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  • New Home Sales [View news story]
    Might be buyers who were pushed to buy by the specter of higher interest rates that didn't happen - definitely increases the sense of urgency.

    Or it could just be a better number!

    We'll know for sure next month.
    Sep 24, 2015. 10:09 AM | 2 Likes Like |Link to Comment
  • Don't Be An Investment Hero: Avoid The Temptation Of That Brazilian ETF [View article]

    Curious do you think the solution to their problem might lie in a Volcker style monetary strategy?

    Basically start a brush fire to clear the undergrowth to prevent the whole forest from burning down?

    I don't know a lot about Brazil but I have to think that as long as they have the type of inflationary problems they have and have had, they will always be running from crisis to crisis. Their politics obviously don't help the situation because the will to do the short to medium term pain for long-term gain just doesn't seem to be there.
    Sep 23, 2015. 03:51 PM | 1 Like Like |Link to Comment
  • Don't Be An Investment Hero: Avoid The Temptation Of That Brazilian ETF [View article]
    "Currently, consensus EPS estimates for this year are very negative at -25.8%. However, analysts expect Brazil to be able to make up for this growth in the following three years by averaging a robust 20.3% growth rate from FY2-FY4. This seems like an incredibly high hurdle for Brazil to leap over even as these growth expectations start from a depressed level after this year."

    I think that 20.3% growth rate is basically the answer to the question: "What minimum growth rate do I need to be able to pump these stocks up enough for forecasted returns so that they can look good while we are selling with both hands to the suckers?"
    Sep 23, 2015. 03:48 PM | 2 Likes Like |Link to Comment
  • Weekly Update: The Fed Speaks, It's Time To Get Back To 'Investing' [View article]

    I have been following you for many years and for most of them you were what I would have called an uber-bull even during some significant downdrafts. The current pessimism you are expressing is intriguing given your past track record.

    Will you be doing anything differently with your portfolio as a result of your concerns? What do you consider as the worst case scenario for the level of the S&P?

    From what I can see your track record has been very good so I look forward to your thoughts.
    Sep 23, 2015. 03:41 PM | 2 Likes Like |Link to Comment
  • Weekly Update: The Fed Speaks, It's Time To Get Back To 'Investing' [View article]

    The margin rate on IB starts at 1.64%/yr according to the website. The higher your account balance the lower the margin rate so you can get it down pretty low if you have a high enough balance.

    That's what makes it so seductive. Buy stocks with Dividend yields at reasonable yields and you are doing okay but I agree with you 100% - margin can kill!

    Their transaction costs are actually pretty reasonable as well especially if you are a fairly active trader - I am not.

    Never meet a margin call is good advice - just take the loss.

    I use it judiciously whenever I want to make a fast purchase but I am careful and keep it low as percentage of my overall portfolio.

    I am so glad Scotrade and Etrade charge so much more ;)
    Sep 23, 2015. 12:38 PM | Likes Like |Link to Comment
  • At the close [View news story]
    Buying or short covering at the end of day?

    Interesting range in the S&P today - these 30, 40 point swings are starting to become commonplace!
    Sep 22, 2015. 04:06 PM | Likes Like |Link to Comment
  • WSJ: Apple steps up electric car efforts, aims for 2019 shipping date [View news story]
    This will be fun!

    Teslarites vs AAPL FanBoys.

    If this blog was clogged with TSLA info before it will be unmanageable now.
    Sep 21, 2015. 03:08 PM | 4 Likes Like |Link to Comment
  • Volkswagen orders probe into EPA emissions violations [View news story]

    "Actually I see it the other way. the market ALWAYS over-reacts to stuff like this."

    I totally agree!

    How the heck does a company this size lose 20% in a single day on a story?

    GM's actions actually killed people and they were fined less than a billion!

    I can't imagine they could possibly charge them more than that but you never know, this could be protectionism in a political form.
    Sep 21, 2015. 01:11 PM | 3 Likes Like |Link to Comment
  • Tesla sets Model X launch event for Sept. 29 [View news story]

    I am short this stock but I can't help but be bemused by how stupid it makes me feel!

    No profits - check
    Running out of money - check
    Outrageous valuation - check
    Pumper's Hype - check
    Insano fan boys/girls - check
    Questionable accounting - check

    You can go on and on and yet apparently Elon has also invented anti-gravity for the stock price.

    Oh well!
    Sep 21, 2015. 11:34 AM | 22 Likes Like |Link to Comment
  • Weekly Update: The Fed Speaks, It's Time To Get Back To 'Investing' [View article]

    Doug Short also covers the margin debt metrics and I think most of us would consider him a neutral source.

    The more I ponder this the more I think that there is no magical upper limit on how high margin can in fact go - it truly depends upon how long the bull market lasts. So from that standpoint it might be entirely useless as a timing indicator to sell but it seems unarguable that peaks in margin debt coincide with market cycle highs after the fact.

    We could see margin levels double from here if ZIRP remains intact! I can't see why that can't happen if we are still early in this cycle. I have used a fair bit of margin at times through my Interactive Brokers account which has charged about 1.5% on those loans. That seems insanely cheap to me.

    My Etrade and Scott's accounts are way higher and I have only used them for short duration transactions.

    I bought 4,000 shares of NLY at $9.78 in part because I still believe the interest rise risk is way overblown and this stock was chopped in half over the last 3 years. I also think housing should still do okay even in a downturn. So I do step in when I have conviction.

    I am closely watching GDX (absolutely destroyed from its ATH) and XLE because I would like to have a position in miners and energy so I am patient and sometimes you can wait a long time and still get nicely rewarded for doing so.

    My final thought is that I think this indicator is probably quite valuable as a timing tool once a bear market is in full swing and it reaches an extreme low then you can start to buy when others are doing everything they can to sell - the old back up the truck cliche.
    Sep 20, 2015. 09:21 PM | Likes Like |Link to Comment
  • Weekly Update: The Fed Speaks, It's Time To Get Back To 'Investing' [View article]

    Thanks for the feedback. First time I have ever read anything from him specifically although I have always watched margin data so thanks for pointing that out.

    I think the charts do speak for themselves in the sense that they suggest a strong correlation between margin and the direction of the market for obvious reasons even if the messenger is suspect.

    Margin is a measurement of buying power but I am not sure how important it is when it comes to demand or how much it impacts supply.

    The marginal buyer (pun intended) is more supportive of the market when things are at their worst and provides less support when markets are at fair or over value.

    I don't know if it is coincident or predictive given how sparse the datapoints are but you can see why it creates a compelling argument from a supply and demand point of view.

    Kind of like measuring money on the sidelines - it's contrarian in the sense that the extremes matter way more than the average level. Buying when margins are at their lowest is probably the point of maximum fear in a market and would be a good time to buy after the onset of a bear market.

    Don't know what it predicts if the bull trend is still intact hence my request for opinions. Like all things investing there is no clear answer :)

    I am more buy and holder than anything else but I would love to be a bottom fisher in the future!
    Sep 20, 2015. 08:07 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Has The Fed Assumed A Third Mandate? [View article]

    Yield curve inversion is not a perfect indicator - we have had recessions in the US that were not preceded by a yield curve inversion. It has an excellent track record but still not perfect.

    However, if all you do is rely upon it then you may be overly complacent because I don't think we can ever have yield curve inversion with ZIRP in place hence my question. If all the models operate on the same premise then you are getting the same information repeated by 6 different sources yet it leads people to assume they are independent of each other - "no one is forecasting recession therefore there will not be a recession (as long as the yield curve is not inverted)."

    It would be awesome but probably a wish to have a perfect indicator that works that is independent of the yield curve. I know if I could invent it I wouldn't be sharing it with anyone ;)
    Sep 20, 2015. 12:40 PM | 5 Likes Like |Link to Comment
  • Weekly Update: The Fed Speaks, It's Time To Get Back To 'Investing' [View article]
    I believe the correlation works more like Canada following the US rather than the US following Canada but it certainly suggests a problem when your largest trading partner is in recession.
    Table 1
    Merchandise trade: Canada's top 10 principal trading partners – Seasonally adjusted, current dollars
    Canada is officially in recession.

    The economy shrank in the second quarter of 2015, making it the second quarterly contraction in a row.

    Gross domestic product in Canada fell at a 0.5% annualized rate in the quarter.

    In the first quarter the economy shrank by 0.8%.

    Statistics Canada, the national statistics agency, revised the contraction in the first quarter to 0.8% from 0.6%.
    Sep 20, 2015. 12:13 PM | Likes Like |Link to Comment
  • Weekly Update: The Fed Speaks, It's Time To Get Back To 'Investing' [View article]

    I posted this elsewhere and I think you might appreciate it since you follow some technical indicators. What's your opinion?

    This is an interesting argument but the historical record may be a little sparse so keep it in mind but the "supply/demand" argument for stocks seems logical. You can't fake these numbers or game them to match an argument - they are exactly what they are. One thing it may predict fairly well is risk appetite which could be a very interesting tell for where we are in this market cycle as it would suggest that investors are becoming actually becoming more risk averse - the "watch what they do not what they say" argument.
    "The Latest Margin Debt Figures Confirm A Major Bear Market Is Probably Underway"

    "Back on May 6th, as the stock market was pushing to new highs, I argued here that, “record-high margin debt should make you more cautious,” toward the stock market. At the time, it was popular to dismiss the idea that the level of margin debt, both absolute and relative (to GDP), should mean anything at all. Since then, stocks have fallen hard, along with margin debt levels, and the message it sends is even more meaningful today.

    The simple reason I believe margin debt is a valuable indicator is that at extremes it is a very good measure of potential supply and demand for stocks. When margin debt is very low it tells us there is a lot of potential demand out there for stocks. Conversely, when it’s very high it signals that there is very little potential demand left and plenty of potential supply. If you believe supply and demand are the key to prices then this measure is something you should watch very closely then.

    Recently, we hit record-high levels of margin debt, on both an absolute level and in relation to overall economic activity. I like to look at margin debt relative to GDP because it is a simple way to measure the popularity of financial speculation relative to overall economic activity. When this measure is very high, it tells me investors are highly interested in speculating in equities."
    Sep 20, 2015. 11:44 AM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Has The Fed Assumed A Third Mandate? [View article]

    A separate issue.

    Do any of the recession alert indicators described above provide a recession signal without an inverted yield curve?

    Hopefully the question makes sense.Thank you.
    Sep 20, 2015. 11:37 AM | Likes Like |Link to Comment