16 June 2017: The R-word

The Federal Reserve’s confidence in the stability of the US economy and its optimistic outlook for the near future is not shared by everyone. In an article at Seeking Alpha, research analyst Adem Tumerkan states that the economy isn’t as strong as the Fed wants us to believe, and that the economy is even ‘dangerously close to a recession’. According to him, the Fed is being deliberately overly optimistic in their assessment of the current state of the economy, in order to be able to speed up the tempo of rate increases. In times of crisis, the Fed’s main tool is to cut interest rates. In order to lift the economy out of a recession, they have to cut interest rates by 300 basis points (3%) or more. But before they can cut rates by 3%, first they have to get there. So this is a race against time, and the big question is: what comes first?

US stocks retreated last Thursday. The pressure continued on technology stocks, and the introduction of a new element of political uncertainty weighed in on the markets. According to the Washington Post, Justice Department special counsel Robert Mueller is investigating President Donald Trump for obstruction of justice. The VIX went up by almost 13% to 12.01 intraday, but eased later to close at 10.90 (+2.44%) as the major US indices recovered from their intraday lows. All indices closed in the red though: the NASDAQ took the biggest hit, finishing at -0.47%. The S&P500 also recorded a loss (-0.22%) while the Dow closed barely down (-0.07%). UVXY ETFs benefited from the rise in volatility and closed at +2.59%. XIV ETNs paid the price and lost 1.19%.
Danny Daredevil was the only model which ended the trading day higher: his RSS rose to 367% and his AAR now stands at 188%. Adventurous Anny is still holding cash and her RSS remained at 39%. Solid Suzy and Lazy Larry took a small step back. Their RSS is now back at 22%.
None of our models gave a trading signal at the end of yesterday’s session, but both Danny Daredevil and Adventurous Anny are now very close to a signal.

Model Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

366.58%

15.75%

-0.47%

188%

Adventurous Anny Cash 6 March 2017

39.23%

39.23%

14.33%

227%

Solid Suzy XIV 6 March 2017

22.42%

22.42%

11.78%

106%

Lazy Larry
XIV 6 March 2017

22.42%

22.42%

11.78%

106%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

RS_v05-smallRené’s Reflections @ Friday: Zangklok

This week, I heard the Dutch word ‘zangklok’ for the very first time. I was on my way to a business meeting in Antwerp, while listening in to a Belgian radio station. A woman was interviewing another woman. What it was about, I didn’t know, but since this was Belgian radio, it must have had some substance. Unlike the vast majority of Dutch radio stations, their Belgian counterparts somehow always manage to be surprising, funny, informative and entertaining at the same time. For that reason, I prefer to listen to the Belgian radio (and watch the Belgian TV, for that matter) even when I am in the Netherlands.
The morning radio host interviewed a guest who mentioned the word ‘zangklok‘. My curiosity was immediately aroused, as I had never heard that word before, so I turned the volume up. It seemed that the radio host had also never heard the word before. The guest then explained its meaning: it is the collective sound of all the birds that sing at dawn. In English, this natural phenomenon is known as ‘dawn chorus‘. Not all bird species wake up at the same time. That’s why the early dawn chorus sounds much different from the late one. The guest demonstrated this by playing a sound recording of the earliest sounds of the dawn chorus, followed by a recording of the same location, a couple of hours later. The radio host delightedly remarked: “I have heard many sounds through these headphones, but never something like this. What a way to start the day!” She nailed it right there. It can be that simple.