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Jeff Miller  

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  • Weighing The Week Ahead: The Start Of An 'Earnings Recession'? [View article]
    Mitchad2 - You have developed some practical rules for risk control, and they have so far worked for you. I am curious about the danger of a flash crash, which I have written about before in discussing stops. You know this but for the benefit of others, when a stop is activated it becomes a market order. During the Flash Crash some stocks were down 80% or so -- if only for a few minutes.

    It also depends upon how much edge you have in your trading system. The Kelly Criterion (used in a conservative fashion by the Ken Uston blackjack team) is an accepted standard. http://bit.ly/MaAiTj

    I have seen many blow out their trading accounts. Excessive size was a frequent reason, along with a method that had no edge to start with.

    Thanks for sharing your approach, which others may find helpful.

    Jeff
    Apr 12, 2015. 11:40 AM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Correction Looming? [View article]
    Thanks to everyone who added to the great discussion this week, and also to those who enjoyed the links and provided some encouragement. I do not always feel like spending Saturday on this. It is good to know people find it useful:)

    While I do not respond to each and every comment, I do read everything and join in where I can add something.

    Jeff
    Apr 5, 2015. 06:36 PM | 5 Likes Like |Link to Comment
  • Weighing The Week Ahead: Correction Looming? [View article]
    GaltMachine -- I find that many using y/y numbers are uncomfortable with or unable to do seasonal adjustments. They wind up "backing into" current changes by comparing y/y numbers for two different points. So I prefer the adjusted current changes, but try to remain cognizant of when something is distorting the result.

    For example -- we always have winter, but occasionally it is more (or less) severe than represented in the seasonal adjustment. We naturally ignore positive effects from the census temp hires a few years ago or "cars for clunkers." The same thing applies to issues like the port work stoppages.

    It is true that the recession forecasting models usually include something about the slope of the yield curve. This is expected, since it has done so well with past recessions. It is convenient for those who want to predict a recession to throw out this indicator because the Fed policy is so dominant. It is an easy and self-serving excuse.

    This deserves a full post, but the basic idea is that the Fed has held the short end low before on several occasions. That is part of the reason the indicator has worked. Secondly, the Fed policy is influencing the long end -- by about 1.1% according to their studies. So the slope is affected in two ways.

    The hand of the Fed is nearly always involved in marking a business cycle peak.

    Thoughtful question, deserving a longer answer.

    Jeff
    Apr 5, 2015. 04:26 PM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Correction Looming? [View article]
    bbro -- Thanks for the great example to highlight this important theme. I used to do a monthly employment preview emphasizing these issues. I still do it occasionally, and I also point out trends in the benchmarking.

    The market places too much emphasis on this number, and a single month -- as you observe.

    Jeff
    Apr 5, 2015. 12:50 PM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Correction Looming? [View article]
    txbadonetoo -- You are correct that labor participation remains low and the debate about causes (economic versus demographic) continues. I have reported several times about the part-time issue. Most of it is voluntary and the ratio has not changed as much as some assert.

    The time frame of the chart is certainly chosen to emphasize the rebound. Every chart that we see, including the ones I post, is open to discussion.

    Thanks,

    Jeff
    Apr 5, 2015. 12:47 PM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Correction Looming? [View article]
    hawkeyec -- I agree with your observations about the inventory data. Once market participants decide that a theme is important, they react and over-react to each new data point. That is why I started adding inventories to my weekly data calendar -- at least for now.

    Thanks for joining in!

    Jeff
    Apr 5, 2015. 12:42 PM | 4 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time For An Economic Spring Thaw? [View article]
    Simont --

    In general, Federal spending is counter-cyclical, increasing in times of economic difficulty. State and local spending is pro-cyclical, mostly because of the requirements for balanced budgets and the declining revenues.

    There have been significant job and spending cuts at the local level -- teachers, police, fire-fighters, library workers, etc. This has been a major drag on GDP for years. Just resuming normal growth will get rid of one headwind.

    The point of the analysis was to get people to include the state and local impacts, so I urge you to read again.

    Jeff
    Mar 30, 2015. 02:58 PM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time For An Economic Spring Thaw? [View article]
    avolossov -- I have been mentioning earnings almost every week, tracking both the Q4 numbers and the forward expectations. There have been both good and bad weeks. This time I wanted to point out that the future estimates seem to have stopped declining -- modestly good news.

    Thanks for joining in with a good point.

    Jeff
    Mar 30, 2015. 02:54 PM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time For An Economic Spring Thaw? [View article]
    bobtcat2 -- You need to do some research on the definition of a recession -- the time from a business cycle peak to a trough. Follow the links on WTWA for some accurate information.

    And there will not be another QE.

    Jeff
    Mar 30, 2015. 02:51 PM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time For An Economic Spring Thaw? [View article]
    jj1937 -- Chicago had its second coldest and third snowiest February in history.

    I have the plowing bills to prove it!!

    Jeff
    Mar 30, 2015. 02:49 PM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time For An Economic Spring Thaw? [View article]
    Total Return -- I disagree, and I think the point is important. Overall market prices can move lower for many reasons -- not just net fund redemptions. My own sense is that most of them start with changes in trading positions, especially the algorithms. A modest change should not really affect a fund like Bill Miller's. He obvious felt the same. Do you think that pension fund managers are shifting from stocks to cash or bonds because of small moves?

    I try to educate new clients about what to expect from each of our programs. Three of them involve stocks with different levels of volatility. While none are "buy and hold" some volatility comes with the territory even with active management. I once had a client who asked me, after a three percent decline, "What is our exit strategy?" This investor will not last long in any investment program since what he really wants is to trade.

    Jeff
    Mar 29, 2015. 11:40 AM | 10 Likes Like |Link to Comment
  • Weighing The Week Ahead: Is Good Economic News Now Bad For Investors? [View article]
    Lakeaffect -- I like to include a range of opinions. The Hussman advice gets a lot of play, and I include many ideas for consideration. I originally had another "contra" piece to go with this one, and I dropped it.

    I guess I thought that I have written enough about Hussman and the Shiller PE.

    Sorry.

    Jeff
    Mar 8, 2015. 10:51 PM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Is Good Economic News Now Bad For Investors? [View article]
    Last Boomer -- Interesting observations on housing. We'll see about the correction.

    Jeff
    Mar 8, 2015. 12:17 PM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Is Good Economic News Now Bad For Investors? [View article]
    Mitchad2 -- First off, I congratulate you on your successful trading. I don't know why anyone would question it. Many people appreciate learning about what others are doing, so it is always welcome.

    I am surprised that you think I am "biased" against traders. My first job in the business was supporting the trading activity of market makers on the trading floor at the Chicago Options Exchange. When I became a consultant, all of my original clients were traders on one or another of the Chicago trading floors. Everyone on my team has significant trading experience.

    My sense is that financial media and brokerage commercials make it seem easier to succeed than it really is. A large percentage of those who try suffer significant losses. I have watched it happen.

    I am also concerned that many traders who take the wrong side create an inaccurate picture of the economic environment to explain their own mistakes. Since this discussion dominated financial media, it unduly influences the average investor.

    My point about HFT is that it has left less room for traders to exploit swings.

    And finally, I agree that winning contests is a lot different from real trading or investing. You take shots that you would otherwise not do -- sort of like winning a large NCAA pool. It can be fun if it does not interfere with your day job!

    Jeff
    Mar 8, 2015. 12:15 PM | 5 Likes Like |Link to Comment
  • Weighing The Week Ahead: Is Good Economic News Now Bad For Investors? [View article]
    Hi James,

    Thanks for joining in with your emphasis on the link to the "more detailed" report. As you note, the conclusions there are quite similar to my observations here. We also apparently share an emphasis on recession forecasting, which will not help with 10% corrections but should help to avoid the large ones.

    As to the current odds of a correction -- people have been predicting one for years and eventually it will happen. I cannot forecast the next six months, but my guess is that most people lose more by trying to time the market than they would in a correction!

    Thanks again for your kind and helpful reply.

    Jeff
    Mar 8, 2015. 12:00 PM | 6 Likes Like |Link to Comment
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