Another Take on Valuation - It's Not As Bad As You Might Think

Now that the temps have cooled I am offering some weekend reading giving a contrarian view of the currently elevated levels of the indexes, offering in effect the view that these high valuations may not be all that unusually high after all, at least not in an historical context.  For those who may be leaning towards the bears (if not already hibernating), this article from Heritage Capital Research may provide some balance.  Enjoy what's left of the weekend.

S&P 500, Nasdaq hit records on tech lift

Third straight records for both the S&P and Nasdaq, eight straight quarters of gains for S&P and Dow, five for Nasdaq.  The bull market seems alive and well with the Dow up 23 points for the day.  There is talk of Trump replacing Yellen as Fed Chair but with the cautionary note that the market has already priced in Yellen staying on and that valuations will surely change if she leaves.  For a market that values predictability, that’s not good.  Volume was close to recent averages at 6 billion.

S&P ekes out record on healthcare gains, tax plan hopes

A third tumultuous day with first a 50 point drop out the gate followed by a hundred point rise to close 40 up.  For the second day, the driver has been hopes for tax reform which gave a boost to financials as among the expected beneficiaries.  Healthcare also got a boost plus the news that Q2 growth had been better than previously reported.  S&P P/E is still 20 percent higher than historical long-term averages.  The bears say a major correction is coming, the bulls say things will keep going as long as there’s no other reason than historical averages for them not to.  Volume was below average at 5.8 billion.

Wall St. gains on financials boost, tax hopes

Another very turbulent trading day with the Dow zooming up over a hundred right out the gate, then falling just as precipitously about 110 soon after before regaining ground to close 56 up.  There are days when the market sells off over the threat of rate hikes, and other days when investors decide that rate hikes will be good for the banks.  The latter was the case today with the financial sector getting a boost aided by anticipation of tax reform, though details as always remain scant.  Other good news included an increase in factory orders.  Volume was above average at 6.5 billion.

Wall St. ends flat after Yellen; tech shares bounce

A turbulent trading day with the Dow zooming up 90 points right out the gate only to drop like a rock again almost immediately and lose everything plus another 11 before day’s end.  After four straight losses, Apple finally had a good day that boosted the tech sector but Yellen affirming the likelihood of a December hike balanced all that out.  Consumer confidence for September and home sales for August also fell.  Volume was back to below average at 5.8 billion.

Wall St. declines on tech selloff, North Korea concern

In all these years, investors have not yet figured out that whenever Apple introduces a hot new product, there are always bumps in the road.  So beyond the continuing noise surrounding North Korea, the market continues to get hit by Apple stock dropping due to problems with the release of the new iPhone.  The market was down 140 points mid-day before recovering to a 53 point loss with safe-haven assets like gold picking up as often happens when crisis lurks.  The VIX was up to just over 11 (so it’s worse than it was, but keep in mind that anything under 30 is considered good) and the losses from Apple were more than made up for by gains in oil which enjoyed its 16^th gain in a month and a two-year high with global suppliers finally committing to cutting down the glut.  Volume was above average at 6.4 billion.

Succinct Summation of Week’s Events 9.22.17 (plus Green Assets)

The usual Sunday night weekly summation is below with all three indexes again making new all-time highs.  The bonus this Sunday is a Bloomberg article exploring the issue of ethical investing.  No, this doesn't mean insider trading.  Rather it refers to a developing trend where the stock market can represent an opportunity to support the issues and companies that you feel are ethical, that indeed there are ways to be an activist citizen beyond the ballot box.  This particular article focuses on companies that have active environmental policies for investors who agree with that position.  WealthTrack had an episode on this same topic a few weeks ago entitled, "Socially Responsible Investing," and I will plan to make a brief presentation on this at the October meeting.

There's Nothing Old About This Bull Market

You read about it almost every day, certainly every week -- this bull market has lasted for eight years, stocks are dangerously overvalued, it is the second longest bull in history, we are long overdue for a correction, a crash is coming and coming soon.  On the weekends, I try to bring you articles of interest and this weekend stands out particularly as Barry Ritholtz's Friday column in the Washington Post argues that this bull market has not been very long at all and those cynics who insist it is are using faulty data and flawed methodology.

Wall Street edges up, shaking off healthcare, North Korea worries

The market was all jitters over the possible repeal of healthcare sending the Dow straight down 60 points.  Then McCain registered his “no” vote and everything immediately rebounded to close just 9 points down.  Insurance stocks took the worst beating until the McCain announcement sent them back up to close 0.1 percent higher.  Energy closed up a tad higher too with North Korea still on everyone’s radar.  Some investors are worried enough to go to the safety of gold, others confident that the market will cope just fine.  Volume is again below average at just under 5.3 billion.

Wall Street pushed down by rate expectations, North Korea, Apple

What goes up must come down and after 7 consecutive record highs the Dow finally came straight down today to the tune of 53 points.  It is a pattern that has repeated often – investors just can’t seem to decide whether they want a full recovery or not.  We need rate hikes and normal inflation to get back to normal.  This has been the Fed’s position all along.  Yesterday applauded for getting on the path to normalization, today not quite so comfortable since rising rates also means less ease of borrowing and less equity.  Did anyone really believe rates should remain near zero forever? 

Wall St. closes slightly higher after Fed policy decisions

Janet Yellen has been saying for quite some time now that a balance sheet reduction program would begin as soon as the data supported it but investors apparently didn’t believe it until today when she announced an actual timetable.  Since the market was expecting this anyway, the Dow only rose a modest 41 points but it was another consecutive record high.  Financial stocks rose on the prospects of higher rates as the odds makers now put it at 67 percent for a December hike.  She made the hawks happy by announcing the program, the doves happy by insisting it would still be data dependent.  Volume was higher than average at 6.7 billion shares.

Wall Street edges higher; U.S. Fed meeting in focus

Like yesterday, in anticipation of good news from the Fed tomorrow, the Dow inched up 39, the Nasdaq 6, the S&P 2 today.  The modest boost was because of more fence-sitting until the Fed actually says its piece, but even a tiny boost added to the already record highs puts all three indexes at still new records.  The Dow is now running 6 in a row, the S&P 3.  As noted, volume remains on the light side at 5.8 billion.

Wall St. clings to records, helped by banks; tech falters

It was another session straight up with the Dow putting on another 63 points on anticipation that the Fed will announce this week how it’s going to pay down its portfolio.  (I seem to recall the Fed has already laid out its plans in previous meetings.)  But this hope for good news has sent the Dow to its fifth consecutive all-time high and the S&P to its second.  As has been true for a long while, there is still a lot of cash sitting on the sidelines and it’s expected these hesitant “retail investors” will get back in the market and keep the bulls running. At almost 6 billion shares, volume was in line with the 4-week average, which is diluted by the very weak August trading.

Succinct Summation of Week’s Events 9.15.17 (plus Ray Dalio)

The usual Sunday night weekly summation is below.  It was a very good week for the markets with all three major indexes reaching new all-time highs, job openings also higher than expected, up almost a full percentage point since June.  The negatives of retail sales and industrial production down are being dismissed as transitory events caused by the hurricanes.  I guess we'll have a better idea of this in a few weeks.  Meanwhile, the Sunday bonus this week is a two-hour audio conversation with Ray Dalio, the founder of Bridgewater Associates, who started his investments firm in his apartment 42 years ago and now has $160 billion dollars under management which makes Bridgewater the fifth most important private company in the U.S. and Dalio among the 100 wealthiest people in the world.  Bridgewater is a name that comes up frequently in research so this two hour recording may very well be a very worthwhile condensed course in successful investing.  Hope everyone had a great time this beautiful weekend.

How To Find The Best Stocks To Buy BEFORE They Breakout [slides]

For your weekend pleasure, courtesy of Deron Wagner and his Morpheus Trading Group website, I offer below a quick slideshow containing a tutorial on buying stocks before they breakout.  We've studied plenty of timing strategies.  Here's another one.  It's only 22 slides so it should be a quick study.  Who knows?  There might be something useful in there.  Enjoy the rest of your weekend.  It'll be pleasant.

Wall Street hits record highs, S&P 500 pierces 2,500

Today the S&P reached the symbolic benchmark of 2,500 (even if it was just by ¼ point.)  Even though many experts don’t put a lot of stock in any index, let alone benchmarks (yes, it’s quite true that almost as many stocks go up vs down on any given day and an index is just an average), what they ignore is the  basic reality that investing is a whole lot more about emotions than mathematics.  These benchmarks are very important for psychological reasons. 

Dow strikes record high as broader market weakens

Another record high as the Dow shot up another 45 points though there was mixed news on the inflation front that brought the S&P down a peg.  Inflation is higher than expected which increases the odds of a December rate hike to 50 percent today.  Investors wonder whether next week’s Fed meeting will point to this as a concern or not.  Crude is also up today.  For the year, the Dow is up 12 percent, the S&P 11, and today’s volume of 6 billion shares is just slightly above the 4-week average.

Wall Street hits record high - without help from Apple

Despite a second day of losses at Apple due to problems with the new iPhone, there were enough gains in consumer and energy stocks to lift the Dow another 39 points.  And despite Apple’s problems, it is up 37 percent for the year so some analysts are advising a “sell” to take profits.  The S&P reached new highs both Monday and Tuesday.  Today the Dow and Nasdaq recorded new highs.  The S&P continues to trade considerably above its 10-year average.  What’s amazing is that all this is happening despite all the problems with D.C. and North Korea.  At 6.2 billion shares, volume is still a little above the 4-week average.

S&P ends at record high led by banks while Apple drag

For the second straight day with the aftermath of Irma being far less damning than originally feared, the market was on a straight up trajectory with the Dow gaining another 61 and the S&P reaching a 2^nd consecutive all-time high.  Even bad news from Apple delaying the new iPhone (when ever has Apple introduced a hot new product that did not go bumpy at first?) could not dampen investor relief and enthusiasm.  With both North Korea and the hurricanes on the back burner, investors could focus on fundamentals which are strong.  Volume at 5.9 billion shares was just a tad  above the four-week average, the month average being weak because of light late summer trading.

S&P 500 chalks up record high as fear gives way

With Hurricane Irma not being nearly as nasty as feared, making landfall as a Category 3 instead of 5, relief swept the markets today and shot the Dow straight up, way up, right out the gate where it kept going all day to close up 259 points.  Another point of relief was that the commotion expected from North Korea on Saturday did not materialize.  In the wake of the hurricane, feared one of the worst in history, insurers got a big boost.  Volume remains above recent averages at 6 billion shares traded.

Succinct Summation of Week’s Events 9.8.17 (plus putting investor fears into perspective)

The usual weekly summation is below.  Last week the market didn't have too much trouble adjusting to the bad news surrounding Harvey.  Let's see if we have the same reaction this week to Irma.  This Sunday's bonus is for the glass half-full crowd.

YouTube Options Course

As we are into Managed Risk Investing, options are not exactly at the top of our list as they are considered risky.  Of course, risk is a relative term.  For instance, jumping out of a plane can be very risky as there are many things you can do wrong while preparing a parachute.  One thing out of place and it's curtains.  But for trained and experienced skydivers, there is virtually no risk because they know what they're doing.  The same could be said for any kind of speculative investment strategy and those who believe in them (commodities, short selling, options, etc) believe in them strongly by arguing that you just really need to know exactly what you're doing.

S&P 500 slips as Hurricane Irma nears Florida; tech falls

Like yesterday, the Dow swung in a hundred point range again as investors try to size up the pros and cons of all the competing interests out there.  On the negative, there is of course Irma (and lest we forget, North Korea) plus a decline in the usually bullish tech sector.  On the positive the market has decided that these massive storms may be good for the insurers after all with the sector getting a 2 percent boost.  The S&P is still within 1 percent of its all time high.  All in all, the negatives and positive seem to cancel each other out with the Dow rising a trifling 13 points.  At 6 billion shares, volume is still a little above recent averages.

Wall St. ends flat as media stocks slump, healthcare gains

Today was a return to business as usual with the market being less concerned about Korea and hurricanes and more about industry as the Dow swung in a hundred point range over slumps from both Disney and Comcast.  On the positive side of the ledger was healthcare, strong earnings growth and solid economic data.  In the end, the two sides balanced with a mere 22 point loss on the index.  For the third day, trading is closer to normal averages with 6.4 billion shares.

Energy shares lead broad rebound on Wall Stree

A day of panic followed by a day of bargain shopping with the Dow shooting up right out the gate and staying that way all day to close 54 up.  Part of the boost came from the easy deal Democrats reached with Trump today to pass an extension on the debt limit.  That’s one problem that was on everyone’s worry list yesterday that got checked off the list today already.  Much of the rest was the reopening of the Gulf coast refineries in the wake of Harvey providing an immediate spike to oil prices.  Despite many troubling issues, fundamentals are still saving the day and preventing a breakdown of the market.  For the second day volume was higher than recent averages (and closer to normal averages) at 6.3 billion shares.

Fresh North Korea tensions hit Wall Street

Being that it was a relatively non-news day with no major positive developments on which to focus, all eyes turned to North Korea, as they always do on the non-news days.  Their test of a hydrogen bomb sent the Dow down, straight down, all day long to close off 234 points.  There were of course a few other more minor reasons to be gloomy.  September is historically a bad month for the market and this particular September is shadowed by the threats of a budget showdown in D.C. and the federal debt ceiling.  Trading has been light for the past four weeks, but not today, when 6.7 billion shares changed hands.

Succinct Summation of Weeks Events 9.1.17 (plus How Work has Changed)

Concluding this Labor Day is once again the offer of the weekly summation.  Among the positives are Q2 GDP and ADP employment getting a substantial boost.  The more prominent negatives include nonfarm payrolls coming in way below expectations.  The bonus this Labor Day is a look at the changing intensity in the workplace, that in the last 44 years more than 4 times the percentage workers are now working considerably more than a 40 hour week, up to 26% in 2016 from 6% in 1973.  More Americans are working harder for fewer benefits.  How long can this be sustained?  Hope everyone had a great holiday.

One Of The Best Ways to Manage Risk Is...

Last week, Heritage Capital Research posted on their web site a short course on managed risk investing.  It is a fairly short read and a very good summation.  That is your bonus on this Labor Day Sunday.  The weekly summation will be published tomorrow night at the end of this 3-day holiday weekend.  Enjoy Labor Day!

Equity Factor-Based Investing: A Practitioners Guide

For your weekend reading this Labor Day holiday, there is a special treat, a 24 page manual on a new strategy called Equity Factor-Based Investing.  It must be pretty special because the web page it came from is designed so that it cannot be reproduced, as I will note below.  It certainly is worth a look and, if it's as special as it appears, I will read it and make a presentation on it at a future meeting.  Enjoy the holiday.

Wall Street edges up as rate-hike bets in check after jobs data

This was once again the odd case that can only happen on Wall Street where bad news is taken as good news with the jobs report coming in below expectations.  But this was greeted as a positive since fewer jobs means the Fed might not raise rates again this year after all.  But rate stress relief was not the only good news that shot the Dow up 39 points.  There was also factory activity at its highest since 2011 and various other economic indicators supporting further growth.  One of the negatives was a fall in construction spending but we can bet that with the Harvey rebuilding that will reverse itself quite quickly.  This is the second week that all the indexes registered gains.  As it has been for the past month, volume remains light at 5.1 billion.