News

News as drama

News As Drama

Children have trouble focusing their attention.  To get my son to turn all his attention to his homework (since when do first graders have homework, anyway?), we often need to mute or turn off the TV.  Handheld screens are completely off the table for him unless we are on a long car ride.  He doesn’t have the discipline to choose substance over sparkle.  YouTube knows that he and his generation love unboxing videos and shoddy animation.  Don’t think the media isn’t targeting you the same way. As an adult, you should be immune to such base manipulation, right?  This is not the case.  Advertisers need to get you to self-diagnose moderate to severe Wandering Toe Syndrome and ask your doctor if Toeproxin™ is right for you.   How do they do that?  The adult version of unboxing videos is drama.  This used to be the domain of prime-time fictional television….


News as drama

Three Trades Based on This Week’s Headlines

The two big news items this week are the French election and US tax reform.  There was also a big shakeup in the House of Mouse as Disney’s ESPN laid off a significant amount of on-air talent.  What’s the best way to trade this news?  If you read this blog with any regularity, you already know where this is going. French Election France’s establishment parties got the boot as nationalist Marine Le Pen and centrist Emmanuel Macron advanced through the first round of voting.  This continues a global trend of shaking up the political status quo.  As in other recent elections, volatility picked up before the election only to drop once the results were reported.  While Le Pen is seen as a populist wild card, Macron is expected to win handily in the next round.  Many expect Macron to add a stable presence to contrast President Trump’s boat-rocking. The trade: No…


No Picture

A Note on Structured Notes

What happens to all the investments we say no to?  We are acutely aware of how our invested money performs, but it can be difficult to keep track of the investments that just didn’t make the cut.  Did we dodge a bullet?  Or did we miss out on a shooting star? Structured Notes I recently came across an email from a year ago where I researched a structured note for one of our advisors.  In the SEC’s investor bulletin regarding structured notes, these are “securities issued by financial institutions whose returns are based on, among other things, equity indexes, a single equity security, a basket of equity securities, interest rates, commodities, and/or foreign currencies.”  I suggest you read the entire thing as well as FINRA’s investor alert on structured notes. The Pitch This particular note was pitched to one of our clients by his banker and the client wanted us to…


A warning sign to the rest of society.

Walk of Shame

Motivation Most people seem to be operating on the same social frequency.  I can see this, but I am unable to take part without tremendous effort that feels insincere.  Awkward conversation is my forte.  Hoping to improve, I observe and try to understand how people interact with one another.  One thing that has helped me in deciphering social interaction has been to recognize motivation.  Once you find out what drives someone, their behavior becomes easier to understand.  What is the most common motivator that I have seen? People like to feel important.  Everyone is the star of their own movie.  So when an airline looks for volunteers to give up their seats, they’re actually telling their passengers this: “There are four people more important than you who are getting on this flight.  How much do we have to pay you to admit that?” Before boarding, this is a glorified marshmallow test.  Delay…


Cleveland Bridge

Eventful 24 Hours

The last 24 hours have been eventful.  If you need yet another perspective on world events, keep reading.  If not, just skip to Other Stuff where it’s less serious. We launched missiles into Syria. This feels like the typical setup where the world calls on the US to act as the world’s police, our military is deployed, and the world decries our meddling in world affairs.  A dictator is butchering his own people, but no one is willing to do anything about it except us (sternly worded letters don’t count as action).  If we don’t do anything, we’re abandoning the region to nefarious powers.  If we go in guns blazing, we’re warmongers.  Ad hoc missile strikes seem to have minimal political backlash while still accomplishing a mission. If this doesn’t lay to rest the conspiracy theory that Vladimir Putin controls our executive branch, it certainly erodes its credibility. In one…


Red Herring, Red Swan

Red Herring With headlines proclaiming the worst day for the stock market in 2017, you might think the market has plummeted in a bout of panic-selling.  This is a red herring.  The S&P 500 hasn’t been down more than 1% in over 100 days.  Of course we’re going to have another 1% down day some time, but the real story is the lack of big down days rather than breaking this streak.  I’m sure some poor souls are reaching out to their brokers to ask what they should do.  CNBC is shaking the tree with the noise around this ridiculous headline and brokers are happy to collect the commissions that fall into their laps. Red Swan The concept of Black Swans has been bastardized almost beyond recognition.  Nicholas Taleb put forth the idea of a Black Swan event being something outside the realm of normal expectation making a significant impact that…


March Madness and a Special Dispensation in Cleveland

A quick update today as March Madness takes hold and Cleveland prepares for St. Patty’s Day.  How big is St. Patrick’s Day in Cleveland?  The Catholic Diocese of Cleveland issued a notice regarding corned beef and Lent.  My Catholic friends are encouraged to enjoy corned beef and perform a work of mercy rather than abstain from meat. Fed The Federal Reserve raised rates by 25bps.  The decision was nearly unanimous with the lone dissent being hometown boy Neel Kashkari.  Kashkari is a Northeast Ohio native and scary smart.  I think his dissent was more to attract attention to a political issue (economic inequality) rather than an actual desire to hold rates.  He has run for public office before (governor of California, no less!) and I think he will again.   The community that is smart enough to elect him will be very lucky.  I don’t agree with all of his…


An Anniversary and Some Words on Garbage

This week marks the anniversary of the bull market whether you measure from the intraday bottom on 3/6/2009 or the day’s closing bottom on 3/9/2009.  It’s not as simple as all that, though. After a 19% annualized gain or over 300% cumulative, it’s hard to ignore claims that the market is over-valued.  Sure, the doom and gloom folks have been saying that all the way up, but it’s getting harder to find statistics that don’t show the market at least fairly valued.  JP Morgan’s David Kelly shows P/Es slightly above historic averages, but the Shiller CAPE is really elevated. Some things to keep in mind After a long run, it feels like we are due for calamity or at least a pullback.  We’ve already had a pullback – four of them, in fact.  And we only need to look at last year to remind ourselves that the market’s rise was…


Market Top?

The Market Top and Procrastination

If it bleeds, it leads and in the investing world that means finding someone willing to call the market top.  There are plenty of statistics and charts that show the market as being over-valued pretty much since the end of the financial crisis.  While we can identify how the market looks relative to the past, the information is less useful in predicting the future. I’ve been critical of Cyclically Adjusted Price/Earnings (CAPE), but I do watch this and other valuation metrics as I think they provide information about the markets and market participants.  I don’t think any one of these fundamentals provides actionable information, however.  That is to say it would be unwise to try to time entry and exit in the market based on these statistics.  I feel the same way about charts.  It seems to me that you can overlay a chart from any time period and make it look just…


How ‘Bout That Market: 2/27/2017 Crisis

How ‘Bout That Market?  This is a question I hear at social gatherings often enough that it makes sense to make it a regular entry on this website. The Market The markets continue their march upwards in spite of unrelenting headline risk.  The stretch of positive performance is somewhat unnerving because of two streaks: an 11-day winning streak for the Dow and 48 days without a 1% move in the S&P 500.  This is really weird action, especially in the face of an emotion-driven news cycle.  Have we finally reached the point where reporting everything as a crisis means that nothing is a crisis?  Liz Ann Sonders remarked on a call that when there are so many voices calling for a bubble, it’s not a bubble.  I’m inclined to agree.  Even the perma-bears seem to be tiring of shouting bubble all day. News seems to have devolved into second-guessing President…