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Markets: Time to Reflect on Risk, not Return

The week ended September 7th saw a pull-back from the record highs set in late August. Perhaps we witnessed the infamous “double top” (January 26th and August 29th). It is clear that financial markets have become riskier, and, perhaps, it is time for investors to assess the risks inherent in their portfolios versus the prospects of future returns. There is a short-term and a long-term view, neither of which augurs …Read More

The Fed’s new bubble – Part 2

In part I of this two part series, I discussed the possible rush for the exits and market volatility in what I saw as a long overdue correction. The violence of the correction and the extremes of volatility that I worried about have now actually appeared. As I rewrite the introduction of this part II, conventional Wall Street wisdom has now become that the correction and volatility are due to the …Read More

Fed Likely to Put Economy at Risk

Market volatility finally showed up in the popular indexes (DJIA, S&P 500, NASDAQ).  These were down two weeks in a row as of November 17 on rising volume (never a good sign when markets are falling), and they are no higher than they were a month earlier (October 20).  The VIX, a measure of market volatility, rose to 13.13 on November 15, from a near record low of 9.14 earlier …Read More

The Headlines Say Growth…

The headline numbers, for jobs and GDP, and most of the sentiment indexes, would lead one to conclude that the economy was robust and accelerating. Even the Fed agrees, as they upgraded their view of the economy to one now in “solid” growth mode. The reality is that much of the data was distorted by the hurricane rebuild effort, and Q4 data will also be plagued by distortions due to …Read More

2017 forecasts when Trump honeymoon ends

In this time of market exuberance and significant increases in almost every sentiment index, it is time to recognize that when reality returns, markets will correct. This coming year is going to begin with more uncertainty than is normally the case: The Trump fiscal agenda is huge, but so are the debt levels; and the Fed has begun a tightening cycle in earnest, with the economy still in first gear. Of …Read More

When policies are anti-growth, sell the rallies and buy the dips

The equity markets are generally forward-looking. That’s why you have price movements that seem incompatible with the latest economic (backward-looking) data. The equity market today, as seen through the eyes of the S&P 500, has been flirting with all-time highs while the economic data indicate that the economy continues on feeble legs. So, just as the “forward-looking” market has predicted 25 of the last 8 recessions, so too, it can …Read More