Trading the Trend

[over9k]

Tongue in cheek, so have you gained back last week losses?

I'm now almost exactly the same as I was a week ago. Since my peak of about 13th of july I'm down just a smidge, but several stocks like paypal are back to all time highs again. I reckon I'll be back to my 13th of july high by the end of the week.

Edit: just checked, I'm down just over 2% since the 13th, so I reckon I'll be back to it by friday close.

But my holdings are different now too, I've now got some nvidia and gold added.

 

[ducati916]

1. Well you can destroy the value of the dollar without prices surging,

2. and cpi doesn't track how much money is printed.

3. I'm an austrian by training so as far as I'm concerned, we should actually have deflation.

4. But different discussion.

1. Really? And how would you manage to do that? Nixon did that in Aug. 1971. Prices surged through the roof.

2. No it doesn't. Relevance of the statement?

3. With regard to 'deflation': how does Austrian theory differ from mainstream economic theory?

4. Same discussion definitely.

jog on
duc

 

[ducati916]

So issues with gold as an inflation hedge:

jog on
duc

 

[ducati916]

In keeping with the manufacturing data: Transports, Rails, Trucking and Heavy Industrials.

On the move.

jog on
duc

 

[ducati916]

What an epic short squeeze looks like when it rips your face off:

 

[qldfrog]

What an epic short squeeze looks like when it rips your face off:

View attachment 106652

out of my league: BZX allows users to lend, borrow, and trade in the decentralized finance?
crypto currency loan?
Am I the only one lost here? missing too much knowledge I assume..

 

[over9k]

1. Really? And how would you manage to do that? Nixon did that in Aug. 1971. Prices surged through the roof.

2. No it doesn't. Relevance of the statement?

3. With regard to 'deflation': how does Austrian theory differ from mainstream economic theory?

4. Same discussion definitely.

jog on
duc

1 & 2: It's to do with the relationship with demand. If everyone just stuff the money under the mattress, it's not going to bid up the price of stuff and therefore destroy the value of the currency already in circulation.

3: Austrian theory says there shouldn't be a central bank. Interest rates should/would be determined by the supply & demand of savings & loans.

4: Well the simple reality is that inflation is calculated through a "basket of goods", making it an inherently engineered metric. Things which are not in that basket can head stratospheric (i.e be bid up) and the reserve bank is mandated to do absolutely nothing.

A very easily demonstrable example of this is housing - if you used house prices to calculate inflation, over the past 20 years or so you'd say inflation was on the moon.

Understanding things this way is how we can have what you might call "hidden" inflation. I.e that rates are too low and sending the price of stuff (like housing) soaring but because this isn't counted in the metric, we "don't have inflation".

What I'm saying is that it all depends on how it is calculated. You can flush the country with cash, the country uses it to do nothing but bid up the price of something not in the cpi, and so as far as the fed's concerned, there hasn't been any inflation anywhere, even though there actually might have been tons of it, it just hasn't been counted. Hence the ability to print money to eternity and, officially speaking, not have any inflation anywhere.

 

[over9k]

WELL TODAY'S NOT GOING WELL IS IT?

Paypal still well into the green though.

 

[gartley]

WELL TODAY'S NOT GOING WELL IS IT?

Paypal still well into the green though.

At last some action from the meandering of the last 2 months!!

 

[over9k]

I might actually end up in the green for the day. Gold's in the toilet but everything else looks like it might crack positive territory. Paypal's screamed 5% and climbing.

Edit: Oh boys. It's green again. Even gold's recovering. My prayers have been answered. All hail the printing press.

 

[over9k]

Also, not being funny here:

Donald Trump's twitter account is as important to watch as the fed. Not joking.

 

[over9k]

Oh dear.

A security flaw's been discovered.

Good thing I sold 75% of it off the other day.

 

[ducati916]

The broad market is improving. Technology, Communication Services, and Consumer Discretionary are the only sectors that have lagged the S&P 500, and their performance has been dragged down by the mega-cap tech-like stocks of Alphabet (GOOGL), Facebook (FB), and Amazon (AMZN).

On an equal-weighted basis, the S&P 500 is actually up 1.3% since 20 July, and only two sectors (Technology and Materials) have seen negative average returns. On the upside, Real Estate (4.1%) has been the big winner followed by Consumer Discretionary (3.3%), and Consumer Staples (2.2%). The fact that Consumer Discretionary at the cap-weighted sector level is down over 1.4% while the average performance of stocks in the sector has been a gain of 3.3% illustrates what a mammoth impact AMZN has on that sector.

Breadth among S&P 500 stocks has also been overwhelmingly positive. For the S&P 500 as a whole, 59% of stocks in the index have had positive returns since the close on 20 July. Only two sectors (Technology and Materials) have seen fewer than half of their components post positive returns over that time, while Real Estate, Consumer Staples, and Utilities have seen roughly three-quarters of their components rally since 20 July.

The rotation continues, which is a positive for the continuation of the trend (market) higher. There are still sectors that are lagging and as they start to come on board, again, a positive for the overall market.

jog on
duc

 

[ducati916]

Currently, 64.61% of companies have exceeded consensus analyst EPS estimates over the last three months, while 63.75% of companies have beaten consensus sales estimates over the same time frame.

In looking at the chart, you can see a big spike in the EPS beat rate over the last few weeks. Since earnings season began on July 13th, nearly 80% of companies have posted stronger than expected EPS numbers. That's a huge beat rate and suggests that analysts were too bearish on Q2 numbers heading into July. The revenue beat rate held up much better than EPS beats throughout the first half of 2020, but it too is on the upswing this season.

So far this earnings season, the average stock that has reported Q2 numbers has gained 1.31% on its earnings reaction day. That compares to a historical average one-day change of just 0.06% on earnings reaction days. As shown below, stocks that have beaten EPS estimates this season have gained 2.2% on earnings reaction days, while companies that have missed EPS estimates have fallen 1.89%. It's rare to see beats gaining more than misses decline, but that's what is happening this season.

All the 'virus' headlines has distracted from the underlying improvement in the fundamentals that signalled well ahead of time the improvements occurring. The result being that analysts following their own stocks/industries/sectors seem to have been way off with their estimates.

The market moves higher.

jog on
duc

 

[ducati916]

This story can be found here: https://www.institutionalinvestor.c...e-Best-Market-Neutral-Funds-Is-Run-by-a-Robot

However it was this section that caught my eye:

Castle Ridge is a Robot or AI. Jim Simon's was the pioneer (really) in Quant based trading and was incredibly successful and Bridgewater (who really irritate me) posted big losses.

jog on
duc

 

[ducati916]

As to today's market, relax:

jog on
duc

 

[over9k]

So duc, how confident are you that this "rotation" will remain?

 

[gartley]

Wall St crooks and banksters pumped it in the end as usual. DAX got dumped big time so we will see how it pans out in the next few sessions

 

[ducati916]

1 & 2: It's to do with the relationship with demand. If everyone just stuff the money under the mattress, it's not going to bid up the price of stuff and therefore destroy the value of the currency already in circulation.

3: Austrian theory says there shouldn't be a central bank.

3(a)Interest rates should/would be determined by the supply & demand of savings & loans.

4: Well the simple reality is that inflation is calculated through a "basket of goods", making it an inherently engineered metric. Things which are not in that basket can head stratospheric (i.e be bid up) and the reserve bank is mandated to do absolutely nothing.

A very easily demonstrable example of this is housing - if you used house prices to calculate inflation, over the past 20 years or so you'd say inflation was on the moon.

Understanding things this way is how we can have what you might call "hidden" inflation. I.e that rates are too low and sending the price of stuff (like housing) soaring but because this isn't counted in the metric, we "don't have inflation".

What I'm saying is that it all depends on how it is calculated. You can flush the country with cash, the country uses it to do nothing but bid up the price of something not in the cpi, and so as far as the fed's concerned, there hasn't been any inflation anywhere, even though there actually might have been tons of it, it just hasn't been counted. Hence the ability to print money to eternity and, officially speaking, not have any inflation anywhere.

3. Austrians definitely decry Central Banking. Now, what you haven't actually addressed is the question of a 'deflation'. It is clear however that if there is no Central Bank, then a deflation must simply be allowed to run its course. This would not be so devastating if this had continued to be the model and gold was the world currency. However, the switch to fiat pure in 1971, has allowed bubbles of such enormous size to build, that were they to undergo true deflation, the depression that would likely ensue would rival or exceed that of 1929 - 1934.

3(a) Austrians however go a lot further in their detail of how interest rates (should) be determined. They argue that the 'natural rate' should prevail. Given the situation today what is your guestimate, or even better, provide an analysis of the prevailing natural rate. How far off are the Central Banks currently?

4. Yes it is. We can conveniently divide it into: CPI & PPI. CentralBanks could care less about CPI. They move very quickly against PPI, which has been stated a number of times on this thread. So your 'hidden' inflation isn't hidden at all. It is very clear and out in the open for anyone even remotely interested.

Therefore anyone buying gold as an inflation hedge in the financial markets are simply kidding themselves. Stocks will rise alongside gold with the added advantage of a dividend return. Should there be a PPI inflation, and interest rates rise, gold gets slaughtered. Stocks are less prone to rate rises, some (financials) benefit. Therefore the whole 'inflation' issue is an interesting one currently as far as the two trends are concerned.

The public are positioning thus:

Yet:

So even CPI inflation is likely to come under downward pressure. Ironically, increased inflation expectations should lead (in a rational response) to increased spending, to get ahead of price rises (as happened in the 1970s). COVID is therefore (a) deflationary to debt, mitigated by Central Bank actions and (b) disinflationary from a CPI perspective. Inflationary pressures are however building in PPI via POO.

1/2. So finally, the volume of money. Austrians state it is the expansion of credit (primarily) that expands the money supply, which is correct. That expansion erodes purchasing power of the money. Correct. The Austrians failed to differentiate between asset price inflation and inflation generally, or PPI and CPI. Possibly it wasn't an issue for them. For those of us trading the markets, it is the primary and central issue. Schiff et al. are calling for the collapse of the US dollar.

If there were true inflation, the US dollar would be in trouble. This would show up in the market.

The US dollar is a long way away from demonstrating any inflation. What it is demonstrating is increasing confidence around the rest of the world (check exchange rates) that the COVID crisis is over. Economies are re-opening, trade and economic activity is picking up and we are returning to 'normal'. Now normal may well be sub-par when compared to other time periods, but, that has been true for some time. This is good for stocks, bad for gold. Why? Because in a ZIRP/NIRP world which drives fixed income investing, stock dividends are a return that big money must have. Notice the surge in Utilities, the classic safe dividend sector. Tech. (particularly in early stages) does not pay dividends, hence the rotation. There will be further rotations out of gold as dividend paying sectors are adjudged safe and open for business. The only people chasing gold (into another mini-bubble) are the latecomers, momo traders, etc. Silver caught the gold fever, but is still miles from confirming inflation.

The fact is that COVID triggered a massive deflation (similar to 2008) but the speed at which the CB stepped into the market (seems to have fooled many) and prevented the blow-out and an extended recovery, as we had in 2008-2009 or more aptly in 1930-1934. If we were (able) to calculate net-net the deflation and consequent expansion of the Fed's Balance Sheet, what we would actually find? My guess is net-net we are pretty close to zero, although, that bubble in debt is again reflating, which means down-the-line, we will repeat this exercise again.

jog on
duc

 

[ducati916]

So duc, how confident are you that this "rotation" will remain?

Very.

jog on
duc