The Morning Call
4/27/16
The
Market
Technical
The indices
(DJIA 17990, S&P 2091) sat on the sidelines yesterday, awaiting today’s Fed
meeting and tomorrow’s Bank of Japan meeting. Volume rose, breadth was weaker
and the VIX continues to look like it has found a bottom.
The Dow closed
[a] above its 100 day moving average, now support, [b] above its 200 day moving
average, now support, [c] within a short term uptrend {17594-18549}, [c] in an
intermediate term trading range {15842-18295} and [d] in a long term uptrend {5541-19413}.
The S&P
finished [a] above its 100 day moving average, now support, [b] above its 200
day moving average, now support, [c] within a short term uptrend {2090-2192},
[d] in an intermediate term trading range {1867-2134} and [e] in a long term
uptrend {800-2161}.
The long
Treasury was off again, drawing ever closer to its 100 day moving average. A break below that MA would be a negative and
heighten the risk that inflation could be raising its head.
GLD rose,
finishing within in a short term uptrend and above its 100 day moving average
and a key Fibonacci level. This pin
action also suggests investors are starting to worry about inflation.
Bottom
line: the indices took a break ahead of
today’s Fed meeting. There is nothing in
the technicals to alter my assumptions: stocks are in heavily congested
territory, so the upward progress will be more plodding but I expect them to challenge
their all-time highs and fail.
Sell
in May and go away? (medium):
Fundamental
Headlines
Yesterday’s
economic releases were mixed to negative: the April Richmond Fed manufacturing
index was above estimates, the February Case Shiller home price index was in
line, while April consumer confidence was less than anticipated and March
durable goods orders (primary indicator) were very subpar. Nothing
from abroad.
***overnight,
first quarter UK GDP growth slowed but April German consumer confidence rose.
The
excitement will start this afternoon with the release of the FOMC
statement. I say excitement; actually
expectations are that the tone and substance of the Fed policy is unlikely to
change. Still, Fed days always get
investors all atwitter; so we should see some pickup in activity this
afternoon.
How
the Fed ignored the Constitution (medium):
To
be followed soon thereafter by the Bank of Japan, which meets tomorrow (actually
tonight in the US). There should be more
fireworks coming out of this meeting because the BOJ has been signaling more
easing but without revealing its extent.
That should mean a wider spread in expectations and, hence, a larger
likelihood of either disappointing or exceeding them. That said, however little the increase in
easing, it is still just digs the BOJ in a deeper policy hole.
Bottom line: the
economic data remains negative. This
earnings season is not exactly inspiring (but as the optimist would say,
earnings are beating lowered expectations).
The central bankers don’t get it.
Indeed, the only questions before investors are how deep the bulls**t will
be coming out of today’s Fed meeting and to what additional extremes the
Japanese are willing to go in order to prove beyond a shadow of a doubt that
they will to go down in that annuals of economic history as the perpetuators of
one of the most economically destructive monetary policies ever.
My
thought today is for investors with less than a $1,000,000 portfolio to focus,
at least, a majority of their assets in exchange traded funds (ETF). These are funds that offer a (relatively)
passive managed diversified portfolio of securities that may reflect an index (e.g.
S&P 500), or an industry segment (e.g. energy), or a country (e.g. Germany)
or geographic area (e.g. Europe) or, in the case of bonds, a quality range
(investment grade, junk), or a geographic exposure (EU bonds) or……….you get the
picture. They can offer exposure as
broad or specialized as you may want.
Their
advantages are:
(1)
cost: management fees are, generally, quite
inexpensive; the investor is not stuck with paying higher broker commissions on
a large number of small trades; and they are largely passively managed, which
is to say, the funds themselves don’t do a lot of trading, again avoiding
broker commissions,
(2)
choice: the ETF world has virtually every country,
industrial sector, investment strategy sliced and diced so that you can
structure your assets exactly as you want.
You decide how much of your portfolio is invested in bonds versus
stocks, foreign versus US securities, etc.
(3)
diversification: they allow you to buy a well-diversified
exposure no matter how much you may want to own. For instance, I may want to own a five
percent position in US REIT’s. But if I have
a $500,000 portfolio, that is a $25,000 holding. From a cost effective perspective, that means
I have to choice one REIT if I want a direct participation. However, I can buy $25,000 of the Vanguard
REIT ETF and that helps diversify away the specific risk of owning single
stock.
All you have to
do is allocate how you want your assets invested, then go to sites like ETF.COM
and select those ETF’s that fit your goal.
You can also go to our site to see how we structure our ETF Portfolio
and the ETF’s that Portfolio owns.
Investing for Survival
The
emotional and psychological risks in investing.
News on Stocks in Our Portfolios
Revenue of $50.6B
(-12.8% Y/Y) misses by $1.37B.
Revenue of $40.5B (+24.3% Y/Y) in-line.
Revenue of $3.07B
(-7.0% Y/Y) misses by $100M.
Revenue of $22.63B
(+2.2% Y/Y) beats by $1.19B
Revenue of $7.72B
(-0.8% Y/Y) beats by $30M.
Revenue of $13.36B
(+0.3% Y/Y) beats by $180M
Economics
This Week’s Data
Month
to date retail chain store sales grew more than in the prior week.
The
February Case Shiller home price index was up 0.7%, in line.
April
consumer confidence came in at 94.2 versus expectations of 96.0
The
April Richmond Fed manufacturing index was reported at 14 versus estimates of
12.
Weekly mortgage applications
fell 4.1% while purchase applications dropped 2.0%.
The
March US traded deficit came in at $56.9 billion versus consensus of $62.6
billion.
Other
Politics
Domestic
Thoughts on
crime and punishment (short):
International War Against Radical
Islam
More on the Saudi’s, the production
cut and 9/11 (medium):
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for Survival’s website (http://investingforsurvival.com/home)
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