Monthly Archives: July 2014

How will this bull market end?

In normal times this current bull market would have experienced a significant correction in the light of recent serious world events: but these are not normal times.  As a result of the policies of central banks that are desperate to stimulate growth and avoid a deflationary spiral, the world is awash with money, low interest rates and high debt.  The consequence has been an inflation of asset prices and in such an environment investors have little alternative but to invest in the equities market.  As a result markets around the world which normally would have reacted negatively to recent world events, have remained in a strong bull trend.

The phenomenal strength of this bull market can be seen from the weekly chart of the S&P500 below. Over a three year period the lower Bollinger band at two standard deviations has not been touched and over about the… Continue reading

How useful is the televised financial media?

Television channels such as Bloomberg and CNBC which serve the financial industry and investors seem obsessed with filling 24 hours with advertisements and content which is often fatuous and of little value. From time to time there is the newsworthy item but these rare pearls of wisdom are difficult to find among the advertisements and noise. The common format used by these channels is a panel of up to 5 market commentators who seem to spend most of their time competing with and talking over each other and shouting down anyone who might dare to offer an alternative view, (CNBC is notably guilty of this). Cynically one could suggest that their bonus is determined by the amount of chatter and noise they produce.

The question is, do financial channels such as CNBC and Bloomberg have much real value to the investor or to the industry? At a time when the… Continue reading

Margin lending and the bull market

Many technical indicators provide a useful measure of the health of the economy and the equity markets. At a time when there is so much media market hype it is worth referring to this link which has 23 charts all of which show that the US economy is vulnerable and indicate that the end of this bull market is close.

World and U.S. stock markets continue to climb to new highs and show clear evidence of a bubble. Stock market bulls are becoming increasingly confident and convincing more investors to believe that the economy is in recovery and that the bull market will continue. But these investors who are often novices or inexperienced are being deluded because the U.S. stock market and most world markets are experiencing classic asset bubbles driven by central banks and when this bubble bursts, it will erase an enormous amount of investor wealth.

One useful… Continue reading

Dark pools are not consistent with a transparent market.

The share market exists to enable businesses to efficiently raise capital and provide the investor with a secondary market. As such it should provide a fair and transparent market which does not disadvantage any investor.

The recent book by Michael Lewis raised public concern in the United States over trading practices such as high frequency trading and at the same time drew attention to trading activities known as dark pools. These dark pools are used mainly by institutional investors often for large orders which are matched off-market.  Institutional participation may also be motivated to use dark pools by a need for secrecy until after a transaction is complete.  Some former insiders have suggested that so much trading is now conducted away from exchanges that quoted prices for stocks may no longer reflect the reality of the market.  Dark pools disadvantage the small investor and do not inspire… Continue reading

Investors are in denial!

It is always the same.  Near the end of every bull market investors become convinced that the bull-run will never end: but of course it always does.   At this time when most world equity markets continue to go to new highs one cannot but reflect on human frailty when it comes to investing. This is a phenomenon of the crowd, where markets are a net result of the emotions of millions of investors, so bubbles and market collapses will always be a feature of the market place.

The following diagram is borrowed from Harry Dent, an economist with a philosophy based on demographic trends as the leading indicators of economic activity.  Dent’s diagram illustrates the naivety of investors when it comes to recognition of high risk in a market.Human modelAt the moment investors seem convinced that the bull market will continue despite some widely available key… Continue reading

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