My goal was to share the inner workings of the financial industry, provide market transparency, and share some of my ideas and investment models.

I am grateful for all the positive feedback that I have received.

As my business continues to grow, time to write well, thought-out commentary for this blog – in addition to writing commentary for outside sources, interviews, market research and white papers – has become less and less.

In the next week, I will be merging this blog with my firm’s main site: www.riverbendinvestments.com. Past commentary will be archived to view.

Going forward, I will instead be publishing my weekly commentary on the website for those who wish to follow a more detailed and technical discussion on the market.

Day to day market comments and observations can be found on my twitter account: http://twitter.com/johnrothe

Weekly Market Commentary can be found on the Riverbend website: http://riverbendinvestments.com/market-commentary/

Thanks for reading!

John

Last week, bond manager/guru Jeff Gundlach made a presentation where he referred to the status of the markets as a “coiled snake ready to strike”.

You can see what he is talking about when taking a look at the VIX:

Dreamliner Fleets Grounded in Japan in Further Boeing Setback - Bloomberg

From cliff to ceiling – The Economist

Bull Market Durations – The Big Picture

Apple: Boom to Bust - Market Anthropology

Hmmm… of the day:

If you have any feedback, thoughts, or would like to discuss in more detail, feel free to email me.

Thanks and have a great 2013!

My Top 10 Predictions For 2013:

1) We will see a strong summer rally this year as investors become relieved when Congress goes on vacation.

2) Investors will face higher levels of volatility in the stock market this year.

3) International focus shifts from Eurozone to Japan.

4) Realization that the US may become Japan.

5) Debt ceiling debate will cause a downgrade of US credit.

6) Apple will release a new iPhone.

7) Investors will become disappointed in Apple’s lack of innovation post Steve Jobs. Samsung to gain market share.

8) Q1 earnings will disappoint as CEOs’ use fiscal cliff as an excuse.

9) Student loans become the new hot debate.

10) Energy replaces tech as top weighting in S&P 500 as push for oil independence rises.

I go into much more detail about each of my predictions for 2013 in this week’s market piece. If you are on the distribution list, you will receive it this afternoon.

If you are not and would like a copy, please leave me your email:

(click to enlarge)

VIX levels, which measure the expected volatility in the market and sometimes referred to as the “fear gauge”, have been rather low considering current economic events.

VIX levels continue to drop in 2013

VIX levels remained relativiely unchanged in 2012 – source CBOE

And the trend is not just in the US. Emerging markets, which tend to be more sensitive to global macro economic conditions, are also seeing lower levels of volatility:

Volatility Emerging Market – source CBOE

Doubline’s Jeffrey Gundlach refers to 2013 as the “Year of the Snake”. That the markets are coiling, waiting to strike.

He may be on to something…

Over 5,000 PhDs are working as janitors, and many more working as waiters, secretaries, attendants, clerks, and telemarketers. In fact, the number of PhDs and Master’s degree holders on welfare more than tripled between 2007 and 2010.

In addition, student loan burdens will become a drag on their incomes (and the economy) for decades to come.

Time for a student loan reform bill?

(click to enlarge)

via: Online Colleges

Blackstone Steps Up Home Buying - Bloomberg

Investors still seem to be digesting the fiscal cliff “solution” and what impact it may have on the US economy in 2013.

In addition, the upcoming debt ceiling debate has many worried that politicians will once again go too far and hurt our credit rating.

Even copper, which I like to use as an indicator for global demand, seems to be stuck in the same pattern (make sure to notice this year’s decline in volume):

Readers will remember my past posts about using copper as an indicator:

What does copper have to do with the stock market?

Copper is an amazingly conductive metal, AND a fantastic gauge of the overall health of the global economy. From September 2011′s Economist:

“Copper’s excellent conduction of electricity and heat means that it is used not only to cable and pipe the globe. An average car contains over 25kg of copper; electronic gadgets, from PCs to mobile phones, use copper for wiring and contacts. Its ubiquity means that rising demand should provide an early indication of an uptick in manufacturing and construction. Copper sagged in the early stages of the credit crisis, for example, and then started to pick up at the end of 2008, some months before the stock market began to rebound.”

 

It seems to me that the continuing political debates are slowing down our already slow growth cycle. However, Goldman Sach’s 2013 outlook for commodities has some interesting points. Including the macro idea that we are not at the end of the commodities super cycle, but at a break – much like the US stock market was before its late 1990′s rise.

It’s an interesting read if you get the chance:

UPDATE: It seems the person who put the report on Scribd didn’t have permission and the content was removed.
Commodities 2013-14 Outlook (GS) (20121205)
 

The green line shows the close of the S&P 500 Total Return Index on the survey date. The purple line depicts a two-week moving average of the NAAIM managers’ responses.

Download Excel file with data since inception »

NAAIM member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary widely as indicated below. Responses are tallied and averaged to provide the average long (or short) position or all NAAIM managers, as a group.

Range of Responses:

200% Leveraged Short
100% Fully Short
0% (100% Cash or Hedged to Market Neutral)
100% Fully Invested
200% Leveraged Long

Data collection issues that may affect the statistical significance of this data include:

Use of a single, composite number for each adviser may not accurately represent the market view of a manager who has short term and long term strategies that are providing conflicting signals or a manager who uses both contra-trend and trend following strategies for different portfolios.

Investment Styles very widely among managers participating in this survey. They may include managers that trade very frequently and can switch long and short positions daily. Other managers stay fully invested at all times and only change allocations among market segments or sectors. Still others trade around core positions and only a portion of their portfolios change, but that portion could potentially go from long to short very quickly.

Sample size: Although the number of participating managers, known as NAAIM Trend Setters, is steadily growing the sample size is not large and therefore may be less reflective of actual market conditions.