Posts Tagged markets

A Mixed Bag of More of the Same

“Thinking is difficult. That’s why most people judge.” – Carl Jung

Many observers are surprised with the current levels of US Stock Indices. There is so much talk about stretched valuations, Trump Trade being over, the potential damage of rising interest rates, trade/currency wars, political uncertainty, rising inflation and last but not the least, the aging economic growth cycle, that given all this, stock prices seem unjustified.

Looking at this wall of worry, one might conclude that “the winter is coming” and it’s time to run to the hills away from the White Walkers, short sellers and bearish bets.

In the past, I have seen how Republican leaning investors, commentators and strategists have allowed their political views to cloud their judgement, and how this led to misguided conclusions, most of which, have been proven wrong.

Unlike the popular rhetoric, the stock market rallied during Obama years, the dollar got stronger, inflation has been tamed, unemployment dropped like a rock, the economy grew and the US has become the safe house in a shady neighborhood.

The thorns of this rosy picture have been stagnant incomes, and stubbornly elevated public debt.

Learning from this experience, investors need to set aside their political views and think with facts in hand, not allowing their preconceived notions to get in the way.

I will address these concerns, and conclude that the stock market still has room to grow, pullbacks are likely and they should be used as buying opportunities.

Concern 1: Stretched Valuations

No matter how you slice and dice it, stocks are expensive. Questions to follow:

1 – How expensive?

2 – Can they go higher from here?

They are extremely expensive when you just look at absolute, traditional, isolated price to earnings ratios. If this is your only gauge, the answer to the second question is a short “no”, and they can’t get go much higher from here.

But when you look at relative factors, especially when compared to other investment vehicles like bonds, real estate, commodities and currencies, stocks still seem to provide growth potential. Roughly a third of US domestic stocks’ dividend payout rate is higher than the yield on 10 Year US Treasury.

In other words, when compared to especially low bond interest rates, stocks are only moderately expensive and the answer to the second question in hand is a “yes”, they can still go higher.

Also, from a purely investment strategy point of view, all we really care about is the asset price action and when we dive in to it, we get good and bad news.

The bad news is that high valuation is a pretty reliable indicator of investment returns in the following 10 years. The good news is that the same cannot be said about the following 3 years. So, if history is any guide, one can conclude that the investment strategy could be to ride the wave while it lasts, especially in the next 3 years but moot your expectations for the next 10 year returns.

Concern 2: Aging Economic Expansion and Bull Market

We are in the eighth year of a stock bull market and economic growth. On average, economic expansions last about 5-7 years and the longest has been 10 years (1992-2002). The stock market not only hasn’t seen a bear market since 2008, it also hasn’t seen a 10% correction for 287 market days as of 4/1/17. So justifiably, some argue we may be approaching a rest stop with a horrible vista point.

I will counter this argument and hope to offer some consolation with 3 supplemental sets of facts.

1 – First let’s get the 287 market days without a 10% pull back, out of the way. Assuming we are in a long-term bull cycle, this is well within historical averages.

2 – The US stock market hasn’t seen bear claws since 2008, but came pretty close with a 15% correction (Q2 2015 – Q1 2016). During the same period, global stock market did face the bear with many developed economies’ losses of well over 30%.

3 – If we expand the above-mentioned period to Q1 2014 – Q1 2016, we’ll see a stock market that was flat for two years (consolidation). Such periods can and do act like a bear market, especially when they last for two years.

On the topic of economic expansion, the key thing to remember is that in spite of its duration, the growth level is still well below past recoveries, and current indicators do not waive the checkered flag for the stop pit.

Concern 3: Rising Interest Rates

It is true that stocks struggle during rising interest rate environments. The reasons for that are plenty but the usual suspects are: 1 – Increasing cost of money, makes it costlier to do business and invest; 2 – Some fixed income securities’ yields start to look attractive compared to risk adjusted equity returns.

That being said, current levels are low enough to give us some time  before the danger zone. If you’d like me to be more specific, the 10 Year Treasury Yield is at approximately 2.5% and historical tendencies point to a 4% rate as the line in the sand in the tug of war. Based on FED actions, it may take us till the end of 2018 or into 2019 to reach that point. Since I try not to make predictions that far in advance, knowing what I know now is good enough to conclude that the current rising rate environment may not hinder equity returns.

Concern 4: Political Uncertainty

Markets have welcomed Trump’s presidential victory as they saw four arrows in his quiver:

1 – Tax cuts

2 – Lower regulations

3 – Fiscal expansion

4 – Trade wars.

Except for trade wars, the rest are deemed to be business friendly and hence will boost earnings. Well, this is a typical case of confirmation bias at least from the earnings point of view. As of 3/31/17, S&P 500 Operating Earnings Per Share has gone up 22.1% (Source: S&P Dow Jones Indices).

In other words, the earnings environment is the best in years and this is due to the pre-Trump economic environment, finally acknowledged by Republican leaning market participants, who for years have advocated a recession. (Sorry to sound speculative and like a sour cherry here.)

I welcome this development as it not only reflects domestic facts more accurately, but also global positive economic surprises.

For those curious minds, the biggest jump came in materials and technology sectors, 36% and 32% respectively, while the biggest loser was real estate by -32%.

In other words, given that a simpler tax code is better for business and the economy, smart deregulation can translate in to a more robust business environment and fiscal expansion is past due because of the FED’s inability to stimulate, setting politics aside, current stock levels may be justified.

Summary

For those readers who look for the blue or the red pill type of conclusion from all this, here is your takeaway:

  • Yes, the market seems moderately stretched
  • Therefore, a correction may be around the corner
  • “Sell in May, Go Away” strategy may prove prudent this year as we approach seasonally weak summer months
  • That being said, long term economic and market trends are in tact
  • Therefore, dips should be seen as buying opportunities
  • Volatility may increase, so tighten your seatbelts and keep your eyes on your long-term objectives

Thanks for reading my commentary and as always, you can reach me at bbakan@shieldwm.com for questions and comments.

 

Disclosure

The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy.

The information provided is not intended to be a tax advice. Investors should be urged to consult their tax professional or financial advisers for more information regarding their specific tax situations.

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What is Wrong with the US Stock Market?

“Life is pleasant. Death is peaceful. It is the transition that is troublesome.” Isaac Asimov

 

A client and friend asked why the current US stock market was having a hard time finding a path and if I saw this lack of a path as a threat to the global financial stability.

I started my reply with “In short…”, only to realize I had promised in my last newsletter, to share reasons to be bearish in my next newsletter and Eureka! Without further adieu: “6 reasons why US stock markets are having difficulty forming an uptrend.”

Reason 1: Transition from the Industrial Revolution to Information Age

We are at a juncture where multiple trends are ending and are in transition to the next. The biggest one of these is the end of the Industrial Revolution, which started in the late 1800s in England and probably lasted until the end of the 20th century. I use caution here as trends and cycles are difficult if not impossible to define while in them. Most of the political and economic concepts we live in or with, were either born or have grown strength as a result of this mega step in human history. The world’s governmental and economic systems are built to support this industrial life style based on production, transportation and consumption of goods, while supported by the banking system whose function is to turn profits into investments for businesses and lending for consumers.

And then, there came the technological revolution and globalization. In this new world, information and ideas may have become more important than having access to capital, as money is easily and readily available to invest in marketable ideas. Labor markets are global and therefore more competitive. National borders are less meaningful, as resources move faster than ever. Education systems, at least here in the US, fail to prepare the youth for the skills needed in this new economy. Automation is taking over human participation in production. Productivity growth no longer equals income growth. Since 1970’s incomes haven’t been able to keep up with productivity growth and the gap has been widening (except in the last few years because of falling productivity). With the use of computerized trading systems and financial engineering, risks and returns have grown exponentially. The level of welfare and the income distribution policies are a discussion for a heated debate, as haves can reach resources globally, while have nots end up competing against poorer parts of the world who are willing to work for much less.

As a result of this mega shift, there are 5.5 million job openings in the U.S. that can’t be filled, which was 3.5 million only two years ago. The capital markets and investors are trying to adapt to this new wave of technologies, business models and get a better sense of the present and projected valuations, while seeking balance in risk/return relationships. This tug of war between the past and the future is forcing the global economic machine and its capital markets to give errors in the forms of global financial crisis, massive computerized trading errors, discrepancies in valuations and increased volatility. Are these new challenges? No. But their magnitude brings us to an uncharted territory and at times, the capital markets act like a deer in the headlights. This long period with a sideway trend we have been in since November, could be one example.

Reason 2: Global Economic Slowdown

Are we in a global economic recession? No. According to the Organization of Economic Co-operation and Development (OECD), there have been 13 global downturns since 1960, last one being in 2011, with average length of 22 months. It looks like every 4-7 years, we go through a global recession and it wouldn’t be outside of historical averages if we experience a slowdown in the next 3 years. According to IMF calculations, global economic growth rate was 3.4% in 2014, estimated to be 3.5% in 2015 and 3.8% in 2016. So there is no global downturn currently or in the projected near future. However, it is not robust growth by any means and so it’s vulnerable to shocks. The strongest headwind for growth is the debt hangover. Governments and consumers are trying to pay down their debt as opposed to investing and spending, a minus effect on growth.

In most cases, when the US joins the international community and contributes to negative growth, markets react with a sharp decline. However, when the US is in growth mode while the rest of the world slows down, US stock markets typically go sideways. Given the problems in the EU zone and Japan, the slowdown in the Emerging Markets and US growth rate at around 2.5%, the sideway trend can at least partially be explained by the state of the global economy as a whole.

Reason 3: The Federal Reserve (FED)

We are in a central bank driven, multiple expansion based bull market. (Multiple expansion is paying a higher price for given earnings). Once the FED starts the tightening phase, we will be in a different zone and the US stock market’s reaction will depend on the speed of the rate increase.

Usually market tightening cycles start during an uptrend. Going back to all tightening cycles since 1946, the S&P continues the uptrend for another 4 months after the tightening begins (average of 5 cases). In the case of a fast tightening cycle though (7 cases) a sharp decline immediately starts with the tightening, lasts for 3 months to fully recover in 6

months (Source: NDR). So the speed of the hike is more relevant than the hike itself. Will the FED push rates up at a fast or slower pace? Most likely at a slower pace because the economy is growing at an annual rate of 2.3%, and the inflation rate that FED considers is at 1.8%. Slow growth, no inflation and lackluster income growth doesn’t give FED enough room to push the paddle to the metal. Even so, the markets are trying to adjust to the fact that probably the tightening cycle is only a few months away and as Isaac Asimov noted: “Transition is troublesome.”

Reason 4: Strong Dollar

It is usually a good sign when a currency strengthens. It shows that a country’s stability, the value given to its promises and its credibility are rising. It is however a headwind in the short term for the exporters as it makes the exported goods more expensive. About half of all revenues generated by the S&P 500 companies come from overseas. A strong dollar shrinks those revenues and makes it harder to increase market share. It is however also making imports cheaper, lowers input prices and so mutes the inflation. Since the US doesn’t have an inflation problem, the dollar strength isn’t helping. In time, a better and more efficient allocation of resources can and will usually fix this problem (which is good to have), but it does hurt growth while adjusting to it.

Reason 5: Low Energy Prices

Similar to a strengthening dollar, lower energy prices can be a good thing only if those savings were allocated efficiently elsewhere. The reason why it is a negative for now is that the energy companies are the largest contributors to capital expenditures (capex). Low oil prices mean low revenues for energy companies and low revenues mean low capex. Since one’s expense is another’s income, lower spending subtracts from growth. Also, their profit decline lowers their stock prices, adding more pressure to the market indexes.

Reason 6: Stretched Valuations

Valuation is how much one pays to a security for expected returns (capital gains and income) at the risk level of that return to materialize.

Currently, the stock valuations are a bit stretched. Not so much that major indexes are in a bubble territory, but they certainly are not fairly or underpriced. One area that is in bubble territory is the dividend paying stocks. Those seeking yield have been discouraged by the bond market and have found refuge in dividend payers, which made that space a bit crowded.

The market is more vulnerable to shocks with stretched valuations. There is still upside potential…but the volatility in prices is harder to handle for many investors.

Summary:

The bottom line is that the bull market doesn’t end because it gets tired or it expires. It usually ends because of a recession, bubble type extreme valuations or extreme investor optimism. Currently, we are experiencing none of the above.

I have shared with you the reasons to be bullish and bearish in two market updates. Hope you have enjoyed – see you next time.

Disclosure

The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy.

The information provided is not intended to be a tax advice. Investors should be urged to consult their tax professional or financial advisers for more information regarding their specific tax situations.

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Markets Comfortably Numb, or Confused?

“It is easier to find man who will volunteer to die, than to find those who are willing to endure pain with patience.” Julius Caesar

If you think the stock market was down 5% since November, then up 8%, then down 2%…and it’s been on a trade mill during which time the end result performance has been flat for the last 8 months – you’d be correct (you’d get a very similar result with Dow Jones). In more detail:

On November 26th 2014, S&P 500 closed at 2072.83. Lowest we’ve seen this large cap US equity index that we call “market” hit since then, was on December 16th at 1972.74. The highest point was on May 21st 2015 at 2130.82. The drop from November to December was 4.8%, and the increase from December to May was 8%. On Friday June 12th, this index closed at 2,094.11, 1% above November 26th high!

Well, then bonds must have done relatively well, right? No…20 year treasury (Symbol TLT) index is down 2.9% in the same period (Nov 26 – June 12) and in fact down 6.3% year to date…

How about commodities (Symbol DBC)? Down 17.8% since Nov 26th and down 4.7% year to date.

US small cap equity index (Symbol IJR) is up 5.6% since Nov 26th and up 4.9% year to date.

Lastly, a safer bet in stocks, utilities is down 6.9% (Symbol IDU) since November.

Emerging markets (EEM) is down 4.98% since November 26th and developed internationals (EFA) is up 2.6% (Please note that I look at investable ETFs instead of an index as they are better indicators of money flow.)

So what does this picture tell us about the present and the future of capital markets? Short answer: it’s a mixed message. Volatile and yet flat, not knowing which direction to take. Let’s dive deeper.

The U.S. Economy

The good and bad news about the US economy is that it’s growing at a moderate paste, or one can call it a “sluggish growth”. This is good because we are far from recessionary pressures as some fear mongers would like to argue, bad news because it is below the historical averages and expectations.

Every period has phrases that become short term clichés and sometimes for good reasons. Last quarter’s cliché reward goes to “Extreme Weather Conditions and Port Disruptions”, which was seen as the main root of the negative real annualized GDP growth of 0.7% during the first quarter. (Notice how I used negative growth as opposed to contraction…it should say something about our addiction with growth). Market reaction to this news was a “meh”…for two reasons 1 – The cliché accurately described the main reasons behind the contraction and both conditions dissipated, which signaled an expected stronger second quarter as a result. 2 – By some measures, there was no contraction. For instance if you look at Gross Domestic Income (GDI), which in theory should be the same with Gross Domestic Product (GDP), as one’s spending is another person’s income. GDI grew 3.6% year over year versus 2.7% growth in year over year increase in GDP. The difference arises due to different data sources and these two figures converge in the long run. The gap suggests that GDP is not accurately capturing all the output in the economy and understating growth (Source: Ned Davis Research).

So first quarter contraction should largely be ignored and deservedly it was. The economy did slow down because of a shrinking shale gas industry, stronger dollar and the cliché mentioned above but there is a big question mark on contraction.

Second quarter and second half of this year is expected to bring stronger economic growth. I base this conclusion on forward looking indicators such as Purchasing Managers Index and most current data on revised retail sales to the upside, exceptional strength in auto sales, strong employment trends and rising incomes.

Stocks, Bonds and Commodities 

The mixed message from the main asset classes is probably the following: the longer term uptrend in stocks is likely to continue. Shallow declines should be seen as buying opportunities. Long term bull markets in bonds and commodities are likely to be over.

When the stock market goes sideways for 3-4 months let alone 8, unless a catalyst for a deep correction is on its way, it usually builds up for the next up trend. Why? Because this period frustrates the investor, bullish sentiment quickly fades, patience is replaced by pessimism and negative sentiment is bullish for stocks (just like extreme optimism is bearish). Negative sentiment is bearish because it signals a built up of potential buyers if and when the tide turns.

Along with an improving US economy, negative investor sentiment is likely to turn into a tailwind for the stock market during the second half of the year.

Those who have been waiting for a correction may not be aware but one form of a correction is a long side-way trend. Is 8 months long enough? We shall see.

Summary

A few take-aways from the market action during the first half of the year are:

  • Long term bull market in bonds and commodities might be over.
  • Second quarter US economy and second half stock market may perform better than the prior period.
  • Small cap out performance gives hope for a sustained uptrend.
  • Utilities under performance confirms the possibility of an uptrend. Why? Because as the market matures, the defensive sectors outperform growth oriented sectors (a rotation towards lower beta). Defensive sectors’ under performance keeps the bulls in the game.
  • International opportunities may out shine US investments, but for only those with patience and longer time horizon, as the timing of this switch is impossible to guess.

The contrary view to the market building for the next uptrend argues that the valuations based on price/earnings ratios are stretched, margin debt (to borrow and invest) is at extreme highs, we are coming close to the end of the business cycle, cash ratios are at extreme lows (everybody who is to be invested already is) and we haven’t had a meaningful correction (over 15%) since 2011.

In my next newsletter, I will expand on these bearish opinions because they are noteworthy. For now, the bull is still running, a little confused and tired may be, and so taking it’s needed rest, but until proven otherwise, a benefit of the doubt should be granted.

How to counter the bears and what to say about FED’s next move? That’s for the next commentary.

Disclosure

The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy.

The information provided is not intended to be a tax advice. Investors should be urged to consult their tax professional or financial advisers for more information regarding their specific tax situations.

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Macro Factors In Play

“It is better to be vaguely right than precisely wrong.” –   Wildon Carr, 1942

 

My last market commentary’s title was “Dollar Is Up, Oil Is Down, Stocks Get Confused”. If you’re wondering why I haven’t written a newsletter for the last few months, that’s because this analysis has been as valid as it was a few months ago. Since November 2014, stocks have been in a sideway trend, dollar has been climbing up and oil looking for a bottom at around $40-$50 per barrel.

Some investment strategists argue that at this stage of the bull market, the name of the game is picking individual investments instead of indexing. They put this forward by looking at breaking correlations among asset classes and securities. In the early stages of a bull or a bear market, correlations rise, related asset classes move in tandem. As the trend starts to mature, correlations break and stock/bond pickers become popular again.

Though there is some truth in this, correlations haven’t shown a sustainable divergence pattern, meaning, just when they seem to be on their own, a heavy hitter gets a seat at the table and a brand new set of cards are dealt. The US dollar, oil, cold weather, port disruptions, Janet Yellen and foreign tensions are the most noteworthy examples.

I’ll argue, macro factors such as mentioned above are still the dominant players and paying attention to them would be wise. British Philosopher Wildon Carr’s quote makes so much sense when applied to capital markets. A diversified portfolio by definition will have less than perfectly correlated securities and some of them will zig while others zag. If you call this being vaguely right, it surely beats being precisely wrong on a stock holding that is 100% of your portfolio. So please remember this before you get too comfortable with your individual stock selections and don’t dismiss your diversified portfolios entirely, but rather supplement your allocation with individual holdings to get the best of both worlds.

Oil

Oil has been, and probably will for a while be, a headline topic for market followers. It has lately settled in $40-$50 per barrel range with significant daily price fluctuations. I have recently seen a report on future oil contracts, an estimate of the future price traders are willing to pay, and it points to $30/barrel oil. I personally think $40 dollar is the near term floor simply because below those levels, there aren’t many producers that can survive without making money.

This is a double edge sword. Cheaper oil pushes prices down and as a result helps improve savings rate along with consumer confidence. On the other hand, troubled refineries and depressed levels of oil production put a cap on capital spending. This has already been seen in shrinking durable goods orders, which is a big red flag for the markets. In the long run however, once the savings come back to the system as investments or pent up demand, the lost production can be re-gained. So in the short term, lower oil prices may hurt production and capital spending, but increased savings can translate into investments and higher consumption in the coming months.

Dollar

 Can you have too much of a good thing? Too strong of a dollar can surely be an example. The timing of the dollar strength has taken care of two interrelated worries for some: An overheating economy and inflation. If you remember, the 3rd quarter growth rate was 5%, which is high enough to cause inflation and push FED to move with their rate hike sooner rather than later. A stronger dollar lowered import costs and subdued inflation, while making exports more expensive and lowering large exporters’ profits. 4th quarter economic growth rate was 2.2%, clearly nowhere near overheating territory, accompanied by a 1.8% inflation rate. The strong dollar is not solely responsible, but surely had a role in it. In the short term, we may observe a reversal of this trend as there has been an excessive momentum behind the dollar. In the long term however, especially against the currencies where the central banks are implementing their own version of monetary easing, it is hard to see how the dollar can lose significant ground. If you’ve read about the Euro/Dollar parity, this projection refers to Euro and the US Dollar being equally valued, which would require the Euro to lose about 7%. That’s Goldman Sachs’ projections by the year end.

The FED

 Six years since the beginning of the recovery and the bull market, the biggest gorilla in the room has been the FED. There are two unstoppable forces I’d never knowingly (can’t say I haven’t made mistakes) stay in front of: the market trend, and the FED. I take pride in writing my commentary as an easy read in everyday language, but if the FED is the most important player and the timing of the rate increase is extremely important, then let’s make an exception and dive deeper into the statements of their last meeting.

In the US, the FED has two mandates, to keep the inflation at or around 2% and sustain full employment, which is 5.5% unemployment rate. So, since the current inflation rate is at 1.8% and the unemployment rate is at 5.5%, are we right at the doorsteps of a rate increase? No, not for another 6 months or so it seems, and here is why: NAIRU.

Not to be confused by Nibiru, the Babylonian god Marduk’s home planet, NAIRU stands for non-accelerating inflation rate of unemployment, meaning the unemployment rate below which inflation rises. In other words, once the unemployment rate goes below NAIRU, the FED would see this as an inflation warning and start sharpening their pencils to increase interest rates to fight inflation.

This unemployment rate, the rate below inflation rises, has historically been 5.2%-5.5%. The most recent FED statement lowered it to 5.1%. This is significant because it simply means the FED will not use unemployment as an excuse to raise rates until it reaches to 5.1%, not the previous estimate of 5.5%.

Also, if you add the part time employed to the unemployed number (U6), it is 11%, and all the more reason for the FED to delay the rate hike from June to September.

Extreme Weather Conditions and Port Disruptions

 While here in California we are dealing with a drought in historic proportions, the East Coast and Mid-West has gotten hit hard with extreme cold weather conditions this year and especially the latter has significant short term effects on the economy. When it is freezing cold, people shop less, certainly delay purchasing big ticket items such as cars, home appliances and real estate. To add insult to injury, strikes in major ports, especially on the West Coast, has slowed down or stopped all together the shipment of goods.

In aggregate, the US economy has slowed down more than anticipated and the markets have noticed. Like any other short term headwinds, these conditions have for the most part passed (except the drought) and the pent up demand will likely start adding to the economy in the coming months.

All these macro factors are affecting your investments in one way or another. With some exceptions, no individual holding is immune to macro regimes. A strong dollar lowers large US companies’ overseas profits, cheap oil makes it more difficult to profit from energy related industries, these two trends tie  in to interest rate and inflation expectations, and Janet Yellen’s statements are carefully watched by the markets.

The bottom line is that the uptrend in US stocks is still intact. So use the dips as buying opportunities, have a globally diversified portfolio, look for companies with wider access to domestic markets and rebalance periodically.

Hope you’ve enjoyed my market update. For questions or comments, please feel free to reach me at bbakan@shieldwm.com

Disclosure

The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy.

The information provided is not intended to be a tax advice. Investors should be urged to consult their tax professional or financial advisers for more information regarding their specific tax situations.

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