2024

President Biden has given the green light for Ukraine to use American-made weapons to strike inside Russia, marking a major reversal of policy, Fox News has confirmed.

A senior U.S. official confirmed that President Biden has signed off on the Ukrainians’ use of U.S. long-range weapons near the city of Kharkiv to protect the second-largest city from ongoing Russian assault.

The official described the reversal as a ‘limited’ policy shift related to Kharkiv rather than a broad shift in policy that would open up use of U.S. weapons inside Russia.

‘The president recently directed his team to ensure that Ukraine is able to use U.S.-supplied weapons for counter-fire purposes in the Kharkiv region, so Ukraine can hit back against Russian forces that are attacking them or preparing to attack them,’ the U.S. official said. ‘Our policy with respect to prohibiting the use of ATACMS or long-range strikes inside of Russia has not changed.’

This story was first reported by Politico.

Deputy Pentagon press secretary Sabrina Singh reiterated ‘no change in policy’ multiple times when she was asked about the policy during a briefing Thursday afternoon.

This post appeared first on FOX NEWS

Politics

‘History of anger problems’: Jill Biden mocked for hyping president as ‘calm’ and ‘steady’

First lady Jill Biden was blasted on social media on Wednesday after she said during an interview that President Biden is ‘calm’ and ‘steady’ compared to former President Trump, who represents ‘chaos.’

‘We have a choice, this is what I’m out there saying. We have a choice we can have my husband who is calm, and steady and strong and has character and integrity or we have the other choice, which is chaotic,’ Biden told ‘Good Morning America’ on Wednesday. ‘We have to decide. Democracy or chaos.’

The comment drew immediate criticism on social media from conservatives skeptical of the portrayal of Biden as ‘calm’ and ‘steady.’

‘This doesn’t work this time. Does anything feel calm?’ conservative commentator Stephen L. Miller posted on X.

‘Narrator: He’s incredibly weak, has a history of anger problems, and has so little integrity that he can’t give a simple speech without telling multiple, already-debunked lies,’ Red State writer Bonchie posted on X.

Biden has often been criticized for seemingly losing his cool in recent years. In 2019, he appeared to call an Iowa man ‘fat,’ and a ‘damn liar.’ He later denied calling him fat, claiming he was saying ‘facts’ instead.

Since becoming president, there have been multiple reports of him being prone to angry outbursts at staff and others when not in the public eye. A report last year detailed how he had referred to former President Trump as a ‘f—ing a–hole’ and a ‘sick f—‘

An Axios report detailed how Biden has such a temper that aides try not to meet him alone, in fear of facing his wrath. His admonitions reportedly include ”Godd— it, how the f— don’t you know this?!,’ ‘Don’t f—-ing bulls— me!’ and ‘Get the f— out of here!’

‘No one is safe,’ one administration official told the outlet.

Biden’s tactics generally came in the form of ‘angry interrogations’ until it became apparent to others in the room that they did not know the answer to a question. It allegedly became so routine that staff named it ‘stump the chump.’

In March, the White House pushed back against an NBC News report that said Biden is growing anxious and angry about his re-election bid.

‘There’s a report that when President Biden was told his handling of the war between Israel and Hamas was starting to affect his poll numbers, the quote is he began to shout and swear. So when he does that, is he shouting and swearing about Netanyahu or about Hamas or about his poll numbers?’ Fox News White House correspondent Peter Doocy asked National Security Adviser Jake Sullivan.

‘This is the ‘when did you stop beating your spouse’ question because I don’t think he ever did that,’ Sullivan responded.

‘Excuse me?’ Doocy interjected, before Sullivan continued.

‘Well you use that as the premise of your question, which is when he does that. He – I’ve never seen him do that shout or swear in response to that. So from my perspective, that particular report is not correct,’ Sullivan said.

Biden’s anger was on display in February when he reacted to a special counsel report about his mishandling of classified documents. He called some assertions ‘plain wrong.’

‘There’s even reference that I don’t remember when my son died. How the hell dare he raise that? Frankly, when I was asked the question, I thought to myself it wasn’t any of their damned business,’ he said.

‘I am well-meaning, and I’m an elderly man and I know what the hell I’m doing,’ he said.

He also was not keen on some questions from reporters. ‘My memory is so bad, I let you speak,’ he snapped at Doocy.

Fox News Digital reached out to the White House for comment but did not immediately receive a response.

This post appeared first on FOX NEWS

Politics

DOJ reaches settlement with ex-FBI ‘lovebirds’ caught in anti-Trump text scandal

Former FBI officials Peter Strzok and Lisa Page have settled with the Justice Department over alleged privacy rights violations after the release of their disparaging text messages leveraged by former President Trump to challenge the Russia investigation during his presidency.

The settlement is still pending finalization and approval from a judge.

A tentative agreement was filed Tuesday resolving Page’s 5-year-old lawsuit against the FBI for releasing text messages with Strzok — with whom she had an affair — that were critical of the former president. Strzok’s lawsuit seeking back pay and reinstatement remains unsettled.

Page sought $1,000 in compensation following the leak of her text messages to the media. Additional details about the settlement were not immediately available.

In 2019, Strzok argued in a court filing in Washington, D.C., federal district court that his politically charged anti-Trump messages were protected by the First Amendment even though he sent them on bureau-issued phones while playing leading roles in the probes into both Hillary Clinton and Donald Trump.

Strzok, once the FBI’s head of counterintelligence, said he was entitled to ‘develop a full factual record through discovery,’ and that it would be premature to dismiss the case at this early stage. He went on to argue that the DOJ’s position would ‘leave thousands of career federal government employees without protections from discipline over the content of their political speech.’

Page also filed suit against the FBI and Department of Justice, alleging the government’s publication of her salacious text messages with Strzok constituted a breach of the Federal Privacy Act.

Page’s complaint also sought reimbursement for ‘the cost of childcare during and transportation to multiple investigative reviews and appearances before Congress,’ the ‘cost of paying a data-privacy service to protect her personal information’ and attorney’s fees.

In a later filing, according to CNN, Strzok’s lawyers wrote that the defendants ‘should not be heard to complain about the notoriety and putative damage to the FBI’s reputation from Strzok’s speech when it was their own illegal disclosures, magnified and distorted by the false attacks made by the President and his allies, that placed a spotlight on Strzok’s opinions.’

The two were involved in the FBI’s initial counterintelligence investigation into Russian meddling and potential collusion with Trump campaign associates during the 2016 election and later served on Special Counsel Robert Mueller’s team.

In 2020, the spotlight was on the lovers’ scandal during a live performance titled ‘FBI Lovebirds: UnderCovers’ at the Conservative Political Action Conference (CPAC), which was based on the anti-Trump text messages shared between the former agents. Trump has called the couple the ‘FBI lovebirds’ during his rallies.

Fox News’ Gregg Re and Brooke Singman contributed to this report.

This post appeared first on FOX NEWS

Politics

Supreme Court rules in favor of NRA in key First Amendment case

The Supreme Court on Thursday unanimously decided that the National Rifle Association (NRA) ‘plausibly alleged’ that the New York State Department of Financial Services (DFS) violated the group’s First Amendment rights by blacklisting the group.

In a unanimous decision written by Justice Sonia Sotomayor, the high court ‘holds that the NRA plausibly alleged that [then-New York State Department of Financial Services Superintendent Maria T.] Vullo violated the First Amendment by coercing DFS-regulated entities to terminate their business relationships with the NRA in order to punish or suppress the NRA’s advocacy.’

‘The judgment of the U. S. Court of Appeals for the Second Circuit is vacated, and the case remanded for further proceedings consistent with this opinion,’ the court said, allowing the NRA to continue to argue its case, overruling the second circuit’s dismissal of the suit.

The case stems from a lawsuit filed by the NRA in 2018 which questioned whether a government regulator threatens regulated entities with adverse regulatory actions if they do business with a controversial speaker, allegedly because of the government’s own hostility to the speaker’s viewpoint, violates the First Amendment.

‘Six decades ago, this Court held that a government entity’s ‘threat of invoking legal sanctions and other means of coercion’ against a third party ‘to achieve the suppression’ of disfavored speech violates the First Amendment,’ the opinion states.

‘Today, the Court reaffirms what it said then: Government officials cannot attempt to coerce private parties in order to punish or suppress views that the government disfavors,’ it said. ‘Petitioner National Rifle Association (NRA) plausibly alleges that respondent Maria Vullo did just that.’

The NRA sued Vullo, who — at the order of former New York Gov. Andrew Cuomo — allegedly blacklisted the NRA, effectively forcing banks and insurers to cut ties with the group.

She sent ‘guidance letters’ in 2018 to banks and insurance companies encouraging them to sever ties with the NRA and other pro-Second Amendment organizations, citing reputational risks. The guidance letters were issued shortly after the shooting at Marjory Stoneman Douglas High School in Parkland, Florida, that killed 17 students and staff.

The lawsuit alleged that Vullo made ‘backroom threats’ against regulated firms, accompanied by offers of leniency on unrelated infractions if regulated entities would agree to blacklist the NRA.

‘As superintendent of the New York Department of Financial Services, Vullo allegedly pressured regulated entities to help her stifle the NRA’s pro-gun advocacy by threatening enforcement actions against those entities that refused to disassociate from the NRA and other gun-promotion advocacy groups,’ the court’s Thursday opinion states.

‘Those allegations, if true, state a First Amendment claim.’

The Supreme Court in November agreed to hear National Rifle Association of America v. Vullo, after a federal appeals court in 2022 dismissed the group’s lawsuit, arguing Vullo’s actions were reasonable.

On Thursday, the high court said the Second Circuit is vacated, and the case remanded for further proceedings consistent with its opinion, meaning the gun rights group can continue to argue its case in lower courts.

The NRA garnered support from unlikely allies in the American Civil Liberties Union (ACLU), a group that ideologically opposes the NRA but said it is ‘proud’ to defend the gun group’s ‘right to speak.’

‘Today’s decision confirms that government officials have no business using their regulatory authority to blacklist disfavored political groups,’ said David Cole, the ACLU’s national legal director, who argued the case for the NRA. ‘

The New York state officials involved here, former Gov. Andrew Cuomo and his chief financial regulator, Maria Vullo, were clear that they sought to punish the NRA because they disagreed with its gun rights advocacy. The Supreme Court has now made crystal clear that this action is unconstitutional.’

Neal Katyal of Hogan Lovells, counsel for Vullo, said, ‘We are disappointed by the Court’s decision. As the Court’s decision makes clear, because of the posture of this case, this ruling required the Court to treat the NRA’s untested allegations as true even though these allegations have no evidentiary merit.’

‘This case will now go back to the Second Circuit, which threw out the lawsuit on qualified immunity grounds before. The Supreme Court did not address the qualified immunity decision of the Second Circuit, and we are confident Ms. Vullo’s claim of qualified immunity will be reaffirmed,’ Katyal said, adding that, ‘Ms. Vullo did not violate anyone’s First Amendment rights.’

Fox News’ Shannon Bream and Bill Mears and Fox News Digital’s Emma Colton contributed to this report.

This post appeared first on FOX NEWS

Stocks

S&P 500 Sinks on Software and Semiconductor SELLOFF

See Dave’s chart tracking relative performance of defensive sectors here.

In this edition of StockCharts TV‘s The Final Bar, Dave welcomes Jonathan Krinsky, CMT of BTIG. Jonathan speaks to the weakness in market breadth conditions and the software group as a key space to watch for relative strength weakness. David breaks down the relationship between the S&P 500, Nasdaq 100, and Dow Jones Industrial Average and highlights the relative performance of defensive sectors.

This video originally premiered on May 30, 2024. Watch on our dedicated Final Bar page on StockCharts TV!

New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.

Stocks

From Summer Doldrums to Year-End Surge: How to Profit from Seasonal Trends in Precious Metals and Bitcoin

Safe-haven investments like gold, silver, and now Bitcoin have had a bumpy and uncertain rise, but they’ve all ascended despite mixed opinions from analysts. This rise is due to fears of inflation (or slow growth with inflation), record-high US national debt, changing Fed rate expectations, and record purchases by central banks, especially among the BRICS nations.

Except for Fed rate cuts, which might happen sometime toward the end of the year, much of everything mentioned above is likely to continue in the direction they’ve been going—which is against the US dollar(‘s value of).

Bearish Near-Term, Bullish Long-Term

Aside from interest rates remaining steady, if not another hike (depending on the upcoming trio of inflation reports), there’s another reason to anticipate a potential dip before the next leg up: seasonality.

Gold, silver, and Bitcoin all experience summer doldrums. So, based on this expectation, should this seasonal pattern repeat this year, let’s assume there might be a dip in the near-term followed by a potential bullish surge toward the end of the year. If you want to get into any of these safe havens, might this summer be a time to load up on positions?

Tools for Analysis

The objective is to examine the seasonality outlook and compare it to the current price context. To do this, it helps to look at StockCharts’ Seasonality tool and the tools in StockChartsACP to fine-tune your analysis. This article will use the Fibonacci Retracement tool and the Money Flow Index (MFI) to fine-tune its analysis.

Seasonal Hot Summer “Dips” in Gold, Silver, and Bitcoin

Since you’re likely a stock trader or investor, let’s not just look at each asset’s seasonality by itself, but compare its seasonal performance against the S&P 500 ($SPX) to see its historical performance against the broader market (which may bear similarity to your portfolio).

Using StockCharts’ Seasonality tool, pay attention to the following two figures and note that we’re looking at a 10-year seasonality cycle:

The bars (and numbers above them) represent the % frequency of the asset closed higher, in this case, relative to the S&P.The % figure at the bottom of the bar reflects the average return over 10 years relative to the S&P 500.

CHART 1. SEASONAL 10-YEAR CHART OF BITCOIN AGAINST THE S&P 500. Note the higher-close rate versus the average returns.

Bitcoin’s higher close rates and returns in June and July are decent, with August being the worst-performing month (summer doldrums). But almost all months tend to get dwarfed by the October higher close rates and returns (89% higher closes and a 22.5% average return).

Now, let’s look at silver’s ($SILVER) performance.

CHART 2. SEASONAL 10-YEAR CHART OF SILVER AGAINST THE S&P 500. Note the weakest performances in June and November vs. its outperformance in December.

Not quite as brilliant as Bitcoin, but silver ($SILVER) is the neglected sibling among the three. Compared to the S&P 500 (remember, we’re not looking at each asset’s seasonality on its own), June through November tend to hover from negative to almost no movement despite the higher closing rates in August and October. November is the worst month for silver, but December is the month the white metal tends to outshine the broader market, with a 67% higher close rate and a 4% return. Again, this supports the bearish to bullish pattern that the market tends to be expecting on a fundamental basis.

And finally, gold.

CHART 3. SEASONAL 10-YEAR CHART OF GOLD AGAINST THE S&P 500. December and January are the strongest months for gold compared to the broader market.

Relative to the S&P, gold’s ($GOLD) performance looks similar to that of silver’s, with November being the worst month and December (but also January) exhibiting the strongest relative performance, with a 67% higher close rate and a 2.3% average return over the last 10 years.

So, if you reshuffle your portfolio with these safe-haven assets, you’d have to figure out which assets you’d be overweight and when while maintaining your broader market portfolio.

CHART 4. DAILY CHART OF BITCOIN. The crypto is in a trading range, but momentum is declining.

According to some analysts, during the traditionally slower summer months, prices may seek a new catalyst, potentially causing Bitcoin to drop below $50,000. Also, note the slight bearish divergence in the declining Money Flow Index (MFI) line and the almost flat range, signaling a drop in buying momentum. Assuming that’s the case, prices would first have to break below support a few points above the 38.2% Fibonacci retracement level (see blue arrow). A drop below this level would likely find support above the 50% Fib level (see blue arrow), below which we see the $50,000 price mark.

There’s likely to be some technical buying activity near this level. However, should prices continue drifting lower, the range between 50% and 61.8%, an ideal buying range, would also coincide with a four-week historical congestion range (see blue rectangle) above which there may be strong support. You should reassess your bullish outlook if the price falls below this level.

CHART 5. DAILY CHART OF SILVER. Note the strong surge in silver. Is it topping or does it have more room to run?

The slight divergence in the MFI shows a stronger price surge against slightly weakening momentum. Still, it makes you wonder if silver may be topping. As an industrial metal, in addition to being a monetary metal, silver has a different fundamental path. Nevertheless, it has a similar seasonality profile to Bitcoin and gold—summer weakness and end-of-year strength.

If prices top at the current highs, silver would have to break below its swing low (see blue dotted line), coinciding with the 23.6% Fib level. A break below this would likely find support at the 38.2% line coinciding with former resistance (see blue arrow). The next swing low, also an ideal buying range for those looking to go long, would be near $26.25, where the 61.8% Fib level sits.

CHART 6. DAILY CHART OF GOLD. Gold looks like it’s topping. But there’s plenty of clear support below it.

It looks like an intermediate-term double-top pattern, but whether this ends up being a correction or a much longer decline depends on several factors, one of which is the Federal Reserve’s rate actions.

Assuming a correction, the blue arrows indicate clear market-based support (and potential resistance-turned-support) levels. These coincide with the 38.2%, 50%, and 61.8% Fib retracements. Similar to the Bitcoin example above, you can also see a downsloping MFI line from the overbought range, indicating a slight weakening in buying pressure. If you’re following the seasonal narrative, near-term weakness followed by a bullish run toward the end of the year, the range between the 50% and 61.8% Fib levels may be a favorable entry. Just be sure to buy when technical conditions, from patterns to momentum, indicate a strong bullish reversal.

The Takeaway

When “buying the dip,” identify strong reversal patterns and signs of bullish momentum. Despite the mixed opinions analysts may have on these three safe-haven assets, they have all responded to inflation, changing Fed rate expectations, and strong central bank buying (concerning gold, but also as an indication of challenges in the global economy and the US dollar).

Seasonality-wise, these assets often experience summer doldrums, potentially leading to near-term dips before a bullish surge towards the end of the year. If you’re considering going long, this summer might present an opportunity to buy. Keep an eye on the Fib levels.

How to Access the Seasonality Tool

There are different ways to access the seasonality tool in StockCharts.

Click the Charts & Tools tab at the top of the StockCharts page, enter a symbol in the Seasonality panel, and click “Go.” Enter the symbol in the ChartBar at the top of the page and select “Seasonality” from the dropdown menu on the left.From Your Dashboard, in Member Tools, click on Seasonality.Below the seasonality chart, you’ll find links to instructions and quick tips that give more detailed instructions.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Stocks

Rules-Based Money Management – Part 7: The “Dancing with the Trend” Model

Note to the reader: This is the twenty-third in a series of articles I’m publishing here taken from my book, “Investing with the Trend.” Hopefully, you will find this content useful. Market myths are generally perpetuated by repetition, misleading symbolic connections, and the complete ignorance of facts. The world of finance is full of such tendencies, and here, you’ll see some examples. Please keep in mind that not all of these examples are totally misleading — they are sometimes valid — but have too many holes in them to be worthwhile as investment concepts. And not all are directly related to investing and finance. Enjoy! – Greg

This article continues directly from the preceding one.

Mutual Fund Expenses

If you are trying to decide on which mutual fund to buy and are looking at objectives, such as growth, conservative, or small-cap, you need to know this. Most of them hug a benchmark, and performance is based on how they perform relative to that bench.mark. If they beat the benchmark, they call it alpha, whereas if they don’t, they call it tracking error. Because most mutual fund managers are tied to a benchmark, expenses can become the only discernible difference among them.

You need to understand mutual fund expenses because, so many times, decisions on which fund to buy boil down to this factor. Expenses can cause you to forget the goal, which is to select the fund that will give you the total return you need. Below is Table 15.2, which shows three mutual funds, their total expenses, and their total returns. Which mutual fund is delivering the most alpha?

Fund C clearly delivered the most alpha. If Fund C generated the same total return as the other two with a higher expense, then Fund C manager produces the most alpha of the three funds. However, if you are a momentum buyer like me, the above does not come into play. The concern about expense ratios comes into play when, often, that is the only delineation among managers who all follow the same objective.

Turnover and Taxes

Turnover refers to the percentage of an investment vehicle’s holdings that have been “turned over” or replaced with other holdings in a given year. Most unconstrained tactical models generally yield a high turnover.

The turnover is based totally on market action; low volatility trends will not have high turnover, while short whipsaw-like moves will have high turnover.Rarely are there any long-term gains or losses.Predominately, there are short-term gains and losses.

A good model will not compromise its investment process with tax considerations. Plus, there is no risk of getting a long-term gain that you did not participate in. This is a phenomenon most never realize can happen until it happens, and by then it is too late. Most mutual funds that follow an objective will hold issues for really long periods of time, upward of many years. If you purchase shares of an open-end mutual fund, and, shortly thereafter, the fund manager decides to sell one of their long-term holdings, you will realize the full long-term capital gains tax, and you never participated in the actual gains.

Remember: Taxes are the consequence of successful investing.

Watching a Tactical Strategy over the Short Term

Most tactical unconstrained strategies are long-term. Following them daily is insane. Following them even quarterly is misleading. Many tactical unconstrained strategies do not have a benchmark. This is critical to understand and convey. Almost the entire world of money managers is tied to benchmarking and rebalancing any tactical unconstrained strategies do neither. Often, because of one’s investment model, it will be out of sync with the market, which is why comparing it to a benchmark like the S&P 500 on an improper basis (short term) is frustrating. You must realize that expecting it to track the daily, weekly, or even monthly direction of a benchmark is admitting that you do not understand this process.

Benchmarking

Many funds/strategies are tied to a benchmark. In fact, I think most are tied to a benchmark. The goal of these managers is to try to beat the benchmark. Some do and some don’t; yet when the number beating (or failing to beat) the benchmark is usually not worthy of comment, especially over time, I like to say that benchmarking is what you try to do when you have no idea what to do. The World of Finance is wrapped up in relative performance and comparison.

Relative performance is a widely used investment tool, but often causes horrible investment decisions. If a client is told his or her account is up 15%, they are happy; until you tell them the market was up 20%. This often causes a client to search for a new fund or advisor who claims to beat the market. We all know that no one can legally make that promise, but carefully worded marketing material can easily give the reader a subliminal message that makes them believe it can be done.

The cycle of performance chasing is the beginning of a vicious process of moving money from what is perceived to be a better-performing fund or strategy. Sadly, these moves usually happen at the point in time when they should add to their current account instead of sell it. In the case of tactical unconstrained management, which is what the Dancing with the Trend strategy is, trying to select a benchmark to measure performance is losing sight of the strategy’s goals and the client’s investment horizon. The only benchmark that should matter is the strategy return required to meet your goals. Most will find that, in their later years, a strategy that meanders to the upside with minimal downside action will be their most comfortable ride. Benchmarking in the investing world is common, often used in sales and marketing, rarely of any true value to an investor who is not interested in a strategy that does not attempt to beat a benchmark. It is, however, human nature to try to measure and compare things; sadly, that trait can cause poor results. In brief, benchmarking leads to chasing performance that generally leads to poorer performance.

Full Cycle Analysis

If you would like an investment plan more oriented to your lifespan rather than your attention span, you probably would be better served with a tactical approach to the markets. The markets are not tied to the calendar, yet the world of finance is. Performance measures should be appropriate for the strategy, which means that tactical unconstrained should be measured over the full cycle of the market, whether it be top to top or trough to trough. As an example, in Figure 15.16 , a full cycle can be from A to C or from B to D.

Actual Results from a Rules-Based Trend-Following Strategy — Dancing with the Trend

I am guilty of overkill with the multitude of charts and tables in the remainder of this chapter; however, I have a reason for it. First of all, the Dance with the Trend strategy does not have a benchmark. No benchmark exists for trend following that uses stops and treats cash as an asset class. Personally, I don’t think there ever will be. Secondly, many people look at a wide variety of performance data and risk statistics, and it seems logical to me to provide as many different “looks” as I can. Hopefully, I included one you are familiar with and can use.

This section shows you the results from the Dance with the Trend strategy, a rules-based strategy that uses a weight of the evidence approach to trend following, rules and guidelines, and strict discipline. The Dance with the Trend strategy began on December 31, 1996, with data through December 31, 2012. It has real results from a 17-year record of real money management; no back-tested results and no hypothetical results.

Dance with the Trend Performance and Risk Comparison

The Dance with the Trend strategy is compared to S&P 500 Growth, S&P 500, S&P 500 Value, Russell 2000 Growth, Russell 2000, Russell 2000 Value, MSCI EAFE, and MSCI Emerging Markets. These categories cover large-cap, small-cap, and international.

Figure 15.17 shows the number of instances of drawdowns greater than 10%. The Dance with the Trend strategy had only two instances. All others had at least six.

Figure 15.18 shows the number of instances of drawdowns greater than 20%, which is also considered a bear market. The Dance with the Trend strategy had no drawdowns greater than 20%. Let me say that again. The Dance with the Trend strategy had no drawdowns greater than 20%.

Figure 15.19 shows the total number of months spent in a drawdown of greater than 10%. The Dance with the Trend strategy had 42 months spent in a state of drawdown of greater than 10%, while others could be measured in decades.

Figure 15.20 shows the number of months in Bear Market territory. The Dance with the Trend strategy had zero months in a bear status. Zero!

Figure 15.21 shows the maximum drawdowns. The Dance with the Trend strategy had a maximum drawdown of 17%. Remember, there were two giant bear markets during this period, each with drawdowns near -50%.

Figure 15.22 shows the average drawdowns. The average drawdown of the Dance with the Trend strategy was -5.1%.

Figure 15.23 shows the Ulcer Index, which is a measure of risk. The Dance with the Trend strategy had an Ulcer Index of only -7%.

Dance with the Trend over a Full Market Cycle

Any strategy that is a trend follower that treats cash as an asset class and moves to cash during bad periods in the market does not have a benchmark. The only way to correctly measure performance for a strategy such as the Dance with the Trend strategy is over the full market cycle. The next three tables include the ubiquitous 60/40 strategy for comparison, along with the also-ubiquitous S&P 500 Index. When one does not have a benchmark, at least something needs to be used. You can recall my comments on “The 60/40 Myth” in earlier articles.

The following tables use many statistical and risk measures; their definitions are scattered throughout the book, but all are reproduced here for convenience.

Return — This is the annualized return, which is also the geometric mean of the returns.

Cumulative Return — This is the compound return of the series from the beginning date.

Standard Deviation — A measure of the average deviation of the returns from their mean (same as sigma).

Downside Risk — Also known as the semi-standard deviation, as the sum is restricted to those returns that are less than the mean. (Author note: Be careful here and be aware of the amount of data being analyzed. An inadequate amount of data would make this value unreliable.)

Beta vs. Market — This is the sensitivity of the series compared to that of a benchmark. A beta of one means the return series and the benchmark are similar.

Alpha vs. Market — This is the mean of the excess returns of the series over beta times the benchmark. (Author note: This is horribly overused in modern finance and very difficult to distinguish from returns derived from beta.)

Sharpe Ratio — The annualized excess returns of the series divided by the annualized standard deviation.

Best Period Return — The maximum of the returns in the period of data analyzed.

Worst Period Return — The minimum of the returns in the period of the data analyzed.

Up Capture versus Market — This measures how well the series did in capturing the up periods of the benchmark.

Down Capture versus Market — This measures how well the series did in capturing the down periods of the benchmark.

Maximum Drawdown — The maximum compounded loss the series incurred during any period of measurement.

R-Squared versus Market — Shows how closely related to the benchmark the series is based on the variance of returns. This is also known as the goodness of fit.

Correlation versus Market — This measures how closely related the variance of the series is to the benchmark.

Table 15.3 shows the performance data for the first full bear/bull cycle in this century. When a risk statistic is compared to the market, that market is the S&P 500 Index.

Table 15.4 shows the Dance with the Trend strategy during the bull/bear cycle.

Table 15.5 shows the Dance with the Trend strategy since its conception.

Dance with the Trend with Other Asset Classes

The following tables show various risk statistics for the Dance with the Trend strategy compared to a wide variety of other asset classes. If a strategy such as the Dance with the Trend strategy does not have a benchmark, then this is a more valid method of comparing performance measures. Table 15.6 shows all of the risk statistics used in the previous tables, with the addition of R-squared and Correlation.

Dance with the Trend Return Analysis

Table 15.7 shows the various asset classes’ performance over various time periods from 1 to 15 years.

Dance with the Trend Upside Downside Analysis

Table 15.8 shows statistics for various periods relative to up and down markets, as determined by the S&P 500 Index.

Dance with the Trend Comparison with Style/Asset Classes

Table 15.9 shows the performance of the Dance with the Trend strategy against a host of various asset classes.

Dance with the Trend Performance Comparison

Figure 15.24 shows the various asset classes from 1/1/1996 until 12/31/2012. The dotted line (Dance with the Trend) offers a fairly smooth ride. As one ages, this comfortable ride becomes more and more important. It is an investment ride that is easy to stick with over the years. Another wonderful advantage is it means that one could pull out almost all of their money at any time, independent upon market action. Think about that!

Mean Shifting

The Dance with the Trend model measures the trend of the market, then utilizes rules to scale into the trend, and maintains risk containment measures (stop loss) both absolute and relative, and, when an uptrend is not identified, a cash position of up to 100% is utilized. There are two distribution concepts at play with this type of model. First the use of stop loss measures will reduce the downside variance and shift the return distribution mean to the right. Secondly, the baggage of trend following, known as whipsaws (see the previous article), will reduce the upside variance and shift the return distribution mean to the left. The benefit is that the mean shift to the right is much greater than the mean shift to the left, yielding a net shift to the right. (See Figure 15.25.)

Table 15.10 shows monthly return distributions for the Dance with the Trend strategy from 1996 to 2012, compared to the S&P 500. You can see that the average (mean) of returns for the Dance with the Trend strategy for this 17-year period was 0.65% versus 0.52% for the S&P 500, and with lower variability as denoted by St. Dev. (standard deviation/sigma). The more significant point is the minimum (Min) value for the strategy is only -5.84% vs. the S&P 500 at -16.94%.

The top plot in Figure 15.25 is the monthly return distribution for the Dance with the Trend strategy from 1996 to 2012. The vertical axis shows the number of events that occurred at the various return levels. The shaded area is the 12-month moving average of those returns, so that you can more closely relate to where the bulk of returns occurred. The second plot is the monthly return distribution of the S&P 500 over the exact same time period, also with the 12-month moving average shown. Notice the lack of negative returns (left side) on the top plot of the strategy compared to the S&P 500 in the lower plot. This ability to avoid downside returns provides a right shift (more positive) in the mean of all values.

In the top plot, there are two return values that have been truncated (two long lines that reach the top of the plot) in order to keep the values in the vertical axis the same as those in the lower plot. Their values are 33 and 29. I think it is clear that the Dance with the Trend strategy offers higher returns, in addition to much fewer returns in the negative (left) realm.

That was a lot of performance comparisons. Hopefully, you were able to grasp the message that a rules-based trend-following strategy that uses stops and treats cash as an asset class is much better than many, if not most of, the investment strategies being hyped by managers who only try to follow a benchmark.

Thanks for reading this far. I intend to publish one article in this series every week. Can’t wait? The book is for sale here.

Business

Inflation pressure lingering from pandemic is keeping Fed rate cuts on pause

WASHINGTON — Hopes for interest rate cuts this year by the Federal Reserve are steadily fading, with a stream of recent remarks by Fed officials underscoring their intention to keep borrowing costs high as long as needed to curb persistently elevated inflation.

A key reason for the delay in rate cuts is that the inflation pressures that are bedeviling the economy are being driven largely by lingering forces from the pandemic — for items ranging from apartment rents to auto insurance to hospital prices. Though Fed officials say they expect inflation in those areas to eventually cool, they’ve signaled that they’re prepared to wait as long as it takes.

Yet the policymakers’ willingness to keep their key rate at a two-decade peak — thereby keeping costs painfully high for mortgages, auto loans and other forms of consumer borrowing — carries its own risks.

The Fed’s mandate is to strike a balance between keeping rates high enough to control inflation yet not so high as to damage the job market. While most measures show that growth and hiring remain healthy, some gauges of the economy have begun to reveal signs of weakness. The longer the Fed keeps its benchmark rate elevated, the greater the risk of causing a downturn.

At the same time, with polls showing that costlier rents, groceries and gasoline are angering voters as the presidential campaign intensifies, Donald Trump has sought to pin the blame for higher prices squarely on President Joe Biden.

The Fed, led by Chair Jerome Powell, raised its benchmark rate by 5 percentage points from March 2022 through June 2023 — the fastest such increase in four decades — to try to drive inflation back down to its 2% target. According to the Fed’s preferred measure, inflation has tumbled from 7.1% in June 2022 to 2.7% in March.

That same gauge showed, though, that prices accelerated in the first three months of 2024, disrupting last year’s steady slowdown. On Friday, economists expect the government to report that this measure rose 2.7% in April from a year earlier.

A separate inflation indicator that the government reported this month suggested that prices cooled slightly in April. But with inflation remaining stubbornly above the Fed’s target level, Wall Street traders now expect just one rate cut this year, in November. And even that is hardly a slam-dunk, with investors placing the likelihood of a cut in November at 63%, down from 77% a week ago.

Last week, economists at Goldman Sachs became the latest analysts to give up on a rate cut in July, pushing back their forecast for the first of two cuts they expect this year to September. Oxford Economics made a similar call last month. Bank of America foresees just one Fed rate cut this year, in December. Just months ago, many economists had forecast the first rate cut for March of this year.

“We will need to accumulate further data over the coming months to have a clearer picture of the inflation outlook,” Loretta Mester, president of Federal Reserve Bank of Cleveland, said this month. “I now believe that it will take longer to reach our 2% goal than I previously thought.” (Mester is among 12 officials who are voting on the Fed’s rate policy this year.)

As further data accumulates, so do some signs that the economy is cooling a bit. More Americans, particularly younger adults, are falling behind on their credit card bills, for example, with the share of card debt 90 days or more overdue reaching 10.7% in the first quarter, according to the Fed’s New York branch. That’s the highest proportion in 14 years.

Hiring is also slowing, with businesses posting fewer open jobs, though job advertisements remain high.

And more companies, including Target, McDonalds and Burger King, are highlighting price cuts or cheaper deals to try to attract financially squeezed consumers. Their actions could help lower inflation in the coming months. But they also underscore the struggles that lower-income Americans face.

“There’s a lot of signs that consumers are kind of losing some steam and hiring demand is cooling,” said Julia Coronado, a former Fed economist who is president of MacroPolicy Perspectives. “You could see more of a slowdown.”

But Coronado and other economists also regard the latest trends as a sign that the economy may simply be normalizing after a period of rapid growth. Companies are still hiring, though at a more modest pace than at the start of the year. And data suggests that Americans traveled in record numbers over the Memorial Day weekend, a sign they’re confident in their finances.

One reason why inflation remains above the Fed’s target is that distortions stemming from the pandemic are still keeping prices elevated in several areas even as much of the rest of the economy has moved past the pandemic.

Housing costs, led by apartment rents, jumped two years ago after many Americans sought additional living space during the pandemic. Rental costs are now slowing: They rose 5.4% in April on an annual basis, down from 8.8% a year earlier. But they’re still rising faster than before the pandemic.

Last month, rent and homeownership, along with hotel prices, accounted for two-thirds of the annual rise in “core” inflation, which excludes volatile food and energy costs. Powell and other Fed officials have acknowledged that they had expected rents to fall more quickly than they have.

The cost of a new lease, though, has tumbled since mid-2022. A gauge of newly leased apartment rents calculated by the government shows that they rose just 0.4% in the first three months of 2024 compared with a year earlier. Yet it takes time for newer, lower-priced rents to feed into the government’s inflation measure.

“Market rents adjust more quickly to economic conditions than what landlords charge their existing tenants,” Philip Jefferson, the Fed’s vice chair and a top lieutenant to Powell, said last week. “This lag suggests that the large increase in market rents during the pandemic is still being passed through to existing rents and may keep housing services inflation elevated for a while longer.”

The cost of auto insurance has soared nearly 23% from a year earlier, a huge jump that reflects the surge in prices of new and used cars during the pandemic. Insurance companies now must pay more to replace totaled cars and as a result are charging their customers more.

“This is about stuff that happened in 2021,” said Claudia Sahm, chief economist at New Century Advisors and a former Fed economist. “You cannot go back and change that.”

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Business

Walgreens announces price cuts on 1,300 items amid ongoing consumer spending fatigue

Walgreens announced Wednesday it would continue to cut prices on 1,300 items — making it the latest company to pivot to value amid signs U.S. consumers are experiencing spending fatigue.

The pharmacy chain said in a statement announcing a ‘summer of savings’ that the lower prices were in response to consumers’ ongoing struggles with elevated inflation rates that continue to bedevil the U.S. economy.

“Walgreens understands our customers are under financial strain and struggle to purchase everyday essentials,’ said Chief Customer Officer Tracey D. Brown, Walgreens’ president of retail. ‘We continue to be committed to our customers by lowering prices on over a thousand additional items, something we’ve been doing since October of 2023.’

Walgreens previously pointed to a ‘challenging’ retail environment when it announced its quarterly earnings in March.

Among the price cuts the company highlighted:

Prices may be different based on your location.

Walgreens’ announcement follows others by retail giants that also indicate greater awareness of consumers’ price sensitivities. Last week, Target announced lower costs for thousands of items in its stores , while Walmart recently unveiled an entire new line of food items costing $5 or less.

The post-pandemic economic recovery is showing signs of splitting into a ‘K’-shaped one, with more well-off people able to sustain consistent levels of spending, even amid inflation rates that continue to hover above 3%. Lower-income consumers have been cutting back more substantially.

In its monthly consumer confidence report, released Tuesday, the Conference Board business group said those making over $100,000 per year expressed the largest rise in confidence, higher overall than that of lower-income groups.

“The lower-income consumer in the U.S. is stretched … [and] is strategizing a lot to make their budgets get to the end of the month,” PepsiCo CEO Ramon Laguarta told analysts on the company’s conference call last month.

Meanwhile, other areas of the economy more closely tied to wealthier consumers continue to outperform, especially travel. Even as American Airlines announced Wednesday it was cutting growth plans, analysts said the changes did not reflect a broader pullback.

“American’s diminished [outlook] speaks far more to its flawed initial forecast than any broad-based shift in passenger demand,” JPMorgan airline analyst Jamie Baker said in a note about the airline Wednesday.

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Business

Weekly mortgage demand drops to three-month low as rates begin climbing again

After a brief pullback during much of May, mortgage rates began rising again last week. That had an immediate impact on what had been several weeks of strengthening mortgage demand.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.05% from 7.01%, with points rising to 0.63 from 0.60 (including the origination fee) for loans with a 20% down payment.

That was the first increase in four weeks, and while it might not seem like a huge move, that is an average, and rates had fallen back into the high 6% range before shooting higher in the second half of the week.

As a result, total mortgage application volume fell 5.7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

“Both purchase and refinance applications fell, pushing overall activity to the lowest level since early March,” wrote Joel Kan, an MBA economist in a release. “Borrowers remain sensitive to small increases in rates, impacting the refinance market and keeping purchase applications below last year’s levels.

Refinance demand, which had been in a small recovery phase, plunged 14% for the week but was still 12% higher than the same week one year ago.

Applications for a mortgage to purchase a home fell 1% for the week and were 10% lower than the same week one year ago.

“There continues to be limited levels of existing homes for sale and many buyers are struggling to find listings in their price range that meet their needs,” Kan added.

Mortgage rates jumped sharply to start this week, rising 12 basis points just on Tuesday, according to a separate survey from Mortgage News Daily. This followed comments on the direction of interest rates from Minneapolis Federal Reserve President Neel Kashkari. He told CNBC on Tuesday that he needs to see, “Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back.”

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