The canary in the credit crunch coalmine

Historically, every recession has been accompanied by an equity bear market.     One characteristic of every recession has been a credit crunch. As the economy slows, banks react by tightening their lending criteria, which dries up the availability of credit, and eventually causes a credit crunch. There are a number of ways that investor...

FOMC preview: Rising stress edition

The Federal Reserve is widely expected to raise interest rates a quarter-point this week at their FOMC meeting this week. Even though financial conditions remain at benign levels, there are a number of signs that stress levels are rising during the current tightening cycle.     Rising Libor-OIS spread Bloomberg reported that stresses are showing...

Will diversified portfolios be doomed in the next recession?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend...

No, Mr. Bond, I expect you to die

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Powell Fed: Market wildcard

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Did risk-parity funds crash the bond market?

When the markets crash unexpectedly, everyone is on the lookup for culprits. One of the leading theories behind the latest downdraft in stock prices is the rise in bond yields, which spooked the stock market. Derivative analysts have pointed the finger at Risk-Parity funds as the leading actors in the bond market rout. They contend...

Risk on, or risk off?

Mid-week market update: In view of this week's market volatility, I thought that I would write my mid-week market update one day early. After the close on Monday, my Trifecta Market Spotting Model flashed a buy signal. As shown in the chart below, this model has been uncanny at spotting short-term market bottoms in the...

The pain trade signal from the bond market

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Bubbleology 102: What could derail this momentum driven rally?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Can the melt-up continue?

Mid-week market update: The week began on a bullish note this week as the melt-up theme dominated early in the week (see Jeremy Grantham`s call for a possible melt-up, and my own views published last November: Embrace the blow-off, but with a stop loss discipline). On Monday, the market rose for a fifth consecutive day,...

The VIX also rises

Deep in the recesses of my memory from my youth, I recall reading an Ernest Hemingway quote that went something like this: How did you go bankrupt? Two ways. Gradually, then suddenly. From The VIX Also Rises The VIX closed at an all-time low last week. Anyone who bought volatility in the last couple of...

Is 3% for 6 months enough to take equity risk?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Equity lessons from the bond market

Political operative and former Clinton advisor James Carville once quipped that he wanted to be reincarnated as the bond market so that he could intimidate everybody. Equity investors and traders are well advised to remember that comment, as there is much to be learned from a cross-asset, or inter-market, viewpoint from bond market action. For...

The Fed has spoken (and what that means)

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Imagining the next bear market

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

All eyes on policy makers

Mid-week market update: As we wait to see if the stock market can break either up or down out of this narrow trading range, this week has been a light week for major market moving economic data, However, there are a number of political and non-economic developments to keep an eye on.     The Fed...

A market top checklist

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...