What does a growth scare look like?

Kids, it's not all bad, no matter what others say.

There are times that stock markets will react in ways you were not expecting. There are other times when they react exactly how you expect! What does that prove though? It proves that the stock market is almost a living and breathing creature. It is a reflection of all participants thought in one place at any onetime. The right, the wrong, the informed, the not so well informed. What you will try to do is be more informed than most, that way you try to stack the cards in your favour.

You can see such moves in the early part of 2014.

When the Fed finally moved in December, the ramifications were pretty clear, things change. The issue is, what things?  It was Emerging Markets last week. Anything with Emerging Market exposure at some point last week had a bad time. Then, some poor data from the US had people fighting over how bad a growth scare would be.

Let's look at growth scares. They come in all forms, they can be triggered by any piece of data at any time. However, not all growth scares are created equal. The nastiest US growth scares usually start from the bond market. When bond yields rise too fast, there is every reason to sit up quickly and take notice. The trouble with yields moving higher quickly is all about positioning, that is mortgages, convexity, hedging instruments and how people can get offside too fast. When people say something as bland as "too far too fast", it means something in bond land!

Do not ever underestimate the power of the bond market during these times, they rule.

What about other growth scares triggered by events we couldn't even think about? They are all navigable using the panic days that have been discussed in earlier posts. You just have to keep your head while all around are losing theirs. You will be pleasantly suprised at the benefits of buying panic in a bull market.

There will always be panic, there will always be someone trying to convince you this is 1929, 1974, 1987 or 2008-9 all over again. Those events are extremely rare and shouldn't be counted upon to repeat regularly.

Do not ever get upset that a growth scare threw you from a bull market, that is precisely what they are intended to do, you will sell what you love, buy it back higher and kick yourself for being so trigger happy. You should, it's a great learning experience, it has happened to me more often than I can tell you or care to admit.

Try to understand the cycles that you are in, they are remarkable. They are repeatable and very rewarding.

Over time, you will trust your instincts more than the musings of lightweight reporting and young inexperienced professionals. With some luck, you will recognize the genius that actually is the stock market itself and the language that it speaks, it's a journey of ambition as much as anything else. Keep a level head and clear vision, they will serve you when the growth scares are encountered.

Always strive to learn from these episodes, keep your balance, understand the emotions. It's the same as your skiing, fear is there to learn from. You have mastered some lessons already. Mum and I continue to be amazed at your progress.....

Queen takes Pawn

No crystal ball but a 2014 roadmap

Kids, we learned a lot in 2013, what about 2014?

It once again gives me great pleasure to put pen to paper (more for my benefit than anything else) for 2014 predictions, with a suitable amount of tongue-in-cheek.

2013 predictions weren’t bad at all. Europe, US, buying panic to sell complacency, Yellen, IPO comebacks, Housing, demise of correlation trading, Arsenal even spent money on players (black swan event)! All attached….

Now for some 2014….

*2014 bull market continues
*Bernstein stock target prices for next 12 months (within coverage) points to SPX 1900. Remember we don’t value growth particularly well!
*Blue-sky trading of breakouts the most rewarding vs the mean to reversion value strategy.
*ZeroHedge articles via email continue to be buy signal of choice
*Taper happens causing bonds to re-price and the mkt discounts taper to ZERO quickly
*Interest rate plays dominate, CME, SCHW
*Consecutive down days in combination with panic tick levels remain terrific long entry points: Nick rule #1
*Dollar strength continues
*China growth not an issue of at least 7%. Lets face it, who can argue with the sitting Government?
*Growth over value
*House price increases in the suburbs
*Stocks that do not show leadership and disappoint on earnings, do not reward capital: *Underperformance from Funds in a bull market continues, but the gap gets plugged with an IPO market on fire
*SPX +15%
*IWM outperforms SPY by 8%
*Utilities still the ugly step-child of equities:
*US GDP accelerates to 4%
*Navigating Yellen commentary and actions is the banana-skin
*Fund flows become a very important marker for underlying bid for equities regardless of “valuation”
*Action over price continues to win

SPX looks like this for 2014!!!! With the giant swings caused by FED moves and talk….

Off the reservation calls:
*Arsenal win the league
*Obama cover of Time magazine with Headline “The Loved one I lost”
*Argentina win World Cup

*England retain the Ashes
*Wall Street confidence climbs again
*Philanthropy thrives
*US tax code goes 20% flat tax
*US Government signs off on $2trillion infrastructure spending bill
*Nobody sells their Bitcoins in the assumption it prices at $100,000, making it the currency for the privelaged
*TSLA gets a LOI from Toyota
*Jeter retires with guard of honour
Just for some context here were the 2013 predictions:US.....
*Another bull market move higher in SPX, 1560 acheivable with a following wind
*M&A pick-up, at some point the use of cash is better deployed than just
dividends, however it might be muted from the "special divi" craze of late.
*FED...well that's just boring now with QE infinity *Single stock moves do
better than SPX, correlations continue to decline.
*Buying panic and then selling into complacency works wonders for performance
*Value names continue to be value traps *Housing works.
*Wall Street makes a resounding comeback as Washington focus on growth
allowing funds to invest appropriately and the IPO market to regain a footing.
*3/4/5 Consecutive down days for SPX in conjunction with TICK index continues
to work as a buying of panic opportunity.
*Short squeezes become normal practice
*US BONDS give ground all year, without showing a danger of a yield spike.
*We seriously start to talk about inflation expectations again.
*Correlation trading continues to be a disastrous strategy, single stocks win
Some Macro....
*EURO/Dollar reverts to stronger dollar and weaker Euro, but this time is
deemed a POSITIVE for the markets as resolutions take hold!
*Europe slowly sees signs of strength as the weaker EUR benefits *Silver/Gold
ratio hints at going back to 20 given SILVER STRENGTH *China reverts to better
growth *Commodities remain well bid and defy the inevitable "topping out"
predictions.
*Japan. The stimulus vs monetisation debate continues to thrive with no
outcome.
General.....
*Obama getes "Man of the Year" award, for doing not very much at all!
*Geithner replaced by Corzine after evading all Court processes from MF Global
*Bernanke calls it a day. Yellen in line to the thrown, gets blown off course
by a Petraeus email scandal.
*BOE employs a NON-Brit as BOE Governor....oops, that's happened!
*The average Hedge Fund complains about liquidity when chasing stocks +5% on
the day!
*Arsenal spend some money on players
*Mets fall at first hurdle, whichever hurdle you deem is the first!
*Yankees sell A-Rod, win World Series with Jeter retiring in Game 7

Queen takes Pawn