Weekend Update – October 30, 2016

It’s good to have certainty in all matters of life.

I think.

There’s no doubt that stock market investors like to have certainty, or at the very least they really don’t like uncertainty.

Personally, when it comes to investing and the opportunities present when pursuing the sale of options, I like that intersection between certainty and uncertainty, especially if there is a volley back and forth, but the range is well defined.

That’s because that volley gives rise to more generous option premiums even as the risk may not reflect what is being paid.

Within that context, I’ve liked 2016, other than the brief reaction served up in response to the December 2015 interest rate increase decision by the FOMC.

With 2016 coming to an end in just 2 months and after the past week of corporate earnings, it was still hard to know where the economy was standing and whether the FOMC might have better justification to finally implement another rate increase, as we’ve all been expecting for almost a year.

So far, this most recent earnings season hasn’t provided very much of a pattern of good news on top and bottom line beats and there hasn’t very much in the way of optimistic guidance being given.

What certainty was missing over the past week with regard to the direction of the economy gave way to some certainty on Friday, however.

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Weekend Update – October 23, 2016

This past week was the first full week of earnings for this most recent earnings season and you could be excused for wondering just how to interpret the data coming in.

The financial sector had fared well, but if you were looking for a pattern of revenue and earnings beats, or even looking for a shared sense of optimism going forward from a more diverse group of companies, you’ve been disappointed to date.

For the most part, this past week was one of mixed messages and the market really rewarded the messages that it wanted to hear and really punished when the messages didn’t hit the right notes.

With so much attention being placed on the expectation that the FOMC would have sufficient data to warrant an interest rate increase in December, you might have thought that companies would start painting a slightly more optimistic image of what awaited their businesses, perhaps based upon a building trend from the past quarter.

That optimistic guidance has yet to prevail even as some have been reporting better than expected revenues.

But no one should be surprised with the mixed messages that the market hasn’t been able to interpret and then use as a foothold to move in a sustained direction.

The mixed messages coming from those reporting just follows the wonderful example of streaming mixed messages that have been coming at us all year long from members of the Federal Reserve.

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Weekend Update – October 16, 2016

As a movie a few years ago, “It’s Complicated,” starring Alec Baldwin, was a funny one that explored some aspects of life that many could relate to in one form or another.

A few weeks ago we were all surprised to learn of some new casting for the upcoming season of Saturday Night Live. But now after his successful appearances portraying Donald Trump, Alec Baldwin’s next role could very well be that of Janet Yellen.

While the Chairman of the Federal Reserve may not be as widely known as the Presidential candidate, for those that are aware of the very important role she plays in all of our lives, we could use something amusing to put events into perspective as we end so many days just shaking our heads wondering what is really going on.

Clearly, it’s complicated.

The one thing you know in life is that when you hear someone begin an explanation of anything with the qualifier “it’s complicated,” you had better be prepared to be deflated.

In the event you are paying attention to the world’s economies, deflated is not the direction anyone wants to be going.

Unlike the way it was portrayed in the movie, complications are usually not very funny, unless perhaps brought to life by Alec Baldwin.

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Weekend Update – October 9, 2016

About a year ago at this time, we were all waiting for what would turn out to be the first interest rate increase by the FOMC in nearly 9 years.

Once that increase finally arrived at the end of 2015, we were all preparing for what we were led to believe would be a series of small such increases throughout the course of 2016.

The problem, however, that stood in the way of those increases becoming reality was the FOMC’s insistence that their decisions would be data dependent. As we all know, the data to justify an increase in interest rates just hasn’t been there ever since that first increase.

The cynics, with the advantage of hindsight, might suggest that the data wasn’t even there a year ago, but that didn’t stop the FOMC from their action, which in short order took the market to its 2016 lows.

Back when those lows were hit in February, many credit Jamie Dimon, the CEO of JP Morgan Chase (JPM) for abruptly ending the correction by making a $26 million purchase of his own company’s shares. That wasn’t a terribly large amount of money, but it probably wasn’t a coincidence that the market turned on a dime.

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Weekend Update – October 2, 2016

Jim Carrey made, what was by most accounts, a truly putrid move entitled “The Number 23.”

At its heart was the “23 enigma,” which is the belief that most of life’s events and incidents are somehow related to the number 23.

For example, you liked how that new sweater fit on you? The number 23.

Need more proof? The burning of Joan of Arc? The number 23.

While those may be disputable to non-believers, this was certainly the week validating the 17 enigma.

Interestingly, the great director Alfred Hitchcock made a movie entitled “The Number 17,” which is regarded among his worst and is rarely ever screened.

This past week, however, the number 17 may have been the key to five days of indecisive trading that saw triple digit moves each day, only to see the S&P 500 end the week with a 0.2% movement.

What the past week gave us were 17 separate occasions during the week when members of the Federal Reserve gave scheduled presentations.

17 is a prime number.

The prime rate is based on the federal funds rate, which is set by the FOMC and their actions or inactions have been ruling markets for months.

Do you really need any more proof than that?

If you do not, that turns out to be very fortunate, but there’s not too much doubt that it has become a free for all in terms of getting one’s interest rate opinion out in front of as many people as possible.  

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