Chart of the Day

[Lsbcal]

Running_Man - don’t confuse them!

I did already apologize above.

P.S. I went for a 7 mile run today so Running Lsbcal today.

 

[copyright1997reloaded]

I definitely value this sort of chart, and usually don’t try to psychoanalyse supposed reasons for posting it. How I would try to use it is realizing that German bankers are at least as intelligent as most other bankers, there may be some opportunities here.

Ha

Or that there is some systemic issue in Europe effecting the banking sector. Regulation anyone? Too much central control on banking? None of the above?

In terms of a more broad comparison of USA vs Europe, check out the 10 largest holdings in the Europe ETF vs. SP-500:
Europe:
Ticker Name Sector Country %
NESN NESTLE SA Consumer Staples Switzerland 3.25
NOVN NOVARTIS AG Health Care Switzerland 2.82
ROG ROCHE HOLDING PAR AG Health Care Switzerland 2.28
HSBA HSBC HOLDINGS PLC Financials United Kingdom 2.13
FP TOTAL SA Energy France 1.68
RDSA ROYAL DUTCH SHELL PLC Energy United Kingdom 1.66
BP. BP PLC Energy United Kingdom 1.66
SAP SAP Information Technology Germany 1.41
RDSB ROYAL DUTCH SHELL PLC CLASS B Energy United Kingdom 1.40
SIE SIEMENS N AG Industrials Germany 1.20

USA:

Name Symbol % Assets
Microsoft Corp MSFT 3.71%
Apple Inc AAPL 3.36%
Amazon.com Inc AMZN 2.92%
Berkshire Hathaway Inc B BRK.B 1.88%
Johnson & Johnson JNJ 1.64%
JPMorgan Chase & Co JPM 1.54%
Alphabet Inc Class C GOOG 1.51%
Facebook Inc A FB 1.49%
Alphabet Inc A GOOGL 1.48%
Exxon Mobil Corp XOM 1.36%


Anything jump out at you?

 

[Running_Man]

Interesting look at the long term growth trend in the US

 

[flintnational]

^^ Reversion to the mean? It looks like periods of sub 3% GDP are followed by periods of above 3% GDP. Lets hope so.

 

[Lsbcal]

Interesting look at the long term growth trend in the US

I'm wondering if it will show a rise as the 10 year window moves through the 2008-2009 period. PE10 should drop this year if all else were to constant as 2008-2009 is gone from that 10 year window.

 

[NYEXPAT]

^^ Reversion to the mean? It looks like periods of sub 3% GDP are followed by periods of above 3% GDP. Lets hope so.

Weird, I see the exact opposite where periods of above 3% growth are followed by periods of below 3% growth, kinda like 2018-2019.

 

[Running_Man]

I just see a 63 year low in GDP growth over the last 10 years while the market is up 300 percent

 

[Running_Man]

Looks like international stocks should outperform US for a while.

 

[Running_Man]

 

[pb4uski]

Yeah, while I'm sticking to my 30% allocation of equities to international equities, it has taken some talking myself into it at times.

 

[ERD50]

Yeah, while I'm sticking to my 30% allocation of equities to international equities, it has taken some talking myself into it at times.

But if we are thinking in terms of regression to the mean, shouldn't we be increasing allocation to Int'l?

I've got a pretty low allocation, but it is all in some IRAs that are not too large. But it does kinda hurt to see those under-performing, being more obvious as they are segrgated.

-ERD50

 

[flintnational]

Yeah, while I'm sticking to my 30% allocation of equities to international equities, it has taken some talking myself into it at times.

Me too. I have been 30% international for probably 20+ years. I even doubled down about 5 years ago and added an EM tilt. Clearly, we have earned our long term investor badges.

Running_Man, thanks for the charts. Always interesting.

 

[pb4uski]

But if we are thinking in terms of regression to the mean, shouldn't we be increasing allocation to Int'l? ....

Not for me... that would be market timing.... I'm satisfied with just rebalancing to target and taking whatever the markets give me.

 

[Chuckanut]

Not for me... that would be market timing.... I'm satisfied with just rebalancing to target and taking whatever the markets give me.

+1

I think we can safely predict that at some point the regression will take place, but when is the big unknown.

 

[Lsbcal]

Looks like international stocks should outperform US for a while.

Interesting chart. But is there really any theory as to why the average (red line) should be where it is on the chart? Couldn't one draw a small red circle around that 2011 intermediate peak area if one did not know another surge was coming for US stocks?

I think the red line (plus standard deviation lines) would move around quite a bit if using only early data to guess at where things might go for future data (now known) data. In other words such charts are interesting to identify past trends and maybe link them to known historical changes like trade policy. But are they at all predictive?

I'm agnostic on this stuff and don't know how far the US/foreign ratio can change stray. This is why I use a trend following approach to allocate the foreign part of my portfolio.

 

[ERD50]

Not for me... that would be market timing.... I'm satisfied with just rebalancing to target and taking whatever the markets give me.

I guess it's really the same/similar thing. As INTL drops, rebalancing would have you buying more. So maybe it's just a matter of how far one lets things deviate before rebalancing?

-ERD50

 

[Dtail]

Yeah, while I'm sticking to my 30% allocation of equities to international equities, it has taken some talking myself into it at times.

Same here but at 20%.

 

[Sunset]

+1

I think we can safely predict that at some point the regression will take place, but when is the big unknown.

We need to increase our foreign %, it's super low, probably around 2%
So I don't consider it market timing just trying to get the allocation to a better balance

 

[flintnational]

We need to increase our foreign %, it's super low, probably around 2%
So I don't consider it market timing just trying to get the allocation to a better balance

I would call it buying low and selling high. It sounds better.

 

[target2019]

We need to increase our foreign %, it's super low, probably around 2%
So I don't consider it market timing just trying to get the allocation to a better balance

I would call that a strategic asset allocation change...

 

[Running_Man]

I always liked the BDI index back in the day it was signaling great global trade then a glut of ships and a dropping of economic activity lead to a long term deflation in the index. The overall index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser is signaling a slowdown in economic activity in early 2019.

 

[Running_Man]

OK so the BDI index I think was a good forecaster of the slowdown in economic activity that is causing great concern around the world. The charts are interesting as I like to think about things when I post them and they cause my mind to ruminate. I find this chart utterly fascinating and extremely worrisome:

 

[Lsbcal]

OK so the BDI index I think was a good forecaster of the slowdown in economic activity that is causing great concern around the world. The charts are interesting as I like to think about things when I post them and they cause my mind to ruminate. I find this chart utterly fascinating and extremely worrisome:

I don't immediately see what you must see in this chart. There are only 2 recession instances here and in one case the index is going up heading into a recession while in the other it is going down into a recession. You must not be looking at the slope.

How is this predictive of a slowdown?

 

[Running_Man]

10 yr US Treasury Interest Rate Cycles
1981 15.82 1983 10.50
1984 13.00 1986 7.25
1987 9.63 1998 4.10
1999 6.59 2003 3.95
2007 5.20 2008 2.04
2011 3.40 2012 1.38
2013 3.00 2017 1.32
2018 3.26 ?2020? -0.65

I had thought the FED was ending the 37 year bear market in interest rates last September, but the attempt to lift rates failed as economic gravity proved too strong for interest rate escape velocity. In October 2018 I didn't know if the FED really understood the issue that was before them in regards to demographics and the economy. I thought it was more appropriate in Dec 2018 to cut rates not to raise them. In October expectation and business forecast was for 3 rate increases in 2019 and GDP growth of 3 percent, the December 2018 fiasco of a rate hike shocked the FED and they have been in full verbal defense of the S&P500 since. However, as the chart in the post above shows the FED signalling of stopping rate hikes and cutting of rates is not sufficient to keep the trade weighted dollar from increasing, and it is back to the level of Dec 18th 2018 when the pressure really caused the problems for the US stock market. This is very bad for multinationals Expect a collapse in interest rates in the US that has occurred in the long end to really hit the short end as the breakout of the end of the interest rate cycle failed.

I will on Monday:

Sell stocks to get back to 25% minimum holdings, has been a good year so far. I will be keeping the individual stocks I have purchased this year and sell the S&P500 to drop to the 25% range, investing 50% of the proceeds in 2 year US Treasuries and 50% in 5 year treasuries. The market has made a good run at a new high and may yet get there. FED is certainly on the average investor's side. However the stock market is not the economy, the FED I think is about to shock people with the level of interest rate cuts over the next year. I think the investment of choice right now is 2-5 year US treasuries, so that is what I am tilting towards.

A drop in the trade weighted dollar index accompanied by a rise to a new high for the stock market indexes would be a good sign the FED actions are accomplishing their goals. If the FED doesn't cut rates by 50 basis points in July I will be surprised, that is my expectation with the chart I am looking at.....

 

[Oz investor]

I had thought the FED was ending the 37 year bear market in interest rates last September, but the attempt to lift rates failed as economic gravity proved too strong for interest rate escape velocity. In October 2018 I didn't know if the FED really understood the issue that was before them in regards to demographics and the economy. I thought it was more appropriate in Dec 2018 to cut rates not to raise them. In October expectation and business forecast was for 3 rate increases in 2019 and GDP growth of 3 percent, the December 2018 fiasco of a rate hike shocked the FED and they have been in full verbal defense of the S&P500 since. However, as the chart in the post above shows the FED signalling of stopping rate hikes and cutting of rates is not sufficient to keep the trade weighted dollar from increasing, and it is back to the level of Dec 18th 2018 when the pressure really caused the problems for the US stock market. This is very bad for multinationals Expect a collapse in interest rates in the US that has occurred in the long end to really hit the short end as the breakout of the end of the interest rate cycle failed.





.....

i took the rate hikes as a desperate move to gain more 'wiggle room' before the next economic downturn .

time will tell , the yield curve inversion signals ( if you can believe that ) a recession within 18 months , but many nations are using unconventional policy already .

what i DON'T expect is a bull run based on solid fundamentals and growing company profits ( and i don't mean earnings per share , in this era of buy-backs )

good luck

it looks like interesting times ahead