HI Financial Services Commentary 10-31-2017
You Tube Link: https://youtu.be/lr8qjNqBcDQ
What do you want to talk about today?
Why we do what we do!!!
Market Averages on Monday
What happening this week and why?
PCE Prices .3 vs est .4
Core PCE .1 vs est .1
Personal Income .4 vs est .3
Personal Spending 1.0 vs est .8
Employment cost index .7 vs est .6
Chicago PMI 66.2 vs est 62.0
Consumer Confidence 125.9 vs est 121.5
Case Shiller 5.9 vs est 5.9
Earnings rules the trend right now
Where will our markets end this week?
DJIA – Overbought bullish
SPX – Bullish
COMP – Bullish overbought
Where Will the SPX end November 2017?
What is on tap for the rest of the week?=
Tues: AET, AKS, ARCH, BP, CMI, K, MA, PFE, DDD, EA, X, PZZA, DVN
Wed: EL, GRWN, TAP, CTL, CTRP, CF, GPRO, MRO, SHAK, TSLA, RIG
Thur: RL, AES, YUM, LOCO, FLR, FOSL, P, WU, SBUX
Tues: Employment Cost Index, Case Shiller, Consumer Confidence, Chicago PMI
Wed: MBA, ISM Index, Construction Spending, FOMC Rate decision, Auto, Truck
Thur: Initial, Continuing Claims, Challenger Job Cuts, Productivity
Fri: Average Workweek, Non-Farm Payroll, Private Payroll, Unemployment Rate, Hourly Earrings, Factory Orders, Trade Balance, ISM Services.
How I am looking to trade?
AAPL 11/02 AMC
AOBC 11/02 AMC
CLX 11/1 BMO
DHI 11/09 BMO
DIS 11/9 AMC
FB 11/01 AMC
www.myhurleyinvestment.com = Blogsite
The S&P is about to do something it hasn’t done since Lyndon Johnson was in the White House
Published 3:37 PM ET Wed, 25 Oct 2017 Updated 7:08 AM ET Thu, 26 Oct 2017
It’s been a record year for records, and this month is no exception.
Despite a spike in volatility on Wednesday, the average daily market range in October has skidded to its most narrow since August 1964, when Lyndon B. Johnson was president, the Dow Jones industrial average was trading a little more than 800 and the common measure of implied volatility, the CBOE Volatility Index, or VIX, was still decades away from its creation.
This historically calm market, according to data from Ryan Detrick, senior market strategist at LPL Financial, is particularly unusual for October.
“Everyone knows that October historically is one of the more volatile months. Well as of right now, the average daily change for the S&P 500during the normally volatile month of October is only 0.22 percent,” Detrick said Tuesday on CNBC’s “Trading Nation.”
That range is its tiniest since August 1964, which was “probably the least volatile year ever. 2017, with a little bit of time to go, is right there with it.”
Detrick acknowledged the concern that volatility may be mean-reverting, and will return to the market eventually simply given the school of thought that market turbulence tends to return after periods without. But at this point, Detrick said, what is supposed to be a turbulent season is turning out to be just as calm as the rest of the year.
Furthermore, stocks will likely continue their climb higher even if volatility penetrates the market once again, Detrick said. He expects the economy to remain strong in 2018, pointing specifically to solid manufacturing data and a global resurgence in earnings.
“We could see higher volatility in the future, but this could also be accompanied with higher equity prices. Again, that has happened before and it will likely happen again,” he wrote Tuesday in an email to CNBC.
Equities were lower Wednesday, on pace for their worst session since early September. The VIX rose and neared its highest level since Sept. 8, just below the 12 mark.
David Einhorn says value investing will make a comeback, just like it did after dot-com bubble
- Value investing is “due at some point for a significant recovery,” David Einhorn told CNBC,
- On the strategy’s recent ineffectiveness: “The last time it happened was around 1999 when everyone was talking about eyeballs as the new paradigm for investing,” he says. “That didn’t end very well” for momentum investors.
Published 3:10 PM ET Wed, 25 Oct 2017 Updated 4:16 PM ET Wed, 25 Oct 2017CNBC.com
Billionaire hedge fund manager David Einhorn said value investing will make a comeback eventually and its ineffectiveness right now is just a “temporary phenomenon.”
“The last time it happened was around 1999 when everyone was talking about eyeballs as the new paradigm for investing,” Einhorn said Wednesday on CNBC’s “Closing Bell,” referring to the dot-com bubble run in growth stocks. “That didn’t end very well” for momentum investors.
Value investing is “due at some point for a significant recovery,” he said. “When it reverts, it tends to revert pretty sharply. And I think it will do so.”
Einhorn is optimistic about tax reform and the potential impact it will have on his investments.
“I actually think tax reform has a much better chance of passing than the health care package did,” he said. “Companies we own in our portfolio tend to be profitable, so they tend to pay taxes. So lower corporate tax rates should really benefit them.”
On the flip side, he added the stocks he is currently betting against don’t generate significant profits, so tax reform will not help them much.
“We’re kind of hoping tax reform will pass, and we expect that will be positive” for the firm’s returns, the manager said.
Einhorn wrote about the recent underperformance of his main investing strategy in a letter to clients Tuesday obtained by CNBC.
“The market remains very challenging for value investing strategies, as growth stocks have continued to outperform value stocks,” he wrote in the letter. “The persistence of this dynamic leads to questions regarding whether value investing is a viable strategy.”
His hedge fund firm Greenlight Capital returned 6.2 percent in the third quarter, bringing its performance for 2017 through September to 3.3 percent. In comparison the S&P 500 rose 14.2 percent in the same year-to-date time period, according to the investor letter.
The investor wasn’t sure when value investing will outperform again, he told his clients.
“The knee-jerk instinct is to respond that when a proven strategy is so exceedingly out of favor that its viability is questioned, the cycle must be about to turn around. Unfortunately, we lack such clarity,” he wrote.
“After years of running into the wind, we are left with no sense stronger than, ‘it will turn when it turns.'”
The stock market’s valuation is back to the point where Greenspan warned of ‘irrational exuberance’
- The Shiller CAPE ratio is at about the level as when then-Fed Chairman Alan Greenspan gave his widely cited “irrational exuberance” speech in 1996.
- The only time valuations were higher was around the time of the stock market crash and beginning of the Great Depression in 1929 and during the dot-com boom in the late 1990s.
Published 9 Hours Ago Updated 7 Hours AgoCNBC.com
As the stock market keeps moving higher, valuations have reached an ominous level that comes appropriately enough on Halloween.
The Shiller CAPE ratio, which compares stock prices to their earnings over a 10-year period, is at 31.43, about where it was when then-Fed Chairman Alan Greenspan gave his widely cited “irrational exuberance” speech in December 1996, according to calculations by Nomura.
The only time valuations were higher was around the time of the stock market crash and beginning of the Great Depression in 1929 and during the dot-com boom in the late 1990s, according to the model formulated by Nobel Prize-winning economist Robert Shiller.
The Shiller valuation level, whose formal name is the Cyclically Adjusted Price-Earnings Ratio, has captured considerable attention lately as the bull market continues. The S&P 500 is up about 15 percent this year at a time when market veterans have been expecting returns to slow.
Using a more conventional measure of valuation, comparing the S&P 500 price to forward 12-month earnings, the market is trading at a 17.9 multiple. That compares with the five-year average of 15.6 and the 10-year average of 14.1, according to FactSet.
“The theory (Shiller) put forward claimed that markets can be driven to irrationally high levels by self-reinforcing beliefs among market participants. We are still far from the peaks in the dot.com boom When will the second horn peak?” Nomura said in a note.
Shiller himself has been reluctant to push the CAPE level, recently telling CNBC that while he believes the U.S. market is expensive, he wouldn’t encourage investors to sell aggressively. Instead, he believes they should diversify into global markets, particularly Russia.