Thoughts about the markets, automated trading algorithms, artificial intelligence, and lots of other stuff

  • Diversification Ideas for this Market

    David Stendahl sent me some stats that point to some diversification opportunities. 

    Does the following chart look like a bunch of scribbles?  Good; it shows the diversified returns of the S&P 500 Index, Gold, Euro, 10-Year Note, Corn and Crude.

     

    111211 Diversified Returns
     

    Keep these markets in mind as trading options that often offer performance not highly correlated with the S&P 500 Index.

    What follows are a similar set of comments for various markets.

     

    Gold

    Over the past 14 yrs, the top 20 winning mos. in Gold produced an avg return of 8.3% …
    The same mos for the S&P 500 returned 0.6%.

    Since 1997 Gold generated a total return of 165.3% based on its top 20 grossing mos. …
    The S&P 500 index returned 12.5% for the same mos.

    Gold generated an avg return of 8.3%/mo based on its top 20 grossing mos. since 1997 …
    Returns the next month were up on avg 1.3%.

    FYI: Gold generated an avg return of 0.6%/mo based on its top 20 grossing mos. since 1997 …
    Returns the next month were up on avg 1.3%.

    14 year perspective … top 3 monthly returns for Gold 13.4%, 13.2% & 12.3% vs. those for the S&P 500 index 11%, 10.1% & 9.3%.

    The short advantage … top 3 negative monthly returns for Gold -17.9%, -11.4% & -9.2% vs. those for the S&P 500 index -18.1%, -12.2% & -11.5%.

     

    Crude Oil

    Over the past 14 yrs, the top 20 winning mos. in Crude Oil produced an avg return of 9% …
    The same mos for the S&P 500 returned 1.8%.

    Since 1997 Crude Oil generated a total return of 179.2% based on its top 20 grossing mos. …
    The S&P 500 index returned 35.3% for the same mos.

    Crude Oil generated an avg return of 9%/mo based on its top 20 grossing mos. since 1997 …
    Returns the next month were up on avg 1.6%.

    FYI: Crude Oil generated an avg return of 1.8%/mo based on its top 20 grossing mos. since 1997 …
    Returns the next month were up on avg 1.6%.

    14 year perspective … top 3 monthly returns for Crude Oil 19.2%, 17.3% & 11.6% vs. those for the S&P 500 index 11%, 10.1% & 9.3%.

    The short advantage … top 3 negative monthly returns for Crude Oil -23.3%, -15.1% & -13.6% vs. those for the S&P 500 index -18.1%, -12.2% & -11.5%.

     

    Corn

    Over the past 14 yrs, the top 20 winning mos. in Corn produced an avg return of 10.7% … the same mos for the S&P 500 returned 1.9%.

    Since 1997 Corn generated a total return of 214.7% based on its top 20 grossing mos. … the S&P 500 index returned 37.7% for the same mos.

     

    Euro

    Over the past 14 yrs, the top 20 winning mos. in Euro produced an avg return of 5.5% …
    The same mos for the S&P 500 returned 2.4%.

    Since 1997 Euro generated a total return of 109.2% based on its top 20 grossing mos. …
    The S&P 500 index returned 49% for the same mos.

     

    Ten Year

    Over the past 14 yrs, the top 20 winning mos. in 10 Yr. T-Note produced an avg return of 2.1% …
    The same mos for the S&P 500 returned -1.5%.

    Since 1997 10 Yr. T-Note generated a total return of 42.3% based on its top 20 grossing mos. …
    The S&P 500 index returned -29.8% for the same mos.

    10 Yr. T-Note generated an avg return of 2.1%/mo based on its top 20 grossing mos. since 1997 …
    Returns the next month were up on avg 0.1%.

    FYI: 10 Yr. T-Note generated an avg return of -1.5%/mo based on its top 20 grossing mos.
    Since 1997 … returns the next month were up on avg 0.1%.

    14 year perspective … top 3 monthly returns for 10 Yr. T-Note 5%, 2.7% & 2.4% vs. those for the S&P 500 index 11%, 10.1% & 9.3%.

    The short advantage … top 3 negative monthly returns for 10 Yr. T-Note -3.7%, -2.6% & -2.5% vs. those for the S&P 500 index -18.1%, -12.2% & -11.5%.

     

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  • The Perfect Holiday Gift – A Yacht Built Like a Tropical Island

    I know what I want for the holidays … an amazing island built right on a beautiful yacht. 

     

    Top of Yacht

     HT KD

    This was created by UK-based Yacht Island Designs. 

    As you can see, the design is inspired by tropical islands, with huts, a pool … and to top that … a volcano guaranteed not to erupt.

     

    Back Detail of Yacht

    Since it's a yacht, it comes packed with VIP rooms, arcades, gym, lounges, spas and even a helipad. What a great place to do business? 

    The back of the yacht has a retractable beach deck and dock.  Why go to the trouble of getting out to sea if you can't wake-board, jet-ski, or swim; right?

     

    Back of Yacht 

    If you want to know how much it would cost to fuel-it-up or operate, it's probably not in your price range.

    Hope you are having a happy holiday season.

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  • The Perfect Holiday Gift – A Yacht Built Like a Tropical Island

    I know what I want for the holidays … an amazing island built right on a beautiful yacht. 

     

    Top of Yacht

     HT KD

    This was created by UK-based Yacht Island Designs. 

    As you can see, the design is inspired by tropical islands, with huts, a pool … and to top that … a volcano guaranteed not to erupt.

     

    Back Detail of Yacht

    Since it's a yacht, it comes packed with VIP rooms, arcades, gym, lounges, spas and even a helipad. What a great place to do business? 

    The back of the yacht has a retractable beach deck and dock.  Why go to the trouble of getting out to sea if you can't wake-board, jet-ski, or swim; right?

     

    Back of Yacht 

    If you want to know how much it would cost to fuel-it-up or operate, it's probably not in your price range.

    Hope you are having a happy holiday season.

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  • Are You Expecting a Santa Claus Rally or a Dumb-Money Mugging?

    That was quite a move in the markets last week.  Was it 'real', or wishful thinking?

    Kind of like the jobs number?  Does it show an improving economy (with some seasonal hiring), or was the jobs number smoke, mirrors, tomfoolery and skulduggery?

    Back to the market, a quick look at a daily chart of the S&P 500 Index shows that the recent rally stalled the resistance. Price is still below the 200 day moving average, and it closed below the recent downtrend line. An impressive rally, to be sure … However, it was the lack of volume on the big push higher that caught my attention.

     

    111204 SP-500 Stalled at Resistance
     
    When a market makes a 7% move (especially without a volume spike), traders are going to notice.

    So, while some pros looked to take profits into the push higher – it looks like something finally caught the eye of retail traders.

    While not statistacally significant, these examples  seemed worth sharing.

    While I was getting a haircut this week, I listened as my barber debated the merits of buying Netflix with the barber standing next to him. Likewise, a trainer at the gym wanted to talk about several stock ideas he's considering buying.  Meanwhile, several people called to talk about whether to buy American Airlines while it was priced less than a happy meal toy.

    We can talk about "smart-money" versus "dumb-money"; but until this, I hadn't seen recent interest in the markets from normal investors.

    Perhaps something is stirring the 'animals spirits'.

    Without selling pressure, it doesn't take much to push markets higher.  So, are you expecting a Santa Claus Rally or a Dumb-Money Mugging?

    Time will tell.
     

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  • Some Interesting Links for Your Weekend Reading

    Government popularity has taken a hit lately.

     

    111203 Congress Approval Rating Cartoon
     

    Here are some of the posts that caught my eye. Hope you find something interesting.

    Lighter Links:

    Trading Links:

     

  • Some Interesting Links for Your Weekend Reading

    Government popularity has taken a hit lately.

     

    111203 Congress Approval Rating Cartoon
     

    Here are some of the posts that caught my eye. Hope you find something interesting.

    Lighter Links:

    Trading Links:

     

  • See How the Dalai Lama Responds to a Dalai Lama Joke

    Here is a video that shows how an Australian Australian presenter failed to amuse the Dalai Lama with a Dalai Lama joke.

     

     

     

    The play-on-words "joke" he used is: the Dalai Lama walks into a pizza store and asks if they can make him one with everything. 

    The Dalai Lama's response is funnier than the joke.

    He could have added: The Dalai Lama then gave the cashier $20 and asked for his change.

    The cashier replied: Change comes from within.

     

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  • An Oversold Market Doesn’t Always Bounce

    Our markets remain oversold on short-term charts.

    However, while last week was tough on the Markets, a quick glance shows that selling was relatively contained.

     

    111127 Tough Week for the Markets

    Without committed sellers, it won't take much to prop things up again.  However, without the liquidity of organic buying, the Markets remain vulnerable to fear, uncertainty and doubt.

    As you know, the news out of the Euro-zone has not been good. There are bank problems, an inability to agree on solutions, yields rising, and sentiment crumbling. As a result, traders worry that we'll miss this year's Santa Claus Rally. Nonetheless, conventional wisdom says not to short a dull market. 

    At a time when interest rates are historically low, we are seeing strong out-flows of cash from funds and almost no new money entering to buy stocks. At this point, it seems as though people are more interested in 'not losing' rather than worrying about how much they can make on their money.

    This is when careful trading trumps hopeful seasonality.  Consequently,  expect traders to be on the look-out for short-term opportunities and diversification into other markets.

     

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  • An Oversold Market Doesn’t Always Bounce

    Our markets remain oversold on short-term charts.

    However, while last week was tough on the Markets, a quick glance shows that selling was relatively contained.

     

    111127 Tough Week for the Markets

    Without committed sellers, it won't take much to prop things up again.  However, without the liquidity of organic buying, the Markets remain vulnerable to fear, uncertainty and doubt.

    As you know, the news out of the Euro-zone has not been good. There are bank problems, an inability to agree on solutions, yields rising, and sentiment crumbling. As a result, traders worry that we'll miss this year's Santa Claus Rally. Nonetheless, conventional wisdom says not to short a dull market. 

    At a time when interest rates are historically low, we are seeing strong out-flows of cash from funds and almost no new money entering to buy stocks. At this point, it seems as though people are more interested in 'not losing' rather than worrying about how much they can make on their money.

    This is when careful trading trumps hopeful seasonality.  Consequently,  expect traders to be on the look-out for short-term opportunities and diversification into other markets.

     

    Related articles
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  • Were You Actually Grateful or Thankful This Weekend?

    This Thanksgiving weekend, a friend called to say he was reaching out to the people he was thankful for – and just wanted to let me know how he felt.

    My mind immediately began thinking about what else the call could have been about? I remembered that I intended to send him a book. I thought about the last time we talked. And then it hit me, he was actually exercising his ability to be thankful.

    Wow, what a concept.

    Were you actually grateful and thankful this weekend?

    It is a choice. It is a habit.  For me, it is something I aspire to exercise more regularly … What about you?

    Looking back over the past few weeks, I recognize that I have been pushing hard – with a focus on finishing the year strong. Maybe it's time to recognize how much progress was made and intentionally focus on making people feel appreciated and capable instead?

    Scar tissue, resentment, frustration, and fear are unnecessary and counterproductive. It's time to figure-out what feels good and do more of it.

    With that in mind, here is a picture of me with my awesome wife and oldest son at the Cowboys game.  We had a great Thanksgiving.  Hopefully, you did too.

     

    111124-HMG-JBR-BSG-at-Cowboys
     

    This public service message has been presented by the part of me that knows better. Hopefully, the part of you that knows better will notice it.

    Have a great rest of the year.

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