https://risksandreturns.com/category/stock-market/ In search of asymmetric trading opportunities… en-US https://risksandreturns.com/2016/03/31/assessing-the-current-rally/ https://risksandreturns.com/2016/03/31/assessing-the-current-rally/ Thu, 31 Mar 2016 11:37:31 +0000 Since the February 11th bottom at 1810, the S&P 500 has rallied 14%. The market is now within 3% of an all-time high. Although the market could pullback in the short-term, the technicals of the rally lead me to believe that the February 11th bottom could hold. https://risksandreturns.com/2016/02/11/managing-a-drawdown/ https://risksandreturns.com/2016/02/11/managing-a-drawdown/ Thu, 11 Feb 2016 02:45:57 +0000 I have been mostly on the right side in calling the stock market’s short term movements over my investing lifetime. Although accurately predicting the market’s short term gyrations is much more difficult than forecasting where the stock market will be in 5 years, I believe it is feasible with well-reasoned analysis which incorporates market sentiment, technical analysis, stock market history, macroeconomic fundamentals, valuation, and the simple view that markets are inherently cyclical. https://risksandreturns.com/2016/01/13/the-return-of-the-9798-playbook/ https://risksandreturns.com/2016/01/13/the-return-of-the-9798-playbook/ Wed, 13 Jan 2016 02:03:15 +0000 My long-term bullish outlook on US stocks is predicated on a US economy that continues to strengthen in the face of a global slowdown. This has happened before. FT Alphaville compares the current period to 1997/1998: https://risksandreturns.com/2015/12/22/bull-market-to-resume-in-2016/ https://risksandreturns.com/2015/12/22/bull-market-to-resume-in-2016/ Tue, 22 Dec 2015 18:02:52 +0000 And now we are behaving hysterically at the prospect of just one? It’s a bit of a joke, really… We might have a wobbly few weeks when they do move, but I’m sure the Fed will stroke us like you wouldn’t believe and the markets will settle down, and most probably go to a new high. -Jeremy Grantham on the Fed’s eventual first rate hike. (8/6/15) http://on.ft.com/1InJDDg https://risksandreturns.com/2015/08/25/im-100-long-for-the-1st-time-in-years/ https://risksandreturns.com/2015/08/25/im-100-long-for-the-1st-time-in-years/ Tue, 25 Aug 2015 04:47:41 +0000 The 5-15% multi-month correction that I was waiting for since May has finally arrived. Last Friday I tweeted that I increased my net long exposure to stocks from 25% to 75%. And I tweeted again on Monday morning that I was using my remaining cash balance to buy stocks during the early morning flash crash. https://risksandreturns.com/2015/07/30/a-market-correction-is-up-to-the-fed/ https://risksandreturns.com/2015/07/30/a-market-correction-is-up-to-the-fed/ Thu, 30 Jul 2015 13:51:27 +0000 Since I turned cautious on stocks in early May, the market has been treading water with minimal volatility. If the year ended today, the S&P 500’s intra-year decline of 4% would be the 2nd smallest in 35 years. https://risksandreturns.com/2015/05/05/time-to-be-cautious-of-us-stocks/ https://risksandreturns.com/2015/05/05/time-to-be-cautious-of-us-stocks/ Tue, 05 May 2015 14:07:05 +0000 I have been quite bullish on the US economy and US stocks over the past couple of years. I viewed every correction as an opportunity to increase my long position. In fact, the near 10% correction in October got me 90% invested – one of my highest exposures to US stocks ever. https://risksandreturns.com/2009/02/08/a-rough-10-years/ https://risksandreturns.com/2009/02/08/a-rough-10-years/ Sun, 08 Feb 2009 11:46:15 +0000 The New York Times has created an nice graphic which shows that for the 10-year period ending in January, the S&P 500 had its worst inflation- and dividend-adjusted performance in 82 years. https://risksandreturns.com/2008/11/11/valuing-stocks-relative-to-bonds/ https://risksandreturns.com/2008/11/11/valuing-stocks-relative-to-bonds/ Tue, 11 Nov 2008 11:35:24 +0000 A popular method for determining whether equities are cheap is to compare the stock market’s dividend yield with the yield on long-term government bonds. Using the amount of dividends paid by companies in the S&P 500 index during the past 12 months, the dividend yield is currently 3.22%. Meanwhile a ten-year treasury yields 3.75%. The following is a historical look at how dividend yields and long-term treasury yields compare. https://risksandreturns.com/2008/10/13/im-now-neutral-on-equities/ https://risksandreturns.com/2008/10/13/im-now-neutral-on-equities/ Mon, 13 Oct 2008 11:21:26 +0000 The recent stock market rout has left equities no longer trading at the expensive valuations that I had been concerned about. They aren’t cheap either, so I don’t plan to do any buying at current levels. But I have closed virtually all of my short positions leaving my portfolio with lots of cash. My reasoning for believing that stocks have become more fairly priced is based on my outlook for earnings and the multiple the market will assign to those earnings. https://risksandreturns.com/2007/08/19/repositioning-my-portfolio-after-the-sell-off/ https://risksandreturns.com/2007/08/19/repositioning-my-portfolio-after-the-sell-off/ Sun, 19 Aug 2007 12:53:17 +0000 Thursday saw major declines in US stocks, which at one point had the S&P 500 down 10% from its 52-week high — a threshold defined as a market correction. This was the first correction in 52 months and the end of the second longest streak since World War II. However, Thursday afternoon the markets recovered and further recouped losses on Friday after the Fed announcement that the discount rate had been cut by 50 basis points. https://risksandreturns.com/2007/07/30/the-lboprivate-equity-party-is-coming-to-an-end/ https://risksandreturns.com/2007/07/30/the-lboprivate-equity-party-is-coming-to-an-end/ Mon, 30 Jul 2007 12:16:36 +0000 As the following graph shows, LBOs have surged in recent years: https://risksandreturns.com/2007/07/27/whats-behind-the-credit-worries/ https://risksandreturns.com/2007/07/27/whats-behind-the-credit-worries/ Fri, 27 Jul 2007 12:11:05 +0000 The Economist explains what’s behind the fear of a liquidity contraction that shook the markets today: https://risksandreturns.com/2007/05/09/the-shenzen-composite-and-nasdaq/ https://risksandreturns.com/2007/05/09/the-shenzen-composite-and-nasdaq/ Wed, 09 May 2007 10:05:07 +0000 I just noticed an Economist article published a couple of weeks back that underscores the current craze in Chinese equities. https://risksandreturns.com/2007/03/04/the-worst-days-for-the-dow/ https://risksandreturns.com/2007/03/04/the-worst-days-for-the-dow/ Sun, 04 Mar 2007 13:02:14 +0000 The New York Times points out that as painful as Tuesday’s 3.3% plunge in the DJIA was, “you could almost call that a blip when measured against the biggest plunges on record.” https://risksandreturns.com/2007/02/28/some-thoughts-on-yesterdays-stock-market-panic/ https://risksandreturns.com/2007/02/28/some-thoughts-on-yesterdays-stock-market-panic/ Wed, 28 Feb 2007 13:00:52 +0000 Yesterday a 9% tumble in China’s stock market spread across the world causing the Dow to fall by 3.3% and many emerging markets to decline by even more. It is difficult to determine exactly what triggered the Chinese market sell off, but there were rumors circulating that the government will be introducing a capital gains tax. https://risksandreturns.com/2007/02/07/whats-wrong-with-record-profit-margins/ https://risksandreturns.com/2007/02/07/whats-wrong-with-record-profit-margins/ Wed, 07 Feb 2007 21:08:12 +0000 I just came across a fascinating article from Hussman Funds that clearly explains why investors should be concerned with corporate America’s record profit margins. The bottom line is it won’t last — and when it begins to contract, equity valuations will fall too. https://risksandreturns.com/2006/12/31/proshares-etfs/ https://risksandreturns.com/2006/12/31/proshares-etfs/ Sun, 31 Dec 2006 19:58:53 +0000 Last July ProFunds released an interesting ETF product, called ProShares, which can provide double the inverse performance of some of the major indices. These are in addition to several other ProShares leveraged offerings: https://risksandreturns.com/2006/12/18/will-cramer-be-right/ https://risksandreturns.com/2006/12/18/will-cramer-be-right/ Mon, 18 Dec 2006 20:02:24 +0000 I found some excerpts of an interview that BusinessWeek conducted with CNBC’s star personality Jim Cramer. When asked about his outlook for 2007, he doesn’t hide his bullishness: https://risksandreturns.com/2006/11/07/the-coming-bear-stock-market-crash-part-4/ https://risksandreturns.com/2006/11/07/the-coming-bear-stock-market-crash-part-4/ Tue, 07 Nov 2006 19:25:14 +0000 In the last post of this series, The Coming Bear, I discussed the reasons why I believed the economy was headed for a housing-led recession in 2007. If this turns out to be correct the stock market is going to fall dramatically and will probably challenge the 2002 lows. https://risksandreturns.com/2006/10/02/marc-faber-turns-bullish-on-u-s-large-caps/ https://risksandreturns.com/2006/10/02/marc-faber-turns-bullish-on-u-s-large-caps/ Mon, 02 Oct 2006 19:46:56 +0000 MarketWatch has noted that famed contrarian investor, Marc Faber (whose writings I regularly read), has shifted to favoring U.S. large cap stocks over emerging market equities. https://risksandreturns.com/2006/08/19/stocks-are-still-in-a-bear-market/ https://risksandreturns.com/2006/08/19/stocks-are-still-in-a-bear-market/ Sat, 19 Aug 2006 17:37:19 +0000 A look at the chart of the Dow Jones Industrial Average seems to indicate that the stock market has recovered from its lows in 2002 and is close to making a new historical high. One might believe that the bull market that began in 1982 has never even ended.