Following my search for predictable stockmarket patterns ("Real Cycles"), Joseph Dancy analyses the phenomenon of winter season investment growth. It seems that "sell in May and go away" is still good advice. Dancy quotes Mark Hulbert:
[The research] implies that simply going to cash between May Day and Halloween will have only minor impact on long-term returns while dramatically reducing risk -- a winning combination that would show up in a much improved risk-adjusted performance.
Until everybody does it, of course. But what are the chances of that happening?
Saturday, November 17, 2007
Friday, November 16, 2007
Off motif
Some music education howlers - though to me they seem inspired...
An opera is a song of bigly size.
A harp is a nude piano.
Find more here: Missouri School Music Newsletter
Picture(s) source
Thursday, November 15, 2007
Guh-nomes
I read somewhere that in Harold Wilson's 1956 attack on Swiss bankers' alleged foreign currency manipulations, he pronounced "gnomes" with a hard G, perhaps for oratorical emphasis. Now Jim Willie thinks these shy creatures can be seen popping their heads above ground level again:
The Swiss want power to return to central Europe. Recall that the owners of the US Federal Reserve are reported to reside in both Switzerland and London, in more control of US monetary policy (if not political leaders) than people realize.
He thinks the Swiss franc is set for a rise.
Speaking of which, I speculated some while ago that Warren Buffett's currency speculation may have been in the "swissy", perhaps as a hedge against possible forex movements while negotiating a bid for the Zurich financial group. Not that I'd put any money on either of those horses, of course.
So much of European history is connected with mining: Martin Luther and Protestantism generally - maybe because digging out wealth with your own hands gave you a certain independence from government, and a taste for even more freedom. Perhaps that's the underlying theme of gold: intrinsic value that can't be stolen by rulers.
Update
... though according to this story, it can be seized by force, as we see in today's Federal raid on the Liberty Dollar. Watch out for more of this story and the call for a legal class action to follow. Governments have no sense of humour about unofficial challenges to their currency.
... but the news is no use
Ghassan Abdallah echoes what I've been thinking for some time, namely, that financial news (a) comes too late to help you make decisions, and (b) like the market charts, can be interpreted in either a bullish or a bearish way.
His advice is to get a sense of the underlying trend. I agree, though I'm unhappy about what I'm sensing.
His advice is to get a sense of the underlying trend. I agree, though I'm unhappy about what I'm sensing.
"It's good news week"
... as the ironic (though barely intelligible) Hedghoppers Anonymous song went.
For while Japan and China are selling down their holding of US securities, the UK is gobbling up even more, according to Matt's graphs at Discursive Monologue. Maybe we want to be second in Uncle Sam's hierarchy of foreign creditors, instead of third.
And US employment is holding up, according to the official October figures - but not if you use a different measure, says Chris Puplava.
For while Japan and China are selling down their holding of US securities, the UK is gobbling up even more, according to Matt's graphs at Discursive Monologue. Maybe we want to be second in Uncle Sam's hierarchy of foreign creditors, instead of third.
And US employment is holding up, according to the official October figures - but not if you use a different measure, says Chris Puplava.
Synthetic alarm?
Gold's fallen nearly $50 dollars off its 7 November high, just as everything else seems to be taking on a crimson hue.
Is it central bank intervention in the bullion market, or gold forgetting it's a currency and trying to be a commodity, or a temporary slackening in demand because of investment houses having to pony up some cash to cover other positions?
"Danger! Danger!" to quote Robby the Robot from Lost In Space - and next episode, the meteor shower will hit the ground harmlessly.
Is it central bank intervention in the bullion market, or gold forgetting it's a currency and trying to be a commodity, or a temporary slackening in demand because of investment houses having to pony up some cash to cover other positions?
"Danger! Danger!" to quote Robby the Robot from Lost In Space - and next episode, the meteor shower will hit the ground harmlessly.
Wednesday, November 14, 2007
Which banks are weakest?
Matt at Discursive Monologue compares the banks' mysterious black-box "level 3 assets" with the value of shareholder equity, to give an idea of the scale of the risk the investor in financial stocks may be taking.
Turkeys should note that Thanksgiving is on November 22 this year.
Turkeys should note that Thanksgiving is on November 22 this year.
Mutts of the Dow
Greg Silberman suggests buying cheap, small-cap US stocks. Shades of Sir John Templeton's founding investment at the start of WWII?
Pioneer work ahead
Nigel Maund (November 5, republished in SafeHaven Nov. 12), after a florid beginning, concludes that gold must rise and the dollar must be defended with heavy interest rate rises:
...gold's great bull market will be the harbinger of a major global recession or, more probably, a depression brought on by a sequence of massive defensive interest rate rises required to support the dollar in its pre-eminent position as a global currency, with all the benefits, political and economic, that this brings to the USA.
...gold's great bull market will be the harbinger of a major global recession or, more probably, a depression brought on by a sequence of massive defensive interest rate rises required to support the dollar in its pre-eminent position as a global currency, with all the benefits, political and economic, that this brings to the USA.
Riding the waves
Eric Chevrette shows how the chartists can read the same pattern in radically different ways. His view is that the US market is due to go up, not down - though the declining dollar still makes other regions and assets look more attractive.
To what extent can one sensibly make predictions from the line alone, instead of interpreting it in the light of theorized underlying causes?
To what extent can one sensibly make predictions from the line alone, instead of interpreting it in the light of theorized underlying causes?
Financial liquidity for dummies
At last, somebody spells it out for us. A testy (which I like - the man is clearly genuine in his desire to communicate) article on how the Federal Reserve influences interest rates, and the important distinction between permanent and temporary cash injections. Karl Denninger ("Genesis" of Market Ticker) reads between the lines and suspects a bank has been caught short in the bad-loan imbroglio.
He also directs us to a useful blog ("The Slosh Report") on Fed Reserve liquidity operations, and the Fed's own funds site, which you can find here.
Denninger is rightly outraged at the cynical abuses of the financial system, and quite emphatic that US real estate will have to devalue by 30% - 50%. He has set up a petition, sadly limited by its nature to US citizens.
And a video, though I find the use of nuclear explosion imagery counter-productive (I've momentarily forgotten the psychological term for this, but it's a "never happen, Cap'n" response to terrible imaginings).
He also directs us to a useful blog ("The Slosh Report") on Fed Reserve liquidity operations, and the Fed's own funds site, which you can find here.
Denninger is rightly outraged at the cynical abuses of the financial system, and quite emphatic that US real estate will have to devalue by 30% - 50%. He has set up a petition, sadly limited by its nature to US citizens.
And a video, though I find the use of nuclear explosion imagery counter-productive (I've momentarily forgotten the psychological term for this, but it's a "never happen, Cap'n" response to terrible imaginings).
Tuesday, November 13, 2007
America will survive
Mark Twain claims not to be dead, May 1897Wifred Hahn (SafeHaven) gives his reasons for thinking that, post-bubble-burst, American fundamentals will improve, at least for a while.
Is the US going through a bit of slow-down ... a bit of currency trashing? Yes, of course. It is deserved. But economic adjustments will now occur, feeding through to other world economies. Gradually, the trade (non-energy) deficit will shrink. Once foreign equity markets begin declining significantly in anticipation of a slowing global economy and the USD has put in a bottom, it is possible that a torrent of foreign-invested portfolio capital will return to the US. Some estimates put the value of this foreign investment at over $1.5 trillion (and rising as the US dollar falls.)
From our perch in Canada, the next few months likely present the lowest risk buying opportunity of US dollars in at least a century. US "large-cap" companies with significant overseas operations are also attractive on a relative global basis as these are best able to weather an economic slowdown. America will survive for a few years longer.
Real cycles
The number 11 bus, or Outer Circle, takes about two hours to go round Birmingham. Years ago, it was regulated by Bundy clocks at various points on the route. However early he arrived, the driver would have to wait for the correct moment, insert his key, then continue with his journey.
With any routine, selfish habits creep in: the consumer pays, but the service revolves around the provider. Even in the coldest weather, the driver, shut in his heated cab, would leave the passenger door open at each stop, including the long pauses at clock stages; this saved him having to punch the control for the door if a new fare should arrive. If the driver got hungry, he might pull up outside a fish and chip shop and get a hot meal to eat off his dashboard as he drove. On the 16 route, there was an green-painted cast-iron Victorian public urinal just off the Soho road, where the driver would stop off when he felt the need - leaving the bus door open, as usual.
"As above, so below", the alchemists said; and vice versa. I read a long time ago how British elections tend to be timed around economic boomlets; and more recently, how the American economy revives every four years to fit the fixed-term Presidential elections. Among stockbrokers, it used to be said "Sell in May, and go away", so the market suited the requirement for gentlemen to relax in summer; and see how even now, the Dow and the FTSE rise towards the end of the year, when traders' annual bonuses are calculated - the Tech boom of 2000 being an excellent example.
The doomsters don't tend to set timetables - maybe they've learned that from the Jehovah's Witnesses (I don't know how often The Watchtower showed us that the end was possibly going to come very soon - a favourite image was a runaway train heading downhill to a bridgeless chasm). So I'll my neck out instead and make a prediction: the Dow will rise until bonus time, then flutter nervously until the 2008 Chinese Olympics; then there's the US Presidential election to get through; then we'll have the reckoning. A new president will be able to say, "I've had a look at the books, gentlemen, and I hadn't realised how badly the company was managed." And at last, the corrective process will really begin.
That's my chance to join the ranks of the comprehensively wrong. Place your bets.
With any routine, selfish habits creep in: the consumer pays, but the service revolves around the provider. Even in the coldest weather, the driver, shut in his heated cab, would leave the passenger door open at each stop, including the long pauses at clock stages; this saved him having to punch the control for the door if a new fare should arrive. If the driver got hungry, he might pull up outside a fish and chip shop and get a hot meal to eat off his dashboard as he drove. On the 16 route, there was an green-painted cast-iron Victorian public urinal just off the Soho road, where the driver would stop off when he felt the need - leaving the bus door open, as usual.
"As above, so below", the alchemists said; and vice versa. I read a long time ago how British elections tend to be timed around economic boomlets; and more recently, how the American economy revives every four years to fit the fixed-term Presidential elections. Among stockbrokers, it used to be said "Sell in May, and go away", so the market suited the requirement for gentlemen to relax in summer; and see how even now, the Dow and the FTSE rise towards the end of the year, when traders' annual bonuses are calculated - the Tech boom of 2000 being an excellent example.
The doomsters don't tend to set timetables - maybe they've learned that from the Jehovah's Witnesses (I don't know how often The Watchtower showed us that the end was possibly going to come very soon - a favourite image was a runaway train heading downhill to a bridgeless chasm). So I'll my neck out instead and make a prediction: the Dow will rise until bonus time, then flutter nervously until the 2008 Chinese Olympics; then there's the US Presidential election to get through; then we'll have the reckoning. A new president will be able to say, "I've had a look at the books, gentlemen, and I hadn't realised how badly the company was managed." And at last, the corrective process will really begin.
That's my chance to join the ranks of the comprehensively wrong. Place your bets.
Measuring relative value
Fiat currency is elastic - it stetches and contracts according to the demand for, and supply of, credit. So it is an unreliable tool to measure the value of anything.
George Kleinman addresses this problem and suggests a relativistic approach: compare the historical price ratios of different asset types. He admits that you can play this game forever, but it's not his fault that governments have corrupted our traditional yardstick. All you can hope for is some sense of trend, which is what all this rune-reading is for, anyway.
His conclusions: gold looks undervalued against oil, and not overvalued against either the Dow or silver. His trend feeling: a coming economic and stockmarket downturn.
Financial Sense may be run by investment advisers, but I feel their commitment to public education goes well beyond self-interest. It's a sort of University of the Air.
George Kleinman addresses this problem and suggests a relativistic approach: compare the historical price ratios of different asset types. He admits that you can play this game forever, but it's not his fault that governments have corrupted our traditional yardstick. All you can hope for is some sense of trend, which is what all this rune-reading is for, anyway.
His conclusions: gold looks undervalued against oil, and not overvalued against either the Dow or silver. His trend feeling: a coming economic and stockmarket downturn.
Financial Sense may be run by investment advisers, but I feel their commitment to public education goes well beyond self-interest. It's a sort of University of the Air.
Monday, November 12, 2007
Tear your eyes away from the gold watch
A sound article from Clif Droke, about psychology, avoiding the extremes of bulls and bears, and remembering that being a contrarian means going upbeat when the crowd feels down.
Sovereign wealth funds: a tidbit
Adrian Ash in Financial Sense:
BCA Research in Montreal thinks that "sovereign wealth funds" owned by Asian and Arabian governments will control some $13 trillion by 2017 – "an amount equivalent to the current market value of the S&P500 companies."
BCA Research in Montreal thinks that "sovereign wealth funds" owned by Asian and Arabian governments will control some $13 trillion by 2017 – "an amount equivalent to the current market value of the S&P500 companies."
Sunday, November 11, 2007
Is an irregular cycle a cycle at all?
And 'mid this tumult Kubla heard from far
Ancestral voices prophesying war!
There is a kind of thrill in contemplating destruction - it's a whorl in the grain of human nature. Jeffrey Nyquist indulges this tendency in a piece about Robert Prechter Jnr's views on mass psychology and the markets, and our facing possibly the biggest economic depression since the founding of the American Republic.
You know how everything seems so bright when you get out of the cinema?
Ancestral voices prophesying war!
There is a kind of thrill in contemplating destruction - it's a whorl in the grain of human nature. Jeffrey Nyquist indulges this tendency in a piece about Robert Prechter Jnr's views on mass psychology and the markets, and our facing possibly the biggest economic depression since the founding of the American Republic.
You know how everything seems so bright when you get out of the cinema?
The returning wave
As Japanese currency is getting out of risky investments and heading home, Brady Willett lists the factors putting the dollar under downward pressure:
In recent weeks the markets have speculated that the Saudis may drop their peg, that other Gulf states and sovereign wealth funds in the area are lightening their exposure to the dollar, and that OPEC continues to eye settling in Euros instead of dollars. Also recently China and Japan dumped a combined $33 billion in U.S. Treasuries (in August), and Chinese officials have continued to discuss reducing exposure to the dollar. Suffice to say, that against an already uncertain backdrop U.S. dollar holders are coming forward threatening to fan the flames and talk of the dollar era being over is running hot is hardly encouraging. Less encouraging still is the fact that those who previously cheered the dollar’s decline are turning scared.
He wonders whether we may see an emergency support plan for the dollar.
Saturday, November 10, 2007
Avast behind!
Pearce Financial (Financial Sense, yesterday), like Marc Faber, believes that the East is dangerously overheated and deflation could hit commodities as well as shares; also, the dollar could rise again, and the Japanese yen might break free from its moorings.
I'd like some help with understanding this last, as tides of returning dollars and yen would seem to argue inflation in their home countries.
Karl Denninger (Market Ticker, yesterday) explains it as a relativistic effect:
Our problems are bad. The problems that will be faced overseas are FAR WORSE. Overseas economies are dependant on us, not the other way around. When this sinks in the other currencies against which the DX is measured will collapse; this will appear to raise the dollar, but in fact it is the sinking of other currencies.
"Tom the cabin boy smiled, and said nothing."
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