About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, March 26, 2020

SPX -- Thanks Guys. You Can Take It From Here

Last Sunday, I posted that a trade worthy rally in a deeply oversold market was imminent.
I caught it, and now I can sit back and watch the wizards of the financial world work whatever
magic they may have. I am sure that at some point over the next year, there will come a time
when the old cat can catch a canary again.

Sunday, March 22, 2020

SPX -- Technical Update

The market remained in crash mode through 3/20. It has now moved deeply into oversold territory.
Although this is a bear market, The SPX is approaching a trade worthy point based on the impor-
tant intermediate term stochastic momentum measure (second panel on chart link below). When
both measures on this indicator decline below the 20 level, rallies normally ensue, even in a bear
market. This type of situation is fast approaching. And, as you might guess it is not for the faint of
heart.   WeeklySPX

Seen against the 40 wk m/a, the SPX is as oversold as it has been in years. Note also that the
3/20 SPX closing took out the late 2018 low, thus re-inforcing the concept of an in-force bear.
The bottom panel on the chart is a longer term MACD measure and it also is starting to turn
negative, which is not a good sign.

I plan to catch up on the fundamentals later in the week. Having hit the 80 mark, I have seen
and have been through  nasty periods when illness strikes in epidemic fashion. The current
CO-VID 19 pandemic is personally one of the scarier ones and ranks right up there with the
polio epidemics of the early 1950s.

Friday, February 28, 2020

SPX -- Technical

The recent price decline wiped out the major intermediate term overbought and left the SPX
modestly oversold.

I have fair value at 2800, so most of the substantial overvaluation was also wiped out.

The SPX remains hyper-extended on a very long term basis.

The market has decisively broken the uptrend underway since late 2018 but remains positively
extended on a trend from the 2016 low.

The intermediate term MACD is turning down and speedy positive whipsaw reversals are rare.

I like an oversold 14 week stochastic as a long side entry point but we are not there yet (See
bottom panel of linked chart below).

The high volume of the past week signals a level of downside exhaustion.

Last week's price action is indistinguishable from the onset of a crash pattern, so more cautious
players may look for a bottoming process and not jump in long just because Friday did see
the SPX reverse partially and close up from its low for the day. I make this point because
intermediate term bullish  sentiment has yet to be washed out yet.

SPX Weekly Chart


Sunday, January 26, 2020

SPX -- Note

By the end of last week (Jan. 17) The SPX had become sharply overbought for the intermediate
term:
       > High RSI and Money Flow, elevated MACD. The market was then over a 10% premium
          to its 40 wk. m/a.
      > Put to Call ratio had fallen to low levels, signaling excess of optimism (bottom panel of
         chart).

When the SPX is this strongly overbought, history indicates only a 1 in 4 chance long side
players can make decent money over the next 6 - 12 months from the highs recorded.

With the new corona virus (which carries a pneumonia kicker that can be fatal) as backdrop,
edgy market players are using this new uncertainty to take profits after the recent strong leg up.
It is too early to tell the eventual economic damage from this accelerating disease.

Weekly SPX Chart 

Monday, January 06, 2020

SPX -- Notes

SPX is positive but is overbought, overvalued and hyper-extended long term.

Primary monetary liquidity measures positive and accelerating.
Earnings indicators -- Currently flat to down. Forward view suggests return of positive profits
at some point in 2020.
SPX earning power in 2020 estimated at $170.
Fair value for SPX now 2800.
SPX is currently about 16% above fair value.
P/E premium is at 2.6 multiples above fair value.
Current P/E of 19.1x reflects market player expectations of moderate profits growth coupled
with continuing easy money and low inflation.
Inflation pressure gauges have turned up but only slightly so.
----------------------------------------------------------------------------------------------------------------
Chart shows positive turn in important MACD longer range indicator (lower panel on chart).
SPX is at 8% + to 40 wk m/a. and is approaching heavy intermediate term overbought area.
Contrarian sentiment indicators (not shown) are just below too confident danger zones.
---------------------------------------------------------------------------------------------------------------
Both 2020 presidential race and renewed US / Iran conflict are in phases that are too early
for sensible market commentary and are still too much subject to conjecture.

SPX Weekly Chart

Wednesday, January 01, 2020

2020 -- Gateway To The Great Whatever

Four horsemen of the economic apocalypse are: high debt, deflation, default, depression. They
were on the far horizon as early as 1981. but easy money, with occasional large help from fiscal
policy, kept them at bay since then save for the major slip up in 2007-08. But, huge central bank
easing allowed the global economy to barely skirt a depression. Even then there were massive
defaults in short term credit which almost did us all in. Since then more debt has been piled on,
mainly at the long end.

So, the battle to keep the horsemen at bay is monetary and fiscal policy job #1. Bloated central
bank balance sheets have created enormous inflation potential viewed long term. But since
stringent monetary and fiscal policy needed to curb inflation might well set the horsemen free
to roam about the world, gov't policy may well remain on the easy side until inflation finally
accelerates significantly and tilts policy to tightening the reins no matter how gingerly.

So, as we enter the new decade, fending off deflation and default will be the governing worry.
With global output growth potential modest reflecting demographics and the very limited
sustainable spending power of the vast majority of the masses, gov't policies will have to
figure ways of managing the possibility of further asset inflation (stocks and bonds). On top of
this challenge, there may come a point when accomodative policies wind up having sharply
diminishing returns for growth. Hence, 'The Great Whatever.'

Tuesday, October 15, 2019

That's All Folks

In late September, I turned 80. According to Wall Street lore, this counts as a life well lived for
an investment guy. The most important thing I've learned so far about being 80 is the you have
to become more inventive if you want get around decently well. But learning the fine art of
compensating for advanced age is a time consuming endeavor as I am finding out. So it seems
to me like a good time to step out of the capital markets milieu. And, there is the view I have
that both bond and stock prices are bloated and now not interesting. I also think that the vast
gulf between the folks who are financially loaded and the rest of mankind is unsustainable
over time at least here  in the US. If I was a betting man, I would say that the bloats we now
see in the markets and in wealth disparity are going to be corrected over time, at least here in
the US. I hope these evening out processes are not born out of economic, financial and social
disaster, but my guess is they are on their way over the next couple of decades come what may.
I wish all the many readers of this blog so long and good luck.