Black swan is perhaps a bit too strong right now. But, ankle biting geese upon the investment markets can cause a scare here and there. Ever been chased by a protective goose? They can be very serious creatures.
I've become more of a technical investor with a big dose of leftover "what are the fundamentals of this investment world today"?.
Does the market place remain a hugh pile of other folks money seeking profits, or does some real value exist, somewhere?
Is this just a chase, chase, chase?
It is apparent that the really big money does much care one way or another about what is going on in politics, in general, yes? The U.S bombing North Korea or North Korea bombing Guam; well, that might change a few things for a week or so, eh?
Interest rates (still touchy/feely as to central bank actions) remain low, inflation remains low and the yield spread between the 10 and 30 year Treasury's has continued to shrink.
Spread between 30's and 10's:
---Feb. 3, 2017 = .62%
---July 21, 2017 = .57%
---Nov. 10, 2017 = .48%
---Dec. 1, 2017 = .39%
---Jan. 19, 2018 = .27%
For a period during much of 2016 the spread remained about .6%.
http://stockcharts.com/freecharts/perf.php?$UST30Y,$UST10Y&p=5&O=011000
Appears to be pretty much all in for equity, choose your sector(s); be they broad based or more focused.
I remain of the mind set that mergers and acquisitions will expand and that some companies may do share buybacks; and whatever else one may consider to increase equity pricing above and beyond what may be considered normal or overbought levels. I do review RSI (relative strength) levels and many are rich right now.
We remain directed more to the large cap/growth without any direct investments into mid/sm cap; although these are inside of many fund holdings.
What say you about the forward direction of global equity markets?
Thanks and take care,
Catch
Comments
- Catch said: I've become more of a technical investor with a big dose of leftover "what are the fundamentals of this investment world today"?
I never understood technical analysis, but respect those who invest based on moving averages, etc. and appear to do well. Fundamentals is hard to access. However, Europe seems to have pulled out of its multi-year slump. Japan is finally seeing some inflation and stock market rebound following a decades long bear market. Interest rates remain low at home and abroad. Larry Summers, speaking on Bloomberg recently, suggested some of the global market gains are due to people shifting money out of the U.S. due to our current banana republic political atmosphere. (Things like pledges to arrest / imprison your opponent if you win the election).
- Catch said: Does the market place remain a hugh pile of other folks money seeking profits, or does some real value exist, somewhere? Is this just a chase, chase, chase?
My sense, having invested for 50 years, is that there’s a whole lot of “chase chase” going on. That doesn't mean the equity markets can’t continue to spiral upwards for many more years. It does mean that as a 70+ year old retiree, I’m not willing to put a large amount of money at risk. So much depends on one’s situation and time horizon.
- Catch said: It is apparent that the really big money does much care one way or another about what is going on in politics, in general, yes? The U.S bombing North Korea or North Korea bombing Guam; well, that might change a few things for a week or so, eh?
Catch lists more potential black swans than I care to dissect. Most have been out there for years. But don’t you love “The law of unintended consequences” ? So many threats emanating from Washington to reign down fire and fury on the Korean Penninsula that it has driven the two nations there closer together. Some real dialogue is taking place between the two adversaries. Some revolves around the 2018 Winter Olympics in South Korea. Neither country wants to partake of all out nuclear war on their peninsula.
- Catch said: Interest rates (still touchy/feely as to central bank actions) remain low, inflation remains low and the yield spread between the 10 and 30 year Treasury's has continued to shrink.
The HY spread doesn’t surprise me. There is often a strong correlation between the equity and junk bond markets. What happens to rates depends on the health of the world economy. Low rates have boosted the global markets higher following the near depression in ‘08. As the punch bowl is gradually taken away, do we achieve orbit or careen back to earth in flames? Nobody knows for certain. However, higher short term rates could actually help longer dated bonds if a recession were to occur as a result. For that reason I’m averaging a bit into a GNMA fund - the equivalent of taking a parachute along with you on a flight. A lot of dead weight - but priceless in an emergency.
https://www.marketwatch.com/story/stock-markets-dont-need-a-trigger-to-correct-says-robert-shiller-2018-01-23
I am aware of the traditional Black Swan definition. I've linked an Investopedia write regarding this, and have pulled a portion of the write, just below.
As to an out-of-thin-air Black Swan event; I surely won't have advance warning through my own means. But, I attempt to pay attention as to any possible triggers for such an event and this is the purpose of this post; to obtain other's view points.
Regards,
Catch
By Brian Bloch | Updated December 16, 2015
The concept of black swan events was popularized by the writer Nassim Nicholas Taleb in his book, "The Black Swan: The Impact Of The Highly Improbable" (Penguin, 2008). The essence of his work is that the world is severely affected by events that are rare and difficult to predict. The implications for markets and investment are compelling and need to be taken seriously.
Black Swans, Markets and Human Behavior
Classic black swan events include the rise of the internet and personal computer, the Sept. 11 attacks and World War I. However, many other events such as floods, droughts, epidemics and so on are either improbable, unpredictable or both. This "non-computability" of rare events is not compatible with scientific methods. The result, says Taleb, is that people develop a psychological bias and "collective blindness" to them. The very fact that such rare but major events are by definition outliers makes them dangerous.
Implications for Markets and Investing
Stock and other investment markets are affected by all manner of events. Downturns or crashes such as the dreadful Black Monday or the stock market crash of 1987 or the internet bubble of 2000 were relatively "model-able," but the Sept. 11 attacks were far less so. And who really expected Enron to implode? As for Bernie Madoff, one could argue either way.
But the point is, we all want to know the future, but we can't. We can model and predict some things (to an extent), but not others - not the black swan events. And this creates psychological and practical problems.
https://www.investopedia.com/articles/trading/11/black-swan-events-investing.asp
Thank you for your observations.
@redwing
Yes, I do agree that there will be variations; even if very short to market moves. I still feel there is too much inexpensive investment monies from big and powerful investment houses using algos and humans to profit from any number of market sectors. A continuing circle of choices with varying ranges of value from which they hope to profit.