TheAcsMan

November 19, 2016

Weekend Update – November 20, 2016

You might be able to easily understand any reluctance that the FOMC has had in the past year or maybe even in the year ahead to raise interest rates.

To understand why those decision makers could be scarred, all you have to do is glance back to nearly a year ago.

At that time, after a 9 year period of not having had a single increase in interest rates, the FOMC did increase interest rates.

The data compelled them to do so, as the FOMC has professed to be data driven.

Presumably, they did more than just look in the rear view mirror, casting forward projections and interpreting what are sometimes conflicting pieces of the puzzle.

At the time, the conventional wisdom, no doubt guided somewhat by the FOMC’s own suggestions, was that the small increase was going to be the first and that we were likely to see a series of such increases in 2016.

Funny thing about that, though.

Data is not the same as a crystal ball. Data is backward looking and trends can stop on a dime, or if I were to factor in the future value of money based upon the increase in the 10 Year Treasury note ever since Election Day, considerably more than a dime.

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November 12, 2016

Weekend Update – November 13, 2016

Following the past week, it should be pretty easy to know what to do when the experts chime in and compete for your attention.

You run as far and as fast as your feet can possibly take you.

It will be fascinating to walk into a physician’s waiting room about 6 months from now and pick up some seven and eight month old copies of the news magazines sprinkled around the various end tables.

I’ve always enjoyed reading those aged articles just to get a snicker over how wrong the futurists and the experts consistently demonstrate themselves to be.

Most of the time, I don’t even have an appointment or any need. I just go to do the reading and then leave when someone finally asks “Sir, have you been helped?”

From the 99% probability of a Clinton victory in the Presidential election, as put forward by the Princeton Election Consortium, or the less sanguine 60-70% probability put forward by competitor fivethirtyeight, no one of any credibility got it right.

My guess is that if these elections predictions were written by stock analysts, the probability of a Clinton victory would have been reduced to 30% the day after the election, just as price targets and ratings are so often changed after stock moving news has already done its work.

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November 5, 2016

Weekend Update – November 6, 2016

Some days we really have no clue as to what made the market move as it did, but nothing bothers us more than not knowing the reasons for everything.

We tend to like neat little answers and no untied bundles.

It starts early in life when we begin to ask the dreaded “Why?” question.

We want answers at an early stage in life even when we have no capacity to understand those answers. We also often make the mistake of querying the wrong people to answer those questions, simply on the basis of their ready availability and familiarity.

Those on the receiving end of questions usually feel some obligation to provide an answer even if poorly equipped to do so.

While the market has now gone into a 9 consecutive day decline, it seems only natural to wonder why that’s been happening and of course, some people, have to offer their expert explanation.

It is of course understandable that the question is posed, as earnings haven’t been terrible and neither have economic data. Yet, a 9 day decline hasn’t happened since 1980 and has taken the market into a stealth 5% decline.

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October 29, 2016

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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October 22, 2016

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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October 15, 2016

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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October 8, 2016

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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October 1, 2016

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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September 24, 2016

Weekend Update – September 25, 2016

The Talking Heads were really something.

I saw them and The Ramones in Cambridge.

Not at a concert, but at an album signing.

I picked up an album just to be able to get a close look at the members of both bands, mostly because one of the Ramones had a safety pin through his cheek and I thought that was pretty weirdly cool.

Then I promptly put the signed albums back into the rack.

Maybe it’s strange that so many years later one of the Ramones, maybe the one with the safety pin, would sing an homage to American capitalism and maybe a bit of an homage to one of its media symbols, “The Money Honey.”

But that was all almost 40 years ago and I never dreamed that those two groups would have been so influential. I never would have returned the signed albums back to the rack had I any clue that they would have been worth something some day.

In time, I came to especially like the Talking Heads, but never got as close as I did that one afternoon, instead having to settle on repeatedly melting the cassette tapes holding their songs.

“Burning Down the House,” “Once in a Lifetime” and so many more.

This coming week, right on the heels of the FOMC’s most recent statement release that kept investors in a celebratory mood, is going to be something of a Talking Feds festival.

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September 17, 2016

Weekend Update – September 18, 2016

Everyone has been there at one time or another in their lives.

Maybe several times a day.

There is rarely a shortage of things and events that don’t serve or conspire to make us crazy.

Recurring threats of a government shutdown; the 2016 Presidential campaign; the incompetence in the executive suites of Twitter (TWTR) and pumpkin flavored everything, for example.

I add the FOMC to that list.

Although his annual Twitter campaign against pumpkin flavored everything has yet to start this year, there is scant evidence that Marek Fuchs, a wonderful MarketWatch columnist, has actually gone crazy.

However, as opposed to the hyperbole that typically characterizes the situation when someone is claiming to be made “crazy,” traders may be actually manifesting something bordering on the insane as members of the Federal Reserve toy with the fragile flowers they are in real life.

The alternating messages that have come from those members, who at one time, not too long ago, were barely seen, much less heard, have unsettled traders as the clock is ticking away toward this coming week’s FOMC Statement release.

Couple their deeply seated. but questionably held opinions regarding the timing of an interest rate increase, with the continuing assertion that the FOMC will be “data dependent,” and a stream of conflicting data and if you are prone to be driven crazy, you will be driven crazy.

Or, at the very least, prone to run on sentences.

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