Market Perspective (9)
If you have never seen Rocky IV go watch the movie and then come back and read this article because the six-year old bull market is in a very similar position to Ivan Drago in round two of his fight with Rocky. Throughout the entire movie leading up to round two, Drago is depicted as an unstoppable force who literally killed Apollo Creed in the ring.
“In two fights with Apollo, Rocky was lucky to survive; how would he possibly defeat the bigger, stronger Russian fighter? Once you see that Drago is being pumped full of steroids the task of beating him is nearly unfathomable. When the fight begins, Drago predictably pounds Rocky for the first round and a half. Battered, bloodied, and exhausted Rocky stands in and takes the beating until the moment comes for him to unleash a massive right hand that cuts Drago’s left eye. “The Russian is cut, and it’s a bad cut”, the announcer exclaims! What does this have to do with the stock market in the first quarter? Simply put, the bear (Rocky) wounded the bull (Drago), and the tide is about to turn.”
A failing ceasefire in Ukraine, "Grexit Part Deux", plunging commodity prices, the closure of the Port of Los Angeles, and the east coast resembling the planet Hoth; how does that make you feel about stocks sitting at all-time highs?
Interest rates have recently crept back above 2% on the 10-year Treasury; how does that make you feel if you have between a third and a half of your investable assets in bonds? How about real estate in your area; are there a growing number of for sale signs or are prices continuing to rise? Seemingly everywhere you look, asset bubbles exist with few appealing alternatives to diversify ones risk. In periods like this, the best thing an investor can do is assess their short, intermediate, and long term goals and reallocate their assets to match their needs for life's liquidity events.
Leading up to the 2014 NFL season, many experts in the world of sports media had predicted the Chicago Bears would be an elite offense in their second year under Marc Trestman. Further, it looked like the “break-out” year for Jay Cutler; the “talented” quarterback who was supposed to save the Bears franchise when they traded for him in 2009.
Last week, Marc Trestman and the man who hired him (Phil Emory) were fired; the Bears finished 5-11 and were ranked 23rd out of 32 teams in total offense. The point of this is simply you cannot be an expert at predicting the future regardless of your field of expertise. That does not mean there isn’t value in playing the “what if” game when looking at the year ahead; just remain connected to a strategy that fits your goals and risk tolerance. Understanding who you are as an investor will always be your most useful tool when approaching the market in good times and bad.
- 2015 Market Outlook
- Oil Prices
- Interest Rates
- Affordable Care Act
- Stock Trader’s Almanac
- Goldman Sachs
- Chicago Bears
- Marc Trestman
- Jay Cutler
- High Yield Bonds
- Vladimir Putin
- Shinzo Abe
The Republican Party scored a major, although somewhat expected victory in this year's midterm election.
Not only did the Republicans take control of the Senate, but they added to their numbers in the House while posting strong results in gubernatorial races as well. In listening to "political experts", the nature of that control and how it will be used over the next two years is the biggest unknown.The Republican Party that will control Congress is far from a unified group and one has to wonder if they will be able to focus their attention on major issues like tax reform and immigration; or will it be two years of investigations into Benghazi, the IRS, and a flailing attempt to repeal the Affordable Care Act (ACA). There are significant differences in the Republican Party between the likes of Mitch McConnell, Mario Rubio, Rand Paul, and Ted Cruz. Throw in the specter of a Jeb Bush run in 2016 and you have the potential for total anarchy in the party. How will these distinctly different paths impact the last two years of the Obama Administration and what impact can that have on the markets looking forward to the 2016 Presidential Election?
In our view, the deterioration of the geo-political landscape took a major step back in the third quarter in three main areas.
The first area is in Ukraine, where tensions escalated significantly on July 17, 2014 when Malaysia Air Flight 17 was shot down killing all 298 aboard. While Russia and the West disagree on who shot down the plane, the preponderance of evidence presented suggests it was rebels in Ukraine armed with Russian weapons. The downing of MH17 may well have been a mistake as many are quick to suggest, but the net effect is roughly the same. Since that time, the United States and the EU have issued multiple rounds of sanctions targeting individual oligarchs, financial transactions, and major state industries. Meanwhile, Vladimir Putin, not one to sit on its hands, has launched numerous incursions into eastern Ukraine in an attempt to build a land bridge with newly acquired Crimea. Russian aggression has not stopped at Ukraine; there were 16 events of Russian bombers invading US airspace between the end of July and August 7 alone. Since that time, news of Russian planes violating or approaching the airspace of various European countries as well as the US and Canada has continued. The Russian ruble dropped to a historic low vs the dollar on 9/21/2014 at 38.80.
With the passing of the Hall of Fame Game this past weekend, Fantasy Football season has officially begun.
Months of anticipation have led to the beginning of the fantasy draft season. No longer can one rest on the laurels of last year's victory, and, if you lost last year, then you can no longer continue to wallow in defeat. Hope springs eternal and, with the right strategy, the right amount of research, and some lucky breaks on the injury front, you could be a champion this year. So ask yourself . . . are you ready? Do you know your draft position and what player you will take with your first pick? How would you assess your knowledge of late-round value picks? Sleepers? Keepers? If you can't answer these questions, you are behind the eight ball already. For you, time is of the essence. Realistically, you don't even have time to read this article . . . but you should probably keep reading.
“Investor Complacency.” This buzz phrase du jour is best understood through the lens of one of those great parties you never want to end, when the day after is not even a passing thought.
Like many of you, I have been to some great parties in my day (sadly none of them at the Playboy Mansion), and they all have some similarities: the “grand purpose” for the party, the benign start of the evening, the middle of the festivities where nothing can go wrong . . . and the inevitable day of reckoning that follows. Perhaps you have never been to one of these parties or experienced such euphoric highs and reality-altering lows, but certainly you have seen them in the movies. Classic films like Bachelor Party, The Hangover, and especially Weird Science would best fit the bill given what we believe has been the extraordinary market manipulation since the financial crisis by central banks, high-frequency traders, and out of control government regulation. The highs and lows of the stock market can be seen in the epic parties of your life or in these classic films.
One small step for establishing a bank, one giant leap for de-dollarization . . .
On Tuesday July 15, 2014, with the signing of the BRICS Contingent Reserve Arrangement (CRA). The basic explanation: a banking institution to counter-balance and more effectively represent the needs of the 3 billion people currently being underserved by the IMF (US) or the World Bank (Europe). The political view: another win for Putin vs. the USA during a period of global political evolution. The world is moving away from the unilateral model of the United States serving as the "Global Wet Nurse & Policeman," to a model of global governance based on a greater emphasis on regional leadership to resolve conflict and the promotion of economic policies. While this process has been underway for a while (every empire eventually loses its position on top), the recent speed of the transition is alarming.
Knock knock . . . who's there? A correction . . . A correction, who? Fooled you again!
The US equity markets continued their steadfast march to higher ground in the first half of 2014 (1), based on whatever aggregate pool of data the analysts de jour care to cite during their CNBC moment. The fact is, the economic and earnings numbers are subject to consistently lowered bars on a quarterly basis year after year. The "recovery" following the Great Recession has left Main Street with the same empty feeling as your stomach two hours after eating Chinese food. Meanwhile, investors are choking down earnings that, when adjusted for the buyback market and persistent "cut-to-the-bone-to-find-efficiency" model of corporate management, leaves equities hovering on the ever-thinning ledge of profit margins . . . Climb higher?
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