Brexit is a reality

[COR-TEN]

The war will start further east because NATO appears to need a new mission to justify its existence.

So we're needlessly ratcheting up the tensions with Russia.

I think you have that backwards. Russia is the aggressor. The US and Nato are just responding.

[jeemie]

The war will start further east because NATO appears to need a new mission to justify its existence.

So we're needlessly ratcheting up the tensions with Russia.

I think you have that backwards. Russia is the aggressor. The US and Nato are just responding.

Really?

Who do you think financed and backed all the color revolutions that overthrew Russian-leaning governments in their border countries...including Ukraine?

Poroshenko is a thug, and is backed by neo-Nazis...and this was the side we chose to be on.

This is Great Power politics again...and NATO made the first moves.

[Legacy User]

http://heatst.com/uk/exclusive-france-s ... -massacre/

Imagine what we'd know if the media didn't hate us.

[COR-TEN]

The war will start further east because NATO appears to need a new mission to justify its existence.

So we're needlessly ratcheting up the tensions with Russia.

I think you have that backwards. Russia is the aggressor. The US and Nato are just responding.

Really?

Who do you think financed and backed all the color revolutions that overthrew Russian-leaning governments in their border countries...including Ukraine?

Poroshenko is a thug, and is backed by neo-Nazis...and this was the side we chose to be on.

This is Great Power politics again...and NATO made the first moves.

Wow. Holy fucking shit, wow.

Where exactly do you get your information? What sort of knowledge of the region do you have? It's obvious you have bias and know nothing of the conflict. You're just spewing the same PutinBot talking points, err.. lies. I'll bet you think the Ukrainians shot down MH17 from a fighter jet and completely sanction the illegal annexation of Crimea.

1. No. The US did not back either the orange revolution or the Maidan. Look to the economics of Ukraine and the corrupt leaders installed by the Kremlin. There is no doubt the west prefers Ukraine be on their side, but suggesting that the US or the CIA is at the root of the conflict is preposterous.
2. Poroshenko may be a money grubbing capitalist, but the thug exists on the other side of the border in Russia. The one that blows up residential buildings in Moscow to justify a war in Chechnya, routinely murders journalists and dissenting figures, and spreads the lies and propaganda you are apparently susceptible to. Oh, wait, and he rigs elections and changes laws so that he can stay in power like a true totalitarian dictator. Stalin would be proud.
3. Poroshenko was elected by the majority of Ukraine, and the Right Sector(what you like to call neo nazi's), have exactly 10K members. Yanukovych, the kremlin puppet he replaced, was just as corrupt as his Russian counterparts, and insured all resources and dependency was going to Russia. Either through threats of violence, outright violence and murder, or corruption. Ukraine has been leaning to Europe for decades to escape the rape of it's more powerful neighbor. Yanukovych was stealing money just like Putin. What started the Maidan was Yanukovych's flip flop when he signed an economic agreement with Russia despite the people's request to sign with the EU. Overwhelmingly.
4. You think the right sector elected Poroshenko? They have no power in the Ukrainian parliament. Neo Nazi's in the US probably have more membership and influence over policy than they do in Ukraine. Look to Russia for neo nazi biker gangs where Putin routinely rides his bike with on "excursions." It has been proven that Russian military snipers were the ones that started the murders in the Maidan. It is also not a secret that the right sector wants an independent Ukraine, just like the rest of Ukrainians.

Further, the agreement made during the dissolution of the USSR stated quite clearly that Ukraine's borders would be respected and the sovereignty of its government protected. Both of which were violated. Also, conflicts between Russian forces and the US (as well as other nato members) has increased to levels higher than that of the cold war. You figure it out.

A Putin quote : "The dissolution of the USSR was the biggest tragedy of the 20th century." He's also suggested, inaccurately and with great immaturity, that there is global stability when two super powers are at odds. Russia is nothing but a giant gas station, and is otherwise irrelevant. Putin is a whining bitch that is crying over the fact that his beloved USSR is gone and desperately wants it back.

[jeemie]

I'm calling neither Russia nor Putin paragons of virtue, but I understand everything they're doing...easy to do via the paradigm of pre-Cold War great power politics.

And trust me (or not)...I know exactly what's going on in Ukraine...and it's not what we get fed by the media.

I have relatives that still live there, and friends here who used to live there as well.

I trust them more than I trust any media sources.

NATO needs something to justify its existence, so it plays up the Russian threat at the expense of ISIS because you don't need to have a huge defense apparatus to defeat ISIS. You do need a huge defense apparatus to keep comfortable NATO generals and staff in the comfort to which they are used.

[955876]

Thanks, 95. Although you didn't really help me ( ), you at least confirmed I'm not being crazy/stupid.

I'm going to finish my rebalance, but I'm not buying squat after a 5-straight day run-up to record highs with little to justify it.

Yep, this bull market will come to an end. But it can easily go another 5-10pts higher. Then there will bigger decisions to make.

What has justified the run-up after the initial Brexit shock is that markets are now counting on monetary policy to remain ultra-accommodative. A scenario that supports both global stocks and bonds. I'm sure you've heard the expression "don't fight the Fed". Some analyst now belive the Fed is on hold until 2018. If that's the case then things should run a while longer. A surprise rate hike, and especially one larger than expected could be the tipping point.

I going to assume you meant another 5-10% higher rather than "points". I could easily see that happening.

Our analyst paint a couple contradictory pictures (as usual). On one hand they believe the Fed is on hold and that risk assets should continue to perform well over the next 12 months while at the same time they have a 12 month price target of 2,050 for the S&P. A number below where we are now. Their bull case only has upside to 2,200 which is barely 2% above where it's trading at present.

Bear case has a downside target of 1,525. That's a 30% decline from today's level. They give a 20% probability to the bull/bear case and 60% to the base case of S&P @ 2,050.

Seems the risk at this point outweighs the reward. By potentially quite a bit. So raising cash and maybe even building a position in gold could be prudent. Not a 100% but enough to cushion an equity decline while waiting for bonds to take their hit after rate hikes. Then see which is more attractive to overweight from there. No easy answers.

For me personally, I've done very very little rebalancing for myself or professionally and know that I need to. Problem is, I've had to take 5 out of the last 12 months off from work to deal with a very serious family medical issue. To say I'm behind would be a huge understatement. At this point I'm simply hoping things can at least stay in a comfortable range at least to year end to give me some time to catch-up.

[Legacy User]

Great. Let's all invest in Amazon at 500 times earnings or buy 2 million dollar track homes because the government refuses to let us get a fair return on bonds. What could possibly go wrong?

No thanks, I'd rather invest in high dividend stocks trading at a reasonable valuation. Or precious metals.

Does anyone in this middle school we call the US ever learn from bad experiences?

[jeemie]

Great. Let's all invest in Amazon at 500 times earnings or buy 2 million dollar track homes because the government refuses to let us get a fair return on bonds. What could possibly go wrong?

No thanks, I'd rather invest in high dividend stocks trading at a reasonable valuation. Or precious metals.

Does anyone in this middle school we call the US ever learn from bad experiences?

Making money off money is the way it works nowadays...economic rent-seeking.

If we really wanted to help the working class, we'd tax the hell out of economic rent...those types of investments are squeezing out investments in what I term legitimate economic activity.

[955876]

No thanks, I'd rather invest in high dividend stocks trading at a reasonable valuation. Or precious metals.

While that does make sense, high dividend stocks have served as a bond proxy for investors seeking yield. A good number of "high dividend" stocks are actually trading at high valuations as money has flowed into them over the past several years.

Some of these high yielding stocks are up +20% YTD. A number far outpacing the broad market. And historically, the sectors that were running the hardest at the end of a bull market tend to get hit first when the market turns. Tread lightly.

Some of the big banks actually look attractive here. They haven't participated in the rally and carry attractive valuations. They should also benefit from rate hikes.

JP Morgan has a 10.8 PE with a 3% dividend yield. Wells Fargo an 11.6 PE with a 3.2% dividend. Both companies are sitting decently off their 52 week high and carry target prices above their current price.

A good number of higher yielding stocks are trading at or very near their high and carry price targets lower than their current price along with PEs at the high end of their historical range.

[Legacy User]

Nothing to tax. Just put a stop to the rent seeking. I thought the one thing the left and right agreed on were no more bailouts. But cronyism and too big to fail has only increased since 2008.

This is what Jefferson was talking about when he criticized the money shifters in the financial service industry and was against a national bank.

We'd be so much better off if we had let Citi and Goldman Sachs die a natural death. If the government had to bail out anyone, bail out the creditors.

The financial services industry is so deep with unnecessary complexity through regulatory capture.

Main Street is not going to get a fair deal unless they snap out of it.

I agree with 955..we're running out of places to put money. Maybe water resources.

[Kodiak]

For me personally, I've done very very little rebalancing for myself or professionally and know that I need to. Problem is, I've had to take 5 out of the last 12 months off from work to deal with a very serious family medical issue. To say I'm behind would be a huge understatement. At this point I'm simply hoping things can at least stay in a comfortable range at least to year end to give me some time to catch-up.

Yeah, I had a healthy amount of cash I was lazy in getting invested, and just started putting it to work. Told myself I'd put equal amounts to work every month for 6 months. Now I'm re-thinking everything.

When I cashed out a bunch of my other account for a re-balance right before Brexit, I decided I'd wait a week or two to see how things shook out (quarter end, with the holiday, and all that uncertainty)....I expected the market to trade sideways, but saw much more downside risk.

Oh well, as you said it's probably not going to kill me to sit in cash, possibly for a while. It's rare to see a run-up like the past few weeks without some profit taking along the way. I really don't think this is driven by interest rate expectations - haven't looked at the data, but I suspect it's a capital inflow driving things.

Just wish there was a better place to put cash. Do not like the volatility of gold, although given the current strength of the dollar that may not be a bad bet, certainly if you think capital inflows are driving this that's a good hedge.

[Kodiak]

Some of the big banks actually look attractive here. They haven't participated in the rally and carry attractive valuations. They should also benefit from rate hikes.

I thought utilities, and particularly banks, suffer in rising rate environments? Story for banks goes they have loans locked in for years paying lower rates, and then rate hikes means they have a higher cost of capital paying more on deposits.

[955876]

The financial services industry is so deep with unnecessary complexity through regulatory capture.

Dodd-Frank Financial Reform Bill. Sold to the public after the financial crisis as a way of protecting poor unaware consumers from the evil big banks. Problem is, the bill is packed so full of onerous regulations it has had the opposite effect. Small regional and local banks have gone out of business limiting competition and in turn making the big banks even bigger. The smaller banks simply don't have the $$$ to keep up with all the regs.

A bill aimed to help ends up hurting. And that's not even getting into potential bond market liquidity issues that could arise. That's a bigger topic though.

I'm going to assume the "Fiduciary Rule" that Obama and others pushed the DOL to implement will be much of the same. A political talking point where they will trumpet how they are helping Main Street all the while hurting those very consumers even more.

[Legacy User]

The critics of Dodd Frank pointed out from the very outset, that all this would do is make IBs even more powerful against RBs, which should have benefitted a fair free market.

And why the hell do the two Congresscritters most responsible for the blowup get their names on the bill?

It's so third world corrupt...

speaking of which, what the hell is going on in Turkey right now?

[Kodiak]

A bill aimed to help ends up hurting. And that's not even getting into potential bond market liquidity issues that could arise. That's a bigger topic though.

With banking/financial, the govt has played a huge role in bubbles.

I never thought they needed to get so carried away. All I felt needed done was re-instate Glass-Steagall, or perhaps just increase reserve requirements and simpler, harder leverage calcs (as opposed to grossly understated VaR calcs on huge notional amounts).

The financial meltdown was really little more than ignorance of cross-default risk and excess leverage. I don't think those were complicated fixes. In hindsight, the idea that banks should insure each other against losses was massively stupid.

[955876]

Some of the big banks actually look attractive here. They haven't participated in the rally and carry attractive valuations. They should also benefit from rate hikes.

I thought utilities, and particularly banks, suffer in rising rate environments? Story for banks goes they have loans locked in for years paying lower rates, and then rate hikes means they have a higher cost of capital paying more on deposits.

You are correct in terms of utilities. As rates rise, the attractiveness of the yield paid by utilities decreases. So they tend to not be an ideal asset to hold in rising rate environments.

For banks it's different though. The difference between interest income that banks generate vs what they pay has been compressed in this very low rate environment. They also have less incentive to lend in very low rate environments. That changes for them as rates move higher. At least that's how I understand it. Who he fuck knows anymore though.

[955876]

A bill aimed to help ends up hurting. And that's not even getting into potential bond market liquidity issues that could arise. That's a bigger topic though.

With banking/financial, the govt has played a huge role in bubbles.

I never thought they needed to get so carried away. All I felt needed done was re-instate Glass-Steagall, or perhaps just increase reserve requirements and simpler, harder leverage calcs (as opposed to grossly understated VaR calcs on huge notional amounts).

The financial meltdown was really little more than ignorance of cross-default risk and excess leverage. I don't think those were complicated fixes. In hindsight, the idea that banks should insure each other against losses was massively stupid.

Totally agree with you.

And guess who repealed Glass-Steagall??

[Kodiak]

And why the hell do the two Congresscritters most responsible for the blowup get their names on the bill?

IMO, the banks are so much more sophisticated and so far ahead of regulators that most of the reforms are useless and outdated by the time it's implemented. Contrary to popular opinion, banks don't like risk and don't like losing money - when a crisis hits triggering new regulation, the banks have already figured out what went wrong and corrected....and moved onto new securities and models not covered by the new regs, laying the foundation for the next crisis.

There have been 4-5 major financial crises the past 30 years, and every one has as its root cause overconfidence in models that grossly understated risk/exposure.

[Kodiak]

And guess who repealed Glass-Steagall??

I believe it was Bill Clinton and a Republican Congress.

But I'm not sure Glass-Steagall is really the issue - that just goes back to my point about leverage. Gave the banks more capital to lever up, which just magnifies the losses.

[Legacy User]

This is killing me. I got about 2/3 my re-balance done with the remaining still in cash....feeling like the market is very overbought right now.

I'm thinking there will be at least a couple of days of profit taking next week...maybe waiting for 2-3 points before I put the rest of my cash to work.

I don't advocate trying to time the market, but this is goofy to me. Seems cash may be flooding into the US markets right now as a safe-haven, but other markets are rallying (and UK/EU seems to have steadied).

Thoughts? I'm at a loss of what to do. It feels overbought, but there has been some positive news and YTD performance doesn't look so overbought (just that most of those gains have come the past two weeks).

What is it that you are trying to accomplish, if not market timing?

Why is your money in cash during a rebalance?

Stay out of your own money's way, Kodiak! Don't think so much

Stock market is at all-time highs. And that is coming after a historically bad start to the year. Worst ever actually. This current bull run is also the second longest in history. How much further can it go?

Bond yields are at all time lows which means bond prices are also very high. Bonds have been in a multi-decade bull run. Bond yields are negative in several other major economies. Unchartered territory really.

Something will give at some point. That point could be very soon or it could be a bit further out. Wish I knew. It will come though and when it does it could be real ugly.

When the market decides it's ready to turn south it will happen quickly. And while trying to time the market has historically been a bad idea, something is going to give here.

Raising some cash now is far from a bad idea.

http://www.investopedia.com/articles/05/032905.asp

Kodiak, I was not trying to make you feel stupid. The fact is that regardless of what any analyst, economist, investment guru thinks about the direction a market may be headed, no one knows. This is proven time and time again. And it is not just retail investors who think they have something pegged, but also many times the 'professionals', who really should know better.

The most prudent investment plan should be the one that gives you the highest probability of achieving financial success, whatever success might mean to you. You should have a proper asset allocation plan to achieve this success, and stick to it, even when it is difficult to do so. How do you figure this out? You bite the bullet and pay a financial planning professional (a good one - ask for referrals and do your homework) to put together a financial plan for you, which will include that probability of success analysis and show you that optimal asset allocation.

From a pure asset management standpoint, a lot of the robo platforms (Schwab has a nice one) would work very well for your average retail investor. With the platforms available today, most investors should not need to then pay an advisor an ongoing fee to manage your money. I say "would work very well" and "should not need to" because the reality is your average investor makes emotional decisions with their money, seriously decreasing their long term chance of success (see the article I linked). A good advisor will be the voice of reason, point you back to your plan, and remind you to stick to it. If you pay someone an ongoing fee just to do that for you, it might be worth it! [A good advisor should do that and also provide the full range of financial advice - protection planning, estate planning, tax planning, etc.]

All that said, none of what I wrote is going to grab headlines anytime soon or be sexy to talk about at the next Catalina Wine Mixer

[Kodiak]

They also have less incentive to lend in very low rate environments. That changes for them as rates move higher. At least that's how I understand it. Who he fuck knows anymore though.

Ehhhh, what I've read is that retail banks can do ok in stable rate environments, print cash in falling rate environments, and struggle with rising rate environments until rates stabilize and the portfolio has been turned over. Their portfolio of loans is really a bond ladder, and sensitivity to rising rates depends on the duration of that portfolio. The big investment banks also get hurt on flagging market returns and decreased M&A activity.

[Legacy User]

Who the fuck knows anymore though.

The epiphany!!

[Legacy User]

One thing I do know is that helicopter money from all central banks is coming to keep the Potemkin economy afloat. Because the solution to any form of pain is always Fentanyl.

If the labor force were what it was in 2008, unemployment would be 9%. So now success if defined by convincing people to give up.

The developments in Turkey may end up being a positive. Big winner: German comedian who insulted him that idiot Merkel went after.

[Kodiak]

The fact is that regardless of what any analyst, economist, investment guru thinks about the direction a market may be headed, no one knows. This is proven time and time again. And it is not just retail investors who think they have something pegged, but also many times the 'professionals', who really should know better.

Ehhh, I think 95 made a lot of good points. We are overdo for a recession, and we are overdo for a correction. Both happen, not like clockwork but we do know it's going to happen.

I have about 2/3 of my money in. The remainder I'm sitting on isn't so much trying to time things as waiting for a good buying opportunity. I expected either sideways trading or some volatility - mature bull markets do not steadily march up. The S&P500 has already had two corrections, or nearly so, in just the past 12 months. I'm confident there will be more buying opportunities in the current range, if not lower. Just as imprudent to have waited, and then get impatient and jump in near the top because you're afraid of missing out on the run.

LOL, best looking option out there might be to pay down more of my mortgage - 2% after tax bleccchhhh....could then refi next year and take it back out if the markets look more promising.

[955876]

They also have less incentive to lend in very low rate environments. That changes for them as rates move higher. At least that's how I understand it. Who he fuck knows anymore though.

Ehhhh, what I've read is that retail banks can do ok in stable rate environments, print cash in falling rate environments, and struggle with rising rate environments until rates stabilize and the portfolio has been turned over. Their portfolio of loans is really a bond ladder, and sensitivity to rising rates depends on the duration of that portfolio. The big investment banks also get hurt on flagging market returns and decreased M&A activity.

Could be. Thing is though, when the Fed says they are standing firm on rates utilities have gone up and financials have gone down.

If the banks favored this current rate environment, why are bank stocks not participating in the rally when the fed says its pushing the rate increase further down the road?

I'm not an expert on all that drives a banks balance sheet so just tossing out there what I've heard over the years in terms of asset classes that do well in rising rate environments and financials always seems to show up on list. Current stock performance in bank stocks supports that.

Although I certainly recognize other factors could also be driving the big underperformance in financials.

[Kodiak]

If the banks favored this current rate environment, why are bank stocks not participating in the rally when the fed says its pushing the rate increase further down the road?

Who knows. I'm reading the banks stocks are being impacted by Brexit, though I don't know the mechanics. They don't just move in lockstep with Fed rates, either - the 10-yr has rallied and that's the proxy for the mortgage market.

Rates have been low for a long time, and ignoring QE the spreads are probably pretty stable by now. Those spreads, which drive profitability, are probably pretty similar when rates are unchanged for years whether the Fed rate is 0.25% or 6.25%. Actually just looked at a study saying spreads are pretty narrow historically.

[955876]

Who knows. I'm reading the banks stocks are being impacted by Brexit, though I don't know the mechanics

Exactly. Brexit is another reason why the Fed pushed rate hikes further down the road. It's all intertwined.

Although with all the uncertainty surrounding Brexit, I think a good number of people are trying to figure this out as they go.

For me, I just hope things don't get too bad in terms of a correction as I really don't have the time to deal with any of it. In a bad spot in that regard as issues at home dominate my time. I'm very fortunate my firm has allowed me to take all the time I need to deal with those issues but that doesn't do anything about all the work that needs to get done that doesn't.

So I cross my fingers and try to keep the stress level down. I just had to take another three weeks off and the day I left work was he day of the Brexit vote. So I was a bit nervous to say he least after the Dow shed 900+ points over the next two trading days. To say I'm VERY pleased it bounced back so quickly would be an understatement. Helped me out a lot.

[Legacy User]

When we get to negative interest rates, the only thing that will make sense is a run on the banks. I'm not paying them to keep my money.

[955876]

When we get to negative interest rates, the only thing that will make sense is a run on the banks. I'm not paying them to keep my money.

Have you been following what Japan is tossin around? I'm only going on what I heard in conversation here with an associate and haven't done any reading or research on it myself. So this might not be the full scoop.

Japan is talking about issuing perpetual zero coupon bonds. These bonds have no maturity and no coupon payments. The bank of Japan will then buy these bonds.

A means of creating stimulus without ever having to pay the money back.

It's either genius or a path to ruin.

[Legacy User]

If any private company tried to do that, they'd be sharing a cell with Madoff.

It is utter desperation yet dip shits in the major financial media cheerlead insanity.

The emperors (Fed, NWO, EU, all central banks) have no clothes, we realize this right?

The West and Japan have absolutely fucked themselves with low birth rates, social safety nets and immigration (save Japan) and are going to try and fail to print themselves out of it.

When has that ever worked?

A Ponzi scheme is genius until it eventually fails, and it always does.