FEB 9 18 SIT EC y POL
ND denounce Global-neoliberal debacle y propone State-Social
+ Capit-compet in Econ
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they
documented with graphics
FORECASTING THE NEXT BIG RECESSION
Our new
analytical tools point to a high probability that the next recession will start
in late 2019 to mid-2020.
MY INTRODUCTION before you read this
important article:
Level of volatility has not been
addressed as particular important factor.
However, chart 1 points to the issue volatility indirectly.
Hugo Adan. Feb 9-18
OPEN
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IMPOSIBLE TO STOP
VOLATILITY SWINGS THIS WEEK:
Remember
January's "Goldilocks" market?
See Chart:
WELL IT'S
GONE...
The Short-Vol trade implosion has now spread to the
rest of the world and all other asset classes.
China had one of its ugliest weeks ever...
See Chart:
But US equities were a bloodbath...even with the
sudden mysterious buyer of last resort who panic-bid stocks up (after the
S&P broke below its 200DMA)...
We've seen this pattern before.
Dow futures were lifted 1000 points off the lows
today...
See Chart:
Stocks
were on target for their worst week for US equities since Lehman in Oct 2008...
(worst 2-week drop since Feb 2009)
See chart
But after
the S&P hit its 200DMA, everything bounced miraculously...
See Chart:
All major indices
remain red in 2018...
The Dow saw well
over 12,000 points worth of intraday swings this week...
This
the worst swing in momentum... ever...
See chart:
And
the biggest swing in equity flows ever...record inflow 2 weeks ago to
record outflow from equity funds this week
See chart:
VIX was
notably higher on the week...
Risk started to
spread to other asset classes too...
See chart
This is
the worst 10-day drop for aggregate bond and stocks returns since Feb 2009...
See Chart:
Credit markets
started to scream today as spreads spiked...
Flashing
another big red flag that this is far from over...
See chart
Lots of chatter about
how "bonds are blowing out" and driving equities lower... well no!
only the 30Y is wider on the week! and the short-end is well lower in yield on
the week...
The key
that is crushing stocks is the 2.85% region...
See Chart
The Dollar Index was
up most in 2 months this week, hovering at pre-Mnuchin
Massacre levels...
See chart:
Cryptos actually
rebounded notably in the second half of the week after the US regulatory
hearings went better than expected, with Litecoin leading...
Interestingly
Bitcoin and VIX decoupled as the stress remained in equity markets...
See chart
https://www.zerohedge.com/sites/default/files/inline-images/2018-02-09_12-32-14.jpg?itok=fM14uEqb
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How can central banks "retrain"
participants while maintaining their extreme policies of stimulus?
Human
habituate very easily to new circumstances, even extreme ones. What we accept as "normal" now may have
been considered bizarre, extreme or unstable a few short years ago.
Three
economic examples come to mind:
1.
Near-zero interest rates. If someone
had announced to a room of economists and financial journalists in 2006 that
interest rates would be near-zero for the foreseeable future, few would have
considered it possible or healthy. Yet now the Federal Reserve and other
central banks have kept interest rates/bond yields near-zero for almost nine
years.
The Fed has raised rates a mere .75%
in three cautious baby-steps, clearly fearful of collapsing the
"recovery."
2. Massive
money-creation hasn't generated inflation. In classic economics, massive
money-printing (injecting trillions of dollars, yuan, yen and euros into the
financial system) would be expected to spark inflation.
As many of us have observed, "official"
inflation of less than 2% does not align with "real-world"
inflation in big-ticket items such as rent, healthcare and college
tuition/fees. A more realistic inflation rate is 7%-8% annually, especially in
the higher-cost regions of the US.
3. Stock
markets are soaring but sales and profits are stagnant. Everyone knows
central banks are still pumping billions of dollars per month into the
financial system, and this (coupled with central
bank purchases of stocks and bonds) has been pushing
stocks sharply higher for the past 9 years, with only a few hiccups
along the way.
All of
these extremes generate mal-investment, diminishing returns and perverse
incentives for ramping up unproductive
and risky speculation, leverage and debt. Yet the central banks have trapped
themselves in this risky trajectory because they've pushed the accelerator to
the floorboard for 9 years. Any extreme held in place for 9 years has long
slipped from "temporary" to permanent.
Participants have now habituated fully to central banks extreme
stimulus of financial markets, and in a sense they've forgotten how to price
assets based on real-world private-sector measures.
How can central banks
"retrain" participants while maintaining their extreme policies of
stimulus? The only possible answer is: they can't.
See Chart:
In the source-art below
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"...when it seems to good to be true... it probably is..."
What is the Sortino Ratio?
It turns out we can. In finance
there’s a metric called the Sortino Ratio. It measures return relative to downside
volatility (a variation of standard deviation). A higher number
is better than a lower number, but the number can get higher in a few
different ways – returns can go up, downside volatility
can go down, or both returns can go up and volatility can go down
simultaneously. Higher returns by themselves are not enough to make the
metric move, if they come with more downside volatility.
Sortino
Ratio = Return / Downside Volatility
Over the 10- and 15-year periods ending January 31, 2018, the Sortino Ratio for the S&P 500 Index was 0.99%
and 1.08%, respectively, according
to Morningstar. But over the past 3- and 5-year periods, the Sortino Ratio for the index has been 2.67% and 3.10%,
respectively. Clearly we’ve been spoiled with 3-
and 5-year periods of high returns with little downside volatility –
around triple the ratio of the longer term periods. Over long periods of time,
the market doesn’t deliver such robust high volatility-adjusted returns.
See chart
Source: Morningstar
Ironically, the fraudulent
Sortino Ratio of Bernie Madoff’s hedge fund was 2.95%.
Madoff didn’t advertise market-beating returns, but returns that were close
enough to the market’s with hardly any volatility. Somehow
– probably with the help of very low interest rates and investor psychology – we’ve gotten a Sortino Ratio over the last 3 and 5 years that
roughly matches that of the Madoff fraud
Lessons for Investors
The first
obvious lesson for investors during this bout of volatility is that periods of uninterrupted
returns don’t last. A correction is a normal part of investing. It’s not that
investors get paid for enduring volatility, as some theories suggest; it’s that
volatility is simply the price of admission into the stock market.
Returns or getting paid comes from being careful about how much you pay for
stocks.
2nd. Another lesson
is that investors
should have an appetite to start buying when prices drop. If you don’t feel
like buying, but, instead, want to sell, it’s very likely your allocation
wasn’t correct to begin with. Nobody likes to see any part of their
portfolio decline, but if the decline has hit a piece
of your assets that doesn’t make you want to throw in the towel, that’s
a good sign. Stocks may still be to expensive, but a good investor should at
least be thinking about buying during and after big declines. In fact, if
you’re still employed and making automatic contributions to 401(k)s and other
accounts, take some satisfaction in knowing that you’re contributing new money
to your retirement accounts, and buying stocks at lower prices.
Third, take this bout of volatility as an invitation
to rebalance your portfolio and reassess how much stock exposure is really
appropriate for you. Many people fill out asset allocation questionnaires when they
set up financial plan, and those are generally good things to do.
Last, get updates from your
advisor about the market’s Sortino Ratio. It’s been around 1 for a long time. If it starts flashing anything over 2, and gets near 3, you
know things have been too calm and returns have come too easily.
….
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“Find me someone who worked in the era of 15 percent inflation and I’ll
talk to them about Bitcoin and the Internet,” said the 29-year-old fund manager.
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POLITICS
Seudo democ y sist
duopolico in US is obsolete; it’s
full of frauds & corruption. Urge cambiarlo
"What
is the best way to 'deflect'
attention from something such as this?
War, naturally. "
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"Why isn't the (mostly)
unredacted Grassley memo front page news? Here's why: Because it confirms the Nunes memo and blows up the Schiff talking points (which the
media ran with)."
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WORLD ISSUES and M-East
Global depression is on…China, RU, Iran search for State
socialis+K- compet. D rest in limbo
DEMOCRACY NOW
US politics crisis: Trump captured by Deep state to
reproduce old cronyism without alter-plan
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars: its profiteers US-NATO
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INFORMATION CLEARING HOUSE
Deep on the US political crisis, their internal conflicts n
chances of WW3
Is the Stock Market Rigged? By Paul Craig Roberts, Dave Kranzler, and
Michael Hudson
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US Massacre Of Syrian Troops Threatens To
Unleash Wider War By Bill Van
Auken
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Russiagate or Intelgate? By Stephen F. Cohen
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|
|
Living in an Orwellian Tyranny By Gilad Atzmon
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Surveillance Capitalism By Tucker Carlson
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COUNTER PUNCH
John McMurtry The
Politics of Genocide Denial
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Jeff Mackler The
US Plan to Partition Syria
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Jose-Antonio Orosco Trump’s
Immigration Reform is Tone Deaf
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Louis Proyect The
Tortured State of Ukrainian Society
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SPUTNIK and RT SHOWS
Geopolitics & the nasty business of US-NATO-Global-wars
uncovered ..
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RT SHOWS
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NOTICIAS IN SPANISH
Latino America looking for alternatives to neoliberalism to
break with Empire:
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Marco Rubio: El mundo "apoyaría"
un golpe militar en Venezuela De que mundo habla el?
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PRESS TV
Global situation described by Iranian observers..
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