Uncategorized, Weekly Update

Was This Historic October Selloff the Beginning of a Bear Market?

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Published November 2, 2018

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October is one of the two best months of the year here in Austin, Texas (the other being April). “Best” being defined as a break from the sweltering heat that drags along from May through September. In April and October, skies are sunny, temperatures are moderate, and our city is a joy. However, this year, we have experienced unprecedented rainfall that has washed away much of our prized October. The result of all the rain has been a swollen, mud-filled river through our city that has overwhelmed our water treatment facilities causing us to spend a week boiling water if we wanted to use it. It’s been a dramatic unraveling of our normally blissful month.

The stock market has experienced its own October unraveling. After a period of immense calm, stock investors have been rocked by a crushing series of volatile trading days, most often leaving market indexes heavily in the red. The sharp selloff ranks among the top 10 most damaging 35-day periods in the past 65 years. (more…)

Uncategorized, Weekly Update

No, the Stock Market Does Not Predict Recessions

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Published October 26, 2018

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Below is a good post from Ben Carlson regarding the ability of the stock market to predict recessions. The data says the stock market is bad at such predictions, rising half or more of the time in a 3-6 month window ahead of the onset of a recession. So, if the stock market “looks ahead” by 6-9 months as we are often told it does, the market is no better than a coin flip in foreseeing recessions. It may not look ahead all that well is the point. (more…)

Uncategorized, Weekly Update

Explanations for the Market Drop

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Published October 19, 2018

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Our post last week noted that the October selloff in stocks likely had drivers other than the oft-noted rise in interest rates as some of the most interest rate-sensitive sectors, such as utilities, were holding up just fine. We also noted that the wave of geopolitical issues that seem to be ever-widening were unlikely to be a major cause of the selloff as investors were not pouring money into bonds, as they typically do during periods of angst. A recent note from Oppenheimer points to persistent and increasing weakness in non-U.S. economies as being the primary catalyst for the current stock market correction. (more…)

Uncategorized, Weekly Update

The Market’s Best Performing Sector Isn’t Tech

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Published October 5, 2018

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Since July, one sector has ruled all in the stock market. While the large-cap Dow Industrials, S&P 500, and Nasdaq all flirt with record highs, you might be surprised to find that neither technology nor consumer stocks, the long-time leaders of this market advance, are the current belles of the ball. That distinction goes to healthcare stocks. (more…)

Uncategorized, Weekly Update

Market Manias – Bitcoins, Marijuana, and the Internet of the 1990s

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Published September 28, 2018

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We are far down the road of this bull market cycle. How much further this road goes is anyone’s guess. Nevertheless, we are struck by the mania investing stories of last year and this, namely, cryptocurrencies (2017’s mania), and marijuana stocks (2018’s mania). These stories are very similar to the internet “dot.com” stories of the late 1990s, it appears to us. (more…)

Uncategorized, Weekly Update

Interest Rates Try to Rise Once Again

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Published September 21, 2018

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After first popping above 3% back in May, U.S. 10-year Treasury rates returned to that closely-watched level this week, clearing 3% for the second time. The first time rates eclipsed 3% the rally in rates lasted barely a week before investors poured back into bonds pushing yields downward. A push upward in both June and late July failed to clear 3%. Rates have moved quickly in the month of September from 2.85% to 3%+ in a straight shot. This week’s rally finally did the trick, blowing past 3% and setting the stage for perhaps a run to 4%. (more…)

Uncategorized, Weekly Update

A Smattering of Concerning Charts

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Published September 7, 2018

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It is said that stock markets climb a wall of worry. As concerns dissipate, investors feel more free to take risk and buy stocks. A sustainable market rally takes hold when the worries are replaced by a “Goldilocks” scenario where market participants view the near-term future as favorable for stock investing. They buy shares with little concern. The lack of concern reaches a point of complacency where investors are undervaluing potential risks. (more…)

Uncategorized, Weekly Update

Where the Next Market Crisis Might Come From

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Published August 31,2018

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With the 10-year anniversary of the onset of the global financial crisis just weeks away, now is a good time to ask where the next global economic crisis might come from. To be clear: We’re not sounding any alarms here. We don’t think a crisis is imminent. But we do like to keep our eyes on the horizon.
Reforms to the global financial system in the wake of the 2008–2009 crisis mean the next crisis probably won’t look like the last one. So what will it look like? (more…)