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“Bloodbath” – Dow Crashes Over 1000 Points, Enters Correction

February 8, 2018

“Bloodbath” – Dow Crashes Over 1000 Points, Enters Correction

Dow crashed over 1000 points today….

All 2018 gains are gone…

Time for “Markets In Turmoil” special…

Markets “turmoiled” again today as Treasury yields spiked on a weak auction and the implications of a budget deal that means more supply is coming. This spooked stocks once again and XIV, the Inverse ETF, tumbled at the open – after ramping stocks delusionally into the open. As stocks got monkey-hammered again, so bonds were bid and ended with a relatively small rise in rates as plunges in Risk-Parity funds likely prompted forced delevering in stocks and bonds. Perhaps most notably, credit spreads started to snap wider and rate volatility spiked as equity market contagion spreads.

Investors have swung from “extreme greed” to extreme fear” in a record few days…

…click on the above link to read the rest of the article…

The Risk of a Correction in the Equity Bull Market

January 25, 2018

THE RISK OF A CORRECTION IN THE EQUITY BULL MARKET

  • Rising commodity prices, including oil, are feeding through to PPI
  • Unemployment data suggests wages may begin to rise faster
  • Federal Reserve tightening will continue, other Central Banks may follow
  • The bull market will be nine years old in March, the second longest in history

Since March 2009, the US stock market has been trending broadly higher. If we can continue to make new highs, or at least, not correct to the downside by more than 20%, until August of this year it will be the longest equity bull-market in US history.

The optimists continue to extrapolate from the unexpected strength of 2017 and predict another year of asset increases, but by many metrics the market is expensive and the risks of a significant correction are become more pronounced.

Equity volatility has been consistently low for the longest period in 60 years. Technical traders are, of course, long the market, but, due to the low level of the VIX, their stop-loss orders are unusually close the current market price. A small correction may trigger a violent flight to the safety of cash.

Meanwhile in Japan, after more than two decades of under-performance, the stock market has begun to play catch-up with its developed nation counterparts. Japanese stock valuation is not cheap, however, as the table below, which is sorted by the CAPE ratio, reveals:-

Star_Capital_-_Equity_Valuations_31-12-2017

Source: Star Capital

Global economic growth surprised on the upside last year. For the first time since the great financial crisis, it appears that the Central Bankers experiment in balance sheet expansion has spilt over into the real-economy.

An alternative explanation is provided in this article – Is Stimulus Responsible for the Recent Improved Trends in the U.S. and Japan? – by Dent Research – here are some selected highlights:-

…click on the above link to read the rest of the article…

Internal Combustion: Anatomy Of A Market Top-Part 1

September 5, 2015

Internal Combustion: Anatomy Of A Market Top-Part 1

image

Over the past few months, we have detailed the systematic deterioration in the internals of the stock market. This trend recently reached depths historically seen only near major market tops.

This is Part 1 of a 1 or 2-Part series on factors that are characteristic of a cyclical top in the stock market. It should really be a 3-Part series but, like Star Wars, we skipped over the 1st part of the story. Part 1A would have covered what we term the “background” conditions of the market. These background conditions – including valuation, sentiment, stock allocation, long-term price vs. trend, etc. – convey the general market environment that exists. These conditions are not catalysts or actionable indicators. Rather they reflect the market’s backdrop, instructing us as to which cyclical trends are likely to develop, at some point. Now, the status of these background conditions can persist – and for a long time. Indeed, we have been discussing the overbought/extended/high-risk nature of various of these indicators for years already. So, in a way we have covered the true Part 1 of this “Market Top” series, just not in a formal sense (our October 2013 Newsletter may have been the closest to an actual “Part 1”).

This piece covers the “internals” of the stock market. Internals (or breadth) refer to the level of participation among stocks throughout the entire equity market. It includes metrics like the number of stocks that are advancing versus declining, the amount of volume in advancing stocks versus declining stocks, the number of stocks that are making new 52-week highs versus new lows, etc. In our view, strong internals, i.e., widespread participation among stocks, is an important ingredient of a healthy market.

…click on the above link to read the rest of the article…

 

Birinyi’s S&P 3200 Call——Bull From A 30-Year Bull

August 6, 2015

Birinyi’s S&P 3200 Call——Bull From A 30-Year Bull

When stock market guru Laszlo Birinyi told bubblevision today that S&P 3200 would be reached by 2017, his argument was essentially to keep on keeping on:

“What we’re really trying to tell people is stay with it, don’t let the bad news shake you out…There’s no reason we can’t keep on going,” he said.

That got me to thinking about when I first ran into Birinyi at Salomon Brothers way back in 1986. He was then a relatively underpaid numbers cruncher in the equity research department who was adept at making the bull case. Nigh onto 30 years later he has become a rich man crunching the numbers and still making the bull case.

Indeed, I don’t ever recall when he wasn’t making the case to be long equities, and as the chart below shows, you didn’t actually have to crunch the numbers to get there. Just riding the bull from 200 in January 1986 to today’s approximate 2100 on the S&P 500 index computes to a 8.4%CAGR and a 10% annual gain with dividends.
^SPX Chart

^SPX data by YCharts

Even when you take the inflation out of it, this 30-year run is something close to awesome. But, alas, that’s my point. It’s too awesome.

In inflation-adjusted terms, the S&P 500 index rose by 6.2% per annum over the last three decades. That compares to just a 2.2% annual advance for real GDP, meaning that the market has risen nearly 3X faster than national output in real terms.

You don’t have to be a math genius to realize that a few more decades of that kind of huge annual spread, and the stock market capitalization would be several hundred times larger than GDP.

Likewise, you don’t have to be a PhD in quantitative historical research to recognize that the last three decades are utterly unique. If you run the clock backwards by 30 years from the January 1986 starting point, for instance,  you get a totally different picture.

 

…click on the above link to read the rest of the article…

The Swiss National Bank Bought Another 500,000 AAPL Shares Just Before 10% Correction

August 5, 2015

The Swiss National Bank Bought Another 500,000 AAPL Shares Just Before 10% Correction

Three months ago we were stunned to learn, and report, that the Swiss National Bank – a central bank – had been one of the biggest buyers of AAPL stock in the first quarter, when it added 3.3 million shares to its existing position, or 60%, bringing the total to 9 million shares, for a grand total of $1.1 billion. Moments ago, the SNB which unlike the Fed and the other “serious” central banks releases a 10-Q divulging its equity holdings, updated on its latest stock portfolio.

We were amused to learn that in the quarter in which AAPL stock almost hit a new all time high, the Swiss money printing authority which reported a record $20 billion loss in the second quarter, and a record $52 billion in the first half, added another 500,000 AAPL shares, bringing its new grand total to a whopping 9.4 million shares, equivalent to $1.2 billion as of June 30 (well below that now following the recent 10% correction).

At $1.2 billion, AAPL remains the top holding of the SNB, almost double the second largest position, which as of June 30 was Exxon stock valued at $637 million (and is worth much less now, and has most likely been surpassed in notional terms by #3 MSFT).

So what are the the Swiss hedge fund with nearly $94 billion in equity holdings? Here is the full breakdown.

Now if only the Fed would be this transparent about its own equity holdings…

 

It Begins: Energy Giant Chevron Suspends Stock Buyback, Blames “Cash Flow Squeeze”

January 30, 2015

It Begins: Energy Giant Chevron Suspends Stock Buyback, Blames “Cash Flow Squeeze”

It was less than 24 hours after we posted that either oil will double from here allowing energy companies to grow into a normal P/E multiple, or energy stocks will have to crash by over 40% for the ridiculous 23x to return to its normal, long-term average of 13.6x. Moments ago energy giant Chevron admitted that not only does it not see oil doubling any time soon, but that energy prices are almost certain to go far lower from here, and as a result the company decided that after buying back $5 billion of its shares in 2014, i.e., buying high and higher before the stock crashes may not be the best use of dwindling cash flow, and as a result has just suspended its stock buyback program of the rest of 2015. Yes, energy giant Chevron just ended its buyback!

As regular readers know, company buybacks are forecast to be the single biggest source of demandfor stocks in 2015..

 

… which means this may well be the beginning of the end of the 6 year bull market. For now, the realization if only hitting Cheveron stockholders.

…click on the above link to read the rest of the article…

 

Saxobank CIO Warns “Another Shock Drop Is Coming.. And It’s Coming Soon” | Zero Hedge

October 22, 2014

Saxobank CIO Warns “Another Shock Drop Is Coming.. And It’s Coming Soon” | Zero Hedge.

Saxo Bank’s Chief Economist Steen Jakobsen is predicting another ‘shock drop’ in the markets within a few weeks. With debt and low inflation continuing to create a nervous atmosphere behind most markets, Steen argues that we will hit fresh lows in mid-November. Steen takes the view that central bank policy is creating a ‘fantasy land’ for investors and he points out that the recent ‘day dive’ in markets was a closer reflection of reality. Steen outlines his suggestions for trading ahead of another dip in mid November with targets for the S&P 500 around 1810 and the Dax at 8000 – 7800. Be long fixed income as it is “a free put on the equity market.. and the economic cycle is not yet ready to adapt to a rising interest rate.”

…click on the above link to view the video…

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