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Amadon

Amadon
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  • The RED Spread: A Market-Breadth Barometer - Can It Predict Black Swans? [View article]
    O. Young Kwon;

    Thanks for your reply sir and at this point I will not pursue this issue with follow-up inquiries concerning whether or not the substitution of other advance/decline indices based on NYSE Composite, S&P. Nasdaq, or Dow would yield substantially different results.

    With your permission I would like to pose a more fundamental question related to the following quote from the above article:

    "The TANER System is with you always, posting its TANER Momentum lists on StockTalks. You can find your favorites on these posts."

    Why do you post The Taner Momentum List using cryptographic puzzles? For example today you posted your 5,844th StockTalk:

    S.TM.1-2-3 (DLTR DE CME) S.TM.2-3 (ESRX NVR) S.TM.1 (HD FLS AGN KSU AET) S2 (WMT KO EDU) S3 (AMZN ISRG JOY).

    I notice from your biography that you developed this system in 2009 along with the unique acronyms associated with it. I am going to suggest that you will protest that you are not posting cryptographic puzzles every day due to your own familiarity with your very own system resulting in a kind of 'blindness' to the fact that for literally millions of Seeking Alpha users who visit the site each and every day from all over the world the post can not be described in other way. To think otherwise would presume that we have all been born with some kind of inherent knowledge of your method and acronyms.

    There is one other possible explanation. We have all had experiences in school where the instructor makes available to his/her students text relating to the course material and then proceeds to pose questions based on that material refusing to assist in solutions by demanding the students dig out the answers from the text provided. To solve any of the 5844 cryptographic puzzles you have posted thus far the curious would be required to first discover the 'hidden link' by clicking on your logo which would take them to your biography where they could then discover the text which describes the method and the meaning of the acronyms. With this information in hand the curious could then set about solving the cryptogram of the day. When you consider that the estimated daily time on site (mm:ss) for SA is about 4.5 minutes as most users browse from work it seems a lot to hope for that many would set about solving cryptographic puzzles.
    http://bit.ly/RR3svc#

    In light of this I wonder why after obviously going through so much time and effort to develop your method and laboriously produce a result each and every day for 5 years you don’t include a link with the cryptographic puzzles which would take the curious right to the decrypted answer and a full explanation of the implications as interpreted by the author of the system?

    Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoetnt tihng is taht the frist and lsat ltteer be at the rghit pclae. The rset can be a toatl mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe.
    Sep 24, 2012. 01:32 PM | 2 Likes Like |Link to Comment
  • The RED Spread: A Market-Breadth Barometer - Can It Predict Black Swans? [View article]
    O. Young Kwon;
    Thanks for your explanation. Since your method is unique and it appears that it may indeed be capturing the twin lens snapshot of the market it was designed to record I would like to ask a question concerning its fundamental construction. To quote from this article:

    " (1) a combination of 10 bond ETFs and 30 Stock ETFs in our TANER.Rotation Model (TRM) and (2) 40 equities in our TANER.Stock Model (TSM). The Diffusion Index is a statistical measure of the scope of expansions and contractions."

    Here is what it says to me:
    A diffusion index is a ratio of daily advances and declines of index components at market close. This system uses a combination of 10 bond ETF'S and 30 Stock ETF"S as the components of one diffusion index and 40 selected stocks as components of a second diffusion index. The product of each index is expressed as a ratio from 0 - 100% of components advancing/declining.

    My question: There are many advance/decline numbers published everyday on Finra. Bloomberg, Yahoo, MSN, covering all of the major indices. Why not simply use this information which is so readily available, has a high degree of reliability and covers a much broader spectrum of the market. What is the special significance of the components you have selected?

    Let me be clear. The components selected will be critical to the derived intelligence. For example, if I wanted to construct a 'Guns & Butter' diffusion index designed to measure war sentiment then I could select a range of defence contractors for one index and a range of consumer staples stocks for the other. I have never heard of this being done but I would expect to see some indication of rising and falling war sentiment/expectations from such an approach.

    Since you have selected the components of your method I am wondering how much of your own personal interests and philosophy are represented in it?
    Sep 24, 2012. 06:28 AM | 1 Like Like |Link to Comment
  • The RED Spread: A Market-Breadth Barometer - Can It Predict Black Swans? [View article]
    Dr. Kwon;

    I have been going over your new comment and attempting to analyse it. I notice that you have posted your own interpretation of what the numbers mean. This is a good idea in my view and what has been missing on your presentation.

    The Data Points on September 21, 2012 (Friday):

    The RED = 54.5% comfortably Warm (54% of components advancing?)

    The RED Spread = 4.8% The RED Spread (the Bond Premium) fell to 5.2% from 6.4% on September 20 (Thursday), and fell again to 4.8% on September 21 (Friday), but the signal is still bullish even though it weakened a bit. The market seems to make a bottom around a range between 6.3% and 6.4%, as shown in the Table. It is a trough of the equity market. An upswing (a Rebound or a Rally) is likely to be under way from the trough if it will be confirmed. (Decline due to money moving out of bonds?)

    My interpretation of what you are saying is this and please correct me if I am not understanding.

    Bond prices have dropped from 6.4% on the 19th to 5.2% on the 20th to 4.8% on the 21st. If the bond price is going down then the yield is going up. Why would bond prices be dropping? Inflation expectations? Lets look at your numbers for last week.

    9/17/2012 54.2 6.3% T2(3) 1,436.56
    8/18/2012 54.0 6.3% T2(4) 1,459.32
    9/19/2012 54.0 6.4% T3(4) 1,459.32
    9/20/2012 54.4 5.2% * 1,460.26
    9/21/2012 54.5 4.8% * 1,460.15 (If bond money is declining why no rise in stocks yet? Is this what you see as the start of a rally?)

    From Barrons:
    "ETF investors may be a little late to the party, but they are rushing the gates now.

    Stock indexes have been on the rise all year, but it's just within the past month or so—a direct result of central bankers both here and abroad announcing policy changes—that money has truly flooded into riskier assets via ETFs.

    The trend is unmistakable. Exchange-traded funds for U.S. stocks, emerging markets, high-yield bonds, and gold are in, while conservative bond funds are out. "We've had a lot of clients talking about the 'great rotation,'" says Dave Lutz, an ETF trader for Stifel Nicolaus. "A lot of fixed-income-oriented people have decided to start chasing equities," he says. Some are motivated by fear: the fear of being left behind by an equity-market juggernaut.

    The industry-leading SPDR S&P 500 exchange-traded fund (ticker: SPY) offers one example. This low-cost U.S. stock fund, with its generic equity exposure, has seen assets under management swell by roughly 11% over the past month, thanks to a nearly $12 billion tidal wave of net new money. Just a few weeks back, the fund's net flows were negative, year-to-date. Big, fast asset swings may be typical of this product, but this is simply a more dramatic version of what's going on elsewhere. The No. 2 asset-gatherer is Vanguard MSCI Emerging Markets (VWO), a generic, low-cost ETF that has enjoyed some $1.7 billion in new money over the past month. Exchange-traded funds for financial stocks, small-caps, and even Brazilian stocks are high up on the tally, too.
    Table: ETFs by Category

    Meanwhile, investors are looking askance at bond funds for what seems like the first time in eons. They have pulled more money out of the iShares Barclays 3-7 Year Treasury Bond ETF (IEI) than any other ETF over the past month, siphoning away $890 million. Not far behind: the iShares Barclays 20+ Year Treasury Bond fund (TLT), which has shed more than $625 million. Both ETFs' year-to-date asset flows turned negative over the last month. All asset-flow figures are from research firm XTF.

    The No. 3 beneficiary of the asset wave—gold—is the clearest "tell" for central bankers' hand. "Higher inflation and currency depreciation are likely now that central banks are opening the monetary floodgates—which should benefit gold," argued Commerzbank's commodity strategists recently. Bets in that vein drove the SPDR Gold Trust (GLD) to rake in $1.6 billion in new assets. The trend is also driving money into the iShares Gold Trust (IAU), the iShares Silver Trust (SLV), as well as the mining-oriented Market Vectors Gold Miners ETF (GDX)."
    http://on.barrons.com/...

    If the flight of money from bonds to equities is what is driving the market then consider this:
    Jason Goepfert over at Sentiment Trader has for years been keeping record of the differing expectations for a rally from what he calls the "smart money" vs. the "dumb money." At present, 67% of the dumb money is expecting a rally vs. 29% of the smart money.

    Back in August, when prices were much lower, the smart money and dumb money were split 50/50 on the likelihood of a rally. Now with the market up 10%, the differential in expectations is the widest since March, which preceded a three-month slide. Here is his interesting chart.
    http://bit.ly/P9yyci

    Thanks for your comment.
    Sep 22, 2012. 04:30 PM | 1 Like Like |Link to Comment
  • The RED Spread: A Market-Breadth Barometer - Can It Predict Black Swans? [View article]
    Dr. Kwon;
    First, let's stipulate that your system of using two separate diffusion indices to simultaneously measure the equity and bond markets is valid and will produce an output indicating direction, momentum, turning points and a better gauge of the whole market economy than the S&P Index. This is to be expected as they were designed to capture different aspects of the market. The difference being in the weighting of index components.

    The problem I have concerning your system is complexity and availability.

    Concerning complexity, I think it is too much to expect the average retail investor to have the necessary time and resources to daily collect closing prices on 40 stocks and 20 bond funds and then process those numbers and finally to analyse and understand the meaning. To do so would require a sophistication in software data processing and economic theory usually associated with institutional investors.

    As to availability, I am not aware of any widely available results of such data collection and processing other than your own daily posts on Stock Talks. In order to be useful the average investor would at the very least be required to familiarize themselves with the unique terminology incorporated in your system.

    While I admire your efforts to introduce an improved method of evaluating the market with supplemental information to a wider audience I can not help but compare your endeavour to that of Yale professor Robert Shiller.

    For years the standard way to investigate market valuation was to study the historic Price-to-Earnings (P/E) ratio using reported earnings for the trailing twelve months (TTM). Proponents of this approach ignore forward estimates because they are often based on wishful thinking, erroneous assumptions, and analyst bias. Professor Shilling improved the results by introducing smoothing much as you do by adding 10 year averaging for a
    P/E10 ratio. After many years it is still not widely known or understood by retail investors.
    Sep 21, 2012. 01:36 PM | 1 Like Like |Link to Comment
  • Eurozone flash Markit manufacturing PMI 46 in Sep vs 45.1 in Aug, manufacturing output 45.5 vs 44.4, services 46 vs 47.2, composite output 45.9 vs 46.3 and hits 39-month low. "The eurozone downturn gathered further momentum in September, suggesting that the region suffered the worst quarter for three years," says Markit. The flash PMI is consistent with GDP of -0.6% in Q3, "sending the region back into a technical recession." (PR[View news story]
    Yes; I bought EDZ on Tuesday. Up about 4% this morning so far.
    Sep 20, 2012. 09:42 AM | Likes Like |Link to Comment
  • Buy When There's Blood In The Streets [View article]
    Sir; A very interesting concept. Is the theory based on a belief that investors will jump in on the day following a sell-off to pick up bargains?
    If a large number of people employed this strategy would that not in itself change the performance?
    Sep 20, 2012. 08:52 AM | 1 Like Like |Link to Comment
  • Yields fall as Spain auctions €859M of 10-year bonds at a cost of 5.67% vs 6.65% at a sale last month, with the "bid-to-cover" ratio rising to 2.8 from 2.4. The Treasury also issues €3.94B of three-year paper at a yield of 3.845%, up from 2.8% previously. Overall, Spain sells €4.8B of debt, exceeding the goal of €4.5B. [View news story]
    AIP; Really? If the market is healthy why would we have 3 QE's in 12 months? The P/E10 is at 21.5, up from the average of 16 which suggest it is overvalued. Ask yourself why would it be overvalued during a time when all the central banks are throwing everything they have to juice the economy.

    "A more cautionary observation is that when the P/E10 has fallen from the top to the second quintile, it has eventually declined to the first quintile and bottomed in single digits. Based on the latest 10-year earnings average, to reach a P/E10 in the high single digits would require an S&P 500 price decline below 540. Of course, a happier alternative would be for corporate earnings to continue their strong and prolonged surge. If the 2009 trough was not a P/E10 bottom, when might we see it occur? These secular declines have ranged in length from over 19 years to as few as three. The current decline is now in its 12th year.

    Or was March 2009 the beginning of a secular bull market? Perhaps, but the history of market valuations suggests a cautious perspective."
    http://bit.ly/JNT7Io
    Sep 20, 2012. 07:49 AM | 1 Like Like |Link to Comment
  • Will The BOJ Do Whatever It Takes? [View article]
    Marc;Is the Stock Market Cheap?
    By Doug Short
    September 3, 2012 "After dropping to 13.3 in March 2009, the P/E10 rebounded to an interim high of 23.5 in February of last year and is now at 21.5. Of course, the historic P/E10 has never flat-lined on the average. On the contrary, over the long haul it swings dramatically between the over- and under-valued ranges. If we look at the major peaks and troughs in the P/E10, we see that the high during the Tech Bubble was the all-time high above 44 in December 1999. The 1929 high of 32.6 comes in at a distant second. The secular bottoms in 1921, 1932, 1942 and 1982 saw P/E10 ratios in the single digits. The price rebound since the 2009 low pushed the ratio back into the top quintile, and it has since hovered around that boundary. By this historic measure, the market is expensive, with the ratio approximately 31% above its average (arithmetic mean) of 16.5 (16.45 to two decimal places). Last month it was 28% above."

    Considering that the present valuation has been largely a function of central bank 'communication strategy' and that they have pretty much 'shot their wad' with QE Forever,a more cautionary observation is that when the P/E10 has fallen from the top to the second quintile, it has eventually declined to the first quintile and bottomed in single digits. Based on the latest 10-year earnings average, to reach a P/E10 in the high single digits would require an S&P 500 price decline below 540.
    http://bit.ly/JNT7Io
    Sep 20, 2012. 07:24 AM | Likes Like |Link to Comment
  • Eurozone flash Markit manufacturing PMI 46 in Sep vs 45.1 in Aug, manufacturing output 45.5 vs 44.4, services 46 vs 47.2, composite output 45.9 vs 46.3 and hits 39-month low. "The eurozone downturn gathered further momentum in September, suggesting that the region suffered the worst quarter for three years," says Markit. The flash PMI is consistent with GDP of -0.6% in Q3, "sending the region back into a technical recession." (PR[View news story]
    Is the Stock Market Cheap?
    By Doug Short
    September 3, 2012
    A more cautionary observation is that when the P/E10 has fallen from the top to the second quintile, it has eventually declined to the first quintile and bottomed in single digits. Based on the latest 10-year earnings average, to reach a P/E10 in the high single digits would require an S&P 500 price decline below 540.
    http://bit.ly/JNT7Io
    Sep 20, 2012. 06:50 AM | Likes Like |Link to Comment
  • Eurozone flash Markit manufacturing PMI 46 in Sep vs 45.1 in Aug, manufacturing output 45.5 vs 44.4, services 46 vs 47.2, composite output 45.9 vs 46.3 and hits 39-month low. "The eurozone downturn gathered further momentum in September, suggesting that the region suffered the worst quarter for three years," says Markit. The flash PMI is consistent with GDP of -0.6% in Q3, "sending the region back into a technical recession." (PR[View news story]
    Sounds like it might be time for the ECB to up the game and promise to do 110% of everything it can do and in October they can go to 120% of everything they can do. Move over Zimbabwe, here we come!
    Sep 20, 2012. 05:38 AM | 1 Like Like |Link to Comment
  • Yields fall as Spain auctions €859M of 10-year bonds at a cost of 5.67% vs 6.65% at a sale last month, with the "bid-to-cover" ratio rising to 2.8 from 2.4. The Treasury also issues €3.94B of three-year paper at a yield of 3.845%, up from 2.8% previously. Overall, Spain sells €4.8B of debt, exceeding the goal of €4.5B. [View news story]
    Bingo. This is one of those critical markets subject to manipulation by banks and government in defensive measures to prevent market price discovery of the risk.
    Sep 20, 2012. 05:31 AM | 2 Likes Like |Link to Comment
  • Will The BOJ Do Whatever It Takes? [View article]
    And today could be the kick-off. Asia sold off overnight. Europe is now in the process. Oil has taken a drop from near triple digit to low 90's now, and even gold is down after all the inflation moves of the central banks. With Bernanke and Co. embarking upon yet another round of quantitative easing -- this time with no end-date and allowing for 'unlimited expansion' of the Fed's balance sheet -- many investors are wondering what would happen to stocks without it.

    Scarier still to many folks: What happens if the Fed throws everything at the wall... and it's still not enough to get the economy going? Fasten your seat belts, this could be a bumpy ride.
    Sep 20, 2012. 05:23 AM | Likes Like |Link to Comment
  • Will The BOJ Do Whatever It Takes? [View article]
    Marc; I would suggest that the answer to the question posed by your article "Will The BOJ Do Whatever It Takes?". is no. The BOJ action seems very modest to me.
    Sep 19, 2012. 09:47 AM | Likes Like |Link to Comment
  • Will The BOJ Do Whatever It Takes? [View article]
    Bingo!
    Sep 19, 2012. 09:44 AM | Likes Like |Link to Comment
  • Will The BOJ Do Whatever It Takes? [View article]
    JJ; In my research, I have discovered those critics who currently condemn the monetary system almost universally suggest that the only solution is to restore a gold backed currency. I don't think any readers of this timeline can be in any doubt, that such a system will be open to abuse by those very people who abuse it today. Indeed if we introduced a currency backed by chairs, I believe we would find ourselves with nothing to sit on! --- By Andrew Hitchcock, 26 Feb 2006.
    http://bit.ly/NturHC
    Sep 18, 2012. 01:24 PM | Likes Like |Link to Comment
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