The New Bull Market

Value Hunter · 27 October 2020

While I would not buy most tech stocks at todays prices I think Financials and Energy stocks are mostly value traps.

On the one hand high levels of fines for fraud and remediation costs, etc are here to stay for banks for a long time to come. Also depressed interest rates (which will remain low for a long time) is crimping their net interest margins. This will remain for many years. But the biggest concern for banks long-term is fintechs, decentralized finance, blockchain solutions, etc. Banks are dinosaurs and are not keeping up with the times and the pace of technological innovation. They will eventually fade into the background just as companies like Research in Motion (Blackberry) once did. In terms of funds management active funds are still losing market share to index investing so most fund managers will be a bad investment.

Oil companies are structurally challenged as alternative energy costs of production keeps dropping year after year after year. This means long-term trend for oil prices is not good. At this rate most oil companies won't be profitable in another ten years time (many are already losing money as we speak).

If I was looking at financials I would be looking at disruptive fintechs (rather than traditional banks) and if I was looking at energy stocks it would be renewable energy companies (rather than oil and gas stocks).

Just my 2 cents.

qldfrog · 27 October 2020

Value Hunter said:
While I would not buy most tech stocks at todays prices I think Financials and Energy stocks are mostly value traps.

On the one hand high levels of fines for fraud and remediation costs, etc are here to stay for banks for a long time to come. Also depressed interest rates (which will remain low for a long time) is crimping their net interest margins. This will remain for many years. But the biggest concern for banks long-term is fintechs, decentralized finance, blockchain solutions, etc. Banks are dinosaurs and are not keeping up with the times and the pace of technological innovation. They will eventually fade into the background just as companies like Research in Motion (Blackberry) once did. In terms of funds management active funds are still losing market share to index investing so most fund managers will be a bad investment.

Oil companies are structurally challenged as alternative energy costs of production keeps dropping year after year after year. This means long-term trend for oil prices is not good. At this rate most oil companies won't be profitable in another ten years time (many are already losing money as we speak).

If I was looking at financials I would be looking at disruptive fintechs (rather than traditional banks) and if I was looking at energy stocks it would be renewable energy companies (rather than oil and gas stocks).

Just my 2 cents.

I see your point but think about the existing fleet of ice vehicles, even the ones being sold today, headlines are on EV, numbers are still with ICE;
Covid lockdowns have had far more impact than ev transition, and India and Africa are just ramping up.
Oil will still be king for the next 2 decades at least..just not star.and if the big western banks start reducing loans investments, oil will just be more expensive so more profit
I think actually oil company are the buy of the decade.
Look at tobacco players 20y ago...amazing returns

ducati916 · 27 October 2020

Still waiting on some of the EOD charts to update, however, 2 to look at:

Obviously the VIX blew higher today. On the longer term chart, we're looking to see if resistance holds. Maybe yes, maybe no.

Hindsight is a wonderful thing.

Mr flippe-floppe-flye:

We're going lower before we go higher. Of a more pressing concern is this the start of a topping process that takes us a lot lower? The next rally higher will provide a lot more information on that. Most tops are a bit of a process. We will definitely need a broad based market move.

*And now it does:

We're headed to that support point below. Whether that holds or folds we'll find out. If not, next stop the one below.

jog on
duc

ducati916 · 27 October 2020

Value Hunter said:
While I would not buy most tech stocks at todays prices I think Financials and Energy stocks are mostly value traps.

On the one hand high levels of fines for fraud and remediation costs, etc are here to stay for banks for a long time to come. Also depressed interest rates (which will remain low for a long time) is crimping their net interest margins. This will remain for many years. But the biggest concern for banks long-term is fintechs, decentralized finance, blockchain solutions, etc. Banks are dinosaurs and are not keeping up with the times and the pace of technological innovation. They will eventually fade into the background just as companies like Research in Motion (Blackberry) once did. In terms of funds management active funds are still losing market share to index investing so most fund managers will be a bad investment.

Oil companies are structurally challenged as alternative energy costs of production keeps dropping year after year after year. This means long-term trend for oil prices is not good. At this rate most oil companies won't be profitable in another ten years time (many are already losing money as we speak).

If I was looking at financials I would be looking at disruptive fintechs (rather than traditional banks) and if I was looking at energy stocks it would be renewable energy companies (rather than oil and gas stocks).

Just my 2 cents.

With regard to oil/gas:

I don't see any real issues at least into the near future.

Their valuations will come back. Not today, but down the road a little.

jog on
duc

ducati916 · 28 October 2020

So markets meandering somewhat, I am leaving the hedges in place as we will have to establish a new trend for the VIX, the last cycle is kaput. Market has not reached an extreme level yet, so we could still have some more fireworks to come:

Some more on Oil:

Oil is about as unpopular as anything has been. As always, when a sector is hated, there is required a catalyst to trigger a re-evaluation:

Maybe yes, maybe no. The use of oil is not going away anytime soon.

Reasons to be careful.

Mr flippe-floppe-flye:

jog on
duc

ducati916 · 28 October 2020

Value Hunter said:
While I would not buy most tech stocks at todays prices I think Financials and Energy stocks are mostly value traps.

On the one hand high levels of fines for fraud and remediation costs, etc are here to stay for banks for a long time to come. Also depressed interest rates (which will remain low for a long time) is crimping their net interest margins. This will remain for many years. But the biggest concern for banks long-term is fintechs, decentralized finance, blockchain solutions, etc. Banks are dinosaurs and are not keeping up with the times and the pace of technological innovation. They will eventually fade into the background just as companies like Research in Motion (Blackberry) once did. In terms of funds management active funds are still losing market share to index investing so most fund managers will be a bad investment.

Oil companies are structurally challenged as alternative energy costs of production keeps dropping year after year after year. This means long-term trend for oil prices is not good. At this rate most oil companies won't be profitable in another ten years time (many are already losing money as we speak).

If I was looking at financials I would be looking at disruptive fintechs (rather than traditional banks) and if I was looking at energy stocks it would be renewable energy companies (rather than oil and gas stocks).

Just my 2 cents.

With regard to banking and fintech:

Certainly challenging the traditional banking system. It can be seen that the banks are adopting the new technologies and in many cases buying them. So certainly an early investment in the right fintech could prove very lucrative a number of different ways.

jog on
duc

ducati916 · 29 October 2020

Bad day for stocks again:

VIX blew through resistance and headed higher, with stocks falling. One thing to note: while VIX has surged 20%/5%/20% stocks have not fallen proportionally.They have fallen, but not as much as might be expected.

Intra-day TRIN is signalling a bottom:

This will fluctuate through the day (obviously) and until some of the EOD stuff is updated, always a bit risky to call a bottom. However I think that the EOD indicators will probably also start to signal a bottom.

What I have done is take profit on 50% of the hedges. The other 50% remain in place.

jog on
duc

qldfrog · 29 October 2020

not really improving so far....let's see EOD

frugal.rock · 29 October 2020

qldfrog said:
not really improving so far....let's see EOD

Nothing got better I think...

The weekly vix does indicate that it may have found resistance, however as per the yearly here, if it goes through this current level, ouch...
Hopefully the guru @ducati916 has more to fill us in.
At one stage, crude wti was down 6%, but ended 0.4% up. Bizarre.

fergee · 29 October 2020

frugal.rock said:
Nothing got better I think...

View attachment 113897

The weekly vix does indicate that it may have found resistance, however as per the yearly here, if it goes through this current level, ouch...
Hopefully the guru @ducati916 has more to fill us in.
At one stage, crude wti was down 6%, but ended 0.4% up. Bizarre.

View attachment 113898

Looks good from where I'm standing

ducati916 · 29 October 2020

So yes, other charts confirm that we have pretty much reached a point where we move higher:

The question is: Bull market over? No, I don't think so, but, we'll find out. Just the end of the Sept/Oct. volatility, which should settle down post election, assuming the transition is reasonably litigation free.

jog on
duc

frugal.rock · 29 October 2020

G'day Duc,
Is the September October volatility a annual thing? as I had noticed it was choppier than July August for Aus market anyway.

Hmm, post election. Was musing about that this morning.
What are the chances it all gets very very ugly?... it seems the undercurrent powers are willing and empowering a shitestorm to occur.
Cheers.

ducati916 · 29 October 2020

frugal.rock said:
G'day Duc,
Is the September October volatility a annual thing? as I had noticed it was choppier than July August for Aus market anyway.

Hmm, post election. Was musing about that this morning.
What are the chances it all gets very very ugly?... it seems the undercurrent powers are willing and empowering a shitestorm to occur.
Cheers.

Mr Rock,

Yes, pretty much:

Re. Election...no, post election the market (if history is any indicator) will rip higher whoever wins.

jog on
duc

ducati916 · 30 October 2020

So a better start to the day if you are a bull:

VIX is also lower.

This is the chart that's interesting:

So this is yesterday's chart. It has (recently) had significant fluctuations in the ratio, which means there are higher than usual volumes going through in one direction and then (often) reversing the next day. This indicates outright (day trader) speculation rather than a position or hedging, which is madness as you are hard pressed unless you go DITM (delta 1.0) to profit over very short time frames with Options.

Today's chart will probably show another large reversal in the ratio. The PUT/CALL ratio has always been interesting at extremes, but currently it is increasingly useful day-to-day as it seems to track (Robinhood?) day traders who are using Options rather than Stock or Futures, making for some choppy trading.

Mr flippe-floppe-flye:

jog on
duc

Dark1975 · 30 October 2020

Banks brace for 'big bang' switch on $80 trillion worth of swaps

In a critical development in the global shift away from old benchmarks that was triggered by Libor's shortcomings, interest-rate swaps on more than $80 trillion in notional debt will transition this weekend to a new rate for determining their value.

www.americanbanker.com

Hey duc
Wounder if you could take a look at this and would this add to a black Monday?
Just a theory
But this has been quietly played down,
Tho after reading this I settled out to 90% in cash till after Monday
What your thoughts?

ducati916 · 31 October 2020

Dark1975 said:
Banks brace for 'big bang' switch on $80 trillion worth of swaps

In a critical development in the global shift away from old benchmarks that was triggered by Libor's shortcomings, interest-rate swaps on more than $80 trillion in notional debt will transition this weekend to a new rate for determining their value.

www.americanbanker.com

Hey duc
Wounder if you could take a look at this and would this add to a black Monday?
Just a theory
But this has been quietly played down,
Tho after reading this I settled out to 90% in cash till after Monday
What your thoughts?

Interesting article. The date precedes the current weakness that we are currently embroiled in. For the Banks it has been a non-issue as they are up since that article, particularly the smaller regional banks. Banks are not the only holders of SWAPS however.

So could it have been a factor in the current weakness or even causative in the market? It could be. The trouble with trading (or trying to) the news is that it is highly subjective and therefore very difficult. All of the news will be embedded somewhere in the price. Easier to trade the price and ignore the news, don't double count it.

By way of another example:

The economy (shock) is not great.

As a result, sentiment is (currently) way down.

An example of this data analysed:

Volatility obviously high(er) than it has been:

Which represents the range of the swings, ie. the entire market (pretty much) moves in one direction, flippe-flopping day-to-day.

Today as another example:

However, there is good news (I think!):

We have a fall in the VIX, no new high (above & below):

Which (for the moment) is a topping process in VIX and a bottoming process in Stocks. It will obviously play out next week.

jog on
duc

Dark1975 · 31 October 2020

ducati916 said:
Interesting article. The date precedes the current weakness that we are currently embroiled in. For the Banks it has been a non-issue as they are up since that article, particularly the smaller regional banks. Banks are not the only holders of SWAPS however.

View attachment 114002
So could it have been a factor in the current weakness or even causative in the market? It could be. The trouble with trading (or trying to) the news is that it is highly subjective and therefore very difficult. All of the news will be embedded somewhere in the price. Easier to trade the price and ignore the news, don't double count it.

By way of another example:

View attachment 113998

The economy (shock) is not great.

As a result, sentiment is (currently) way down.

View attachment 113999

An example of this data analysed:

View attachment 114000

Volatility obviously high(er) than it has been:

View attachment 113997

Which represents the range of the swings, ie. the entire market (pretty much) moves in one direction, flippe-flopping day-to-day.

Today as another example:

View attachment 114001

However, there is good news (I think!):

View attachment 113996

We have a fall in the VIX, no new high (above & below):

View attachment 114003

Which (for the moment) is a topping process in VIX and a bottoming process in Stocks. It will obviously play out next week.

jog on
duc

Thank you for your invaluable input duc

ducati916 · 31 October 2020

And at EOD, all the ducs are in a row:

All confirming that the probability is now high that the bottom is in. I'll remove the last 50% of my hedges on Monday.

jog on
duc

ducati916 · 3 November 2020

So a better start to the week:

Earnings are doing well:

The election is this week and assuming the result is not contested, we should be back to business as usual:

Vol. is dropping:

Good broad based participation currently:

Bit of a rotation occurring (it has been for a while now)

What we could be looking at statistically:

Mr flippe-floppe-flye:

jog on
duc

qldfrog · 3 November 2020

funny thing about people trying to justify link between next us president polls and share market:
headlines today:

so the frog relates to his English old learnings and think:
the market wants Trump to win
yet he reads on the same day from Goldman Sachs:

The Presidential Predictor matches Wall Street’s forecasts. Goldman Sachs analysts predict a “blue wave,” in which Democrats will retake the White House and Senate and maintain control of the House of Representatives.

Goldman believes that could be a positive outcome for markets.

“Such a blue wave would likely prompt us to upgrade our forecasts,” Goldman Sachs chief economist Jan Hatzius wrote in a report last month.
mr LeDuc is probably right: the market does not care nor does it really care about Covid infection numbers..i do not either why would the market?

The New Bull Market

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