20 October 2017: 1987, part IV – The hits

These Dutch Guys are experimenting with new methods to predict traders’ sentiment. They are investigating whether or not popular songs can forecast the feelings of investors. The first results are promising. A look at the hit charts of October 1987 indicates that it is not very surprising that Black Monday happened. Number one in the Billboard Hot 100 that week was Lost in emotion by Lisa Lisa and Cult Jam. But there were more songs in that week’s Top 10 that were prediction turmoil: Bad by Michael Jackson (#4), Causing a commotion by Madonna (#5), Here I go again by Whitesnake (#6) and Who will you run to by Heart (#7). However, most worrisome were the two songs that concluded the Top 10: Paper in fire by John Mellencamp (#9) and I heard a rumour by Bananarama (#10). The two remaining songs in the Top 10, U got the look by Prince (#2) and Carrie by Europe (#3), were not able to form a positive counterbalance.
From this week‘s hits, we conclude that another stock market crash is not very likely. There are some signs, however, that indicate that some trouble might be ready to pop up. Rockstar by Post Malone Featuring 21 Savage (#1) definitely describes the prominent feeling among the majority of investors these days. But the subtitle of Cardi B’s Bodak Yellow (Money Moves) at number 2 gives a first warning that things might change. If money really moves, the phone number 1-800-273-8255 (which also happens to be title of the song at number 3 by Logic featuring Alessia Cara & Khalid) might receive many more calls than currently is the case.

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All indices started in the red yesterday. But they finished mixed, with the Dow and S&P 500 inching up in the last minute to secure record finishes. The Dow gained 0.02% and the S&P 500 added 0.03%. The NASDAQ lost 0.29%, mainly due to energy and information technology stocks. Apple had its worst days in two months, losing more than 2%. Volatility was dramatically up during the first hour of trading, but eased in the remainder of the session. The VIX was up more than 15% after 30 minutes of trading, but closed lower at the end of the session (-0.2%). UVXY ETFs moved up almost 9% before closing down 1.5%. XIV ETNs recorded another gain (+0.8%) and closed above 110 points for the first time.
Although it looked very different at the beginning of the day, Danny Daredevil suffered another loss yesterday. His RSS dropped to 9%. Adventurous Anny is still holding cash. Solid Suzy and Lazy Larry reached their highest return since their start: 66%.
None of our models gave a trading signal at the end of yesterday’s session.

Model  Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

9.04%

-72.95%

-21.73%

5%

Adventurous Anny Cash 6 March 2017

9.22%

9.22%

0.67%

15%

Solid Suzy XIV 6 March 2017

66.18%

66.18%

13.60%

125%

Lazy Larry
XIV 6 March 2017

66.18%

66.18%

13.60%

125%

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

 

RS_v05-smallRené’s Reflections @ Friday: Après nous, le déluge

If you are a millennial in China, you can live the life of Riley. You want one of these most desirable, expensive luxury items your companions indulge themselves with? And you didn’t order it online yet? So what’s your problem? Grab your phone. Open the Jiebei app on your smartphone. Jiebei means ‘just borrow’. But you probably already knew that, as a millennial in China. Your friend in Shanghai used that same app to get a 10,000 yuan loan. In less than a minute, after answering just a few simple questions, she could book her trip to London. At 14.6 percent annual interest, but hey. You want to go to London now, right? And not wait for another year. Oh, and the fact that the financing firms are bundling all these consumer debts, and sell the bundles in the form of complex financial products to investors, don’t worry about that. It’s a $23 billion business, so it must be good for the economy. After all, who knows what the yuan will be worth tomorrow if we don’t spend it today. So let’s spend it while we still can! Après nous, le déluge!