The Macro View

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One-Off Or The New Normal?

With the end of the year now in sight, I'm guessing that more than a few investors and/or fund managers have reviewed their efforts for the year and are likely frustrated with their overall performance thus far. The bottom line is that 2011 has been a very difficult year for investors seeking growth of capital as a great many methods of management are not working well. So, my question comes down to this: Is 2011 a one-off or the new normal?

Last week, I highlighted the fact that many popular trend-following methods of managing the market have simply stopped working due to the volatility in the market these days. Decimalization, the elimination of the uptick rule, HFT, and the proliferation of ETF's are all to blame here.

Debunking the 'Missing the 10 Best Days' Myth

When you make money in the markets, your thoughts travel to where and how you will allocate your newly acquired funds; interestingly, neurons are fired from the same region of the brain inspired by stimulants such as cocaine. On the contrary, when an individual loses any portion of his or her money, the brain processes this portfolio decrease and triggers a flight response...

...perhaps because now the question arises of how one can obtain his or her necessities and desires?

Of Trends, Traditions, and Commandments

I believe one of my favorite Wall Street-isms nicely sums up the current stock market environment. Long-time readers will undoubtedly recognize this oldie-but-a-goodie, so feel free to join in now... On Wall Street, if something happens once, it is considered a trend. If it happens twice, it is a tradition. And if it happens three times, well, it's a commandment.

The key question at this point is if the bottom has been put in for this waterfall decline and if a new uptrend has been established by the "big bounce." To be honest, I'm not sure on either count. But the four consecutive successful tests of the 1120 level suggests that this area should be considered pretty decent short-term support. So, the bulls have that going for them, which, to borrow a line from Caddyshack, is nice.

S&P Downgrades U.S. Sovereign Debt Rating

In a press release Friday evening, Standard & Poor’s downgraded the U.S. Government’s “AAA” sovereign debt rating Friday evening. S&P lowered the long-term rating to AA+ from AAA and affirmed the country’s A-1+ short-term rating.

The rating agency said “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”

Is It Time To Start De-Risking Again?

With the U.S. stock market having spent the last five months moving sideways and many analysts arguing that the macro picture looks downright ugly going forward, it seems that some of the big names in the investment business are starting to de-risk their portfolios once again. The bottom line here is it has been all too easy for managers not focused solely on U.S. large caps to lose money this year and experience has taught some of the big boys that conditions such as these means it may be time to take a step back.

For example, as of June 30, the average Global Macro Hedge fund was down on the year- this according to the Barclay Global Macro Index, generated from the performance of more than 10 Global Macro funds. And with Global Macro managers having lost money in both May (-1.45%) and June (-1.49%), investors may be getting anxious.

Rogers: The Game Is Simple – Buy Commodities

Legendary investor Jim Rogers says the investing game is simple these days. Rogers said this week, “I do believe I could count on one hand the number of times I’ve been presented with an investment opportunity that guarantees success no matter what direction the economy takes.” Rogers adds, “If the world economy gets better, I earn my money on commodities. If the global economy gets worse, then they will print more money and I will make money in commodities.”

Although we have featured comments by Rogers many times on the site, Jim Rogers, who ran money with Mr. George Soros way back when, is one of the few investors with an investment record that substantiates his expertise and provides answers supported by both the fundamentals as well as detailed research.

ECRI Founder Calls For Prolonged Slowdown in U.S.

On the U.S. economic front, there’s good news and bad news: The good news is the U.S. is “not yet” entering a double-dip recession. The bad news- we are headed toward a sharp and prolonged economic downturn... At least according to a Wall Street Journal interview with Lakshman Achuthan, co-founder of the Economic Cycle Research Institute.

ECRI, as it is known, a well-respected economic forecasting firm that has a strong track record for identify turning points in the market.

The Mutual Fund Industry's Dirty Little Secret

A sad but true statistic with regard to mutual funds is that most managers run funds that they do not personally invest in, or as President of Morningstar stated they have “no skin in the game.” Phillips suggests that if managers risk something of value – such as their personal money – they may be more interested in ensuring the fund’s overall wellbeing.

In addition, when managers have their own money in the fund, they may be more sensitive and reactive to the market’s ups and downs.

Stats Show Investors Should Reconsider "Sell in May" Rule

With the month of May now in the history books with a minus sign, it seems those who ridiculed the old Wall Street adage of "Sell in May and Go Away" may wish to re-think their stance. On that note, I would like to share some further research I have done regarding this bit of Wall Street wisdom.

First some background information. The data I have analyzed covers the period from 1950 through 2010, inclusive. That is a total of 61 years of market activity, the results of which are based upon the S&P500 Index.

Are They Watching In Washington? And If So...

One of the benefits of being closely involved with watching the important business and economic news is that it is easy to stay in tune with the message from the headlines. And in short, the message we’ve been hearing lately is that the economy is not exactly hitting on all cylinders at the present time.

This week alone, we’ve seen the PMI’s (Purchasing Managers Index – designed to indicate the state of the manufacturing sector) from around the world come in below expectations. We’ve gotten word that business activity has slowed via reports from both the Richmond Fed Index and Chicago Fed National Activity Index. We’ve seen Orders for Durable Goods pull back and housing prices continue to fall. We’ve seen an uptick in jobless claims that is becoming difficult to ignore, and finally, a GDP report that failed to include the upside surprise that many analysts were hoping for.

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