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Lawrence Fuller

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  • Stocks: Clear Sailing Into 2015 [View article]
    Recent days looks more like panic buying by institutional equity managers that are trailing their benchmarks, buying big, ugly and liquid names that influence the indices in hopes of catching up and earning a bonus. With an ever strengthening dollar, why are small caps deteriorating (again) so badly. They should be leading. The 5 and 10 day moving averages for the RUT have now fallen below the 20, as they did just before the small cap swoons in July and September. Breadth continues to deteriorate. Why are long-term treasury yields declining? They should be rising if we are seeing an acceleration in economic growth. Not a lot making sense right now.
    Nov 23, 2014. 09:19 AM | 10 Likes Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    The Fed will never sell the bonds it purchases. They will let the portfolio run off/mature. Unless they organize a plan to sell them to other central banks, directly, behind closed doors without our knowledge so as to not create a panic. They can and do, do what ever they want, with no checks or balanaces.
    Nov 1, 2014. 11:03 AM | 3 Likes Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    James, I like what you write, but I take issue with this one. If stock buybacks were funded with free cash flow from rising revenues/earnings, it would be one thing, but much of the near $500 billion a year in buybacks have been funded with debt. I don't see debt borrowings in the same light as excess liquidity.

    As well, this correction, and the ridiculous rally that followed, the final day of which was an emini futures meltup overnight, has more, if not all to do with computers than investors... our market structure has completely changed from what it was 10 years ago. investors have been so marginalized that they/we don't matter. It wasn't investors that spiked the market 16 S&P points per day 12 days in a row. The strength of the rally was no different than the strength of the meltdown - both a sign of lack of liquidity, and a very disorderly market. Most of us have been convinced that when stocks rise at such a rate over short period of time, its GREAT, but its not, even for bulls. This is not normal market behavior. In 20 years, I've never seen stock indices behave this way.

    As for economic growth, I'm very cautious about banking on a GDP estimate, even the second or third revision, as a baseline for analysis/valuations. We were six months into 2008, deep in recession, and the BEA was INCREAESING its GDP estimate on a revision for Q2 - complete joke. Remember, there is an election on Tuesday.
    Nov 1, 2014. 11:01 AM | 5 Likes Like |Link to Comment
  • The Spark That Ignited This Correction [View article]
    Hi GestaltistView,
    I think the process simply reversing itself will be enough to send the S&P back through 2000 before year end. I'm in the camp of those that don't think the fundamentals are improving, nor do I think current valuations are justified, but given my view that this correction was a hiccup by the market participants that control the trend (hedge funds in combo with HFTs), I see no reason why it can't recover.

    The Russell 2000 is clearly a laggard, and I think you continue to see relative under performance moving forward, but until short term rates move up, the game is on. So long as the stock buy backs continue apace, the game is on. So long as cost cutting and debt refinance continue to keep margins where they are or push highs, the game is on.

    Once the balance sheet recovery is over and the $3T hedge fund industry has to start to delever en masse because of an increase in short rates, then I think you get a bear market decline.
    Oct 19, 2014. 07:40 PM | Likes Like |Link to Comment
  • The Spark That Ignited This Correction [View article]
    M Picciotto,
    I've been a long time critic of QE and its influence on markets, but I don't think its ending is having the same impact as the end of the first 2 1/2. I think markets have switched over to interest rates as a focus. There is more than enough liquidity to support asset prices, but the leverage is geared towards that zero % interest rate. As for this recent 10% swoon, I think it is ALL related to a handful of funds that suffered big losses on some widely owned investments and concentrated sector exposure. What followed was an unwinding of that leverage + other funds piling on to make the losses greater + our modern day market makers hitting the off switch in terms of liquidity. That's all it takes.

    This decline wasn't based on an abrupt end to QE, or an announcement that it would end. Markets have known exactly when it was ending and what the schedule was for the taper - not similar to the end of the previous QEs.
    Oct 18, 2014. 03:12 PM | 1 Like Like |Link to Comment
  • The Spark That Ignited This Correction [View article]
    I agree with what you are saying, that's my point. Europe, China and Japan have been showing signs of weakness for well longer than a year now. Why are markets suddenly caring now? Why are investors/traders paying attention at this point in time? That's doesn't make sense to me. I don't see what has changed, so I'd appreciate your reasoning.
    Oct 16, 2014. 09:02 AM | 3 Likes Like |Link to Comment
  • The Stock Market Is Still Broken [View article]
    Thanks for reading sasaucer,
    I think the discussions post article can be as interesting, or more so sometimes, than the article itself. In my view, the conundrum the Fed has created for itself with zero interest rate policy is how to gracefully unwind the leveraged investment/speculation in financial markets it has encouraged. I don't see this being any where near as significant a factor with respect to individual investors as I do with hedge funds. Those funds have amassed $3 trillion. When you can borrow at less than 1%, why wouldn't you leverage in an assortment of fixed-income, equity, commodities, currencies..... Who owns what, how much, ect. Is it really hedged? What is the derivative component? The NY FED has proven in recent weeks that it does not regulate anything, in fact, stands out of the way of the major investment banks, allowing them to do whatever they want. I believe what we have seen over the past month is a degree of unwinding, especially as we close in on the end of many funds fiscal years (oct 31). There are also significant redemptions expected.
    Perhaps this is the catalyst to a broader sell-off, and perhaps it is just another one of these 5% pullbacks. That's difficult to determine.

    What I find interesting is that many SA writers and market pundits are pointing to real world economic factors (wealth disparity, no income growth, weak GDP growth, balance sheet manipulation, weak global growth, geopolitical concerns ect.) as the reason for this sell off. I have written extensively about these issues for nearly two years. They have been in place for a long time, but they were never important. Why now? This market could dust off just about anything a month ago. Horrible data from EU, weak ISM, bad employment report, ect.
    Oct 12, 2014. 08:37 AM | Likes Like |Link to Comment
  • The Stock Market Is Still Broken [View article]
    I agree with you Tack. No chance of more QE, but I think they could drag out the first rate increase for some time. You just had Fischer quoted in a bloomberg article this afternoon trying to talk up markets by suggesting the first rate hike won't come until the economy strengthens - good luck there.

    Every recession is a different animal, that's for sure. It is very difficult to identify what cracks turn into caverns. I think the next recession is more of a profits recession than a consumption recession, simply because that's where we seen the most significant increase/recovery.

    Oct 11, 2014. 07:32 PM | Likes Like |Link to Comment
  • The Stock Market Is Still Broken [View article]
    Hi rngod,

    I mean short term, and I wouldn't include the small caps in the rebound, at least to the extent that they make new highs. I think the pace of increase for the S&P 500 will slow substantially, but we could very well see new highs in the coming months (2100, 2200?). So long as the rate of stock buybacks continues to exceed net new issuance, and earnings continue to eek out small increases, we can push higher until an eventual end to ZIRP. The end of ZIRP changes the whole dynamic of leveraged speculation, especially for the $3 trillion hedge fund industry.

    I'm now beginning to think the Fed may continue with ZIRP for another year or more. They are so dependent on continued financial asset performance to keep this lame expansion going, I can't believe they will do anything to unhinge it. I understand the relationship between QE and S&P performance. It is a strong one. Still, I think interest rate policy is more important at this point in combination with share float and corporate profits.

    It seems to me that when this cycle ends, it will be more similar to 2000 than 2008, because it will be a corporate recession rather than a consumer-led recession. Sectors will experience bear markets on a rotational basis, rather than all at once.
    Oct 11, 2014. 06:04 PM | Likes Like |Link to Comment
  • The Stock Market Is Still Broken [View article]
    I agree with you Tack, I think its very possible they do not raise rates in April or June 2015. It will be interesting to see how they back out of that loose commitment.
    Oct 10, 2014. 05:58 PM | 1 Like Like |Link to Comment
  • The Stock Market Is Still Broken [View article]
    Thanks for your insightful, educated and clearly written response Dave, much appreciated.
    Oct 10, 2014. 04:23 PM | 5 Likes Like |Link to Comment
  • The Stock Market Is Still Broken [View article]
    I agree with your analysis. Reflating over and over again is not a winning strategy, especially in hopes that it supports debt-driven consumption. This is round three of the saga.
    Oct 10, 2014. 04:18 PM | 1 Like Like |Link to Comment
  • 4 Reasons The Jobs Report Stinks [View article]
    The market is improving. For those that own the market, the economy looks like its improving as well, but most peoples' economy is not improving, as shown by the job statistics. Lots of college grads driving Uber cabs, or working as baristas or waiters, or whatever. Working 25 hours a week with no benefits. This is improvement for market watchers and participants, but dead end jobs are not improvements for the millions that have them or the real economy at large.

    At the same time the consumption that market watchers point due is predominately debt induced. It is not the result of an increase on incomes.
    Oct 3, 2014. 04:21 PM | 22 Likes Like |Link to Comment
  • Of Course The Market Is Rigged! [View article]
    Very much appreciate the comment, thank you for reading blueice.
    May 5, 2014. 09:35 AM | 1 Like Like |Link to Comment
  • Of Course The Market Is Rigged! [View article]
    It was definitely sarcasm...I'm hoping for less complexity and not more :) I loved the boring 1990s.
    Apr 14, 2014. 11:41 AM | Likes Like |Link to Comment