Retail Sales, Personal Income And Recessions

“Davidson” submits: Q3 hedge fund letters, conference, scoops etc There are several indicators which provide an early indication of economic peaks. None of them are signaling a peak is at hand. Their history suggests the current market pessimism is a significant ‘Head-Fake’ by those who 1) believe that price trends reveal [...]

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S&P 4,245?

“Davidson” submits: Q3 hedge fund letters, conference, scoops etc Just as the recent bout of excessive pessimism can have an unusual discount pricing impact, what occurs near the end of the market cycle is often excessively optimistic. Using the Investor Value Index as a guide vs the last 2 market tops, [...]

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Calculating Real Private GDP For Value Investor Index

Ben getting a ton of questions on this so here are more explanations. Q3 hedge fund letters, conference, scoops etc “Davidson” submits: Here is a chart of the 4 quarter moving avg Real Private GDP. The BLACK DOTTED LINE is the trend line. This trend is based on quarterly data and a [...]

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Media Missteps On Gasoline

“Davidson” submits: Media now touts high gasoline inventories-Don’t know where they get this. Q3 hedge fund letters, conference, scoops etc “Gas Prices Are Falling, but Refiners Keep Making More” Gasoline excess can weigh on U.S. oil prices that have already fallen about 40% since early October https://www.wsj.com/articles/gas-prices-are-falling-but-refiners-keep-making-more-11545566401 Gasoline inventories begin a rise every year from [...]

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Time To Buy?

“Davidson” submits: Q3 hedge fund letters, conference, scoops etc Most investors are confused by sell-offs. Sharp declines are scary and result in further panic selling. This is especially so when most of the investors one hears in the media believe that markets forecast economic activity. In reality, it is economic fundamentals [...]

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S&P 500 Intrinsic Value Index Update

There really isn’t any fundamental reason for this sell off. Based on economic data the economy is strong and continuing to grow. The market was high, but nowhere near as high as the last two “bubbles” when stocks were over >100% higher than the S&P Intrinsic Value Index. [...]

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Pessimism Not Justified By Fundamentals

“Davidson” submits: Every market has unique drivers. Most investors anticipate future trends using past market history. But, when the past never repeats, then predictions based on the past are worse than pure guesswork. The consensus on the Yield Curve, current US tariff policy fit the ‘guesswork’ category. Several data series [...]

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The Economic Uptrend Continues

“Davidson” submits:Q3 hedge fund letters, conference, scoops etcEmployment growth continues to trend higher and vehicle sales continue to be maintained at levels reflecting replacement and new additions characteristic of a strong and steady economic expansion. I use the Household Survey because it is the only estimate including the self-employed, [...]

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Opportunity…Not Concern

“Davidson” submits: Q3 hedge fund letters, conference, scoops etc Most use what they have been taught in B’School about ‘Inverted Yields’, i.e. the 2yr vs 10yr. History shows it is the T-Bill/10yr Treasury rate spread which is most important and most reliable. Today we see 0.60% when 0.20% is the historical [...]

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Another Non-Recessionary Data Point

People can’t seem to grasp the fact the stock market does not predict recessions.  Hard economic data points do and right now, none are pointing to a recession.  The best quote on this is, ” the stock market has predicted 11 of the last 2 recession” . We’ve had [...]

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Insider Buying Picking Up

“Davidson” submits: Insider activity is a useful indicator when one compares a company’s price history with the buying/selling option exercises of management. One frequently detects higher levels of share accumulation when prices decline to levels which under-price a company’s future potential. Using this information is enhanced by correlation with a [...]

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Rising Pessimism And Solid Economic Data…

“Davidson” submits: Correlating multiple data series reveals the connections between them that viewing in isolation does not. When the goal is to identify the better buy opportunities for the SP500, spikes in the VIX coupled with spikes in Insider Buying tend to occur together. Since 2009, there have been 4 [...]

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Market Psychology & Fundamentals Mismatched

“Davidson submits: Real Personal Income data begins in 1959(see the FRED chart)and Real Retail and Food Svc Sales begins in 1992(see the correlated data charted from 1992). Both have long enough history to prove themselves decent recession forecast tools. Real Personal Income flattens perhaps 18mos-24mos prior to a recession while [...]

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Refinery Inputs Near Seasonal Low…Oil Inventories Grow…For Now

“Davidson” submits: Q3 hedge fund letters, conference, scoops etc A lot of forecasts for recession are coupled to the fall in ‘oil prices’ which some investors tie to a slowing economy with the same simple interpretation of “Dr. Copper”. The US refinery industry has had an unusually long fall maintenance period [...]

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Mortgage Credit About To Surge?

This bears really close watching. Mortgage credit, or lack thereof has been a drag on this economy. Housing starts are still nowhere near where they need to be and Dodd/Frank is the culprit. Should these regs be relaxed to even reasonable standards, we would likely see a surge in [...]

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The VIX And Investment Timing

“Davidson” submits: Q3 hedge fund letters, conference, scoops etc What is the ‘VIX – CBOE Volatility Index’ https://www.investopedia.com/terms/v/vix.asp Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Derived from the price inputs of the S&P [...]

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Household Debt At Historic Low Levels

“Davidson submits: Q3 hedge fund letters, conference, scoops etc One of good measure of indebtedness and risk to financial markets is the Household Debt to GDP Ratio(Percentage). Dodd Frank has not permitted the normal level of mtg lending we have experienced prior to the Sub-Prime surge. So restrictive has it been [...]

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Government Spending Boosting GDP

“Davidson” submits: Q3 hedge fund letters, conference, scoops etc Real GDP rises with increase in Govt Exp&Inv, but Real Private GDP not perceptibly changed. The Real Private GDP has been ~3% March 2009-July 2018. Real Private GDP is the true measure of economic activity and Govt Exp&Inv does not have a [...]

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Can One Make Sense Of Illogical & Scary Markets?

Davidson is at his best when markets are rocky….. Q3 hedge fund letters, conference, scoops etc “Davidson” submits: The current environment appears scary much like a ship in a storm without a rudder. Events seem to come out of nowhere from unanticipated directions. Each new headline threatens to topple what seemed positive [...]

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