This past Friday I spent some time on the phone interviewing Jason Trennert, the Chief Investment Officer at one of our investment strategy services, Strategas Research Partners. I had about ten questions to throw at Jason, the same questions I’ll pose to some other investment heavies. I think you’ll enjoy reading this, as Jason takes a unique look at the various markets, drawing on history, economics, and finance to form strategies and opinions. I believe that, like me, you’ll find that Jason’s views form a narrative of sorts that’s internally consistent and persuasive.
I’ve pasted in a little bit about the firm from its website, and below that is the interview. You can find the firm’s website here.
Ever since Al Gore invented the internet, the belief that everything on it should be free has persisted. Of course, as you know from reading this blog, free isn’t all it’s cracked up to be.
Still, there are some free gems, and as far as investment websites go, FinViz (Financial Visualizations) is one of the better freebies. Here’s a sampling of what you can do with it.
First, there’s the traditional heat map of security prices. One gets to it by clicking on “Maps” as shown immediately below.
Various indexes can be illustrated. In this case it’s the S & P 500.
There’s a temperature scale at the bottom. Basically, the brighter the red the bigger the loss; the brighter the green the bigger the gain. Note, too, that the relative sizes are representative of the companies relative sizes. So, in the chart above, it’s easy to see that ExxonMobil is the largest of the integrated oil companies.
There is also a 3D version of the heat map, which adds relative height to the mix. In addition, hovering over one of the securities pops up a quick 3-month candlestick chart of the stock. In this case, Sprint Wireless stands out as a good performer while Vodafone (VOD) stands out as a poor performer.
Bubbles is a new version of the heat map, and it stands perched on the edge of over-doing it. Again, the companies are shown in relative size, and the closer to the “front”–in 3-dimensional space, the better or worse the performance. As with the 3-D chart, hovering over a ticker pops up a 3-month chart. Various controls allow the chart to be zoomed in and out.
There are other ways of visualizing data, but if you stop there you’re missing out on FinViz’s most powerful feature, in my opinion.
That’s the screener, and it’s found as shown below.
When you initially open it there are no criteria selected and 332 pages of 20 securities each are available, but as you start to select criteria the list gets narrowed down. Here are all of the criteria available.
Next, here’s a look at further scrutinizing the results of a screen.
Finally, if you really get into FinViz–especially the screening part–you can Google it and find out how others are using FinViz. Here’s a screen shot from one PIMP MY TRADE website.
Oh, and a word about websites linked to from this blog–and Mom, this applies to you, if there’s a naughty word used, sorry. Kids, if you happen to see a bad word when reading Daddy’s blog, it wasn’t my fault. Every effort has been made to make this a family-friendly blog, but the very fact that it occasionally references Congress makes that an impossibility.
This is one of the oldest investment saws out there, and that’s a testimony to its durability. The Stock Trader’s Almanac–I’m using the 2008 version so it missed out on that horrendous Autumn, and also 2009′s great Summer run–has compiled statistics back to 1950 regarding its Six-Months Switching Strategy. It found that a $10,000 investment grew to $578,413 by just investing from November – April, but grew to just $341 when invested in all of the May – October periods. Notice, too, that one would have been ill served by following the strategy over the last two years, so it’s clearly not fool proof.
David Kotok, of Cumberland Advisors, did some work on this phenomenon and discovered that the determining factor–make that A determining factor–is monetary policy, or whether the Fed is easing, tightening, or neutral on the monetary gas pedal–mostly measured by interest rate policy.
If it’s tightening, one should sell in May and go away
If it’s easing, one should not sell in May, but stay invested, ceteris parabis
If the Fed is neutral–and this seems to be a key, but unstated, conclusion from Cumberland’s work (see the original at the link below)–there are other factors that explain seasonality
Here’s Cumberland’s conclusion:
So, what do we do in 2010?
The Fed is unlikely to raise the targeted Fed Funds rate between May and October this year. They cannot lower it, since it currently is between zero and a quarter of one percent. Therefore, the application of the results of our historical study is hampered by the existence of the zero-interest-rate lower boundary. For this reason, we have to assume the Fed is either neutral or easing, and cannot be sure which applies. We have no history to guide us.
The same logic applies to other markets of the world. When we survey central banks, we find that Japan is unlikely to raise its targeted policy interest rate. It is currently near zero. The UK is also unlikely to raise its policy interest rate. In Europe, we are witnessing a massive easing of credit as the European Central Bank and the European Union create their version of a crisis response. Their policy may be likened to our American TARP and Federal Reserve activities following the failure of Lehman Brothers.
The Federal Reserve’s expansion of international swap lines appears to us to be a form of easing. Granted, it comes in response to the European crisis and the ECB initiative. However, easing is easing, no matter what form it takes.
As a result, we enter the May-October period with the working assumption that the G4 central banks are collectively easing. This should neutralize the negative seasonals in 2010. That is bullish for stock prices.
Ned Davis Research is one of our key investment strategy providers. (I should probably call them something like a key investment strategy partner, but who’s kidding who: we write them a check; they send us e-mails). Every year, NDR puts together a composite of how the year might unfold based on three historic studies:
Four-year Presidential cycle
10-year (decennial) cycle
Here is a link to the chart. (Just kidding, Ned & Co. if you’re out scanning the internet for copyright violations).
To avoid getting a hand-slapping from the fine folks at NDR, let me just describe the chart: sell in May and go away. The twist that they put on this is that they “don’t fight the tape,” which is to say that they allow their strategy to be guided by various readings and indicators. They don’t sell just because the calendar gets flipped from April to May.
So far, however, the market seems to be holding the un-edited script that says sell in May and go away. If we decide to go with this thinking you’ll be the first group–okay, second–to know. First, we sell out our client accounts, then we put something on the blog. If you want to be in the first group, you know how to find us. Click here for starters.
Oppenheimer’s Chief Market Technician, C. B. Worth, had this to say about last Thursday’s nasty action. All emphasis is mine.
The first thing to be said is that crashes do not come out of nowhere (and everybody knows it).
Crashes come when too many stocks are “Vulnerable-Extended.” Crashes come from complacency. Crashes come from consensus thinking. Crashes come from hubris.
The second thing to be said is that “unidentified, unknown, inexplicable, and mysterious” computerscomputer programs, computer programmers, or computer operators, are never the reason a market crashes.
A market crashes on a particular day when it has been weak for several preceding sessions, is especially weak on the day in question, and when at some point… intra-session on the day of the event… it gets so very weak that buyers disappear, literally… and sellers panic. “Get me out!”
Now that we’ve crashed, there are virtually no “Vulnerable-Extended” Sells in the market. This is a positive. Complacency and hubris have been expunged.