The Independent Market Observer

Is the Stock Market Getting Overextended?

June 30, 2014

With all of the data out there—and all of the different takes on where the economy and financial markets are going—is there a warning sign that can tell us if the stock market is getting overextended?

I track several signals that are good economic indicators, but the stock market is tougher. There aren't any really good signals out there. Even the one I use most, the 200-day moving average, isn’t all that great.

One sign of a pending top, though, has become more apparent in recent weeks: investors are increasingly invoking 1999 to explain why the market is now reasonably priced.

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The Aereo Decision: In Praise of Content Creators

June 27, 2014

I have mixed feelings about the Aereo decision. 

If you haven’t heard, the Supreme Court ruled this week that Aereo—a company that uses multiple small antennas to capture TV broadcasts, which it then streams to subscribers over the web—violated copyright law.

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Appearance on CNBC Worldwide Exchange

June 25, 2014

Learn why I told CNBC Worldwide Exchange that I think taking out protection against a deeper correction is a good idea at this point in an interview today, June 25

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What If the U.S. Set Oil Prices?

June 25, 2014

For decades now, the U.S. has essentially had to accept the oil prices set by world markets. Starting in 1973 with the OPEC-driven oil shock, the major producers have been foreign countries. If the U.S. wanted the oil, we had to pay the price.

But are things starting to change?

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Reasons to Worry About the VIX

June 24, 2014

Also known as the “fear index,” the VIX tends to stay low when investors are feeling confident and to spike when investors get scared. Technically, it reflects the volatility of the stock market—how much things bounce around—but on a practical level, it tends to mirror recent market performance.

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U.S. Ex-Im Bank: Should the Government Step Back?

June 23, 2014

A longstanding demand of much of the political class has been for the government to stop interfering in the economy.

The latest example of this is a statement by incoming House Majority Leader Kevin McCarthy, in response to a question about the U.S. Export-Import Bank: “One of the biggest problems with government is they go and take hard-earned money so others do things the private sector can do.”

As you might guess, McCarthy says he won’t support reauthorizing the bank’s charter.

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Picking Winners: The World Cup and Investing

June 20, 2014

The thing that interests me about the World Cup—besides the chance to watch elite players going all out—is how the results totally upend the usual global stories.

Looking at the Goldman Sachs projections for the tournament, the major powers (with the exception of Germany) are nowhere to be found. Combined, the U.S. and Russia have a 1.1-percent chance of winning it all. China isn’t even on the list. Japan is, but might as well not be. Ditto the UK.

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Interview with WSJ MoneyBeat

June 20, 2014

Yesterday, June 19, I spoke with Wall Street Journal MoneyBeat's anchor, Paul Vigna, on the keys to avoiding what is being projected as an unsettled second half of 2014 for the U.S. economy. 

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Interview on Fox Business Network's Opening Bell

June 19, 2014

I joined Maria Bartiromo on the set of Fox Business Network’s Opening Bell today, June 19, to discuss the economic impact of the crisis in Iraq.

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Fed to Market: Full Speed Ahead

June 19, 2014

The Federal Reserve’s announcement yesterday that it would continue its current tapering schedule—but that a rise in rates still isn’t imminent—drove markets to the 20th new high of the year.

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Why the Middle East Matters: Oil Prices and the U.S. Economy

June 18, 2014

With rising turmoil in two major oil-producing states, Iraq and Iran, the world faces an increase in oil prices—and the consequent economic damage. Fortunately, the U.S. is much better positioned to ride out the storm than it has been in the past.

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In the News: The Costs and Benefits of More Data

June 17, 2014

Is having more information always a good thing? It’s generally hailed as such, but, depending on your perspective, the reality may be more complicated.

In the news today, there are several examples of more data leading to changes that, while painful in the short run, should yield long-term positive results.

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Full Recovery Ahead? A Big-Picture Look at Employment Data

June 16, 2014

Returning to the office after 10 days out, I have a lot of reading to catch up on. One benefit of that, though, is being able to connect individual data points for a bigger-picture view.

Employment, in particular, caught my eye this morning. Taken together, a slew of positive employment numbers paint an even better picture. (The employment data here is from various federal sources, as compiled by Ned Davis Research.)

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Unexpected News: Iraq Conflict, Oil Prices, and a Political Upset

June 13, 2014

I’ll admit to being a bit out of touch with the markets for the past week, but I did note yesterday’s drop, which we can safely attribute to the increase in oil prices as conflict in Iraq escalates. Like many commentators, I’ve been focusing more on risk out of China and Europe, but the Middle East clearly remains a factor.

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Fun with Statistics: Correlation and Causation

June 12, 2014

Whenever you look at statistics, there are two things to keep in mind:

  1. Correlation is not causation.
  2. There are three types of lies: lies, damn lies, and statistics.
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May Market Update: Financial Markets Close Strong as Economy Thaws

June 11, 2014

Here’s my recap of May’s market and economic news, plus insights on what to expect going forward. 

U.S. equities

U.S. financial markets had a relatively quiet month, with little volatility, except for the Nasdaq, which was down close to 2 percent mid-month. All U.S. equity markets finished May on a strong note, however, with the Dow Jones Industrial Average up 1.19 percent, the S&P 500 Index up 2.35 percent, and the Nasdaq up 3.11 percent, despite the mid-month drop.

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What Housing Slowdown?

June 10, 2014

There’s been a fair bit of commentary lately about the apparent housing slowdown. Possible causes include an absence of buyers, the decline of the investor buyer, low credit scores, and declining affordability.

Do any of these anecdotal problems actually exist? And if so, what effect might they have on the housing market?

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Norway: Big Mountains, Big Government, Big Oil

June 9, 2014

Greetings from Norway!

After a great three days in Oslo, we’re on the train stopped at Ål on our way to Flåm, up in the fjord country. Based on my time here so far, Norway is a wonderful place: the people are nice, the scenery spectacular, and the weather terrific (at least this time of year).

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Will We Hit 200K? A Prospective Look at the Employment Numbers

June 6, 2014

This is a bit of a speculative post, as I’m writing it a day ahead of time, before the next set of employment numbers comes out. (I’ll be on a plane to Norway for a family vacation when they do.) I may have to revise or retract some of my thoughts here, but hopefully the main points will survive.

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Use It or Lose It, Banks: ECB Introduces Negative Interest Rate

June 5, 2014

The European crisis isn’t over. This is according to a very authoritative source—the European Central Bank, which just took the almost unprecedented step of instituting a negative interest rate, essentially charging banks to deposit money. For the banks, it really has become a case of using their deposits or slowly losing them.

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In the News: Carbon, Bank Fines, Deflation, Financial Conflict

June 4, 2014

With no major stories breaking today, let’s discuss a few key themes in the news lately.

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What the Low VIX Means for the Stock Market

June 3, 2014

I’ve written before that there’s generally more downside risk in the stock market than investors expect. One way to account for that is to look at the VIX. 

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Market Thoughts for June 2014

June 3, 2014

In my latest Market Thoughts video, I talk about recent volatility in the financial markets and a drop in interest rates. I also offer my thoughts on the U.S. economy, including the recovery and employment.

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Economic Risk Factor Update

June 2, 2014

Today, I’m launching a new series of monthly updates on risk factors that could signal economic trouble ahead. (The data comes in on a regular basis, but its economic significance doesn’t change that quickly.)

The data series highlighted here have proven to be reliable storm signals—and they’re suggesting a pretty nice summer ahead. 

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Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

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