19 June 2017: United States debt-ceiling crisis of 2017?

It is not something that is on the mind of investors at this very moment. But there is an issue looming behind the horizon that needs to be dealt with, the sooner the better. This summer, the raise of the United States debt-ceiling is on the congressional calendar. According to Bob Bryan in an article at Business Insider, the Trump Administration is internally divided over what to do, and the voice from the White House is lacking coherence. In 2013, under President Obama, the debate on this same subject led to the debt-ceiling crisis of 2013, with Dagong Global Credit Rating downgrading the United States from A to A− in response to the crisis. This year again, this item is on the agenda, and the clock is ticking, the deadline approaching. If the White House fails to be proactive on this matter, history might repeat itself. They better get their act together soon, before this turns into a huge elephant in the room.

white-chapel-logo-smallWith the exception of the Dow, which gained for the fourth week in a row and closed at a record (+0.11% for the day), the major US indices struggled to sustain momentum Friday as the recent tech selloff kept investors on edge. The NASDAQ lost ground for the third day in a row and closed 0.22% lower. The consumer-staples sector came under pressure on news that Amazon is buying Whole Foods Market for $13.7 billion. The S&P500, which had been in the red all day, managed to close in the black (+0.03%) at the end of the trading day.
Volatility was slightly up during the first hours, with an intraday high of 11.35, but went down substantially during the second half of the day. The VIX closed just above its intraday low at 10.38 (-4.77%).
UVXY ETFs suffered as a result and closed almost 2% lower. XIV ETNs, on the other hand, gained almost 1%.
Danny Daredevil gave in slightly: his YTD stands at 13.5% and his AAR is now at 183%. Adventurous Anny was still holding cash Friday. Her RSS remained at 39%. Solid Suzy and Lazy Larry profited: their RSS rose to above 23%.

Model Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil XIV 1 January 2016

357.53%

13.50%

-2.40%

183%

Adventurous Anny XIV 6 March 2017

39.23%

39.23%

14.33%

223%

Solid Suzy XIV 6 March 2017

23.62%

23.62%

12.87%

112%

Lazy Larry
XIV 6 March 2017

23.62%

23.62%

12.87%

112%

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

 

Two of our models gave a trading signal at the end of Friday’s session: Danny Daredevil and Adventurous Anny. Danny switched from UVXY ETFs to XIV ETNs and Anny used her cash to buy XIV ETNs at the opening of today’s session.

 

 

In the Netherlands, the recent weather has been better than during the average Dutch summer. With temperatures around 30 degrees Celsius, René decided to spend the whole weekend at his forest retreat, with nothing but a sufficient supply of fresh foods and mineral water, and his iPad with the e-book Jesse Livermore: World’s Greatest Stock Trader by Richard Smitten. René didn’t read the book, he devoured it. Jesse Lauriston Livermore (1877 – 1940) was a legendary American investor who became famous during the 1920s and 1930s. In case you have never heard of the man, check him out. He was nothing short of brilliant in his approach of stock trading, concentrating solely on the momentum of stocks, rather than on financial news, (insider) tips, or even fundamentals. More than a hundred years ago, he was one of the first (if not the first) to recognize human psychology as one of the main drivers of financial markets: “All through time, people have basically acted the same way in the market as a result of greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis.” According to René, who had many a déjà vu experience while reading it, this book is a must-read for anyone interested in investing.

 

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