Guest Post by Doug Wakefield
Guest Post by Doug Wakefield
Guest Post by EWI
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Up, down, up, down; 200 points higher, 300 points lower; rinse and repeat!
It isn’t easy being an investor in the U.S stock market these days. Honestly, it feels more like being in a clinical trial for mood stabilizers. Or, as the market oracle himself Warren Buffett described it in December 2014:
“Mr. Market is kind of a drunken psycho. Some days he gets very enthused. Some days he gets very depressed. And when he gets really enthused… you sell to him, and if he gets depressed, you buy from him. There’s no moral taint attached to that.”
Moral taint, no. But, there is a pretty significant learning curve attached to that. To wit: You have to know in quantitative terms what “really enthused” or “depressed” looks like on a price chart — before the mood swing. As in tangible, objective criteria that signals
Guest Post by Bob Hoye
Guest Post by Steve Saville
The historical record indicates that the gold-mining sector performs very well during the first 18-24 months of a general equity bear market as long as the average gold-mining stock is not ‘overbought’ and over-valued at the beginning of the bear market. Unfortunately, the historical sample size is small. In fact, since the birth of the current monetary system there have been only two relevant cases.
The first case involves the general equity bear market that began in January of 1973 and continued until late-1974. This bear market resulted in peak-to-trough losses of around 50% for the senior US stock indices.
The following chart comparison of the Barrons Gold Mining Index (BGMI) and the S&P500 Index shows that the gold-mining sector commenced a strong upward trend near the start of the general equity bear market. During the bear market’s first 20 months, the BGMI gained about 300%.
On a weekend where I took my daughter to Boston for two nights of voice coaching/recording, needed to watch the Patriots game (on DVR) and a late Rangers game, on a taxing California road trip (it may have been taxing for them too ), I somehow managed to get 35 quality pages done with NFTRH’s 325th edition.
I am happy with the report for the reason I often am when I think I’ve done a good job; I feel I am personally a better investor today than I was on Friday afternoon.
Never mind that the US increased employment by 252,000 in December and unemployment sagged to 5.6%. The stock market moves to its own beat and doesn’t care much about the particulars in the ‘Jobs’ report or the media’s interpretations of its details.
The market only cares about how those particulars affect the money creation that has kept it in operation since 2009. Here are two graphs from NFTRH 324…
On the Monetary Base view, Post-QE Base dropped, the S&P 500 popped (Santa seasonals)… then dropped… then the Base popped after the S&P 500 dropped and then the S&P 500 popped, then it dropped (to fill the gaps) and popped again; but today it dropped.
The Fed Funds view (ZIRP is into its 6th year now) simply shows box 1 (black) and box 2 (red). Box 1 wants to see box 2 remain very thin and horizontally rectangular while it continues to grow very tall in a vertically rectangular sort of way.
Economics 101, Wonderland style.
The worry in the ‘Jobs’ details was supposedly in wage stagnation. The mainstream thinking being that wage growth would spur organic economic expansion as all those consumers get out there and gobble up the economy’s products.
But it can be argued (by the second chart above that it is the lack of wage growth that can cause fretting by policy makers and an avoidance of any moves that would threaten box 2. Put another way, if wages start growing and the things that mainstream economists call inflation start to get out of hand the pressure would mount – amidst the strong economic backdrop – to get on that rate hike cycle and not fall behind the curve.
So today’s reaction by the stock market is not unexpected by this individual participant, because I was only looking for a gap-fill bounce with no need to read more into it than that. But the lack of wage growth is not a reason why the stock market should be going down. The jumpiness in yield spreads could be among them, however.
Last week we noted over at NFTRH.com that silly season was upon us. In that post, Oncomed (OMED) was one of the featured items. This is a stock I first became acquainted with a little over a year ago and it has had a special place in my stock trader’s heart ever since. It got irrationally bid up on news last year and as that stuff unwound over the last year it was a nice seasonal Tax Loss / January Effect idea to close out 2014.
So another 19% is taken as I stick to my stated objectives (in NFTRH), which are to peel off some, most or even all of these trades into the expected market bounce. You have got to take profits when they are there. That’s what they say.
BTW, the actual target on OMED is 26, but I sold at 25 and change.