Category: Weekend Update

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Weekend Update – July 31, 2016

Let me get this straight.

The people sequestered in their nearly meeting for 2 days in Washington and who only have to consider monetary policy in the context of a dual mandate are the smartest guys in the room?

We often hear the phrase “the smartest guys in the room.”

Sometimes it’s meant as a compliment and sometimes there may be a bit of sarcasm attached to its use.

I don’t know if anyone can sincerely have any doubt about the quality of the intellect around the table at which members of the FOMC convene to make and implement policy.

While there may be some subjective baggage that each carries to the table, the frequent reference to its decisions being “data drive” would have you believe that the best and brightest minds would be objectively assessing the stream of data and projecting their meaning in concert with one another.

One of the hallmarks of being among the smartest in the room is that you can see, or at least are expected to see what the future is more likely to hold than can the person in the next room. After all, whether you’re the smartest in the room and happen to be at Goldman Sachs (GS) or at the Federal Reserve, no one is paying you to predict the past.

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Weekend Update – July 24, 2016

“When you’re a hammer, everything looks like a nail.”

That old saying has some truth to it.

Maybe a lot of truth.

When you think about stocks all day long everything seems to be some sort of an indicator as I look for a rational explanation to what is often a prelude to an irrational outcome.

Reducing the intricate character of what is found in nature to a mathematical sequence is both uplifting and deflating.

When the very thought of uplifting and deflating conjures up an image of a stock chart it may be time to re-evaluate things.

When you start seeing the beauty in nature as a series of peaks and troughs and start thinking about Fibonacci Retracements, it is definitely time to step back.

Sometimes stepping back is the healthy thing to do, but as the market has been climbing it’s most recent mountain that has repeatedly taken the S&P 500 to new closing highs, it hasn’t taken very many breaks in its ascent.

You don’t have to be a technician, nor a mountain climber to know that every now and then you have to regroup and re-energize.

You also don’t have to be a mountain climber to know that standing on the edge of a cliff is fraught with danger, just as each step higher adds to risk, unless there’s a place to rest.

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Weekend Update – July 17, 2016

 

Stock market investing is all about risk and reward and sometimes you do have to stick your neck out.

There is no reward without risk.

It’s sort of like those who say that you will never understand happiness without having experienced sadness.

My preference, however, it to simply experience varying levels of happiness and to ignore anything that might detract anything from the lowest level of happiness.

I ignore lots of things, much to the consternation of those around me.

But I ignore that consternation.

The same thing isn’t really possible with investing as not only is happiness so often of a very temporary nature and fleeting, the only way to avoid risk right now is to look at bonds or your mattress and those carry lots of opportunity risk.

Also, there’s a big difference between the qualitative feel of personal happiness and the quantitative nature of investing.

In other words, instead of being a giraffe, you would have to be an ostrich, although the ostrich is actually doing something of value when their head is below ground.

So you do have to stick your neck out if your happiness is defined in the form of stock gains.

I wasn’t very happy in 2015, but am very happy with 2016, to date.

Much of that has to do with the fact that the very stocks that disappointed me in 2015 are the ones delighting in 2016, even as they still have lots to do to erase the stink of 2015.

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Weekend Update – July 10, 2016

 I still have a fascination with license plates and the bumper stickers put on their cars.

The license plate thing these days is more geared toward trying to decipher the message contained on someone’s vanity plates.

That often takes a combination of having a very open mind as to the intended grouping of letters and numbers and to the message.

Of course, the exercise isn’t complete until then driving past the car driver and either giving them a thumbs up or a shoulder shrug.

The bumper sticker thing is more just a question of reading and then trying to imagine what the person in the car will look like once going past them.

For example, in my experience, those with the “Choose Civility” bumper sticker tend to be very rude drivers, but they don’t look rude.

What both fascinations have in common is that as I get older, the distance that I need to get within range to be able to read the plates and the bumper stickers is increasingly getting smaller and smaller.

That brings some danger, but sometimes it’s really hard to resist.

When I say “sometimes,” I mean that I can never resist and it is the reason that my wife won’t let me drive when we’re together.

I need to be within range.

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Weekend Update – July 3, 2016

We often have an odd way of accepting someone’s decision to change their mind.

A change of mind is frequently thought to be a sign of a poorly conceived conviction or a poorly conceived initial position.

Few politicians change their minds because they know that they will be assailed for weakness or for having caved in, as opposed to having given careful and objective thought to a complex topic.

Of course, then there’s also the issue of a politician changing their mind simply for political expediency or political advantage.

That kind of distasteful behavior, although perhaps pragmatic, just stokes our cynicism.

We sometimes get upset at a child’s frequent changes of mind and want to instill some consistency that ultimately stifles ongoing thought and assessment.

At the same time, as parents, we are often faced with alternating opinions as to whether we need to be consistent in application and formulation of the rules we set or whether there should be some ability to make the rules a living entity that is responsive to events and circumstances.

When I was a child, I attended a “Yeshiva,” which is a Jewish version of a parochial school. We were taught to abide by Biblical laws, include the law regarding Kosher foods.

One day, when I was about 10 years old, I found a package of ham in our refrigerator and confronted my mother about the blatant violation of a sacred rule.

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Weekend Update – June 26, 2016

 A week ago, the world was getting ready for what all the polls had been predicting.

Only those willing to book bets seemed to have a different opinion.

Polls indicated that Great Britain was going to vote to leave the European Union, but those willing to put their money where their mouths were, didn’t agree.

Then suddenly there was a shift, perhaps due to the tragic murder of a proponent of keeping the EU intact.

That shift was seen not only in the polls, but in markets.

Suddenly, everyone was of the belief that British voters would do the obviously right thing and vote with their economic health in mind, first and foremost.

The funny thing is that it’s pretty irrational to expect rational behavior.

In a real supreme measure of confidence, just look at the 5 day performance of the S&P 500 leading up to the vote.

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Weekend Update – June 19, 2016

About 25 years ago a character debuted on Saturday Night Live and the recurring joke was to try and guess the character’s gender.

The sketches typically had  red herrings and lots of mis-direction and the question of Pat’s gender was never answered.

Never a terribly popular character, someone had the fiscally irresponsible idea of making a feature film and Pat was never heard from again.

The guessing stopped.

Fast forward to 2016 and think of Pat as an FOMC member.

Over the past 2 months or so there has probably been lots of mis-direction coming from Federal Reserve Governors, perhaps as they floated trial balloons to see how interest rate action or inaction would be received by the stock market.

The health of the stock market is not really part of their mandate, but since so much of the nation’s wealth is very closely aligned with those markets, it may only be logical that the FOMC should at least have some passing interest in its health.

Who would have guessed 6 months ago when the first interest rate hike occurred that we would be at a point where that has thus far been the only one?

Who would have thought that in the transpiring 6 months nothing would have validated the December 2015 interest rate increase and that nothing but conflicting economic data would be forthcoming?

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Weekend Update – June 12, 2016

Sometimes you just have nowhere to go.

One thing that was fairly certain last week was that there wasn’t too much of a trend and there wasn’t any clear path to follow.

As markets began testing the 18000 level on the DJIA and 2100 on the S&P 500, the chorus was loud and clear.

There is no place to go but up.

The alternating chorus was that there was no place to go but down.

The market instead went sideways, but not very far as all roads seemed to be closed off.

After the previous week, which ended precisely unchanged, this past week managed to move 0.1%,

Granted, the first three days of the week did seem to benefit from Chairman Janet Yellen’s superb demonstration of how hedging your words works to allow people to hear whatever it is that they want to hear.

Following Monday afternoon’s talk, Dr. Yellen essentially said something to the effect of “It’s not good out there, but it’s all good. You know what I mean?”

Years ago I heard a fairly odd individual present a lecture on the pharmacological management of children requiring sedation. He referred to the well known age and weight based rules regarding dosages, but said they were inadequate. Not surprisingly, after listening to him for a brief while, it was only his eponymous rule that could determine the correct amount of sedative agents to administer to a child.

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Weekend Update – June 5, 2016

While so many people are still confused over the “Transgender Bathroom” issue, the real confusion came from this week’s Employment Situation Report.

With the odds of an interest rate hike by the FOMC’s June meeting seemingly increasing every day, you would really have to believe that the FOMC knew what was going to be in the economic news cards.

The increasing hawkish talk all seemed to be preparing us for a rate hike in just 2 weeks. Judging by the previous week’s market performance you would certainly have been of the belief that traders were finally at personal peace with the certainty of that increase.

The concept of being at personal peace is confusing to some.

I’m personally confused as to how it could have taken so long to see the obvious, unless we’re talking about stocks, interest rates and investor’s reactions.

What I find ironic is that the proposal for all inclusive bathrooms is really age old, at least at the NYSE, when there was a recent time that there was only a need for a single sex bathroom, anyway.

Just like many of us know, what a great degree of certainty, which camp we belong to when nature beckons, the lines seemed to be increasingly drawn with regard to interest rates.

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Weekend Update – May 29, 2016

We’ve all been part of one of those really disingenuous hugs.

Whether on the giving or the receiving side, you just know that there’s nothing really good coming out of it and somehow everyone ends up feeling dirty and cheapened.

Every now and then someone on the receiving end of one of those disingenuous hugs believes it’s the real thing and they are led down the wrong path or become oblivious to what is really going on.

This week the market gave a warm embrace and hug to the notion that the FOMC might actually be announcing an interest rate hike as early as its June 2016 meeting.

The chances of that even being a possibility was slight, at the very best, just 2 or 3 weeks ago. Since then, however, there has been more and more hawkish talk coming even from the doves.

The message being sent out right now is that the FOMC is like a hammer that sees everything as a nail. In that sense, every bit of economic news justifies tapping on the brakes.

Traditionally, those brakes were there to slow down an economy that was heating up and would then lead to inflation.

Inflation was once evil, but now we recognize that there are shades of grey and maybe even Charles Manson had some good qualities.

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