Word for this week divergences.
"Many people think they are thinking when they are merely rearranging their prejudices." William James
"When men yield up the privilege of thinking, the last shadow of liberty quits the horizon. Thomas Paine
"Becoming fearless isn't the point. That's impossible. It's learning how to control your fear, and how to be free from it." Veronica Roth, Divergent
"But I will find new habits, new thoughts, new rules. I will become something else." Veronica Roth, Divergent
The hot movie series and book trilogy starts with a book titled "Divergent".
My daughter read the book and saw the movie recently in one of those midnight showings where you can be one of the first several thousand teens that see it the night before it is released.
Now it is her new favorite book and movie. She can't wait to read the next book and see the next movie.
It seems that you must fit into a certain category of personality type in the story. However for some reason the main character doesn't fit in where they are supposed to fit.
I haven't seen the movie yet.
"the act of moving away in different direction from a common point"
Definition of 'Divergence'
When the price of an asset and an indicator, index or other related asset move in opposite directions. In technical analysis, traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the money flow index (MFI), are moving in opposite directions.
In technical analysis, divergence is considered either positive or negative, both of which are signals of major shifts in the direction of the price. Positive divergence occurs when the price of a security makes a new low while the indicator starts to climb upward. Negative divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead closes lower than the previous high.
There was a wide divergence between the direction of the treasury yield and bond values during the last decade.
Since May of last year the direction of yields on the ten year treasury has increased and bond values have suffered.
Another wide divergence was the direction of gold in relationship to stocks during the last decade.
The value of gold fell last year as the stock market rose significantly.
This year stocks are struggling and gold has risen.
What should we take away from this?
- Be widely diversified across non-correlated asset classes.
- Focus on deep value and fundamentals.
- Don't get carried away or enamored by momentum of any one asset class or investment, every investment moves through cycles of up and down.
- Pay attention to risk.
- Develop an ongoing and deepening relationship with a trusted investment advisor.
- Investing is not as simple as some might lead you to believe.
- Depth of research, full time vigilance, continuous updating of knowledge and training indicate for most, you need to consult a professional financial advisor.
- The decision to "buy and hold" along with "passive investing" could become the road to going nowhere fast.
This was an interesting picture of the Tech heavy Nasdaq Composite Index I saw yesterday.
The S and P 500 index trended down last week - 2.65%
The 10 year Treasury Yield index trended down last week.
The US Dollar index trended down last week. - 1.22%
The CRB Commodities index trended up last week. + 1.49%
The Gold Index trended up last week + 1.24%
The US Aggregate Bond Index trended up last week. + .81%
The International Aggregate Bond Index trended up last week.
The New York Composite Index trended down last week.
The Dow Jones World Index trended down last week - 1.99%
The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.
2013 4th qtr + 2.53
Year to date commodities and gold are outpacing other assets. Equities move back into negative territory for 2014. Bonds outpace stocks
Many investors take the wrong approach looking primarily at recent return and average percentage rates. Overall risk measures and managing downside risk play an increasing role in end results.
Investors instead should be focused on managing Dynamic Beta exposure, evaluation Active Share, Sharpe ratios, Treynor ratios, Sortino ratios and Alpha.
The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. All decisions about investments should be made within parameters of risk, time frame, financial position and overall asset allocation.