Weekly Recap & Outlook – 12.06.13

December 6th, 2013

Tower Private Advisors

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  • Surprising response to strong payrolls report
  • Solid payrolls report

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Weekly Precap & Outlook – 11.20.13

November 20th, 2013

Tower Private Advisors

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  •  Asymptotes…remember those?
  • A rant about duration

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Weekly Recap & Outlook – 10.18.13

October 18th, 2013

Tower Private Advisors

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  • Sell in May and go away is getting ready to go away
  • Little data reporting with the government shut down

Capital Markets Recap

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You’re probably familiar with the old investment saying that goes, sell in May and go away. May 1 – October 31 marks the worst six months of the calendar for stocks. Starting in 1950, $10,000 invested in just May 1 – October 31 would produce a total of $15,389, for a gain of just $5,389. The same $10,000 invested on November 1 – April 30 would produce $574,496, for a gain of $564,496. Just so you don’t think that was a typo, here it goes again:

$15,389 v. $574,496

From just an eyeballing of the data, this strategy doesn’t seem to have lost its effectiveness in recent years, although it will be confounded this year (+10.22%) and was last year (+1.58%). With just two weeks to go in October, the calendar is about to turn in stock investors’ favor. That and the fact that our strategy services are largely bullish toward stocks has us gearing up to boost portfolio equity exposure. Almost by definition that will entail a reduction in fixed income exposure, and it’s that dynamic that is also driving this decision: on almost any time frame beyond say 6-12 months, it is almost inconceivable that bonds can outperform stocks. Here’s what this does NOT mean:

  1. Stocks are cheap; they’re not
  2. The economy is strong; it’s not
  3. Quantitative easing has been a magic elixir; it hasn’t
  4. America’s house is in order; it’s not
  5. Etc., etc., etc.

Top Stories

Phwew! That’s over…for now. Is there another story? I don’t think so. If you’ve been living under a rock, here’s the deal. The government will now be funded through January 25, and the debt ceiling will be breached on or about February 7.

Here’s is a brief collection of stories from the week:

  • Talks begin to prevent another U.S. shutdown
  • According to The Economist magazine, the last minute deal didn’t fix any of our big problems. No kidding!
  • Budget deal sends S&P 500 to record high.
  • China’s economic growth accelerates to 7.8% in the third quarter
  • U.S. GDP is likely to get a 0.6% haircut
  • The International Organization of Securities Commissions released a report that said investors are taking on additional risk as a result of ultra-low yields.
  • Finance officials around the world are bracing for a reduction in the Fed’s monetary stimulus.

This Week

With the federal government shut down this week, there wasn’t a lot of economic news. What there was was largely indicative of a weakening economy. On the positive side, Initial Jobless Claims fell by 16,000, although economists were looking for a decrease of 39,000. In the chart below you can see a big spike in jobless claims last week. That, apparently, was related to a backlog in California that’s being worked through, but considering that a jobless benefits claim is a one-time thing–one doesn’t reapply the next week, for example–the fact that the spike wasn’t quickly reversed suggests it might be more than just a spike, like maybe some government workers filed claims.

jobless

The Empire State Manufacturing Index fell sharply this week (from 6.29 to 1.52). The Housing Market Index fell a bit, too. Bloomberg’s two survey measures of sentiment–Bloomberg Economic Expectations and Bloomberg Consumer Comfort–fell sharply in the midst of the Washington disfunction.

Next Week

The flood gates open up next week as all of the pent-up reports that couldn’t be release–or weren’t produced last week–come out this next week. Included in the deluge will be the Nonfarm Payrolls Report, which is scheduled to be released on Tuesday.

Graig P. Stettner, CFA, CMT
Chief Investment Officer
Tower Private Advisors

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Weekly Recap & Outlook – 10.04.13

October 4th, 2013

Tower Private Advisors

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Great animation on how the economy works

September 23rd, 2013

Ray Dalio is CEO of Bridgewater Associates, one of the rockstars of the hedge fund world. I saw a link to the animation below in a tweet from Bill Gross. This animation describes how the economy works in the eyes of Ray Dalio, and its very understandable, especially for the lay person.

 

As an added bonus, here is a link to something Ray Dalio wrote on his principles–principles of life and management. He wrote this in 2011, and while Ray and I operate from two different worldviews, I think you can take a bite and spit out the bones. A couple of excerpts:

What is written here is just my understanding of what it takes: my most fundamental life principles, my approach to getting what I want, and my ‘management principles,’ which are based on those foundation. Taken together, these principles are meant to paint a picture of a process for the systematic pursuit of truth and excellence and for the rewards that accompany this pursuit. I put them in writing for people to consider in order to help Bridgewater and the people I care most about.

And

#8 Create a culture in which its OK to make mistakes but unacceptable not to identify, analyze, and learn from them.

And

#34 Make sure people don’t confuse their right to complain, give advice, and debate with the right to make decisions.

Lots of good stuff.

Graig P. Stettner, CFA, CMT
Chief Investment Officer
Tower Private Advisors

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