The death of "buy and hold" by Jean Jacques Chenier

The biggest myths on Wall Street is that investors should buy and hold stocks for the long run. Many studies show that stocks over the last 100 years have averaged about 8% real returns (net of inflation) a year. This is probably true, (there is some debate even on that number), but the problem, as we have experienced in the last ten years, is that those returns are very uneven. There are long periods of time where returns average far above that 8%, and then there are long periods of time where returns are flat or negative. For example, if you bought the Dow Jones Industrial 30 stocks in 1900 to 1940, or from 1966 to 1984, you would have had a negative “real return” (net of inflation).

The Wall Street mantra of “buy and hold” does not always check with reality. From 1900 to 1943 (43 years!) and 1962 to 1982 (20 years), the Dow remained in choppy trading ranges. Are we at the beginning of such a period?

Jean Jacques Chenier, London 8 September 2010

Selling Opportunity? by Jean Jacques Chenier

New York, September 2nd 2010 by Jean Jacques Chenier

Yesterday's strong rally was a typical bear market rally. Bear markets rallies are fulled by short covering. There should be little follow up but we'll wait the middle of next week to go short. Traditionally, the days immediately before and after a national holiday see some support.

However , September can be a treacherous month and we are looking for an opportunity to short the S&P 500 (a s well as the Nasdaq) next Tuesday.

Have a successful trading day.

Jean Jacques Chenier

The death of "long only" by Jean Jacques Chenier

New York August 31st, 2010 by Jean Jacques Chenier.

Yesterday during its show "Mad Money" Jim Cramer was defending investment in the stock market for the individual and/or small investor.

According to Cramer, over the long term, nothing beats the Stock Market.

This opinion is totally misleading.

First the "long term" to be sure to make money on the Stock Market is 80 years which is pretty long for most of us. There are cycle of about 20 years down or flat markets and 20 years bull markets.

Second, even if you assume that, over the long term you'll get a decent return from the Stock Market, return is not the only metric. The risk has to be taken into consideration. And the risk as expressed by the volatility is just awful.

To be followed.

Jean Jacques Chenier

Euro Lower by Jean Jacques Chenier

New York 22 August 2010:

The euro zone's private sector expanded at a slower pace in August. The
preliminary composite purchasing managers index for the euro zone fell to 56.1
in August from July's 56.7. Economists had forecast a reading of 56.3.

 Both France and Germany posted better-than-expected results, while other
euro-area economies dragged on the headline index, stoking investor fears that
the severe fiscal tightening in smaller euro-zone countries is crimping growth.

 The data comes after comments on Friday by European Central Bank official
Axel Weber--usually seen to be one of the central bank's most conservative
members--who said that the ECB should offer unlimited liquidity for Europe's
banks into 2011.

 With Weber's comments still in investors' minds, the "weaker than expected
European PMI data for August did the euro no favors.

 Jean Jacques Chenier

Oil speculators under fire

"Oil speculators under fire" is on the front page of the Wall Street Journal today. The Journal also publishes am opinion piece by French president Sarkozy and British Prime Minister Gordon Brown calling for a curb is speculative activity on oil and commodities because it could fuel volatility (meaning higher price). This piece is totally misinformed : volatility and higher price in commodities is the result of the huge deficit run by the US and fear of a collapsing US Dollar and runaway inflation.
Jean Jacques Chenier, New York July 8th, 2009

Jean Jacques Chenier on Interest Rates

06-24-09
The Fed as cornered itself.

Treasuries fell for the first time in four days, with yields on the 10-year note increasing six basis points, or 0.06 percentage point, to 3.69 percent at 4:58 p.m. in New York.

A further increase in long term interest rates may put such any recovery in jeopardy.

Of course we know what the Fed answer would be: they would print more money! That would just add fuel to the fire: interest rates are n ot climbing because of hope of recovery. They are climbing because everybody with alf a brain knows thta the Fed will NEVER withdraw the money it has printed in time.

Guess what will be the result on the Stock Market!

Jean Jacques Chenier, New York 24 June 2009

Jean Jacques Chenier Market commentary

Jean Jacques Chenier 06-20-2009
The current recession and aging population is contributing to larger fiscal deficits. Future obligations tell us these numbers are likely to grow. The only panacea is economic growth that can make these obligations affordable. There are only two ways to resolve the issue – increase revenues or cut expenditure. Both of these are not palpable and to any politician who wishes to get re-elected. It is easier to ignore the problem till such time that blows up and then find a scapegoat.
It is obvious that the Fed will not retrieve the money it has printed in time. It never has. The US will inflate its way out of recession ... for a while. At some point, of course it will trigger a dollar crisis and longe term interest rates will shoot higher stopping the recovery in its track.
For the time being the big question is the timing. It's too early to tell but I'll keep you posted.
Jean Jacques Chenier