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Feb 04, 2016 | Post by: Roman Chuyan, CFA Comments Off on Extreme Investor Fear Is Positive For The Market

Extreme Investor Fear Is Positive For The Market

Investor sentiment reached extreme levels of fear amid the January market debacle, according to the American Association of Individual Investors (AAII). The ratio of bearish to bullish investors exceeded 200% (two bearish investors for every one bullish) in January, and still stood at 187% at month-end. This is a level of

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Jan 25, 2016 | Post by: Roman Chuyan, CFA Comments Off on Stocks Remain Overvalued

Stocks Remain Overvalued

The 7% drop in the S&P 500 this month was significant by some measures. For example, investor sentiment moved to levels of bearishness rarely reached since the financial crisis: AAII’s individual investor bear/bull ratio stands above 200%, an extreme level of negativity rarely seen outside of 2008-09. But, how much

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Jan 11, 2016 | Post by: Roman Chuyan, CFA Comments Off on Simplistic Trend-Following Will Push US Stocks Lower

Simplistic Trend-Following Will Push US Stocks Lower

Trend-following is one of most-favored methods used to time the market – after all, “a trend is your friend.” Investors who use trend-following watch for indicators such as the popular 50-day moving average crossing above (a bullish signal) or below (bearish) the 200-day MA. This indicator seems to have worked in the

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Dec 21, 2015 | Post by: Roman Chuyan, CFA Comments Off on HY Debacle: An Update

HY Debacle: An Update

The high-yield bond debacle has continued since I covered it here. To recap briefly, “the current HY prices and spreads, 6.4% for the HY index overall and 4.08% for BB, suggest considerable stress that typically occurs during a credit contraction.” The HY bond market deteriorated further since then: The HY

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Dec 03, 2015 | Post by: Roman Chuyan, CFA Comments Off on The Great Credit-Equity Divergence

The Great Credit-Equity Divergence

“– Now, here, you see, it takes all the running you can do, to keep in the same place.” The Red Queen in: Lewis Carroll, Through the Looking-Glass I’d like to highlight the state of the high-yield bond market (or “junk bonds”), defined as bonds rated Ba1/BB+ or lower. Bond markets in

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Nov 09, 2015 | Post by: Roman Chuyan, CFA Comments Off on How Long Can Equities Ignore Earnings?

How Long Can Equities Ignore Earnings?

The price-to-earning (P/E) ratio is the most widely used gauge of how expensive or cheap the market is. As of Nov 6, the S&P 500 was trading at 19.7 times its trailing 12-month earnings. Yes, 19.7, not 16.5 or so that some people use based on expected forward earnings that are notoriously

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Oct 20, 2015 | Post by: Roman Chuyan, CFA Comments Off on Q3 Earnings Are Declining – Again

Q3 Earnings Are Declining – Again

The price-to-earning ratio is the most widely used gage of stock market valuation: how expensive or cheap the market is relative to earnings. The S&P 500 is currently trading at around 18.6 times its trailing 12-month earnings. At model Capital, we find that historically, the trailing P/E Ratio has a significant

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Aug 31, 2015 | Post by: Roman Chuyan, CFA Comments Off on Short-Term Rhyme

Short-Term Rhyme

“No occurrence is sole and solitary, but is merely a repetition of a thing which has happened before, and perhaps often.”  – Mark Twain, The Jumping Frog Investors were shaken by a global equity plunge in the past two weeks. Emerging markets were already falling this year, due to plunging commodity prices and

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Aug 18, 2015 | Post by: Roman Chuyan, CFA Comments Off on How Housing Will Impact the Economy

How Housing Will Impact the Economy

July Housing Starts were reported today above expectations, at 1.206 annual rate, the highest in 8 years. It is a strong number. To understand its expected impact on the overall economy going forward, let’s take a longer-term view. In the chart, I show Housing Starts, a measure of U.S. home building

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Aug 12, 2015 | Post by: Roman Chuyan, CFA Comments Off on Should you be concerned about U.S. equities?

Should you be concerned about U.S. equities?

Anxiety is running high as financial media keep focusing on the Fed preparing to raise rates in September, on China, and on the “death cross” in some technical charts. Understandably, advisors are concerned as well – we answered several questions from our advisor clients in the past week. At times

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