Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
fishfryer,
I believe global central banks had a coordinated and concerted policy to kill market volatility since the financial crisis. Why is this important? Control over global capital flows is key to monetary policy. There are big hands (sharks) out there that answer to no one and only care about profits irrespective of how much damage their actions do to nations or people. The laissez faire stance of central banks before the financial crisis allowed them to roam free and cause chaos in the markets and destruction in the real economies.
No one is more powerful than the central banks when they are united. However, Japan's recent actions and European mishandling of Cyprus has signaled a possible conflict within the inner circles of global central banks. Sharks do not have great power, but they have great leverage because computer programs and individual speculators will pile on if the sharks are successful in their push to move markets. Volatility begets volatility.
Japan's actions reintroduced volatility to the global markets, unleashing the feeding frenzy of the sharks again. You can see volatility move from currencies to commodities and now it's starting to move to the safest equities markets (Germany, US, England).
FED alone would not be able to contain the destructive force of volatility IF it gets out of control.
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
Thank you. Just googled Paul Krugman & Japan. I hope Japan succeeds, but their already sky high debt level makes their effort very high risk. And also, would it be a net benefit or a zero sum game...who knows, but I would think volatility would (& has been) increase.
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
fishfryer,
Personally, I have been a seller of the bearish arguments thus far. I've thought that record energy production & lower energy costs would be a "game changer" for the US economy, and thus have remained very bullish on the US equity markets. I've also argued that in a low volatility (VIX) equilibrium environment, equities exhibit bullishness.
Two factors have raised my concern recently. First, I mentioned the underperformance of the home builders sector. Second, volatility of the S&P500 Index has been rising, and this is the first time in quite a while that I am thinking VIX is undervalued. Higher volatility when the S&P500 Index is rising often signal market tops. Could these be early warning signals or false alarms? I have not yet turned bearish, but I'm paying attention.
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
I have been on record as being bearish on gold, bearish treasuries, and bullish equities since the beginning of the year, but my logic behind that was a return to confidence in the markets and global economies that would funnel capital to more productive assets.
Based on market patterns I'm seeing over the past several weeks, I'm starting to question if that logic would continue to apply. If gold has been falling due to returning confidence BUT if deflation is what is ahead, then demand for gold as store of value should increase. I'm not saying it would or that it should, but that is the logic.
More on Oracle: New software license/cloud subscription sales fell 2% Y/Y in FQ3, down sharply from FQ2's +17% and below guidance of +3%-13% (is cloud competition a factor?). Hardware product sales -23%, same as FQ2 and worse than guidance of flat to -10% (plunging UNIX server demand). License update/product support sales +7% (same as FQ2). Cloud software sales (boosted by acquisitions) grew "well over 100%." $2.1B in buybacks propped up EPS. Opex -2% Y/Y. ORCL -6.6% AH. CC at 5PM ET (webcast), guidance should be provided. (PR) [View news story]
FDX this morning and ORCL in the afternoon. That's 2 bell weather stocks that have reported weaker than expected earnings and subsequent big drops in stock prices. On the surface, this is not a good sign to next earnings season, and earnings and economic fundamentals (not "fears" and "worries") will be the reason for the market to go down.
However, if earnings of these two companies were weaker due to stiffer competition, then I see that as slightly positive for the overall markets... Too early draw any conclusions...
Tomorrow's Cypriot vote on the bailout plan has been cancelled reports the FT's Peter Spiegel, with President Nicos Anastasiades set to tell the Eurogroup he doesn't have the votes to pass the bill. Stocks had clawed their way back to near flat, but are headed down again, the S&P 500 -0.5%. [View news story]
It is from my experience that any online news headline from FT is often wrong and sometimes used to manipulate markets...No way of knowing, but I would not rely on rumors from FT
Wall Street Breakfast: Must-Know News [View article]
Higher oil production with expanding alternative energy sources and greater energy efficiency is and will continue to shape global economy and geopolitics (for the better). A small example, but I was reading about new LED bulbs made by CREE that are 85% more efficient and cost effective and I was like WOW.
Wall Street Breakfast: Must-Know News [View article]
I wonder how much outright corruption but more importantly systemic corruption cost the US the past 20 years...I'm not trying to be sarcastic. If we knew this figure, which I would think would be in the multiple trillions, think about the tremendous economic benefits from just a tiny improvement...
The CBOE Volatility Index today dropped below 12 for the first time since 2007 and against a long-term average of 20.4. Contrary to what contrarians believe, writes Mark Hulbert, low VIX levels are not necessarily bearish. Thinking about VIX as what it is - a measure of expected volatility - rather than as a "fear gauge" might help do away with this misperception. VXX -2.2%. [View news story]
MWingo, how are you playing a pop in VIX to 15? VIX futures? VIX options? VXX options? SPY straddle? Most VIX plays are priced off of VIX futures, not the spot VIX. Let's take a look at VIX futures prices...
If VIX pops to 15 in a matter of 1 week, then being long the March VIX futures at 13 would give you a nice return. VIX Mar future expires on the 20th. If VIX goes to 15 within 1 month time, VIX April futures trading at 14.50 would have upside potential to 16.50, but down side is 11.5. Finally, if VIX rises to 15 within 2 month time, VIX May futures trading at 15.5, the upside would be limited to 18, while the downside is 11.5. Of course, VIX could go higher than 15, but I have to ask if you are fully aware as to how prices of volatility instruments actually move...
The CBOE Volatility Index today dropped below 12 for the first time since 2007 and against a long-term average of 20.4. Contrary to what contrarians believe, writes Mark Hulbert, low VIX levels are not necessarily bearish. Thinking about VIX as what it is - a measure of expected volatility - rather than as a "fear gauge" might help do away with this misperception. VXX -2.2%. [View news story]
Market may seem irrational if looked through the paradigms of black swans, complexity theory, and profiteering from disorder and chaos...but I believe that the close economic and government cooperation and coordination on a global scale calls for a different kind of thinking...Is it irrational to invest money into productive assets that actually create value? Isn't that what healthy markets are all about? and not the dysfunctional, destructive financial markets that we've seen over the past 15 years?
Stephen, perhaps it would be helpful to explain the relationship between implied volatility of the options (VIX is a measure of this) and realized volatility of the S&P500 Index. If realized volatility is only 10, VIX at 20 is outrageously high. VIX moves from extended periods of high volatility equilibrium to low volatility equilibrium and back and forth. These periods can last for years, making the long-term mean or median of 20.4 a useless number.
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
Thank you for that info...just googled "Net Promoter System" by Bain. Perhaps some of my thinking is not so far-fetched... I discredit most of the stuff I read and hear from mass media...but every so often I have to wonder, "Do majority of the people really think that way?"
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
Sell assets that have risen due to fear. That would be gold, long-term bonds, anytime VIX spikes. Buy portfolio of assets that are in the business of strenthening connections(human, corporate), perhaps GOOG(YouTube), FB, IACI(match.com), media & content firms, crowd funding, avoid firms that have traditionally try to profit from transferring costs to society, just to name a few off the top of my head...
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
I'm going to present my theory that may be considered way out there... Complexity theory took hold in economics in the 90s, especially the theory about increasing marginal value or utility(IMV), which turned conventional wisdom of decreasing marginal value upside down. In short, dominate (info, money, power, influence,etc) and set the standards and one could reap ever greater rewards.
This paradigm shift (IMV) and its ultra competitive underpinnings spread to every thread of the fabric of society at the micro level, which in turn set the unintended norm for the macro level--a vicious cycle not only acceptance of, but reverence for those that reaped the highest rewards without questioning whether or if any real value was created and/or how much of the social fabric was destroyed in the process. Societies' value (hence valuation) systems broke down. In fact, this outcome is exactly what complexity theory models also predicted.
Since the near catastrophic end-game that was the financial/economic crisis of 2008-09, I believe another paradigm has been gaining traction in both the micro and macro levels--that is the theory of a holographic universe. Basically, everything is connected and everything is part of a greater whole. I'm not just pushing some new age, spiritual nonsense. I see it in every scientific discipline and research, in global economic and political policies, in the corporate world, in entertainment, etc.
I do not know what would be the end results of this new paradigm shift, but I have to believe it would be more positive and constructive then IMV. I'm talking about 10-20 year bull market here...Yes, my outlook is far-fetched, but why not have a vision?
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
I believe global central banks had a coordinated and concerted policy to kill market volatility since the financial crisis. Why is this important? Control over global capital flows is key to monetary policy. There are big hands (sharks) out there that answer to no one and only care about profits irrespective of how much damage their actions do to nations or people. The laissez faire stance of central banks before the financial crisis allowed them to roam free and cause chaos in the markets and destruction in the real economies.
No one is more powerful than the central banks when they are united. However, Japan's recent actions and European mishandling of Cyprus has signaled a possible conflict within the inner circles of global central banks. Sharks do not have great power, but they have great leverage because computer programs and individual speculators will pile on if the sharks are successful in their push to move markets. Volatility begets volatility.
Japan's actions reintroduced volatility to the global markets, unleashing the feeding frenzy of the sharks again. You can see volatility move from currencies to commodities and now it's starting to move to the safest equities markets (Germany, US, England).
FED alone would not be able to contain the destructive force of volatility IF it gets out of control.
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
Personally, I have been a seller of the bearish arguments thus far. I've thought that record energy production & lower energy costs would be a "game changer" for the US economy, and thus have remained very bullish on the US equity markets. I've also argued that in a low volatility (VIX) equilibrium environment, equities exhibit bullishness.
Two factors have raised my concern recently. First, I mentioned the underperformance of the home builders sector. Second, volatility of the S&P500 Index has been rising, and this is the first time in quite a while that I am thinking VIX is undervalued. Higher volatility when the S&P500 Index is rising often signal market tops. Could these be early warning signals or false alarms? I have not yet turned bearish, but I'm paying attention.
Deflation: Are Markets Signaling The Dreaded Scenario? [View article]
Based on market patterns I'm seeing over the past several weeks, I'm starting to question if that logic would continue to apply. If gold has been falling due to returning confidence BUT if deflation is what is ahead, then demand for gold as store of value should increase. I'm not saying it would or that it should, but that is the logic.
Can anyone share a different point-of-view?
More on Oracle: New software license/cloud subscription sales fell 2% Y/Y in FQ3, down sharply from FQ2's +17% and below guidance of +3%-13% (is cloud competition a factor?). Hardware product sales -23%, same as FQ2 and worse than guidance of flat to -10% (plunging UNIX server demand). License update/product support sales +7% (same as FQ2). Cloud software sales (boosted by acquisitions) grew "well over 100%." $2.1B in buybacks propped up EPS. Opex -2% Y/Y. ORCL -6.6% AH. CC at 5PM ET (webcast), guidance should be provided. (PR) [View news story]
However, if earnings of these two companies were weaker due to stiffer competition, then I see that as slightly positive for the overall markets... Too early draw any conclusions...
Tomorrow's Cypriot vote on the bailout plan has been cancelled reports the FT's Peter Spiegel, with President Nicos Anastasiades set to tell the Eurogroup he doesn't have the votes to pass the bill. Stocks had clawed their way back to near flat, but are headed down again, the S&P 500 -0.5%. [View news story]
Wall Street Breakfast: Must-Know News [View article]
Wall Street Breakfast: Must-Know News [View article]
The CBOE Volatility Index today dropped below 12 for the first time since 2007 and against a long-term average of 20.4. Contrary to what contrarians believe, writes Mark Hulbert, low VIX levels are not necessarily bearish. Thinking about VIX as what it is - a measure of expected volatility - rather than as a "fear gauge" might help do away with this misperception. VXX -2.2%. [View news story]
If VIX pops to 15 in a matter of 1 week, then being long the March VIX futures at 13 would give you a nice return. VIX Mar future expires on the 20th. If VIX goes to 15 within 1 month time, VIX April futures trading at 14.50 would have upside potential to 16.50, but down side is 11.5. Finally, if VIX rises to 15 within 2 month time, VIX May futures trading at 15.5, the upside would be limited to 18, while the downside is 11.5. Of course, VIX could go higher than 15, but I have to ask if you are fully aware as to how prices of volatility instruments actually move...
The CBOE Volatility Index today dropped below 12 for the first time since 2007 and against a long-term average of 20.4. Contrary to what contrarians believe, writes Mark Hulbert, low VIX levels are not necessarily bearish. Thinking about VIX as what it is - a measure of expected volatility - rather than as a "fear gauge" might help do away with this misperception. VXX -2.2%. [View news story]
The Art Of Trading Volatility [View article]
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
Complexity theory took hold in economics in the 90s, especially the theory about increasing marginal value or utility(IMV), which turned conventional wisdom of decreasing marginal value upside down. In short, dominate (info, money, power, influence,etc) and set the standards and one could reap ever greater rewards.
This paradigm shift (IMV) and its ultra competitive underpinnings spread to every thread of the fabric of society at the micro level, which in turn set the unintended norm for the macro level--a vicious cycle not only acceptance of, but reverence for those that reaped the highest rewards without questioning whether or if any real value was created and/or how much of the social fabric was destroyed in the process. Societies' value (hence valuation) systems broke down. In fact, this outcome is exactly what complexity theory models also predicted.
Since the near catastrophic end-game that was the financial/economic crisis of 2008-09, I believe another paradigm has been gaining traction in both the micro and macro levels--that is the theory of a holographic universe. Basically, everything is connected and everything is part of a greater whole. I'm not just pushing some new age, spiritual nonsense. I see it in every scientific discipline and research, in global economic and political policies, in the corporate world, in entertainment, etc.
I do not know what would be the end results of this new paradigm shift, but I have to believe it would be more positive and constructive then IMV. I'm talking about 10-20 year bull market here...Yes, my outlook is far-fetched, but why not have a vision?