Is Seasonality in Individual Stocks Based on Sound Evidence?
People often wonder whether it is actually possible to make profitable trades by taking advantage of seasonal trends in individual stocks. Most investors accept the idea that seasonal trends in commodities exist and are also quite open-minded with respect to recurring phenomena such as the year-end rally in stock indexes.
S&P 500 Index, 30-year seasonal chart – the year-end rally is highlighted. It has been observed in 24 of the past 30 years and its average gain far exceeded the average loss of the six losing years. Moreover, its average gain represents more than a quarter of the average annual return of the index. The existence of this pattern is widely acknowledged and there are reasonable explanations for it. Source: Seasonax
How to Save Money When Buying or Make More When Selling a Home
In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine. Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell.
The people who took this photograph probably want to sell… how do we know? Read on…
Photo credit: vantagedesigngroup.com
Moody’s & Reserve Bank of Australia Warn of Increasing Mortgage Arrears and Looming Apartment Defaults
Last Wednesday Moody’s reported that mortgage arrears continue to rise across Australia, particularly in the mining states of WA & NT:
Moody’s report notes that mortgage performance deteriorated in all eight Australian states and territories over the year to 31 May 2016, reaching 1.50% from 1.34% at 31 May 2015. And, in Western Australia, Tasmania and the Northern Territory, the 30+ delinquency rate climbed to the highest levels since Moody’s records began in 2005, while in South Australia, the delinquency rate was just 0.1 percentage point below the state’s record-high reached in April 2013.
Western Australia fared the worst in terms of mortgage performance over the year to 31 May 2016, with the 30+ delinquency rate increasing by 0.69 percentage points to 2.33%. This measure has been on the rise in the state since 2014, following the end of the mining boom. Relatively poorer economic and housing market conditions in Western Australia contributed to the historically high level of mortgage delinquencies.
In Australian regions dependent on the mining boom, delinquencies and defaults have risen sharply. It seems highly likely that the bust is eventually going to spread to the large Eastern and Southern coastal cities given the degree of overvaluation based on fundamental criteria
Australian property bubble on a scale like no other
Yesterday Citi produced a new index which pinned the Australian property bubble at 16 year highs:
Bubble trouble. Whether we label them bubbles, the Australian economy has experienced a series of developments that potentially could have the economy lurching from boom to bust and back. In recent years these have included:
- the record run up in commodity prices and subsequent correction;
- the associated boom in mining investment and current reversal;
- record low bond yields;
- the boom in housing construction, specifically apartments, that was spurred by the low interest rates.
Housing indicators in the bubble meter are at record highs but interest rates remain at record lows. Typically monetary policy is well into tightening mode at this stage in the housing cycle. A destabilizing housing burst (both in activity and prices) is a clear risk, particularly the longer the upswing runs.
Unknowable Degrees of Bubble Insanity
Back in February, we brought you an update on the truly insane real estate bubble in Australia (see: “Australia’s Housing Bubble – In the Grip of Insanity” for details) in the wake of Jonathan Tepper of Variant Perception reporting on an eye-opening fact-finding tour in Sydney.
This rotting shack in Sydney and its tiny plot of land sold for nearly $1 million in May of 2014 – more than two years ago. Since then, house prices in Australia have increased even further. Yes, it is an insane bubble, no doubt about it.
Photo credit: Attila Szilvasi
Medical vs. Financial Engineering
I broke my elbow a month ago, pretty badly as I was told. The surgeon screwed the pieces back together, using a steel alloy bracket and six screws. Two hours later, I left the hospital with no cast, a bandage (just to cover a very ugly scar), a prescription for painkillers and therapy started a week later.
This isn’t Ramsey’s elbow specifically, but a random post surgery elbow collection from the inter-webs, to illustrate how it’s done. The contraption in the lower right-hand corner is generally used to hold an elbow together after a complicated fracture. As you can see from the x-rays, this is then complemented with additional thingamabobs as required.
Image source: eortopedi.com
First, a few quick words on Brexit. Being the always positive and optimistic person that I am (big grin), I see one very positive outcome of Brexit – it is a revolution without bloodshed.
The peasants are getting restless…
Illustration via squadron.com
Is it Time to Buy Income-Producing Real Estate?
No, No, No. Much to the dismay of my real estate buddies, who are complaining about how high prices while watching the cash flow of their portfolios bursting at the seams from a few good years of rent increases, the answer is no.
REIT cap rates (as of mid 2015, they have declined further since then)
A Sudden Turn for the Worse
Freddie Mac posted a loss of $354 million this quarter, versus a $2.16 billion gain the previous quarter. Fannie Mae did slightly better with net earnings of $1.1 billion, which were still substantially down from $2.5 billion the previous quarter though.
Freddie Mac HQ – a strange time for posting losses
Photo via nytstyle.com
Tide of Money
BALTIMORE – Another indecisive week in the markets. China did not blow up. Energy company debt did not melt down. And investors did not panic in the face of a slowing world economy, falling corporate earnings, and central bank absurdities.
This morning, all is well. But nothing fails like success. Throw a lot of money at any market, and you are asking for trouble. Today, readers are urged to check their real estate holdings.
Vancouver at dusk…
Photo via fourseasons.com
A Mountain of Debt – But at Least We Have an iPhone
Whenever I encounter someone from the younger generation (40 years or younger), I make it a point to apologize for leaving them a country in far worse shape than the one I enjoyed. Surprisingly, none of them believe that apologies are necessary, as most have no clue what I am talking about.
Most read in the last 20 days:
- Strange Moves in Gold, Federal Reserve Policy and Fundamentals
Counterintuitive Moves Something odd happened late in the day in Wednesday's trading session, which prompted a number of people to mail in comments or ask a question or two. Since we have discussed this issue previously, we decided this was a good opportunity to briefly elaborate on the topic again in these pages. A strong ADP jobs report for March was released on Wednesday, and the gold price dutifully declined ahead of it already, while the stock market surged concurrently. Later in...
- Gold – An Overview of Macroeconomic Price Drivers
Fundamental Analysis of Gold As we often point out in these pages, even though gold is currently not the generally used medium of exchange, its monetary characteristics continue to be the main basis for its valuation. Thus, analysis of the gold market requires a different approach from that employed in the analysis of industrial commodities (or more generally, goods that are primarily bought and sold for their use value). Gold's extremely high stock-to-flow ratio and the main source of...
- Doomsday Device
Disappearing Credit All across the banking world – from commercial loans to leases and real estate – credit is collapsing. Ambrose Evans-Pritchard writing for British newspaper The Telegraph: Credit strategists are increasingly disturbed by a sudden and rare contraction of U.S. bank lending, fearing a synchronized slowdown in the U.S. and China this year that could catch euphoric markets badly off guard. Data from the U.S. Federal Reserve shows that the $2 trillion market...
- The Balance of Gold and Silver – Precious Metals Supply and Demand
Orders of Preference Last week, we discussed the growing stress in the credit markets. We noted this is a reason to buy gold, and likely the reason why gold buying has ticked up since just before Christmas. Many people live in countries where another paper scrip is declared to be money — to picture the absurdity, just imagine a king declaring that the tide must roll back and not get his feet wet when his throne is placed on the beach — not real money like the US...
- The American Empire and Economic Collapse
Dashed Hopes Despite widespread optimism among libertarians, classical liberals, non-interventionists, progressive peaceniks and everybody else opposed to the US Empire that some of its murderous reins may finally be pulled in with the election of Donald Trump, it appears that these hopes have now been dashed. Liberty... some of it is still above water, but definitely not as much as there could or should be.* While the hope for a less meddlesome US foreign policy...
- Pulling Levers to Steer the Machine
Ticks on a Dog A brief comment on Fed chief Janet Yellen’s revealing speech at the University of Michigan. Bloomberg: “Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.” […] “The appropriate stance of policy now is closer to, let me call it...
- Credit Contraction Episodes
Approaching a Tipping Point Taking the path of least resistance doesn’t always lead to places worth going. In fact, it often leads to places that are better to avoid. Repeatedly skipping work to sleep in and living off credit cards will eventually lead to the poorhouse. Sometimes the path of least resistance turns out to be problematic The same holds true for monetary policy. In particular, cheap credit policies that favor short-term expediency have the...
- The Empire Needs an Emperor
Unknown (sort of) Head of State BUENOS AIRES – Type Swiss President “Doris Leuthard” into Google. You will get about 450,000 results. Do the same with Donald Trump, and the number is closer to 396 million. That’s 87,900% more references. The world’s press is as fascinated by President Trump as it is indifferent to President Leuthard. Doris Leuthard, President and energy minister of Switzerland. She has won her second presidential term this year. It basically...
- Mea Culpa – Precious Metals Supply and Demand
Input Data Errors Dear Readers, I owe you an apology. I made a mistake. I am writing this letter in the first person, because I made the mistake. Let me explain what happened. The wrong stuff went into the funnel in the upper left-hand corner... I wrote software to calculate the gold basis and co-basis (and of course silver too). The app does not just calculate the near contract. It calculates the basis for many contracts out in the distance, so I can see the...
- The Cost of a Trump Presidency
Opportunity Cost Rears its Head Last Thursday’s wanton attack on a Syrian air field by the US and its bellicose actions toward North Korea have brought the real cost of candidate Trump’s landslide victory last November to the forefront. It didn't take long for Donald Trump to drop his non-interventionist mask. The decision was likely driven by Machiavellian considerations with respect to domestic conditions, but that doesn't make it any better. Unlike...
- India – Is Kashmir Gone?
Everything Gets Worse (Part XII) - Pakistan vs. India After 70 years of so-called independence, one has to be a professional victim not to look within oneself for the reasons for starvation, unnatural deaths, utter backwardness, drudgery, disease, and misery in India. Intellectual capital accumulated in the West over the last 2,500 years — available for free in real-time via the internet — can be downloaded by a passionate learner. In the age of modern technology, another mostly...
- French Election – Bad Dream Intrusion
The “Nightmare Option” The French presidential election was temporarily relegated to the back-pages following the US strike on Syria, but a few days ago, the Economist Magazine returned to the topic, noting that a potential “nightmare option” has suddenly come into view. In recent months certainty had increased that once the election moved into its second round, it would be plain sailing for whichever establishment candidate Ms. Le Pen was going to face. That certainty has been...