Drudge: "Dow Dives Deep," "Year's biggest selloff," "Fed fear."
Bloomberg: "S&P 500 Posts Biggest Drop Since November 2011 on Fed."
Here's how I see it:
Yep, it's pretty scary. The recent selloff is so huge you need a magnifying glass to see it.
It's important to keep things in perspective.
This is very disappointing and makes equity markets look weak and dependent on the fed.
ReplyDeleteInteresting write-up
ReplyDelete"BUT IS THIS A BIG FAT BUYING OPPORTUINITY? - the 3M VIX Curve is in BACKWARDATION. Happened Dec, Feb, April. All ended up being BUYS - Why? Cause the market is pricing sharp NEAR-TERM Stress, while the rest of the curve not as elevated"
Does your SP Index include dividends? If not, the growth rate would be much better.
ReplyDeleteRe: S&P 500 index, it does not include dividends. With reinvested dividends the annualized return on equities would be over 8%.
ReplyDeleteI like to think of these situations as, "Stocks are on sale!"
ReplyDeleteWhen, oh when, will the Fed learn that the economy and the markets like QE?
ReplyDeleteQE is good!
QE deleverages taxpayers. QE has caused no inflation that I can see without using a microscope, and maybe staved off deflation of the type Japan has faced.
QE may have to become a permanent part of the Fed's arsenal.
If the Fed sticks to its 2 percent inflation ceiling target, it will always buckle on stimulus about when we get to 1.75 percent inflation.
Ergo, I don't see much chance of higher interest rates. We will ever be on the edges of ZLB.
We will be stuck in the very low range for a long, long time. Impossible? See Japan.
Okay, so when interest rates are near zero, the Fed cannot lower interest rates to boost the economy.
What you have left is QE.
Oddly enough, the Fed's inflation-phobia is setting the stage for long-term reliance on QE, or long-term recessions. Like Japan.
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ReplyDeleteBuying Opportunity??: The real buying opportunity is when YOU PERSONALLY ARE SCARED of investing your money! It is really quite simple but you must have the courage and fortitude to do the opposite of your emotions.
ReplyDeleteWhy is that the time to buy?? Because such emotions are brought on by terrible news and those emotions are shared by millions of other investors which provokes the selling and creates the buying opportunity.
It works for me. When I awake at 4 AM felling stupid for owning stocks and "feel" that I should sell that morning, I have found that those feelings occurs within days of THE market bottom.
That's why Scott Grannis' analysis is so invaluable in keeping me aware of what is actually happening in the economy and not reacting to my emotions. It helps confirm that I should do the opposite of my fewarful emotions.
The best way forward is to maintain a 30-40 year investment perspective by acquiring world-class skills that earn premium wages that convert into dividend and rent-earning equities over a lifetime -- the short-term investment situation is hopeless given that increasing interest rates will devastate growth investors, bondholders, and goldbugs -- as that devastation accelerates, the buying opportunity will become spectacular -- young investors should head to college and become physicians, engineers, or actuaries -- we live in the land of opportunity once again -- anyone over age 65 who has not already accumulated an estate is destined for hard times -- unaccredited investors (with incomes less than $300K annually and networths of less than $1 million) should be under cover and on guard against the four horsemen of the apocalypse...
ReplyDeleteI am 78yrs,own a home in the north and one for winter in Ca. I sold out all my 1 mil+ stock account held for 11 years in Fisher Investments in April, convinced we were facing runaway inflation. I moved all to Vanguard inflation protected fund, lost money every since. considering moving back into stock funds.
ReplyDeleteWhat do you think Scott ?
You bought TIPS at their all-time highs, when real yields were at their lowest levels ever. Inflation may yet rise, but real yields are likely to rise as the economy picks up. Your inflation bet might pay off, but TIPS' prices are likely to continue to decline.
ReplyDeleteLong time no hear any alleluias on Apple on this blog... Should I still buy it on margin?
ReplyDeleteHave been buying foreign and domestic equity and debt today.
ReplyDeleteNo hallelujah's=contrary indicator?