The Morning Call
5/4/15
The Market
Technical
Monday Morning Chartology
The
S&P closed right on the trend line connecting the lower highs. The brief period above that trend line did
not meet our time and distance discipline, so it was negated. Clearly, the close today will be important.
On
Friday, the long Treasury closed below its 100 day moving average, the lower
boundary of its short term trading range and the lower boundary of its
intermediate term uptrend. If it remains
below the trading range by the close Tuesday, the trend will be negated. If it remains below the intermediate term
uptrend by the close Wednesday, the trend will be negated. Our muni bond holdings in the ETF Portfolio
have not started to challenge comparable trends yet; but they are getting close.
No
change here: head and shoulders formation still intact. Avoid.
The
VIX is still near lows but also still in a very short term downtrend. I continue to believe that this represents
cheap portfolio insurance.
Fundamental
Friday’s economic data was universal misses versus expectations. Most were slight misses to the downside: April manufacturing PMI (54.1 versus 54.5), April light vehicle sales (16.5 million versus 16.9 million), April ISM manufacturing index (51.5 versus 52.0) April consumer sentiment (95.9 versus 96.0); with one really lousy number thrown in for good measure: March construction spending (-0.6 versus +0.4%). So thirteen of the last fourteen weeks have been disappointments.
***overnight,
April Chinese PMI was reported at 48.9 versus 49.6 in March; April EU PMI was reported
at 52.0 versus 52.2 in March; and according to Greek officials, progress is being
made in that country’s bail out negotiations with the Troika.
What bubble? An up to date look at investor psyche
(medium):
QE
and creative destruction (medium and a must read):
Investing for Survival
12
things I have learned from Morgan Housel: Part 1
1. “’I
don’t know’ are three of the most underused words in investing.”
“What’s really interesting about finance – and I think
this is true for a lot of fields whether you’re in physics, math, chemistry,
history, or whatever it is – the more you learn, the you more you realize how
little you know.”
There is nothing more fundamental to investing than
understanding that risk comes
from not knowing what you are doing. And as Morgan Housel is saying here:
the more you know, the more you know that there is even more that you do not
know. If you are not getting more humble as you: 1) get older, 2) grow as a
person, or 3) learn, then you are not paying attention. The best investors keep
their circle of competence tightly defined and limited in scope. Skills can atrophy
or become outdated. New competencies can be developed with time and effort.
What you
are doing when you are investing is buying an ownership interest in an actual
business. No matter how hard you may
work to know everything about that business, the phenomenon effecting that
business, and the markets in which it competes, there always be much that you
do not know. Even if you may chose an index-based approach to investing,
you are making choices about what types and amounts of assets to buy. The very
best investors have been able to develop systems that deal effectively with the
fact that investing is probabilistic process. The best systems are designed to
enable the investor to buy and sell assets in a way that is “net present value
positive” over time after fees and expenses. Systems that do not produce net
present value positive results over time after fees and expenses, are
speculation and are not investing.
News on Stocks in Our Portfolios
·
Revenue of $34.56B (-35.1%
Y/Y) beats by $10.19B.
Economics
This Week’s Data
Other
WSJ
slams Bernanke (medium):
Politics
Domestic
International War Against Radical Islam
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