Category Archives: Analysis

Opportunities are Present Even During Recessions

Of the last five GDP estimates* released by the Bureau of Economic Analysis, four of them have produced an annualized growth rate below 2.0%**; 0.4%, 1.3%, 1.8%, 3.0%, and 1.9% respectively.  Additionally, the Federal Reserve revised down their own ranged-estimate … Continue reading

Posted in Analysis, Portfolio Strategy | Tagged , , | Leave a comment

Analysis of the S&P 500 on Jobs Day

Today was an ugly day for equities and Treasurys were not the beneficiary.  But in preparation for the Employment Situation report tomorrow, I thought it would be good to become familiar with some history.  Of the 15 Employment Situation reports … Continue reading

Posted in Analysis, Portfolio Strategy | Tagged , , | Leave a comment

The Implications of the FOMC Release on April 25, 2012

Over the course of the last year, a third round of quantitative easing was a topic debated by many Fed-watchers as they mulled the status of the U.S. economy. The conclusion was fairly equally divided. Until yesterday. Without suggesting additional … Continue reading

Posted in Analysis, Portfolio Strategy | Tagged , , , , | Leave a comment

Anecdotal Evidence of Economic Expansion

Land surveying is one of the foremost leading indicators of economic activity. It is a required procedure for most every form of construction. If Target wants to create a new island in their parking lot, it requires a survey. If … Continue reading

Posted in Analysis, Portfolio Strategy | Tagged , , , | Leave a comment

Mixed Data, Mixed Reaction, Awaiting AAPL

The first tick on the SPX today was slightly negative–the low of the day. From there, the SPX made its way to 1375, pausing only briefly in advance of the 10 AM economic releases. Although several indicators came out this … Continue reading

Posted in Analysis, Portfolio Strategy | Tagged , , , , | Leave a comment

The Economic Bifurcation May Be Converging

The high for the S&P in the first half of 2010 was about 1220 toward the end of April. Comparatively, in the first hallf of this year, the S&P hasn’t printed below 1249, yet Gallup’s Economic Confidence index is near its low for the year—and lower than it was at any point in H1 2010. The consumer is weak; corporations are relatively healthy. However, they are not mutually exclusive events. At some point, that gap will have to be closed. It will not be over the course of one summer, but over the next quarter or so, you should expect individual economic situation to factor in to equity market returns. Continue reading

Posted in Analysis, Investment, Portfolio Strategy | Tagged , , , | Leave a comment

Of Course We Won’t Have QE3

The Fed has done its job; and monetary policy has run its course. However, the economy is still soft and requires additional support–that is, more fiscal stimulus. The budget proposal in which every dollar the debt ceiling is raised, there will be as much or more cut from future spending, seems rather appropriate. It allows for the continued near-term support the economy needs, yet addresses the long-term structural issues. This is the only measure that will be helpful to today’s economy. But depending on the resolution of this issue, the Federal Reserve, in an act of desperation, may attempt to replace the lack of fiscal response. This may include an extended-extended Fed Funds Rate or some other plan that has not yet been laid out. It is very unlikely additional monetary measures will be effective. The economy requires an extremely long time to heal and tough choices need to be made at inopportune times. Continue reading

Posted in Analysis, Investment | Tagged , , , | Leave a comment

Twading: The Twitter Revolution

In a previous post, I had mentioned algorithmic trading based on Twitter commentary.  While I don’t think this is the easiest route to quantitative glory, it represents the convergence of finance and technology.  Bloomberg Insights has the following visual: For … Continue reading

Posted in Analysis, Investment | Tagged , , | Leave a comment

Investment Decisions and Behavioral Finance

Our ability to find real patterns is a mark of our intelligence, but our intelligence often backfires, as when we identify illusory patterns as real. Imagine that we are facing machines with two levers marked S and B. The machines dispense nothing if we pull the worng lever but they dispense $10 if we pull the right one. We’ll get to pull levers many times. A pattern is programmed into the machine but we do not know what it is… How would we go about the task if we want to get the most money out of the machines? Continue reading

Posted in Analysis, Portfolio Strategy | Tagged , , , , | 1 Comment

Past Performance Does Predict Future Performance

Market predictions can be made for several reasons: industry fundamentals, technical analysis, etc. However, the most influential factor in market predictions is past performance. The psychological mindset of the investor dominates the assessment of the future. This is obviously an unintended and unwanted circumstance. Successful long-term investing requires the elimination, or significant reduction, of this behavioral risk. Predictions are not inherently bad. But it is less about the prediction itself and more about the hypothesis that created it. Continue reading

Posted in Analysis, Executive Views, Portfolio Strategy | Tagged , , , | Leave a comment