Monday, August 24, 2015

Stock Market Corrections

How long from peak to trough in recent corrections?

Compilation of information about stock market corrections.

A Field Guide to Stock Market Corrections, Joshua Brown {
- 10% drop is a correction,  20% bear market, 50% crash, 80% depression.
- Since the end of World War II (1945), there have been 27 corrections of 10% or more, versus only 12 full-blown bear markets (with losses of 20% +).
- The average decline during these 27 episodes has been 13.3% and they’ve taken an average of 71 days to play out (just over three months).
- From the beginning of the secular bull market in 1982 through the 1987 crash, there was just one correction of 10% or more. Between the Crash of 1987 and the secular bull market’s peak in March 2000, there were just two corrections, according to Ed Yardeni.

As of August 2015, the current bull market is about 6 years old. The last time we had such a long stretch was the 5 year run-up to the 1987 crash.

Google Finance graph of 1987 crash

The current correction started July 20, 2015 and is 35 days old as of August 24, 2015.

The CNN Fear & Greed Index is scoring 13/100 (heightened fear) as of August 28th, 2015.

Wednesday, August 5, 2015

Buy LC, Sell AAPL

I added to my Lending Club (LC) position for the following reasons.
- Quarterly results announced last night beat expectations.
- Guidance raised for second quarter in a row.
- Continued confirmations that LC is the largest online marketplace for peer-to-peer lending.
- I personally because a lender verifying amazing on-boarding process, see article.
- Stock continues to trade 40% of yearly highs.
- LC market cap of ~5.5B$ compared to JPM 255.8B$
 Price: $14.72
 Trade/Portfolio: 0.89%
 Position/Portfolio: 6.31%

 I sold remaining shares of Apple (AAPL) for the following reasons.
- Apple's massive lead is a strong inhibitor to innovation.
- Second generation management won't be able to make tough decisions when necessary.
- Lack luster sales of iWatch beyond Apple groupies.
- Saturation of iPhone makes growth difficult to sustain.
- Ubiquity of iPhones creates desire for "something new" in youth segment.
- Apple crossed below 200-day moving average.

Price: $112.33
Trade/Portfolio: Closed position
Gain: +38.67%