Chameleon Asset Strategies Blog

Items filtered by date: May 2016 - Chameleon Asset Strategies

While it’s true that most of the time advisors and managers alike are probably paid too much to do little, now is the time that true financial professionals will earn every penny. In my opinion, it is also the absolute worst time to be a passive investor following a mechanical model that worked well in the past. When both stocks and bonds have been appreciating nicely for many years following a crisis, it is easy to believe that they will continue this way forever. Clichés are regurgitated by people and media to the point where most of the public accepts them as fact… That doesn’t make them true. For example, the old adage used to be that over any 10 year period in history, you always make money in stocks. Now they say over any 15 yr period, you always make money in stocks. Diversification is the only free lunch... A balanced portfolio returns 6-8% a year on average while most retail investors only realizes 3% … You can’t time the market, so don’t attempt to…You can’t outsmart the market, so don’t try to pick individual stocks, Fees are the enemy, etc etc.

With this mountain of evidence in favor of simply owning an extremely low cost index vehicle or utilizing a robo strategy that avoids all of the mistake that investors make, why isn’t everyone firing their advisors, dumping their funds and riding off into the sunset with their fortunes? Well, a lot of people are doing the first two things and hoping for the 3rd.  I can understand the appeal of a “Matrix” like intelligent being at the helm of one’s financial future, systematically rebalancing your way to financial success with mechanical precision and Swiss timing, but perception and reality drift apart here. The strategies above are more like cruise control than self-driving cars and there’s a big difference. Cruise control is great for long road trips and open highway. Improved gas mileage, lower wear and tear on the vehicle, less driver fatigue... We’ve just had the ideal market for cruise control - 7 years of market stimulation/manipulation by the Fed. Things are looking great in the rear view mirror but is that what things look like through the windshield? Everyone and every robot is a genius in a bull market, but I personally think it’s far more likely that we’re entering traffic, a construction zone or a city that will require more than a brick on the gas pedal and a locked steering wheel.

Self-driving cars exist, but they’re not available to the masses. If you think you have one, you might want to read the manual a little more carefully. Check the fine print and you’ll probably also notice that the vehicle only drives forward and doesn’t function in reverse ( most portfolios, robo or advised only do well when asset prices are rising – bull markets)  If you’re switching on cruise control right now, make sure that your eyes are open, that you’re facing forward, and have air sick bags within reach. I’m looking forward to buying a shiny new Tesla at some point that will chauffeur me around while I trade in the back seat, but today is not that day. 

As I forecasted last week, the dollar has reversed and is appreciating again vs other currencies around the world. If the index pushes through 95, I would expect a sell off in a variety of commodities that have been helped by the dollar weakness. This will put pressure on energy producers and miners, which have been responsible for a large part of the recent equity market rebound. I’ve been pretty vocal about my lack of belief in the rally in US stock index futures. In the last several sessions, they’ve been losing steam and working on a down trend. I’ll continue to look for quality selling opportunities as I believe that current prices are ludicrous given the global turmoil. 10 Yr. Treasury futures are also flirting with breakout territory, which will pour accelerant on the moves if they occur as expected. Time will tell!



Take care,



Accelerated by the Bank of Japan’s decision to take no further action Thursday, Nikkei futures fell by 10.8% last week. It’s a topic for another time, but global financial markets have become insatiably addicted to free money and ever greater amounts of stimulus. The mere thought of interrupting the morphine drip incites panic as seen in Japan. It’s no secret that Japan has a multitude of economic problems, but it is still the world’s 3rd largest economy and one would be wise to pay attention to what is happening there. The world’s 2nd largest economy, China, has also been experiencing a severe slowdown in economic activity. While the true state of affairs is somewhat opaque, we do know that Apple sales in China dropped 26% this quarter. Not exactly a beautiful picture.

So will the mess cross the Pacific and infect our markets also? You wouldn’t know it by looking at the S&P flirting with all time highs, but I think that it already has. We haven’t met the technical definition of recession yet, but GDP sliding from a 3.9% peak print in 2015 to last week’s .7% doesn’t inspire confidence. Nasdaq futures have broken the uptrend and moved down through support. There will be bounces here and there but I’m expecting the selling to continue for a while as it is exhibiting textbook bear market behavior.


The dollar index has recently weakened very significantly against other currencies around the globe. This weakness has helped commodities stage a bit of a rebound, but I don’t think that this tailwind is going to continue. The Europeans, Chinese and most certainly the Japanese are not happy about their relative strength to the dollar as it makes their exports less competitive. Given that our Fed is still contemplating another rate hike and the rest of the world is considering further easing it seems that central bankers would prefer to stay within this range vs allowing another destabilizing force to be exerted. I don’t know who will flinch first but I think the odds favor a little dollar strength from here.


All the best,



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