My coffee cup at our spot by the Sea of Cortez.
“Way down here, you need a reason to move.”
— James Taylor, Mexico
NOTE: I’ll be driving down the gritty paradise of Baja, unplugged for a week. Hopefully, they’ll let us back in. Your Daily Bit of Wall Street Wit & Wisdom will return on Monday, April 8th.
Market price also needs a reason to move. That reason is the human behavior of buying and selling. I’m not smart enough to know all the factors which influence why people act the way they do. That is why I use Japanese Candlestick charts to study the character of the behavior of market price movement. Candlesticks account for the actions of the Algos (algorithmic trading by computer), as well.
Japanese charting techniques vividly depict who has the advantage, buyers or sellers, and are a great tool to determine when and where the balance of power is likely to shift.
Have a great week ahead!
Lyft IPO party in Los Angeles, h/t Alex Welsh for the New York Times
“The chief losses to investors come from the purchase of low-quality securities at times of favorable conditions.”
— Benjamin Graham
Friday’s launch of trading in the Lyft IPO (initial public offering) made plenty of news. What it didn’t make was money for those who bought at the open. All those who clambered to get in on the action closed under water.
IPOs can be used as an exit strategy for business owners and early investors.
The ride-hailing company reported losses of $682 million in 2016, $688 million in $2017, and $911 million in 2018. Lyft has cautioned that losses could mount as the company seeks international expansion.
IMO, zip your wallet.
Get where you want to go and enjoy your weekend!
“Earnings, dividends, book value… none of these really matter for moving the overall stock market. The only 2 fundamentals that matter are:
1. How much money is there?
2. How much does that money want to be invested?
Change either of those, and you move prices.”
— Tom McClellan, @McClellanOsc
Follow the money, the big money, the sovereign money.
Central bank monetary largesse provides liquidity that juices markets.
In the latest reporting period, there was a central bank balance sheet contraction.
That’s a clue.
Today is opening day across the nation for many devotees of the pastoral pastime. We’ll throw back to my thoughts, written on the 2015 passing of Yogi Berra and how his many Yogi-isms apply to the markets and trading.
Enjoy and we wish you safe at home!
We are saddened this week at news of the passing of baseball’s legendary Lawrence Peter Berra, universally known as Yogi, at the age of 90. Yogi was an apt moniker for the Hall of Fame icon of New York sports whose self-control, unifying presence, and good-humored philosophical approach to life can be compared to that of an actual yogi’s.
Reading through his Yogi-isms reminded me that many of them, whether they’re authentic or derived (“I never said most of the things I said,”), are applicable to markets and trading, as well as life.
The Palais Garnier, Paris h/t Rindoff / Dufour via Getty Images
“If you have to sit in the balcony, it’s time to head for the exits.”
The adage above is apt admonition for investors eagerly awaiting a slew of IPOs (initial public offerings), as well as those clamoring for Chinese junk bond yield.
Sometimes it’s better to enjoy the show from afar.
Not this kind of “yield”
“An inverted yield curve isn’t a technical indicator like a moving average. Rather, it has real world implications. If you borrow short to lend long, your profit margin is gone.”
— Eddy Elfenbein
You may be hearing talk of the yield curve in the news. The yield curve is a line that depicts the interest rate of US Treasury debt, of equal credit quality but different maturity, at a set point in time. The yield curve shows the difference between short-term and long-term interest rates.
A normal yield curve has an upward slope, with short-term rates lower than long-term yields. That makes sense, as the interest rate should be higher for the uncertainty of events as you go out in time.
An inverted yield curve is one in which long-term yields are lower than near-term yields for debt of the same quality. This is an unusual condition and is seen as a harbinger of economic weakness.
On Monday, the yield for a 6-month Treasury Bill was 2.49%. The yield for a 5-year Treasury Bond was 2.21%.
The Treasury rate is known as the “risk-free” rate, because it is based on “the full faith and credit of the United States of America.”
That concept is what the global financial house of cards is built upon.
“Headlines, in a way, are what mislead you, because bad news is a headline, and gradual improvement is not.”
— Bill Gates
Investing is done over a long time horizon (years). Speculating concerns a short time (days, weeks, months). Our specialty is sensible speculation.
You may find that by the time a market move makes headlines, it’s too late. Look at the character of market price behavior, not what the headline writers make of it. What they say may turn out to be a contrary indicator.
And that can be useful, as well.
“The minute you think you’ve found the key to trading, I promise you the markets will change the lock.”
— Linda Raschke
Approach your trading with humility. Enter each trade with a complete game plan for any potential outcome.
Be a lifelong learner. That will be a key to your success in and out of the market.
What are you learning today?
h/t Heather Myers, @cbs8
“The stock market depends about as much on stock market analysts as the weather does on weather forecasters.”
There is never certainty in the market, only likelihood. That is why we don’t tell the market what to do.
We listen to the clues market price provides us to its likely path.
Wishing you sunshine and seventies,
Carnegie Hall, Photo by Chris Lee
“We get to mastery through practice. You can’t shortcut that.”
— Jody Adams, Chef
Yep, that goes for trading and just about any activity.
Same way you get to Carnegie Hall.