Volatility

  • 27 Jul
    The Truth About The VIX

    The Truth About The VIX

    • The VIX is especially liked by the media because it’s based on what has happened. However, the VIX has no forecasting power.
    • We’re looking at an historically low VIX which indicates a complacent market, this creates cheap downside protection for those who fear a fall.
    • Nevertheless, there are interesting opportunities to take advantage of the low VIX for the brave.

    Introduction

    We constantly hear news about the VIX index. However, few really know how the VIX index is derived, what its importance is in the financial world, and if it even has an influence on your portfolio. As the VIX index is at all-time lows, it’s a good time to discuss what it is and if there is an opportunity to take advantage of it. More →

    By Sven Carlin Investiv Daily Volatility
  • 19 May
    What Three Chinese Companies Tell Us About The Risks You Need To Watch For In Emerging Markets

    What Three Chinese Companies Tell Us About The Risks You Need To Watch For In Emerging Markets

    • Proper due diligence is needed to separate low risk from high risk investments.
    • The fact is, nobody does their research anymore as ETFs and index funds have taken over the investment world.
    • I’ll describe a few Chinese investments that look amazing at first but can easily lead to a total loss.

    Introduction

    Yesterday we talked about how emerging markets are generally becoming attractive. Today we’ll discuss a few Chinese stocks that show some of the risks lying in such a market.

    As I see the S&P 500 climb to new highs, I understand that risk isn’t what investors think about, but my experience that spans a few market cycles keeps me focused on the risks while investing.

    By risk I don’t mean short term volatility coming from market sentiment. The S&P 500 hasn’t been volatile at all in the last 8 years as it has just gone up, but for every point that it goes up while corporate earnings remain flat, the risk investors are taking gets higher. More →

  • 10 May
    The Trouble The Market Refuses To See

    The Trouble The Market Refuses To See

    • GDP growth is at three year lows, car sales have dropped 11%, and the biggest sector contributing to new employment is about to go into oversupply.
    • The FED is in a stalemate situation. It should raise interest rates and deleverage, but it’s already too late as the economy, government, and population is hooked on low interest rates.

    Introduction

    The market’s behavior reminds me of the three wise monkeys. One doesn’t see, the other doesn’t speak, and the third doesn’t hear. The VIX index, a measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices, indicates that investors expect stability and didn’t even react to the bad news coming from the automotive industry, jobs, and a very important bankruptcy. More →

  • 01 May
    What You Can Learn From Under Armour

    What You Can Learn From Under Armour

    • There’s a divergence between Under Armour’s fundamentals and its stock price.
    • Every growth story is bound to end or at least slow down at some point, and at that point the stock usually gets hammered.
    • However, sentiment must not be underestimated as an $0.03 earnings beat can send the stock up 10%.

    Crazy Stock Movement

    Under Armour’s (NYSE: UAA, UA) stock has had a wild ride in the last four years. It went from $12 in 2013 to highs above $50 in 2015 only to fall to the current lows around $19. More →

  • 28 Dec
    2017 Looks Like Another Excellent Trading Year

    2017 Looks Like Another Excellent Trading Year

    • Rebalancing your portfolio between sectors and markets should lower your risks and increase your returns in 2017.
    • 2016 is an excellent example of how such a strategy works when the general stock market is overvalued.
    • Things like avoiding REITs in August 2016 or entering metals will be easy to spot and act upon, even in 2017.

    Approaching The Current Market Risk Reward Puzzle

    A recent Wall Street Journal article raised the question of whether investors looking to get into the market now are too late for the Dow 20,000 party. Many investors watched the 7-year stock bull market from the side-lines after they got burned during the latest financial crisis and didn’t overcome their anxiety and invest again. The article suggested that investing now is a good thing to do if you are a long-term investor. More →

  • 13 Oct
    How To Spot The Big Trends Of The Future

    How To Spot The Big Trends Of The Future

    • In the short term, the market is heavily influenced by new information and noise.
    • In the long term, there are clear trends that can give you an edge to beat the market.
    • We’ll discuss a few trends that are clear but that will take time to develop.

    Introduction

    Some argue that the market is efficient and prices always reflect available information. The Efficient Market Hypothesis (EMH) was developed by Chicago School of Economics Professor Eugene Fama who was also awarded a Nobel prize for his findings in 2013. Implications of the EMH are that it is impossible to beat the market consistently on a risk-adjusted basis since market prices only react to new information or changes in discount rates. More →

  • 10 Oct
    You Might Want To Sell Your Dividend Yielders…

    You Might Want To Sell Your Dividend Yielders…

    • Fundamentals aren’t the reason behind your dividend yielders’ excellent performances.
    • Yields have marginally increased and the impact on dividend stocks is significant.
    • Do you think about risk when thinking about dividend income?

    Introduction

    A chase for yields has pushed the price of dividend yielding stocks to extreme levels.

    Looking at the S&P 500 Low Volatility High Dividend Index—which tracks the performance of the 50 least-volatile high dividend-yielding stocks in the S&P 500—you can see it has almost been a four bagger (3.7x) since the Great Recession, growing from 1,720 points to its current 6,395 points. More →

  • 20 Sep
    7 Years In & Valuations Matter More Now Than Ever Before

    7 Years In & Valuations Matter More Now Than Ever Before

    • Volatility can tell you when to buy, but valuations tell you when to sell.
    • In the 2000s, faster than expected earnings growth, low transaction costs and reduced risks from lower volatility were considered factors of the “New Era” for stocks.
    • These days, low interest rates and low inflation are new factors that create the “New Era,” while the PE ratios just grow and grow. Does this sound familiar?

    Introduction

    Apart from professionals, you rarely find investors who are passionate enough about their investments to make it their day-to-day and weather through the peaks and troughs in the market.

    There are many traders, especially young ones, who were unaware of what stocks were back in 2009 that now believe they are the kings of the world as a result of the tailwinds of the current bull market. In such an environment, valuations are ignored and investors become euphoric which makes them believe, for example, that the merging of Tesla and Solar City is a good idea, or that Facebook will have everlasting growth. In reality, our “new normal” is one of negative interest rates and low yields. More →