Thursday, April 18, 2013

Claims continue to decline



Weekly claims for unemployment continue to slowly decline. No sign of anything unusual going on in the labor market. That's good, because avoiding recession is all that matters from an investment perspective these days.


When yields on risk-free assets are close to zero, it only makes sense to hold those assets if you need liquidity and/or are highly concerned about the potential for losses in other assets, most of which are yielding substantially more, as shown in the chart above. From a macro perspective, the fact that significant assets are being held with virtually a zero yield (e.g., bank savings deposits are now $6.8 trillion, up from $4 trillion in late 2008) can be interpreted as a sign that the market is very worried about a recession, since that is the one event most likely to create widespread losses in risky assets.

16 comments:

steve said...

scott, the so called earnings yield is a misnomer at best and duplicitous at worst. earnings have never been a good harbinger for stock prices. generally they're negative at a market bottom such as in '09. I firmly believe there is NO WAY to time the market. you should be in it or not. I've been in the biz for over 30 years and have never seen anyone time the market with any degree of consistency or success. you may feel better because the earnings yield is relatively high right now but statistically there is no better chance of investment gains looking forward 5 years as any other time.

Gloeschi said...

Shhhh.... don't tell Scott that T-Bills give your money back after 90 days, while stocks... well, maybe 50%?
The readers of this blog *must* be convinced to buy stocks. Or the supplemental AARP insurance card.

mmanagedaccounts said...

What do you know? Gloeschi failed again to read what Scott wrote. How else can he explain his stupid commend?

William McKibbin said...

We continue to live in a once in a lifetime "buy" window for dividend and rent-earning equities -- now is the time to sell everything that's not nailed down and convert those dollars into equities -- additionally, world-class skills are continuing to earn ever increasing premium wages -- now is the time to acquire world-class skills that earn premium wages that can be converted into dividend and rent-earning equities over a lifetime -- most Americans will be enduring declining real wages over the balance of the 21st century -- however, accredited investors with world-class skills are increasingly positioned as the chieftains of the global economy -- all nlucky people without assets and world-class skills should take cover from the world economy in order to survive...

Benjamin said...

Yields have been near zero for 20 years i Japan...and you know what? That's where they should have been, as the Bank of Japan was set on asphyxiating the Japan economy. They also have a savings glut.

Today, in the USA, we have a savings glut, as pointed out by Scott Grannis Trillions in deposits, trillions more on corporate balance sheets.

The last y-o-y core PCE deflator came in at close to 1 percent than 2 percent.

The Fed is asphyxiating the US economy also, just with a looser noose than the one used in Japan.

The BoJ says now they will double the money supply. The Fed should make a similar announcement.

Timidity is not a good monetary policy.



theyenguy said...

On Thursday, April 18, 2013, Volatility, ^VIX, continued its rise that began on Monday April 15, 2013, as seen in the charts of TVIX, VIXY, VIXM, presented in this Finviz Screener, that caused both the S&P 500, SPY, and World Stocks, VT, to break down and trade 0.7%, and 0.5% lower, taking both below their channel support levels, on the collapse of credit, seen in Junk Bonds, JNK, and the collapse of carry trade investing, ICI, that began on Black Monday, April 15, 201. Sectors trading lower on the day included WOOD, FDN, ITB, XSD,IGN, IBB, PKB, IGV, PPA, XRT, FXR, and PSP


Bonds, BND, traded higher, to strong resistance, on the trade lower on stocks, VT. The fall in stocks, and the strength in bonds, flattened the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, as is seen in chart of the Steepner ETF, STPP, flattening near its lowest ever value. The Interest Rate on the US Ten Year Note, ^TNX, traded at 1.70%.

The pursuit of yield terminated on Black Monday April 15, 2013. Yes, we have finally attained the end of yield, meaning yield paying investments, such as those seen in this Finviz Screener ... http://tinyurl.com/c4eouwr ... have topped out in value and are turning lower. Most notably Dividends, Excluding Financials, DTN, are failing to support Dividend Growth, VIG. The end of profitable Small Cap Real Estate investing, ROOF, REIT investing, RWR, has commenced, as is seen in the high dividend paying investments, presented in this Finviz Screener, ... http://tinyurl.com/chhr7r4 ... trading trading lower.

steve said...

" on the collapse of credit, seen in Junk Bonds, JNK"
seriously? these securities are barely off their all time highs unless you call a decline of .2% a "collapse".

Móĥặmeḓ Bưffón said...

thank you for this post

الموسوعة الشاملة |  ازياء |  برامج مجانية |  صور |  تحميل البرامج

WimpyInvestor said...

You might want to add AAPL to the chart. I believe the earnings yield is 11, using forward PE of 9.

Scott Grannis said...

It's even more dramatic if you back out Apple's cash: a trailing earnings yield of almost 16%, and a PE of about 6. Rather amazing that the market can be so extremely skeptical of Apple's future.

William said...

ECRI Weekly Leading Indicator Rises second week in a row

A measure of future U.S. economic expansion increased to its highest level since April 2011, while the annualized growth rate also strengthened.

The Economic Cycle Research Institute said its Weekly Leading Index rose to 130.6 in the week ended April 12 from a revised 130.2 the previous week.

The index's annualized growth rate rose to 6.6 percent, a three-week high.

steve said...

so if you liked aapl at 700 you should surely LOVE it at 395!

Hans said...

Benjamin, excellent post indeed..

The Bank of DC, is doing the same thing as the BOJ...

John said...

Which way will the markets go? Only the fools know for sure. However, for what it's worth, I suspect the later boomers, (born 1955-64) might try to stuff more money into their IRAs and 401ks, giving stocks a lift for several more years.

We'll see.

Antonio said...

Scott, your insight about the financial and economic situation in Europe would be appreciate. I recall you mentioned some time ago there would a decent opportuniy of buying european stocks if governments showed a strong commitment to rein in public spending. In my opinion, no significative steps have been taken on that issue, so far.

Scott Grannis said...

Antonio: I'll stick with my observation. No sign yet that Europe understands the need to cut spending, and that's probably why Europe hasn't seen much improvement in its outlook.