We left on Friday, the 16th of August, and returned last night. In total, we traveled over 2,600 miles and visited seven states (eight, if you count Michigan’s Upper Peninsula as a state, as some “Uppers” [pronounced “youpers”] have advocated). The UP was the most beautiful part of the trip, with spectacular Tahquamenon Falls and Pictured Rocks National Lakeshore (Lake Superior) leading the list of sights, but the Wisconsin banks of the Mississippi were also stunning as the green rugged hillsides met the lush wetlands of the broad river below.
It has been quite a few years since I last took a road trip. What had been a staple of our family’s summer vacations disappeared once the kids moved out of the house. I think thereafter that subconsciously I felt that in order to maximize vacation time, I had to fly to a “destination” so that vacationing could start right away.
But on this trip, I found there was something recuperative about driving for miles between stops, focusing only on the open highway and the cars immediately in front and in back of me. And it was somehow curative having nothing to do but curse the omnipresent truckers and the endless parade of orange cones. And what a relief – the major decisions consisted only of where to stop next and what hotel to stay in that night.
Still, driving as far west as Fargo, North Dakota to stay the night in my –49th state (one more to go to make it an even 50), and as far south as Iowa City, Iowa, one does travel some very long stretches of highway. And while driving long distances does clear the mind, it can be boring. My wife is very loquacious, but some days we were in the car ten hours!
Thank goodness for Talking Books. For some reason, the miles seem to speed by when you have a CD of a bestselling book playing away in the background. It’s that way in other aspects of life, as well. I read on the treadmill and 30 minutes just evaporates. And which seems longer, a morning watching TV news or a morning sitting alone (no fair falling asleep) on your back porch?
Yes, being exposed to a constant flow of information makes the time pass quickly. I know many of you have discovered the Talking Book method of avoiding boredom on long driving trips, and I’ll bet you’ve also experienced the problem with the technique. Yup, you get so engrossed you miss an exit… or two.
The point of all of this is that in everyday life we have so much information flowing at us that we can overlook where we’re going. It’s certainly that way with investment news. The earnings and economic news never seem to quit. And every position, and each action – be it buy, sell or hold – has commentators and gurus voicing an opinion on every side of the subject. For many investors, it is impossible to sort out the right direction to be heading in, let alone whether you should be on the entrance or the exit ramp for the investments making up your portfolio.
Computerized investing provides relief from investment information overload or “CNBC-itis.” By doing the research beforehand, and discovering the important factors that have a greater probability of resulting in higher or lower prices, investors can sort out the “good” information from the noise. Combining the strategic buy and sell signals with a discipline that always follows the signals, results in a lower probably of missing an exit or entrance… no matter how good the story.
I have to admit that on Wednesday last week when I learned, despite being on the road, that the stock market had hit a thirteen-day low, I did wonder whether or not I had “missed” an exit. The bears’ “story” was a good one. You had to hear it – riots in Egypt, nerve gas in Syria, the high costs and disruptions of Obamacare experienced by company after company, and more talk of tapering Federal Reserve purchases and of shutting down the government again.
Yet, by Friday, even after Thursday’s strange three-hour suspension in trading on the NASDAQ, stocks were rising, and the major market indexes had registered gains for the week. The S&P 500 Index that had been flirting with a slide below its 50-day moving average was once again solidly above the bellwether indicator. Even at the low on Wednesday, the maximum loss registered since the August 2nd all-time highpoint was less than 4%!
While weakened, most of our strategies have retained their equity bias. Although earnings season has passed, some companies continued to report in the post-reporting period and most of the remaining members of the S&P 500 that reported last week beat analysts’ earnings and revenue expectations.
Economic reports, unlike the eighteen new reports expected this week, were few and far between last week. Bracketed by two housing reports, one favorable at the start of the week and one unfavorable to close the period, the nine reports were pretty evenly split with four beating expectations and five missing.
Interest rates moved higher, then lower as the week wore on – just the opposite of stocks. As a result, when the week ended, just as stocks were higher for the week, rates were lower. Still, bonds continue to approach bear market territory as illustrated by the chart below. Yet, stocks will likely continue to be unimpressed as long as rates remain so far below their long-term average (20–year-plus Treasury bonds are currently yielding 3.8% versus a 5.4% 50-year average) and prices remain above their current uptrend channel.
Source: Bespoke Investment Group
And the stock market bears, too, were coming out of the woodwork last week, which actually makes me feel more bullish. With stocks falling at their farthest – a whopping 3.9% in thirteen days – investors withdrew more dollars in one week than they have in the last five years, pulling $12.3 billion from stock funds, mostly from ETFs.
And bearish sentiment increased in an unprecedented manner. For the first time since 1987 it gained ground for five weeks in a row, and last week’s percent rise was the most since 4/11/13 and the fifth greatest increase since 2009. Of course, history tells us that past occasions that were near this level of bearishness have, for the most part, been buying opportunities.
Source: Bespoke Investment Group
The bearish news stories droned on while I was gone last week, but it seems that the really important information, like our strategies, continues to favor the bullish storyline. Still, with accounts managed using computerized strategies, regardless of which tale you’re listening to, you never have to worry about missing an important exit or entranceway. Then again, when it comes to investing, a boring ride may be the best kind of all. It’s good to be home…
All the best,
Jerry
© Flexible Plan Investments
