Seeking Alpha

O. Young Kwon

 
View as an RSS Feed
View O. Young Kwon's Comments BY TICKER:
Latest  |  Highest rated
  • Weighing The Week Ahead: Market Correction? [View article]
    Jeff. Good reading always. Thanks.

    Correction? Perhaps maybe or not, but the true is that a busy ant (dislike Bulls or Bears, but like me) is too busy to worry about it. All the ant (or I) does (or do) is to try to keep the honey jar (or long-term well-diversified portfolios with life-time savings) well, and collect a tiny honey (or small gains on trading accounts) each day – shiny or rainy (or on rips or on dips).

    Young
    Feb 4 05:22 AM | 2 Likes Like |Link to Comment
  • January Employment Preview: What To Watch For [View article]
    Hello Jeff.

    It’s another outstanding employment preview as every month. It’s one of the most tricky issues: There are many pitfalls and misguides. What we have to think about is employment trends during downswings and upswings are not symmetrical because cutting employees are much easier and faster than rehiring them. A weak recovery of employment is a norm. Therefore, any not-so-bad employment figures would be bullish rather than bearish in the current business cycles.

    Young
    Feb 1 05:37 AM | 1 Like Like |Link to Comment
  • A Lackluster Market Ahead As Budget Fight Is Looming [View article]
    Dear Investor:

    This article is to analyze macroeconomic and market data, draw some market perspectives, and build reliable investment strategies, GIVEN economic policy – monetary and fiscal – and other things including political events such as elections, fiscal-cliff negotiations, and coming debt-reduction battles.

    The fundamental grounds of the approach are threefold: (a) “Hard” data are primarily used rather than “soft” data such as survey or other “complied” data. (b) A rule of “Disciplined Flexibility” is a major guide than other valuations or chart formations, or historical patterns. (c) A form of “two-tier portfolio” is the basic investment strategy than just sticking with a portfolio (or no portfolio) strategy of either long-term investing or short-term trading.

    Some outputs of my analysis are posted on Seeking Alpha EACH DAY: Here are some links.

    “The Daily TANER Momentum [DTM]” http://bit.ly/UFs0XV

    “The Daily Market Condition [DMC]” http://bit.ly/10dGzks

    O. Young Kwon
    Jan 31 05:42 AM | Likes Like |Link to Comment
  • A Lackluster Market Ahead As Budget Fight Is Looming [View article]
    <<< This reply is delayed for a couple of days due to a technical problem on this site, caused perhaps by there were too many readers on this article. 2,082 readings as of this writing! Thank all of you. O. Young Kwon>>>

    The main focus of the article is investment implications (probable market reactions and workable investment strategies on this kind of market conditions) induced by political events such as the election (11/6/2012), the tax deal (12/31/2012), or the coming budget battles (started on 1/23/2013), not the political events themselves.

    Any comment whose angle dwells on the latter than the former, like this comment, is out of the scope of the article. The comment, however, is welcome, even though it contained some apple-orange comparisons.
    Jan 30 05:19 AM | Likes Like |Link to Comment
  • Do You Understand Ceteris Paribus? [View article]
    Hello Jeff.

    It’s really a unique excellent outstanding pitch to let investors see investment conditions correctly without making their own bias which is induced by ignoring ‘ceteris paribus.”

    The assumption about “other things being equal” (ceteris paribus) is a fundamental logic in drawing any inference from economic analysis.

    Therefore, any valuation, debate, or criticism must be dwelled under this given assumption, ceteris paribus. Otherwise, we simply are ending to be wrong in reading a wrong page of a wrong novel.

    For instance, the S&P 500 Index is a striking distance from an all-time high now. It’s not too high to be sustainable under current data points, ceteris paribus, meaning if other things include the transitory noises from the coming budget fight.

    Young
    Jan 23 05:43 AM | Likes Like |Link to Comment
  • The RED Spread: A Market-Breadth Barometer - Can It Predict Black Swans? [View article]
    Dear Investor:

    The primary role of The Market Condition Monitor [MCM] with two gauges – The RED (a market depth indicator0 and The RED Spread [REDS] (a market breadth indicator) is to date the market turning points – peaks and troughs. The MCM determined two turning points in 2012: A peak on April 4 and a trough on August 28 The current market has been on an upswing (or a rally), starting August 28, 2012.

    During any swing – upward or downward --, the movement is not steady: It shows various transitory pullbacks or rebounds, influenced by political events (i.e., the fiscal cliff talks) or affected by the monetary policy (i.e., quantitative easing). Did the MCM catch any market distortion from the Cliff negotiations and QE? Let’s take a look with the Daily Market Condition [DMC]. (Click: http://bit.ly/10dGzks condition For "The Daily Market Condition")

    THE Relationship Among RED REDS P/T/B ,S&P 500 & 10Y T Yield
    * * * * * 10Y TN IR
    DATE RED REDS P/T/B S&P 500 Yield ON/OFF
    4/4/2012 54.3 -3.7% p 1,398.96 2.240% .
    8/28/2012 51.0 6.3% T3(1) 1,409.20 1.630% OFF
    10/31/2012 51.1 2.3% * 1,412.16 1.690% ON
    11/30/2012 52.7 3.5% * 1,416.87 1.608% ON
    11/7/2012 53.9 4.1% * 1,418.07 1.630% OFF
    12/14/2012 54.3 3.2% * 1,413.58 1.710% ON
    12/21/2012 53.5 2.6% * 1,430.15 1.750% ON
    12/28/2012 50.6 1.9% * 1,402.43 1.710% OFF
    12/31/2012 51.4 1.1% * 1,426.19 1.760% ON
    1/2/2013 53.4 1.1% * 1,462.42 1.840% ON
    1/3/2013 51.1 1.1% * 1,459.37 1.899% ON
    1/4/2013 53.5 1.3% * 1,466.47 1.910% OFF
    1/7/2013 53.4 0.9% * 1,461.89 1.900% OFF
    1/8/2013 53.0 0.7% * 1,457.15 1.870% OFF
    1/9/2013 53.2 0.7% * 1,461.02 1.850% ON
    1/10/2013 53.4 0.9% * 1,472.12 1.890% OFF
    1/11/2013 53.5 0.9% * 1,472.07 1.880% ON
    1/14/2013 54.5 1.7% * 1,470.68 1.860% ON
    1/15/2013 55.3 2.5% * 1,472.34 1.830% ON
    1/16/2013 54.2 2.7% * 1,472.63 1.820% ON
    1/17/2013 54.4 3.1% * 1,480.94 1.880% OFF
    1/18/2013 55.0 3.4% * 1,486.88 1.840% ON
    P = Peak T = Trough B=Breakeven
    IR = Inverse Relationship between REDS & 10Y T Yield

    The normal inverse relationship between the RED Spread [REDS} (the Bond Premium in terms of diffusion index) and the 10-year Treasury yield has been usually ON, meaning that the market condition was normal,. Some OFF dates indicated an abnormal relationship between them, reflecting a market stress of distortion.

    The RED Spread {REDS] must fall on the current upswing, but a wrong direction has been found on either an ON date or an OFF date. It is a wrong direction because it started an upswing from August 28. As shown in the above Table, a wrong direction happened on 11/30/12, 1/14/13, 1/15/13, 1/16/13, and 1/18/13 with ON, and 11/7/12, 1/4/13, and 1/17/13 with OFF.

    The Cliff and Budget negotiations and the Fed’s bond purchases have contributed to these distortions This kind of erratic market movements will be most likely to continue due mainly to the debt-ceiling and-spending sequester debates for a couple of months, or for much longer with the temporary short-term extension of debt limit, and the somewhat side effects of the Fed’s further QE.

    Ironically, these distortions make the current market MORE bullish. This is because the current upswing has been dampened due to a safety flight and bond purchases. When the political even in question turns to be better in a short run or the end of QE is expected in an intermediate run, the market tends to rise. Today (1/20/2013) Jacqueline Doherty.of Barron’s said “Both the Dow transports and industrials are on the rise – a key combination for the birth of a long secular rally.” The DMC will track the development each day. Stay tuned.

    O. Young Kwon
    Jan 20 03:15 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Signs Of A New Bull Market? [View article]
    Hello Jeff.

    It’s another outstanding post as usual. Yes, it’s much better to have a rule of “disciplined flexibility” (to avoid all kind of pitfalls from charts, valuations, or historical patterns,), regardless of an upswing or a downswing, or a rebound, or a pullback. The truth is that when you spend too much time to figure out whether this is a bull or bear or a pig, the current market opportunity might be gone!

    Welcome a NEW Bull.

    Young
    Jan 20 08:57 AM | 1 Like Like |Link to Comment
  • Japan Rally Coming To An End? [View article]
    Michael.

    It’s an excellent analysis and agreeable conclusion about Japan which makes a new effort with an old “failed” idea. Japan cannot come back to the glorious era again due to many social, demographic, economic , and political aspects.

    Young
    Jan 17 08:13 AM | Likes Like |Link to Comment
  • Big Tests For Stocks [View article]
    Hi, Cam.

    It is a correct observation, reading “Positive flows into equity funds after a long winter of negative flows could be interpreted as positively as the return of bullish momentum.” Yes, a BIG pitfall for most bulls and bears is they fail to see both directions of flows objectively. They only see one side of flows which they favor, ignoring the other side of flows. The only way to stay away from this mistake is to make a decision based upon data points.

    The discussion about debt ceiling and earnings are also informative.

    Young
    Jan 14 06:08 AM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Focus On Expectations? [View article]
    Hi Jeff.

    At the late stage of the current slow recovery, profit margins seem not to decline (or perhaps increase) for rebounding financial and housing sectors, exporters to China and the Euro zone, and natural-gas using industries

    Young
    Jan 13 04:25 PM | Likes Like |Link to Comment
  • Fed Profits And Treasury Financing: The Good And The Bad [View article]
    I am glad to find a rare Fed sympathizer like you in a jungle where the nasty detesters are all over. It’s true that the Fed is not only a lonesome inflation fighter but a growth promoter as well as a safety-net holder for the global financial system. In a conclusion part, some points about the Fed’s forced monetization due to the lack of proper policy cooperation as a BAD one is expected, but not found. O. Young Kwon
    Jan 12 03:23 PM | 2 Likes Like |Link to Comment
  • Business Cycle Forecasting: The Superlative Results Of Robert F. Dieli [View article]
    Hello Jeff. Congratulations!

    You have done a superlative work on this subject. It is absolutely my great pleasure to read this post as a Business Cycle Research Associate at the Center for International Business Cycle Research [CIBCR] with Dr. Geoffrey H. Moore from 1980 to 1983. All Dr. Moore and I did at the CIBCR was to collet international business cycle data, compiling business-cycle indicators (leading, coincident, and lagging), and analyze business cycle turning points under the NBER system. Again, I really appreciate you and Dr. Dieli for bring this invaluable information here.

    One caveat for the chart: A new peak is normally higher than the previous peak, but not always. Looking forward to read more.

    Thanks again.

    Young
    Jan 11 07:21 PM | 2 Likes Like |Link to Comment
  • The RED Spread: A Market-Breadth Barometer - Can It Predict Black Swans? [View article]
    Dear Investor:

    Last two weeks – the end of 2012 and the first week of 2013 – the market whipsawed drastically not only daily but in intraday. This movement was one of the widest swings with a thin volume during the first week and a heavy volume during the second week Now the market calmed down. As you witnessed, there are so much noises and advices from all sources from media, politicians, and investment advisers. How did you invest during this time?

    The budget-negotiation drama called all attention of the market participants. Investors remembered the debt-ceiling debacles last summer through December in 2011. Rating agents warned possible downgrades on the U.S. again. The Economic Cycle Research Institute [ECRI] called a Recession Signal on July 2012. Doug Short obediently posted the updated ECRI signal every week. Finally he concluded it was a false signal Many misguided articles and talk shows distracted investors. How did you respond to this situation?

    Was it a possible case for investors to encounter a Black Swan which is one of the major themes in this article? “[T]he necessary and sufficient condition for a market clash is that (a) a sharp drop of the RED to 40 or lower and (b) a near zero REDS.” (From this article). Let us see the two indicators – the RED (a Depth Gauge) and the RED Spread [REDS] (a Breadth Gauge) from The Daily Market Condition [DMC] (http://seekingalpha.co...):

    <Quote>

    The Daily Market Condition [DMC] (January 7, 2013 Monday)

    The Data Points on January 4, 2013 (Friday):

    The RED = 53.5% It’s Warm, by maintaining above 50%.
    The RED Spread = 1.3% The signal remains to be very bullish.
    On Friday the RED Spread edged up to 1.3%. The normal inverse relationship between the RED Spread [REDS} (the Bond Premium in terms of diffusion index) and the 10-year Treasury yield continued to be OFF (meaning that the market condition was not normal), as shown in the near chart. The erratic market movements will be likely this month, perhaps next month with debt-ceiling debates.

    The current 10-year Treasury yield at 1.91% (inched up from 1.899% on Thursday) is higher than 1.63% at a market trough on August 28, but it is much lower than 2.24% at a market peak on April 4. A stream of spillovers from the Treasury market is expected. This is a main force of the current sustainable upswing.

    <Unquote>

    The RED was 52.52% and the REDS was 1.51% on average during Dec.24, 21012 to Jan. 4, 2013 for two short weeks.
    As a result, we didn’t expect a big clash this time. Compare to the 2007-2008 clash, this time we have a much better situations: First, the U.S. produces more oil now so that manufacturers’ profits becomes much higher than five years ago, other things being equal Second, the housing and related industries are rebounding, which were the main forces to dragged the economy. Third, the Fed policy is now more accommodative with quantitative easing. Forth, the equity is not expensive, compared to bonds or Treasuries because the yield of 10-year Treasury was 1.79% on average Fifth, the global economy becomes better due mainly to the euro-zone’s being out of the wors, and China’s rebound.

    The confusion about of the probable impact of the so-called “fiscal cliff” led investors to fail to grasp the reality: The reasons were twofold: One is the character of the political event. This event is binominal ultimately until we have a comprehensive resolution, but this event is progressive because many parties are involved. The final consensus solutions require many steps and time. The second related reason is any intermediate or temporary solutions must be well evaluated on a right time frame.

    The issue of the time domain is crucial to understand the fiscal cliff which coined by the Fed Chairman, implying that the debt problem will catastrophic in a long run if deficits have accumulated year after year, without any proper fiscal measures. Most pessimistic articles seem to analyze the cliff issue, based on a relatively short term. For example, my comment on “It’s Only A Fiscal Slope, Not A Cliff,” by Cy Harding:

    “It’s a lucid view on the so-called ‘fiscal cliff’…reading “[M]ost of the effects would come out of economic activity over the course of the year…that is average…Not only would those increases not be an over-a-cliff event, but spread over the year, they would probably not kick in right away in January…So the markets (…even the politicians) just might have it right by not panicking at this point.”
    One caveat, however, is that this is a sort of short-term view, downplaying a bit the role of uncertainty, expectations, and a proper mix of monetary and fiscal policy, which effect the economy gravely in a long run. (From my comment http://bit.ly/116jUeS)

    The current bill is far way from an acceptable resolution to deficits and debts in order, without denting economic growth too harshly in a short term, and narrowed the gap between revenue and spending in a long term. We expect much more difficult negotiations with debt-ceiling and spending cuts in two months. Investment decision and portfolio management are always challengeable for individual investors. With political events, they become more difficult. What can we do?

    The answer is that security selection and market timing may be a loser’s game in this environment. The better way is to set up a portfolio strategy which has at least two portfolios: a long run portfolio (at least 70% of total capital, anchored by a few Index Funds or ETFs) and one short-term trading portfolio. It’s important to adjust the allocation of assets (Bonds Vs. Equities, and components of each category) gradually, not on an on-off basis. The RED and RED Spread, and the TANER Momentum (The TANER ETF Model [TEM] in particular) can be a reliable guide every day to help your investment.

    Happy and Profitable New Year!

    O. Young Kwon
    Jan 6 07:33 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Are Earnings Hopes Too High? [View article]
    Mitchad1

    Glad to hear your performance last two weeks when the market moved widely not only daily but intradays as well. Your on-off strategy worked very well this time, but has a severe down-side risk.

    My strategy is a step-by-step adjustment of the allocation of my portfolios (two long-run portfolios and two trading portfolios). During last two weeks the allocation was changed from a 60-bonds-40-equities to a 60-equities-40-bonds with less than 5% cash. It worked nicely without having too dangerous risk in case of the opposite outcome emerged.

    O. Young Kwon
    Jan 6 11:20 AM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Are Earnings Hopes Too High? [View article]
    Hi, mitchard1. Let me respond to your concerns:

    The first one: The Fed has more than 400 Economics Ph.D. and sophiscated maco models, but fortunately we have the Chairman who doesn’t just follow the models or views of other members. He is really one of the most reliable experts in this area. We are better to rely on him.

    The second point: 70% of equities is a bit higher than mine (60%). Let us see the market reaction in a couple of months. Good luck.

    O. Young Kwon
    Jan 6 09:01 AM | 1 Like Like |Link to Comment
COMMENTS STATS
933 Comments
720 Likes