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MARKET OUTLOOK - Global & Local


mminion

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battle of the big boys. !!

Can take many forms, and the bigger the market cap, the greater the gyrations. I have always thought tax-loss selling is over by now because that is domain of the smaller players. But big fundies/ instos, often they can window dress by selling winners to make the short term results look glamorous.

 

All you can do, eb, is watch the momentum, the licks of trades going through regularly as the bots nibble away at the other side?

 

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more from Don S

We're at the stage of the investment cycle where, in times past, many investment advisers would be quoting with enthusiasm a comment John Templeton had made many years ago:

 

The investor who says this time is different … has uttered among the four most costly words in the annals of investing.

 

Templeton was alerting investors to the dangers of the recurring view in markets that, because the big influences on investments are seen to have changed fundamentally, the future for investors will be very different from the past.

 

Some things are different, some are familiar

 

For young investors, I should point out John Templeton was an outstanding investor and fund manager—and a generous philanthropist—who did much in the 1950s to set up and popularise managed funds. In 1999, Money magazine called him arguably the greatest stock picker of the twentieth century.

 

And like Warren Buffett, John Templeton had studied at Yale under Benjamin Graham, the great teacher of value investing. His 16 rules for investment success, first outlined in 1933, also included his famous aphorism:

 

Bull markets are born of pessimism, grow on scepticism, mature on optimism and die on euphoria.

 

These days, many investors believe that COVID-19 has profoundly and permanently changed how investment markets work. In my view, this prevailing sentiment is over-stated: some things will be different while others will stay familiar.

 

COVID-19 is the worst pandemic in a century and the first to occur in our now highly globalised world. The initial panic was heightened when some major health institutes projected multiple millions of deaths, and the future course of the pandemic is highly uncertain.

 

By early March, COVID-19 was already bringing about the quickest and deepest economic downturn in history, and one which would worsen as lockdowns and social distancing requirements were introduced. Around the world, governments and central banks announced an unprecedented easing in fiscal and monetary policies.

 

In five weeks from 20 February, average share prices plunged more than a third from record highs. Between 23 March and mid-June, much of the heavy drop in share market indexes was recovered, mainly at times when rates of new infections from COVID-19 in the US and Europe were falling. Share markets have been volatile and unusually uneven by sectors and across individual stocks.

 

As well, the pandemic has worsened the already tense relations between the US and China, and contributed indirectly to social unrest and riots, notably in the US.

 

John Templeton frequently reminded investors that share markets have a long history of over-reacting, both in the tough times and when investors turn optimistic. And Howard Marks, deservedly now one of the most-quoted by Australian investors, recently reminded us:

 

… the most optimistic psychology is always applied when things are thought to be going well, compounding and exaggerating the positives, and the most depressed psychology is applied when things are going poorly, compounding the negatives. This guarantees that extreme highs and lows will always be the eventual result in cycles not the exception.

 

Three reasons it's not just the Fed

 

As well, the long-familiar view 'Don't fight the Fed' has had another airing. Certainly, the switch to a more positive sentiment in stock markets in late March owed a lot to the Fed's aggressive programme of buying bonds. The further uptick in stock markets during June was attributed to the Fed's direct purchases of a wider range of corporate debt including low-rated borrowings.

 

But investors seem to be exaggerating the role of the Fed. This time around, relatively little attention has been paid to at least three other influences that affect share prices.

 

One is the massive fiscal boosts most countries have implemented, which will likely be extended on only a slightly reduced scale into 2021.

 

Two is that the early indications that the hit on global GDP from COVID-19 will be milder than expected earlier provided there's not a second wave of infections in Europe and the US. High-frequency data suggest both the US and Australian economies have passed the low points of their slowdowns. Retail sales in May rose by 18% in the US and by 16% here.

 

Three, it appears to this elderly scribe that there is another familiar reprise. It's that this time any recovery in overall economic conditions won't be V-shaped but instead will be more configured like an L or a W. Similar comments were made during economic slumps in 2009, 2003, the second half of the 1990s, 1983, the 1970s and even in Australia's recession of 1961 (which at the time was said to mark the end of our post-war prosperity).

 

What to watch

 

Market sentiment will likely continue swinging widely in coming months. Gloom will re-appear whenever, for example:

...the pandemic gathers momentum...well-liked companies report unexpectedly weak earnings

...a cluster of reports is released with disappointing economic figures.

But share prices could well resume their bumpy recovery as investors recognise the global economic slump is somewhat milder than was feared and expected, particularly if the fiscal boosts are tapered rather than suddenly removed. Of course, share markets could move up noticeably if a vaccine is discovered.

 

Investors should reflect on John Templeton's advice when the prevailing market view is 'this time it's different' and also bear in mind another of his investment principles:

 

Don't panic. The time to sell is before the crash, not after.

 

Don Stammer

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https://www.afr.com/markets/equity-markets/...20200703-p558ly

 

 

Recent central bank actions mean capital markets are no longer "free", according to Bridgewater Associates's Ray Dalio, founder of the world's largest hedge fund.

 

"Today the economy and the markets are driven by the central banks and the coordination with the central government," said Dalio, speaking at the Bloomberg Global Asset Owners Forum on Thursday (Friday AEST).

 

As a result, "capital markets are not free markets allocating resources in traditional ways".

 

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kinda take the words out my mouth ..............

capitalism and economic 101 all can throw out of windows

 

doing less watch more from sideline might be wise...imho

 

 

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perhaps the Average American is a little smarter than the elites give them credit for.

According to the Feds latest statement, American Consumers have been paying down debt like there is no tomorrow (maybe for some of them there isn't).

Despite the Fed spending the US citizens future earnings propping up the main players on Wall street, the plebs have been knocking off those credit card debts, and not increasing the debts as they have in the past.

 

From Zero hedge

 

 

One of the striking changes to US consumer behavior spawned by the economic shutdowns from the coronavirus pandemic, was the unprecedented surge in personal savings which exploded to a record 32% of disposable personal income before easing modestly last month to 23.2%.

 

Now, thanks to the latest consumer credit data released by the Fed, we know what much of that saving went to: paying down debt .

according to the Fed's latest G.19 statement, in May, total consumer credit tumbled by another $18.28 billion, which while less than the record $68.8 billion crash in April, was far below expectations for $15 billion drop. Just like March and especially April, most of the credit repayment took place in revolving credit which shrank by another $24.3 billion in May (after declines of $21.5BN in March and $58.2BN in April) as US consumption literally went into reverse and instead of spending wildly as it does every other month, usually spending what it can't afford, US consumers repaid the most on their credit cards ever.n fact, over the past three months, US consumer have paid down a staggering $104 billion in credit card debt, bring the total outstanding credit card debt below below $1 trillion. Indicatively, the first time total credit card debt hit $1 trillion was back in December 2007, which means that the deleveraging of the past 3 months has sent US credit card balances to a 13 year low!Going back to the aggressive repayment of credit card debt, that is quite an ominous development for a US economy which is 70% reliant on stable - in many cases credit-card funded - consumer spending. Ominous, but not unexpected, because in a time of virtually no visibility on job prospects and how the pandemic is resolved, instead of doing what they do best, i.e. spend, Americans not only saved money but also went into credit paydown mode, crippling an economy where 70% of total output is a direct result of consumer spending; and needless to say, the tens of millions of Americans (depending on whether one believes the initial claims or the BLS jobs report) who have lost their jobs are not going to go out and spend like drunken sailors any time soon.

 

So how long until this shocking plunge in consumer spending reverses? The answer is that nobody knows, but until US consumers feel comfortable enough to once again "charge it", there can be no recovery.

 

What we find most surprising, however, is that in this day and age when the Fed has effectively institutionalized moral hazard and where failure is no longer punished as capitalism is now officially dead and zombie existence is rewarded, Americans still care enough about their credit rating to pay down their own debt even as corporations and the country go on a historic debt issuance spree which everyone knows will never be repaid.

 

Our advice to Americans with credit cards: go crazy, after all if everyone defaults - and gets a default - it's the same as nobody defaulting.

 

Mick

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https://www.sharecafe.com.au/2020/07/10/pri...-not-headlines/

 

 

Basis this and parabolic nature of many stocks, the inherent risk has built to be sufficiently high that a significant cash or short position is warranted. Add to this, the number of economically sensitive stocks that are testing support or breaking lower is noticeably increasing as well. Everything from IAG to BSL to Lend Lease to Transurban to Challenger all look troublesome. I know that when I find a lack of value and technically attractive setups, it is a time to be concerned.

 

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not agreeing all the things he says, but dose think he made some good points

 

be cautious is right thing to do i guess!!

 

 

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