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:
- Speculative Blow-Offs in Stock Markets – Part 1
Defying Expectations Why is the stock market seemingly so utterly oblivious to the potential dangers and in some respects quite obvious fundamental problems the global economy faces? Why in particular does this happen at a time when valuations are already extremely stretched? Questions along these lines are raised increasingly often by our correspondents lately. One could be smug about it and say “it's all technical”, but there is more to it than that. It may not be rocket science, but...
- Speculative Blow-Offs in Stock Markets – Part 2
Blow-Off Pattern Recognition As noted in Part 1, historically, blow-patterns in stock markets share many characteristics. One of them is a shifting monetary backdrop, which becomes more hostile just as prices begin to rise at an accelerated pace, the other is the psychological backdrop to the move, which entails growing pressure on the remaining skeptics and helps investors to rationalize their exposure to overvalued markets. In addition to this, the chart patterns of stock indexes...
- India: Still the Fastest Growing Large Economy?
India’s Currency Ban - Part X It has now been four months since Narendra Modi declared about 86% of monetary value of currency illegal. Linked here is the last in my series of updates, which was written soon after the deadline to deposit the demonetized currency. Most of the banned currency was eventually deposited, making a mockery of Modi, who had claimed that unaccounted money would not reach the banks. Perhaps 3% of the cash never reached the banks. A cunning plan...
- Gold Sector: Positioning and Sentiment
A Case of Botched Timing, But... When last we wrote about the gold sector in mid February, we discussed historical patterns in the HUI following breaches of its 200-day moving average from below. Given that we expected such a breach to occur relatively soon, the post turned out to be rather ill-timed. Luckily we always advise readers that we are not exactly Nostradamus (occasionally our timing is a bit better). Below is a chart of the HUI Index depicting the action since the January...
- They're Worried You Might Buy Bitcoin or Gold - Precious Metals Supply and Demand
Bitcoin Mania The price of gold has been rising, but perhaps not enough to suit the hot money. Meanwhile, the price of Bitcoin has shot up even faster. From $412, one year ago, to $1290 on Friday, it has gained over 200% (and, unlike gold, we can say that Bitcoin went up — it’s a speculative asset that goes up and down with no particular limit). Bitcoins are a lot less tangible than this picture implies, but they are getting a lot of love recently...
- Welcome to Totalitarian America, President Trump!
Trump vs. the Deep State If there had been any doubt that the land of the free and home of the brave is now a totalitarian society, the revelations that its Chief Executive Officer has been spied upon while campaigning for that office and during his brief tenure as president should now be allayed. Image adapted from the cover of “Deep State #5” - depicting an assassin from the future President Trump joins the very crowded list of opponents of the American...
- The Long Run Economics of Debt Based Stimulus
Onward vs. Upward Something both unwanted and unexpected has tormented western economies in the 21st century. Gross domestic product (GDP) has moderated onward while government debt has spiked upward. Orthodox economists continue to be flummoxed by what has transpired. What happened to the miracle? The Keynesian wet dream of an unfettered fiat debt money system has been realized, and debt has been duly expanded at every opportunity. Although the fat lady has so far only...
- Boosting Stock Market Returns With A Simple Trick
Systematic Trading Based on Statistics Trading methods based on statistics represent an unusual approach for many investors. Evaluation of a security's fundamental merits is not of concern, even though it can of course be done additionally. Rather, the only important criterion consists of typical price patterns determined by statistical examination of past trends. Fundamental considerations such as the valuation of stocks are not really relevant to the statistics-based trading...
- Searching for Truth
Heresy or Truth? RANCHO SANTANA, NICARAGUA – In the fifth century, Christian scholars counted 88 different heresies. Arianism. Eutychianism. Nestorianism. If there was a way to “offend” God, they had a name for it. One group of “heretics” argued that there was no such thing as “original sin.” Another denied the trinity. And another claimed Jesus was not divine. Which one had the truth? Depiction of the first Council of Ephesus in 431 AD, convened by Emperor...
- Why the 21st Century Sucks - Turtles All the Way Down
A Truly Sucky Century BALTIMORE – What an awful century! Worst we’ve ever seen. Household incomes are down. Employment is down, with 7 million people in the U.S. of working age without jobs. Productivity growth is down. GDP growth is down – to only about 0.5% per capita last year. Even life expectancies are down. Drug overdoses are up. Suicides are up. One out of every eight children lives in a family getting food stamps. One of out every eight adults takes psychoactive drugs...
- Gold and the Fed's Looming Rate Hike in March
Long Term Technical Backdrop Constructive After a challenging Q4 in 2016 in the context of rising bond yields and a stronger US dollar, gold seems to be getting its shine back in Q1. The technical picture is beginning to look a little more constructive and the “reflation trade”, spurred on further by expectations of higher infrastructure spending and tax cuts in the US, has thus far also benefited gold. From a technical perspective, there are indications that the low at $1045.40,...
- India: The next Pakistan?
India’s Rapid Degradation This is Part XI of a series of articles (the most recent of which is linked here) in which I have provided regular updates on what started as the demonetization of 86% of India's currency. The story of demonetization and the ensuing developments were merely a vehicle for me to explore Indian institutions, culture and society. The Modimobile is making the rounds amid a flower shower. [PT] Photo credit: PTI Photo Tribal cultures face...