Nov52016

Weekend Update – November 6, 2016

Weekend Update

Some days we really have no clue as to what made the market move as it did, but nothing bothers us more than not knowing the reasons for everything.

We tend to like neat little answers and no untied bundles.

It starts early in life when we begin to ask the dreaded “Why?” question.

We want answers at an early stage in life even when we have no capacity to understand those answers. We also often make the mistake of querying the wrong people to answer those questions, simply on the basis of their ready availability and familiarity.

Those on the receiving end of  questions usually feel some obligation to provide an answer even if poorly equipped to do so.

While the market has now gone into a 9 consecutive day decline, it seems only natural to wonder why that’s been happening and of course, some people, have to offer their expert explanation.

It is of course understandable that the question is posed, as earnings haven’t been terrible and neither have economic data. Yet, a 9 day decline hasn’t happened since 1980 and has taken the market into a stealth 5% decline.

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Oct292016

Weekend Update – October 30, 2016

Weekend Update

It’s good to have certainty in all matters of life.

I think.

There’s no doubt that stock market investors like to have certainty, or at the very least they really don’t like uncertainty.

Personally, when it comes to investing and the opportunities present when pursuing the sale of options, I like that intersection between certainty and uncertainty, especially if there is a volley back and forth, but the range is well defined.

That’s because that volley gives rise to more generous option premiums even as the risk may not reflect what is being paid.

Within that context, I’ve liked 2016, other than the brief reaction served up in response to the December 2015 interest rate increase decision by the FOMC.

With 2016 coming to an end in just 2 months and after the past week of corporate earnings, it was still hard to know where the economy was standing and whether the FOMC might have better justification to finally implement another rate increase, as we’ve all been expecting for almost a year.

So far, this most recent earnings season hasn’t provided very much of a pattern of good news on top and bottom line beats and there hasn’t very much in the way of optimistic guidance being given.

What certainty was missing over the past week with regard to the direction of the economy gave way to some certainty on Friday, however.

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Oct222016

Weekend Update – October 23, 2016

Weekend Update

This past week was the first full week of earnings for this most recent earnings season and you could be excused for wondering just how to interpret the data coming in.

The financial sector had fared well, but if you were looking for a pattern of revenue and earnings beats, or even looking for a shared sense of optimism going forward from a more diverse group of companies, you’ve been disappointed to date.

For the most part, this past week was one of mixed messages and the market really rewarded the messages that it wanted to hear and really punished when the messages didn’t hit the right notes.

With so much attention being placed on the expectation that the FOMC would have sufficient data to warrant an interest rate increase in December, you might have thought that companies would start painting a slightly more optimistic image of what awaited their businesses, perhaps based upon a building trend from the past quarter.

That optimistic guidance has yet to prevail even as some have been reporting better than expected revenues.

But no one should be surprised with the mixed messages that the market hasn’t been able to interpret and then use as a foothold to move in a sustained direction.

The mixed messages coming from those reporting just follows the wonderful example of streaming mixed messages that have been coming at us all year long from members of the Federal Reserve.

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Oct152016

Weekend Update – October 16, 2016

Weekend Update

As a movie a few years ago, “It’s Complicated,” starring Alec Baldwin, was a funny one that explored some aspects of life that many could relate to in one form or another.

A few weeks ago we were all surprised to learn of some new casting for the upcoming season of Saturday Night Live. But now after his successful appearances portraying Donald Trump, Alec Baldwin’s next role could very well be that of Janet Yellen.

While the Chairman of the Federal Reserve may not be as widely known as the Presidential candidate, for those that are aware of the very important role she plays in all of our lives, we could use something amusing to put events into perspective as we end so many days just shaking our heads wondering what is really going on.

Clearly, it’s complicated.

The one thing you know in life is that when you hear someone begin an explanation of anything with the qualifier “it’s complicated,” you had better be prepared to be deflated.

In the event you are paying attention to the world’s economies, deflated is not the direction anyone wants to be going.

Unlike the way it was portrayed in the movie, complications are usually not very funny, unless perhaps brought to life by Alec Baldwin.

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Oct82016

Weekend Update – October 9, 2016

Weekend Update

About a year ago at this time, we were all waiting for what would turn out to be the first interest rate increase by the FOMC in nearly 9 years.

Once that increase finally arrived at the end of 2015, we were all preparing for what we were led to believe would be a series of small such increases throughout the course of 2016.

The problem, however, that stood in the way of those increases becoming reality was the FOMC’s insistence that their decisions would be data dependent. As we all know, the data to justify an increase in interest rates just hasn’t been there ever since that first increase.

The cynics, with the advantage of hindsight, might suggest that the data wasn’t even there a year ago, but that didn’t stop the FOMC from their action, which in short order took the market to its 2016 lows.

Back when those lows were hit in February, many credit Jamie Dimon, the CEO of JP Morgan Chase (JPM) for abruptly ending the correction by making a $26 million purchase of his own company’s shares. That wasn’t a terribly large amount of money, but it probably wasn’t a coincidence that the market turned on a dime.

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