Posts Tagged ‘Corrections’

Weekly Recap & Outlook – 06.21.13

Friday, June 21st, 2013

Tower Private Advisors

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

Capital Markets Recap

wro

“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.

Whatever…

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

spx

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.

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

 

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Weekly Recap & Outlook – 04.19.13

Friday, April 19th, 2013

Tower Private Advisors

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  • Correction? What correction?

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Weekly Recap & Outlook – 06.01.12

Friday, June 1st, 2012

Tower Private Advisors

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  • Spain getting ready to circle the toilet bowl
  • A fix for emotion-driven investing
  • Lousy payrolls report

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Weekly Recap & Outlook – 03.18.11

Friday, March 18th, 2011

Tower Private Advisors

Prior posts

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  • A roller coaster week
  • Ugly February economics
  • You’re on your own next week

(more…)

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BP an Analog for Japan?

Wednesday, March 16th, 2011

I saw the story immediately below and began thinking about BP disaster as an analog for Japan.  I know, I know–plugging a hole in the bottom of the ocean isn’t the same as stopping a nuclear problem–I mean, we know that, right?  Recalling those images, though, from the undersea cameras as they tried to snake this or that mechanism down there seemed plenty complicated–and they used concrete in that disaster, too, right–makes it sound not so far fetched.

Anyway, here’s the story.  Doesn’t it sound familiar?

So I took it a step further.  In the chart below you’ll see three panels.  In the top and bottom panels are charted BP’s stock and the S & P 500 starting 19 days before the April 20, 2010, well disaster, respectively.  The middle panel shows the Japan ETF (EWJ) from 19 days before the earthquake.  I adjusted the Y-axis on that panel, and it’s, coincidentally, not far off the scale of the BP chart.  It took the S & P 500 about 28 weeks to recoup its pre-spill levels.  From the leak to the bottom of BP stock’s decline was about ten weeks.  I didn’t try to figure out when the well had been plugged/capped because–you’ll recall–there was endless talk about endless lawsuits from the spill; I figured the bottom in the stock was a better measure.

Here are takeaways

  • This thing feels a lot like BP, with the markets trading off every single news story.
  • At times it seemed like we’d have an Old Faithful right in the Gulf, which is to say it seemed like it’d never be plugged.
  • Comparing stock prices to then, there turned out to have been a lot of great values, although BP has yet to get back to its former glory, although that seems like a stretch.
  • I’ve probably taken this to far from the very beginning, but if we take the former bullet point a bit further, we might conclude that avoiding the Japan ETF and investing, instead, in Japan recovery (think oil spill recovery) ideas, might be rewarding over time.

We never want to let time and history be the sole factors in investment decisions, but they can provide useful signposts.  Yes, the situations are absolutely different this time, but I will guarantee you that the traders have not changed a whit.  They’re still prone to swings of emotion, and that’s what makes history-doesn’t-repeat-itself-but-it-often-rhymes such a useful saw.

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