Post New

There has been a lot of volatility recently. Do people think the market will be changing directions, or is it just noise?

"I don't need to know what's going to happen next. I just need to know what I'll do in response to whatever does happen." -- Jim Rogers
----------
"Over the full market cycle, investing to achieve short-term comfort costs a fortune." -- John Hussman
-------
“You need long-term strategies to reach long-term goals, and paying attention to short-term fluctuations in the stock market is one of the most destructive things you can do for your long-term financial health.” -- Jim O’Shaughnessy
----------



It is painful to, for example, watch your SMA timing signal decline from +14.9% to +8.7% on its way, possibly, to the +0.0% trip-point.



“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

"Until you realize taking a beating is a normal part of long-term investing, you’ll hurt the overall performance of your portfolio.
Staying with your strategy during a pullback is difficult, and it never gets any easier."

Do you have a plan, or not? If so, stick to it.

When you look at a -6.2% move as above, you could also say "another -8.7% to go, we're not even halfway there."

FWIW, one of my subscriptions behind a paywall just now came out with this:

----------
"I think this is getting over-done, though I'm not willing to put new money to work just yet. But I am going to sell some of the hedge I put on from July 3rd, when I said to buy the ProShares UltraShort -2X S&P 500 (SDS), $24.20 real time market price, +3.7%, when it was at $22.72."

"as I write this (pre-market), the markets have taken ANOTHER leg down on the weak non-farm payrolls number that just came out. So if you were looking for an opportunity to buy, I think this is a good moment, especially if this now virtually guarantees a rate cut in September by the Fed based on the rally in bonds.

I will be back with some buy ideas, but this is clearly the shake out we have been waiting for.

----------

Who knows? Buy? Sell? Hold? Stick with your plan?

one of my subscriptions behind a paywall just now came out with this:
".... for an opportunity to buy, I think this is a good moment .... this is clearly the shake out we have been waiting for."
Who knows? Buy? Sell? Hold? Stick with your plan?

Who is the oracle who said that? Jim Cramer?

I was asked "the name of that service?"

It is Douglas Albo CEFs: Income + Opportunity
https://seekingalpha.com/author/douglas-albo
https://seekingalpha.com/checkout/mp_1237

I followed his free posts for a long time, and finally bit the bullet and subscribed a few years ago, when Preferred stocks basically quit working.

I believe it is important to "diversify strategies within a portfolio, and not just securities." Growth & value strategies are well covered here. But income(-ish) strategies are not. I reject Dividend Strategies as just stupid, and I don't much like bonds.
So income(-ish) strategy using CEFs filled that segment in my portfolio.

One thing he keeps pounding the table for is that in CEFs you need to focus on NAV performance & yield, not price performance & yield. Most small investors focus on the latter, which is why you see such things as GGT paying 17% yield at a premium of +85% while bleeding NAV.
Or CLM, paying 19.5% while NAV has gone from 22 to 7 in the last 10 years.
$10,000 initial investment went to $3,846 while collecting $12,229 dividends.

Like Wile E. Coyote running off a cliff, works
great until he notices that there is nothing holding him up.

One of my notes:
"Doug Albo (3/26/20): ETJ is really not a bull market fund even though investors will bid it up like one. It's more for protecting your capital in a deep bear market since investors will panic and drop the market price to a -20% discount. That's where you want to buy because your financial interest in the fund in a worst case scenario is NOT the market price, its the NAV."

FWIW, ETJ is currently at -9.8% discount and 8.9% yield.
$10,000 initial investment went to $8,424 while collecting $8,286 dividends, the last 10 years.


Eh, sorry I rambled on so long, I easily get carried away.

FWIW, one of my subscriptions behind a paywall just now came out with this:
----------
"I think this is getting over-done...

FWIW, here is a talking head quote from the opposing viewpoint : )

Global Investment Strategy newsletter from BCA Research. A subscription service I used to subscribe to. I stopped when it started costing over $12k/year, though I made a serious bundle on some of their recommendations. To over generalize, they follow where the big money is going. They've been advisors since 1947.

Their recent quote:
"At the end of June, BCA’s Chief Strategist Peter Berezin published his Quarterly Outlook report: “Here Comes the Pain” Peter and his team were tactically bullish on stocks for most of 2023, but shifted to neutral at the start of 2024, and downgraded stocks to under-weight in late June. Last week, he further fleshed out his thinking in a Q&A format report title “It’s Bear-zin Now."
The bottom line is: Don’t buy the dip."

Emphasis theirs. The comment was sent out July 26 by email to their ex-subscribers and presumably potential future subscribers.

Jim

Preferred work perfectly now. I get 7% safe yields.

As far as the Doug Albo behind paywall I mentioned, this is what he came out with this morning (8/5/24) pre-market:

if you don't sell your hedges on days like today, then when do you? As a result, I'm selling the last of my ProShares UltraShort -2X S&P 500 (SDS) and turning around and buying the ProShares Ultra +2X S&P 500 (SSO).

SSO is an aggressive, bullish idea but I'm going to give myself room to add just in case this gets even worse. The problem is that you don't know how low this forced selling will take things down during an unwind.

Those 2X leveraged ETFs on the S&P 500 have nothing to do with "CEFs: Income". But I guess they do fit in the "CEFs: + Opportunity" category. Weird dichotomy.

Hah! Just now at the open, finance{dot}yahoo is down, DOW is down -1200, S&P is down -4%.

Washout day? Black Monday wannabe?

Washout day? Black Monday wannabe? <?i>

It's not that big a dip in the grand sweep of history, but the mood to sell is clear.

One thing that's a bit surprising: when there is a bit of panic in world markets, normally the US dollar spikes upwards. A flight to safety usually means raising cash, and most of that cash normally gets shoved into greenbacks. But this time the dollar is falling. USD index is about the lowest since January.
Only about 3% above the five year lows.

Jim

But this time the dollar is falling. USD index is about the lowest since January.
Only about 3% above the five year lows.

Perhaps because everyone is expecting an interest rate cut. A cut weakens the dollar. It may be bigger and sooner than people were expecting recently.

Elan

Washout day? Black Monday wannabe?

Not yet. SPY is down about 6% in the last month (-3% today, and -3% the previous month).

Most extreme monthly SPY returns:

  Date    21d
19871028  -27%
20081022  -24%
20020723  -19%
20010920  -16%
20081120  -16%
19740912  -15%
20110823  -13%
19620605  -13%
20010316  -12%
19900824  -12%
20100525  -11%
20020920  -11%
20200330  -11%
19731212  -10%
  ...     ...
19740314  10%
19910225  10%
19621204  10%
19991115  12%
20200429  12%
19870129  13%
20081222  16%
19821103  18%
19820903  18%
20020821  19%

SPY is up 17% the last year (-3% today, and 20% the previous year).

Most extreme SPY returns (since 1950, previous 252 market days):

  Date    252d
20020723  -33%
19740813  -20%
20090724  -19%
20010717  -18%
19700814  -17%
19820805  -16%
20080724  -15%
19880728  -13%
19620705  -11%
  ...     ...
20200729  10%
19910725  11%
19930722  11%
19780809  11%
19920723  11%
20040723  12%
20230801  13%
19680716  15%
19810806  15%
20050722  16%
20100726  16%
20180727  16%
19750812  16%
20170727  17%
19560702  18%
19960718  19%
20140728  19%
19610705  20%
19720810  20%
19990719  20%
20240801  21%
19800806  21%
20110725  22%
19640707  22%
20070725  23%
19760810  25%
19520627  26%
19950720  26%
20030723  26%
19510628  27%
19630705  28%
19540702  28%
19860731  29%
20130726  29%
19850731  30%
19980717  30%
19710813  32%
19890727  33%
19590702  36%
20210729  38%
19500628  38%
19870730  39%
19550701  46%
19970717  48%
19830803  63%

  Date    252d
19500628  38%
19510628  27%
19520627  26%
19540702  28%
19550701  46%
19560702  18%
19590702  36%
19610705  20%
19620705  -11%
19630705  28%
19640707  22%
19680716  15%
19700814  -17%
19710813  32%
19720810  20%
19740813  -20%
19750812  16%
19760810  25%
19780809  11%
19800806  21%
19810806  15%
19820805  -16%
19830803  63%
19850731  30%
19860731  29%
19870730  39%
19880728  -13%
19890727  33%
19910725  11%
19920723  11%
19930722  11%
19950720  26%
19960718  19%
19970717  48%
19980717  30%
19990719  20%
20010717  -18%
20020723  -33%
20030723  26%
20040723  12%
20050722  16%
20070725  23%
20080724  -15%
20090724  -19%
20100726  16%
20110725  22%
20130726  29%
20140728  19%
20170727  17%
20180727  16%
20200729  10%
20210729  38%
20230801  13%
20240801  21%

Just my perception. It was ridiculously overbought ergo, you know it's got to retrench and catch its breath a bit. People like seeing patterns even where there aren't any. So, all the serious intonations of interest rates/Fed mistakes/ whatever else I might have missed. You can't tell me that just now today, because somebody talked to "the spirits" and decided The Fed is 60-90 days late with a 1/4 point rate cut it's "too late" and therefor the market and the economy are in uncharted waters and unprecidented times and...... you all know the drill. And it's Summer. Aug/Sept. What better months to drop a load and scare people? It all looks too pat. Too contrived.

It was overbought.

USD index is about the lowest since January. Only about 3% above the five year lows.

We must be looking at different things. DXY did fall on Friday and Monday with a low of 102.2 and recovered a little by the end of the day. However, back in early 2021 it was as low as 90. What index were you looking at?

DB2

But this time the dollar is falling. USD index is about the lowest since January.
Only about 3% above the five year lows.
...
Perhaps because everyone is expecting an interest rate cut. A cut weakens the dollar. It may be bigger and sooner than people were expecting recently.

Another popular theory: the carry trade had become popular again. People had borrowed vast piles of Japanese yen at low rates and plowed it into T-bills at much higher rates, collecting the interest rate differential. With leverage this is very profitable, while it lasts. As soon as there were hiccups in the market (especially the relative chaos in Tokyo markets), they decided that the risk of turmoil was rising and so decided to stop doing this, meaning selling their US bills and paying back yen loans. That requires selling dollars to buy yen. This drove the yen up and drove the dollar down.

Of course, trying to ascribe a reason for any market move is usually a bad idea, bordering on hubris. Things just happen sometimes!

Jim

We must be looking at different things. DXY did fall on Friday and Monday with a low of 102.2 and recovered a little by the end of the day. However, back in early 2021 it was as low as 90. What index were you looking at?

Ummmm....I looked at the right index but read the chart incorrectly. I counted the vertical lines which I thought were annual, but were each 6 months, oops!
So it's within spitting distance of the 2.5 year lows, not five year. What can I say? It was a hectic day : )

Jim

Sarcasm: A thing I love about the financial journalism is that the massive Japanese yen carry trade was not a thought of a whisper on anyone's lips as to a significant market risk. The simple stuff was - overbought mag 7, starting to come down, rotation into small caps, big buying of long dated Treasuries in anticipation of dropping yields, and the like.

Then three bad days "triggered" by a questionable jobs report and all of a sudden it's "oh look, that massive carry trade unwind of course OF COURSE!!"

I bet the number of people who were concerned about the size of that trade in a crowded old wooden theater way was less than the number of obscenely rich hedge fundies at one of the parties in the Hamptons last weekend.

Reeks of 2008-Q1 09 "gee why does the stock market keep going down? Have faith, it'll come back" journalism - until it was exposed AFTER the bottom of the crash that the investment banks were trading bull**** derivatives squared on top of knowingly fabricated mortgage bond "tranches".

Quelle horreur.

FC

It's a news writer's dream. From the FT:

"A carry trade is all the financial markets clichés at once. It’s picking up coins in front of a steamroller en route by escalator to a crowded rooftop bar before they take away the punch bowl. It’s Wile E. Coyote’s reversion to the mean, gradually then suddenly, having changed his mind after the facts change. Another cliché that fits is the one about crashes being a feature, not a bug...

(paywall)
https://www.ft.com/content/447fbfdc-6cf3-4b92-8767...

Jim

It seems to me that this was inevitable. Japan's central bank has basically provided liquidity for the other central banks to remain over tight in their monetary policy. As long as they did everything was fine, but once they began telegraphing their intent to end quantitative easing, it was a certainty that the borrowing of yen for free, converting that yen to dollars, and investing those dollars in the highest quality dollar-denominated assets would end. It had to.

https://www.ft.com/content/599790b6-abf1-4ca5-a1d9...

https://www.japantimes.co.jp/business/2024/07/31/e...

At its two-day policy meeting, the BOJ voted to increase its short-term policy rate target to 0.25% from a range of 0% to 0.1%. It also said that it would reduce its buying of government bonds through March 2026. An institution that had recently earned a reputation for being wishy-washy and making missteps instead acted decisively and with resolve. Just days before, the vast majority of analysts polled forecast that the central bank would remain dovish and leave rates unchanged until September or October in order to gather more data.

I've been thinking about the potential inevitability of Japan's central bank doing exactly this all year.

Post New

Pandemics FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.