Stocks have ripped off a four-week +11% rally after staring into the abyss during a very turbulent January and February. The bear market calls grew as the year got off to the worst start in history. By some measures, clues to a coming bear had been foretold months before. After all, the market for most stocks peaked almost a year ago now, back in April 2015. Since then, it’s been a rough ride with 2 drops of -10% and subsequent sharp snapback rallies. (more…)
Coming into the first quarter of this year corporate earnings were expected to continue to struggle. Energy earnings have been under severe pressure for a year now as the plunge in oil prices decimates the income statements and balance sheets of those companies. With global economic growth remaining a concern, the ripples from that weakening growth flow outward to other sectors as shown below in the anticipated earnings changes from the prior year. (more…)
We know that stocks average a return around +10% or so over many decades. We also know that the indexes rarely hit that +10% number, instead delivering years that are substantially positive, substantially negative, or just plain unchanged more often than not. (more…)
Like a sailboat needs wind to move through the water, our Turbo Model needs market volatility in order to be most effective. The past few years have seen an unprecedented level of calm in the markets with stocks going over three years without a -10% correction, an event that usually occurs at least annually. Without this up and down, back and forth movement in the markets, our Turbo Model cannot beat the market. It finds no opportunity to exploit. This lack of foothold for Turbo led to decent but below-market performance in 2012-2014. Not seeing the typical market waves, Turbo began looking for smaller waves, becoming more sensitive to smaller shifts in stock prices in an effort to find any hint of the volatility that drives its performance. Unfortunately, this increased sensitivity led to a series of performance-damaging whipsaws, especially in 2015, as unusual v-shaped market recoveries had become the norm. Initially, you figure the low volatility calmness of stocks is temporary. But when it goes on year after year and after many a disgruntled subscriber note, we decided we must search for a better solution. (more…)
We thought that our friends here in Austin at Per Sterling did a good job with this month’s blog post. So we’re sharing portions of their monthly comments below. The words are theirs, not ours and thus reflect an investment approach that is more “traditional” than ours. Nevertheless, we think they do good analysis and bring it together in a clear fashion. (more…)
The crisis du jour is found in European banks. The market has determined that nothing good and everything bad is knocking on the door of these large institutions. Remembering how unpleasant the fallout from the U.S. banking crisis was, markets have quickly piled into the worst case scenarios and extrapolated all manner of unhappiness from a few data points. (more…)
Stock investors bid good riddance to a miserable month of January, the worst beginning to a year in stock market history. Chart 1 below provides a visual history of stock market returns: (more…)
Egged on by the stock market’s miserable January performance, there are increasing concerns that the market drop is projecting a coming recession. Last week we examined a few of the reasons why such a forecast may not be on point; how the economy might continue plugging along albeit with simmering growth. This week we will review some of the notes floating around that support the notion of recession, attempting to find if there are reasons beyond just the decline in stock prices to support the recession argument. (more…)
As pundits and market analysts look for clues behind this year’s shockingly bad start to the stock market they have raised the volume on calls that a recession must be coming soon to U.S. shores, presumably having washed across the Pacific from China in the form of continually plunging oil prices and a central bank out of the good drugs the market needs to survive. (more…)
Can we realistically expect to find the next great stock?
The list below comes from @ivanhoff a professional stock trader and frequent investment writer, blogger, tweeter, et al. The list outlines the stages of a market correction. Given that stocks are mired in a significant correction right now, it seems worthwhile to revisit this list. Herewith is Mr. Ivanhoff’s outline. (more…)
