I have a quiz question for you. If you are an investor using the trend-following technique, you believe the trend is your friend. One of many methods used to identify a trend is to add up the past twenty, fifty, and two hundred days of prices, and then average them out in order to see…
We currently have investments aimed at the Managed Health Care industry in several of our model portfolios. The position has not been performing up to expectations as of late, and as is the routine here, that meant a complete review of the industry and holding to reassess our conviction in it. A security review in…
In the July 26th issue of Businessweek, the feature article titled “Amber Waves of Pain” attacks the commodity Exchange Traded Fund (ETF) market. They note that investors were “angry” about certain ETF investments that did not perform as expected including the U.S. Oil Fund (symbol: USO). This was mostly due to a condition in commodity…
I just returned from Las Vegas where I attended a four day investment conference. The eight hours of flying time (round trip) offered a great opportunity to get caught up on my reading list. This Time is Different, Eight Centuries of Financial Folly, is an immensely important book written by Carmen Reinhart and Kenneth Rogoff.…
Last week in his testimony before the House Banking Committee, Federal Reserve Chairman Ben Bernanke testified that the economic outlook was “unusually uncertain.” Bernanke’s comment raises the question of what is the “usual” level of economic uncertainty. For example, in the days leading up to the financial catastrophe that struck Wall Street due to the…
I saw this chart a few weeks ago, although I cannot remember where, and brushed it aside. But I felt compelled to recreate it today after sifting through some sentiment indicators. Sentiment Indicators are used in technical analysis to gauge investor attitudes toward the market. They allow a market observer to quantify the level of…
The big news at the end of last week was the release of the results of the European Union’s “stress test” of its banking system. As it turned out, only 7 of the 91 financial institutions that were examined would “fail” under the adverse scenario used in the test, with an estimated capital shortfall of…
Sunday’s headline in the Washington Post reads, “Battle looms on tax breaks,” “Bush-era cuts for rich at issue,” “Democrats see a chance to put GOP on the spot.” The story, by Lori Montgomery, explains the upcoming political showdown over tax cuts in some detail and points out that the politics of extending the Bush tax…
Not surprisingly, defensive market sectors have generally outperformed since the latest bout of market volatility hit in late April. Through yesterday, many cyclical sectors are down by double-digits since then; the S&P 500 is still down by about -10% from its high on 4/23. Meanwhile, defensive sectors like Consumer Staples and Telecom are only down…
One of the differences between the latest correction and previous market setbacks in this bull market has been the return of system risk. Many of the system risk indicators we follow are bond market relationships and we have written about them in this blog from time to time. One of those measures is called the…
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