 2007-09…

• The shift from Active to Passive Index funds can also cause issues in our next downturn as well..

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Aug 31st 2018; Up Up & Away!

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Sep 022018
 

Hey Folks, I want wish all our readers in the US Markets Happy Labor Day! Enjoy the long holiday weekend. Trading Volume will be low on Monday with US Markets closed. September has traditionally not been kind to market performance so let’s see how this one shapes up for us. We are getting a bit expanded and I see some settling in price action but I still don’t see a larger pull back at this time…in other words, we are still in the “buy the dip” type of market.

• The S&P and NASDAQ just closed their 5th straight winning month…Sept is the most dangerous month for the S&P and the DOW going back to 1950 average declines of 0.5% and 0.7% respectively…some of the largest single month declines have occurred in Sept…we can expect the FEDs to boost rates by 25 bps on Sept 26th to a range of 2-2.25% (94.6% probability) and another rate hike in Dec of 25 bps (63.6% probability)…The S&P is now trading at 16.8 times 12 month Forward Earnings…Up from 16.2 end of June and 18.6 the end of this past January’s strong run before the sell-off…
• Yield Curve hit lowest since 2007 to 21 bps…2s over 10s…but other analysts also look at other yield curves like the difference between the Fed Funds Rate and the 2 Yr Notes…according to some analysts this yield curve gets to the crux of credit creation…ie., when short term money earns more than lending, the flow of loanable funds moves away from credit…and we’ve seen this yield widen slightly in the past few months to money and credit are not threatened at this time…
• Odds & Ends; — BREXIT could get worse with delays on a final exit plan…watch Italian Bonds Yields over 3%…Hog prices could skyrocket on signs of another bovine disease emanating from China…Major Indexes for the Tech, Telecom will be changing shortly as big Tech Companies like GOOGL, AAPL, FB and AMZN get reclassified into other sector Indexes…XLY and XLK will be rebalanced after markets close on Sept 21st as a new Sector, XLC (Communication Services) gets added to the mix…

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Aug 24th 2018; What Noise?

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Aug 252018
 

Hey Folks, from the Political turmoil to the underlying trade tariff issues the markets are ignoring all of the ambient noise and pressing higher. As I have been saying we are on a “buy the dip” mentality and continue to do so; –at least for now.

• In Powell’s speech at the Jackson Hole Wyo Symposium he saw no signs of inflation accelerating past the Fed’s 2% annual target and is still committed to slow steady rate hike trajectory of 25 bps Qtrly…for this upcoming mtg on Sept 25/26th markets price a 95% probability and for a 64% probability of another 25 bps rate hike for the Dec 18/19th mtg….But while the equity markets are setting near all time records the 2s/10s Yield Curve shows it going even flatter down to around 20 bps is the smallest since 2007 just before the Financial crisis hit…
• Italian Bonds are getting in worse shape which could be the match that lights the next fuse across Europe…most people do not realize that the Italian Bull market is the worlds 3rd largest, primarily due to Italy’s largest debt load…the Yield on the 10 Yr just climbed over 3% but this includes ECB support and the big question becomes what happens when the ECB begins to pull back on its stimulus…this is a possible contagion that is also made worse with Italian Banks exposure to Turkey’s banks along with Spain and Portugal..if this forces ECB to continue stimulus then we can see the Euro go much lower and the USD much higher, which in turn could hamper recovery efforts in Emerging markets…
• Railroad stocks are up strong this year…CSX (36%), Norfolk Southern (21%) & Union Pacific (12%) so taking a contrarian view could be a good play…
• The real sign of a slowing economy and a longer run pull back would be when both XLK and XLY begin to under perform…XLV seems to be the market favorite over the past 3 months rising over 10% after under-performing for the first part of this year…and more than 90% of all companies in the Health Care Sector have beat both top and bottom line growth in the recent Q2 earnings which makes it the best performing sector…

Enjoy this week’s Weekly Round-Up;

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Aug 17th 2018; Stress & Ambien

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Aug 182018
 

Hey Folks, I guess when you combine lack of sleep with stress and throw in some Ambien and what do you get? You may think an erratic Rat Brain Trader, and perhaps you may be right. But you also get an erratic Elon Musk tweet that has rocked his company’s stock and put him into some difficult times…I believe longer term it will all work out but for now, trading TSLA has been very profitable for our members that have followed the momentum…and now, on to other interesting tidbits;

• The US Trade war shows the strength and dominance of the US over other countries when it comes to economic power…about 60% of the World’s Capitalization is represented by 18 major countries and in each, the US is in the top 3 trading partners for those countries…in comparison, the US is an island onto itself with US imports from any one country totaling no more than 5.% of trade…in general, in order to grow at a faster clip, the World needs the American Economy more than the US needs the rest of the World…but things never endure…
• FANG Stocks see the dentist and get trimmed a bit…Other than AMZN, exposure to the other FANG stocks declined in the 2nd Qtr by 50 of the largest Hedge Funds – FB and NFLX by 1.2 Billion each and GOOGL by 1 Billion…However, overall Tech Sector grew from these same Hedge Funds by over 8 Billion…more rotation is going on here in a profit taking mode…
• China has issues – none of Trump’s Trade Tariff’s origins…Baby Bust – 1 Child Policy for over 35 years has now caused a future problem of not enough workers to support an aging population…Bank Bust – 13.2% YoY growth in loan growth…now China must manage a balancing act of too much debt (270% of GDP) while managing a sharp reduction in trade war issues and fiscal policy stimulation…
• Crypto Currencies off over 70% from highs in late 2017…but Wall Street continues to push trading vehicles for investors to part with their cash for virtual currencies…the SEC has delayed until Sept 30th a decision on a proposed Bitcoin ETF…if approved look for Bitcoin to rally a good deal…

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Aug 10th 2018; When Foggy – Drive Slowly

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Aug 112018
 

Hey everyone, this week’s price action is all about caution, even though we move up towards our all time highs in the S&P.

• Hyman Minsky postulates (American Economists who died in 1996) that over prolonged period of prosperity, investors take on more and more risk until lending exceeds what borrower can pay of causing the markets to fall…which is contrary to the prevailing efficient market hypothesis which says markets are always efficiently priced and that humans are mostly rational…”Minsky Moment” means humans can and do act irrationally in times of extreme stress causing moments or periods of panic….
• Summer months always seem to bring on some market turmoil; for example, in July 1997 the devaluation of the Thai Baht caused the lead-in to the Asian debt crisis; August 1998 we saw the Russian Ruble devaluation and then in August of 2015 we saw China devalue the Yuan over 2.5% and now we are seeing in August of 2018 the machinations in the Turkish markets with their Lira…it has fallen over 23% for the week…at play were large European Banks in Spain, Italy and France that have over 100 Billion of loans across Turkey’s Banks…we also saw most Emerging markets fall on this news…
• Peak Earnings – S&P close to all time highs made this past January…and while the price level is close, the forward PE back in January was at 18.6 while now it is around 16.7…Stronger Earnings have been growing faster than the increase in prices…so far, of the 458 companies reporting earnings we are seeing a growth rate of 24.6% which puts the S&P on track for its 3rd consecutive Qtr. of double digit gains…

Here is my take on current market action with this week’s Weekly Round-up.

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb