Welcome to the latest edition of our new feature, “Weekend Reading For Traders”. We kick things off this week with an article covering the surprise news on Wednesday that the Bank of England would buy long-dated U.K. government bonds “on whatever scale is necessary” in response to the unfolding chaos in their bond markets. From there, we cover a fantastic podcast interview with Jurrien Timmer, the Director of Global Macro at Fidelity Investments who shares some fascinating insights on both fundamental and technical analysis.
Next, we have an article that further emphasizes the notion that the recent, but seismic shifts in monetary policy from the Fed and other central banks, may require a mindset shift for investors in the coming years. And we’ve also included an article that looks at what needs to happen to the market internals for buyers to start inching back in.
Lastly, we wrap things up with a pair of articles about baseball. One which looks at the context of Aaron Judge’s historic home run and another that offers a glimpse into a small, but captivating, corner of our nation’s pastime.
And with that, we hope you enjoy this latest installment of Weekend Reading For Traders.
Bank Of England Buys Bonds In Bid To Stop Spread Of Crisis
(Paul Hannon and Chelsey Dulaney | The Wall Street Journal)
This past week, the Fed took an unusual back seat as focus shifted to the turmoil in the UK and the BoE’s surprise response. News of sweeping tax cuts sent the British pound spiraling lower, triggering expectations of an emergency rate hike, which (when it didn’t materialize), pushed global bonds (already weakened on the heels of an uber-hawkish FOMC the previous week) even lower. On Wednesday, however, the BoE said that they would purchase long-dated UK government bonds “on whatever scale is necessary” in an effort to calm bond markets and help prevent a collapse in pension funds as well as the entirety of the British financial markets. That news led to a big bounce in an already deeply oversold market, but those one-day gains vanished on Thursday, as the broader action continues to indicate that market players are still looking for opportunities to sell into strength rather than vice versa.
Fill The Gap Episode Twenty-One, with Jurrien Timmer, CMT
(David Lundgren and Tyler Wood | CMT Association)
If there’s one piece of content that you check out from our list this week, then this is it. For those of you who aren’t familiar, the CMT produces a bi-weekly podcast, and their most recent episode features an interview with Jurrien Timmer, the director of Global Macro at Fidelity Investments. There are gobs of gems littered throughout the show, including how he marries traditional fundamental analysis (i.e., discounted cash flows and financial statements) and technical analysis, the things he looks for when determining if a market might be at an inflection point, where he thinks we are in the current market cycle, and why investors may need to look at the markets differently in the coming years.
What shines through the most, however, is Timmer’s passion for analyzing financial markets from multiple angles in order to reach conclusions that he can then communicate to investors, and why he feels that macro and technical analysis is like playing “four-dimensional chess”.
Turbulent Times Are Here to Stay. How to Invest for the Next Decade.
(Nicholas Jasinski | Barron’s)
Over the past several weeks, numerous market observers have noted that, with the recent seismic shifts in central bank policies, markets might be poised to see the sort of sideways action that was prevalent between 1965-1982, and why that could mean a resurgence of active (vs. passive) investing, and why investors might be looking to build portfolios consisting of individual companies (vs. index funds). Accordingly, Jasinski notes (as did Stanley Druckenmiller a couple of weeks ago), that the biggest driver of market gains over the previous 12 years was the Fed, which stood ready to act as a “put” during any hint of turmoil. That, in turn, made it increasingly difficult for investors to do much better than socking their savings away in a low-cost index fund. However, those trends seem to be shifting, and while index funds may not be the no-brainer they once were, that doesn’t mean that individual companies won’t do well, and it’s that understanding that will help disciplined investors benefit in the coming years.
Daily Volatility Needs To Calm To Draw Back Equity Buyers
(Andrew Thrasher | athrasher.com/)
Despite the market turmoil, traders and active investors have spent the past several months confounded by a relatively subdued VIX. There have been some big moves, but the index has yet to push over 40, which many traders view as a necessary milestone for the market to be able to put in a lasting low. In this article, Thrasher notes that the most likely culprit is the high number of days that the S&P 500 has swung more than 1% in both directions, creating volatility in both directions, rather than a string of down days that would cause the VIX to spike. In fact, shifts away from bear markets are usually characterized by a “calming of daily activity”, and it’s only after that daily volatility has died down that buyers can regain confidence and start to inch back in.
Aaron Judge’s 61st HR Another Murky Milestone For MLB
(David Brandt | Yahoo News)
Traders and active investors have a penchant for statistics and historical comparisons, which may be one reason why many of us are drawn to baseball and have been watching with interest Aaron Judge’s run at the single-season home run record. This past week, he tied Roger Maris’s mark at 61, which many still feel, including Maris’ son, remains the “real” record, rather than the records set at the height of baseball’s performance-enhancing drug era. Of course, controversy and disagreements offer additional texture to baseball, and so while the debate about asterisks and whether or not a certain statistic is “real” or not, the key point is that baseball fans can finally savor another great storyline in a sport rich in history.
He’s Baseball’s Only Mud Supplier. It’s a Job He May Soon Lose.
(Dan Barry | The New York Times)
There’s this guy. He has a super-secret spot somewhere along the New Jersey riverbank, and it’s from that spot that he collects, processes, and then supplies every Major League baseball club with Lena Blackburne Baseball Rubbing Mud, which is subsequently rubbed into every single baseball used in every single game to remove the slippery sheen from a new baseball (or “pearl”). In this article, Barry dives deep into the process that Jim Bintliff (the mud guy) goes through to harvest his mud, why Baseball has had a hard time finding an artificial substitute, and how Baseball has gone to great pains to ensure that teams adhere to their “Mudding Application Standards”. Ultimately, Bintliff and his mud is just another example of the rich traditions in a sport with a seemingly endless supply of quirks and great stories.
