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Post by xray on Sept 19, 2022 17:10:04 GMT
uncleharley, richardsok, yogibearbull, steelpony10, rhythmmethod, Fearchar, retiredat48, steadyeddyNone of us can predict the stock market or the fed. With that said.... If we learned anything from many past market drops, we learned that we cannot fight the " TREND". The trend is " DOWN". Why should we watch our hard earned current CapGains fade away and then have to rebuild it "later" (if possible as many securities will never return to original their high Mktprc's).... I am on the sidelines (90%) and experiencing (by computer analysis ... sole opinion of course) a unstable market IMHO). If/when we turn the corner and again turn positive, I will be glad to get in at the "somewhat" lows that were established by the market. This is the time that I am " BUILDING" and " MOMITORING" my watch list so the jump back into the market will be well planned for re-establishment of our portfolio's. Since many of us are dividend oriented, I am of the (sole) opinion that we will be returning with some very good(bigger) paying dividends and distributions. Since " DISTRIBUTIONS" are for planning the up markets (unlike dividends that are relatively stable in down markets while the distributions are usually correcting lower to down markets with lower NAV's or book values).... One opinion of the many I am sure.... Live Long and Prosper....
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Post by uncleharley on Sept 19, 2022 21:39:15 GMT
The old Dow theory is said to still work also. The DJT index closed friday and today at about an 18 month low, confirming the downward trend of the other major indexes.
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Post by xray on Sept 20, 2022 21:34:56 GMT
richardsok, yogibearbull, steelpony10, rhythmmethod, Fearchar, retiredat48, steadyeddy Something to think about: Looking at our existing Security portfolio (using my reference case of 10% left in the market with 90% current cash and using a 16 security portfolio as a minimum for controlling our overall "RISK"), observe how well we are doing since 12/09 (reference point). If, with that 10%, "5" securities of the many are doing very well (and then chosen to represent our current trading in the market using both portfolio and watch list) in relation to the many other securities, then we should be using these 5 securities representing the 10% (>10% dividend for the average of the 5 securities as a minimum, and at current substantial discount for dividend oriented investors).... One single opinion of the many I am sure.... Live Long and Prosper....
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Post by xray on Sept 29, 2022 20:30:06 GMT
... Super news ... SEPTEMBER IS OVER ALONG WITH THE 3RD QTR. Cash remains "KING" while we wait for the turnaround (hopefully in our lifetime). Market continues to decline. With that said....
MoneyWise 'Probably the last rally': Jim Rogers just warned about getting too excited over the market's recent bump — here are the shockproof assets he likes best right now Jing Pan Thu, September 29, 2022, 10:00 AM
The stock market has been pummeled, and many investors are wondering when things will turn green again. According to legendary investor Jim Rogers, there is hope on the horizon — but perhaps not for long. “We had huge pessimism because of inflation and other things,” he tells ET NOW. “Now it looks like inflation and pessimism is breaking, but just remember, this is probably the last rally.”
The 79-year-old investor knows a thing or two about making money in turbulent times. He co-founded the Quantum Fund with George Soros in 1973 — right in the middle of a devastating bear market. From then till 1980, the portfolio returned 4,200%, while the S&P 500 rose 47%.
So let’s take a look at why Rogers is not too optimistic — and what he likes and dislikes in this environment.
‘Crazy stocks’
Rogers points out that the stock market welcomed a lot of new participants. But these new investors didn’t take the traditional route. “New investors are coming in. They have discovered this new thing called the stock market, it is fun and one can make money and they are betting on crazy stocks,” he says, adding that “crazy stocks are going through the roof.”
He also mentions the euphoria we previously saw around special purpose acquisition companies (SPACs). “Everybody comes in betting on SPACs, But SPACs have been around for years. It has all happened before.” The lesson here, as Rogers explains, is that “usually towards the end, stocks go crazy.”
Commodities to the rescue?
One of the surest signs of inflation is the rally in commodity prices we saw earlier this year. In fact, commodity prices are commonly believed to be a leading indicator of inflation. When the cost of raw materials goes up, that eventually gets reflected in the price of final products — and consumer prices go up. Rogers knows the importance of commodities. He created the Rogers International Commodity Index in 1998. The fund that tracks the index — Elements Rogers International Commodity Index-Total Return ETN (RJI) — is up 12% year to date. He’s also holding commodities himself.
“I own commodities and commodities certainly are going to do well because of supply constraints that are developing and the central banks will print more money eventually because that is all they know to do,” he says. “When we have a recession, they will panic and print more money and when there is a lot of money printing, the main thing to own are real assets.”
Long and short
When asked what he would go long on for the next three years, Rogers’ response was simple: “First, silver, maybe agriculture.” As a precious metal, silver can act as a store of value — it can’t be printed out of thin air like fiat money. Of course, gold has the same function, but Rogers actually favors the grey metal for now. “Silver is down something like 70 or 80% from its all-time high and gold is 15% below its all-time high,” he says. “I will buy both at the right price but at the moment, I would prefer silver to gold.
Agriculture has been another favorite sector for Rogers, and for a good reason: No matter how big the next crash is, no one is crossing “food” out of their budget. Investing in agriculture is also becoming more accessible these days, even if you know nothing about farming.
The host also asked Rogers what he would short for the next three years. “The one thing I would sell would be the American stock market, the FAANGs, the technology stocks in America,” he says. Tech stocks have already plunged. Meta (formerly known as Facebook), Apple, Amazon, Netflix, and Alphabet (formerly known as Google) — which make up the FAANG — are all deep in the red year to date.
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Comment: Sector investing always changes and we must make the changes to our existing portfolio accordingly. Not to do so can be dangerous to our financial health (IMHO) going forward....
Live Long and Prosper....
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Post by xray on Oct 7, 2022 20:31:18 GMT
My: Something to think about: Looking at our existing Security portfolio (using my reference case of 10% left in the market with 90% current cash and using a 16 security portfolio as a minimum for controlling our overall "RISK"), observe how well we are doing since 12/09 (reference point). If, with that 10%, "5" securities of the many are doing very well (and then chosen to represent our current trading in the market using both portfolio and watch list) in relation to the many other securities, then we should be using these 5 securities representing the 10% (>10% dividend for the average of the 5 securities as a minimum, and at current substantial discount for dividend oriented investors)....
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Still playing the 10% market-90%cash/5 security factor. No change while the market tries to find the bottom (hopefully in our lifetime). With that said....
My current data still indicates continued sector change buy-sell-buy-sells during the past months which indicates (to me) that the market remains unstable and the traders are still trying to make money with their continued trading. There has been some "insider activity" last month and this month with a few of my securities that I monitor or hold currently (examples: CAPL 13.5k @ 18.45, GPP with initial ownership announcements for 2 insiders and (still monitoring) RVT 1.6k @ 13.42)....
HGLB continues to be a good hold for me and continues to have some very good analysis numb3rs during all of the crashes (as well as GPP) that we have experienced (with GPP announcing the continuing 8.5% dividend and x-div/pay dates through the rest of the year and that as of the announcement will not have any ROC)....
Other news: RSF completed a tender offer @ 17.58 and continued their distribution through the rest of they year (12/31) showing their x-div/pay dates. . RC increased their tender offer with a additional 25mil to 50mil. ZTR completed their rights offering at 6.96. TWO did a reverse stock split 1:4 but continued their div at the current rate of $0.17/Qtr....
Live Long and Prosper....
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Post by xray on Oct 10, 2022 20:14:34 GMT
Reuters CORRECTED-UPDATE 2 -JPMorgan CEO Dimon warns of recession in 6 to 9 months - CNBC Mon, October 10, 2022, 12:54 PM·2 min read In this article:
^GSPC -0.75%
(Corrects paragraph 2 to say quantitative tightening, not easing, based on video of the CNBC interview. The error had appeared in the previous version too.)
Oct 10 (Reuters) - JPMorgan Chase & Co Chief Executive Jamie Dimon said the United States and the global economy could tip into a recession by the middle of the next year, CNBC reported on Monday.
Runaway inflation, big interest rates hikes, the Russian invasion of Ukraine and the unknown effects of the Federal Reserve's quantitative tightening policy are among the indicators of a potential recession, he said in an interview to the business news channel.
"These are very, very serious things which I think are likely to push the U.S. and the world — I mean, Europe is already in recession — and they're likely to put the U.S. in some kind of recession six to nine months from now," Dimon said. His comments come as the big U.S. banks are set to report their third-quarter earnings from Friday. So far this year, the benchmark S&P 500 index has lost about 24%, with all the three major U.S. indices trading in bear market territory. Dimon said the S&P 500 could fall by "another easy 20%" from the current levels, with the next 20% slide likely to "be much more painful than the first", according to the CNBC report.
Earlier this year, Dimon had asked investors to brace for an economic "hurricane", with JPMorgan, the biggest U.S. investment bank, suspending share buybacks in July after missing quarterly Wall Street expectations. In June, Goldman Sachs had predicted a 30% chance of the U.S. economy tipping into recession over the next year, while the economists at Morgan Stanley placed the odds of a recession for the next 12 months at around 35%.
World Bank President David Malpass and International Monetary Fund Managing Director Kristalina Georgieva also warned on Monday of a growing risk of global recession and said inflation remained a problem after Russia's invasion of Ukraine. (Reporting by Niket Nishant in Bengaluru; Editing by Arun Koyyur)
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Comment: Demand for "CAR's" is increasing (money available by consumers) and is opposite to what we are expecting. Until "DEMAND" drops off (one million in inventory to 2 million in inventory), the market will remain volatile. Market (IMHO) will continue volatile and continue lower until the federal Reserve changes their current policies (hopefully in our lifetime)....
Live Long and Prosper....
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Post by xray on Oct 11, 2022 19:30:04 GMT
Reuters IMF warns of 'storm clouds' looming over global economy Pete Schroeder and Megan Davies Tue, October 11, 2022, 10:38 AM By Pete Schroeder and Megan Davies
WASHINGTON/NEW YORK (Reuters) - The International Monetary Fund warned on Tuesday of a disorderly repricing in markets, saying global financial stability risks have increased, raising the risks of contagion and spillovers of stress between markets.
The IMF said that "storm clouds" are looming over the global economy, including persistent inflation, a slowdown in China and ongoing stresses from Russia's invasion of Ukraine which have driven up the risk of a severe downturn to levels not seen since the onset of the COVID-19 pandemic.
"It's difficult to think of a time where uncertainty was so high," said Tobias Adrian, director of the IMF's Monetary and Capital Markets Department. "We have to go back decades to see so much conflict in the world, and at the same time inflation is extremely high."
The combination of high inflation with central bank policy uncertainty "creates this environment of really high risk and volatility," he said.
"When risk is high, correlations are high," Adrian said. "So spillovers and contagion, (are) at a higher level in these times of high uncertainty."
In its latest Global Financial Stability Report, the IMF warned that global financial stability risks had increased since the April 2022 edition, leaving the balance of risks "significantly skewed" to the downside.
"The global environment is fragile with storm clouds on the horizon," the report stated.
Lingering market vulnerabilities, tightening liquidity, stubborn inflation and ongoing efforts by central banks worldwide to raise rates to combat it have combined to create a volatile and risky environment, the report stated.
"With investors aggressively pulling back from risk-taking recently as they reassess their economic and policy outlook, there is a danger of a disorderly repricing of risk," the report stated. "In particular, volatility and a sudden tightening in financial conditions could interact with, and be amplified by, preexisting financial vulnerabilities."
Markets have had a brutal year with the S&P 500 down 24% so far this year while global bonds entered a bear market and the dollar is around a two-decade high - causing problems for the rest of the world.
In particular, the IMF warned that any sharp downturn would be acutely felt by emerging market economies, where they are grappling with a "multitude of risks" like high borrowing costs, high inflation, and volatile commodity markets. The IMF also cautioned that credit spreads have widened substantially in the corporate sector, and higher rates could adversely impact housing markets.
In China, the property sector downturn has already deepened, and failures of property developers could spill over into the banking sector, the IMF cautioned.
While banks in advanced economies seem to have sufficient capital and liquidity, the IMF noted that in its global bank stress test, up to 29% of emerging market banks would breach their capital requirements in a severe global recession, leading to a capital shortfall of over $200 billion. U.S. banks will report third-quarter earnings starting this week and are expected to show weaker profits.
"It's certainly possible that in an adverse scenario there could be stress on individual institutions," said the IMF's Adrian. "Even in the bank stress test that uses a globally consistent scenario, we find banks are broadly safe but it doesn’t mean every bank is resilient under every scenario."
Credit Suisse has been the center of global attention as speculation about the bank's future gathered pace on social media earlier this month amid anticipation it may need to raise billions of francs in fresh capital, sending its stock and some bonds to new lows.
Adrian declined to comment on specific banks.
Other specific markets to watch were dollar funding markets where Adrian said there was a widening in cross-currency basis swaps.
"We are just under three months prior to the year end and typically around the year end there's a bit of balance sheet stress as some trades are taken off or reshuffled, but the magnitude of the (moves) is quite unusual," said Adrian. "There are dollar funding shortages."
The three-month yen swap rate widened to -60.25 basis points on Tuesday, slightly pulling back from a more than two-year high hit early last week. The current yen swap rate meant that investors were willing to pay more than 60 bps over interbank rates to swap three-month yen into dollars.
He also said there was a risk of a "dash for cash" in the event of a common global shock.
"I wouldn't exclude that there couldn't be another dash for cash - meaning (U.S.) Treasury yields suddenly increasing in a time when there's a flight to quality. Usually in a flight to quality people buy Treasuries, but there could be a sharp sell-off of duration at some point. When it's disorderly, that's when you see the stress.”
(Reporting by Pete Schroeder and Megan Davies; Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci, Jonathan Oatis and Josie Kao)
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Live Long and Prosper....
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Post by xray on Oct 11, 2022 19:44:16 GMT
Deep Dive Opinion: The stock market is in trouble. That’s because the the bond market is ‘very close to a crash.’ Last Updated: Oct. 11, 2022 at 2:19 p.m. ET First Published: Oct. 11, 2022 at 10:30 a.m. ET By Philip van DoornFollow
Larry McDonald expects an abrupt policy change by the Federal Reserve Don’t assume the worst is over, says investor Larry McDonald. There’s talk of a policy pivot by the Federal Reserve as interest rates rise quickly and stocks keep falling. Both may continue.
McDonald, founder of The Bear Traps Report and author of “A Colossal Failure of Common Sense,” which described the 2008 failure of Lehman Brothers, expects more turmoil in the bond market, in part, because “there is $50 trillion more in world debt today than there was in 2018.” And that will hurt equities.
The bond market dwarfs the stock market — both have fallen this year, although the rise in interest rates has been worse for bond investors because of the inverse relationship between rates (yields) and bond prices.
About 600 institutional investors from 23 countries participate in chats on the Bear Traps site. During an interview, McDonald said the consensus among these money managers is “things are breaking,” and that the Federal Reserve will have to make a policy change fairly soon.
Pointing to the bond-market turmoil in the U.K., McDonald said government bonds with 0.5% coupons that mature in 2061 were trading at 97 cents to the dollar in December, 58 cents in August and as low as 24 cents over recent weeks. When asked if institutional investors could simply hold on to those bonds to avoid booking losses, he said that because of margin calls on derivative contracts, some institutional investors were forced to sell and take massive losses. And investors haven’t yet seen the financial statements reflecting those losses — they happened too recently. Write-downs of bond valuations and the booking of losses on some of those will hurt bottom-line results for banks and other institutional money managers.
Interest rates aren’t high, historically
Now, in case you think interest rates have already gone through the roof, check out this chart, showing yields for 10-year U.S. Treasury notes TMUBMUSD10Y, 3.924% over the past 30 years: The yield on 10-year Treasury notes has risen considerably as the Federal Reserve has tightened during 2022, but it is at an average level if you look back 30 years. The 10-year yield is right in line with its 30-year average. Now look at the movement of forward price-to-earnings ratios for S&P 500 SPX, -0.81% since March 31, 2000, which is as far back as FactSet can go for this metric:
The index’s weighted forward price-to-earnings (P/E) ratio of 15.4 is way down from its level two years ago. However, it is not very low when compared to the average of 16.3 since March 2000 or to the 2008 crisis-bottom valuation of 8.8. Then again, rates don’t have to be high to hurt “So when yields go up, there is a lot more destruction” than in previous central-bank tightening cycles, he said. It may seem the worst of the damage has been done, but bond yields can still move higher. Heading into the next Consumer Price Index report on Oct. 13, strategists at Goldman Sachs warned clients not to expect a change in Federal Reserve policy, which has included three consecutive 0.75% increases in the federal funds rate to its current target range of 3.00% to 3.25%.
The Federal Open Market Committee has also been pushing long-term interest rates higher through reductions in its portfolio of U.S. Treasury securities. After reducing these holdings by $30 billion a month in June, July and August, the Federal Reserve began reducing them by $60 billion a month in September. And after reducing its holdings of federal agency debt and agency mortgage-backed securities at a pace of $17.5 billion a month for three months, the Fed began reducing these holdings by $35 billion a month in September.
Bond-market analysts at BCA Research led by Ryan Swift wrote in a client note on Oct. 11 that they continued to expect the Fed not to pause its tightening cycle until the first or second quarter of 2023. They also expect the default rate on high-yield (or junk) bonds to increase to 5% from the current rate of 1.5%. The next FOMC meeting will be held Nov. 1-2, with a policy announcement on Nov. 2.
McDonald said that if the Federal Reserve raises the federal funds rate by another 100 basis points and continues its balance-sheet reductions at current levels, “they will crash the market.”
A pivot may not prevent pain
McDonald expects the Federal Reserve to become concerned enough about the market’s reaction to its monetary tightening to “back away over the next three weeks,” announce a smaller federal funds rate increase of 0.50% in November “and then stop.”
He also said that there will be less pressure on the Fed following the U.S. midterm elections on Nov. 8.
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Live Long and Prosper....
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Post by xray on Oct 11, 2022 19:50:34 GMT
Bloomberg Jamie Dimon’s S&P 500 Bear Market: Brutal, Far From Unimaginable Lu Wang and Peyton Forte Tue, October 11, 2022, 10:26 AM In this article:
^GSPC -0.67%
(Bloomberg) -- Jamie Dimon says don’t be surprised if the S&P 500 loses another one-fifth of its value. While such a plunge would fray trader nerves and stress retirement accounts, history shows it wouldn’t require any major departures from past precedents to occur.
Judged by valuation and its impact on long-term returns, the JPMorgan Chase chief executive officer’s “easy 20%” tumble, mentioned in a CNBC interview yesterday, would result in a bear market that is in many regards normal. A decline roughly to 2,900 on the S&P 500 would leave the gauge 39% below its January high, a notable collapse but one that pales next to both the dot-com crash and global financial crisis.
The price implied in Dimon’s scenario is roughly the index’s peak from 2018, the year when President Donald Trump’s corporate tax cuts took effect and an equity selloff forced the Federal Reserve to end rate hikes. Rolling back the gains since then would leave investors with nothing over four years, a relatively long fallow period. But, given the force of the bull market that raged before then, it would cut annualized gains over the past decade only to about 7%, in line with the long-term average.
Nobody knows where the market is going, Dimon included, and much will depend on the evolution of Federal Reserve policy and whether earnings stand up to its anti-inflationary measures. As an exercise, though, it’s worth noticing that a drawdown of the scope he described isn’t unheard-of, and would strike many Wall Street veterans as a justifiable reckoning in a market that had been carried aloft by the Fed’s generosity.
Falling interest rates had “been great for valuation multiples and we’re unwinding all of those,” Michael Kelly, global head of multi-asset at Pinebridge Investments LLC, said on Bloomberg TV. “We’ve had easy money for a long time and we can’t fix all of that very quickly.”
At 34%, the average bear market since World War II has been a bit shallower, but the drops vary enough that a 40% plunge fits within the bounds of plausibility. One reason the current drawdown may have legs is valuation. In short, even after losing $15 trillion of their value, stocks are far from being obvious bargains.
At the low last month, the S&P 500 was trading at 18 times earnings, a multiple that is above trough valuations seen in all previous 11 bear cycles, data compiled by Bloomberg show. In other words, should equities recover from here, this bear market bottom will have been the most expensive since the 1950s. On the other hand, matching that median would require another 25% drop in the index.
“We had a period of a lot of liquidity. That’s different now,” said Willie Delwiche, an investment strategist at All Star Charts. “Given what bond yields are doing, I don’t think you can say a 40% peak-to-trough decline is out of the question.”
Would the S&P 500 become a bargain if a 20% drop played out? It’s debatable. While 2,900 is quite cheap relative to existing estimates for 2023 earnings -- about $238 a share, implying a P/E ratio of 12.2 -- those estimates would be in serious trouble should a recession occur, as Dimon predicted. Adjusting forecasts for a 10% fall in profits yields an earnings multiple of 14.3 -- not expensive, but not a screaming bargain, either.
Underlining Dimon’s gloomy outlook is the threat of an economic contraction. From surging inflation to the Fed’s ending quantitative easing and Russia’s war in Ukraine, a number of “serious” headwinds are likely to push the US economy into a recession in six to nine months, the JPMorgan CEO told CNBC.
Dimon’s assessment on the economy and market appears more ominous than his own in-house forecasters. Michael Feroli, JPMorgan’s chief US economist, expects real gross domestic product to expand every quarter through the end of 2023.
While market strategists led by Marko Kolanovic admitted their year-end targets for financial assets may not be reached until next year, the team kept their upbeat tone on corporate earnings. It had expected the S&P 500 to rally to 4,800 by December.
“Equities are proving to be an effective real asset class as their earnings are linked to inflation,” the team wrote in a note last week. “Unless nominal GDP growth downshifts drastically, earnings growth should remain resilient and defy expectations of a decline even in an environment of low real GDP growth.”
The clashing views underscores the reality of the post-pandemic world where Wall Street forecasts vary and efforts to predict the future have proved futile. Central bankers and investors alike misjudged the stickiness of inflation. Lately it’s become clear that retailers and chipmakers miscalculated demand and ended up stocking too many unwanted goods.
With the Fed engaged in the most aggressive monetary tightening in decades, no one can say with high conviction where the economy is going. That murky backdrop has led to a wide range of projections when it comes to corporate profits for next year -- a 13% expansion to an 8% contraction, based on strategists tracked by Bloomberg.
Jane Edmondson, chief executive officer at EQM Capital, says she’s more optimistic than Dimon, though she shares the concern over the Fed’s inability to address the supply side of the inflation issue.
“I would agree that if the Fed does not slow down on its quest to combat inflation, we could see more market pain,” she said. “While their hawkishness with interest rates may curb some demand, it does not solve the issues in the supply chain causing higher prices and inflation. In that sense, Jamie’s concerns are warranted as the cure is not appropriate for what ails us.”
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Live Long and Prosper....
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Post by uncleharley on Oct 11, 2022 21:37:46 GMT
I think Dimon may prove to be too conservative, but my next target for support on the S&P 500 is 2900. An issue is that no one is creating an argument for why it should stop there.
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Post by Chahta on Oct 11, 2022 21:40:11 GMT
LINKAnother negative article. No one knows how it will play out. I guess with the inflows stocks staged an attempted rally and whipsawed some folks.
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Post by retiredat48 on Oct 12, 2022 17:58:51 GMT
xray,...Thanks for the detailed posts, xray. Yours in crime...R48
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Post by xray on Oct 12, 2022 18:53:33 GMT
uncleharley, Chahta, retiredat48,Business Insider Investors should expect a 5% sell-off in the stock market on Thursday if CPI comes in above 8.3%, JPMorgan says Matthew Fox Tue, October 11, 2022, 10:04 AM Getty Images / Bryan R. Smith Thursday's CPI reading could spark a 5% sell-off in the stock market, according to JPMorgan. That's if the inflation measurement comes in above 8.3%, which would be ahead of consensus estimates for an 8.1% reading. Alternatively, a CPI print below 7.9% could spark a 3% rally and bolster calls for a Fed pivot. Investors should be prepared for a steep stock market decline on Thursday if the highly anticipated September Consumer Price Index reading comes in above 8.3%, JPMorgan's trading desk said on Monday. The bank expects the stock market to sell-off by 5% if the inflation gauge shows a re-acceleration relative to August's 8.3% reading, as it would bolster the Fed's call that it needs to continue to hike interest rates to tame inflation."This feels like another -5% day," JPMorgan's Andrew Tyler said, referencing last month's 4.3% decline in the S&P 500 after CPI came in at 8.3%, ahead of consensus estimates for 8.1%. While the Fed is widely expected to hike interest rate by another 75 basis points at its upcoming FOMC meeting on November 2, its following two meetings lack consensus and this Thursday's CPI inflation could determine whether the Fed continues with its aggressive rate hikes after November 2, or if a slow-down in rate hikes is appropriate. According to Bloomberg, consensus estimates suggest a CPI print of 8.1% on Thursday, which would represent a continued deceleration in price increases from the peak of 9.1% reached in June. Tyler expects a CPI print of 8.1% to 8.3% in September to also be negative for the stock market, estimating that the S&P 500 would fall about 2% on Thursday in that scenario. "The bigger concern here is the bond market repricing to increase the probability of a 75 basis point hike in December," Tyler said. The combination of a high September CPI reading, poor third-quarter earnings results, and an exogenous shock to oil prices could send the S&P 500 to 3,300, representing potential downside of 9% from current levels, according to the note. Conversely, any CPI readings below 8.1% could spark some big gains for the stock market. Specifically, a CPI print below 7.9% would likely generate a 2%-3% rally on Thursday, "though if we see CPI gap down more than 60 basis points the move could be larger," Tyler said. That's because such a slowdown in inflation would bolster the view that the Fed could soon pivot away from its aggressive interest rate hikes as inflation clearly shows signs of decelerating. It would also open the door for a renewed view among investors that a soft landing of the economy is possible. The scenario of a dovish CPI print, combined with upside earnings surprises could get the S&P 500 back on track to test the 4,000 level, representing potential upside of 11%. "I think anything under 7.8% is enough to trigger a move towards 4,000 as it would likely be interpreted as official inflation measures catching up to some of the higher frequency measures and setting the stage for more dovish surprises. Further, you could see the bond market begin to remove its 2023 rate hike," Tyler said. Whatever the CPI print on Thursday, investors should be prepared for one thing according to JPMorgan's Jamie Dimon: more volatility. The CEO said Monday that the US is headed for a recession in six to nine months that could wipe away another 20% of the stock market's value.---------- Comment: Many of us have followed Jamie Dimon's since 2008 and how JP Morgan handled the crisis. What many of us have learned the hard way is " CAUTION" should be respected when from a considered reliable source. The market has been going down and our portfolio's should reflect the caution being told to us by reducing " RISK" and taking advantage of the next " UP" market (hopefully in our lifetime). The turn in them market is a unknown, and we will probably miss it, but we wouldn't have gotten in/out multiple times trying to find it. Some of us continue to hold (what we consider) are the best five (5) securities (from past analysis and looking forward, by current analysis, for the best big jump on the turnaround) for 10% of current portfolio. On the jump, some of us plan to immediately increase our shares of the "5" in 2% increments to 6%-10% of total portfolio. If a dividend oriented investor, we must consider that some of these high paying dividend paying securities will never again be at the jump prices (going forward).... Also, we must keep in the back of our mind that "some" securities are paying ridiculously high monthly and Qtrly distributions based on last years 12/31 NAV EOY prices which is continuing to drive these securities well below any reasonable value that current buyers are not aware (" BUYERS BEWARE"). On the plus side, many of us could be buying some of these crash valued securities (considered very undervalued for the 2023 year time frame going forward) in January with their "NEW RESET" distribution amounts (examples: GLO/GLQ/GLV). We will probably see many RO's as many undervalued securities will be looking for new money for current investing in a continuing up market.... One single opinion of the many I am sure.... Live Long and Prosper....
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Post by xray on Oct 12, 2022 19:06:00 GMT
uncleharley, Chahta, retiredat48,SmartAsset Cash is King Now, Not Gold Ben Geier, CEPF® Tue, October 11, 2022, 2:21 PM In this article: GC=F -0.34% While gold has long been considered a safe haven in times of market volatility, investors are actually pulling out of the metal of Midas at this moment for a somewhat different choice - cold, hard cash. Gold prices dropped 2.2% on Wednesday following a reports that the Federal Reserve might once again raise interest rates, this time by 100 basis points. Part of the reason for gold's drop is that investors are reacting to the news of this potential interest rate hike, which could cause the economy to enter a full-on recession, by abandoning gold in favor of cash. If you are considering moving money to cash or just want help navigating a difficult time in the economy, consider working with a financial advisor. Gold Investing BasicsPutting your wealth into gold might be the oldest investment in the world, and it is still an option many people employ. It's generally used as a hedge against inflation, as its value is generally independent of other assets like stocks and bonds. There are many ways to invest in gold, including buying actual gold bars, buying high quality gold jewelry, investing in future or using a gold mutual fund. A financial advisor can help you figure out the best way for you to invest in gold, if that is an option that interests you. Why Investors Are Favoring Cash Over GoldAs noted above, inflation is very high in the U.S. right now - higher than it has been in decades in fact. As part of a plan to fight this inflation, the Federal Reserve has been raising interest rates throughout the year, with plans to do so again. In effect, this makes it more difficult for Americans to get loans, meaning there is less money circulating and inflation is brought down. One of the consequences of this may be a recession, but policy wonks have decided fighting inflation is more important. Another impact of the higher interest rates has been a jump in value for the dollar. It is trading higher against the British pound and the euro than it has in a long time. While this does mean that your trip to London might hurt your pocketbook a bit less, an even bigger impact is that investors see putting their money in cash as a strong hedge against the possibility of a recession. Even fund managers are seeing actively-managed mutual funds have their best year since 2009 by allocating more of their assets to cash. Amid a strong dollar and high interest rates, cash isn't trash and can even yield robust returns through the likes of CD laddering. The Bottom LineGold prices are down as more investors are abandoning the precious metal in favor of cash. This is partly driven by rising interest rates creating a stronger dollar that is being used as a haven in the face of a possible coming recession. Investing Tips
If you want help preparing for a potentially difficult economic period, consider working with a financial advisor. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now. A recession doesn't mean you should completely get out of the market, as it won't last forever. Keep contributing to your 401(k) if you have one, and whatever you do, don't panic. ---------- Live Long and Prosper....
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Post by bb2 on Oct 13, 2022 1:36:20 GMT
What? FA advertisement? Sheesh.
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Post by xray on Oct 13, 2022 21:04:26 GMT
Bloomberg Why Stocks Swung 5% in One Day Lu Wang and Vildana Hajric Thu, October 13, 2022, 1:05 PM
^GSPC +2.60%
(Bloomberg) -- A shock turnaround in equities sent Wall Street searching for something -- anything -- to explain how yet another red-hot inflation number translated into the best day for bulls in a week.
Among the answers: increasingly sturdy positioning including well-provisioned hedges, a watershed moment for chart watchers, and several less-than-terrible earnings reports. Throw in some short covering, and the result was a trough-to-peak run-up in S&P 500 futures that approached 5% at its widest.
Expect the unexpected has become the only mantra in a market when cross-currents are flowing from every direction, including a Federal Reserve bent on subduing inflation while keeping half an eye on financial stability. Thursday’s turnaround came after the S&P 500 erased half its climb from 2020’s pandemic low, a hit to wealth that while showing no sign yet of curbing inflation, may one day play a part in achieving that goal.
“It’s the nature of the beast these days where sometimes you get these intraday big swings. We can all speculate on what might be behind it,” said Liz Ann Sonders, chief investment strategist for Charles Schwab & Co. “A lot of it has to do, for lack of a better word, the mechanics of the market, the fact that there’s more shorter-term money in the market, there’s more money that moves around based on algorithms, quantitative strategies. And at any point in time you can have triggers that can cause a 180 in the middle of the day.”
With calling the direction of stocks a near impossibility, professional traders have been busy limiting their exposure to surprise moves. Institutions bought more than $10 billion in puts on individual stocks last week, a record for that group and close to the most ever by any cohort of traders, according to Sundial Capital Research.
There was circumstantial evidence those wagers paid off in the immediate aftermath of the government’s report on consumer prices, which showed hotter-than-expected inflation. While equity futures sold off, the Cboe Volatility Index, a gauge of market anxiety tied to options on the S&P 500, actually fell, potentially a sign of profit-taking by hedged traders. And as those positions were monetized, that prompted market makers to unwind short positions they had put on to maintain their neutral market stance. “It’s a combination of short covering/put selling,” said Danny Kirsch, head of options at Piper Sandler & Co. “It’s a very-well hedged event. It’s trading like event passed, sell your hedges, contributing to market rally.”
Elsewhere, a clutch of technical signals was on the bulls’ side, among them the 50% retracement in the 22-month rally that broke out in the S&P 500 in March 2020. When the index undercut the 3,517 level, some market watchers took that as a sign the nine-month selloff had gone too far.
Another buffer came in at the index’s 200-week average, a threshold that hovers around 3,600 and has become a battle line for bulls and bears in recent weeks. In 2016 and 2018, the long-term trendline halted big S&P 500 declines.
“We bounced off of this support level and that becomes self-fulfilling,” said Ellen Hazen, chief market strategist and portfolio manager at F.L.Putnam Investment Management. “There’s so much uncertainty in the market and so many data points are conflicting that the market responds to whatever is the most recent.”
It’s the first time since July that the S&P 500 wiped out an intraday decline of more than 2%, yet another of the wild swings is a signature of 2022’s stock market as traders struggle to guess the Fed’s policy path and its impact on the economy. The index has posted 2% reversal days, up or down, six times since January, poised for the wildest year since the 2008 financial crisis.
While providing support for tactical traders, the erasure of half the bull market’s bounty is another grim reminder of how brutal the market has been in 2022. With the S&P 500 is at risk of only its third 20%-plus calendar-year loss of the century. The dream state the ruled markets following the outbreak of Covid-19 is slowly lifting, leaving investors exposed to the impact of a hyper-aggressive Fed and bubble-like valuations.
One bull argument that has persisted throughout the selloff is the resilience of corporate earnings. With the third-quarter reporting season about to move into full swing, bulls may be taking cues from Thursday’s better-than-expected results from companies like Delta Air Lines Inc. and Walgreens Boots Alliance Inc.
Despite this year’s $15 trillion wipeout, stocks are far from screaming buys. At 17.3 times profits, the index’s multiple is above trough valuations seen in all previous 11 bear cycles, data compiled by Bloomberg show. In other words, should equities recover from here, this bear market bottom will have been the most expensive since the 1950s.
“People just realized the prolonged beating of risk assets has to end some time. FOMO leads people to chase this rally,” said Larry Weiss, head of equity trading at Instinet. “Unfortunately, we still have plenty of time to ruin this rally.”
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Live Long and Prosper....
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Post by xray on Oct 13, 2022 21:17:11 GMT
MarketWatch Options Trader Opinion: The stock market is ‘oversold,’ but it pays to stay bearish Published: Oct. 13, 2022 at 1:39 p.m. ET By Lawrence G. McMillan
Stocks are falling relentlessly, and few new highs are being registered
The stock market has returned to an extremely bearish phase, as it has been making new yearly lows. This pattern of lower highs and lower lows, in stock prices, defines a bear market. Because of that, one should maintain a “core” bearish position.
Recent activity at the beginning of October had offered some potential hope for the bulls, as oversold conditions in the S&P 500 SPX, +2.60% became buy signals in a few cases. Those were quashed by this latest return to new lows, though, and so it’s back to the drawing board in terms of setting up new buy signals from lower levels.
Not only has SPX made new lows, but there is now a third island reversal on its chart (the circles on the accompanying SPX chart, above). These are rare for an index chart and are quite bearish.
The first major resistance area is 3700-3750 points, which is the first gap on the chart (created when the third island reversal was formed). As for support, one has to go back to the fall of 2020 to find prices that were this low, and when support is that old, it is tenuous, at best. There is theoretically support near 3500.
The McMillan Volatility Band (MVB) buy signal is still in place (green “B” on chart), and it would be stopped out if SPX were to close below the -4σ “modified Bollinger Band.”
Equity-only put-call ratios are pushing to new 2022 highs, reaching levels last seen in March and April of 2020. That makes them oversold, but still on sell signals. Buy signals would only be formed if they roll over and begin to trend downward. It had appeared that they were doing so at the beginning of October, but that was canceled out when they moved to new yearly highs. Also, the total put-call ratio is making new highs, so it has not generated a buy signal yet, either.
Market breadth has been extremely negative, and so both breadth oscillators remain on sell signals. They are in oversold territory, of course, but that does not mean one should buy the market based on that. One needs to wait for confirmed buy signals, which are not going to occur here right away. It’s going to take two or three days of positive breadth in order to roll these oscillators over to buy signals.
New highs on the NYSE numbered only eight yesterday, so the “new highs vs. new lows” indicator remains mired on a sell signal, as it has since April.
VIX has been pushing slowly higher, although it has not made a new high for the year. Even so, the trend of VIX sell signal remains in place and will do so as long as VIX continues to close above its 200-day moving average (MA). That MA is at 26 and rising, so VIX is well above that.
On perhaps a more positive note, another VIX “spike peak” buy signal is setting up, since VIX is “spiking” higher. That buy signal will occur when VIX closes at least 3.00 points lower that its highest price. So far that highest price that has been reached on this most recent move is 34.53 on Oct. 12. Somewhat surprisingly, SPX had sold off sharply earlier Thursday on the CPI numbers, yet VIX was basically unchanged.
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Live Long and Prosper....
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Post by xray on Oct 13, 2022 21:26:34 GMT
MoneyWise America's 6 biggest banks are expected to set aside $4.5 billion in Q3 to cover future loan losses — why that's a clear bad sign for the global economy Lauren Bird Wed, October 12, 2022, 5:00 PM
Fears of a looming recession and a tightening economy are pushing the country’s big banks to prepare for the worst. According to a report from Bloomberg, six of the biggest banks in the U.S. — JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Wells Fargo and Morgan Stanley — plan to set aside about $4.5 billion to protect against loan losses in their third-quarter earnings. Banks typically build up their loan loss provisions when there are concerns borrowers won’t be able to make their payments.
It’s not hard to see why they’re scrambling to prepare. The unrelenting increases in the federal funds rate set by the Federal Reserve — now at 3% to 3.25% — has already seen borrowers begin to default on loans, credit card payments and other variable-rate debts. And by setting aside these massive reserves, banks are signaling they’re anticipating having to handle more losses in the future as consumers continue to feel the squeeze of rising interest rates and scorching-hot inflation.
What these banks are reacting to
Lenders are already starting to feel the effects of the Fed's fight on inflation. Four of the biggest banks in the country are expected to report losses this week in their quarterly earnings reports, including JPMorgan Chase, Wells Fargo, Citigroup and Morgan Stanley. Normally, a higher interest rate would be a good thing for banks — their earnings tend to rise with interest rates. But banks are seeing a dip amid the fluctuating markets — fewer deals are being made and investors are holding back as warning signs of a recession persist.
And that’s led many banks to add to their loss reserves.
The amount banks add to their loan loss reserves then gets subtracted from its earnings. Conversely, when a bank releases those reserves, that money is added to its earnings. Banks and lenders adjust their cash reserves according to the potential losses on their outstanding loans — they’re setting aside money for problem loans that get paid late or not at all. When a loan goes unpaid, a bank will tap into the loss reserves cash to cover it. When banks release their loan loss provisions, it generally means the economy is healthy and borrowers won’t have any trouble making payments. When they build them up, it’s a sign they expect borrowers to have trouble making payments. Many lenders were forced to bolster their reserves to the tune of tens of billions during the crash in March 2020 when the pandemic hit — but in the year that followed, as the economy recovered, they released them. And now they're having to reverse course — for good reason.
Concerns already started last quarter
In the second quarter of this year, JPMorgan reported significant losses and built $428 million in bad loan reserves. The sentiment behind that doesn’t seem to have changed for the bank. Earlier this week, JPMorgan CEO Jamie Dimon warned “some kind of recession” will be coming in six to nine months, according to CNBC. WellsFargo also saw big losses in the second quarter. The bank reported its profits were halved as it pushed funds to its reserves to cover potential losses. Those losses are already eating away at bank profits. In the second quarter of 2022, early delinquencies — loans 30 to 89 days past due — increased $11.4 billion (25%) compared to the same period in 2021, according to the Federal Deposit Insurance Corporation, a federal banking regulator. Which means that as the Federal Reserve continues its aggressive fight against inflation, banks seem to expect delinquencies will persist, as consumers and commercial clients have a harder time making payments in a tightened economy.
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Live Long and Prosper....
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Post by uncleharley on Oct 13, 2022 21:57:09 GMT
MarketWatch Options Trader Opinion: The stock market is ‘oversold,’ but it pays to stay bearishPublished: Oct. 13, 2022 at 1:39 p.m. ET By Lawrence G. McMillan Stocks are falling relentlessly, and few new highs are being registered The stock market has returned to an extremely bearish phase, as it has been making new yearly lows. This pattern of lower highs and lower lows, in stock prices, defines a bear market. Because of that, one should maintain a “core” bearish position. Recent activity at the beginning of October had offered some potential hope for the bulls, as oversold conditions in the S&P 500 SPX, +2.60% became buy signals in a few cases. Those were quashed by this latest return to new lows, though, and so it’s back to the drawing board in terms of setting up new buy signals from lower levels. Not only has SPX made new lows, but there is now a third island reversal on its chart (the circles on the accompanying SPX chart, above). These are rare for an index chart and are quite bearish. The first major resistance area is 3700-3750 points, which is the first gap on the chart (created when the third island reversal was formed). As for support, one has to go back to the fall of 2020 to find prices that were this low, and when support is that old, it is tenuous, at best. There is theoretically support near 3500. The McMillan Volatility Band (MVB) buy signal is still in place (green “B” on chart), and it would be stopped out if SPX were to close below the -4σ “modified Bollinger Band.” Equity-only put-call ratios are pushing to new 2022 highs, reaching levels last seen in March and April of 2020. That makes them oversold, but still on sell signals. Buy signals would only be formed if they roll over and begin to trend downward. It had appeared that they were doing so at the beginning of October, but that was canceled out when they moved to new yearly highs. Also, the total put-call ratio is making new highs, so it has not generated a buy signal yet, either. Market breadth has been extremely negative, and so both breadth oscillators remain on sell signals. They are in oversold territory, of course, but that does not mean one should buy the market based on that. One needs to wait for confirmed buy signals, which are not going to occur here right away. It’s going to take two or three days of positive breadth in order to roll these oscillators over to buy signals. New highs on the NYSE numbered only eight yesterday, so the “new highs vs. new lows” indicator remains mired on a sell signal, as it has since April. VIX has been pushing slowly higher, although it has not made a new high for the year. Even so, the trend of VIX sell signal remains in place and will do so as long as VIX continues to close above its 200-day moving average (MA). That MA is at 26 and rising, so VIX is well above that.On perhaps a more positive note, another VIX “spike peak” buy signal is setting up, since VIX is “spiking” higher. That buy signal will occur when VIX closes at least 3.00 points lower that its highest price. So far that highest price that has been reached on this most recent move is 34.53 on Oct. 12. Somewhat surprisingly, SPX had sold off sharply earlier Thursday on the CPI numbers, yet VIX was basically unchanged. ---------- Live Long and Prosper.... HUH? ? What stock market is this guy looking at. My S&P chart says the 500 gained 92 points or so today
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Post by ECE Prof on Oct 13, 2022 22:27:19 GMT
"My S&P chart says the 500 gained 92 points or so today"
On Oct. 3 and 4 also, $SPX advanced with speed with a volume much higher than the average volume. What happened then? Today, the volume was well below, only 75% of the average volume. Does it say something about today's trade? VIX is still well above 200-MA of 26.
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Post by xray on Oct 17, 2022 22:22:00 GMT
Bloomberg
Bear Market in US Stocks Still in Its Infancy Versus History Jan-Patrick Barnert Mon, October 17, 2022, 6:33 AM In this article:
^GSPC +2.65%
(Bloomberg) -- History shows that the bear market in US stocks may be far from over.
The S&P 500 Index has fallen 25% in a little more than nine months since its January peak, a shallower and shorter drop than is typical of similar instances over the last century. On average in that time, the benchmark has slid about 38% over a period of 15 to 16 months before reaching a bottom, according to data compiled by Bloomberg.
With inflation and interest rates still rising, recession looming in many economies, and stress on supply chains and corporate margins, there are plenty of negatives for investors right now. Still, Morgan Stanley strategist Michael J. Wilson, a long-time equities bear, said Monday that US stocks are ripe for a short-term rally in the absence of an earnings capitulation or an official recession.
Morgan Stanley’s Wilson Says US Stocks Can Rally in Short Term
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
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Comment: Buyers beware and buy to one's "RISK TOLERANCE". Some continuing to stay 90% cash, 10% market (or thereabouts using a 100k portfolio reference point) that gives current investors a maximum probability loss of 5k (correction down) with a 50% pullback (on the 10%) in the market (= new current 95k reference vs 100k original point to date). Using the "SELL/BUYBACK" (S/B) immediately process each time and going forward (on S/B of 10%, 15%, 20%, 25% etc corrections) losses are considered minimum in the scheme of things. If/when market does turnaround, buying in (reverse) cycles of buying should recoup all previous losses and then some (single opinion of course). This system of playing the market is tied to having the "BEST" previous/Current 5 securities (10% in market) by analysis in one's portfolio (past history and present going forward). Friday's close showed some big losses in the CEF world while many securities were holding their own....
Live Long and Prosper....
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Post by xray on Oct 23, 2022 14:19:39 GMT
MY previous post: Comment: Buyers beware and buy to one's "RISK TOLERANCE". Some continuing to stay 90% cash, 10% market (or thereabouts using a 100k portfolio reference point) that gives current investors a maximum probability loss of 5k (correction down) with a 50% pullback (on the 10%) in the market (= new current 95k reference vs 100k original point to date). Using the "SELL/BUYBACK" (S/B) immediately process each time and going forward (on S/B of 10%, 15%, 20%, 25% etc corrections) losses are considered minimum in the scheme of things. If/when market does turnaround, buying in (reverse) cycles of buying should recoup all previous losses and then some (single opinion of course). This system of playing the market is tied to having the "BEST" previous/Current 5 securities (10% in market) by analysis in one's portfolio (past history and present going forward). Friday's close showed some big losses in the CEF world while many securities were holding their own....
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Current Comment: Buyers beware and buy to one's "RISK TOLERANCE". Some investors now decreasing to 80% cash from 90%, 20% market (or thereabouts using a 100k portfolio reference point) that gives current investors a maximum probability loss of 7.5k (correction down) with any 50% pullback (on the 20%) in the market (= new current 92.5k reference vs 100k original point to date). Using the "SELL/BUYBACK" (S/B) and "DOLLAR COST AVERAGING "UP" METHODOLOGY on existing portfolio" process each time and going forward (using S/B of 10%, 15%, 20%, 25% etc corrections) losses or increases are considered minimum in the scheme of things. If/when market does turnaround, buying in (reverse) cycles of buying/selling should recoup all previous losses and then some (single opinion of course). This system of playing the market is tied to us continuing to "currently" have the "BEST" EXISTING" (monitored continuously) current 5 securities (10% previously in current market) by analysis in one's portfolio (past history and present going forward). Friday's close currently showed that some major market prices and NAV increases in the CEF world were occurring while many other securities were also increasing....
Live Long and Prosper....
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Post by xray on Oct 23, 2022 14:39:24 GMT
Bloomberg
After $13 Trillion Stock Crash, Traders Are Ready to Fight Back Elena Popina Sun, October 23, 2022, 8:32 AM In this article:
^GSPC +2.37%
(Bloomberg) --
Judging by the ominous pronouncements from Wall Street luminaries, every trader under the sun should be prepping for fresh turmoil in the world’s biggest stock market. Yet hedging for doom and gloom is falling out of fashion fast, thanks to a historic equity rout that’s already erased $13 trillion in market value this year and flushed out both retail and institutional investors. In the options marketplace, the relative cost of contracts that pay off if the S&P 500 Index sinks another 10% has collapsed to the lowest since 2017. Appetite for bullish wagers is on the rise. And the popular Cboe Volatility Index is sitting far below multi-year highs even as equity benchmarks plumb bear-market lows.
All that might sound strange given the Federal Reserve is still hellbent on delivering aggressive rate hikes just as recession risk snowballs. But traders are getting tired of reciting the same-old bearish mantras. Equity exposures have already been slashed to historic lows, while elevated inflation and monetary hawkishness are hardly new threats. “When there is so much skepticism out there, maybe things aren’t actually as bad,” said Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas, Texas. “We’re awfully close to having all the headwinds priced in. The narrative is getting repetitive, and traders are slowly getting fed up.”
A sense of exhaustion, a low bar for good news and a higher bar for bad news help explain why the S&P 500’s slow-burn crash appears to be creating fewer day-to-day fireworks. Meanwhile, an impulse to chase potential stock-market gains into a historically strong time of year has been on display of late. During the rare sessions when the S&P 500 actually advanced in October, it posted a 2.4% average gain, a move that’s 1.8 times bigger than the average decline this month. It’s the widest ratio since October 2019, data compiled by Bloomberg show. That’s not to say traders are bullish. The VIX is still hovering near 30, reflecting expectations that equity prices will swing around more than normal in these uncertain times. Yet given historic inflation and a scary outlook for interest rates, it could be much higher. The thinking goes that cut-to-bone positioning is reducing the need for bearish hedges. The equity exposure of systematic managers, for example, is hovering near lows only seen twice over the past decade -- during the European debt crisis and the March 2020 pandemic rout -- according to Deutsche Bank AG.
With cash on the sidelines, some investors are warming to the idea that most of the bad news is over and favorable seasonal patterns may yet come into play. Since 1990, the three-month period starting on Oct. 10 has brought the S&P 500 a median gain of 7%, data compiled by Bespoke Investment Group show. On a rolling basis, that’s the strongest three-month trading window for the entire year.
“The perception is that while we’re not there yet, maybe we’re a step closer to finding the optimal bottom,” said Steve Sosnick, chief strategist at Interactive Brokers LLC. “We have a healthy package of unknown unknowns, but after a 10-month rout, we could be getting closer to figuring things out.” All the same, a full-scale economic recession threatens to land next year and the Fed looks powerless to deliver a dovish offset like in previous downturns. That’s why Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, urges caution. “A lot of people that are trading this market are still using the buy-the-dip playbook,” he said in a phone interview. “It’s worked before, but this is the first time in 40 years when inflation is a significant problem, and things are different.”
For now though, fits of panic are hard to see in the world of options hedging. Take the Cboe Skew Index, which tracks the cost of out-of-the-money S&P 500 options, reflecting demand for tail-risk protection. The gauge fell in six of the past eight weeks to hit the bottom decile of readings going back to early 2010.
Meanwhile, there is little appetite to bet on a higher VIX by buying calls, with the Cboe VVIX Index, a measure of the gauge’s volatility, hovering at muted levels. And more generally demand for bullish S&P 500 contracts is rising relative to downside hedges.
“Client demand is totally focused on right-tail/crash up,” Charlie McElligott at Nomura Securities International Inc. wrote in a note to clients. “They’re terrified about missing the big rally when they don’t own any/enough underlying.”
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Live Long and Prosper....
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Post by xray on Oct 24, 2022 17:44:03 GMT
This morning a new term was introduced by security analysts (financial stability ... FIG) in their early morning discussions. With that said....
We now have the three terms to watch if/when investing:
Financial stability Inflation Growth
There is growing concern that financial security may be increasing and that investors should be "cautious" when investing. This goes along where many investors suggest not going "all in" at some point where many will believe we are at the bottom....
Here is a short article to help explain the phenomena....
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Bloomberg Yellen ‘Closely Monitoring’ Financial Markets as Volatility Rises Christopher Condon Mon, October 24, 2022, 11:42 AM (Bloomberg) -- Treasury Secretary Janet Yellen said that while the US financial system remains resilient, the current backdrop has created the conditions where risks to its stability could appear.
This is a “dangerous and volatile environment” for the global economy, including the surge in energy prices and increased volatility in financial markets, Yellen said in answering questions after a speech in New York Monday. It’s an environment in which “financial stability risks could materialize” in the US, she said.
Recent weeks have seen a major selloff in UK government bonds that forced the Bank of England into emergency purchases, and a tumble in the yen that’s prompted repeated intervention by Japan in the foreign-exchange market.
“To date, the US financial system has not been a source of economic instability,” Yellen said in her speech to the annual meeting of the Securities Industry and Financial Markets Association. “While we continue to watch for emerging risks, our system remains resilient and continues to operate well through uncertainties.”
Trading in Treasuries -- the world’s benchmark government debt market -- has been robust, Yellen said, though she highlighted past episodes of stress and noted continuing work to improve its functioning. The Treasury is “very focused” on the issue, she said in answering a question.
Yellen also flagged the risk of strains stemming from private credit. “We are also attentive to the possibility that higher market volatility could expose vulnerabilities in nonbank financial intermediation,” the Treasury chief said. “Regulators have been working together to better monitor leverage in private funds and develop policies to reduce the first-mover advantage that could lead to investor runs in money market funds and open-end bond funds.”
As for Treasuries, Yellen’s comments marked the second time this month that she acknowledged concerns over the functioning of the $23.7 trillion market. The market-making capacity or willingness of large banks has failed in recent years to keep pace with that market’s expansion. That’s reduced liquidity, leaving Treasuries vulnerable in times of stress.
For example, in March 2020 at the outset of the Covid-19 pandemic, the Fed was forced to supply emergency liquidity as investors fled for cash. “In the past few years, we have seen some episodes of stress in this critical market,” she said. “These episodes underscore the importance of enhancing its resilience.”
Despite that, Yellen said trading volumes remained “robust,” and investors were able to execute trades in Treasuries. She said her department’s staff was “working with financial regulators to advance reforms that improve the Treasury market’s ability to absorb shocks and disruptions, rather than to amplify them.”
Treasury officials have been studying the issue for years, and are currently working on a proposal to boost transparency surrounding specific trades in the market.
Options under consideration include more central clearing. Many of the market-making financial institutions, meanwhile, would prefer an easing of regulatory constraints overseen by the Fed that force banks to set aside capital when they hold Treasuries on their balance sheet.
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Live Long and Prosper....
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Post by xray on Oct 24, 2022 17:49:44 GMT
Key Words Yellen warns of ‘dangerous and volatile environment’ as she pledges to bolster Treasury market Published: Oct. 24, 2022 at 12:13 p.m. ET By Chris MatthewsFollow
The Biden administration is 'carefully monitoring financial risks'
“We’ve experienced energy shocks, food shocks, supply shocks, persistent inflation in many countries around the world, rising interests rates in many parts of the world and we have seen some financial market volatility and rising liquidity and credit concerns,” — Treasury Secretary Janet Yellen That was Treasury Secretary Janet Yellen, who warned Monday that the current economic backdrop is “dangerous and volatile,” while stressing that the U.S. economy is “healthy” and the financial system “resilient” during a public appearance at a securities industry conference.
She added that while she doesn’t have evidence of instability currently, the Biden administration is “carefully monitoring financial risks in the United States.” Yellen spoke of efforts to shore up liquidity in the market for U.S. government debt, after volatility in U.K. bond markets highlighted concerns that that high inflation and rising sovereign debt levels could be sapping demand for Treasury debt. TMUBMUSD10Y, 4.222%
“We are very focused on the Treasury market,” Yellen said, adding, “it’s critically important that it is a deep, liquid well functioning and serving as a benchmark for all other assets.” She added that is expected that given rising volatility that the cost of buying and selling these securities would rise and noted that trading volumes remain high and that traders are not having difficulty executing transactions.
Yellen said that the Biden administration is working across agencies to pursue policies that could bolster liquidity in the markets for U.S. government debt, including a rule proposal from the Securities and Exchange Commission that would force more transactions to be centrally cleared.
“We’re looking at a number of ways to improve resilience,” she said, “but I’m not seeing a problem now in the market.”
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Live Long and Prosper....
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Post by xray on Oct 24, 2022 18:43:07 GMT
My: MY previous post: Comment: Buyers beware and buy to one's "RISK TOLERANCE". Some continuing to stay 90% cash, 10% market (or thereabouts using a 100k portfolio reference point) that gives current investors a maximum probability loss of 5k (correction down) with a 50% pullback (on the 10%) in the market (= new current 95k reference vs 100k original point to date). Using the "SELL/BUYBACK" (S/B) immediately process each time and going forward (on S/B of 10%, 15%, 20%, 25% etc corrections) losses are considered minimum in the scheme of things. If/when market does turnaround, buying in (reverse) cycles of buying should recoup all previous losses and then some (single opinion of course). This system of playing the market is tied to having the "BEST" previous/Current 5 securities (10% in market) by analysis in one's portfolio (past history and present going forward). Friday's close showed some big losses in the CEF world while many securities were holding their own....
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Current Comment: Buyers beware and buy to one's "RISK TOLERANCE". Some investors now decreasing to 80% cash from 90%, 20% market (or thereabouts using a 100k portfolio reference point) that gives current investors a maximum probability loss of 7.5k (correction down) with any 50% pullback (on the 20%) in the market (= new current 92.5k reference vs 100k original point to date). Using the "SELL/BUYBACK" (S/B) and "DOLLAR COST AVERAGING "UP" METHODOLOGY on existing portfolio" process each time and going forward (using S/B of 10%, 15%, 20%, 25% etc corrections) losses or increases are considered minimum in the scheme of things. If/when market does turnaround, buying in (reverse) cycles of buying/selling should recoup all previous losses and then some (single opinion of course). This system of playing the market is tied to us continuing to "currently" have the "BEST" EXISTING" (monitored continuously) current 5 securities (10% previously in current market) by analysis in one's portfolio (past history and present going forward). Friday's close currently showed that some major market prices and NAV increases in the CEF world were occurring while many other securities were also increasing....
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One of the ways that some income oriented investors can find some interesting securities for their portfolio's is to always look at "increases in distributions or dividends" (for the past 12 months). That is always a signal that their NAV's or book values should be increasing. If/when their MktPrc's appear stable (both up/down markets) it is something to analyze for one's portfolio. With that said....
Examples: Some of us have had GLP in our portfolio's for quite a while now and remains one of our favorites. GLP again raised their dividend to $0.605/Qtr from $0.5250/Qtr. GPP raised their dividend to $0.45/Qtr from $0.445/Qtr. HGLB raised their distribution to $0.81 from $0.71. CAPL is also very stable but they have been buying our other companies and they have had to keep their dividend stable until their buying stops. All of these securities above have been discussed on these message boards for quite a while now. Buying any security at the right MktPrc is always the problem in both up/down markets. Keep in mind that the above examples works well when held "continuously" and we are monitoring over many years (or when we find them in our searches)....
Also, watch the insiders and what they are doing currently "BEFORE" any buying/selling activity. Referencing the above: -CAPL had insider Buy activity for 13,000 shares @ 18.45 (always compare to current MktPrc's) -GLP had insider Buy activity for 1,000 shares @ 28.45 (always compare to current MktPrc's) -GPP had insider had "initial statements for ownership" activity -RVT had insider Buy activity for 1,600 shares @ 13.42 (on watch list) -IRL had insider Buy activity for 25,000 shares @ 7.10 (always compare to current MktPrc's) - Heavy EOY each year (on watch list)
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Live Long and Prosper....
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Post by xray on Oct 31, 2022 21:36:00 GMT
Oilprice.com The Global Treasury Market Is Under Pressure As Fed Raises Rates Editor OilPrice.com Sun, October 30, 2022, 11:00 AM
The Fed’s next crisis is already brewing. Unlike 2008, where “subprime mortgages” froze counter-party trading in the credit markets as Lehman Brothers failed, in 2022, it might just be the $27 Trillion Treasury market. When historians review 2022, many will remember it as a year when nothing worked. Such is far different than what people thought would be the case. Throughout the year, surging interest rates, the Russian invasion of Ukraine, soaring energy costs, inflation running at the highest levels in 40 years, and the extraction of liquidity from stocks and bonds whipsawed markets violently. Since 1980, bonds have been the defacto hedge against risk. However, in 2022, bonds have suffered the worst drawdown in over 100 years, with a 60/40 stock and bond portfolio returning a horrifying -34.4%.
The drawdown in bonds is the most important. The credit market is the “lifeblood” of the economy. Today, more than ever, the functioning of the economy requires ever-increasing levels of debt. From corporations issuing debt for stock buybacks to operations to consumers leveraging up to sustain their standard of living. The Government requires continuing debt issuance to fund spending programs as it requires the entirety of tax revenue to pay for social welfare and interest on the debt. For a better perspective, it currently requires more than $70 Trillion in debt to sustain the economy. Before 1982, the economy grew faster than the debt. Debt issuance is not a problem as long as interest rates remain low enough to sustain consumption and there is a “buyer” for the debt.
A Lack Of A Marginal Buyer
The problem comes when interest rates rise. Higher rates reduce the number of willing borrowers, and debt buyers balk at falling prices. The latter is the most important. When debt buyers evaporate, the ability to issue debt to fund spending becomes increasingly problematic. Such was a point made by Treasury Secretary Janet Yellen recently. “We are worried about a loss of adequate liquidity in the [bond] market.” The problem is that outstanding Treasury debt has expanded by $7 trillion since 2019. However, at the same time, the major financial institutions that act as the “primary dealers” are unwilling to serve as the net buyers. One of the primary reasons for this is that for the past decade, the banks and brokerages had a willing buyer to which they could offload Treasuries: The Federal Reserve.
Today, the Federal Reserve is no longer acting as a willing buyer. Consequently, the primary dealers are unwilling to buy because no other party wants the bonds. As a function, the liquidity of the Treasury market continues to evaporate. Robert Burgess summed it up nicely:
“The word “crisis” is not hyperbole. Liquidity is quickly evaporating. Volatility is soaring. Once unthinkable, even demand at the government’s debt auctions is becoming a concern. Conditions are so worrisome that Treasury Secretary Janet Yellen took the unusual step Wednesday of expressing concern about a potential breakdown in trading, saying after a speech in Washington that her department is “worried about a loss of adequate liquidity” in the $23.7 trillion market for U.S. government securities. Make no mistake, if the Treasury market seizes up, the global economy and financial system will have much bigger problems than elevated inflation.”
Such isn’t the first time this has happened. Each time the Federal Reserve previously hiked rates, tried to stop “quantitative easing,” or both, a “crisis event” occurred. Such required an immediate response by the Federal Reserve to provide an “accommodative policy.”
“All this is coming as Bloomberg News reports that the biggest, most powerful buyers of Treasuries, from Japanese pensions and life insurers to foreign governments and U.S. commercial banks, are all pulling back at the same time. ‘We need to find a new marginal buyer of Treasuries as central banks and banks overall are exiting stage left.” – Bloomberg
It’s Not A Problem Until Something Breaks
As discussed previously, while there are actual “warning signs” of fragility in the financial markets, they are not enough to force the Federal Reserve to change monetary policy. The Fed noted as much in its recent meeting minutes. “Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.” While the Fed is aware of the risk, history suggests the “crisis levels” necessary for a monetary policy change remain in the distance.
Unfortunately, history is riddled with monetary policy mistakes where the Federal Reserve over-tightened. As the markets rebel against quantitative tightening, the Fed will eventually acquiesce to the selling deluge. The destruction of the “wealth effect” threatens the functioning of both equity and credit markets. As I will address in an upcoming article, we already see the early cracks in both the currency and Treasury bond markets. However, volatility is rising to levels where previous “events” occurred.
As noted in “Inflation Will Become Deflation,” the Fed’s primary threat remains an economic or credit crisis. History is clear that the Fed’s current actions are once again behind the curve. Each rate hike puts the Fed closer to the unwanted “event horizon.” “What should be most concerning to the Fed and the Treasury Department is deteriorating demand at U.S. debt auctions. A key measure called the bid-to-cover ratio at the government’s offering Wednesday of $32 billion in benchmark 10-year notes was more than one standard deviation below the average for the last year.” Bloomberg News. When the lag effect of monetary policy collides with accelerating economic weakness, the Fed will realize its mistake. A crisis in the Treasury market is likely much greater than the Fed realizes. That is why, accordingto Bloomberg, there are already potential plans for the Government to step in and buy back bonds.
“When we warned last week that Treasury buybacks might begin to enter the debt management conversation, we didn’t expect them to jump so abruptly into the limelight. September’s liquidity strains may have sharpened the Treasury’s interest in buybacks, but this is not just a knee-jerk response to recent market developments.” If something is breaking in the Treasury market, it will likely be time to buy both stocks and long-dated Treasuries as the next “Fed or Treasury Put” returns.
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Live Long and Prosper....
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Post by retiredat48 on Nov 1, 2022 4:37:10 GMT
xray ,...thanks for post. I found the last sentence interesting: "If something is breaking in the Treasury market, it will likely be time to buy both stocks and long-dated Treasuries as the next “Fed or Treasury Put” returns."
Hmmm. Opportunity waits?!!? R48
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Post by Deleted on Nov 1, 2022 11:11:29 GMT
xray, Very good post. Do you concur with the danger in the bond market of not having sufficient buyers and no choice but for the Fed to step in? The 60-40 return stat is eyebrow raising. A lot of retirees have been hurt. I cannot emphasize enough that the messages of the death of the bond bull market should have been shouted from the rooftops as it was well predicted with the huge monetary increase. We can argue until the cows come home, but this denial of the effects of monetary policy and a zero interest rate policy are concerning.
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Post by Deleted on Nov 1, 2022 11:44:02 GMT
xray , Very good post. Do you concur with the danger in the bond market of not having sufficient buyers and no choice but for the Fed to step in? The 60-40 return stat is eyebrow raising. A lot of retirees have been hurt. I cannot emphasize enough that the messages of the death of the bond bull market should have been shouted from the rooftops as it was well predicted with the huge monetary increase. We can argue until the cows come home, but this denial of the effects of monetary policy and a zero interest rate policy are concerning. The problem discussed is the Treasury market not the entire bond market. When liquidity freezes at that level, bad things happen in the economy.
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