I just got back from a weekend retreat with a group of entrepreneurs.
It consistently surprises me how valuable it is to take time to get away from your daily routines, in order to focus on the bigger picture.
Part of the benefit is simply taking the time to do it. Another part is listening to others, and hearing a fresh perspective.
Having fun helps too.
I've watched my kids play Guitar Hero and Rock Band on their gaming systems; however, it was quite a different experience watching a bunch of middle-aged children play it at the retreat.
I was particularly embarrassed that I knew so few of the songs. And when I tried participating … I reminded myself more of my father, than of a rock-star.
Yet, for what it's worth, it turned out to be a great group activity to loosen-folks-up at the retreat.
The Dow Jones Industrial Average traded above 11,000 for the first time since 2008. The real question is whether that is a sign of continued strength or that the rally has climbed too far, too fast?
The chart, below, compares the bets made by small traders (a.k.a. the "Dumb
Money"), to those of large commercial hedgers (a.k.a. the "Smart
Money").
In practice, Confidence Index readings rarely get below
30% or above 70% (they usually stay between 40% and 60%). When they
move outside of those bands, it's time to pay attention.
Even
more noteworthy is when there is a wide confidence spread with bullish bets by the Dumb Money and bearish bets by the Smart Money. This type of
sentiment
spread only happens a few times a year. We
often get substantial bullish reversals when that happens.
Conventional trading wisdom says that Crowds are
usually wrong at turning-points. That doesn't mean they are wrong all
the time (yet I take special notice when the Smart Money clearly disagrees).
Consumer Credit Woes Adding Fuel to the Doubt Fires.
Here is a chart from BusinessInsider showing the Fed's latest consumer credit reading. After starting to recover, total outstanding consumer credit had a massive month-over-month decline.
It is tough to stage a lasting recovery without consumers.
So Where Is the Money Coming From?
U.S. Federal debt has increased rapidly.
In a related chart, Doug Short created an
inflation-adjusted view of the debt and an overlay of the tax brackets. With the 2001 and 2003 tax cuts expiring this year, the question is whether the gross
federal debt will be a factor in determining the direction of future tax
rates? Perhaps, like a young household with good jobs buying a home, the
US can afford the rising level of debt? What do you think?
Speaking of Debt-Laden Countries.
European governments on Sunday offered debt-laden Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end Greece's fiscal crisis and restore confidence in the euro.
The Dow Jones Industrial Average traded above 11,000 for the first time since 2008. The real question is whether that is a sign of continued strength or that the rally has climbed too far, too fast?
The chart, below, compares the bets made by small traders (a.k.a. the "Dumb
Money"), to those of large commercial hedgers (a.k.a. the "Smart
Money").
In practice, Confidence Index readings rarely get below
30% or above 70% (they usually stay between 40% and 60%). When they
move outside of those bands, it's time to pay attention.
Even
more noteworthy is when there is a wide confidence spread with bullish bets by the Dumb Money and bearish bets by the Smart Money. This type of
sentiment
spread only happens a few times a year. We
often get substantial bullish reversals when that happens.
Conventional trading wisdom says that Crowds are
usually wrong at turning-points. That doesn't mean they are wrong all
the time (yet I take special notice when the Smart Money clearly disagrees).
Consumer Credit Woes Adding Fuel to the Doubt Fires.
Here is a chart from BusinessInsider showing the Fed's latest consumer credit reading. After starting to recover, total outstanding consumer credit had a massive month-over-month decline.
It is tough to stage a lasting recovery without consumers.
So Where Is the Money Coming From?
U.S. Federal debt has increased rapidly.
In a related chart, Doug Short created an
inflation-adjusted view of the debt and an overlay of the tax brackets. With the 2001 and 2003 tax cuts expiring this year, the question is whether the gross
federal debt will be a factor in determining the direction of future tax
rates? Perhaps, like a young household with good jobs buying a home, the
US can afford the rising level of debt? What do you think?
Speaking of Debt-Laden Countries.
European governments on Sunday offered debt-laden Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end Greece's fiscal crisis and restore confidence in the euro.
The rally continues, and the S&P 500 has gotten back to new highs for the past year. Pretty
impressive on many fronts. How does it compare to other markets
though? This chart shows how several other world markets have done in the past twelve months.
This quick glance around the globe shows remarkably similar performance across the markets. Note how closely the price patterns and peaks and valleys are to each other.
It brings up two questions:
Are these countries each really doing the same things right and
wrong?
Are world-wide expectations and responses really this similar?
Perhaps more importantly, it brings up a
third question: What's really causing the markets to behave so
similarly?
Recognizing What Is Happening, Is the First Step to Profiting From It.
To profit in trading, it's more important to recognize what's happening,
rather than to understand what's happening.
The strength of the rallies don't make sense to me based on logic. However, trends don't depend on logic. So, I dusted-off my copy of Trend Following and will simply ride the bucking
bronco.
But I Still Want to Know Why … Don't You?
Occam's Razor suggests that the simplest explanation is most likely to be correct. So, when markets move in a virtual lockstep (despite many unsettling global variables), let's look for simple explanations.
Here are a few ideas (ranging from silly to plausible).
After watching the movie 2012, world leaders decided the one who dies
with the most toys wins.
Human nature is consistent across cultures.
The recession is over, and we have begun a new global bull market.
Something unusual is happening, and we just don't know what it is.
With consumers mostly out of the market, institutions figured-out how to buy and sell from each other, making relatively easy profits with minimal risk.
Governments agreed to temporarily suspend speculating in each other's
markets, other than in the normal course of business.
Governments and central banks agreed to cooperate. Don't fight the Fed, especially when it's a cartel of Feds.
From a Traders Perspective …
There are still many things to watch, from a trader's perspective, despite the strong correlation among markets. For example: divergence patterns can provide early indications of moves in either direction; relative strength comparisons can show which markets are more likely to over or under-perform; and volume spikes can indicate something unusual happening. Nonetheless, the simple observation is that markets are trending higher, so the safest assumption is that the trend continues until evidence proves otherwise.
My grandfather used to say: "you can fool some people, some of the time; but you can't fool all of the people, all of the time." He was not an exceptionally well-educated man, but he was a professional wrestler … so he knew something about stagecraft. My guess is that one of the actors breaks character soon. That tends to happen in most cartels.
The rally continues, and the S&P 500 has gotten back to new highs for the past year. Pretty
impressive on many fronts. How does it compare to other markets
though? This chart shows how several other world markets have done in the past twelve months.
This quick glance around the globe shows remarkably similar performance across the markets. Note how closely the price patterns and peaks and valleys are to each other.
It brings up two questions:
Are these countries each really doing the same things right and
wrong?
Are world-wide expectations and responses really this similar?
Perhaps more importantly, it brings up a
third question: What's really causing the markets to behave so
similarly?
Recognizing What Is Happening, Is the First Step to Profiting From It.
To profit in trading, it's more important to recognize what's happening,
rather than to understand what's happening.
The strength of the rallies don't make sense to me based on logic. However, trends don't depend on logic. So, I dusted-off my copy of Trend Following and will simply ride the bucking
bronco.
But I Still Want to Know Why … Don't You?
Occam's Razor suggests that the simplest explanation is most likely to be correct. So, when markets move in a virtual lockstep (despite many unsettling global variables), let's look for simple explanations.
Here are a few ideas (ranging from silly to plausible).
After watching the movie 2012, world leaders decided the one who dies
with the most toys wins.
Human nature is consistent across cultures.
The recession is over, and we have begun a new global bull market.
Something unusual is happening, and we just don't know what it is.
With consumers mostly out of the market, institutions figured-out how to buy and sell from each other, making relatively easy profits with minimal risk.
Governments agreed to temporarily suspend speculating in each other's
markets, other than in the normal course of business.
Governments and central banks agreed to cooperate. Don't fight the Fed, especially when it's a cartel of Feds.
From a Traders Perspective …
There are still many things to watch, from a trader's perspective, despite the strong correlation among markets. For example: divergence patterns can provide early indications of moves in either direction; relative strength comparisons can show which markets are more likely to over or under-perform; and volume spikes can indicate something unusual happening. Nonetheless, the simple observation is that markets are trending higher, so the safest assumption is that the trend continues until evidence proves otherwise.
My grandfather used to say: "you can fool some people, some of the time; but you can't fool all of the people, all of the time." He was not an exceptionally well-educated man, but he was a professional wrestler … so he knew something about stagecraft. My guess is that one of the actors breaks character soon. That tends to happen in most cartels.
President Obama played a game of H-O-R-S-E with former NBA star Clark Kellogg during the Final Four telecast yesterday. My expectations were low, and I expected it to be corny.
Unlike the North Korean Supreme Leader's penchant for hitting fictional hole-in-one shots on the golf course, Obama started slow and was willing to show some weakness. Nonetheless, throughout the video, he seemed confident and athletic. Moreover, the bantering and interplay seemed to provide some insights into the President's psyche.
All-in-all, I thought it was a good move by him … and that it did a nice job of polishing-up his image and reminding people why he is so popular.
George Soros' ex-partner at the Quantum Fund isn't afraid to share his thoughts. In a recent CNBC interview, Jim says he doesn't pay attention to the Fed, and that he expects Western Currencies to be weak. However, many will focus on these comments: “Yes, we’re going to have another recession, I guarantee you … By 2012 say, it’s time for another recession, … and the next time it’s going to be worse, because we’ve shot all of our bullets”. Here is the video.
For a different look at how the economy's recovery is doing, here is a look at consumer spending.
Is
Consumer Spending a Reliable Leading Indicator of GDP?
The Consumer Metrics Institute produces a U.S.
consumption index based on actual transaction data for a range of major
discretionary purchases such as cars, houses, durable goods, and
vacations. As such, this index was designed to react quickly to
significant consumer spending changes
in a number of
different segments of economy.
George Soros' ex-partner at the Quantum Fund isn't afraid to share his thoughts. In a recent CNBC interview, Jim says he doesn't pay attention to the Fed, and that he expects Western Currencies to be weak. However, many will focus on these comments: “Yes, we’re going to have another recession, I guarantee you … By 2012 say, it’s time for another recession, … and the next time it’s going to be worse, because we’ve shot all of our bullets”. Here is the video.
For a different look at how the economy's recovery is doing, here is a look at consumer spending.
Is
Consumer Spending a Reliable Leading Indicator of GDP?
The Consumer Metrics Institute produces a U.S.
consumption index based on actual transaction data for a range of major
discretionary purchases such as cars, houses, durable goods, and
vacations. As such, this index was designed to react quickly to
significant consumer spending changes
in a number of
different segments of economy.
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It brings up two questions:
With consumers mostly out of the market, institutions figured-out how to buy and sell from each other, making relatively easy profits with minimal risk.
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