Skip to main content

Posts

Showing posts from February, 2019

Why you're looking at money the wrong way

GDP better than expected; jobless claims up slightly

A very valuable resource -- and free -- I use is called Econoday. It has the latest in economic news, both upcoming and recent. Want to know the lastest EIA oil numbers. You'll have it as soon as it's posted. (One note: sometimes the market anticipates, and prices in news, or just yawns. But sometimes the news can cause some big price swings). Today, it seems the market doesn't care much.
From just this morning after the GDP numbers:

At 2.6 percent, fourth-quarter GDP proved very solid and at the high end of expectations. Consumer spending, despite the sharp drop in December retail sales, leads the report, rising at a 2.8 percent annualized rate which is down from outsized rates of 3.5 and 3.8 percent in the prior two quarters but still more than respectable.Business investment is a positive surprise, rising 6.2 percent for nonresidential fixed investment and back near the high single-digit increases of the first half of last year when the corporate tax cut was driving spend…

Wall Street Update

Boring is what I'd call it. While this morning's news points to a slightly lower opening on most markets (Asian markets were down after Trump walked out on talks with Korea), it's another wait and see. The QQQ has been quiet the last few days, and there is no indication of a major move. 

From Seeking Alpha
Wall Street is pointing to modest declines, with U.S. stock index futures down 0.3%, amid shaky trade talks, the collapse of the North Korea summit and escalating tensions between India and Pakistan. Traders are now eyeing this morning's release of Q4 GDP, which is expected to show a growth rate of around 2.3%, marking a figure that might leave 2018 growth just shy of the Trump administration's 3% annual target. "The key issue is the reported plunge in December retail sales," said Ian Shepherdson of Pantheon Macroeconomics. "Retail sales account for about 30% of GDP, so a big miss even in just one month of the quarter is enough to make a material d…

Crazy is as crazy does

It seems that the Democrat party of JFK has long died. I used to vote for Democratic candidates if I thought they were the better choice. I was once recently told that politics and economics are different and to keep them separate. But, and here's a big but: Politics affect economics, and economics affect politics. Everything affects everything. I even have a text-book at home titled: "The Political Economics of the United States." 

I think this person in question, during an discussion on a local discussion board on the economic policies of running our local city, wanted to avoid politics because he was the president of the neighborhood democrat party. But the two are related.

Don't get me wrong. The Republicans have their own troubles, like being just plain old wimps. That's why I'm glad I live in Texas and don't have to register with either party to vote. 

So I get a lot of newsletters, and here's some samplings from the last day or so. In my mind, any…

NASDAQ crosses key line, but not so fast yet

Tread lightly. Have patience. While the NASDAQ, as represented by the ETF QQQ (bottom chart), opened above a key line of 173.40, it did not go travel higher, and closed below its daily high. I take this as a sign of "well, it's trying to confirm a new rally, but just wasn't strong enough." Yesterday. the futures hit a key supply zone, and within a few hours fell from that zone, another key signal for me of market weakness.  




The NADAQ futures (chart above), as of 7:30 AM CST this morning, are indicating a lower open. This may -- but not always -- indicate a sightly lower open in the gneral market, below my key price for the QQQ. 

Key point here is to see what happens before going all in. Forget what the talking heads on TV say. Only the market action will tell us what will happen as the day goes on. 



Mr. Market will tell the true story. 
In other news:
Markets await Powell's Senate testimony

The Beginning is the End is the Beginning: A Look at Recessions

Stocks are still expensive, though not at all time highs

According to price-to-earnings or “PE” data tracked by Yale University finance professor and Nobel Prize winner Robert Shiller, the S&P 500 is about 75% above its historic average valuation. Ten-year forward average returns fall nearly monotonically as starting Shiller P/E’s increase,” warned hedge fund manager Cliff Asness of AQR in a 2012 research paper, as he studied the S&P 500 going back to the 1920s. Also, he added, “as starting Shiller P/E’s go up, worst cases get worse and best cases get weaker.

Today’s level? Compared to history, we’re in the most expensive 10% of starting valuations, according to Asness’ data. “Average” 10-year returns from here? Based on history it’s about 0.5% a year after inflation, he calculated.





Current Shiller PE Ratio: 30.56 +0.19 (0.62%)
4:00 PM EST, Fri Feb 22 Mean:16.61Median:15.70Min:4.78(Dec 1920)Max:44.19(Dec 1999)

Wall Street Wrap: The good and the bad

The Trump economy is failing. The sky is falling! First of all, let's debunk a myth promoted by the mainstream media, which usually gets anything to do with the economy -- or anything else -- wrong. You've probably heard that 7 percent of car owners are three months behind on their payments. The fine print: These are high-risk borrowers. Those with good credit and borrow through credit loans: Only 0.7 percent are late. Jared Dillian, one of my favorite writers, puts it straight in The Good News About Consumer Debt, which is still at a all-time unsustainable high, but not the gloom and doom the media are promoting (who are just finding ways to denigrate Trump's economy, or anything Trump.)

Besides, the Trump coup has failed

5 Big Reasons to Sell Your Home This Year (Because It Could Get Tougher)Since the start of the year, rates on a 30-year fixed mortgage (the most popular home loan) have been falling, sliding last week to a new 12-month low of 4.37%.


Wall Street Breakfast: …

Market Update

The market has still not confirmed the January rally. I believe the positive news about trade deals with China, if they actually do happen, are already priced in. The FOMC -- according to yesterday's minutes -- remains dovish, which to me means that they are seeing some beginning signs of weakness in the economy. Some of the disappointing news today included December durable goods orders, Leading Economic Indicators, existing-home sales, and the US Manufacturing PMI. Not all were horrible, but showed weakness. Sometimes Mr. Market has a mind of its own.





The best 10 minutes of your life

Listen to this every day. For as long as it takes, even if it's the rest of your life.

"We have a serious matter here to discuss. Take your own future serious." 



Dow Jones likely to break 26,000. Really? Flip a coin

From Seeking Alpha:

The Dow Jones Industrial Averageis likely to break through the 26,000 level today, marking the next comeback for the stock market since the beginning of 2019. The latest boost comes amid the most significant progress yet toward ending the seven-month U.S.-China trade war, with negotiators drawing up six memorandums of understanding on structural issues: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

Note: These trade negotiations have already been priced into the market. 

However, in the meantime, the DJIA futures have dropped below 26,000. Read the markets, not the commentary. As of 8:10 AM CST, the blue line is 26,000 on the Dow futures (YM). (The horizontal line is 5 pm CST yesterday). While not conclusive, they do point to a market which will open below 26,000. Caveat Emptor.



Let's all try Socialism

Is college a good investment? Probably not

The fifth step (Baby Step 5 –College funding for childrento Dave Ramsey's Total Money Make Over is to save to pay for your children's college education. Is this a worthwhile goal? 
Our universities (and high schools) are quickly becoming bastions of censorship. It's unfortunate and a threat to our "way of life," whatever that may be. But the first amendment does not seem to rule supreme any more. Our true history is being over-written. 
---
Man on the street interviews done during the last election asked the question that Hillary Clinton wants to do away with the first amendment. The majority of students THOUGHT THAT WAS A GOOD IDEA. --- More than one in three people (37%) could not name a single right protected by the First Amendment. THE FIRST AMENDMENT. --- Only one in four [college students] (26%) can name all three branches of the government. (In 2011, 38% could name all three branches.) --- Students at the University of Maryland, who pay up to a whopping $44,645 p…

What's happening today?

(Update at 9:30 AM CDT. OK. My hour is up. What happened? The QQQ is up 0.04 percent. Still no direction, in my mind.)

Well, if I knew the answer to that question, I'd be a billionaire. 

But in all seriously, we can look at certain things and maybe make an educated guess. My guess the market will open lower today. 

Market futures in the S&P 500 (ES), the NASDAQ (NQ) and the Dow (YM) are all showing weaker openings to the underlying indexes. The blue line represents the last close. So you will how ask me how much lower? How in the he frak should I know? 

I don't normally trade until after about the first hour anyway unless something just jumps right off the page, and that doesn't happen often. Let the crazies have their fun first.

Here's the NASDAQ (as represented by the QQQ) AT 8:03 AM CST. Note that all this can turn faster, one way other the other, at a moment's notice. That's what makes it fun. Unless it doesn't for you, then I have another, more sedate w…

Makets closed today: Seeking a trend

If you're one of the lucky people to get a day off for President's day, read a book. (Most people won't read a book). Of course, the great majority of people don't get the day off. Only if you're a government worker or banker. So read book. All, and I mean ALL, successful people are voracious readers. In fact, your goal should be one book a month, on your way to reaching Bill Gates' goal of one per week.
But I digress. It's now a good time to prep for tomorrow's market opening. I predict -- well there is nothing I can predict with any certainty. Markets will be up, down, or sideways. However, we can look at some recent activity, and travel into the past and ferret out some intelligent approaches (and one intelligent approach is to do nothing).

First, let's look at the trend of the market. There's an old saying that the "trend is your friend, until it's not." Let's look a the daily trend of the S&P 500, which represents 500 st…

Is college for everyone?

I was going to write an article on the pros and cons of a college education. I have a degree. Not that it really helped me financially (though I did get well-rounded education even if I didn't take gender studies or social justice courses) except when I had to interview for a job after retiring from the Air Force that "required" a college degree. I have a B.S. in Liberal Arts with a major in psychology and a minor in business). I interviewed for IT positions. No one cared what my degree was in; they didn't even ask. What paid off for me were skills. Skills I gained in tech schools (after I got my degree, six months of networking and six months of programming equaled a six figure income, plus a lot of skills I gained, some through self-study at home.) 

Of course, this should be personal decision, but one that is based on your goals. What do you want to do? It's important to know that first. The three videos took my thunder, but make a lot of sense. Consider careful…

Wall Street Wrap

Markets were up for the week. Stocks rallied as investors embraced signs of progress in the U.S.-China trade negotiations, with Pres. Trump saying a deal is close even as structural issues such as forced technology transfers and enforcement oversight remain unresolved.

The NASDAQ, represented by the EFT QQQ, did not form a new high. However, if you're invested, the trend indicates a hold. If you're in cash, I think that this is not the time to buy -- yet. Or if you are invested or are looking for opportunties, remember your risk management rules, and use stops. I added to my stock positions this month, buying Spark Energy (SPKE) and HollyFrontier (HFC).  SPKE is up 11.2 percent, while HFC is up 3.6 percent. I'm still 65 percent in cash and money markets.




The rally came despite data this week showing the first decline in U.S. industrial production in eight months and the largest monthly drop in U.S. retail sales in nearly a decade. Also showing weakness is the housing market.…

Wall Street Update

NASDAQ futures (NQ) are up this morning before market opening in about 30 minutes. Enough to confirm a new rally? 


"The Middle Class is Under Attack." Really? No.

When Elizabeth Warren announced her run for President, she stated that the middle class was under attack. She has also said that ""The president and his administration have not just been indifferent to workers, they have launched an all-out attack on workers." Is this true?

Simply, no. And the media made no attempt to set the record straight, until USA Today ran a story headlined "Can the middle-class revival under Trump last?"
Nor did the army of media fact checkers bother to correct Stacey Abrams, who in her response to Trump's State of the Union" painted a grim picture of the middle class under Trump.

It that speech, she declared that "families' hopes are being crushed by Republican leadership that ignores real life or just doesn't understand it." That "far too many hardworking Americans are falling behind, living paycheck to paycheck." She said the GOP tax cuts "rigged the system against working people." She sai…

Dumb and Dumber

Breaking news: Tonight (Feb 14, 2019), Nancy Pelosi claimed that the problems at our southern border were a crisis created by President Trump, an illusion of his own making. She needs to retire. She's 78 and has been in Congress for 32 years. 

I generally don't write about politics, but recent events need addressing, because they affect our economic well-being. 

I've come to the conclusion that many -- or most -- politicians do not understand even the basic principles of economics. Or if they do, they don't care and have decided just to push an ideology that has nothing to do with sound economics. Some are just dishonest. 

I won't try to educate you on economics here. If you don't know, get some education. It's vitally important, both for your personal finances and who to vote for. 

Being dumb is not a partisan issue. Both Democrats and Republicans suffer from the problem. 

But I'm going to pick on Democrats right now, because some have just proven how dumb …

Psychological Traps for Investors

By recognizing how emotions can lead them astray, investors can take steps to protect themselves from their worst impulses. Here are some traps to avoid.

1. Holding losers too long
Cut your losses early. Love the company, but not the stock. No one is ever right 100 percent of the time. Use risk management before you buy a stock. Decide how much you're willing to risk on any investment or trade and scale your position size accordingly. Never risk more than two percent of your portfolio. Use stop losses to protect yourself.

For example, if your portfolio is $10,000, then a $200 loss would be acceptable. If you buy a stock at $20, then place your stop at $18 for 100 shares, $19 for 200 shares. 

2. Selling winners too soon
If the reason you bought the stock has not changed, do not sell too soon. There are different strategies for managing a trade that has turned profitable on paper. You can sell half your position and let the rest ride. Or you can use trailing stops, moving the stop in lin…

Wall Street Wrap: Is a bear market resuming?

In following up on my article from earlier in the week about the weakness showing in the market, I update market action here in a new chart. While we only have two more days of data, note that a new high may be forming which is lower than the previous high. 



Note that on Friday, the rally in the market came in the last 15 minutes. Futures, which open this evening at 5 pm CST, may indicate which way the market will open on Monday morning. 

There would be nothing wrong in moving to cash at this point, especially if the market trends lower on Monday, Feb. 11. Or one could wait until the moving averages cross over. This would be the blue line crossing below the purple line. 

This type of market action going into a bear market has happened twice before: in 1987 and 2007. After the market losses about 20 percent, a short rally ensues, only to be followed by a resumption of the bear market. Note what happened in late 2007 and early 2008. While past market action cannot predict future market act…

Tax the rich, or not

Higher tax-rates on the "rich" really don't work as expected. From the American Enterprise Institute, a very telling chart. The rich -- which I  guess is defined as the top 1 percent of income -- pay a higher share of taxes when tax rates are lower. 


Avoid these 4 middle class money traps

Bull Market or Bull Trap?

Market weakness is shown by lower highs and lower lows, which the chart here of the QQQ, which tracks the NASDAQ 100, indicates has been happening since Oct of last year. The latest rally in January is approaching the last high set in late November. If the market breaks through this, you could anticipate a further rally. If not, then we could get a correction or more. Time will tell. 



Advice from Warren Buffett

It's always good to know what successful people are thinking and doing. Copying success is no crime; actually, it's a good idea. 

One excellent source is the letters that Warren Buffet has been writing each year to his shareholders. You can access these at: http://www.berkshirehathaway.com/

From his latest, I found this tidbit, which was sound advice:
Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a longterm investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond that Protégé and I sold.I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an inv…

Wall Street Wrap

The strong January jobs report in spite of the U.S. partial government shutdown helped sentiment and eased worries about a potential economic slowdown. Alongside January's 304K job gain, November's print was revised higher by 20K to 196K, but December's was trimmed by a whopping 90K to 222K. 

The last three months have now seen an average job gain of 241K. The unemployment rate unexpectedly ticked higher to 4.0% thanks to a jump in the labor force participation rate to 63.2% from 63.1%, while the broader U6 unemployment rate rose to 8.1% from 7.6%. 

On Friday, the S&P 500 and Nasdaq were weighed by a 5%-plus drop in Amazon after the company issued cautious Q1 revenue guidance amid an anticipated increase in spending. For the week, the Dow gained 1.3%, the Nasdaq climbed 1.4% and the S&P advanced 1.6%.

More details at Seeking Alpha.

Is the market over-valued? One indicator, called the Shiller PE Ratio, indicates that the S&P 500 is high on the valuation curve. 















Speak…