Other People's 13F's Are Useless

Young Money, "Eliminate white noise from the financial media":

The information in 13F filings is very limited: the disclosures are made with a lag, they presents a partial picture (e.g. they don't state if an investment is part of a pair trade), and they don't give the filer's rationale for making an investment.

The only noteworthy 13Fs from 9/30/14 that I heard about were some fascinating impending train wrecks to gawk at, like the guy who put his entire fund in one iron ore miner.

I guess the other thing I'd point out is that 13Fs are how we are able to have holders lists for companies, which are useful. It's reassuring when you're short a company with bonds yielding 40%, and you can check and see that nobody really smart owns it.

Fascinating Indicator - Realized Volatility Premium

Macrofugue posted a chart of an interesting indicator: the realized volatility premium on the S&P 500. (The realized volatility premium is the implied volatility (VIX) minus realized volatility.)

As they put it, "when [the realized volatility premium is] positive, it has presaged increases in implied volatility -- as options writers may have under-priced volatility relative to what has been realised."

If options sellers aren't charging enough - which is what a negative volatility premium means - that is a sign of complacency. It makes sense that these complacent periods are major market tops that precede breathtaking declines.

Noticing Divergences

USD above October high.
EUR/USD below October low.
Commodities index in a clearly descending trend.
Gold below October low.
Silver below October low.
Silver/gold ratio has fallen below the October low.
Shanghai well below October low.

The only thing missing are U.S. equity indices! They need to catch up...

Indicator: The Baltic Dry Index ($BDI)

The Baltic Dry Index ($BDI) tracks international shipping prices cargoes on dry bulk carriers, like building materials, coal, metallic ores, and grains

Because the supply of cargo ships is so inelastic, and because the cargoes are raw material inputs, the index is very sensitive to economic changes and is a leading indicator.

Here is a chart of the BDI. You can see that it has been falling since late October, which mirrors the decline in Chinese stock indexes.

Important New Hussman Column

This week, Hussman updates his "Who's Who of Awful Times to Invest", which consists of the times (including now!) that the market was "overvalued, overbought, overbullish, [and had] rising-yields".

Another Market Signal: Margin Debt

As Alan Abelson points out in Barron's,

in October, total margin debt topped $300 billion, for only the 23rd month ever. The first time that occurred was in December 2006; over the next three months, the S&P was 3.5% higher—but a year later, it was off a painful 22%. And each and every time margin borrowing exceeded $300 billion, a year later stocks had suffered a similar drop.

For that matter, Alan points out, in the one month, March 2000, that margin debt was just shy of $300 billion (for sticklers, it was $299.93 billion), sure enough a year later, the S&P was off 22.6%. 

Nine out of ten indicators agree; it's time to get out of stocks!

"EMRATIO Issuing a Warning"

The change in Civilian Employment-Population Ratio (EMRATIO) can act as a convincing indication of the onset of recession.