Seeking Alpha

Michael A. Gayed, CFA

 
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  • The Risk-Off Setup Arrives
    Yesterday, 7:45 AM SPY 14 Comments

    Summary

    • History proves that bond buying from central banks seems to initially result in bond selling by investors, pressuring yields higher.
    • The best thing happening right now is Treasuries (TLT) and defensive sectors going down at a faster pace than broader beta.
    • The problem all year has been that Treasuries and defensive sectors have led, but in a correlated way to cyclical equities.
  • Will Yen Signal Correction?
    Yesterday, 5:33 AM FXY 3 Comments

    Summary

    • In the pre-Abenomics era, the Japanese Yen would often serve as a strong indicator of heightened volatility and stock market correction risk.
    • Perhaps the final correction confirmation comes from the Yen trying to push higher despite downward pressure from Kuroda.
    • Combined with negative seasonality for stocks in the September/October period, the Yen's behavior may finally be a true warning sign that conditions are about to change.
  • To Save The Euro, Draghi Must Destroy It
    Sun, Sep. 7 FXE 1 Comment

    Summary

    • The European Central Bank’s initiation of selective bond buying in covered bonds and asset backed securities came largely as a surprise to markets.
    • The history of negative deposit rates shows that it does not increase lending, but does put downward currency pressure.
    • It may works for Europe, but with US inflation still undershooting the Fed’s target, Europe’s inflationary gain may be the US’s deflationary pain.
  • The Bull's Self-Delusion
    Mon, Sep. 1 TENZ, SPY 78 Comments

    Summary

    • Equities and Treasuries closed August having one of their best months of 2014 respectively, as bonds continue to price in global deflation at the same time equities completely ignore that.
    • Put simply, bonds are correctly pricing in deflationary risks. Stocks are not. That is not open to debate. That is fact.
    • This is not about calling for a top in stocks. This is about calling for a top in strategy.
  • What Can Break Treasuries
    Mon, Aug. 25 TLT 8 Comments

    Summary

    • Investors and traders turned their focus on the Fed yet again, with the media reciting Yellen’s Jackson Hole comments.
    • What happens in the U.S. may end up being a side show relative to Europe now.
    • If Draghi initiates QE and inflation expectations rise, then European yields likely rise and that could finally break the Treasury uptrend.
  • Now It Gets Interesting
    Sun, Aug. 17 SPY 10 Comments

    Summary

    • Something fairly significant happened last week which could have meaningful implications on market movement into the end of Quantitative Easing.
    • Inflation expectations largely have not mattered with the benefit of hindsight since QE3 began.
    • We are re-entering a period where risk management is going to matter, and the post QE3 era where only buy and hold worked will change.
  • The Greatest Mistake Investors Make
    Mon, Aug. 11 SPY 3 Comments

    Summary

    • Many stock averages worldwide got into oversold territory quickly.
    • Studies have shown that the more frequent an investor checks their account balances, the more over time they dramatically underperform nearly every single part of the investable landscape.
    • With the end of QE near, it stands to reason historical cause and effect will reassert itself in terms of the inputs that our risk trigger focuses on.
  • The Invisible Risk You're Missing
    Sun, Aug. 10 BND, HYG 5 Comments

    Summary

    • To be contrarian doesn’t mean to look at stocks now.
    • To be contrarian means to look at junk debt, and acknowledge that the reach for yield has resulted in excessive risk taking.
    • Credit risk may come back with full force.
  • Volatility Phoenix Rising
    Mon, Aug. 4 VXX 2 Comments

    Summary

    • Last week bore witness to that as the VIX spiked at the same time stocks tumbled to close July down in the final moments of the trading month.
    • Meanwhile, small-caps went through a severe breakdown in what otherwise looked on the surface to not be a horrible month for US market averages.
    • Interestingly though, emerging market rotation appears to be underway.
  • Why Draghi May Ruin Yellen's Plans
    Tue, Jul. 29 6 Comments

    Summary

    • Risks are lurking in the background which could dramatically alter future policy expectations.
    • Financials in Europe have been hemorrhaging all year.
    • If European financials are pricing in some kind of slowdown and/or event, then we will feel it here in the US.
  • The Crisis May Be In U.S. Small-Caps
    Mon, Jul. 28 IWM 5 Comments

    Summary

    • Treasuries remain relatively well bid, acting as if either the US economy is about to meaningfully slow down.
    • U.S. small-cap stocks are considerably more vulnerable than emerging markets despite lingering fears there.
    • Sector movement also does not validate small-cap strength in the near-term.
  • ATAC Week In Review: The Source Of Complacency And Coming Fear
    Mon, Jul. 28 SPY Comment!

    Summary

    • Talking about a correction is not the same as preparing for one.
    • Source of risk is junk debt.
    • No one is asking when they should be selling high yielding debt.
  • Brazil's Coming Melt-Up
    Fri, Jul. 25 EWZ 29 Comments

    Summary

    • Political change can be more stimulative than all the Quantitative Easing in the world.
    • Recent polls show that Brazilian President Dilma Rousseff has been waning in popularity, resulting in the very real possibility that she does not get re-elected.
    • Given how much Brazil has underperformed under her administration, it stands to reason a major change in the government could alter investor expectations.
  • Realities And Dreams: Market Reminders
    Sun, Jul. 20 SPY 4 Comments

    Summary

    • Homebuilder stocks continues severe weakness.
    • Small-caps relative to large-caps crashed.
    • Emerging market credit leading.
  • On Discipline And Whipsaws
    Sun, Jul. 13 IWM, SPY 4 Comments

    Summary

    • Treasuries whipsaw back.
    • Small-caps crater in way that breaks relative momentum.
    • The Not-Everything Boom has still left out emerging markets.
  • A Surprise Recession?
    Mon, Jun. 30 SPY 22 Comments

    Summary

    • Negative GDP among 25 worst in history.
    • European banks major source of risk.
    • Mutual funds and separate accounts went defensive last week.
  • A Crude Awakening
    Mon, Jun. 23 SPY 10 Comments

    Summary

    • Defensive sectors remain well bid despite new all-time highs.
    • Risk-on potentially switching to risk-off in weeks ahead.
    • Oil, combined with consumer weakness, is the elephant in the room.
  • A Stock Correction For Misguided Perception?
    Mon, Jun. 16 SPY 11 Comments

    Summary

    • Too much focus on return, too little on risk.
    • Oil could serve as catalyst for correction.
    • Defensive areas remain stubbornly strong.
  • Tipping Point For Correction: Will Oil Foil The Equity Rally?
    Thu, Jun. 12 USO 12 Comments

    Summary

    • Oil could rise to the point where stocks finally take notice.
    • Iraq may cause enough of a disruption for spike in energy costs.
    • Rising Oil, combined with weaker discretionary stocks, might force Fed to act.
  • When Butterflies Attack
    Sun, Jun. 8 SPY 8 Comments

    Summary

    • Stocks cheer yet another week with days that end in Y.
    • But the why is questionable as negative ECB rates may be deflationary.
    • Complacency at historic levels, and may result in severe breakdown later in year.
  • Stocks Love Failed Expectations
    Mon, Jun. 2 DIA, EEM, TLT 8 Comments

    Summary

    • Bond market appears to be more right than stocks are about economy.
    • Parallels to 2007 and 2011.
    • Nearly all markets acting in line with each other.
  • Markets And The Fork In The Road
    Sun, May. 25 SPY 7 Comments

    Summary

    • Oversold bounce in small-caps may continue.
    • Unprecedented behavior underappreciated by market participants.
    • Fragile 5 proof of non-crisis.
  • Is The Small-Cap Alpha Crash Ending?
    Thu, May. 22 IWM 2 Comments

    Summary

    • Small-cap alpha crash too extreme - counter move can happen.
    • Leadership could occur with large-caps going down at a faster clip.
    • Emerging markets keeping large-caps more attractive.
  • The Selective Correction And Extreme Of Inaction
    Mon, May. 12 IWM, SPY 5 Comments

    Summary

    • Everyone worried about correction, no one doing anything about it.
    • Reach for yield not just a talking point.
    • Selective correction either start of something bigger, or end of decline.
  • Bonds Are Yelling To Yellen: You're Wrong!
    Thu, May. 1 TENZ 8 Comments

    Summary

    • Despite Fed tapering, Treasuries are rallying.
    • Going back to 1977, there is a serious message long duration bonds have on stocks.
    • Something is clearly very wrong.
  • Something Concerning To Think About
    Mon, Apr. 28 IWM 8 Comments

    Summary

    • Defensive sectors and long duration Treasuries remain strong.
    • At this point in the cycle, yields should be rising.
    • This is not about the weather or Russia.
  • The Crash No One Is Talking About
    Sun, Apr. 27 IWM 45 Comments

    Summary

    • A crash is not defined by magnitude, but by amount of time given back in decline.
    • Shades of 2011, as small-caps give back all 2013 outperformance.
    • Seasonally weak period ahead.
  • Cost-Push Reflation?
    Mon, Apr. 21 EEM 5 Comments

    Summary

    • Inflation protection buyers step in.
    • Earnings will set tone.
    • Cost-push reflation hope is building.
  • The Unthinkable Is Happening
    Mon, Apr. 14 IWM 19 Comments

    Summary

    • Severe breakdown in momentum high beta trades continue.
    • Treasuries should not be this strong.
    • The Great Convergence may be underway.
  • When Safety Rallies, Pay Attention
    Mon, Apr. 7 SPY 9 Comments

    Summary

    • Utilities continues to predict coming volatility.
    • Emerging market strength competing with US weakness.
    • Defensiveness remains problematic.
  • The Great Convergence Between Emerging Markets And The U.S. Begins?
    Mon, Mar. 31 EEM 8 Comments

    Summary

    • Defensive sectors well-bid.
    • Small-cap high beta areas wrecked.
    • Emerging markets may be starting melt-up.
  • Setting The Record Straight
    Sun, Mar. 23 SPY 7 Comments

    Summary

    • Hawkish Yellen shocks short end of the yield curve.
    • Brazil and China show signs of life.
    • Alpha is beta rotation in disguise.