Posts Tagged ‘Bernanke’

Weekly Recap & Outlook – 09.06.13

Friday, September 6th, 2013

Tower Private Advisors


  • Waiting for Godot (always wanted to use that one) or waiting for a correction that just won’t happen
  • Lousy Payrolls report but Unemployment Rate falls to 7.3%!



Weekly Recap & Outlook – 06.21.13

Friday, June 21st, 2013

Tower Private Advisors


  • Not much, a short one
  • Markets weren’t kind to my bold forecast of low rates for a while

Capital Markets Recap


“Nah, let’s wait for a pullback…”

“I’m keeping some powder dry…”

“Looking for a buying opportunity…”

Well, you got it, now what?

“Oh, man, this sucker’s got further to go.”

Every investor and her mom is waiting for the proverbial buying opportunity. ‘Get it in the form of lower prices, and suddenly the sky’s falling, and there’s every reason stocks will go lower. It’s not as if buying opportunities just materialize. They’re always sparked by something…lot’s of folks are looking for selling opportunities and sometimes the buyers just go on strike.

Ostensibly, this correction started on Wednesday afternoon when Chairman Ben said that the Fed would likely ease off its bond-buying pace, although that assumed the economy would continue to improve. Well, duh, it’s not like the Fed will buy bonds forever. If traders were shocked by that revelation, then they’re stupid. Still, we must have reasons for things, or the financial media would have little to talk about…”why’s the market down?…[trot out speaker one].”

There is, apparently, some tension in China, where the inter-bank lending rate–the rate at which banks lend to each other overnight–has spiked up to double digits, suggesting the banks there don’t trust each other to pay back the short-term loans. That sort of thing happened here in the depths of the U.S. financial crisis, when our economy almost seized up.


We remain of the view that the correction will be just that, a mild correction.


Today’s action, highlighted by the orange arrow, portrays a tale of two cities, where the market closes almost where it opens–slightly higher–and where the swings on the day are relatively wide.

Here’s the market action over the last several months. Even with yesterday’s shellacking, the S&P 500 is down by just 5.5% or so…merely a flesh wound, although today’s bounce isn’t terribly convincing.

 Oh, and I probably shouldn’t mention this, but markets were not kind to my forecast of interest rates staying low, as is on display below. The 10-year Treasury Note’s yield is 17.3% higher from when I said there’s no need to feear higher rates. Annuallized, that’s 6,000%+ increase. Still, I’m sticking with the idea. Rates aren’t headed higher just yet.


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



Weekly Recap & Outlook – 09.28.12

Friday, September 28th, 2012

Tower Private Advisors

 Capital Markets Recap

The first editor of the Wall Street Journal was Charles H. Dow (1851-1902). From editorials he wrote, what has been termed Dow Theory was distilled. According to the bible of technical analysis, Technical Analysis of Stock Trends, by Edwards and Magee, Dow, “did not think of his ‘theory’ as a device for forecasting the stock market, or even as a guide to investors, but rather as a barometer of general business trends.” Among other of its basic tenets is this one, the two averages, the Dow Jones Industrial Average and the Dow Jones Transportation Average, must confirm each other for a trend to be valid. For example, a 52-week high in the Industrials is unconfirmed (as an indicator of some trend) until the Transportation index also notches a 52-week high. As one might expect by the terminology, a trend is suspect until it ha been confirmed.

The thinking behind the notion of confirmation of the two averages was simple and elegant. If the Industrials was an indication of the strength of an economy, then there ought to be more goods being shipped; thus, the Transporation average should reflect that strength. Today, one could rightly argue that much our economy isn’t shipped, it’s downloaded, which is to say that, in a service economy, transportation isn’t a relevant indicator. Still, the concept continues to work, and, accordingly, ignoring the chart below may be done at one’s peril.

And here’s a closer look, with details added. The lower green circle marks a new high for the Industrials, but the next peak for the Transports wasn’t a new high, leaving the advance by the Industrials unconfirmed.

Maybe this is a perfect use of the Theory as envisioned by Charles Dow, as a general barometer of business conditions. It seems that most folks don’t think that the latest iteration of QE (Quantitative Easing) will have any effect on the economy (I disagree.) On that count, the Dow Theory seems supportive. In a sense, it’s saying, sure, the Industrials are up, but that move isn’t supported by strength in the economy. If it were, the Transports would be up, too.

Market participants should care, too, however, given the Theory’s tendency to be right. In that context, the Theory is saying the upward trend for stocks is not to be believed until it’s the Industrials average is confirmed by the Transports average, and it needs to advance by about 7.5% to do so.

The latest issue of The Economist featured a concise guide to Quantitative Easing, featuring a guide to investing under three possible scenarios. I agree with what’s expressed in it, so I call it a balanced look  at the phenomenon. Here is a link to the article, but it may require a subscription. The gist of the article is this:

  • Previous rounds of QE have had the effect of boosting stock prices “without boosting profits.” It’s what some guy from HSBC has likened to a “sugar high.”
  • On the other hand, QE may be underestimated, as “it is impossible to know what things would have looked like without the previous rounds of monetary stimulus.”
  • As for the effect on stocks–the pieces of electronic paper traded amongst market participants–”investors will be pushed out of low-risk assets into the stockmarket,” and that will push stock prices higher.
  • “The other asset class to benefit from previous rounds of QE has been commodities. This seems rational.” They would benefit from increased economic growth and any inflation.
  • There are three possible scenarios:
    1. The economy stays stagnant, inflation low.
      • “The right strategy in those circumstances would be to buy government bonds.”
    2. The economy recovers to pre-crisis growth levels.
      • “The right strategy then would be to buy equities.”
    3. Inflation accelerates rapidly
      • “In that case, buy commodities, especially gold.”


Maybe they don’t use the middle finger in Iran…

Short one this week…

Graig P. Stettner, CFA, CMT

Chief Investment Officer

Tower Private Advisors


Minutes of August 9 FOMC meeting

Tuesday, August 30th, 2011

This was the meeting where the Federal Open Markets Committee virtually locked in 0-0.25% interest rates through 2013. Apparently, there was quite a bit of discussion, with much of it tilted toward more aggressive monetary policy. Here’s the Wordle cloud of the minutes. One of the most common words (larger words represent more frequently used words) used in many of the minutes is “inflation,” and it almost seems used because committee members fear most its opposite, deflation, which is curious by its absence. (Click for a bigger version.)


[Early] Weekly Recap & Outlook – 08.25.11

Thursday, August 25th, 2011

Tower Private Advisors


  • Jackson Hole
  • Apple
  • Gold contest