• After the Storm
    Posted by on August 25th, 2015 at 12:53 pm

    The stock market has calmed down considerably today. The Dow has been up as much as 441 points. The S&P 500 is currently up 2.32%.

    The rally today is different from yesterday’s selloff in that the “high beta” areas, tech in particular, are doing quite well. The Utility ETF (XLU) is down while the Tech ETF (XLK) is up more than 3%. Growth is well ahead of Value. Yesterday’s selloff was much broader.

    While the market is calmer today, I urge investors to expect more volatility in the days ahead. There’s the reaction, then the counter-reaction, then the reaction to that. The big low often comes a little bit after the worst of the panic passes.

  • Remembrances of Jackson Holes Past
    Posted by on August 25th, 2015 at 9:54 am

    On Thursday, the Federal Reserve will be holding another big meeting in Jackson Hole, Wyoming. Janet Yellen will be skipping this year’s meeting, but it’s still going to get a lot of attention.

    Gary Alexander of Naveller Marketmail points out that the market has often reacted well after Jackson Hole.

    Jackson Hole has become an annual rallying point for the stock market over the last few years. Since 2009, the market has responded favorably whenever some real news comes out of Jackson Hole. From 2010 to 2013, Federal Reserve Chairman Ben Bernanke made monetary history at Jackson Hole. He often announced (or paved the way for) a major Fed policy change at this time. Here’s a brief summary:

    The 2010 Jackson Hole conference was held August 26-28. In his August 27 talk, Mr. Bernanke said that the pace of economic growth had been “less vigorous” than the Fed was expecting and the pace of the U.S. job growth was “painfully” slow. He also acknowledged that the Fed was surprised by the “sharp deterioration” in the U.S. trade balance. His solution was to revive the Fed’s late-2008 “quantitative easing” (QE) scheme. The market loved QE2: The S&P rose from 1040 on the day of Bernanke’s Jackson Hole talk to 1363.6 the following April – up 31%.

    The 2011 Jackson Hole conference was held August 25-27, during an especially volatile month in market history. At Jackson Hole, Chairman Bernanke laid out the groundwork for another new Fed monetary strategy called “Operation Twist.” The detailed plan was not officially announced until September 21, but over the next month or so, various Fed governors hit the road to explain and defend their $400 billion operation to artificially flatten the yield curve. The stock market loved Operation Twist. The S&P 500 rose over 26% from August 2011 to April of 2012.

    The 2012 Jackson Hole conference, held August 30 to September 1, laid the groundwork for QE3, which was officially launched on September 13. Bernanke’s Jackson Hole remarks were more frank than usual. First, he said that the stagnant job market was a “grave concern” to the Fed. He also called current economic growth “far from satisfactory” and “tepid.” Because of this slow growth, Bernanke said that the Fed will “provide additional policy accommodation as needed.” This was a broad hint that more easing (dubbed QE3) would soon follow. The market seemed to love QE3, as the S&P 500 rose by over 17% from its August lows to April of 2013.

    The 2013 Jackson Hole conference was held August 22-24. By then, Chairman Bernanke was a lame duck, so he let his replacement (Janet Yellen) speak in his place. Strangely, she did not say much, except as part of a panel. Since the skies were smoky around Jackson Hole, due to all of the fires in Idaho, the inside joke was that Jackson Hole’s skies reflected the foggy future of the Fed, especially since Bernanke’s hints of “tapering” (uttered in May) were spooking the markets. In the end, tapering failed to faze the market, with the S&P 500 rising 16% by April of 2014.

    Last August (2014), as noted above, Ms. Yellen tried to reassure investors that the Fed might not raise rates as soon as they expect and the market managed to eke out an 11.6% gain by May 2015.

  • Futures Point Higher
    Posted by on August 25th, 2015 at 8:24 am

    We’re not out of the woods just yet, but the futures are indicating that today will be a very good day for stocks. The Dow futures are up 530 points. The S&P 500 futures are up 61.75 to 1,933 from a gain of 3.3%.

  • Morning News: August 25, 2015
    Posted by on August 25th, 2015 at 7:01 am

    Global Markets Rebound Despite Continued Selloff in China

    China Cuts Interest Rates for Fifth Time In Bid to Stem Rout

    For All Its Heft, China’s Economy Is A Black Box

    German Business Confidence Rises With China Fears Subdued

    Fed’s Lockhart Sees 2015 Rate Hike, But Reading Inflation ‘Tricky’

    Oil Expert Daniel Yergin: ‘Hard Times’ Ahead For Producers

    Tim Cook Finally Steps Up For Apple

    Toll Profit Drops as Luxury Homebuilder Hurt By Lower Prices

    BHP Billiton Profit plunges 86% in Commodity Downturn

    This Fund Manager Picks Stocks by Watching Bonds, Beating 99% of Peers

    How Mexico’s Ricardo Salinas Lost Half of His Wealth This Year

    Joshua Brown: 解围

    Cullen Roche: Three Things I Think I Think – What The Hell is Going on Edition

    Roger Nusbaum: Time to Panic? Not Now, Not Ever

    Howard Lindzon: Some Perspectives on Panic

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  • CWS Market Review – August 24, 2015
    Posted by on August 24th, 2015 at 5:41 pm

    Today was one of the more dramatic days in recent Wall Street history. I wanted to send you an update to fill you in on today’s market action.

    At the opening bell, the stock market was flooded with sell orders. This is a good reminder to never place market orders at the open (here’s a guide to the different types of orders). Within six minutes, the Dow was down 1,089 points. The S&P 500 got as low as 1,867.01 for a drop of 5.27%.

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    The prices were chaotic and confused, and many were probably incorrect. A number of ETFs widely diverged from their underlying stocks. At one point, Ford Motor (F) traded as low as $10.44 per share.

    The best example of how crazy this morning was is Kroger (KR), the grocery chain. In 12 minutes, the stock dropped 20% and rallied 25%. We’re talking about a grocery store! The Low Vol ETF (SPLV) was down 45%. The whole reason for this ETF is so that it has low volatility.

    After hitting bottom, the S&P 500 put on a furious rally. By 1:10 pm, the index got to 1,954.09 for a gain of 4.66% off the morning’s low. Several major stocks turned positive for the day.

    But the fun times didn’t last. Stocks turned south again, and by 3:34 pm, the S&P 500 stood at 1,879.98. That was 3.8% drop—not for the day—but merely from the post-lunch high of two hours before. These swings are big for one week, and they all happened in one day!

    The S&P 500 eventually closed at 1893.21, perhaps an homage to the Panic of 1893. The index lost 3.94% on the day for its worst loss since August 18, 2011. This was the lowest close since October 17, 2014. The S&P 500 is now down 11.15% from its all-time high close reached on May 21. This breached the 10% barrier meaning this is now an official “correction” in Wall Street parlance. This is the 28th correction since 1945. In the last three days, the Nasdaq Composite has lost 9.8%. That’s not too far from the 11.3% it lost on October 19, 1987.

    Ryan Detrick points out that the S&P 500 has fallen 3% in the last two days. We haven’t hit three in a row since 1933. In the last three days, the Dow has lost 1,477 points which is an all-time record.

    There wasn’t a strong sector component to today’s selling. Everything was down. The Energy Sector ETF (XLE) closed at $60.13. It’s lower than where it was in late 2006.

    Today, our Buy List held up slightly better than the market, meaning we did a little less bad. Our Buy List lost 3.81% for the day. Wells Fargo (WFC) and AFLAC (AFL) were our biggest losers. Ford recovered from its morning debacle but is still only at $13.19. Assuming the current dividend, Ford now yields over 4.5%. Microsoft (MSFT) yields close to 3%.

    I’m sure you know what I’m going to say: Don’t panic. Don’t sell. Take a step back and don’t get caught up in this mess. The volatility will pass.

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    What’s interesting is that there wasn’t one single company-specific news item for any of our Buy List stocks today. Not one. This is purely a market event, not an economic one. The market is impacting the market. Kroger did not magically become less profitable and then more profitable within a few minutes this morning.

    I’m sure many investors are asking, “What caused today’s action?” This is a difficult point to make, but that question often can’t be answered. At least not comprehensively. Finance isn’t a science like chemistry where one event causes another. Sometimes things just happen and we really can’t say why.

    Sure, we can give generalized answers, like the slowdown in China and chaos in some Asian markets. The oil rout is weakening some economies, and the Fed seems determined to raise interest rates. The Canadian dollar, for example, is at an 11-year low. West Texas crude fell below $40 per barrel for the first time since 2009. China’s market sank 8.5%. But that’s only the background noise.

    The real issue is that people got scared and they sold all at once. I don’t know when the volatility will end but there are a lot of good stocks going for good prices. Make sure you have a well-diversified portfolio of stocks from our Buy List. Pay attention to our Buy Below prices and never chase stocks. I’ll have more market analysis for you in the next issue of CWS Market Review!

  • The Market at 3 PM
    Posted by on August 24th, 2015 at 3:03 pm

    The crisis from this morning has passed, but the market is still rightly spooked.

    Within six minutes of the opening bell, the Dow was down 1,089.42 points. By 1:10 pm, the index had rallied 990.88 points off its low. We then went down again. We‘ve lost more than 480 points from the post-lunch high.

    I expect another rally into the closing bell.

  • The Market at 1 PM
    Posted by on August 24th, 2015 at 1:03 pm

    Today’s rebound has been amazing. The Dow is up nearly 1,000 points from today’s low. Several important stocks have turned green. The Nasdaq 100 Index went positive, and the Nasdaq Composite may be close behind. The S&P 500 has rallied to a loss on the day of less than 1%.

    Today wasn’t Black Monday, it was Black 9:30 to 9:35 Monday.

  • The Market at 11:40 AM
    Posted by on August 24th, 2015 at 11:42 am

    Things are still moving pretty fast but it now appears that the market has recovered dramatically from this morning’s terrible open. The Dow fell over 1,000 points and then rallied more than 600 points. It looks like today is merely a lousy day for the market instead of a disaster. Of course, we’re not done yet.

  • The Market Tanks
    Posted by on August 24th, 2015 at 9:58 am

    Things are moving too fast for me to blog, but the brief version is that the stock market is falling hard today. Some of these prices are unreal. The S&P 500 has been as low as 1,867.01. That’s a drop of 5.27%.

    Ford Motor (F) got as low as $10.44 per share. The stock was actually suspended not because of the drop but because of its bounce back.

    The 10-year yield got as low as 1.93% today.

  • Morning News: August 24, 2015
    Posted by on August 24th, 2015 at 7:30 am

    China Stocks Give Up Year’s Gains as ‘National Team’ Stays on Bench

    China Crash: You Can’t Keep Accelerating Forever

    Park Says South Korea Won’t Back Off as Crisis Hits Markets

    Russia’s Ruble at Eight-month Low, Market Dips Over 4%

    Indian Shares Fall Nearly 6%, Biggest Falls in 6-1/2 Years

    Oil-Nation Currency Pegs to Cave on Crude Rout, Kazakh PM Says

    Oil Plunges Amid Broad Commodities Selloff

    Larry Summers Warns of ‘Dangerous Consequences’ If Fed Hikes in September

    The Fed Is Looking At A Very Different Dollar Than Wall Street

    Vague Disclosures by Highflying Mutual Funds May Put Investors at Risk

    A Sprawl of Ghost Homes in Aging Tokyo Suburbs

    Brad Katsuyama’s Next Chapter

    Junior Miners Jump Into Medical Marijuana, Food Service Amid Slump

    Jeff Miller: Weighing the Week Ahead: The Start of Something Big?

    Cullen Roche: What’s Your Max Pain Point?

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