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Tag Archives: fed funds

Quick Take: Bulls Attempt A “Jailbreak”

Yesterday, I discussed the “compression” of the market being akin to a “coiled spring” that when released could lead to a fairly decent move in one direction or another. To wit: “As you can see in the ‘reddish triangle,’ prices have been continually compressed into an ever smaller trading range. This ‘compression’ is akin to coiling a spring. The more tightly the spring is wound, the more energy it has when it is released.” As shown, the bulls are “attempting a jailbreak” of the...

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The Myth Of “Buy & Hold” – Why Starting Valuations Matter

If you repeat a myth often enough, it will eventually be believed to be the truth. “Stop worrying about the market and just buy and hold stocks.” Think about this for a moment. If it were true, then: Why do major Wall Street firms have proprietary trading desks? (They aren’t buying and holding.) Why are there professional hedge fund managers? (They aren’t buying and holding either) Why is there volatility in the market? (If everyone just bought and held, prices would be stable.) Why does...

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Quick Take: Market Breaks Important Support

I have often discussed that as a portfolio manager I am not too concerned with what happens during the middle of the trading week. The reason is daily price volatility can lead to many false indications about the direction of the market. These false indications are why so many investors suggest that technical analysis is nothing more than “voo doo.” For me, price analysis is more about understanding the “trend” of the market and the path of least resistance for prices in the short and...

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Bull Markets Actually Do Die Of “Old Age”

David Ranson recently endeavored in a long research report to simply declare that “bull markets do not die of old age.” “The life expectancy of bull markets can be inferred from history. Fourteen bull markets in U.S. stocks have come and gone since 1927, and their mean lifetime is 55 months. But this calculation can be taken further. From the age of one year to the age of eight years, there’s no overall tendency for life expectancy to decline as a market advance gets older. The present stock...

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Analysts’ Estimates Go Parabolic – Is The Market Next?

At the end of February, I discussed the impact of the tax cut and reform legislation as it related to corporate profits. “In October of 2017, the estimates for REPORTED earnings for Q4, 2017 and Q1, 2018 were $116.50 and $119.76. As of February 15th, the numbers are $106.84 and $112.61 or a difference of -$9.66 and -7.15 respectively.  First, while asset prices have surged to record highs, reported earnings estimates through Q3-2018 have already been ratcheted back to a level only slightly...

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The Risk To Markets – Global Growth

The stock market has been rallying on the surge in global economic growth (recently monikered global synchronized growth) over the past year. The hope, as always, is that growth is finally here to stay. The surge in growth has also given cover to the Federal Reserve, and Central Banks globally, to start reducing the flood of liquidity that has been propping up markets globally since the “financial crisis.” That optimism has bled over in recent months as improving confidence has pushed...

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Tax Cuts & The Failure To Change The Economic Balance

As we approach “tax day” in the U.S., I wanted to take a moment to revisit the issue of taxes, who pays what, and why the “Tax Cut and Jobs Act” will likely have limited impact on economic growth. This week, Laura Saunders penned for the WSJ an analysis of “who pays what” under the U.S. progressive tax system. The data she used was from the Tax Policy center which divided about 175 million American households into five income tiers of roughly 65 million people each. This article was widely...

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CBO – “Making America More Indebted”

In December of last year, as Congress voted to pass the “Tax Cut & Jobs Act,” I wrote that without “real and substantive cuts to spending,” the debt and deficits will begin to balloon. At that time, I mapped out the trajectory of the deficit based on the cuts to revenue from lower tax rates and sustained levels of government spending. Since that writing, the government has now lifted the “debt ceiling” for two years and passed a $1.3 Trillion “omnibus spending bill” to operate the...

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The Next Crisis Will Be The Last

It is an interesting thing. Throughout the last four decades there is a direct link between the actions of the Federal Reserve and the eventual economic and market outcomes due to changes in monetary policy. In every case, that outcome has been negative. The general consensus continues to be the markets have entered into a “permanently high plateau,” or an era in which asset price corrections have been effectively eliminated through fiscal and monetary policy. The lack of understanding of...

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Do Stocks Really Like Higher Rates?

LPL Research recently penned an interesting post entitled “Why Stocks Like Higher Rates.”  “What does it mean for equities if rates and yields do indeed go higher? Fortunately, to the surprise of many, stocks historically do very well when rates increase. Since 1996, stocks gained all 11 times we saw higher rates,”  Here is the conclusion: “Not to be outdone, the current period of higher rates began in September 2017 and the S&P 500 is up another 11% since then. History suggests higher...

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