Buyback Perplexity? Try Italy. (EWI,GLIBA)

Buyback Perplexity? Try Italy. (EWI,GLIBA)   Our partner in crime here at The Modern Bull, Her Majesty’s Senior Liege, Hugh L. O’Haynew, earlier this week outlined a quasi-criminal project so widespread in corporate circles today that the Securities Exchange Commission felt compelled to investigate it.   The transgression?   Corporate insiders selling their holdings on the heels of share buyback announcements. And one might wonder, what’s the big deal?  Fellow wants to turn a buck; let him sell into strength.  Hell, let him sell whenever he wants!   But there’s more to this little trickster play then meets the eye, my innocent little doe-eyed peach.  For the endgame may not be so straightforward as ‘turning a buck’, or cashing in to pay for daughter Wilma’s graduation dress.  Oh no… Conspiracist Banter There are those of us in the investment game who are more jaded, you might say, and can’t help but think that these sales are coming precisely now because corporate players are worried that the highland jig is up.  And they’re implementing the buybacks as a prop to get out of their positions at a time when confidence is thinning and mom and pop market participation is thin-thin-thin.  …

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Movie Lover’s Intermission (NFLX,JPM)

Movie Lover’s Intermission (NFLX,JPM)   If there’s one thing we’ve come to rely on over the last couple of decades, it’s the resiliency of tech – or at least the resiliency of the tech investor, a love junkie so consumed with his heart’s one desire that he keeps coming back – even after taking repeated beatings. We don’t make this stuff up, folks.   The dot.com bubble burst at the turn of the century; the Lehman Bros. debacle squared big tech (along with everything else) a decade back; and over the last year, we’ve seen several dumps of between 20% to 30% on all the FAANG stocks.   But does anyone care…?   Tech investors seem nonplussed.  They’re a loyal lot.  And that’s fine.   But we here at The Modern Bull are somewhat different.  We don’t have a great deal of hope for the longevity of things tech-y, but we do view them favorably as vehicles for robust and profitable trades.  Hence a company like Tesla, for whom we bear no love whatsoever, we still view as a high beta means of realizing our financial goals.   That said, there are now several reasons to be worried about big…

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Monster Chiller Horror Market! (QQQ,DIA,USO,IYT,GLD,SLV)

Monster Chiller Horror Market! (QQQ,DIA,USO,IYT,GLD,SLV)   There’s a point in every horror movie in which the terror and gore can get no worse.  And then, as if the gods had collectively reached into their cruel joke handbag, it manages to do just that.   It gets much worse.   The freight train has just leveled the town, the bodies are strewn everywhere, widows and orphans and crying babies, fires burning, carnage, mayhem, bubonic sores and pus galore … and whaddaya know, that neo-Viking motorcycle gang from Peoria arrives, thirsting for a good mead-induced blood-letting and plump, diabetic children to sacrifice to Odin. It’s precisely at that point that the fright turns almost comic.  Sure, there are those who get up and leave because they can’t handle what they know is going to be barbarism for the most barbaric.  But for others, it’s hard to contain; the giggle is on, and it’s gathering strength, because the whole affair has been transformed into some sort of ‘surreal state of cognition’ – a dreamlike situation where you’re watching the horror, still somewhat involved, but you know it’s a dream.   Welcome to the Stock Market!   The current market set-up bears a striking…

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Profit Gobble (NIB,DBC)

Profit Gobble (NIB,DBC)   A farmer friend of mine says he wouldn’t be in any other business.  He raises beef cattle, chickens (for eggs) and has a small herd of dairy goats, and he’s convinced that it’s an enterprise that can’t fail, regardless the economic forecast, if things are managed properly.   And we’d agree, though we might quibble with his product line.   In the end, though, it’s true; there’s no escaping that we all have to eat.  Some are willing to survive on junk, of course, while others are a little more discerning.  But when it comes down to how your last dollar is spent, food is where it’s at.   Apparently farmer-boy has a point.   Our Four Gs investment strategy long ago recognized the need to put eggs in the investment basket.  Diversify if you want – and better you should! – just be darn sure that you got some genuine eggs in there! And it’s with precisely that in mind that we turn to the food sector for today’s trade.   We start as follows –   Commodities are experiencing an upturn. And it’s not just oil that’s rising, friends, though energy gets the bulk…

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Haughty, Haughty Boy! (NUS,NOC,SPY)

Haughty, Haughty Boy! (NUS,NOC,SPY)   Much of the commentary here at Modern Bull over the years has been dedicated to preparing for a bear market – and a potentially devastating one, at that.   It has long been our belief that we’re now witnessing the mother of all bull markets, the final, euphoric blow-off top to an advance that began in the depths of the Great Depression some eight decades ago.   It’s an hypothesis shared by others, though to our credit, there are very few who are willing to stick out their necks and claim – as we do – that we still have one more ‘Old Faithful’ spasm of buying ahead of us, the likes of which has never been experienced by today’s market players. What follows, of course, will not likely be pleasant.  And we’ve been proponents of stocking up now in preparation for what’s liable to come.   Banking on Yourself   We, of course, were the first to introduce the world to the Four Gs Investing regimen – Guns, Gold, Gas and Grub, a catchy and poignant slogan that a number of ill-witted, unimaginative copycats have since gone on to pilfer.   As you’ve come…

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Long Wash Cycle (TLT,SLV,XLB,XLK)

Long Wash Cycle (TLT,SLV,XLB,XLK) Intermarket analysis is a helpful tool for the technical trader attempting to anticipate the next big move in the investment universe. What is it, exactly? Well, over time, certain cycles are evidenced in the movement of stocks, bonds, commodities and the dollar, with associated relationships also seen between Emerging Market debt and equity, as well as in the play between large and small cap stocks. In general, however, the main body of evidence points to 1) rising commodities (and a falling dollar) preceding 2) a turn lower in the bond market, followed by 3) a retreat in stocks. That is, when inflation is driving the cost of raw materials higher, interest rates are eventually forced upward, pushing investors out of their fixed income holdings and ultimately equities. It should be noted that the process is anything but clean, meaning it takes place over the long term, and is accompanied by rolls and rises in each asset class, such that it can best be seen only with a wide angle lens and often only after a significant time span has elapsed. Attempting to time one’s investment shift decisively out of one asset class and into another with…

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Equity Happy; Treasury Crappy (TLT,DIA,FCX,UUP,IYT)

Equity Happy; Treasury Crappy (TLT,DIA,FCX,UUP,IYT) We’ve been talking in more emphatic terms about the bond market lately, though not because we have anything new to say on the matter. The message has been consistent for several years – that a grand selloff in Treasuries would funnel tremendous flows of cash into the equity market, precisely at the moment that U.S. stocks were perceived as the greatest possible investment holding of the last three centuries. In other words, there’s a bullish equity bubble in the making that will eventually tear the buttocks from Ginger May Gorilla, while sending the bond market lower for potentially many years to come. So CRASS! Our latest rantings, however, come at a time when the yield on the three year Treasury has come up even-steven with the yield on the S&P 500 (see below), an inflection point that could have a significant impact on the direction of both asset classes. Here’s the way it looks graphically – The last time the two met, the vectors were reversed, with a breakdown in Treasury yields creating an advantage for equities (red rectangle). That took place, of course, while the stock market was melting down, and nary a lad…

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The Nutella Market (XLB,XLK,TLT)

The Nutella Market (XLB,XLK,TLT) There’s very little in this world that can compete with thickly spread Nutella on a crispy rip of focaccia. Hell, just dip that sucker into your oversize jar and give her an uncaring hack-snort swallow… And let the goop fall where it may. Is that life, or is that life? I’ll say… Unless, of course, you keep it up for too long, and it sends you to the oncology ward with a prep for chemo. Don’t Do It! The market has begun to act as if all is sweet and simple again, as if a dollop of the Ferrero hazelnut-cocoa genius was already stuck to its palate, blood-glucose levels were frenzied and a titanic insulin shock was fast approaching. When you see the biggest names on the street hitting new highs, or coming to within a whisker of their records, you know that it’s only a matter of days before the next spasm of buying is upon us and the indexes, too, begin logging all-time bests. This is the phase when rational discourse is abandoned, trust in the past and all it has brought becomes a religious tenet, and money is thrown fastball style at the…

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Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC)

Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC) We’re going to open today with an indicator that gets far too much attention, but that still has much to offer if taken in proper perspective. It’s the VIX Index, the Chicago Board’s measure of implied volatility in S&P 500 options, sometimes called the market’s ‘fear gauge’. Those with a simplistic view of the VIX claim that when it’s low – watch out! – the market is about to take a spill. These folk see the complacency behind low volatility in options as an inevitable contrarian sign that the market is about to explode. And there’s truth to the notion that low volatility is eventually replaced by high volatility. The opposite is also true. Periods of high volatility lead directly to periods of low volatility. On a long term chart, it looks like this – But it’s also clear from the chart that volatility can remain excessively low for extended periods of time, rendering the “VIX at historic lows!” crowd all but irrelevant. A New Take We were been pioneers in the formulation and application of a related indicator that we termed ‘volatility compression’. It’s a marker that has served us well…

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“Bond. Lamest Bond” (TLT,QQQ,USO)

“Bond. Lamest Bond” (TLT,QQQ,USO) We’ve been talking about the end of the nearly 40 year bull market in bonds for some time now. Indeed, we’ve been early on a couple of occasions explaining the case for its demise, even errantly putting our money where our mouth was. We admit now we were early, eager and foolhardy. It happens, sometimes. Part of the business. Yet today, with all signs again militating in favor of just such a rollover, viz. a rising rate regime, a Fed that projects its intentions to continue tightening, a bond market that appears to be accepting the threat, and both the inflationary and corporate earnings backdrop to support it, we see there are still some who are unable to swallow the case for a coming bear market for bonds. Case in point: Morgan Stanley, no newcomer to the world of Treasury investing, turned bullish on the long bond less than a month ago. In a move that’s astonishingly contrarian, the bankers at that esteemed outfit claimed that “trade tensions, declining equity markets and subdued inflation” are forcing it to recommend clients bulk up on the ten year note. We would be all in favor of Morgan Stanley’s…

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