Wall Street's worst month in 3 years ends on a sour note

And so history repeats itself ... and repeats ... and repeats.  And always repeating the mistakes.  So last Wednesday the head of the New York Fed said there would likely be no rate hike in September, only to be contradicted by the Fed Vice Chair on Friday who said there might be.  On Saturday, the Vice Chair expanded on this statement with his opinion that inflation would likely rebound to where the Fed would like, thereby opening the door to a gradual hike.  Of course, the Fed has been on record for quite some time that this was a major policy objective, but no where in any of these statements has a specific time frame been stated.  Wall Street has always assumed a hike would come in December, something that investors are prepared for.  But every time something good happens with the economy and the Fed gives even a hint that things are going in a positive direction, Wall Street assumes that the rate hike will happen in September.

Succinct Summations of Week’s Events 8.28.15 (+ bonus)

Another very tumultuous and historic week so this installment of the summation should be particularly useful.  The first bonus this week is yet another slightly satirical commentary from Barry Ritholtz about the folly of reacting to every little burp in the market and how good old fashioned human judgment can never and will never be outmatched by the computer algorithms that drive hedge funds.

How exposed are American households to the stock market?

Barry Ritholtz's Friday column provides a very different (and probably more accurate) view of income inequality in this country with his graphical presentation of the relative sparseness of low income family's participation in the stock market vs higher income families.  As the graph clearly shows, 90% of people making $75,000/year or more are invested but the numbers go down drastically to only 55% for those making between 30 and 75 grand, and to a miserly 10% to 20% of families making less than 30 grand.

Wall Street ends flat in quiet end to dramatic week

It was another tumultuous day with several dramatic swings throughout the session in a 135 point range.  But in the end things settled down and at close there was but a modest 12 point loss.  But it did not appear that way throughout most of the day as at first the Fed Vice Chair made a statement that a September rate hike may very well occur after all but, later on, investors decided to ignore this comment and stick with Wednesday's statement from the head of the New York Fed that a September rate hike was NOT likely.  Ah, investors ... they are a finicky lot, are they not?  Even as today they remain optimistic about September, overall sentiment still rose from yesterday's 22% to today's 35% chance of a September hike.  But things are getting a little bit back to normal as attested by today's volume of 7.8 billion, much closer to the August average and considerably lower than the frantic 11.2 billion average of the last five days.  If on Monday the Fed leaks any more hints of a hike, there'll likely be another sell off.  Stay tuned.

Wall St. logs biggest two-day gain since financial crisis

For the second day, the "glass half-full" crowd has come through with shining colors as the markets once again rallied strongly, this time to the tune of another whopping 369 points on the Dow.  That effectively recoups all the losses from the previous eight consecutive and historic losing sessions.  In fact, it was a disaster in reverse since, the trend lately has been for a big rally during the day, followed by enormous losses just before close.  Today, it was a big sell off in mid-afternoon with the Dow down another big 400 points by 3 p.m. only to have another huge rally to put the Dow up nearly 400 points by the close at 4 p.m.  What happened was some of the best news from the recovery yet.

Wall Street chalks up biggest gain in four years

The optimists finally had their day today with the Dow zooming up a massive 619 points, its biggest one-day surge in four years, making up most of the losses from the last two days.  The reason behind this is as irrational as the logic behind the big sell off of the past week -- investors have finally seen the silver lining behind this correction, namely that there is now little chance of a September rate hike.  Even though this really should have been obvious weeks ago, today the market finally got it.  There are pros and cons to every market swing. The key to successful investing is not only being aware of both but keeping them balanced.  The hysterical volatility that has been so typical lately has been mostly because on any given day, most have looked only at one or the other. So the optimists have been predicting a bounce for days now and today it came through in a rather historic way.  Will it continue?  Until China settles down, not likely, but the smart money is still betting on further growth this year and that's all that counts.

Wall Street's rally goes up in smoke, indexes end lower

So here's the deal -- the optimists were almost right!  (But of course "almost" doesn't buy the bacon.)  Today, after suffering yet another 8% loss on the Shanghai index, China announced their third round of central bank rate cuts and that triggered a rally 'round the world that shot the Dow back up past all of yesterday's huge losses.  In fact, by 2 p.m., all of Monday's losses had not only been recouped but the index was ahead over 200 points.  Then in the final hour, there was another rush to sell and the Dow again lost more than 400 points to close down 205, making it the seventh consecutive day of losses and sixth consecutive day of triple-digit losses.  Since the day really had nothing but good news, the late session sell off can only be attributed once again to panic.

Wall St. suffers worst day in four years, S&P confirms correction

It seems Friday's optimists who predicted a bounce in the Shanghai index perhaps as early as today were just a tad premature.  Not only was there no bounce, quite the opposite.  Right out the gate, the Chinese market dropped another 10%, or in a single day as much as all the combined prior sell offs of the last few weeks.  The effects across the globe made history with the largest one-day drop in all international markets in recent memory.  The Dow itself plunged over 1,000 points right out the gate, or as much in fifteen minutes as all of last week's losses combined.  It all came back by noon and, if the markets had closed at 1 p.m., the day's net would have been a wash.  But another sell off began in the afternoon session and by close the Dow was down another 588 points from Friday.  But all was not doom and gloom.

Succinct Summation of Week’s Events 8.21.15 (+ 2 bonuses)

This might be the most important week of the past five years to be providing a summary, what with the Dow diving nearly 1,000 points and trouble galore coming from China.  My first bonus on this Sunday is Ritholtz's Friday article which I was pleased to see rendered a very similar assessment of the week's dire events as did I in my Friday posting.  He confirmed what I believe and what I've seen many other analysts say -- this is just another correction.  If you're "buy and hold," keep doing what you're doing.  If you're an active investor, now's the time to buy.  The second bonus was on BR's blog this morning in which I delighted to see him take to task the two biggest blowhards on Wall Street -- Suze Orman and Jim Cramer for, given the dire week, giving the worst advice Ritholtz has seen in a very long time.  If there was a Darwin Award for investors, Orman and Cramer would have it.  Hope everyone had a great weekend.  Looking forward to tomorrow to see if the prognosticators who think there might be a bounce in China as early as tomorrow are right or wrong.

Tsipras resigns, paving way for snap Greek election

With all the intense attention the world has been paying to China recently, we've almost forgotten about the other major drama that remains on stage in the Mediterranean.  Even though the EU bailout package enjoys overwhelming (if grudging) support from the Greek people and certainly overwhelming support from the Greek political factions opposed to Syriza, the Greek PM Tsipras is getting a lot of static from his own party which is throwing every obstruction they can in the path of reform.  So Thursday, Tsipras joined China in doing the shocking and unexpected in an attempt to once and for all put this crisis to rest -- he resigned!

China fears hand Wall St. its worst day since 2011

The skeptics are calling it the worst day on Wall Street in four years, some even six years.  The optimists are declaring today as official "correction" day that, after a nearly 1,000 point loss on the week, the market is now officially by technical standards in correction territory and it is now time to buy like crazy, on margin if need be.  In simple terms, China's manufacturing sector reported its most dramatic shrinkage in six years today and that sent the Shanghai index down another 4%, bringing its total slide since mid-year to 30%, much of that just since last week when China devalued its yuan not once but three times in an effort to stabilize its faltering economy.  Today's 4% hit created a ripple effect including oil below $40 a barrel for the first time in six years continuing its longest losing streak in almost 30 years, a ripple effect felt across all other commodities sectors as well.  The dollar fell too, which is contra-indicative since usually the dollar goes the opposite of commodities; but today they both fell at the same time.  The overall effect was an enormous dump on the Dow to the tune of 530 points, its biggest one-day decline in four years, a momentous 1,000 points for the week.  That translates to 6% down for the week or a $1 trillion dollar loss.

Wall St. tumbles on global slowdown concern; Disney slumps

The China stock exchange tumbled again today bringing the total slide this week so far to 8%, plenty enough to spook global markets already on edge over the Asian giant and precipitating the largest dump on the Dow yet in recent weeks, today a whopping 358 points.  Oil, Disney and Apple, all with big ties to China, saw big hits -- oil 2.3% (lowest since January), Apple 2%, Disney 6%.  The volatility index was up a whopping 25% in one day.  China is hoping its new fiscal policies will help stabilize its equity markets but obviously the jury is still out on that one.  Meanwhile, everyone else is just rattled.  And despite yesterday's assurances from the Fed that the hike will likely not come in September, there are still a lot of skeptics out there who believe it will, which contributed to the panicky sell off.  Volume was quite robust at 8 billion shares, way above the 6.7 billion average this month.

Wall St. falls in volatile trading after Fed minutes

Today was yet another excellent example of the irrationality of the market as the Dow plunged a big 162 points.  Yes, there was some bad news -- oil fell another 5% and there is continuing anxiety about the deteriorating state of China's economy.  But looking at a broader perspective, investors have been anxious for quite some time about the Fed announcing a September rate hike.  Today, the likelihood of that happening decreased significantly.  The Fed, completing its two day August meeting, concluded that though there has been a lot of good news lately, unemployment and specifically underemployment continues to be unacceptably high and the inflation target has not improved at all so most of the governors went on record today that we're not ready for a hike yet.  There's also the problem that oil futures have fallen 17% since the July meeting.  Other exacerbating concerns are that China's problems may worsen and overflow into the global economy and ours.  So with the Fed today publicly stating that our near-zero rate environment will likely be with us a while longer, you'd think people would be happier.  Instead, there was this big sell off to the tune of a way over average volume of 7 billion.  Some days there is just no accounting for market logic.

Wal-Mart, materials shares drag Wall St. lower

China's stocks fell more than 6% overnight and that has intensified fears of a third devaluation of the yuan in as many weeks.  Thus, commodities across the board took another plunge, this time to a near six-year low.  That combined with a very disappointing Q2 report from giant Walmart sinking to its lowest point in 2-1/2 years brought the Dow down 33 points.  Considering that news of this magnitude has caused sheer panic in the recent past, it is a tribute to the market's flexibility that losses were contained at 33 points.  The minimal loss was partly due to a very strong home builders report that showed housing starts at a near 8 year high.  Still, at 5.4 billion, volume was once again considerably below average which means the majority of investors are not yet reacting to this news.

Wall St. up on housing data; Disney boosts media stocks

With home builder sentiment registering its highest in ten years, the market got a boost from housing stocks sending the Dow up 67 points.  Also contributing to this were investors buying in on the low with Disney and other media, consumer and biotech stocks that took a real beating in recent weeks.  92% of Q2 reports are now in with profits forecast up to a plus 1.2% now from the minus 4% forecasts in early July.  Revenue expectations are for a minus 3.5%, but this is still up from a minus 4% a month ago.  Still, it was a rather uneventful day with volume considerably below average at 5.4 billion shares.

Succinct Summation of Week’s Events 8.14.15 (+ bonus)

Once again the week's summation, the most popular posting each week.  This week's bonus is one well worth spending a few minutes with -- a valuable five page course on the two most common major competing investment strategies -- alpha and beta, code for active vs passive investing.  I don't think I've ever seen it explained quite so well.  This was Ritholz's Friday Washington Post column.  Hope everyone had a great weekend.

Books to read to get rich

This is one of the best readings lists I've come across in a long time.  Though I found it posted four days ago, you will note that it was originally published on May 6th, a wealth of information for both career success and market success.  Some of these titles I've never heard of but they certainly look intriguing.  Others look like they may be worthless or, worst, scams.  But there are a few that are well known classics and perhaps we'll find a few others on the list too.

Wall St. edges up after upbeat data, Greek bailout agreement

All in all a splendid day on Wall Street with nothing but good news including the strongest industrial output in 8 months and retail gains continuing to buoy the market to the tune of another 69 points on the Dow.  And more good news from Greece as the EU confirmed agreement to a third bailout program. All a relief after a crazy week bouncing back from earlier losses attributed to the yuan devaluation. Yet investors remain nervous that all this good news is going to mean a September rate hike.  In fact, most are now convinced of this though I still maintain it's highly unlikely since the Fed has a long history of giving plenty of notice on major changes and no sudden surprises.  I remain convinced that the rate hike will come in December but then, what do I know?  I guess we'll find out what I know in a few weeks.  Is Mike smarter than all these geniuses or is he just another finance student trying to make sense of the world and holding on to optimism?  The most telling (and discouraging) news came from today's resident expert from L.A. who said, "I think the bulls are nervous and the bears are hoping for a big market decline once the Fed finally does hike rates."  Imagine that, a whole class of investors who actually want a crash so they can cash in on short selling? Rather disgusting. Do these guys care at all about the average Joes with their 401k's?  Fortunately sentiment does not seem to be on their side as reflected by the considerably below average volume of 5.1 billion, meaning many investors are still appropriately undecided.

Wall St. ends flat as energy shares drop with oil

Another wild day as the Dow dropped 60 points right out the gate, only then to steadily zoom up 140 points throughout the day until 3 p.m., then lose all but 5 before the close.  So what were the opposing forces of nature behind this drop and zoom?  Oil dropping to a 6-1/2 year low was the drop and strong retail numbers for July along with steady new jobless claims indicating the employment market holding solid with no new losses triggered the zoom.  Then in the last hour, it occurred to investors that all this good news is exactly what the Fed is looking for to hike interest rates in September so all the gains were lost.  The uncertainty with China didn't help either.  Volume was below the month's average at 6.2 billion.

Wall St. ends near flat after late-day rally

On the day after the great Chinese meltdown, the markets had more time to assess the situation and reacted with a nearly 300 point drop in the Dow right out the gate.  Then China delivered still another great shock on its second consecutive day -- it devalued the yuan even more.  This was unprecedented.  What was even more unprecedented was the market's reaction.  Instead of having yet another massive routing in sell offs, investors took the position that things had already hit their lowest and started buying like crazy.  Energy jumped nearly 2 percent, Apple 1.5% (regaining fully half of yesterday's losses), and the closely watched volatility index which had jumped nearly 19% in the morning session regained all but 1% of those losses by close, the Dow itself having regained all its losses for the day save 1/3 point.  The volatility not withstanding, clearly there is still a lot of optimism out there and investors saw yesterday as simply a natural correction in an oversold market and today as being ripe for taking profits.  Volume was considerably above average at 8.2 billion.

Wall St slides after China's surprise currency devaluation

Yesterday we saw one of the biggest rallies in recent history when the Dow jumped 241 points.  This was due to a combination of Berkshire Hathaway making the biggest acquisition in history, Greece on the verge of getting their major bailout, and hopes for China to add more stimulus to its ailing economy.  Today, Berkshire Hathaway is still getting kudos, the EU announced that Greece has its deal now, but China shocked the hell out of the world when it announced not a stimulus but a devaluation of its currency.  It was a major historic move, moving the yuan down 2%, its greatest devaluation in 21 years, and the rest of the world that is currently so tethered to China went into arrhythmia as everything from commodities to Apple to construction equipment to automobiles and even candy took a major hit, driving the Dow down 212 points.  I guess the good news is that even this major event was not enough to wipe out all of yesterday's gains.  The sudden currency adjustment sent copper, aluminum and oil all to six year lows.  But last night's major news from Google did shoot them up over 4% so I guess they were the big winner for the day.  I was looking for more enthusiasm.  It happened today when the great sell off hit a volume of 7.1 billion shares.

Wall St. jumps with energy, materials; Berkshire deal a boost

A very big day with the Dow jumping 175 points right out the gate and then steadily rising throughout the day to close with a whopping 241 point gain.  What happened?  Warren Buffett is what with what is being characterized as the biggest deal in history as Berkshire Hathaway buys Precision Castparts for 32 billion dollars.  This was just one more major M&A deal that has characterized 2015 and buoyed market optimism since M&A activity is widely considered a positive sign that corporate America is upbeat about the future of the economy. Also boosting optimism was the latest news from Greece that a multibillion-euro bailout deal could be had as soon as tomorrow and added hopes that Beijing could be pumping additional stimulus into the ailing Chinese economy due to recent weak data.  So it was one of the biggest and best days we've seen in a very long time, but you wouldn't know it by the volume which, at 6.5 billion shares, was even a little bit below average.  But major major news came from Google after the bell so we may see more enthusiasm tomorrow.

Succinct Summation of Week’s Events 8.7.15 (+ bonuses)

It's that time again for the popular weekly eye-shot.  And for this weekend's bonuses, I first submit an article first published in 1995 and resurrected in today's Barry Ritholtz column as a former Merrill Lynch president pens a letter to his daughter instructing her on investment basics.  Very concise and still valid, a very good one page course in intro finance.  And as a salute to Jon Stewart as he signed off this week after (how many decades?) of informing people through comedy, a brief collection of his best Wall Street barbs.  Enjoy, and hope everyone had a great weekend.

10 Weekend Reads

It's been a while since I've supplied a reading list.  Two articles have piqued my interest - the first one on Goldman Sachs and the last one on how to avoid biases in investment decisions.  And don't forget to check out the cool chart at the end illustrating the trends in U.S. Treasuries.

Wall St drops as jobs report augurs for September rate hike

Another wild day with the Dow dropping over 130 points before noon, then steadily rise throughout the afternoon session to close 47 points down.  So what was eating at Wall Street's craw today?  Quite simply that the jobs report came in almost exactly as expected, in other words very good.  Too good -- 215,000 new jobs against a forecast of 223,000 and a 7 year low of a 5.3% unemployment rate holding steady.  Should be good news except now the market is worried once again that with the recovery coming along right on schedule, that first rate hike in 10 years will be in September.  Last week, the odds makers were putting the possibility of a September hike at 47%.  Today that went up to 52%.  Are they crazy?  Why are they completely ignoring history?  The Fed never pulls big surprises like that.  If there was no announcement of a hike at the July meeting, any such hike will certainly be coming now after September.  Why can't all these geniuses see that?  The real concern is that the positive earnings reports are based on cost cutting and stock repurchases rather than sales so many are worried about valuations.  But has this not been the trend for a few years now?  Again, where's the rationale?  At least it's in the minority, if only slightly so.  At 6.7 billion shares, volume was just a little under this week's averages.

Media stock selloff leaves Wall Street bruised

The rout of media companies went into its second day today as investors begin worrying that maybe cable TV is on its way out due to all the cord cutting of the past several years.  Viacom lost 14 percent, Disney was again down, this time almost two more percent, and the entire media index is down again more than another two percent.  All told, the Dow sold off to the tune of 120 points.  Is it justified?  Is cable TV really on its way out?  In the past ten years, the number of U.S. cable subscribers who have "cut the cord" is still well under 10 percent, besides which - where are the cord cutters getting their programming from?  From the Internet and streaming services, of course.  And who owns most of the broadband Internet gateways and streaming services?  The cable companies, of course.  So really, the revenue is just going out of one pocket and into another.  The whole thing started yesterday with Disney, but what the market is not considering is that Disney is so huge that the relatively modest losses they've forecast for their cable TV operations is still a drop in the bucket in the big picture.  No, the cable industry is going to be around for a long time and today's rout is just more of the same hysteria we've been seeing for several years.  The day's good news is that with 75% of S&P companies now reporting in for Q2, earnings forecasts have now been adjusted to a plus 1.6% (compared to negative numbers a few weeks ago) and the all important revenue picture has been moved up again from a minus 3.9% to now a minus 3.4%.  At 7.8 billion, volume was quite a lot higher than recent averages so it definitely was a genuine rout.

Tech leads Nasdaq, S&P 500; Disney sparks media selloff

So the Dow had another wild ride today, up over 100 points in mid-morning trading only to crash in the afternoon to lose all gains plus ten.  Disney is said to be the culprit this time with its announcement of losses from its cable TV division leading to its largest daily drop since 2008.  Disney's 9.2% loss caused a ripple effect to all the other major cable operators ranging from a nearly 5% loss in Comcast to over 12% at Discovery Channel.  Since Disney is so huge (it's sort of the Apple of the media biz), it was more than enough to overcome the day's considerable other good news, namely that all the much better than expected Q2 reports are finally being reflected in boosts to stock prices.  Since July 1st, the profit expectations in the tech sector have more than doubled from a middling 2.1% to 5.3% now, thus creating a sector rotation into technology.  A surge in the service industries to a nearly ten year high might also be taken as good news except that investors took it more that the Fed may raise interest rates sooner after all.  Volume was modestly above this past week's more robust than usual averages at 7.2 billion.

Wall Street moves lower on Apple, interest rate worries

A continuing impact of China's slowing economy has been dramatic hits to U.S. companies doing business in China and no company has a bigger bite of the Chinese market than that guru of iPhones, Apple, which has lost business drastically due to China's inability to buy more of their phones.  Apple's shares have been falling steadily, 3.2% just today, well below their 200 day moving average, and moving the rest of Wall Street in the same direction.  In reaction, the market first went up 35 points only to then fall over 130 and then recover all but 47.  The vagueness of direction coming from the Fed is not helping matters, as investors struggle to predict when the rate hike will happen.  Will it be September or December?  The Fed has been pretty clear that there will be no hike until the U.S. economy is more stable so that should be a good indicator that it's not going to be September.  Nevertheless, the markets want more clarity and so nervous sell offs continue and will continue.  Volume was below last week's averages but on par with longer term averages this year at 6.4 billion.

Weak oil prices, China worries drag Wall Street lower

Even though the Chinese economy has been weakening for some time now, and oil prices have been tumbling for a good deal longer than that, with nothing else to worry about today Wall Street's focus turned once again to both of these issues dragging the Dow down another 91 points.  (At least no one seems concerned about Greece anymore.)  Who says the markets already have all this stuff factored in?  It seems pretty consistent that in the absence of fresh good news, very old news always resurfaces.  Volume was in line with recent averages at 6.5 billion shares.

Succinct Summation of Week Events (7.31.15) & bonus

The week's summation is here, the interesting "positive" being that Japan's labor participation rate has risen to 60%, the highest since 2010.  Yes, this is good news for Japan, but better news for the U.S. as we can appreciate how much better we have it with our 63% rate, down from 65% in 2010 which was down from the pre-recession 66%.  Looking at history makes it easier to see our progress.  In the "negative" column, we see that the Q2 economy grew by 2.3% vs a 2.5% forecast.  But what should have balanced this in the "positive" column (but was omitted) was the earnings forecast that a month ago was minus 4% changed to a plus 1% this week as more and more positive Q2 reports come flowing in.

Gold Performance & Rate Increases?

This article suggests that historically (with a few exceptions) there has been a direct correlation between the Feds raising the interest rates and the price of gold going up.  Since gold has been taking a real drubbing the past several years, perhaps with the Fed planning to raise interest rates later this year, the time has come to start rethinking investing in gold.  After all, can it really go much lower?  Time will tell.