Greek & Chinese Known Unknowns

I.C. Angles Investment Post…

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.” — Donald Rumsfeld, Former U.S. Secretary of Defense

Greece and China have both been in business headlines in June, reminding me of Donald Rumsefeld’s famous quote about known unknowns. It is widely known that Greece may exit the Euro, and as I write this column news has broken that Greek banks will be closed on Monday and capital controls imposed in the country in response to the deepening crisis. It is also known that in response to a slowing economy and recent two week selloff in its stock market, the Chinese government has cut its benchmark lending rate to a record low and is pursuing increasingly accommodative policies. Those are the known knowns.

(more…)

Buyback Bonanza

I.C. Angles Investment Post

Why is the U.S. stock market still edging higher? Economic news and corporate earnings have largely been disappointing. Financial journalists who not too long ago proclaimed that falling oil prices would be a boon to the economy, as consumers had more money in their pockets to spend, have lately been writing articles about how the first quarter was disappointing, due to a strong U.S. dollar and those very same falling oil prices. As for me I still stick by my initial analysis that falling oil prices are a negative, due to their deleterious impact on a U.S. energy sector that was previously caring more than it’s weight, when it comes to creating good paying jobs and generating capex spending. What is more, many investors in 2015 reduced their exposure to U.S. stocks. So, how could stocks possibly seesaw their way, admittedly with more volatility and less upward price momentum, to new record highs? The answer appears to be a corporate buyback bonanza.

(more…)

Worth Reading 4.16.15

If you are concerned, as I am, about the possibility that the stock market may be in a topping phase, the following recent articles are worth a read:

“This is Not Good”

“The Big Four Economic Indicators: Industrial Production”

“Surge in European Equity Valuations”

“Disaster is Inevitable When the Two Decade-Old Stock Bubble Bursts”

“We Traveled Across China and Returned Terrified for the Economy”

“Fast Money, Fast Markets”

“The Misunderstanding of El-Erain’s Cash Position”

“We are Approaching the Peak of the Buyback Movement”

Stock Market Tug of War

I.C. Angles Investment Post…

So far in 2015, the bulls and bears have been in a tug of war on the direction of the stock market. The first quarter has fluctuated between the S&P 500 posting new record highs and turning in a negative return for the year. Both sides have compelling arguments for stocks heading lower or higher in the near term. The bears argue stocks should head lower, because most measures of economic performance have come in below expectations. The economy rather than taking off, as was widely anticipated, is ebbing closer to stall speed. Obviously a recession would be a huge negative for stocks. On the other hand, the bulls have several reasons for why disappointing economic data should not stand in the way of stocks making new highs.

(more…)

Running Off a Cliff

The stock market at the moment reminds me of those old-time cartoon characters, who would run off a cliff and keep running on thin air—only falling when they eventually noticed there was no ground beneath. In terms of valuations, U.S. stocks are sky high, when measured by methodologies that are actually correlated to future returns. Both this bull market and economic recovery are well past typical lifetimes, and due for a fall, based on history alone. In fact as we move into 2015, there are worrisome signs that an economy many hoped was gaining strength, and would allow stocks to grow into their valuations and find more support, might instead be weakening. We are also experiencing divergences in the stock market and other markets of the type you would expect to find as market participants awaken to the reality that the solid ground they thought was beneath them is not.

(more…)

Technically Troubling

I.C. Angles Investment Post…

Despite worrisome characteristics around this bull market, it was not until October of this year that I recommended long-term investors move to underweight stocks. I had remained reluctantly bullish previously, because from a technical perspective of looking at price and volume behavior, including the 125-day simple moving average, the market was simply too robust to bet against in my opinion. But that has changed, and there are several technical indicators, beyond simple moving indicators, that are now cause for concern. It is said no one rings a bell at a market top. That is true. Nevertheless there do tend to be warnings, often recognized in hindsight. And there are some technical warning bells now ringing that previously were silent. Whether they are prophetic or a false alarm, will only be known with the benefit of time. However, given other risk factors, including the overpriced nature of this market, my advice remains to underweight stocks.

(more…)

Downside of Falling Oil Prices

I.C. Angles Investment Post…

Business journalists are celebrating the approximately 40 percent decline in oil prices from their June highs, as a positive development for the economy. Their reasoning is simplistic. Lower oil prices mean more money in the pockets of consumers, which means more spending by Americans and hence more economic growth. But three other factors argue that falling oil prices actually represent a net negative for the U.S. economy, despite the positive of American consumers spending less on energy.

(more…)