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Tuesday, July 1, 2014

Daily update 7/1

New all time all high close.  DJ30 came within two points of 17000.  Here is the daily SPX chart.

They gapped it up and kept on buying until the 1:00 hour.  It was mild selling the rest of the day.    Volume increased slightly today.  The new high data was a bit odd.  There were 360 NYSE new highs, but only 70 SPX new highs.  The previous new high peaks were 353 and 103.  I am not sure why there was a 30% drop in SPX new highs.  I also don't know if it is important or not, but does seem odd.  Lets take a look at the futures chart.

There are three slightly higher peaks on this chart.  Sometimes that makes a short term top.  Hard to predict a runaway market. 

All day long I heard a lot of come on in the water is fine.  Ron Insana was nice enough to inform me I should not be worried about high valuations because interest rates are low.  I was also told that people have been waiting two years for a correction.  Forget about it.  Jump on in. I heard the market is going up on liquidity and momentum.  There is a great investment thesis if I ever heard of one.  Then I was told it is a TINA (there is no alternative)  market.  That sounds like another great investment premiss to me.  I guess you must put every single penny you can spare into equities.  It is a can't miss opportunity.

Interesting paper from the BIS.  Worth reading. 84th BIS Annual Report, 2013/2014  A few interesting snippets from it.

By mid-2014, investors again exhibited strong risk-taking in their search for yield: most emerging market economies stabilised, global equity markets reached new highs and credit spreads continued to narrow. Overall, it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally.

The BIS thanks the markets may be disconnected from the underlying economy.  Rather odd central bank talk. 

In this second phase of global liquidity, corporations in emerging market economies are raising much of their funding from international markets and thus are facing the risk that their funding may evaporate at the first sign of trouble. More generally,countries could at some point find themselves in a debt trap: seeking to stimulate the economy through low interest rates encourages even more debt, ultimately adding to the problem it is meant to solve.

That is the first time I can recall seeing central bank talk that the problem of too much debt might not be cured by more debt.  What a concept.

Finally, looking forward, the issue of how best to calibrate the timing and pace of policy normalisation looms large. Navigating the transition is likely to be complex and bumpy, regardless 
of communication efforts. And the risk of normalising too late and too gradually should not be underestimated.

The BIS is often referred to as the central bank of central banks.  This seems like rather frank talk from them and they seem a bit concerned about the current situation.  Not to worry.  I am sure the FED is totally and completely on top of everything that could go wrong.  There are many more interesting statements in that report.  


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.