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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

Will It Be Pain or Gain in the Fourth Quarter?

On September 30, 2011, in Stocks, by Tim

After a big move higher on Monday following sharp declines earlier in the month, the broad U.S. equity market is stumbling into the close of the third quarter with a decent gain for the week but with the worst quarterly performance since 2008.

In this CNBC story, historical data for follow-on performance to periods like what we’ve just been through is provided and the prospects for stocks in the fourth quarter is debated.

Most of the time, stocks produce a gain in the quarter following  big declines, however, that outcome is by no means guaranteed. A similar table for gold would be interesting to see…

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The World Has Too Many Traders

On September 29, 2011, in Debt, Our Culture, Stocks, by Tim

It occurred to me after watching this remarkable BBC interview with Alessio Rastani the other day – the one that went a bit viral despite the questionable background of the subject – that the “financialization” of the global economy that has slowly transformed the world over the last few decades has produced far more people like Alessio than it really needs.

Just like the little old ladies in Japan who try to compensate for 20 years of freakishly low interest rates with their FOREX accounts and like American punters who lost their shirts in the real estate crash and now intend to make it all back in penny stocks, traders like Alessio Rastani are a symptom of a problem that far too few people are talking about.

The BBC headline read “Anyone Can Make Money From a Crash” and that seems to be the attitude of an increasing number of slightly-above-average Joes in the world.

But, when you think about it, who can blame them?

In a world awash in paper money that steadily loses its value despite the government’s assurance that inflation is low and, during an era when the brightest and most talented college graduates go directly to Wall Street to figure out new ways to make money by pushing all that paper around, the incentives to speculate are just too high for many to resist.

Read the rest of this article at Seeking Alpha.

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I Have to Admit It’s Not Really Getting Better

On September 26, 2011, in Stocks, by Tim

Today’s big 272 point gain for the Dow Jones Industrial Average makes a total of six 200+ point moves for the stock index in September – two up, four down – in what will likely end up as a less volatile month than August, though, as you might guess by looking at the graphic below, so far, the month has produced a bigger overall loss.

A Wall Street Journal report($) today notes the changing sentiment toward stocks that many investors share today, my only question being what took them so long.

And across the financial markets, a sea change is taking place. Investors are abandoning the time-tested “stocks for the long run” optimism that dominated since the late 1980s. Instead, there is a widening belief that the mess left behind by the housing bubble and financial crisis will be a morass to contend with for years.

Of course, we all know who made that mess…

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Margin Calls Whack Gold

On September 23, 2011, in Commodities, Stocks, by Tim

You hear a lot about traders selling gold to meet margin calls in order to cover other losses being a major factor in the nosedive for the yellow metal. Here’s a graphic example of how that’s worked recently as, on at least three occasions in the last few weeks, a big sell-off in stocks is followed by a sell-off in gold the next day.

On September 9th and 21st, while equity markets were plunging, the gold price held up fairly well, but, on the 10th and 22nd the gold price tumbled, margin calls for the prior days’ losses presumably being a big  factor. Of course, the gold price doesn’t always fall the day afters stocks do, but on the big moves down, there appears to be a high correlation.

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Trying to Understand the Market Meltdown

On September 22, 2011, in Stocks, by Tim

After the market meltdown continued today, Susie Gharib on the PBS Nightly Business Report is probably going to have that worried tone in her voice again tonight, replacing the twinkle that was in her eye all of last week when stocks rose for five straight days.

In this video from Reuters, they try to explain what happened.

It should be an interesting day tomorrow to close out the week. After today’s losses for the Dow, all of last week’s 517 point gain have been given up, along with another 250 points.

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Mr. Market to Mr. Bernanke: “Me No Likey”

On September 21, 2011, in Stocks, by Tim

Well, it looks as though the stock market isn’t too impressed with Operation Twist so far. I’ve not yet scanned the other news, but, based on the sell-off beginning at around 2:30 PM EST and then accelerating into the close of trading, it’s a pretty safe bet that markets were expecting something more from the Fed. After seeing the least volatility in months over the last week or so, stocks are suddenly volatile again as we move further into the two most dangerous months of the year with the Fed now sitting on their hands.

Look for more big swings after today’s 284 point plunge for the Dow (down 323 points from the intraday high just before the Fed policy statement was released). And it was going so good there for stocks last week when everyone thought that the Fed had their back.

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