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Watching and Waiting
Don’t just do something, sit there! Not panicking can be tough to do in times of increased volatility, but often the best advice to avoid emotional decisions. We continue to expect severe bouts of volatility at least until the trajectory of the U.S. and global economy is more definitive. In the meantime, the Fed is likely to become more dovish in the near-term, which could stabilize the volatility. Recent results for global PMI readings are relatively encouraging and certainly argue against the apocalyptic forecasts so prevalent today.
GMO Quarterly Letter
by Ben Inker, Jeremy Grantham of GMO,
In a new quarterly letter to GMO's institutional clients, co-head of asset allocation Ben Inker examines U.S. high yield corporate bonds, an "asset class that had a notably bad year," concluding, "at current spreads, high yield seems to be no worse than fair value and probably better than that... In today's environment, that makes it one of the best available risk assets for investors" ("Giving a Little Credit to High Yield").
No Place to Hide or No Place to Go?
2015 was a very frustrating year for investors as there was plenty of volatility, virtually no standouts and quite a few disappointments. Despite relatively steady U.S. economic growth, domestic equities were essentially flat for the year with the exception of some tech and biotech heavy indices. U.S. investment grade bond performance was also essentially flat, while high yield, still under pressure from declining energy and industrial commodity prices, lost money.
Revenge of the Nerds
In a classic 1984 film, “Revenge of the Nerds,” a group of out-of-favor college students (“nerds”) assert themselves at the expense of highly-esteemed fraternity athletes and popular sorority girls. Here is how imdb.com describes the movie on their website:
“At a big campus, a group of bullied outcasts and misfits resolve to fight back for their peace and self respect.”
Crude Awakening
by Jeffrey Baker of HiddenLevers,
The price of oil has had a dramatic effect on markets since the start of the year. WTI was down over 9.0% in January and domestic markets followed oil downwards, returning approximately -5.0% the first month of this year. In an effort to break through the noise surrounding oil, HiddenLevers recently analyzed the commodities market and in this post will summarize the good, bad and ugly outcomes for oil and its broader effect on the global economy.
Increasingly Addled
Long ago and far away in the adolescent cauldron known as Los Altos High School,
I attended a senior U.S. history class with a man-child named Delos Roman. He was
appropriately christened it seems, because his body resembled that of Zeus, the God
of Thunder, and at 6’4”/230 pounds, he rumbled down the football sidelines like a
Mack truck on a downhill mountain road.
On My Radar: The Last Bull Standing
Today, I share with you some of my high-level notes from this week’s Inside ETFs Conference in Hollywood, Florida. The forward return theme was consistent, from Vanguard to Wharton Professor Jeremy Siegel: expect low equity and fixed income returns. Jeffrey Gundlach left the audience in a state of depression (well the audience, not Gundlach) and Mark Yusko spoke of likely recession citing poor ISM numbers. This left Prof. Siegel to later say, “It appears I’m the only bull at the conference.”
The Danger in Emerging Market Debt
by Robert Huebscher,
Most observers saw the recent troubles in the high-yield markets – the gating of the Third Avenue and Stone Lion funds – as a precursor to a junk-bond crisis. Instead, investors should be focusing on a potentially bigger problem, according to Russell Napier. Open-end mutual funds holding emerging-market debt are at risk.
Thoughts on the Alternative Investing Landscape in 2016
As 2016 gets under way, investors need to guard against short-term volatility spikes and contagion risks from factors including geopolitical turmoil and pressure on oil prices. How is the environment impacting the risk/return characteristics of various hedge fund strategies?
Recession on the Horizon? Look at the Big Picture
Whether or not a recession is imminent, I believe it's a good idea for investors to be prepared by having a well-diversified portfolio, including assets such as gold and municipal bonds. Gold has tended to have a low correlation with stocks, meaning that even when stocks were tumbling, it's managed to retain its value well. The same can be said for short-term, high-quality munis, which have been shown to offer a greater amount of stability than some other types of securities, even during market downturns.
Bearish Tendencies (and silver linings)
by Team of Pinnacle Advisory Group,
2015 had many twists and turns, but from a financial market perspective, it was effectively a road to nowhere when looking across a variety of asset classes. In U.S. equity markets, large company stocks (large cap) barely moved as just a few sectors and stocks were big winners. In the broad market, many stocks performed far worse than the large cap averages and gave investors the false impression that the market was generally flat.
US Equity and Economic Review: Where's the Next Big Trade Idea? Edition
by Hale Stewart,
The market started the year with quite a bang, selling off to a degree not predicted by any event that occurred at the end of 2015. The ensuing sell-off has not only caused a fair amount of stress among investors, but also analysts who are struggling to explain what exactly is happening. To that end, I will argue we are seeing two events: an unwinding of the major post-recession trades followed by the markets attempting to find “the new trade.” Most importantly, current turmoil is the result of the inability to find new investment thesis.
Capital Flows into Insurance: Are We at a Tipping Point?
A sudden rush of small, related moves within an industry could signal something bigger: an imminent tipping point, perhaps with large impacts. Recent capital flows into the property and casualty (P&C) insurance industry appear to show signs of one such shift.
On January Barometers and Market Bargains
We are now witnessing historic extremes in the discount afforded to value relative to growth, quality and safety. While this environment has been (and may remain) painful for some time, the eventual normalization of these extremes represents the most compelling opportunities in equity markets today.
Looking for Answers
It can be difficult to stay calm during market declines, but reacting emotionally is rarely beneficial. Investors need to maintain discipline and keep long-term goals in mind. Risks have risen for the U.S. and global economy, but neither a domestic nor global recession appears to be on the imminent horizon. But oil likely needs to stabilize to stem some of the recent volatility. Stay calm, and don’t overreact to the short-term gyrations in the market.
Global Greying and Demographic Drags
The report examines the changing demographics of global workforces. The report notes that birth rates are dropping everywhere, workforce growth is dramatically slowing, and the median age is rising as people are living longer. BMO warns that the likely repercussions include inadequately funded pension and social security plans, strain on health care and retirement facilities, and uncertainty surrounding government budget forecasts due to slowing GDP growth.
Comparisons to 2008 Spark Gold’s Fear Trade
The comparisons to 2008 have triggered gold’s Fear Trade, with many investors scrambling into safe haven assets. Jeffrey Gundlach, the legendary “bond king,” recently made a call that amid further market turmoil, the metal could spike as much as 30 percent, to $1,400 an ounce.
Another Battle for Investment Survival
by Kendall Anderson of Anderson Griggs,
It has been over four decades since my discharge from the US Army. During the short time I spent in service to our country, I had the privilege of becoming friends with a number of battle hardened veterans. These were special people who had the ability to face fear, adjust plans and, most importantly, lead others when needed in hopes that all would survive.
It’s Time to Reevaluate Risk in Your Portfolio
by Don Schreiber of WBI Investments,
In response to the 2008 Financial Crisis, governments around the world led by the U.S. Federal Reserve adopted zero interest rate policy (ZIRP) and quantitative easing (QE) monetary policy tools to try to stabilize the financial system.
Quarterly Letter
In the fourth quarter, the S&P 500 Index
was up a bit over 7% and up 1.38% for the
year. Our accounts, on average, were up
3.52% in the quarter and down 5.03% for
the year. (Individual performance varies by
account.) The gains for the broader Index
in the quarter were mostly made by a small
number of large capitalization tech stocks,
Facebook, Amazon, Netfl ix, Google, and
Microsoft among them.
Stocks Plunge Most On Record Last Week, Oil Down 10%
In the first week of 2016, US stocks plunged by more than in any other first week of January since records have been kept (before 1900). The Dow Jones Industrial Index fell over 1,000 points from 17,591 at the close on December 31 to 16,519 at the close last Friday – a loss of over 6% in one week.
What, Me Worry?
by Scott Brown of Raymond James,
Recent economic data releases have been mixed. However, despite strong job figures, most have been on the soft side of expectations. Lower commodity prices are tough for producers of raw materials, but beneficial to the buyers of those materials. However, the bigger concern is why commodity prices are falling. Many view the drop in oil prices as signaling a more pronounced global slowdown and fear that the U.S. domestic economy may not be robust enough to escape that. The anecdotal data from the manufacturing sector is much worse than is suggested by the hard economic data reports.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
US equites have dropped some 10% in the past two weeks, returning to their August/September lows. This has triggered a bearish technical pattern. Is the stock market signaling a recession and the start of a bear market? Risk has clearly increased, but on balance, the evidence suggests the answer remains no.
Simplify Your Research Process and K.I.S.S. Your Worries Goodbye
by Chuck Carnevale of F.A.S.T. Graphs,
Most everything I write about is based on my belief in value investing as a sound, prudent and profitable long-term investing strategy. At its core, value investing relates to getting value on your money with investing just as it would to getting value for anything you would purchase. I feel safe in saying that no one wants to pay more than they should for anything that they purchase. This would apply to the basic necessities of food, clothing and shelter, and everything else that we would want to buy. Consequently, I don’t think it should be any different when we are buying stocks.
2016: Surprises & Scenarios
by John Mauldin of Mauldin Economics,
Today we’ll look at 2016 forecasts from some professionals I trust. I know most of them personally and have been friends with some of them for years. I know they aren’t just “talking their book.” They may turn out to be wrong, but if so, it will be for the right reasons. After we review the forecasts, we’ll look at some common threads among them, as well as important differences.
On the Couch
I woke up early on Saturday, December 12 – the morning after a day of significant declines in stocks, credit and crude oil – with enough thoughts going through my mind to keep me from going back to sleep. Thus I moved to my desk to start a memo that would pull them together. I knew it might be a long time between inception and eventual issuance, since every time I dealt with one thought, two more popped into my head. In the end, it took a month to get it done.
Don't Be a Consumer Dinosaur
by Scott Klimo of Saturna Capital,
The Consumer Staples sector logged solid stock market performance in 2015, outpacing the S&P 500 Index. Intra-sector performance, however, varied widely, even among companies we might consider similar blue chips. Clorox enjoyed double-digit appreciation, while Procter & Gamble saw a double-digit share price decline, and Church & Dwight came in between the two. Changes to the market landscape are forcing Home and Personal Care companies to evaluate past practices and develop new strategies to address the evolution of consumer preferences and purchasing behavior.
Stocks Plunge Most On Record Last Week, Oil Down 10%
In the first week of 2016, US stocks plunged by more than in any other first week of January since records have been kept (before 1900). The Dow Jones Industrial Index fell over 1,000 points from 17,591 at the close on December 31 to 16,519 at the close last Friday – a loss of over 6% in one week.
The Saudi Executions
On January 2, Saudi Arabia executed 47 people accused of various crimes against the state; 46 were Sunni jihadist radicals and one was a Shiite cleric, whose execution set off protests in Iran and the Saudi embassy in Tehran was sacked. In response, the Saudis broke off diplomatic relations with Iran and several other Sunni nations have either followed suit in breaking off relations or recalled ambassadors in protest. These executions are the result of many important trends affecting Saudi Arabia and the Middle East. In this report, we discuss the executions and the signals they send.
Should Investors Worry About China Selling U.S. Bonds?
At BTS we often say investors should increase the level of attention they pay to the price side of bonds, because we believe the risk of principal loss, especially in a low?interest rate environment, is higher than many people realize. It’s important to focus on supply and demand factors as part of that focus on bond prices.
Frontier Markets in Focus: 2016 and Beyond
Frontier markets represent exciting long-term investment opportunities for our team. We see favorable fundamentals including strong economic growth, abundant natural and human resources, favorable demographic profiles, the potential for rapid technological progress, and potential benefits from improving infrastructure and improving standards of governance.
No More Excuses!
What’s really important going forward is not the Fed’s recent decision?—?which was widely conveyed ahead of time?—?but the course of several issues that will play out globally. These issues include the type and duration of monetary policies that will be pursued by the world’s central bankers, and the trends in commodity prices, currency values, credit spreads and longer-term interest rates.
Economicus Terra Incognita
by John Mauldin of Mauldin Economics,
Welcome to 2016. Tradition dictates that you spend the first few weeks or so reading forecasts for the coming year. I can say with certainty that most of them will be wrong. A smaller number may hit the target. Unfortunately, no one knows which forecasts will fall into which category.
On My Radar: China, Valuation Charts and Recession Watch Charts
China marked its currency lower once again yesterday. That makes eight days in a row they lowered the yuan. Last August, they devalued the yuan and that sent global equity markets into a dive. As Yogi Berra would say, “It’s déjà vu all over again.”
China Reset
And we’re off. The China stock market sucked the air out of the room last week. It’s a strange beast. The size of the market relative to GDP is around 58% compared to 150% for the U.S. But the free, or tradable, part is about one-third as small again. And it runs on high levels of retail margin. What we saw was pent-up selling, circuit breakers kick in, the market close and then repeat for two more days. The authorities dumped the circuit breaker system and allowed the market to settle.
Complex Systems, Feedback Loops, and the Bubble-Crash Cycle
by John Hussman of Hussman Funds,
Our expectations for a global economic downturn, including a U.S. recession, have hardened considerably in the past few weeks, with a continued expectation of a retreat in equity prices on the order of 40-55% over the completion of the current cycle as a base case. The immediacy of both concerns would be significantly reduced if we were to observe a shift to uniformly favorable market internals. Last week, market conditions moved further away from that supportive possibility.
International Economic Week in Review: New Year, Same Problems, Edition
by Hale Stewart,
As the new year starts, the world economy is still in a difficult situation. The Chinese slowdown is impacting a number of developing countries, slowing their top-line growth. Deflationary pressures continue. But now, we have an event (the Chinese market drop) that triggered concerns about global, leading to action (a global sell-off). Don't be surprised to see increased volatility in the coming few months.
How Gold Got Its Groove Back
After five straight positive trading sessions, the yellow metal climbed above $1,100 on a weaker U.S. dollar, its highest level in nine weeks. The rally proves that gold still retains its status as a safe haven among investors, who were motivated this week by a rocky Chinese stock market, North Korea’s announcement that it detonated a hydrogen bomb on Wednesday and rising tensions between Saudi Arabia and Iran.
Results 3,201–3,250
of 4,353 found.
