Trading in Our Scalpel for a Hatchet

Somewhere during the last few weeks the weight of the evidence changed enough in our minds to declare that we are likely at the beginning of a new bear market. As always, the ultimate decision to call for a bear market was part quantitative, part qualitative, and part pure judgment. We wouldn’t single out any…

Springing into Action

And we thought last week was volatile. Apparently, it was just a mild preview to this week’s fireworks in the stock market. Just in case you haven’t been paying attention, the daily S&P 500 returns so far this week are -6.6%, +4.7%, -4.4%, and +4.6% (through Thursday). Whew.

Is it Time to Trim the Hedges?

At the moment we have concluded as a firm that the higher probability is that we are in a new bear market rather than a severe correction like we witnessed last year. Therefore we have been busily crafting and re-crafting strategies to deal with this hostile period for the market. Luckily we have some hedges…

Discounting a Recession

It seems clear that the financial markets have moved past any rational response to a credit downgrade by Standard and Poor’s of U.S. debt from AAA to AA+, and moved on to worrying about recession. Bond investors clearly shrugged off any concerns yesterday as Treasury yields actually fell and bond prices rose on the day.…

The Golden Mean

Boy, it is ugly out there! On the back of European problems and a disappointing world growth outlook, US markets are down more than 4% today as I write this. The S&P is now negative for 2011, the key support zone of 1250 has been broken and the cyclical trend line from March 2009 has been…

ISM Getting Everyone Refocused

The latest Institute of Supply Management (ISM) manufacturing number came out this morning and it was disappointing (shown in the chart below). The 50.9 number was much less than the 54.5 print that was expected by the market, and predictably stocks immediately sold off on the news. Virtually every component, including prices paid, production, new…

Risks Inherent in Risk Protection

Given the amount of macro risk currently facing markets, we have a number of hedges employed in our portfolios for different scenarios. If you’re a fan of the deflation argument, we own some long maturity Treasury bonds. If you’re more worried about inflation or monetary debasement, we own some gold. If the risk of further…

Triple Digit Oil – Again

It was nice while it lasted. Oil recently fell from a high of $115 to $90 and gas prices fell from $4/gallon to $3.53 but that party is over. Oil crossed above the $100/barrel mark once again yesterday (as shown in the chart below) and higher gasoline prices are sure to follow as the summer ends.…

Debt Ceiling Q&A

Due to the fast approaching August 2nd debt ceiling deadline, and increasing media coverage, many of our clients have come to us with questions regarding our views on the issue.  We compiled the most common questions and our answers into a brief Special Report, which is posted on the main Pinnacle website. Please click here to read…