Category: Markets

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Even Some Technicals Are Now At Historical Extremes

I’ve written extensively about how valuations of the U.S. stock market are at historical extremes exceeding even 1929 and 2000. I’ve discussed how valuations are not at all reliable for predicting short-term movements but quite reliable for predicting returns over the next 10-12 years and, so, can be valuable for financial planning and investment strategy.

The implication of extreme valuations today being that annualized returns for U.S. stocks will likely be much closer to 0% than their 10% historical average over the next 10-12 years and with a lot of volatility in the interim.

However, now, we’re starting to see technicals hit historical extremes as well. Technicals are often-used for predicting short-term movements and identify key trading signals although they are still far from reliable.

They are interesting to at least monitor in order to get a feel for the market, investors attitudes towards risk, key trading signals others may be using, etc… Continue reading “Even Some Technicals Are Now At Historical Extremes”

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Tesla…To The Moon!

Today, I’m going to do something I’ve never done before. I’m going to comment on an individual stock.

Since I generally don’t make recommendations on individual stocks for clients, I don’t focus my commentaries on them. However, I’ve been following this company closely for a couple years now, and the situation has become so ludicrous that I feel the need to highlight it. This could be one of those rare examples that go down in history as a great learning lesson. Continue reading “Tesla…To The Moon!”

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Warren Buffett versus U.S. Households… In Charts

Executive Summary: Warren Buffett is holding records amount of cash. Meanwhile, households are holding near record LOW levels of cash and near record high levels of stocks.

Last week we learned Warren Buffett’s Berkshire Hathaway set another new record for the amount of cash and short-term investments (e.g. U.S. Treasurys) its holding. Specifically, Berkshire is holding over $128 BILLION of cash and short-term instruments. That’s a lot of dry powder!

The reason he’s holding so much cash is because he hasn’t been able to find attractively-valued investment opportunities. So, like any disciplined investor, he’s not chasing obscene valuations. Successful investors don’t get caught up in the emotions of manias and bubbles. Successful investors also don’t let fear prevent them from buying good assets when they’re priced right much like Mr. Buffett was doing in early-2009 when everyone else thought the world was ending.

Last week, I also happened to come across some charts from @SentimentTrader (Twitter) showing how households are currently invested. There is some really interesting data here that presents a stark contrast to Mr. Buffett’s approach right now. Before we continue, remember Mr. Buffett’s wise words, “Be fearful when others are greedy and greedy only when others are fearful.”
Continue reading “Warren Buffett versus U.S. Households… In Charts”

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The Fed Cuts Rates for a Third Time…And Zombies

Yesterday, the Federal Reserve confirmed the market’s expectations and announced they would be cutting rates for a third time this year. The rate cut is an addition to the recently-announced program of supplying $120 BILLION in liquidity each night AND announcing the resumption of QE whereby they’ll be buying $60 BILLION of short-term Treasurys each month.

In other words, the Fed is pursuing policy that, until the recent Great Financial Crisis, was unprecedented. Why? Why are they pursuing emergency policy actions when the economy is supposedly strong, stock market is near all-time highs, unemployment near all-time lows and inflation supposedly around 2%? Continue reading “The Fed Cuts Rates for a Third Time…And Zombies”