Down goes the Dow

agip - why are you still arguing witk K5, it's pointless.

Randy Oldman wrote:

agip - why are you still arguing witk K5, it's pointless.

I don't sense the evil one's presence - I think balance has come to the force.

Anway, I'm off to get a deconstructed martini.

whoops! not seeing Down 15,000 early in 2015 after all.

The irony is that sagarin was right - the 1Q WAS weak - GDP was down 0.7%...but the market didn't fall.

I hope Sagarin covered his short - it's an 8 or 9% spread since US stocks are up 4.3% this year.

Agip, did you like that martini?

Take the martini and pass on the market. The technicals are deteriorating.

Ghost of Igloi wrote:

Take the martini and pass on the market. The technicals are deteriorating.

I'm having whatever Allison Brie is having, is all I can say.

as for the markets...I dunno. technicals are ambivalent - some good some bad. Are they getting worse? Depends on how strong my martini is. Or what Allison thinks.

speak, Igloi! tell us what you see in the tea leaves!

...or I should say cardamom leaves

Whew, the week is over. Was too conservative early, missed a good move, but caught up late in the week. The old bubbliness has thankfully returned, I got nervous there for a while. Looks like it's still business as usual for me, the DJIA playing around 18k, with larger moves, and Monday and Friday being especially useful.

For those who care, SP500 up 2.36% YTD at the end of May. DJIA up 1.05%.

Chemical Reagent wrote:

For those who care, SP500 up 2.36% YTD at the end of May. DJIA up 1.05%.

I think a better measure is the Vanguard total stock market index, which is up 3.6% ytd, including dividends. Not terrible - that's 8.6% annualized.

But much better is the rest of the world -

Total World is up 5.9%

and the world excluding the US is up a huge 8.1%

So not too bad so far 2015 - and with all the glumness I can't imagine there is a huge amount of people who can't wait to sell.

agip,

Technically, the Dow Jones Transport Index non-confirmation of the Dow Industrial recent high is a negative. There is a clear lack of breadth, and a breakdown in trend uniformity (stocks not moving in the same direction). Although none of this is science it does mark a change from the past six years market trend.

Fundamentally, margin debt at record highs, and central bank market liquidity at unimaginable levels, argues for tough sleding ahead. Also of concern energy and commodities at the lowest level since the financial crisis. The Atlanta Fed GDP Now is averaging +0.8 for the current quarter. S&P earnings show a clear trend of falling earnings growth.

At some point the business cycle moves to a low point, even if you had no other concerns, you must realize that it will.

Ghost of Igloi wrote:

agip,

Technically, the Dow Jones Transport Index non-confirmation of the Dow Industrial recent high is a negative. There is a clear lack of breadth, and a breakdown in trend uniformity (stocks not moving in the same direction). Although none of this is science it does mark a change from the past six years market trend.

Fundamentally, margin debt at record highs, and central bank market liquidity at unimaginable levels, argues for tough sleding ahead. Also of concern energy and commodities at the lowest level since the financial crisis. The Atlanta Fed GDP Now is averaging +0.8 for the current quarter. S&P earnings show a clear trend of falling earnings growth.

At some point the business cycle moves to a low point, even if you had no other concerns, you must realize that it will.

I can't disagree with any of the numbers/theories you cited, although I have a hunch that when these were more positive in the past you STILL weren't bullish. Although that is a total guess.

There is always a bull case and there is always a bear case.

My main point here is that bullish people tend to rely on bullish facts and bearish people tend to rely on bearish facts - very rare to find someone who is able to switch back and forth profitably. Are you?

No, not true. I am optimistic generally. In 2008 and 2009 I was bullish professionally and personally. Informed optimism tells one that there will be a better time and valuations do matter. It is simple logic that the more you pay for an investment the less you should expect in return. A stock purchase is a claim on a very long stream of income. I am afraid that too many investors miss this point, and fixate on the direction of an index. I have cited a litany of measures that should be cause of concern. Unfortunately there is far to little focus on stock valuation measures, while story stocks and unreliable measures to justify recent highs become the norm.

The market goes up. The market goes down. Repeat.

Ghost of Igloi wrote:

No, not true. I am optimistic generally. In 2008 and 2009 I was bullish professionally and personally. Informed optimism tells one that there will be a better time and valuations do matter. It is simple logic that the more you pay for an investment the less you should expect in return. A stock purchase is a claim on a very long stream of income. I am afraid that too many investors miss this point, and fixate on the direction of an index. I have cited a litany of measures that should be cause of concern. Unfortunately there is far to little focus on stock valuation measures, while story stocks and unreliable measures to justify recent highs become the norm.

ok good, hunch withdrawn.

re; valuation - many problems with making valuation too large an aspect of one's decision making process. Obviously, markets can remain overvalued for years and years - making decisions based on a PE that is, say 17 vs 15...you can sit out a lot of good years based on that. Like 2014 - SPX was up around 13%, no? but the market started that year overvalued. Deiciding to sit out 2014 based on valuation would have been very very expensive.

and anyway - according to JPM, the market is generally valued at its 25 year averages. if you want to include the 1930s then yeah, the market is a little overvalued. But times change, accounting changes, interest rates change...since we are valued at or slightly above 25 year averages, I'm not too worried about valuation.

(slide 5)

agip,

Data is skewed more positive when you included the period with the run-up into the Tech Bubble. The 15 year return on the S&P 500 is 4% including dividends when the market is at an all time high. The return in Treasury bonds would actually be superior over that time period. I am not advocating being out of either of those investments. My point remains that valuation, asset allocation, and timing are important.

Ghost of Igloi wrote:

agip,

Data is skewed more positive when you included the period with the run-up into the Tech Bubble. The 15 year return on the S&P 500 is 4% including dividends when the market is at an all time high. The return in Treasury bonds would actually be superior over that time period. I am not advocating being out of either of those investments. My point remains that valuation, asset allocation, and timing are important.

I hear you - we're just talking here. Of course valuation, asset allocatoin and timing are important. The question is what to do on the ground - if the market is a small amount overvalued...what do you do? Reduce? ignore it?

I will complain when you compare the 1999 market peak to today tho - I mean really - the PE on the SP 500 was in the 30s then. Now it is 17ish. You seem to be implying that a PE of 17 when the market is at an all time high can lead to 15 year returns of 4% per year, same as when the PE is 35. Obviously that's silly - the 99 bubble was a once in a generation insane moment - the market is much, much, much saner and cheaper now so fear levels should be lower.

And anyway, the SPX might only be up 4% over 15 years but probably 90% of other indices have done far better -

small caps (NAESX) +9.5%

emerging markets (VEIEX) +9%

REITS (VGSIX) up 12%

which is your point - that asset allocation can be crucial.

Haven't posted in a while, but just did a big buy at 68.26, will probably sell tomorrow or monday

I hate Greece

Greece can be a pretty good driver of swings from which gain can usefully be extracted.

I wonder how long this era of algo trading will last. It's like a market of zombies.