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We’re not at the market top yet according to David Rosenberg at Gluskin Sheff. Citing legendary Merrill Lynch strategist Bob Farrell, Rosenberg argues that this is because “public participation has yet to reach levels that typifies the final blow-off an equity bull market. …We have yet to see Bob Farrell’s Rule #5 (the public buys most at the peak and least at the bottom).” But how do you really know when you have arrived at the “aha moment” that signals that it is time to exit the stock market?
“Go back to each cycle and you will see that each fundamental peak in the S&P 500 actually represented a ‘failed’ peak,” he writes. “In other words, the market doest a ‘double top’ at the highs. It hits a first peak, corrects mildly from it as the proverbial ‘smart money’ takes profits, and then makes its way to a new high as the last gasp moves up takes hold (generally driven by those who missed out on the bull run and end up capitulating right at the wrong time).”
“Now at that first peak, the momentum is so strong that typically the S&P 500 is up 11% on average over a 30-day period. So the actual classic ‘melt up’ everyone talks about is the first peak. This tends to stir up a frenzy that pulls the momentum crowd and many neophytes into the market hook, line, and sinker. A mini-correction then follows and the brokers typically tell their clients not to miss the boat again — but you know the gig is up if the market makes a new high and does so on weak breadth (lower participation as measured by the NYSE 52-week high list) and Bob Farrell’s rule #7 coincides with fulfillment of that rule #5 (rule #7 goes like this: markets are strongest when they are broad, and weakest when they narrow to a handful of blue-chip names).”
FINRA To Review Its Guidelines After Criticism From The SEC (The Wall Street Journal)
The Financial Industry Regulatory Authority (FINRA) is considering tougher penalties for violations by Wall Street executives, reports Jean Eaglesham at the Wall Street Journal. This comes after a Securities and Exchange Commission (SEC) commissioner, Kara Stein, said FINRA’s disciplinary actions were “too often financially insignificant for the wrongdoers.” He suggested that FINRA update their sanctions. Susan Axelrod, Finra’s executive vice president told the WSJ that they shouldn’t just be judged by the size of the fines. She also said that they would take another look at their guidelines and ensure that their penalties would be “meaningful and will have an impact.”
Investors Looking To Capitalise On Emerging Market Consumer Spending Should Start With Refrigerators (AllianceBernstein Blog)
The refrigerators of emerging market consumers act as a good investing guide for those looking to capitalise on emerging market consumer spending, according to Tassos Stassopoulous at AllianceBernstein Blog. Kitchens he thinks offer a more useful guide than income and assets. Certain measures look at certain items in a home to understand socio-economic status. “So a person with a laptop, TV, mobile phone and stereo could be classified as rich. Yet in our field research, we’ve met people in countries like Ghana whose ramshackle homes are full of electronic devices but who are quite obviously poor,” he writes.
“In working-class homes, the fridge is used mainly for efficiency items (Display). It includes basic foods such as eggs, fruits and vegetables and some pre-cooked food. Middle-class fridges stock more indulgences, from alcoholic beverages to chocolate and cheese. And for affluent households, health is a primary concern. So expect to find foods like low-fat yogurt or 100% fruit juices.”
“Our research suggests that China is in the indulgence phase. So companies that make products like beer, butter and chocolates should benefit from rising incomes. Indian families are still buying fridges, then filling them with efficiency items like milk, yogurt and ready-made sauces. Brazil has already shifted toward health mode, which should see higher-end food producers draw more spending.”
The Demand For Digital Interaction Between Wealth Managers And Clients Is Rising Everywhere (Capegemini/RBC Wealth Management)
While firms continue to focus on in person meeting with their high net worth (HNWI) clients, they’re increasingly open to interacting online as well. 57% of HNWIs conduct all or most of their relationship with wealth managers online. Moreover, 64.2% say the expect to have a digital wealth management relationship in five years.
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