Friday, June 13, 2008
Thursday, June 12, 2008
Nasdaq vs. Homebuilders vs. Oil
The price of oil has risen 729.58% from its low on November 19th, 2001 to its closing high of $138.54 on June 6th. When compared to the tech bubble of the '90s and the real estate bubble earlier this decade, oil's rally is just about in between the two.
As shown below, from the Nasdaq's significant bottom on June 24th, 1994 to its peak on March 10th, 2000, the index rallied 639% over 2,086 calendar days. From its bottom on March 14th, 2000 to its peak on July 20th, 2005, the S&P 1500 Homebuilder index rallied 839% over 1,954 calendar days. Surprisingly, oil's rally is now longer in duration than both the tech and real estate bubbles at 2,391 calendar days.
As we all know, the tech and real estate bubbles eventually burst and fell by as much as they rose. Their declines were very similar in both duration and size as well. While significant gains in any asset class carry their own set of circumstances and positive arguments, it's hard to look at this chart and not expect to see oil's red line come down significantly at some point. The demand argument for oil might be strong, but there were no shortage of "demand" arguments during prior bubbles either.
As shown below, from the Nasdaq's significant bottom on June 24th, 1994 to its peak on March 10th, 2000, the index rallied 639% over 2,086 calendar days. From its bottom on March 14th, 2000 to its peak on July 20th, 2005, the S&P 1500 Homebuilder index rallied 839% over 1,954 calendar days. Surprisingly, oil's rally is now longer in duration than both the tech and real estate bubbles at 2,391 calendar days.
As we all know, the tech and real estate bubbles eventually burst and fell by as much as they rose. Their declines were very similar in both duration and size as well. While significant gains in any asset class carry their own set of circumstances and positive arguments, it's hard to look at this chart and not expect to see oil's red line come down significantly at some point. The demand argument for oil might be strong, but there were no shortage of "demand" arguments during prior bubbles either.
Tuesday, June 10, 2008
Shrinking US
Below we highlight a chart of world market cap since 2004 along with the percentage of world market cap that US stocks make up. The current value of stocks worldwide is just over $54 trillion according to Bloomberg. US market cap currently stands at a little more than $16 trillion, which puts it at 29.9% of world market cap. While 29.9% still puts the US at more than 3 times the market cap of the second biggest country, Japan, it is much lower than it was just a few years ago.
As shown in the chart, US market cap as a percentage of the world has steadily drifted lower over the last four years as global stocks have risen more and the dollar has declined in value. At the start of '04, the US made up nearly 45% of global market cap. Only time will tell if the world will get continue to get flatter or if the US will widen its market cap lead again.
As shown in the chart, US market cap as a percentage of the world has steadily drifted lower over the last four years as global stocks have risen more and the dollar has declined in value. At the start of '04, the US made up nearly 45% of global market cap. Only time will tell if the world will get continue to get flatter or if the US will widen its market cap lead again.
Monday, June 9, 2008
Regarding Comments
I have received a few comments but for some reasons I couldn't reply in the comments section, anyway, thanks a lot for your compliments. As for where I get the articles, since I went to so many sites everyday it's hard to list all.
Briefing Speaking
1) The two most amazing things about the decline on Friday were that it was the worst Friday ever (down 45.80 in S&P futures) after an up Thursday, and that the Chairman, who talked at Harvard on Wednesday about the soundness of the economy, apparently didn't have the number in hand, as I have always treated his utterances as if he knows the next announcement at least three days in advance. The Kennedy School once bought a million + cache of vintage refreshments and presumably a similar effect must have caused the lapse. Of course, the teenage employment aspect is just one more fly in the ointment of the usual random numbers that greet the employment report, sure to be reversed on a statistical basis by the next random number which starts out with a strong bias from regression to mean effects for levels.
2) No wonder Visa and Master Card are up 100% over the last year. Apparently they're predicting 20% a year growth in credit card use as other countries and affinity groups increase their use of credit. Its now "debit or credit" rather than "cash or check." I was particularly interested in all the companies catering to the credit card companies as they would stand to grow as the epyphytes do on Google. Such companies as Total System Services and Heartland Payment Services, Fidelity National Information Services, which do the paperwork for the credit cards. The analysts make much of the fact that the credit card companies don't take the risk on their transactions but pass it on the banks. And certainly the paperwork companies would seem to be doubly removed. They seem like good buys relative to their growth prospects, and the adage that they do lead in the recessions and lead in the recoveries should be tested as should the similar phenonenon for brokerage companies. I was fortunate to be thrust into this line of thinking by having my credit card stolen when a park office would only issue me a $10 permit if I paid by credit card. The next day someone used my number for a four-figure purchase. Apparently thieves have cameras that can scan the front and back of credit cards. They have to go up against the security companies that can match every transaction at a cash register to a photo ID, even months later. The ingenuity of the credit card thieves, as underlined by a recent article in Boardroom Reports, is impressive.
Even more impressive to me was the followup that the biggest credit card company came up with. When I called, an agent offered me a big loan at 1.75%. After putting me through 15 minutes of identifcation they noted the fee was 3% sign-on. When I remarked that I would have appreciate they telling me that at the beginning (I never lose my temper, after 10,000+ competitive squash matches), they immediately dropped it to 1% and offered to qualify me for a bigger loan. They put me through a five-question credit scoring test based on cash flow and occupation ("speculator.. I mean, executive").
The flexibility they show in price discrimination, and reducing consumer surplus, and gaining a customer with a short term premium was impressive. Combined with their projected 20% a year growth, as "credit or debit" rather than "cash or check" becomes the new mantra, they seem to have many of the elements of a good business.
2) No wonder Visa and Master Card are up 100% over the last year. Apparently they're predicting 20% a year growth in credit card use as other countries and affinity groups increase their use of credit. Its now "debit or credit" rather than "cash or check." I was particularly interested in all the companies catering to the credit card companies as they would stand to grow as the epyphytes do on Google. Such companies as Total System Services and Heartland Payment Services, Fidelity National Information Services, which do the paperwork for the credit cards. The analysts make much of the fact that the credit card companies don't take the risk on their transactions but pass it on the banks. And certainly the paperwork companies would seem to be doubly removed. They seem like good buys relative to their growth prospects, and the adage that they do lead in the recessions and lead in the recoveries should be tested as should the similar phenonenon for brokerage companies. I was fortunate to be thrust into this line of thinking by having my credit card stolen when a park office would only issue me a $10 permit if I paid by credit card. The next day someone used my number for a four-figure purchase. Apparently thieves have cameras that can scan the front and back of credit cards. They have to go up against the security companies that can match every transaction at a cash register to a photo ID, even months later. The ingenuity of the credit card thieves, as underlined by a recent article in Boardroom Reports, is impressive.
Even more impressive to me was the followup that the biggest credit card company came up with. When I called, an agent offered me a big loan at 1.75%. After putting me through 15 minutes of identifcation they noted the fee was 3% sign-on. When I remarked that I would have appreciate they telling me that at the beginning (I never lose my temper, after 10,000+ competitive squash matches), they immediately dropped it to 1% and offered to qualify me for a bigger loan. They put me through a five-question credit scoring test based on cash flow and occupation ("speculator.. I mean, executive").
The flexibility they show in price discrimination, and reducing consumer surplus, and gaining a customer with a short term premium was impressive. Combined with their projected 20% a year growth, as "credit or debit" rather than "cash or check" becomes the new mantra, they seem to have many of the elements of a good business.
Friday, June 6, 2008
Thursday, June 5, 2008
The market broke out today
This is the first post written by me. Because this is a new indicator I am studing and I would like to keep tracking it.
Market broke out today, not so much about the amplitute, but rather by the volume, and to be more accurate, by the distribution of volume, there were three big spike in volume in sp500, all of them happened during rising period. Also, biggger volume happened during closing and it was when the big up occured.
Market broke out today, not so much about the amplitute, but rather by the volume, and to be more accurate, by the distribution of volume, there were three big spike in volume in sp500, all of them happened during rising period. Also, biggger volume happened during closing and it was when the big up occured.
Monday, June 2, 2008
DOW 30 Underperform spx 500
After outperforming by a pretty large margin for most of the year, the Dow Jones Industrial Average is now underperforming the S&P 500. As shown below, the Dow 30 is now down 6.12% in 2008 versus -6.01% for the S&P 500. With AIG, MRK and GM all down more than 30% this year, and C and MSFT down more than 20%, it's not hard to see why the Dow is now struggling.
At the start of the year, not too many people thought they would be thanking Wal-Mart (WMT) for holding the index up.
At the start of the year, not too many people thought they would be thanking Wal-Mart (WMT) for holding the index up.
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