Wednesday, March 26, 2014

Is the U.S. Energy Boom all it's “Fracked Up” to be?

You can hear the heightened expectations in the current business news every trading session.  The exploration and production activities which are cranking up in the Bakken, Eagle Ford, Marcellus and other plays are producing a glut of oil and gas which will lead to energy independence and cheaper energy well into the future for American consumers.  Laudable goals and U.S. citizens which think to the contrary are definitely a minority.  The expectations have become so ingrained the psyche of the market that the forward price curve for the benchmark WTI NYMEX delivered crude oil shows lower price levels on contracts reaching as far into the future as can be seen visually in the graph below. 


Ironically, the activity in the energy market is happening during a time period when the sitting U.S. President is resoundingly anti-carbon based energy and providing only regulatory roadblocks through the Department of Energy.  This information alone should cause investor skepticism about the ability of the U.S. energy

Monday, March 3, 2014

New All-time S&P500 Highs - What will Derail the Stock Market Party?

To help investors looking for a system to track the relative attractiveness of the U.S. equity market, the Financial Relativity Index has been created based on a set of leading indicators derived from the research contained in the book, Theory of Financial Relativity.  The index is a heuristic used to gauge the relative attractiveness of investing in stocks at a given time based on the interaction of major market forces and the resulting impact on the rate of change in the price levels of stocks (DOW Signal), money (Interest Rate Spreads) and energy (Oil).  All of the signals in the multivariate model possess characteristics which have a high probability of being exhibited prior to a sustained equity market downturn accompanied by economic recession; and likewise remain within certain parameters when the equity market is more attractive as an investment such as during a post recession rebound or an economic expansion.


Signals Advise More Equity Investment Caution

The status of the Theory of Financial Relativity leading equity market indicators as of 2/28/2014 is show in the table below.
At the end of February, the major US stock market indexes (DIA) (SPY) were increasingly becoming less attractive investment alternatives.  The trend in the market signals were pointing to potential market instability