DH still doesn't understand (after all these years) the myth of the money on the sidelines. At all times, stocks are owned by someone. When institutions sell, someone has to buy what they are selling. The issue is at what price is the selling done. The institutions could sell (or sell overvalued names) and wait to get back in when the market is much lower (after all the margin calls are settled), which is what they did in 2009. But that doesn't mean that the market has to stay at current high levels. No one is arguing that the market will stay down forever. The argument is that it will fall until it reaches a better value (or when the Fed, like the Japanese central bank, comes in to buy up stocks in order to keep confidence up).
As for inflows into 401k's, DH must not understand demographics and the tidal wave of money that is set to come out of 401ks for the baby boomers. As JK pointed out yesterday, the younger generation is underemployed and has less participation in 401k's and pensions, yet the younger generation has higher debt costs for school and other costs like housing. The older generation is living longer and spending their money on assisted living and medical costs. The younger generation may inherit wealth from their parents or grandparents (if they don't spend it first) and maybe that money finds its way back into the market.
Again, if DH was so confident in the market, then why isn't he 100% invested, and the reason is because he knows it is overvalued and the risk of it declining is high and growing. He says it hit a double bottom in March, and yet he didn't go 100% fully invested then. Why not? Sometimes people like to talk a good game, but when it comes to betting with their own chips, they are more risk averse than how they talk.
I love getting to point out the mistakes DH keeps making in his arguments. First, DH doesn't seem to realize that it is an entirely new game. This isn't the same game that Warren Buffet is used to playing. Warren never had to deal with negative interest rates or HFT's or computer algos until recently. If the only thing that matters is corporate earnings, then why is the market up when earnings have declined for 3 quarters in a row and the p/e is 23 and near all-time highs? Why does the market go up when the central banks issue some statement about "doing what it takes" on the same date that earnings or economic news is negative? DH speaks of the long term but apparently he doesn't remember the 1930's. Sure we came out of that with a little war or two, but there was a decade of stock market underperformance.
DH does acknowledge the problem with the national debt, but he's confident it will be dealt with. The way it is going to be dealt with is the way Japan is dealing with theirs, which is to have the central bank buy up all of the ETFs and stocks to keep the market up and hope that they eventually can generate enough inflation to inflate the debt away. Still hasn't worked, but there are those, like Krugman, who think we just need to do a little more.
The proof is in the pudding. The Fed ended QE (except for the reinvestment of principal) in late late 2014 and shortly after that the US stock market went sideways while corporate earnings went down. Where's the correlation with earnings again?
Finally, if DH was so confident, why was so much of his money in TIPs and cash. He likes to talk big that he fully believed in the stock market recovery, then why didn't he put 100% in the S&P, or even triple positive ETFs.
I have to laugh as last year I told Sarge to sell Apple at $130 and he just got mad at me at put me on ignore for just trying to point out that the watch and AppleTV were not going to save it from peaking earnings and peak optimism.
Oftentimes we are the most optimistic on the stocks that we own, which is why a healthy debate is good.
Gambler, I wouldn't say I was totally wrong on NYMT. I did warn about the risk of a divy cut in Q1and that did not happen, so on that count I was wrong. But they did cut the divy last year and the stock is down from the $7-8 level where many own it and are stuck with losses. As Bob notes below, they did miss earnings.
Many stocks are up from the March lows and many have good gains, including NYMT which is up from $4. A good call for those who made it. So are you booking those gains here or are you adding to your recent "winners"? It's funny how some people don't count paper losses, but their paper gains are real.
As for the holdings of BDCL, it is a ETN that tracks the return of a BDC index, which I think was sponsored by Wells Fargo. I think you can find the components of the index on the Wells Fargo (not the fund company section, not the bank) website.
Helmet, my muni closed end funds are up today as the 10 year Treasury rate declines. Also the utilities are not down much. They seemed to have found support after declining previously.
One declining day does not make a market decline or bear market (not just yet) but if sell off should start to accelerate as support gives way, even the strongest stocks will eventually get hit (although maybe not as much).
Looks like the BDCs are starting to roll over too.
What's that saying about the escalator up and the elevator down?
Last week AVACF reported earnings and cut their divy from 65 cents to 30 cents. The stock, which has declined from over $14 in December to $7, bounced up a bit after the report and some posters thought that it was a good time to buy. Maybe it was a bit too early as the stock is now $6.10 and looks to be going lower. Spot prices have turned up a little bit from recent lows of $13.9k per day to 15.9 but the average in Q1 was 38k and the price in the first month of Q2 (April) ranged from $21k to 13k. It's going to take one heckuva increase to get that average back to the Q1 average.
The market always moves in anticipation of a change in fundamentals and the stock price of AVACF will move in anticipation of a change in spot rates, but if it doesn't look like spot rates will increase and hold, that move may be down.
JK, DH isn't really a good student of market history. He mentions he can't see a potential cause that could result in a market decline. China debt bubble or currency moves? Japan currency moves. Terrorist incidents? Britain exit from the EU. War? The mideast. History shows that there are always events that light the match to a market decline and you don't have to have a financial crisis like 2008. Remember Long Term Capital?
If the US economy continues to slow, Treasuries rates could decline from 2% to 1% or lower, which decline would provide more than the 2% dividend yield on the S&P. With the rest of the world going to negative rates, is it really so difficult to imagine US rates declining to 1%. DH has been peddling this "no other place to go" rationale for years, which is akin to the "real estate always goes up" view that was used to justify the housing bubble. History shows that when you get overvaluation plus earnings declines plus deleveraging, you get a stock market decline. Could it be different THIS time? Every time that argument is made, those who made it end up looking like fools.
The first level to watch is the 20 dma at 2075 which has been broken. Next up is the 50 dma at 2032 and then the 200 dma at 2014. Of course, being that it is the end of the month, there are all sorts of other weekly and monthly levels.
Well one can argue whether they did the right move finally. They could have suspended the distribution last year in the first quarter when several other MLPs started to cut and used the savings to buy back even more bonds, but noooooo, Walker wanted his stupid distribution to help offset his ill timed purchase of millions of shares at $24. Further, they could have passed on buying that acquisition last year (which they had to write down within 6 months) and used all of that money to buy debt.
If they did those two things, they might not have had any debt.
Finally, these supposed experts on supply and demand of oil and nat gas did not hedge appropriately, which left them very exposed. Walker is an idiot.
And I didn't even mention the failure to close the Utica sale.
We'll see what AMZN's beat does for the market tomorrow, but could today's action in the market -- down at first after the Japan news, followed by recovery, followed by selloff -- mean a reversal of some sorts is at hand.
I learned my lesson with TVIX and won't be using that to bet on a reversal and probably won't do anything until HYG starts to break down.
JK, I have read, bull markets don't tend to turn on a dime because on the way up a lot of support has been built up, which would have to be broken and then have retests fail. The norm is to have a rolling over process. Sometimes there is a big reversal day in which the market goes up big and then reverses during the day and that can kick off a decline, but the decline can take time. It's always easier in retrospect to call when the top occurred or when the bottom was put in.
DH has no stats to back up his assertion that big money is staying in the market. In fact, the stats are the opposite showing that big money has been sellers for over 12 weeks running. The HFT algos and the central banks can keep the averages elevated for as long as they have ink to print.
As for alternatives to US stocks, big money can go where the best risk reward is. DH thinks the choice is just between the US stocks and that make up the Dow and the S&P and cash, but there are many more options.
Sure we have a 5-7% pullback in earnings (that wasn't projected) so do you think that fiduciaries are going to keep investing at a market multiple of 23 if there are no signs that earnings are going to rebound anytime soon?
Sort of reminds me of the people who said housing prices have to keep going up because people have to live somewhere. We all know how that turned out (in the short run).
Gambler, while I project a "doom and gloom" outlook, I know better to be all long or all short, especially with the Fed doing everything to keep equities up. The question is do you feel comfortable buying equities trading at all time highs when earnings and growth are negative. For every DLNG, there's a CPLP. For every FB, there's Apple.
This is starting to look like a classic blow off top phase and we don't know how high it will go, but we do know from history that markets always have selloffs.
When everyone is long and bragging about all the paper profits they have, that signals complacency. At some point, someone has to sell, even if they are just going to rotate into something that has not participated in the rally. So it becomes a game of musical chairs and everyone thinks some other guy is going to be the one without a chair. Either that or they go looking for a lotto ticket and end up with something like CPLP that doesn't pan out.
Kudos to you for your winning picks. The question is are you going to book those paper gains and then where are you going to go?
But NRZ has put together a nice run, has cleared the 200 dma and former stubborn resistance in the low $12's. Unfortunately, the RSI is at 72 and there are resistance levels to be tested from last summer when it started its stair step decline.
Bob, I would interpret that differently. To me that means that all the shorts have covered, meaning that there's less buying demand available to push MLPs much higher. On the opposite side, shorts will be waiting to establish new positions if MLPs run into technical resistance. I think Ed used to comment on the seasonal nature of MLPs and I think he used to say that they would decline after the May divies were paid. Of course, if oil keeps going up, then MLPs should follow.
Tom McClellan mentioned that about the VXX yesterday. I think we get the GDP number tomorrow which probably comes in under 1%. But none of this matters much as long as the algos are buying and the Fed has got the market's back. HYG is still holding up and is actually up about 5% in April alone after a more than 10% move from the bottom. Until HYG cracks, the market is not going down.