President Obama Reappointing Bernanke As Fed Chair

It's been up in the air for a long time, but Ben Bernanke - the experts' choice - is getting reappointed to the chairship of the Federal Reserve.

I have to admit to haing doubts on the matter, prompted by the annoucement delay. For a time, I was wondering if it was to be Larry Summers who got the appointment. But no, it's "Helicopter Ben" that's going to stay in charge.

In a way, it makes little difference on the inflation front. There's been so much fear of a second Great Depression, a new consensus has emerged which will put up with more inflation as the price of keeping the financial system afloat. Charima Bernanke's going to have a few more worries in the commercial real estate and Option ARM departments during his second term.

It would have been more fun to see Larry Summers in the job, though. He would have made a good G. William Miller.

A Cautionary Signal From the VIX Futures

According to this Bloomberg report, futures traders expect the VIX to ramp up over the next five weeks. "Traders were betting the VIX, a gauge of expected stock swings, would increase 13 percent in the next five weeks, according to futures prices at the end of last week compiled by Bloomberg."

The report does note that the VIX may be expected to rise because some call writers are buying their calls back due to an expected earlier dip not occurring. The second half balances out the anticipated trouble the expected VIX rise portends, with a review of positive items. So, the VIX news can't be pegged as a definite warning that the major averages will fall in September, even if September (not October) is the worst month on average.

Still, it may be wise to take a leaf from Paul Tudor Jones [also quoted in the article] and wait to buy.


Note: I got this article because it was quoted in today's edition of the Casey Research Daily Dispatch

Insider Buying And Selling: A Caution

In the last section of today's edition of the Casey Research Daily Dispatch, there were three different insider-transaction statistics; all of them were in bearish territory. Here they are, as copied from today's E-letter:

• An insider gauge tracked by Market Profile Theorems, a Seattle research shop, moved into bearish territory on July 31 – for the first time since November 2007.
• An insider sell-buy ratio tracked by Thomson Reuters has been hovering around bearish levels not seen for years. It recently registered a 53, meaning insiders pulled $53 out of the market for every $1 in stock they purchased.
• Another insider sell-buy ratio, tracked by Vickers Stock Research, is now “well within the bearish range,” says David Coleman, who analyzes insider activity for Vickers. It hasn’t been so high since November 2007.

The author continues:

Also consider the Barron’s “Insider Spotlight,” a weekly rundown of the top 10 insider purchases and sales. In the past two weeks, the buyers have accumulated $53.9 million in stock. Meanwhile, the sells amount to $640.2 million. That’s a historically very high ratio of 1:11.9.

Although the level of insider selling is alarming, it’s important to note that the very low levels of buying are particularly alarming. Insiders sell stock for many reasons, but they generally only buy stock for one reason: they believe the stock is going up. [The previous sentence is a paraphrase of Peter Lynch's insider-buying rule.] Despite the fact that the media is reporting an end to the recession, a bottom in housing, and a trough in earnings, we are witnessing a vote of zero confidence from the people who know these companies better than anyone else.

This market has been quite successful in fooling many people for over a year, and it has become suspiciously predicatable lately. The above stats could indicate a kicker's coming. It would kick particularly hard anyone who's expecting a replay of the 1975-6 upsurge this year and next. There were two stages to that mini-bull market, and there was only a holding pattern between them.

The lousy insider buy/sell ratios above hint at a real spoiler to the 1975-6 narrative. A downward spill would be a way of unpleasantly surprising some people, perhaps many. The only doubt I have is the same doubt engendered by any formula-based rule: they do fail from time to time.

Nevertheless, I'm in the process of shifting my actively-managed Marketocracy mock fund to more high-yielding, more ploddish companies. I've been at this for a little while, and the above item has made me glad I did.


Note: Casey Research Daily Dispatch, just to let you know, is a free newsletter from a hard-core goldbug investment service. The E-letters aren't archived, which explains why I quoted from today's so copiously.

A Long-Term Thought About Japan

The Japanese market has been beaten down so much over the last twenty years, it's going to have a huge long-term rally once the Japanese economy gets humming again. I'm not saying that said bull market will start next year, but it's likely to get rolling within a decade.

If there's a young Japanese stockpicker who yearns to be Japan's Warren Buffett, this is the perfect time to try out. Mr. Buffett got rolling during the great U.S. bull market of 1949-66, and found some incredible values early in his career. There should be lots of pickings for an orthodox Ben Graham approach, which is how Mr. Buffett started off.

I'm beginning to wish there were a Japanese value fund run on Grahamite principles...


[The above post was inspired by one at "Investing Obtusely," which pointed to a counter-zeitgeist initiative to liberalize banking in Japan.]