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Weighing the Week Ahead: Time for Some Hedging?

3 days ago

The economic calendar is extensive with a focus on housing and consumer behavior.  Expect market participants to look for any sign that the economic recovery is stalling in the face of the COVID-19 surge and the slower pace of reopening.  Unemployment claims data remains an especially important indicator.  Second quarter earnings reports, beginning with the big banks, will also provide a closely watched perspective on the economy.

With so many worried about an economic stall it is natural to ask:

Is it time to do some hedging?

This week’s image is from Sportpunter.com, which takes a British, quantitative, and sports perspective on the hedging question. The image suggests that it is not as easy as it might seem.

In my last installment of WTWA, I drew upon the wisdom of

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Weighing the Week Ahead: Don’t Look Back!

10 days ago

The economic calendar is modest, and many market participants will probably extend their long weekends.  The ISM Non-Manufacturing Index and jobless claims data will be the most important.

Credit for today’s theme goes to Satchel Paige, one of the greatest pitchers of all time.

Don’t look back; something might be gaining on you.

Picture Courtesy of Simpson Street Free Press, where you will also find a nice article by Patricia Cazares, age 13.

In my last installment of WTWA, I described the fragile state of the economic recovery and asked whether it could be sustained.  Bloomberg apparently thinks that I was on the right track, since they ran this story on June 29th: Coronavirus Resurgence Threatens Fragile U.S. Economic Recovery.  Check it out and compare the information

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Investing for the Long Term: Consider Potential Outcomes

11 days ago

I have separated my long-running Investor section from Weighing the Week Ahead. My hope is to highlight ideas for the long-term investor.  In last week’s post I introduced the key concepts and showed some of our survey results.

For now, and for as long as the pandemic weighs on the market, that is the necessary context for each stock idea.  To provide a starting point, I created The Great Reset Matrix.  Thanks to readers who made suggestions after the first version.  It is still a work in progress.

The Matrix is a conceptual guide, which I use in evaluating every new stock idea.  The current version draws upon results from the Great Reset Project, where readers have joined in to help with my Wisdom of Crowds approach.  The results may seem like common sense.  Good!  Comments from

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Weighing the Week Ahead: Sustaining a Fragile Recovery

17 days ago

The economic calendar is a big one, compressed into a holiday-shortened week.  Market participants will be checking out shortly after the Thursday morning jobs report for an extended weekend – somewhere! Employment data is the focus, but ISM manufacturing, consumer confidence, industrial production, factory orders, pending home sales, and auto sales are also all on tap.  Everything except auto sales is predicted to increase smartly.

The economic news is encouraging, but the worry continues:

Can the fragile recovery be sustained?

In my last installment of WTWA, I brought together evidence about the mixed messages facing investors.  I expected that to be a focus for the week and it was. The chart for the week displays the market reaction, confirmed but good economic data and

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Investing for the Long Term: Time to be Wary

20 days ago

I have separated the Investor section from Weighing the Week Ahead.  Last weekend I described my intention to highlight investment ideas for long-term investors.  I can do it better in a separate post, as I hope you will soon see.

I am going to include more of my own commentary on each idea.  I will cite only ideas that are well developed and could be a good fit for some investors.  I hope to add value in three ways:

Each idea will get a “matrix nomination.”  This is an effort based upon my Great Reset idea – focusing on what will work on the “other side” of the recession.  You can see past research or become a part of the project by signing up for a free membership.  I will continue to disseminate results in post like this one, and you can help.  Here is the current version of the

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Weighing the Week Ahead: Understanding a Mixed Message

24 days ago

The economic calendar is normal including reports on home sales, consumer confidence, personal income and spending and jobless claims.  The final revision of Q1 GDP will be of less interest.  While there is growing interest in economic data, most investors and analysts know that the threat from COVID-19 has not ended.  Bloomberg Businessweek’s cover story about The Great Disconnect.

The most important question remains:

How should investors interpret the mixed economic and market messages?

In my last installment of WTWA, I asked whether investors could depend on the rebound trend.  So far, so good.  The list of “propositions to consider” will be a good touchstone in a few months.  With my vacation at an end, today’s post provides a better opportunity to examine these questions

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Weighing the Week(s) Ahead: Can Investors Depend on the Rebound Trend?

June 14, 2020

The economic calendar is normal, featuring housing data and retail sales. Everyone is also watching jobless claims for confirmation that employment is rebounding from the extremely depressed levels.

With so many economic and market crosscurrents, it is a good time for investors to align their expectations with the time frame of their plan.

Will the rebound trend continue? And for how long?

In my last installment of WTWA, I described the need for balance between economic and health concerns. There was some discussion of this specific topic and lots of talk emphasizing both sides. I expect this to be a continuing question for all – investors or not.

I always start my personal review of the week by looking at a great chart. This week I am featuring Jill Mislinski’s version, an

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Website Migration

June 12, 2020

In order to provide a better user experience, we are currently in the process of moving the website.  You may notice a few hiccups–temporary problems we expect to resolve quickly.

Thanks for reading and for your patience.

Jeff

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Weighing the Week Ahead: Are We There Yet?

May 31, 2020

The economic calendar is a big one, featuring several employment reports, including the official version from the BLS. The ISM manufacturing and non-manufacturing surveys provide an early look at economic changes. Despite the significance of the data, most are regarding it as old news. There is widespread willingness to look beyond the chasm of this recession and ask what it will be like on the other side. You can almost hear the chorus of voices asking,

Are we there yet?
Or might there still be a few detours on the road to Walley World?

In my last installment of WTWA, I described the need for balance between economic and health concerns. There was some discussion of this specific topic and lots of talk emphasizing both sides. I expect this to be a continuing question for all –

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Weighing the Week Ahead: A Search for Balance in the Great Reopening

May 24, 2020

The economic calendar features many important reports – housing, consumer confidence, personal income, personal spending, and the Fed’s Beige Book. We now have April data for economic reports and May data for confidence. It is more relevant for seeing the extent of the economic damage. But it is not what people really want to know.

Everyone is making a personal decision about whether and how to venture out after a period of restrictions. There is a balance between the desire to enjoy freedom and the continuing fear of COVID-19. For business owners it is a question of how quickly to reopen and what precautions are necessary. For investors, it will be the first indication of how long the recession might last.

The economic effects lead in one direction. The need for safety suggests

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Weighing the Week Ahead: There are No Shortcuts!

May 17, 2020

The economic calendar is light with a focus on housing reports. These are becoming interesting again since we are getting a look at data that reflects the crisis effects.

The reopening of the economy will continue as the leading story. What will be the safeguards in reopening businesses and the precautions taken by those venturing out? Many will worry about a rebound in COVID19 cases. Others want to see improvement, and they want it right now!

Dr. Anthony Fauci: “…(Y)ou’ve got to understand that you don’t make the timeline, the virus makes the timeline.”

The virus timeline ripples through the pace of reopening, the economic impact, the need for government action, corporate earnings. And finally, of course, financial markets.

There are no shortcuts.

In my last installment of WTWA,

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Weighing the Week Ahead: Roadblocks to Recovery

May 10, 2020

The economic calendar is a normal one and is beginning to include data from after the start of the crisis. This week includes small business and consumer sentiment surveys, as well as April data for retail sales and industrial production. I will also be watching jobless claims, both new and continuing. As I have noted for weeks, none of this will matter. The stock rally on a day with a terrible jobs number makes clear the actual market focus. I expect market participants to be monitoring the economic reopening and asking,

What are the roadblocks to the rebound?

In my last installment of WTWA, I described the high-stakes gamble involved in the economic reopening. That was a good (but perhaps easy) guess about the topic of the week. Financial news made it the lead story throughout

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Close Reading: Will the Market “Tumble Back to its Coronavirus Lows in March?”

May 7, 2020

A reader saw a disturbing article and sent me a question about it. I suspect that many other readers of this article were also worried. It was a mainstream media article using data from a reputable source. Despite these credentials, the title, Will the stock market tumble back to its coronavirus lows in March? About 92 years of S&P 500 history says there’s a good chance, is not supported by the evidence and argument.

Investors must protect themselves by going past the headline. If the conclusion seems important, give the entire article a close reading before taking any action with your investments. I’ll use this article as an example. Let’s start with the heading for the story:

“Since 1928, reviewing the past 25 bear markets, there has been a lower price put in by the S&P 500 index

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Weighing the Week Ahead: Are You Ready for Some High-Stakes Gambling?

May 3, 2020

It is a light economic calendar if measured by the number of reports but an important one given the focus on employment. We will get reports from ADP, the “official” BLS employment situation numbers, and the weekly early indicator from jobless claims. Whatever else happens in the economy, jobs take center stage.

Despite the interest in employment, markets are looking beyond the current horrible numbers. Everyone is paying attention to the reopening of the US economy and how things will look in the future. The nature and pace of the reopening has implications for your personal health, societal wellbeing, and financial markets. The question is:

Are you ready for a high-stakes gamble?
The gamble is especially interesting, partly because one’s ability to control personal risk is much

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Boost your Cardinal Health Dividend Yield

April 30, 2020

Now more than ever many investors need consistent income without a threat to their nest egg. There is a path for this, and it coincides with the best general investment strategy:
Take what the market is giving you!
The current market gift is high volatility which makes equity options very expensive. This has not slowed down the small traders who are speculating by buying options. The pros are selling them, and you can safely join in.
I described the concept in this post The Quest For Yield, Part 8: Find What Is Working. I reviewed this and other methods in my “Yield Quest” series from eight years ago.

The program, which I call Enhanced Yield, consists of buying a good dividend stock and selling a call against the position. While there are many dividend programs and many covered call

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Weighing the Week Ahead: Should Investors Become Traders?

April 26, 2020

The economic calendar is packed with important reports. In normal times we would all be very interested, but the times are far from normal. Several of the reports emphasize April data, the first full impacts of the pandemic and shutdowns. Personal income and spending, ISM manufacturing, and consumer confidence will get special attention for that reason. Corporate earnings will provide an inside look at the shutdown effects and expected impact.
Most important will be the first steps at reopening the economy.
The background makes it a challenge for investors. They have more free time and many voices telling them what is “working.” No one is really helping much with the key question:
Should investors become traders?

In my last installment of WTWA, recognized the more upbeat sentiment

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Weighing the Week Ahead: Curb Your Enthusiasm

April 19, 2020

The economic calendar is light and provides little post-COVID19 data. Continuing jobless claims takes on a new importance, and we may get some useful information from the components of the University of Michigan sentiment survey. 96 companies in the S&P 500 will report earnings. The depth of the employment decline and curtailment of normal activity has turned the national debate to how and when the restrictions will end. Investors, encouraged by these apparent plans, are trying to look beyond the recession. This is a good concept but represents a huge emotional swing from just a few weeks ago. Mr. Market is noted for emotion, but sound analysis is more important.

Investors, curb your enthusiasm.

I am not as grouchy as the character created by award winning Larry David, and certainly not

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The Irrelevance of Financial News

April 17, 2020

I have been a consumer of financial news for more than thirty years. For fifteen years I have joined in financial writing, consistently citing the best work I can find. Traditionally investors could see great stories on the economy, corporate earnings, relevant government policies, and suggestions for investment themes.

Things are different now!
The world has changed, but the news stories have not. Let’s start by looking at some objective measures of the dramatic recent changes.

Stock Market Volatility
The best measure of anticipated volatility in stocks, closely tied to recent volatility, is VIX. While this is a tradable index, the value is based upon the implied volatility of near-term put and call options on the S&P 500 Index. The OldProf simplification: Options on the S&P 500

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Weighing the Week Ahead: Good Questions but Poor Answers

April 12, 2020

The economic calendar includes several important releases, but few reflect the COVID19 effects. Everyone knows the economic news is dismal. Just how dismal does not seem to matter.

Investors want to know whether we have seen the bottom in stock prices. They ask, “When will people return to work?” Is it time to start buying stocks? If so, which ones? Serious market observers are discussing letters representing the future economic path: V, U, L, or W. (I wanted to create a memorable acronym from these letters and sought help from Mrs. OldProf. She admitted that some help from Vanna would be needed).

These are all good questions, attracting plenty of attention and many answers. The problem?

We are faced with many good questions but only poor answers.

In my last installment of

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Weighing the Week Ahead: Navigating the Maze of Models

April 5, 2020

Once again, no one cares about the economic calendar. There are a few items with recent data – jobless claims, mortgage applications, and Michigan sentiment – but most reports are old news. Everyone is focused on the increase in coronavirus cases and deaths. There are plenty of predictions, each based on model from a reputable source. The variation is wide.

The question that needs an answer:

How can we navigate the maze of models?

In my last installment of WTWA, two weeks ago, I interrupted my vacation plans to provide some perspective on the need for clarity in determining what information was both relevant and important. Sadly, we have seen little of that. The headline-driven market gets plenty of fresh material every day. There is little information on how to figure out what

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Critical Thinking: Cyclical Stock Potential

April 1, 2020

At a time when many investors are taking a hard look at their portfolios, good information is more important than ever. Sadly, it is even harder to come by. There is no substitute for applying your own critical thinking skills to the opinions you see. A featured guest on CNBC, Senior Investment Analyst for a major firm, provided a test of that skill. (CNBC put the interview behind their paywall, but I record these programs to verify my analysis.

Interview
The guest had just issued a downgrade for the industrial sector.

His first reason was that the stocks were back to levels at the start of 2019. He questioned the 30% rally in the sector when earnings were only up 10%. He called the 20% difference a “ballistic move” in the stocks, pushing them to excessive valuations bordering on

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Weighing the Week Ahead: A Quest for Clarity

March 22, 2020

Once again, no one cares about the economic calendar. There have been big changes with more to come. While many claim to know what those changes will be, I see only speculation.

We must embark on a quest for clarity.
This implies the willingness to seek new information and go where it leads us.

In my last installment of WTWA, I predicted an explosion of pundit predictions. In a world without meaningful data, all opinions are equal. This was an accurate guess. I will not spend much time on the noise. Suffice to say that uncertainty reinforced fear. All stocks and sectors moved in a highly correlated fashion. The week began with a negative reaction to the second emergency Fed move, reducing rates to near-zero. Instead of calming markets, this created additional panic among those

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Weighing the Week Ahead: A Pundit’s Paradise – Anyone Can Play

March 15, 2020

We have a full economic calendar. Only the FOMC decision will get major market attention. Initial jobless claims provide a post-virus look at the job market. Housing data remains interesting.

Despite this, the media focus will remain on the coronavirus crisis. In the absence of any solid economic data, and in the spirit of the new populism, everyone’s opinion is equal. Stating the obvious passes for great wisdom. Any deeper look seems silly.

It is what I call:

A Pundit’s Paradise. Anyone can play.

In my last installment of WTWA, I predicted little attention to the economic news. That expectation was certainly accurate! I emphasized the need for investors to decide upon and emphasize the time frame that fit their purposes. I also pooh-poohed [OldProf technical term for

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Weighing the Week Ahead: Why it is Crucial to Use the Right Time Frame

March 8, 2020

We have a modest economic calendar. Only two reports will provide any hint about the coronavirus economic impact. The punditry will not be hampered. Without meaningful data, speculation blossoms. There is one idea that could help both your interpretation of data and your investment decisions. We should be emphasizing:

The crucial importance of time frames.
I am going far beyond the common advice of buy-and-hold and ignore what is happening. I hope to show how the choice of time frame affects every aspect of an important time for investors.

My last installment of WTWA, I expected little attention to the economic news. Instead, I predicted discussion about the “message of the markets,” and plenty of variation in what that might be. That was an accurate forecast for the week,

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Weighing the Week Ahead: Should Investors Heed the Message of the Markets?

March 1, 2020

We have a big economic calendar featuring employment news and the latest ISM survey. In normal times, observers would be parsing the data to adjust their economic and earnings expectations. Next week few will care. The market ignored last week’s reports and there is no reason to expect a change to “old news.” Instead, the punditry will be asking:

Should investors heed the message of the markets?
And expect plenty of variation in just what that message might be!

My last installment of WTWA, I expected attention to the wisdom of Mr. Buffett, highlighting his annual letter to investors. That prediction was accurate (barely) until markets opened Monday morning. The coronavirus spread beyond China, mentioned in last week’s “worry” list, became the most important story and lasted all

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Weighing the Week Ahead: Should Investors Heed the Message of the Markets?

March 1, 2020

We have a big economic calendar featuring employment news and the latest ISM survey. In normal times, observers would be parsing the data to adjust their economic and earnings expectations. Next week few will care. The market ignored last week’s reports and there is no reason to expect a change to “old news.” Instead, the punditry will be asking:

Should investors heed the message of the markets?
And expect plenty of variation in just what that message might be!

My last installment of WTWA, I expected attention to the wisdom of Mr. Buffett, highlighting his annual letter to investors. That prediction was accurate (barely) until markets opened Monday morning. The coronavirus spread beyond China, mentioned in last week’s “worry” list, became the most important story and lasted all

Read More »

Weighing the Week Ahead: Investors Can Always Learn Something from Mr. Buffett

February 23, 2020

We have a big economic calendar including important data on consumer confidence, personal income and spending, and inflation. There will also be another round of housing news – two measures of prices, new home sales, and pending home sales. While it is not expected to change, the second estimate of Q4 GDP will be reported.
While these economic reports will claim attention later in the week, we know how it will start. The punditry will be asking:
What does Warren think?
And then they will offer their own opinions!

My last installment of WTWA, I emphasized housing data and trends, partly because so many key reports were coming out. The media followed this topic in some segments, but sometimes suggesting there was a “crisis” because of shortages and affordability. Even investment programs

Read More »

Weighing the Week Ahead: Investors Can Always Learn Something from Mr. Buffett

February 23, 2020

We have a big economic calendar including important data on consumer confidence, personal income and spending, and inflation. There will also be another round of housing news – two measures of prices, new home sales, and pending home sales. While it is not expected to change, the second estimate of Q4 GDP will be reported.
While these economic reports will claim attention later in the week, we know how it will start. The punditry will be asking:
What does Warren think?
And then they will offer their own opinions!

My last installment of WTWA, I emphasized housing data and trends, partly because so many key reports were coming out. The media followed this topic in some segments, but sometimes suggesting there was a “crisis” because of shortages and affordability. Even investment programs

Read More »

Weighing the Week Ahead: Is It Too Late to Invest in Housing Stocks?

February 16, 2020

The economic calendar is modest, and the trading week is holiday-shortened. The most important reports all relate to housing – prices, sales, and plans. With markets viewed as fully or excessively valued by many, there is some renewed interests in finding some attractive remaining sectors. While some political or geopolitical news may well claim the spotlight, even on financial news. That said, this is the closest to a “normal” week for stock analysis that I have seen in a very long time. I expect many to analyze the data and ponder:

Is it too late to invest in housing stocks?

My last installment of WTWA, either through operator or software error, overwrote the prior week’s post. It therefore carries the wrong date of February 2, 2020, but it is last week’s story. I’ll replace the

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