Saturday, August 27, 2016

MAD Weekly Review - August 27, 2016

If a man walks in the woods for love of them half of each day, he is in danger of being regarded as a loafer. But if he spends his days as a speculator, shearing off those woods and making the earth bald before her time, he is deemed an industrious and enterprising citizen. -  Henry David Thoreau

Quite the truthful dilemma highlighted by wise Henry David Thoreau. He was long a champion of the outdoors and National Park advocate.  Yet our capitalist nature can come into conflict with nature, and others love for it.  We must always be mindful there are plenty of ways to responsibly make money.  I bring this up as this week represented the 100th anniversary of the National Park Service.  One of the few government agencies that serve an important purpose in my opinion. So get outside and visit your local county, state, or national park before summer is over.  

Speaking of summer being almost over I bet there are plenty of traders out there that can't wait for it to end.  This has been a dull summer with the exception of Brexit.  Traders make their living on volatility, for which there has been a huge lack.  Investors on the other hand are having a ball. Their long term plans are working well, and they receive daily re-assurance via stable account values. What's good for the goose isn't always good for the gander.  

Either way despite a trader's and investor's different strategies the market is just like nature - it provides a habitat for all of us to thrive in. Just make sure you are prepared for all the seasons it throws at us.  

We received some good economic news on the housing front this week.  New home sales shot up to 654k in July.  That's a strong number, but I'd like to see how it will hold up against an upcoming rate hike which I'll address shortly. That's good for the economy, but it's not having the impact I'd like considering 2nd quarter GDP was actually revised 0.1% lower this week to 1.1%(originally estimated at 1.2%). 

On the flip side existing home sales had an off month as they slipped to a seasonally adjusted 5.39 million units. The report was rather downbeat and cited lack of affordable supply. Remember the price increases I discussed in my mid year update?  Nominal prices are advancing, and squeezing out plenty of home buyers. But they advance is not even The housing market is a strange beast. 

Janet Yellen's speech at Jackson Hole got the market a little frenzied on Friday.  She gave some conflicting views. First she states the economy is doing well, and the case for a rate hike has increased the last few months - Hawkish. Then goes on to say the Fed is exploring purchase of a broader range of assets - Dovish.

The last part is concerning as I wonder what they are seeing that makes them think they need to purchase a wider variety of bonds(most likely).  I'm thinking they are looking to expand their agency debt, and possibly enact corporate debt purchases. This would be in replication of moves we've seen in Europe. It's not entirely comforting to think about this.

The market finally re-adjusted it's expectations for a rate hike this year.  The odds of a September hike went from 21% to 36%, and December went from 51% to 63%.  I've been saying a lot this year rates need to be raised. The next few meetings are extra high stake.

The market ended the week on a down note, which has been rare the the last few months. I'll have a cool article coming out in a few days. It's from my Topstep Trader discussion I had Wednesday.  I'll give you a hint. It involves $1 million dollars. Also I'll be exploring ways to invest in the self-driving car future as part of my Your Vehicle is Now Worthless series

IndexStarted WeekEnded WeekChange% ChangeYTD %
S&P 5002183.872169.16-14.71-0.76.1
Russell 20001236.861238.882.020.29.1

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