Jordan Kahn’s “Get Mental!” Investor Psyche Diary

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jordan

November 10, 2024 - 12:32 PM

I am starting a small position in the HDGE etf. This is an inverse etf that actively shorts stocks. This is just a small hedge to offset some long exposure in our trading accounts.

jordan

November 10, 2024 - 1:46 PM

The put/call ratio remains high today at 1.19 right now. As for the VIX, it surged +31% higher yesterday and today it is down 11% so far. The VIX has moved back below its 50-day average but is still above the 30 level signaling traders still expect elevated volatility levels. Are we having fun yet?

jordan

November 11, 2024 - 11:07 AM

The NAAIM Survey of Manager Sentiment eased slightly this week to 44.1. Like many of the investor survey figures I follow, this one is back in neutral territory. The 44 reading is up a lot from the -3.6 low we saw in October, but it is also far from the highs in the 80s and 90s we saw early in the year. Investor sentiment often trends higher into year-end, so I wouldn't be surprised to see these figures head higher in the coming weeks.

jordan

November 11, 2024 - 11:26 AM

I think the important thing that many investors miss about monitoring investor sentiment is that it isn't ALWAYS a contrarian indicator. I like to say that investor sentiment is usually directionally correct during a market trend, but very wrong at market turning points. That is what I really watch for. For example, in August and September this year bearish sentiment began to rise steadily. It continued to build and build such that by the time we entered October we were seeing extreme readings that have often signaled trading bottoms in the past. So when you saw the big market turnaround day on Oct. 4th you could have been prepared for a big market bounce because you knew how bearish everyone had become.

Gary

November 11, 2024 - 11:44 AM

Jordan, what do you think about the sustainability of the stock rally over the last 2 days? The euro, and thus the equity market, seems to be cheering the passage of the Italian austerity package. However, as we have seen with several other countries passing severe austerity measures with little in the way of growth incentives, this will only lead to further economic contraction, which then leads to less tax revenue and a worsening of their acute debt crisis. Bloomberg ran an interesting article late last night: http://www.bloomberg.com/news/2011-11-11/invisible-run-on-banks-becoming-conversation-with-italian-yields-above-7-.html The key statement: “The Italian banks are trapped,” said Roger Doig, a London-based analyst at Schroders Plc, which manages about $58 billion in fixed-income assets. “They are where they are and that’s with the Italian sovereign. The austerity required if the sovereign wants to remain in the euro zone means there’s going to be a recession, which will mean losses for the banks.” What are your thoughts?

jordan

November 11, 2024 - 11:50 AM

@Gary: I agree with you, and that article. The market seems to be cheering these austerity packages intially, but their passage increases the odds considerably that all of the associated countries fall into recession due to lack of growth. Moreover, if Europe remains in recession, I think it starts to drag down China and Asian growth as well. So the short-term enthusiams to me does seem at odds with the long-term consequences of these policy actions.

briang

November 11, 2024 - 12:07 PM

There was a great article out of Credit Suisse this morning on the importance of Italy to the EU. The strategist thought that the austerity plan would pass this weekend, the ECB will step up its purchases of Italian debt, forcing yields back to 6.5%, and then the ECB becomes the lender of last resort. i have to be honest and say a lot of what has went on in Europe and the constant bleating of headlines has been well beyong my expertise and understanding, but we do seem to be getting closer to the end game, rather than the constant drama of events and headlines. The same Credit Suisse strategist mentioned that Italy is 17% of European GDP and accounts for 7% of German exports directly, so Italy is a bigger deal than Greece it seems.

briang

November 11, 2024 - 12:10 PM

In terms of Europe's economic importance vis-a-vis the rest of the world, i always felt that as long as Germany and the UK stayed strong the remaining countries mattered little. I think teh bigger deal is if China slows rapidly. They have made noises about stopping the monetary tightening even thiugh GDP growth is still north of 9% - other than falling commdity prices, not sure what impact rasing bank resrves did in China.

jordan

November 11, 2024 - 12:13 PM

@Brian: yes, the effect on China could be pronounced as Europe is a BIG market for China. But as to your earlier comments about how much Italy matters, it's bond market is huge and the spillover effect could be big also. Already we are seeing CDS prices in France start to widen. And France has been considered on par with Germany heretofore.

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WallStreetAllStars.com is proud to present Jordan Kahn’s “Get Mental!” Investor Psyche Diary.

Each trading day in the “Get Mental!” Investor Psyche Diary, Jordan focuses on investor sentiment and a bevy of indicators he follows, marrying his stock picks and opinions with technical analysis. Jordan gives special attention to the concept of investor psychology, something that is sorely missing from most people’s arsenal.

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Jordan Kahn, CFA, is the President and CIO of KAM Advisors a Beverly Hills-based money manager and is the author of Jordan Kahn’s “Get Mental!” Investor Psyche Diary. He previously was a managing partner with Beverly Investment Advisors. Mr. Kahn holds a master’s in financial markets and trading from the Stuart School of Business at the Illinois Institute of Technology and a bachelor’s degree in economics and finance from the University of Colorado.