Thread: coolhand's Account Talk

Originally Posted by Scout333

Cool, Any thoughts on where mortgage Reits are headed in this market. I.E. the American Capitals and Annalys of the world. You would expect valuation decreases when interest rates go up and we have seen some of that. Considering bailing but hard to leave 15-16% dividends.

I agree on the very nice dividends these instruments throw off, but most are leveraged and very susceptible to rate increases as you know. I have no idea what to expect and here's why. This is very important.

Ben Bernanke is talking about leaving the Fed. That is not a minor issue for the market. This market has been liquidity driven for some time and introducing a new Fed Chair brings with it a very high degree of uncertainty of how the new Fed Chair will manage current Fed policies. No one knows when this might actually happen, but the Fed is meeting today and tomorrow and will make their usual announcement at the meetings conclusion on Wednesday. Anything can happen depending on what is said or not said tomorrow. It's anyone's guess. I'm not saying they "will" announce a new Chair, only that it's a very real possibility. Markets hate uncertainty and no trader or investor can be sure how this will play out at this time.

Wow good call on FAX. 5% turn around from LOD to ending near HOD today. I'm considering it but would have loved those gains lol

Originally Posted by bmneveu

Wow good call on FAX. 5% turn around from LOD to ending near HOD today. I'm considering it but would have loved those gains lol

I saw that volatility today and was a bit surprised by how far down it fell in early trading. If I could have watched it more carefully I would have bought more today too. But by the time I saw how it was trading, the LOD was already in and that was 0.24 below the previous close, or about 3.6% down. That's okay. There's always other opportunities. And the Fed may generate some more very soon.

Originally Posted by coolhand

I agree on the very nice dividends these instruments throw off, but most are leveraged and very susceptible to rate increases as you know. I have no idea what to expect and here's why. This is very important.

Ben Bernanke is talking about leaving the Fed. That is not a minor issue for the market. This market has been liquidity driven for some time and introducing a new Fed Chair brings with it a very high degree of uncertainty of how the new Fed Chair will manage current Fed policies. No one knows when this might actually happen, but the Fed is meeting today and tomorrow and will make their usual announcement at the meetings conclusion on Wednesday. Anything can happen depending on what is said or not said tomorrow. It's anyone's guess. I'm not saying they "will" announce a new Chair, only that it's a very real possibility. Markets hate uncertainty and no trader or investor can be sure how this will play out at this time.

When they do name the new chair I don’t think we will see a radical change from what has been going on.
The Fed is creating a bubble with these low interest rates. If and when the bubble burst is anybody's guess.

I checked the auto-tracker positions this morning just to see where folks are leaning. The Total Tracker is showing a modest dip in stock allocations (close to 2%), while the Top 50 has a modest increase (about 2%) in stock allocations. Nothing out of the ordinary and certainly no signal to be gleaned other than the continued drop in Total Tracker allocations is longer term bullish. But the intermediate term is very questionable and in fact I'd call it bearish right now. The short term appears okay, but today's Fed announcement has the potential to change things quickly. I know Wall Street is carefully watching this announcement, perhaps more than usual, but it could turn out to be a non-event if nothing out of the usual is announced. We'll see soon enough.

Originally Posted by markmars

When they do name the new chair I don’t think we will see a radical change from what has been going on.
The Fed is creating a bubble with these low interest rates. If and when the bubble burst is anybody's guess.

The bubble is in the bond market and air is already being released. There was $17.672 billion that exited bond funds in two weeks - most of it is hiding in money market funds for now. Eventually more money will flow to stocks - there is no better choice.

Originally Posted by markmars

When they do name the new chair I don’t think we will see a radical change from what has been going on.
The Fed is creating a bubble with these low interest rates. If and when the bubble burst is anybody's guess.

One would think. But yields have risen in recent action and that has the market a bit on edge. If we were to have a continuation of the current correction, I'd like to be properly positioned for it. That's why I'm currently 40/60 stocks/cash. I have one IFT left this month, so I can reenter stocks should conditions warrant such.

Originally Posted by Birchtree

The bubble is in the bond market and air is already being released. There was $17.672 billion that exited bond funds in two weeks - most of it is hiding in money market funds for now. Eventually more money will flow to stocks - there is no better choice.

It does have to find a home and obviously the money market is only a temporary position for most. But you can't deflate the bond market without raising the specter of inflation either. And this economy is hardly robust enough to endure that scenario without negative consequences. I have no idea how it plays out, but it will be interesting and I've got positions in both stocks and bonds, so I'm ready for anything.

Low interest rates and low inflation are like rocket fuel for the stock market. At some point there will come a recognition and if money is to be made going forward you have to own the risk trade. If the current round of QE remains open ended, that raises the probability that QE 3 fueled rally may surpass in length the previous rallies - how high is the sky.

Originally Posted by Birchtree

Low interest rates and low inflation are like rocket fuel for the stock market.

Then why has Japan been in a bear market for 20+ years?

Good question. I think "in a normal economic environment" low interest rates and low inflation sound like a good thing. But Japan is staring down the barrel of deflation, and there is nothing that they can do to defeat it. Obviously a trillion bucks thrown at it did nothing. Maybe they should summon Godzilla.

BTW, I think we're a year or two away from becoming Japan's economy.