27 Apr 2015

Flash Crash Surprise, Five Years Later

It’s been almost five years since the ‘flash crash,’ when markets fell by about nine percent in less than 40 minutes in the middle of a trading day. Some well-established companies like Procter & Gamble fell by 40 percent within one minute while others like Sam Adams traded for just one penny per share even though it was selling for around $60 per share minutes earlier. I remember it vividly… Read More

By David Ott Tags:
9 Mar 2015

It’s Good News that Good News is Bad News

The Bureau of Labor Statistics (BLS) offered some good news regarding the employment situation on Friday. The economy added 295,000 new jobs in February, far better than the consensus expectations of 240,000 and the unemployment rate fell from 5.7 to 5.5 percent, a new low since the 2008 financial crisis and the peak unemployment rate since then of 10 percent in 2009. Part of the reason for the decline in… Read More

By David Ott Tags: ,
4 Mar 2015

Another Internal Market Correction

A correction is defined as a 10 percent peak-to-trough decline and a bear market is defined as a 20 percent peak-to-trough decline. With those definitions in mind, it’s worth noting that the utilities sector entered correction territory yesterday after falling 10 percent from their highs at the end of January. Energy stocks are down more than 20 percent since their high last summer, and have been in bear market territory… Read More

By David Ott Tags:
3 Mar 2015

NASDAQ: Party Like It’s 1999

If you were watching CNBC or Bloomberg television yesterday, you saw that the ‘big news’ of the day was that the NASDAQ market crossed 5,000 for the first time since the peak of the tech bubble. Although the financial news media loves to celebrate when indexes cross round numbers (think 2,000 for the S&P 500 or 18,000 for the Dow Jones Industrial Average), they don’t do a whole lot for… Read More

By David Ott Tags:
13 Jan 2015

Mind Blowing Sector Returns

Which sector returns were better last year, healthcare stocks or utilities? There’s no question that both had great years, up 25.26 and 28.94 percent respectively, compared to 13.66 percent for the S&P 500. The question, though, asks which is better, and I think the answer depends a little on what you care about. If the answer is straight performance, then clearly, utilities won by 3.68 percentage points. The following chart… Read More

By David Ott Tags:
7 Jan 2015

As January Goes, So Goes the Year

The talking heads on CNBC have been talking a lot about how the first few days of trading this January are a lot like the first few days of last year: the polar vortex, nervousness about the economy and sharply falling stock prices. In fact, that’s all true, but I’m hard pressed to draw any implication from the similarities. First of all, we’re talking about five data points – almost nothing… Read More

By David Ott Tags:
2 Jan 2015

Stocks Enjoyed Amazing Results in 2014

Last year was a mixed bag for stocks.  The headline index that most professional indexes follow, the S&P 500 had a great year, up 13.68 percent.  I looked at all of the annual returns since 1926, the year when good quality data is thought to begin, and found that 2014 ranks 46th out of 89 years, putting it in the 51st percentile – basically the center of the distribution of returns. Early… Read More

By David Ott Tags:
25 Nov 2014

Investing at All-Time Highs

A friend of mine came into some money recently and said that he was wary about actually investing the funds because the market is at an all-time high. He said that he knew he wasn’t supposed to time the market, but wanted to get my thoughts before pulling the trigger. I told him what I tell everyone: as long as your time horizon is sufficiently long, it’s okay to go… Read More

By David Ott Tags:
16 Oct 2014

Why Are Stocks Faltering?

On Wednesday, I wrote that I was ‘double shocked’ to see that the yield on the 10-year US Treasury note had fallen to 2.175 percent, so imagine my surprise yesterday when the yield fell to 1.86 percent – triple shocked! What was to blame for the steep initial losses and sudden (though not complete) recovery? No one really knows, actually, but here are some of the more credible theories across… Read More

By David Ott Tags: ,
1 Oct 2014

3 Current Stock Market Observations

Back in February, I wrote that the stock market was overvalued and cited metrics like the Shiller PE ratio and Tobin’s Q that show the market is high relative to history. At the time, I concluded by saying that timing the market is notoriously difficult, so pick your stock/bond allocation and stick with it through thick and thin. (Click here for the article) A few people called or emailed back… Read More

By David Ott Tags: