Mercury Rising 鳯女

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Archive for the ‘stock market’ Category

Just lucky

Posted by Charles II on February 28, 2014

Jia Lynn Yang, WaPo:

Forget hiring a top hedge fund to manage your portfolio. Your better bet might be an employee at the Securities and Exchange Commission, according to a new report suggesting that regulators are trading on inside information relating to investigations and upcoming enforcement actions.

In the report titled “The Stock Picking Skills of SEC Employees,” researchers found that SEC employees’ stock purchases look like your average person’s. But when these employees sell their stocks, they appear to systematically beat the market by making sales within weeks of costly enforcement actions by the agency.

“These results suggest that SEC employees potentially trade profitably under the new rules, and that at least some of their profits potentially stem from trading ahead of costly SEC sanctions and on privileged non-public information,” write Shivaram Rajgopal, a professor of accounting at Emory University, and Roger M. White, a doctoral student in accounting at Georgia State University. “In short, it appears that SEC employees continue to take advantage of non-public information to trade profitably in stocks under their regulatory purview.”

I have to say, all the most successful investors, guys like Warren Buffett, do it this way: trade on inside information. I still can’t believe that Martha Stewart of all people did jail time for what goes on all the time.

Posted in frauds, stock market | 6 Comments »

Look out slightly below, government shutdown edition

Posted by Charles II on October 6, 2013

Not a big move so far. But a roughly three-quarter point drop in S&P futures for a Monday does not bode well. And Asia ex-Shanghai looks to go red. I would not be surprised to see the markets down 2 percent on Monday, though of course that’s pure speculation.

And then there’s this Reuters piece:

While most on Wall Street continue to believe it very unlikely the United States will default on its debt later this month, banks and securities firms are already gearing up for how to handle any U.S. Treasuries tainted by missed payments.

Borrowing costs could surge for businesses and consumers and the stock market could plunge. The Treasury warned on Thursday that a default could trigger a financial crisis and the worst recession since the Great Depression.

SIFMA will be on high alert for a default beginning on October 16, the day before the Treasury says it might be forced to stop adding to the national debt.

Playing with nitroglycerin is so much fun… according to the Republican Congress.

And then there’s this:

Art Cashin says traders have a very cynical explanation for why the government shutdown fight hasn’t been resolved yet.

Cashin, UBS’ director of floor operations at the NYSE, told CNBC’s Bob Pisani around midday that “they don’t want to cut it off because both sides are getting partisan donations pouring like a water faucet in as long as they go nose to nose.”

Cashin predicts that once the contributions start to dry up, Congress will go back to “doing the people’s business.”

Posted in economy, stock market | 2 Comments »

Cliff-diving, Japanese style

Posted by Charles II on June 13, 2013

Nikkei-6-13-13

Down 5.7% (758 points) so far today, and 20% from its high. US futures scheduled to open down 0.75%, and roughly 4% (S&P) from its high.

Seems pretty clear that money is flooding out of international markets (Japan, Brazil, Turkey which is down roughly 20% from its high) and into the US. Which is not keeping the US from falling, just from tanking. The permabears are calling for a new crash as bad as 2008. I don’t see that, because the bubble inflation seems much smaller. But certainly a 10-20% correction would be normal after the enormous run we’ve seen.
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SPY trading at 50 day moving average. It’s likely to bounce, at least in the short-term. If it breaks below, the first strong support is at the 200 day MA which would be somewhere around 1500-1550.

So, excitement!

(But don’t watch the technicals. Watch the news. Things like the Turkish riots are real news, and real news is what really affects the market)

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Look out below, Japan edition

Posted by Charles II on May 23, 2013

Outsourced to Ritholtz:

Nikkei is down 7.3%….Major European indices are off 2-3%.

Year of the Water Snake indeed.
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Added: So, of course, what looked like a major crisis brewing turned out to be a simple correction. That’s the Water Snake. The minute you think it’s going one way, it turns the opposite direction.

Posted in Japan, stock market | Comments Off

Watch out below, Cyprus edition

Posted by Charles II on March 17, 2013

Asian markets look to be headed down 2% (as Hong Kong and Japan are as of ca. midnight Eastern), while S&P futures are down 1.4%.

A correction by 8% would get the S&P to the 200 day moving average, while a correction of 12% would bring it to a Fibonacci level. The immediate cause of this is the EU’s screw-up with Cyprus

Ansuya Harjani, CNBC:

After a period of what some experts have called “irrational exuberance” in global markets, the weekend decision by the euro zone to force bank depositors in Cyprus to contribute towards a bailout provided a stark reality check for investors on Monday.

Investors are concerned that taxing depositors will set a dangerous precedent for the euro zone and ultimately risk runs on regional banks. The strategy may also provoke depositors in other debt-ridden nations to shift their money to “safer” European banks.

“The madness of this decision about Cyprus is unfathomable. We expect runs on Cypriot banks when they open on Tuesday [Monday being a bank holiday]. No sensible foreign depositor would continue to keep money in a banking system that just took nearly 10 percent of his deposit without any notice,” David. Kotok, chairman and chief investment officer, Cumberland Advisors wrote in a note to clients.

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Update. As PW says, the word is that the Cypriot banks are being targeted because Cyprus has become a money laundering center for Russian enterprises.

But, via Ritholtz, it is also said that it’s just a tax, that the money laundering thing is just a talking point.

Posted in stock market | 2 Comments »

Look out below, Asia edition

Posted by Charles II on February 21, 2013

Don’t know what this means. CNBC:

A massive sell-off in Asian stock markets on Thursday erased the previous day’s strong gains after Wall Street fell on minutes from the Federal Reserve’s latest meeting, which sparked concern about the central bank’s bond-buying program.

The drop in commodities like silver’s SLV (down to 27 from its high of 34 last September) and copper’s CU (at 28 and change from its high of 46 in mid-2011) suggests that there’s real economic weakness. On the other hand, the real drop is in Shanghai (3%) while Korea is just 0.5%. US futures are down marginally. So I sort of suspect this is more of a China story at the moment.
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Just to add (2/21): my guess is that this will be a 14-20% correction, which would be around 1200-1290 on the SPY and it will be driven primarily by congressional stupidity, Fed paralysis, and Chinese opacity. Possibly the Europeans have exhausted their supply of stupidity, although if they don’t do something to reduce the likelihood of revolution in Greece, they haven’t.

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The Year of the Water Snake: A year of investing dangerously

Posted by Charles II on January 2, 2013

Black-Snake-31t

From Wikipedia. Work by William Nutt.

My last year’s predictions for the markets were not particularly good:

I see the same two paths open before us that there were last year. On one path, the Chinese allow their currency to float and the consumer economy to take root. The Germans stop trying to punish southern Europe. The US gets the dead hand of the Republicans off the economy and does something for underwater homeowners. Japan bites the bullet and goes solar. Under this scenario, a true recovery begins, and a true bull market takes hold. On the other path, the political system continues its now-epic FAIL, recovery turns into recession, and the bull market is pushed off for years.In the formerlatter case, making money in the market is all but impossible for the small investor. In the latterformer case, everything does well, but especially industrials, basic materials, energy, staples, and services

So, which is the Year of the Water Dragon? If you believe in Chinese astrology, it’s a good year to make money. If you believe in the stupidity of politicians, things do not look good.

I know which of the two I believe in.

We had extremely stupid politicians, yet the markets rose thanks to a Fed that has bathed asset prices in an unprecedented geyser of money. The US turned in a middling performance, while Asia did extremely well despite having politicians about as stupid. Brazilian large cap stocks underperformed.

Now we move to the Year of the Water Snake.

WorldMarkets2012

So, here’s an astrologer, Sophia Angelique, aka Tessa Schlesinger, on what the Water Snake will bring:

In general, snakes are a tricky lot. If it wants to move forward, its body undulates and it’s not easy to tell which direction it is going to go in. That’s the same with the 2013 year. It will seem to go in one direction, and then, very unexpectedly, it will veer in completely another direction. That’s why it will be so difficult to plan for. Those that do best this year are the ones that have a natural ability to move at the pace of the snake and who are able to navigate tricky waters. The example is steering a ship in a storm with loads of mist, unable to see, and having to use other senses – like radar, sound, computer equipment, etc. to get through safely. It’s a year when it’s best to work with others and to talk things over before starting something new. It’s a year when quick maneuvers are going to be needed in order to avoid unexpected obstacles.

Considering how well the macro approach I use has done in predicting the market, you might as well rely on astrologers. And considering that John Boehner and Eric Cantor are in charge of the House of Representatives, it is indeed a good bet that those two snakes are going to go in highly unpredictable directions.

Posted in stock market | 1 Comment »

Tough market

Posted by Charles II on December 14, 2012

Hope this isn’t an omen:

Tough_Market

On a more serious note, Gillian Tett of FT talks about how computerization is leading to the end of work, in Jeremy Rivkin’s phrase. Exim Bank financing rose 25% (meaning that US exports are increasing), but the jobs behind those exports have actually fallen by 12%. So automation appears to be destroying more jobs than it is creating. She says that Brian Arthur of Palo Alto claims that computerization is responsible for 60-80% of productivity growth since 1995. Personally, that would be no surprise: comparing the work required to send 10 gifts by online shopping vs. six gifts by conventional shopping is enough to convince me that computers are a good thing.

But we have to come to terms with the end of work. As discussed in the thread below on guns, social violence rises when unemployment and hopelessness rise.

Posted in economy, stock market | Comments Off

Doubling down on ice cream sundaes

Posted by Charles II on August 7, 2012

Back in March, I said the market was overvalued. It was then at 1416. The Volatility Index was similarly at low historical levels of about 15:

The VIX is now at 15.

VIXY, a security that tracks the VIX index was then at about 36. It is now at 25.

This is a hated security. While VIX is unchanged, and the S&P is at the same level, VIXY is off 30%.

Now, maybe everything is copacetic. There will be no fiscal cliff, no uncertainty related to Europe or the election, the global slowdown will be negligible and the Republicans will not manage to screw everything up within the next six months.

But I just increased my bet on ice cream sundaes.

Granted, so far, I have been nothing but wrong this year (I briefly got in the money in June, but decided to hold). And, as I pointed out, extremes in VIX tend to be lumpy: there are long, long periods when it is below 25, even as low as 10.

But I do not believe that things are so peachy that I’ll end up buying ice cream sundaes for the investment banks on the other side of this bet.

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If the Fed bails out the markets this time, they are fools

Posted by Charles II on June 4, 2012

It’s definitely look out below time in the stock market. And that’s a good thing! The S&P was in a minibubble, outracing other markets. Now it looks to print -1%, with Asia down 2%.

The stock market does not produce anything useful. It does serve to allow companies to raise money that they could not raise from bank financing. This is valuable for small companies who can’t borrow at the bank. But with interest rates low, big companies would be fools to issue equity instead of getting loans. The only important thing that a rising stock market accomplishes is that it enable the upper middle class/lower upper class to spend extra: to take a vacation or buy a Mercedes. These things actually do produce jobs, so a swiftly rising market is useful in the early stages of recovery.

In the real world, whole countries are suffering recessions. A few are insolvent. The stock market of those countries should not be rising in that environment. The US is doing ok, but the economy is soft. Europe is a disaster. Asia does most of its net trade with the US and Europe. There has been a stock swoon every summer since the crash for reasons that probably have to do with data artifacts more than real economic developments. And each time the Fed has responded to the whiners in the privileged classes with quantitative easing.

The whiners are back. If the Fed does QE it this time, they are fools. The market is roughly fairly valued based on present earnings. If, as seems likely, the world will re-enter a mild recession in 2013-14, then it’s overvalued. By 10% 0r 20% perhaps. Not by 50%. QE to raise asset prices will not fix the problem. The problem is that people need work, raises, better benefits. The problem is that the political system seems to be incapable of providing jobs, good wages, benefits.

Posted in economy, stock market | Comments Off

 
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