Posts filed under “Think Tank”
While the minutes from the April FOMC meeting mentioned that some
members raised the possibility of an increase in the total amount of
asset purchases, one has to wonder what they may be thinking now with
the US$ index lower by almost 6% since the day before the April meeting,
the CRB higher by 12% and the 10 yr bond yield up almost 20 bps. Looking
forward, do they step it up and fight the bond market in order to keep
rates low or do they sit on their hands and let the current plan unfold.
Hopefully at some point (I was hoping a while ago), the Fed will
disabuse themselves of the belief that they constantly have to do
something and of the belief that what they are doing is really
contributing to the long term health of this country. I’m sorry for
repeating myself but Ben and the boys need to just sit on their hands
for a while
The minutes from the last FOMC meeting gave its economic forecast for growth, unemployment and inflation. They modestly raised its 2nd half ’09 GDP estimate but trimmed its ’10 GDP range. They expect the unemployment rate to reach above 9% from below 8% previously. Their inflation forecasts were little changed. The rest of the minutes…Read More
This pullback in the market off the morning’s highs is again being led by the three most important groups in my opinion when analyzing the state of the US economy, retail, housing and financials. The weakness last week was also led by these three groups while at the same time the reflation trade outperforms, helped…Read More
While some recent housing data has shown some signs that the housing market is close to a bottom, the purchase component of the weekly MBA data still is evidence that natural buyers are not responding to historically low interest rates. Mortgage applications for purchases fell 4.4% for the week and are only 7.6% above the…Read More
David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. Mr. Kotok’s articles and financial market commentary have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to CNBC programs. Mr. Kotok is also a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE), and the Philadelphia Financial Economists Group (PFEG).
May 20, 2009
Some bullets on different asset classes follow.
It appears that the March 9 low is seriously established. Since then, the market has powered higher with broadened participation. The market has confirmed a determined upward bias. We can see evidence of this broadening by examining the S&P 500 Index and its component parts four different ways. Let’s look at four ETFs to support this view.
RSP is the stellar performer among them; it is the equal-weighted version of the S&P 500 stocks. From March 9 through May 18 it delivered a total return of 50%. Compare this with RWL, the revenue-weighted version of the same S&P 500 index; it delivered a total return of 43.5% for the same period. SPY is the ETF that tracks the cap-weighted S&P 500 index; it was up 35%. OEF is the cap-weighted largest 100 stocks within the S&P 500 index; it was up 32.7%. Conclusion: market leadership has been broadening, which is why the specially designed ETFs are outperforming the standard cap-weighted ETF. Disclosure: RSP is Cumberland’s largest ETF position and a current core holding in US ETF portfolios.
Contrast the above with the performance of these same four ETFs during the period of January 1, 2009 through March 9. Then the market was in steep decline. Selling was uniform and impacted all four ETFs nearly equally. RSP declined 28.4%, RWL was off 29.3%, SPY fell 26.7%, and OEF declined 26.8%. Conclusion: during the sell-off nearly all stocks fell; after the bottom was formed on March 9 the market leadership changed, which is why the highly correlated performance during the decline morphed into the diverse and less-correlated outcome of the recovery.
Emerging markets have been the stellar performers in the rally since March. Brazil and China have been leaders among them. Many believe that China’s stimulus response to the global financial crisis has been and remains more effective than that in the US. Cumberland has been overweight China and overweight the emerging markets in international ETF accounts. Bill Witherell will be writing about the details. Cumberland continues to overweight this sector.
Category: Think Tank
Good Evening: On the surface, the tiny changes in asset prices in the U.S. on Tuesday might not seem like much to write about. Mixed earnings results, debatable economic data, and dwindling volatility levels may indicate a snoozer, but real asset prices (i.e. our standard of living) actually fell today because our currency continues to…Read More
Category: Think Tank
The sense of optimism that the worst of the economic downturn has passed and the outlook looking forward is much improved continues to spread around the globe. Today the affirmation of this belief was reflected in Germany as the ZEW investor confidence expectations # in their economy rose to the highest level since June ’06,…Read More
If the VIX closes below 30 today, it will be the first time since Sept 12th, the Friday before the Lehman bankruptcy announcement on the 15th. The Sept 12th close was 25.66.
Credit Crisis Watch: Thawing – noteworthy progress Are the various central bank liquidity facilitiess and capital injections having the desired effect of unclogging credit markets and restoring confidence in the world’s financial system? This is precisely what the “Credit Crisis Watch” is all about – a review of a number of measures in order to…Read More
Here is an excerpt from our latest issue of The Institutional Risk Analyst comment and some additional thoughts since we’ve published. Got some very good responses/retorts that we’ll share with with la famiglia ritholtz as with previous comments.
The Rag Blog
March 22, 2009
Despite bringing the world economy to its knees and costing taxpayers hundreds of billions of dollars in bailouts for events such as Bear Stearns, Lehman Brothers and American International Group (NYSE:AIG), the Masters of the Universe who run the largest Wall Street firms of have learned not a thing when it comes to credit default swaps (“CDS”) and other types of high-risk financial engineering. Indeed, not only are the largest derivative dealers fighting efforts to reform the CDS and other derivative instruments that caused the AIG fiasco, but regulators like the Federal Reserve Board and US Treasury are working with the banks to ensure that a small group of dealers increase their monopoly over the business of over-the-counter (“OTC”) derivatives.