The Big Picture for the Week of November 1, 2009

Short post today.

The media paid a lot of attention to several things yesterday. The huge move up in the fear gauge, aka the VIX. Dollar up means stocks down. 1042 is a very important number for the S&P 500.

All of these things are very very important. Unless they’re not.

The VIX’ importance ebbs and flows. Sometimes it is important but sometimes not. It is not clear to me that the best application of VIX is as a coincident indicator IE VIX up a lot today so stocks are down.

For now there does seem to be something to dollar up stocks down. If concerns about the greenback come to fruition (perhaps it makes more sense to say play out further) then this relationship should be expected to change. The bigger picture I have been working with has been the US as a less attractive investment destination than other countries. If this turns out to be correct then the dollar will go down slowly and stocks will go up most of the time (but less than many other markets). The point here is that dollar up stocks down will likely change soon.

If you think of yourself as an investor, as opposed to a trader, then 1042 means nothing. Whether the market goes up or down from here investors should take solace the the US capital markets are not permanently broken. At current levels the SPX is about 400 points from the low and 500 points from the high so sort of in the middle. In that context, if you believe that the US markets will function, does it matter if the next 100 SPX points are up or down?

Happy Halloween

9 Comments

  1. Roger,

    The X factor in this thing is the age of the investor which measures the degree to which one cares.don’t you agree?

    bwjr

    Reply
  2. What is an average fee for an investment advisor, fee only, no commissions, just managment of a stock/bond portfolio? Asset allocation would be 50/50 stocks and bonds. 3 portfolios, an IRA, a taxable trust and profit sharing plan. For a 73 year old recently lost her husband. she has enough cash flow from rental property and part ownership of small business.

    Reply
  3. Roger,

    By the way if you think inflation is coming do you think tips is a better way to go than gold or oil? Also if the dollar keeps falling than won’t that eventually affect the bond market in an adverse way. Who do you like in the series and how many games.

    Thanks,

    bwjr

    Reply
  4. bwjr, to your first comment, care about what? If you mean caring about what direction the next 10% is I’m not sure it is age so much as psychological make up. I would submit that the older you are the more of these you have seen (these being normal bear markets and fast declines) and so it would possibly be easier to cope. 10% swings dont ruin financial plans.

    average fee for an RIA I believe ranges 1-1.5%. people with a lot of money would probably pay less.

    bwjr to your other question I believe TIPS can be part of the solution even if the thing they track doesn’t accurately track inflation. I would not suggest owning TIPS at the exclusion of a little gold or vice versa. I own both. As for oil I have no desire to own oil but do own oil stocks. the underlying has volatility characteristics I’d rather not try to manage.

    Reply
  5. Roger,
    “…investors should take solace the the US capital markets are not permanently broken.”

    I don’t know whether its cool for you to comment on other blog postings but I wonder if you might say something about the theme in the 30 October post by Jason Kelly, which IMO appears to be related to your remark. (http://www.jasonkelly.com)
    Mr. Kelly starts off by writing: “For more than a year now, fundamental analysis of companies has been a waste of time. Stocks have traded as a block, first plummeting in tandem a year ago to March as banks froze up the financial system, then soaring in tandem as the Federal Reserve expanded the monetary supply and made cash worthless as an asset with near zero interest. The latter sent liquidity flooding into stocks, lifting all of them together.”

    He mentions fraud, collusion by the powerful and influential and also seems to imply that most asset classes are correlated to the point where they all move in tandem.

    I know that you look overseas for some anti-correlation. In any case, I would like to read your reaction to the post.
    Thanks

    Reply
  6. right or wrong I tend not to assume manipulation and the like.

    the notion of fundies not mattering for short periods of time is not new and I might add maybe a cornerstone to top down analysis ie good stocks will go down in a bear market.

    if you’ve been with me for a while then you know i tried to find countries that could enter and emerge from their bear markets at different times than the US and enter and emerge from rcession at different times than the US.

    i had some luck in this regard with country selection w/o really even thinking about the stuff Kelly writes about.

    Reply
  7. How can 1042 be important? Wasn’t the high roughly 1100 and we now have a 6 – 7% correction, so what is the big deal? Is this one of the technical trend things that is right until it changes, unless it changes back deals?

    Reply
  8. Roger,
    the markets are sreaming that there is lots of risk. Remembre what Taleb quote was. If people knew what the risk in stock is they would not touch it. RW for weeks has been warning that there is something wrong. Vix is reflecting that risk. I had projected 1166 and then a correction. BIG RECCOMENDATION _ USE TRALING STOPS. PROTECT THOSE PROFITS.
    Best,
    Jeff from milan, italy

    Reply

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing

The Big Picture for the Week of November 1, 2009

Short post today.

The media paid a lot of attention to several things yesterday. The huge move up in the fear gauge, aka the VIX. Dollar up means stocks down. 1042 is a very important number for the S&P 500.

All of these things are very very important. Unless they’re not.

The VIX’ importance ebbs and flows. Sometimes it is important but sometimes not. It is not clear to me that the best application of VIX is as a coincident indicator IE VIX up a lot today so stocks are down.

For now there does seem to be something to dollar up stocks down. If concerns about the greenback come to fruition (perhaps it makes more sense to say play out further) then this relationship should be expected to change. The bigger picture I have been working with has been the US as a less attractive investment destination than other countries. If this turns out to be correct then the dollar will go down slowly and stocks will go up most of the time (but less than many other markets). The point here is that dollar up stocks down will likely change soon.

If you think of yourself as an investor, as opposed to a trader, then 1042 means nothing. Whether the market goes up or down from here investors should take solace the the US capital markets are not permanently broken. At current levels the SPX is about 400 points from the low and 500 points from the high so sort of in the middle. In that context, if you believe that the US markets will function, does it matter if the next 100 SPX points are up or down?

Happy Halloween

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing