Posts filed under “Index/ETFs”
Quick: What do great symphonies, great novels, financial markets, and the conversations of clients and therapists have in common?
Answer: All follow distinctive themes. Much of the meaning that we find from all of them lies in our ability to track these themes across their many shifts and permutations.
A composer or novelist brings themes to life through the lines of different musical instruments or the story lines of various characters. Financial markets express themes of economic growth/weakness, inflation/deflation, and stability/instability through the movements across asset classes and national boundaries.
Such communication by themes is familiar to psychologists: What typically brings people to therapy is the fact that they are living out themes that aren’t of their choosing (and maybe not even within their awareness). A common example is the abused child that, later in life, finds herself distancing from relationships and fleeing from even normal, healthy financial risk-taking.
As I emphasized in a recent post, the dominant theme in recent market action (risk assumption vs. risk aversion) has been driven by global macro investment. We can see from the correlation matrix above, taken from my post, that a significant proportion of variance in the daily returns of stocks is shared with the U.S. dollar and commodities, as well as with 10-year Treasury yields.
After strong ISM data around 10:10 AM ET, we saw notable strengthening of the U.S. dollar against the Aussie dollar and euro, as well as a pullback in 10-year Treasury yields and a dip in oil prices. The confluence of this and subsequent market action suggested that global macro participants were firmly in control of market action, shifting from risk assumption to risk aversion.
Our job as traders and investors is to be the therapist, the concert aficionado, and the sensitive novel reader and track themes as they emerge and shift. If we view market action as a conversation, then we can appreciate that listening is a core investment skill.
Its been a tough year for the U Penn prof. First, the market has gotten cut nearly in half, something many buy & hold investors admit is possible, but is supposed to a rare occurrence. But as we have seen in 2008, and 2001-03, and 1972-73, these sorts of brutal bear markets are a lot…Read More
> I am especially pleased to present today’s Think Tank piece by James Bianco. Jim has run Bianco Research out of Chicago since November 1990. He has been producing fixed income commentaries with a circulation of hundreds of portfolio managers and traders. Jim’s commentaries have a special emphasis on: money flow characteristics of primary dealers,…Read More
Kevin Lane is one of the founding partners of Fusion Analytics, and is the firm’s director of Quantitative Research. He is the main architect for developing their proprietary stock selection models and trading algorithms. Mr. Lane is a member of the Market Technicians Association. ~~~ As seen below in the S&P 500 has been capped…Read More
Jack Bogle is having an author event at the Barnes & Noble on Fifth Avenue (555 5th/between 45 & 46), at 6:30PM June 17. He recently published a book called “Enough.” Not sure how people feel about Jack. I like his criticism of Wall Street in general, but given what giant shareholders Vanguard is, I…Read More
As previously announced, both Citigroup and General Motors will officially get the boot from the Dow Jones Industrial Average this morning. Replacing them were Travelers Corp. and Cisco Systems, respectively. So long . . .
As I expected back in 2007, GM is out of the Dow, being replaced by internet powerhouse Cisco (CSCO): Let’s start a pool: At what point in the future will General Motors (GM) ignominiously join Eastman Kodak (EK), Woolworth and others and get tossed out of he Dow Jones Industrials? And, who will replace them?…Read More
Kevin Lane is one of the founding partners of Fusion Analytics, and is the firm’s director of Quantitative Research. He is the main architect for developing their proprietary stock selection models and trading algorithms. Prior to joining Fusion Analytics, Mr. Lane enjoyed success as the Chief Market Strategist for several sell side institutional brokerage firms….Read More
A few interesting Gold discussions lately (See chart below) Also, see Eddie Elfenbein’s Central Bank Gold Sales Began 10 Years Ago This Week: Has it Worked? Via Chart of the Day: “Today’s chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow…Read More