I continue to see sloppy trends in too many areas. Our health care investments are attempting to maintain some positive movements; but this is mostly due to the inclusion of the biotech stocks within these funds.
@Junkster noted positive trends in the HY muni sector; but too many other area remain sideways (recently), including most bond sectors.
I've some homework and intuitive reminders to sort out for the remainder of this week.
Take care,
Catch
Below is just after opening this morning.
VWO 45.62 -0.72%
ITOT 91.36 -0.30%
EMB 114.50 -0.16%
IBB 270.54 -0.92%
TIP 113.71 -0.10%
LQD 118.67 -0.11%
IEF 103.56 -0.18%
IWM 115.56 -0.86%
IYR 74.52 -0.23%
HYG 93.01 -0.17%
Comments
I am not at this time concerned about minor moves and with market valuation at this time. However, I do feel it is, remains, overbought in general with some sectors more so than others. When I look around for value and things that might be oversold I come up with the metals and perhaps commodities … but, there again, metals are a store of value from my perspective.
For me a dip in the market is a drop in valuation of up to five percent. A pull back would be a drop in valuation from five to perhaps ten percent. A down draft would be a drop in valuation of ten to fifteen percent. A correction would be from a drop in valuation form fifteen to twenty percent … and, a recession would be a drop in valuation of more than twenty percent.
In review of my asset compass I am finding the only assets that I follow that have moved into a downdraft or correction mode are the metals down about 17% and commodities, in gereral, which are down about 12%. Everything else for the most part has not yet move past the dip range although I have a few that are in the pull-back range. In my own portfolio I am only off my 52 week high by about 1.2% overall with a couple of positions in the pull-back range.
I'm thinking we need a good pull-back before we can make the climb of the next mountain. Otherwise, we are going to move sideways and range bound around the current pinnacle.
With this, my answer to your question is …. It’s Too Soon To Call; but, I would not be surprised to see a good dip, or pull-back, come before we get through October.
Old_Skeet
VWO 45.39 -1.22%
ITOT 91.02 -0.67%
EMB 114.33 -0.31%
IBB 269.48 -1.31%
TIP 113.49 -0.29%
LQD 118.48 -0.27%
IEF 103.51 -0.23%
IWM 115.18 -1.18%
IYR 74.29 -0.54%
HYG 92.74 -0.46%
Stocks have surged to unprecedented levels amid improving earnings, a pickup in economic growth and an accommodative Federal Reserve. The S&P 500 has set 33 record highs in 2014 and is up more than 8% so far this year.
Strategists aren’t the only ones ditching their pessimistic views. Bearish sentiment among financial advisers dropped to 30.6% last week, the lowest level since 1987, according to the Investors Intelligence weekly poll.
“The history of sentiment reminds us that it’s more dangerous to have an evaporation of bears compared to a plethora of bulls,” Mr. O’Hara said. “The lack of bears is something we should not take lightly,” he added.
http://blogs.wsj.com/moneybeat/2014/09/09/yet-another-wall-street-bear-folds/?mod=yahoo_hs
• The US is pretty much alone in climbing back... sort of... out of the great recession.
• The EU is heading back down, also in a major fistfight with their main energy supplier, Russia: there will be more collateral damage before that's over.
• South America isn't going anywhere for a while.
• China, Asia: Yes, what about China? Poised to shove their weight around and cause lots of trouble in the South China Sea area. No problem for us though, we'll just "pivot" over that way to keep an eye on those guys. Wait... wait... maybe we'd better stay in Europe and keep an eye on Putin... and what about Iraq/Syria/Iran/Israel (yet again)??? Holy smoke!
• The Mideast. Yes, the bloody never-ending fanatic, murderous Mideast. Well, nothing much new going on there, other than a new bunch of fanatic, bloody, murderous bastards who will do their best to overthrow, mutilate, behead, destroy and otherwise inconvenience all of the existing fanatic, bloody, murderous bastards. Not our problem, right? Oh-oh... wait a minute... that's not going so well either... it looks like we may have to do... something!
Well, at least things are just fine here at home. Fortunately we are completely independent of the rest of the world, so none of that other stuff will cause any problems here. The middle class is recovering nicely, the folks at the bottom are moving smartly right up the ladder, good jobs are plentiful, folks now have a little extra to put away for retirement, education is available at reasonable cost, our infrastructure is rapidly being modernized, and best of all, everyone has new iPhones!!
PARRRTTTTYYYY!!!
look good (essentially my momentum portfolio). Been in VNQ, HDV and XLV
for a while. Added VWO a little over a month back and QQQ more recently.
XLE was good for a while and may have peaked (remains to be seen).
Municipal bonds continue to look good as Junkster has pointed out.
VWO 44.41 -1.03%
ITOT 91.24 -0.30%
EMB 113.94 -0.32%
IBB 271.53 -0.67%
TIP 112.84 -0.24%
LQD 117.93 -0.23%
IEF 102.91 -0.20%
IWM 116.14 -0.38%
IYR 72.25 -1.50%
HYG 92.65 -0.15%
I think Fed watching is way overdone and don't pay any more attention to McCully than the other blow-dry pundits. Most of the time in recent years markets have simply "gagged" for a few hours or days following changes in Fed language and than resumed their prior trend.
The recent uptick in long term rates is however very significant and probably a big factor in the commodities slide. Many media pundits grossly oversimplify the relationship between the Fed and longer term rates. While the two are intertwined, markets in the end set long term rates. The Fed's authority to "set" rates is at the very very short end. What "QE" did was give them some badly needed (and artificially induced) leverage at the longer end. With QE coming to an end, I guess it's natural for longer rates to react more to economic conditions.
My equity exposure remains relatively low for many reasons - mostly personal factors. I'm however very curious about commodities because I feel they may represent a profitable short term trading opportunity (also one fraught with peril). Pundits like to cite $40 oil 10-15 years ago. Humm ... Do these guys seriously think $1.50 - $2.00 gas at the pump would be a sustainable price for very long?
FWIW
PS: OK - Bit the bullet today and made a small speculative wager in the commodities pond - which is in addition to my typical static weighting in that area. Left some room to add a little more if they go lower. I expect that the next time the thermometer hits -40 in Minneapolis, should be be to unload these positions for a small gain:-).
I mentioned this a few months back, but it is worth repeating:
"The U.S. drive for energy independence is backed by a surge in junk-rated borrowing that’s been as vital as the technological breakthroughs that enabled the drilling spree. While the high-yield debt market has doubled in size since the end of 2004, the amount issued by exploration and production companies has grown nine-fold, according to Barclays Plc. That’s what keeps the shale revolution going even as companies spend money faster than they make it." (http://www.bloomberg.com/news/2014-04-30/shale-drillers-feast-on-junk-debt-to-say-on-treadmill.html)
One of Rice Energy's PRs ends with this: "Certain of our wells are named after superheroes and monster trucks, some of which may be trademarked. Despite their size and strength, our wells are in no manner affiliated with such superheroes or monster trucks." (http://www.bloomberg.com/article/2014-06-02/aHEbwYkhOK5s.html)
Is shale real? Absolutely. However, I think there's a line where production is no longer economical and, if crossed for a while, I'm curious how heavily indebted companies will fare.
OK - Just kidding. But I think so much depends on which way the political currents blow in coming months. The party in power has great influence over Fed leadership, court appointments, budget, industry regulations, tax policies. etc. Unfortunately, our fiscal and other national policies often are short sighted as a consequence. Price we pay, I guess, for self government.
Tom Gallagher of ISS on the old Wall Street Week was the best I can remember at analyzing national & Washington undercurrents and translating those perceptions into actionable advice for investors.
Made many great calls over the years. He retired and than resurfaced again elsewhere. If anybody has anything by Gallagher in recent months I'd love to see it. For old-time's sake, here's a list of frequent cast members on the old Wall Street Week program. Best free investment advice under the sun. http://www.tvguide.com/tvshows/wall-street-week/cast/205345
Sep 12 2014, 12:34 ET Seeking Alpha
“We have an advantaged resource in the Horn River basin, but the costs are very high. You have to have good alignment with partners," Watson says, so the company is working with aboriginal groups in the area and performing initial work on the site.British Columbia is closer to Asian markets than some competing parts of the world including the U.S. Gulf Coast, but the latter area's projects that are moving ahead because existing infrastructure makes them easier to develop, the CEO says.
http://seekingalpha.com/news/1980685-chevron-needs-partner-contracts-before-moving-on-kitimat-lng-ceo-says
Oil and gas company debt soars to danger levels to cover shortfall in cash
Energy businesses are selling assets and took on $106bn in net debt in the year to March
By Ambrose Evans-Pritchard The Telegraph
6:10AM BST 11 Aug 2014
The net debt of 127 oil companies from around the world rose by $106bn in the year to March
The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.
The EIA said the shortfall between cash earnings from operations and expenditure -- mostly CAPEX and dividends -- has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011.
The agency, a branch of the US Energy Department, said the increase in debt is “not necessarily a negative indicator” and may make sense for some if interest rates are low. Cheap capital has been a key reason why US companies have been able to boost output of shale gas and oil at an explosive rate, helping to lift the US economy out of the Great Recession.
Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said.
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html
Reply to @Scott: Equal amounts into QRAAX and PRNEX.
I'm watching your winning process so that I can structure my own with a small % of my own portfolio. I've found that it isn't only the vehicle that dictates success, but the driver of that vehicle. Trying to figure out if I can be a good driver.
I like your use of vehicle and driver analogy ...
Seems a weak driver might be successful with a good strong vehicle while a good driver might be successful with a weaker vehicle and overcome plus some track strategy might also come into play here by the crew chief ... and, let's not forget about the luck factor that "indeed" many of times has also come into play in determining the outcome.
Heck I'd want to be a good lucky driver with a strong running vehicle plus a good lucky pit crew cheif to boot. Sometime even having all this plus a great name like Earnhardt, Gordon, Bush, etc. one still might check up short.
So even the best check up short from time-to-time as along comes Trevor Bayne and Chase Elliot along with a pack of others that at times can be spoilers. And, let us not forget about Richard Childress and his grandsons as they seem to be on a forward march too.
Now back to investing.
I like old-skeet's answer. You are well aware that I believe trading is more art than science. I trade my equity curve. I want my equity curve to be in the same mode of the type of funds I trade, i.e. a tight, rising channel. At this point in my financial and personal life, I don't want to see even a 1% drawdown in my equity curve. So if things look a bit dicey, I will begin selling off a small portion before my 1% or 1.50% threshold. So hopefully if the decline continues I will eventually be mostly all off before that threshold is hit. I did that in July when I was all in NHMRX as junk munis got a small hit from being overbought and resurfaced worries over Puerto Rico. I was all out before it hit 1% and as it went down below 1% felt good because I had protected my equity curve from any more of a drawdown. However, the junk muni market turned around *quickly* and by the time I was able to get all back in, I would have been something like $8000 for the better had I just sat tight. That was the same situation many times with the tech funds in the 90s and early 2000, but at some point the market will breakdown and not come back. So giving up some monies here and there is worth it if that what it takes to avoid the big decline.
The junk munis are the last ones standing now. Two in that sector are right at their YTD highs - ABTYX and LMHIX. The others are down up to around .50% from their YTD highs. I haven't sold any ABTYX which is in my small taxable account but have sold around 21% of EIHYX which is in my much larger IRA and thus would have more of an impact of my equity curve. It's down a tad less than .50% from YTD highs. If I have to sell more based on adverse price action and if like July this is much ado about nothing, I will go back in but with whichever junk muni fund with the most YTD momentum had the least drawdown in September. So far this is looking like ABTYX.
However, I not going to jump into high yield muni now as I feel I missed the boat to really enjoy the best ride. Glad you are having good success. Perhaps, you will post your next go long call. I am thinking to go long high yield muni now is currently a hold. Those that are in "good deal" those that are not currently in might be better off waiting for the next bus to come along, so to speak. Anyway, I await the next bus.
Again, I cheer your success.
Old_Skeet
A question on the art of your process; how long do you wait for this narrow channel trend to form before declaring it investible? I think you mentioned a couple other bond types you are watching, like EM and I think you mentioned floating rate. Is this formation kind of a gut feel before the innital foothold-the art?
Hope you don't mind the questions, exspecially if you've answered them before.
Generally, I don't have good luck in finding the tight rising channels in time. That's why I
was asking for pointers from you on how you go about finding them. I screen relatively broad sectors (L,M,Smallcap,Developed,Developing market stocks,a handful of bond categories,real estate,energy,healthcare, for example), invest in top 2-4 sectors based on short to intermediate-term momentum and lower volatility. Unlike you, I use ETFs due to avoid paying short-term trading fees.