Trying to hear what's not being said
November 15, 2022 Leave a comment
This study may be useful in conjunction with your other analyses.
Whenever bond prices exhibit medium to longer term overbought tendencies, it points to a reasonable moment when to increase your allocation to equities.
Now, is not that moment.
Other times, in between these moments, might be considered as ‘trading through the cycle’.
November 15, 2022
by Rob Zdravevski
rob@karriasset.com.au
August 15, 2021 Leave a comment
This month, the ASX 200 has touched a “rare” Monthly (not weekly, but monthly) Overbought reading.
For the lack of a better word, I’m calling it rare as the chart below covers 35 years and this level has only been (generally) visited 5 times prior.
Such a moment is worth noting but it’s not an absolute ‘sell’ signal.
My work suggests a greater probability for higher prices or a ‘melt-up’ before we see a peak.
For now the upward trend remains intact and I’ll look for the index to touch 2.5 standard deviations (the upper end of the bands illustrated) above its mean before searching for exhaustion of the current bull market.
Keep in mind that prices can stay ‘overbought’ longer than expected and the constituents (and their weightings) have changed over the course of this charts history.
August 15, 2021
by Rob Zdravevski
rob@karriasset.com.au
August 11, 2021 Leave a comment
The US 10’s are yielding 1.33% and the Aussie 10’s are 1.20%.
That spread (difference) between the US 10 Government Bond Yield and the Australian 10 Year equivalent is currently 0.13%.
But the figure doesn’t really matter, it’s the direction of the trend which is of greater importance.
As we see today………a rising trend (and when coupled with a break above a trend line) portends greener pastures for equity prices.
Below you will find a ‘close-up’ of a Weekly chart, highlighting the current ‘break-out’, while the 40 year chart (on a Monthly basis) illustrates a rising trend (of the spread) equating to an advancing S&P 500 (SPX), while a decline trend results in a lower or sideways travel.
A rising trend in this interest rate differential tend to also equate to a stronger US Dollar, which in turn means a weaker AUD.
Which…..also correlates to weaker commodity prices.
This is an indicator worth watching for your macro and longer term positioning.
Who would think we’d see a stronger US Dollar?
Rising yields on U.S. Treasuries will prolong the advance in the Dollar.
And rising interest rates add to debt servicing stress which can lead to Sovereign Debt pressure (there is no use calling it a crisis, until it becomes one) at which point the U.S. Dollar remains the currency of ‘last resort’.
This can lead to more buying of the U.S. Dollar.
See how this scenario can develop?
August 11, 2021
by Rob Zdravevski
rob@karriasset.com.au
July 5, 2021 Leave a comment
The S&P 500 is trudging higher and has registered a new Weekly Overbought reading.
This Overbought moment is also occurring with some coincidence of it also trading at its highest percentage above the 200 Week Moving Average (WMA).
This is long-term stuff.
These levels were last seen in 2007 and 2001.
It seems logical for the S&P 500 to mean revert over the coming 2 years but keep in mind the mean will continue to roll higher, perhaps to 3,500 in mid-2022.
So, if the S&P 500 ‘rolls over’ and meanders from current levels back to the 200 WMA, it’ll result in a 20% decline and only mean we are back to the same levels seen in November 2020 (for context, that’s 8 months ago)
This is why I think index based/ETF type (overly diversified) investing will provide poor results over the coming 2 years and the ‘age of the stock picker’ is already upon us.
Although (and perhaps confusingly), if you reference this link, the broader market also has every reason to carry on higher, much like the late 1990’s and perhaps more so when coupled with today’s liquidity and with a risk-free rate (the 10 year bond yield) which is now averaging ~ 1.8% as opposed to the 5.5% in the late 1990’s…..all, until the 10 year minus 2 year yield spread moves above 2%.
July 5, 2021
by Rob Zdravevski
rob@karriasset.com.au
September 18, 2020 Leave a comment
| Market Quips & Synopsis Some brief points about selected markets or assets and look for the links within for added musings. About current markets, I’ll open up by saying.. I notice there is dangerous trading going on, market capitalisations in some companies are extraordinary. For example, how does $1 billion market cap on revenues of $20,000 sound? ASX scuttlebutt says, “shorts” are trying to pressure companies into raising capital, some are seeing increased stock “promotion” activity and there are many people in the market “that don’t know what they’re doing or shouldn’t be there”. I see the AUD and XAU (Gold) in a holding pattern, (see the AUD chart below); they need to hold 0.7240 and $1,902 respectively, breaks above 0.7355 & $1,978 should see a new lurch higher Also watching AUDJPY closely, need to hold 76.00 to confirm “more risk-off”, A move above 0.7730 suggests “risk-on” and higher equity indices Another indictor to assess the steam in a S&P 500 decline is whether Japanese 10 Year Bonds (JGB”s) trade below 0.00%. The S&P 500 is down 6% from recent highs, Indicators are not clear in calling a new downward trend, however I think 3,272 is the target (a further 2.5% lower). The Nasdaq 100 has now fallen 11% since its September 2nd high. Looking for it to ease a further 2.4% to 10,814 before determining the strength of the decline. The decline wasn’t a surprise, as written by me on August 29 and September 3rd Global portfolios have a 3% short position in either (or both) the Nasdaq 100 or the SOX index My ASX 200 target is 5,803, which is 1.2% below the price as I write. I’m pleased with calling Oil down from $44 to $39.30. Brent held $39.30 for the past week, has since rallied 10% in past 4 days….quick rallies are not always a preferred scenario VIX remains relatively high at a reading of 26, the call option phenomenon has influenced this increase The De-Equitisation story combined with rising money supply & low interest rates leads to my thesis that higher equities is the dominant and over-arching long term theme. While we accept near-term rates will stay Lower for a while, I think the long end of interest rate curve will rise. AAII Survey exhibiting narrowest bull/bear spread since June 11, which is when S&P 500 had a 8.2% decline. Since March 5th, more retail investors have remained bearish (than bullish). This survey remains a reasonable contrarian indicator as markets bottommed on March 26th and never looked back. Oil Rig count showing no meaningful change of increase, see attached, number of rigs in operation has halved I remain long term bullish on the Oil price and continue to accumulate positions (proxies) to benefit from this opinion. Incidentally, I have a view there is a coming crisis in energy prices which will stoke inflation (albeit it may be 18 months away) In another edition, I’ll expand on various investing themes and I hope to soon publish my bullish thinking about Platinum on my Linkedin page. That’s all for now… warm regards, Rob |
August 15, 2020 Leave a comment
The De-equitisation theme is still intact.
In the 2000’s, there were approx. 8,000 listed companies on U.S. exchanges.
Now, that number is about 4,000.
More and more capital being deployed into fewer and fewer available listed equities.
August 15, 2020
by Rob Zdravevski
rob@karriasset.com.au
March 22, 2015 Leave a comment
I’m not writing this to convince or prove a case to readers, but experience and instinct tells me equity markets are still going to higher.
That’s not such a bold prediction in light of the fact that the general price of listed equities have risen for over a century, but in the window of the past and next 5 years, my view is that we haven’t seen the end of the advance which commenced in March 2009.
We are seeing lower capital inflows to equities, lower overall volume and low retail investor participation. Media commentators are screaming “crash” louder and cite many “problems” which includes trying to identify “bubbles”.
and yet many market indices are hitting new highs.
February 19, 2015 Leave a comment
Click the link below to see our latest investing musings
February 15, 2015 Leave a comment
I’ve been advising and managing the equity portfolios for individuals for 20 years. My business is to analyse investment opportunities and the various probabilities of certain things occurring in the future so to position my clients and their money can benefit from my views.
Those views are formulated by me, the investment advisor, using a host of information and sources so it can be dispensed specifically to fit an investors situation.
One problem that I face and I’m sure for many investment professionals who deal directly with their clients do, is to continually diffuse and deflect the opinions and influence that media commentators and “experts” create.
There is often little merit or evidence to their claims that they predicted an event or “saw it coming”. It is equally concerning when the “noise” created about a recent occurrence is structured to suggest that the recent past or the present is now destined to look like the future.
Which brings me to the current flux of the Crude Oil price.
I find it difficult to believe that so many people have suddenly predicted the 50% fall in the oil price. I don’t recall reading or hearing such predictions, yet now these media prophets are receiving adequate air-time for their supposed foresight.
What happens next is that private client investors takes this information as gospel and call their financial professional panting about the analytical revelation they have just heard or read.
Four messages to financial media personalities:
1) Your statements do not help anybody, other than trick people into thinking you are an authority on a subject.
2) Telling me what has happened is useless. It has already happened.
3) The markets have already reacted to the facts.
4)Prices have discounted this news.
My advice to investors is to dismiss this stuff because often the “expert” isn’t a financial professional, nor are they an investor or a participant in the market, let alone licensed or regulated to provide such advice. I’d be interested to ask anyone of them if they have ever put any of their own money at risk behind any of their comments.
It is important to analyse what has occurred in order to educate yourself so to understand history and circumstances which led to an event, but from there on, especially when investing, ice hockey legend, Wayne Gretsky’s quote seems quite relevant, “I skate to where the puck is going to be, not where it has been”.
If you choose to listen or absorb the news and comments about the capital markets, be discerning about who the person is, what their background is, what are their motivations are and whether they have any “skin in the game”.
I think that there is too much energy spent talking about historical facts and masking them as if the preacher had predicted it. Just observe the recent events involving earthquakes, rising property prices, shark attacks, plane crashes and terrorist rampages. Everybody is an expert after the fact and they love telling me how they “told me so”.
The next time that you choose to act on an investment idea or comment that you’ve heard on TV, then I suggest that you periodically and continually call that journalist or “guest expert” and continue to ask them for advice about how the investment is working out and have them explain why its not looking so wonderful at any point in time.
Don’t let other people’s “noise” become part of your investing process.
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