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  • Weighing The Week Ahead: Is A Recession Looming?  [View article]
    Jeff - I appreciate you including the Blanchard article on the ERP, but I'm having difficulty reconciling what the growing number of countries having negative interest rates are telling us with the idea I should be paying more for stocks because interest rates are lower.

    Perhaps you can address the issue of negative interest rates in a future WTW ahead?
    Feb 7, 2016. 02:22 PM | 3 Likes Like |Link to Comment
  • S&P 500 Update: Bulls And Bears Focus On Crude Oil And The Fed. Both Have Taken Their Eye Off Of What Really Matters - Earnings  [View article]
    F&G - It all comes down to earnings, but more importantly, what the market is willing to pay for those earnings.

    I realize due to publication timelines you don't always have the latest data. The forward 4 quarter estimate fell again to $123.06 from $124.53 last week (the data you printed) and 126 two weeks ago. That puts the forward p/e at 15.8 - not egregiously high, but relatively high considering the slow rate of growth. Yes the lower interest rates will help the defensive dividend payers, but they have become expensive.

    I was a buyer on the break to the low 1800's, but started to lighten up again last week - selling calls on defensive divvy payers, taking profits on growth stocks. I just can't see paying a near 16 multiple in this volatile slow growth environment, at least until I'm more certain things will get better or until it appears the dollar has topped.

    I'm taking much more of a trading approach this year and so far it seems to be working.
    Jan 31, 2016. 11:48 AM | 2 Likes Like |Link to Comment
  • WTI - An Update On Oil And The Dollar  [View article]
    I agree with Calculus that oil is driving the dollar, not the other way around. As oil declines in value it puts pressure on the currencies of the major oil producers. But there is another factor influencing the strength of the trade weighted dollar, and that is China. As China has devalued that puts pressure on most of the Asian/Pacific currencies - even if they are importers of oil.

    Therefore I think the formula is destined to be wrong, as the trade weighted dollar forecasts too low an oil price due to the Chinese influence.
    Jan 22, 2016. 05:03 PM | Likes Like |Link to Comment
  • The Crash Risk Index Slips Over To The Dark Side  [View article]
    Very interesting. Thank you.
    Jan 21, 2016. 11:27 PM | 1 Like Like |Link to Comment
  • Key Charts To Watch  [View article]
    Regardless of bond yields, we should never see anything along the lines of a 2000 multiple (about 30 times earnings) again - at least not in our lifetimes.

    And while bond yields do heavily influence the multiple, there are many other factors that are also important, among them risk appetite and taxes. The so-called "Fed Model" breaks down when looking at periods prior to 1960.
    Jan 17, 2016. 10:34 AM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Can Earnings Season Provide A Floor For Stocks?  [View article]
    "Amazingly, many pundits expect a stronger dollar based on Fed rate increases, yet simultaneously claim that the Fed will be forced to back off or even reverse course."

    I agree that's ridiculous, Jeff.
    The Fed, at least for the moment, is no longer the driver of the US$, with commodities, particularly oil, and the Chinese economy (direction of the renminbi) supplanting the Fed. The USD index topped out in March 2015, but the trade weighted US$ continues to make new highs due to currency weakness in the commodity exporting countries and most of Asia (ex-Japan).
    Jan 17, 2016. 10:20 AM | 2 Likes Like |Link to Comment
  • Key Charts To Watch  [View article]
    "There is a LOT of fear priced into the market, even though PE ratios are not historically depressed."

    I don't see how you can justify that statement. By definition, only if the stock market is cheap can one say that there is a lot of fear. People may be voicing their fears, but that's not showing up in either the margin debt (still high) or the market multiple.
    Jan 16, 2016. 03:37 PM | 5 Likes Like |Link to Comment
  • Constructive Signs Of A Short-Term Bottom  [View article]
    Your dates are wrong. There have been only three since 1960 that have lasted longer.

    Jan 16, 2016. 10:33 AM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy The Dip?  [View article]
    It's not an upward revision for the same time period, but the calendar shift added the next quarter and dropped the most recent. Since analysts always (almost always, anyway) have higher estimates each quarter that made the forward estimate increase.
    Jan 11, 2016. 08:47 AM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy The Dip?  [View article]
    I believe the Fed will follow the economy and not the market. As long as employment stats and other economic barometers are looking OK the Fed is unlikely to step in. There isn't justification for it otherwise.
    Jan 10, 2016. 05:58 PM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy The Dip?  [View article]
    mpmassey - truer words were never spoken. When the S&P declines by 10% you can always find a reason it will go down 10% more. That's why I always have a list of stocks I want to buy and actual orders in for them on a scale down basis. That stops me from holding back when the market looks ugly. And there's no law that says that on a subsequent rally back you can't sell out of the stock or trim the position and wait to see what further develops.

    And while I also agree that there are plenty of stocks that look cheap, that hasn't stopped them from going down - sometimes for many months. And when there is a market wide selloff, very little is spared. It helps either to have a catalyst or a dramatic chart point (such as the 200 week moving average or a long term trend line) that might help stop the carnage in an individual stock.

    Momentum works both ways. Just as we've always heard it's not a good idea just to sell (or short) a stock purely on valuation, it's also not a great idea to buy one for that reason. Often things come out later justifying the selloff - or a stock becomes cheaper simply because it's attracted the eyes of the algorithmic traders.
    Jan 10, 2016. 05:44 PM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy The Dip?  [View article]
    Jeff - a couple comments/observations

    While China isn't a huge export market for the US, there has been no country that has grown in the past 15 years as much as China has. Take a look at the trade weights, particularly the export weights published by the Federal Reserve.
    And the slowdown in China has had a huge impact on the currencies of the entire region.

    Secondly, while in theory I like the idea of buying when the "Equity Risk Premium" is high, in practice it doesn't work that well, with other factors at times more important. EG, for most of the 1970's the ERP was high, yet the market traded mostly sideways. The ERP was low for the 1980's and 1990's, but that was our greatest bull market. What I believed contributed to the big increases in the 80's and 90's was reduction in tax rates - marginal, capital gains and most importantly dividends. The tax rate on dividends went from 70% prior to 1980, dropping to 15% by 2002 (and increased to 20% for the top bracket in 2013). Of course the computer revolution and productivity contributed, but is that next revolution boosting productivity in the offing anytime soon?

    There is little doubt in my mind that the change in the tax treatment had a major impact on the stock market during the last two decades of the 20th century. It has to be considered that with a regime change in Washington may also come a change in the tax code. And with the focus on wealth inequality, the odds are the tax change won't be a favorable one for the stock market.
    Jan 10, 2016. 10:59 AM | 2 Likes Like |Link to Comment
  • Construction Spending Historical Data Contained A Processing Error - Likely No Big Deal  [View article]
    Steve - great report.
    Jan 9, 2016. 06:17 PM | Likes Like |Link to Comment
  • Financial Fridays: The Stock Market Is Lying  [View article]
    The stock market never lies. It is always simply a snapshot of how market participants feel at any given moment.

    And at least for the first few days of the new year participants are nervous about the future of stock prices. They're looking at the news flow (more Mideast turmoil, Chinese yuan devaluations, mostly lousy economic data, etc) and then look at overall valuations and earnings prospects and decide there's no good reason to buy now.

    Will they feel differently next week? Perhaps. Perhaps not. But that has nothing to do with our emergence from caves.
    Jan 8, 2016. 05:30 AM | 2 Likes Like |Link to Comment
  • 2015 Was A Year For Growth Stocks And Only A Handful Were Needed  [View article]
    The author should have explained what a growth stock is.
    There are two types - cyclical and secular growth stocks.

    What you're thinking of is a cyclical growth stock - one that is dependent on a strong economy.

    The stocks which went up most this year are the secular growth stocks. Companies with trends so powerful that they are not dependent upon a strong economy for increased earnings.
    Jan 1, 2016. 06:21 PM | 1 Like Like |Link to Comment