The Simple Accountant submits:Another week, another 1% climb in the S&P 500...bond yields coming back in slightly...commodities starting to move a bit more sideways...Dollar pulling back. Ho hum. For this week, with the short term macro picture not giving us much to get excited about, we will step back to take a longer term view and consider where these markets might be heading. First a quick look at where we have been. Week in Review
One of the peculiar features that characterized the current rally in the stock market that started back in September – at least for the first few months – was the outperformance of defensive stocks versus cyclical names that tend to do better in times of economic expansion. Typically, cyclicals are the ones leading the way when the stock market is pushing to new all-time highs, levels it finally overtook early in the second quarter. Yet defensives were the ones outperforming.
I hope this essay provides some food for thought. It is not my intention to insult or belittle anyone, but using humor and cold logic, to help people understand an abstract topic with many counterintuitive principles. The ultimate goal is to protect what you have and make some more (in that order). Gold is money. We have published a video to make the point that one should use gold to measure the economic value (i.e. price) of everything else including the dollar.
By The Simple Accountant:Having skipped the annual Jackson Hole symposium, citing pressing duties, ECB Chairman Mario Draghi released the details of the central bank's eagerly anticipated bond buying program last week. After promising to do "whatever it takes," will the Outright Monetary Transactions be enough to do the job? Will the Fed expand its balance sheet? While there are good reasons to be skeptical for the longer term, in the short term the markets responded quite favorably.
The Simple Accountant submits:After a few of weeks of directionless trading, US markets took on a negative tone last week amid discouraging economic data. In this week’s article we will look at a few inter-market relationships, in an effort to throw some light on where stocks in particular might go from here.
Week in Review
BlindReason submits: Quite a lot of vitriol from folks angry over Krugman's suggestion that a 25% tariff be applied to Chinese exports in order to force the Chinese to revalue their currency. Even the staid Chairman of Morgan Stanley (MS) argued to take a "baseball bat" to Paul Krugman for the suggestion.
By The Simple Accountant:The much anticipated meeting of European leaders in Brussels did not produce a comprehensive resolution to the region’s sovereign debt crisis, but it did enough to set off a vigorous rally in risk assets. Let’s break down the numbers, and cast a look at the road ahead.
The Simple Accountant submits:Here's a visual study of the US Dollar in which I attempt to show that turns in the dollar have very nicely predicted the directional moves in the major stock indexes over the past three years. This originally appeared on my blog on October 1, but remains valid. Watch out for firming dollar support, and be prepared to review long equity and commodity positions if a dollar rally should appear to be shaping up.