ColinTwiggs, Author at the patient investor

October 14, 2014

Fareed Zakaria: Let’s be honest, Islam has a problem right now – The Washington Post

Fareed Zakaria writes:

Islam has a problem today. The places that have trouble accommodating themselves to the modern world are disproportionately Muslim.

In 2013, of the top 10 groups that perpetrated terrorist attacks, seven were Muslim. Of the top 10 countries where terrorist attacks took place, seven were Muslim-majority. The Pew Research Center rates countries on the level of restrictions that governments impose on the free exercise of religion. Of the 24 most restrictive countries, 19 are Muslim-majority. Of the 21 countries that have laws against apostasy, all have Muslim majorities.

There is a cancer of extremism within Islam today….

October 13, 2014

Finland proves the education lie

Hank Pellissier at GreatSchools examines the education system of over-achiever South Korea:

…South Korea is often regarded, along with Finland, as one of the two premier K-12 education systems in the world — in no small part due to the spectacular academic performance of its students. According to a 2006 survey by the Programme for International Student Assessment (PISA), which evaluates the scholastic performance of 15-year-olds in 57 nations every three years, South Koreans rank first in reading, third in math (tied with Hong Kong), and 10th in science (tied with Liechtenstein). More than 97% of South Koreans graduate from high school, the highest graduation rate in the world.

South Korea emulates the pressure-cooker classroom environment common in Japanese schools:

South Koreans attend school 220 days per year, almost two months more than the 180 days of Americans. (The Japanese enroll an astonishing 243 days per annum; South Korea abdicated first place in 2005 when its students ceased going to school half days on Saturday.) What distinguishes South Koreans from everyone else, however, is the immense number of hours they study outside the classroom. High schoolers, and even middle schoolers, in South Korea are often engaged in scholastics until midnight or 2 a.m. After taking classes in up to 11 subjects, they attend private academies called “hagwons” where they obtain supplemental learning. The bottom line? Most South Korean children spend 13 hours a day or more with their bottoms glued to a chair.

Should Western schools try to emulate this intensity in an attempt to match South Korea’s outstanding performance? The answer is a resounding NO. Finland offers a far better model.

Although these grueling schedules help South Korea’s high test scores, the nation is remarkably inefficient at another PISA criterion known as “study effectiveness.” When PISA calculates each nation’s achievement based on the number of hours spent studying, South Koreans rank only 24th out of 30 developed nations. The winner in study effectiveness is Finland, the world’s true PISA champ, placing first in science, second in math, and second in reading. Finnish students only attend school 190 days per year (two weeks more than U.S. children) and receive less than a half-hour of homework per day.

Finland is #1 in study effectiveness, achieving outstanding results with little of the “meat-grinder” approach common to so many education systems:

Never burdened with more than half an hour of homework per night, Finnish kids attend school fewer days than 85% of other developed nations (though still more than Americans), and those school days are typically short by international standards…..Finland downplays educational competition in a number of ways. Schools aren’t ranked against each other, and teachers aren’t threatened with formal reviews. At many schools, teachers don’t grade students until the fifth grade, and they aren’t forced to organize curriculum around standardized testing….

Surely this is a model worth emulating? I would be interested in the views of any readers who are employed in education.

October 13, 2014

Why children struggle to read

Researcher Jennifer Buckingham writes:

Written English is a code. Once children learn the code, they can read almost any word. Some children learn to read without much formal teaching in phonics – these children are the minority. Most children need to be taught the code through phonics. Children who have not needed much phonics instruction to read well often need phonics to spell correctly. All children from all socioeconomic backgrounds benefit from good phonics instruction, but especially children who have not had the benefit of pre-school or a literacy-rich early home life.

I agree that phonics is important. But if English is a code, shouldn’t educators focus on making that code as simple and easy-to-learn as possible. English started as a phonetic language more than a thousand years ago, but subsequent evolution has introduced a myriad of complex spelling and grammatical rules that take children years to master.

Perhaps that is why education over-achievers Finland and South Korea enjoy such high rankings. Hank Pellissier at GreatSchools writes:

In 2006 the Programme for International Student Assessment (PISA) conducted a survey of 15-year-olds’ academic skills from 57 nations. Finland placed first in science by a whopping 5% margin, second in math (edged out by one point by Chinese Taipei), and third in reading (topped by South Korea)……Finnish and Korean languages are easy to read and spell; they don’t have the illogical phonetics of English.

Simplifying the structure of English phonetics would go some way to leveling the playing field.

October 13, 2014

Robert Shiller maintains exposure to stocks | WSJ

Jason Zweig writes:

Many analysts have warned lately that Prof. Shiller’s long-term stock-pricing indicator [CAPE] is dangerously high by historical standards…..If only things were that simple, Prof. Shiller says. “The market is supposed to estimate the value of earnings,” he explains, “but the value of the earnings depends on people’s perception of what they can sell it again for” to other investors. So the long-term average is “highly psychological,” he says. “You can’t derive what it should be.” Even though the CAPE measure looks back to 1871, using data that predates the S&P 500, it is unstable. Over the 30 years ending in 1910, CAPE averaged 17; over the next three decades, 12.7; over the 30 years after that, 15.7. For the past three decades it has averaged 23.4. Today’s level “might be high relative to history,” Prof. Shiller says, “but how do we know that history hasn’t changed?” So, he says, CAPE “has more probability of predicting actual declines or dramatic increases” when the measure is at an “extreme high or extreme low.” …..Today’s level, Prof. Shiller argues, isn’t extreme enough to justify a strong conclusion. So, he says, he and his wife still have about 50% of their portfolio in stocks.

October 11, 2014

October sell-off continues

DAX and FTSE break support, signaling a down-trend
China is bullish, but rest of Asia is bearish
US stocks are correcting, but continue to indicate a bull market
ASX testing primary support

The quarter-end sell-off has been exacerbated by weakness in Europe.

Germany’s DAX broke primary support at 8900/9000, signaling a (primary) down-trend. Reversal of 13-week Twiggs Money Flow below zero strengthens the bear signal. Target for the decline is 8000*. Recovery above 9000 is unlikely, but would warn of a bear trap.

Dow Jones Euro Stoxx 50

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie displays similar weakness, breaching primary support at 6400/6500. Target for the decline is 6000*. Recovery above 6500 is unlikely, but would warn of a bear trap.

FTSE 100 Index

* Target calculation: 6400 – ( 6800 – 6400 ) = 6000

China’s Shanghai Composite Index is holding above its new support at 2340/2350, but expect retracement to at least 2250 in response to US/European weakness.

Shanghai Composite Index

Japan’s Nikkei 225 Index broke medium-term support at 15500 and the rising trendline to warn of a correction. Reversal of 13-week Twiggs Money Flow below zero would strengthen the signal. Breach of 14800 would indicate a test of primary support at 14000.

Nikkei 225 Index

The S&P 500 is testing primary support at 1900. Declining 13-week Twiggs Money Flow warns of selling pressure. Reversal below zero would indicate a down-trend, offering a target of 1800*.

S&P 500 Index

* Target calculation: 1900 – ( 2000 – 1900 ) = 1800

CBOE Volatility Index (VIX) rose to above 20, indicating moderate risk, but nowhere near the levels typical of a bear market.

S&P 500 VIX

The ASX 200 broke support at 5250/5300, suggesting a test of long-term support at 5000. Declining 13-week Twiggs Money Flow below zero indicates strong selling pressure. Recovery above 5350 is unlikely, but would suggest that the correction is over.

ASX 200

* Target calculation: 5350 – ( 5700 – 5350 ) = 5000

October 11, 2014

A tough time in the market

This has been a tough few weeks for investors and may continue for several more. My advice, however, is: Don’t change your strategy. If your plan was to stay in the market and ride out secondary movements, stick to your plan. Investors are notorious for selling at the wrong time and buying at the wrong time.

Weak economic data out of Europe is likely to hold back the market until the reporting cycle, that started with positive earnings surprises from Costco and Alcoa this week, is well under way. None of our macroeconomic and volatility filters indicate market stress and we believe the best strategy is to maintain existing exposure to equities.

Liquefied Natural Gas [LNG]

LNG had a less than auspicious introduction to the ASX 200, with a sharp sell-off in the last few weeks. There are signs that buyers are returning to the stock, with a strong blue candle on Friday when most other stocks were falling. We recommend that investors continue to hold the stock, at least for the next few weeks.

S&P 500 VIX

October 10, 2014

October sell-off continues

DAX and FTSE break support, signaling a down-trend
China is bullish, but rest of Asia is bearish
US stocks are correcting, but continue to indicate a bull market
ASX testing primary support

The quarter-end sell-off has been exacerbated by weakness in Europe.

Dow Jones Euro Stoxx 50

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie displays similar weakness, breaching primary support at 6400/6500. Target for the decline is 6000*. Recovery above 6500 is unlikely, but would warn of a bear trap.

FTSE 100 Index

* Target calculation: 6400 – ( 6800 – 6400 ) = 6000

China’s Shanghai Composite Index is holding above its new support at 2340/2350, but expect retracement to at least 2250 in response to US/European weakness.

Shanghai Composite Index

Nikkei 225 Index

The S&P 500 is testing primary support at 1900. Declining 13-week Twiggs Money Flow warns of selling pressure. Reversal below zero would indicate a down-trend, offering a target of 1800*.

S&P 500 Index

* Target calculation: 1900 – ( 2000 – 1900 ) = 1800

CBOE Volatility Index (VIX) rose to above 20, indicating moderate risk, but nowhere near the levels typical of a bear market.

S&P 500 VIX

ASX 200

* Target calculation: 5350 – ( 5700 – 5350 ) = 5000

October 9, 2014

ASX 200 rallies

The ASX 200 rallied on the back of positive sentiment from the US. Follow-through above 5360 would indicate the correction is over. Rising 21-day Twiggs Money Flow reflects short-term buying pressure. Reversal below 5240 remains as likely, however, and would warn of a test of primary support at 5000/5050.

ASX 200

* Target calculation: 5350 – ( 5650 – 5350 ) = 5050

The ASX 200 VIX retreated below 15 — levels typical of a bull market.

ASX 200

October 9, 2014

Dollar and interest outlook fall

The Dollar Index is retracing to test its new support level at 84.50. Respect would confirm a primary advance with a target of 89*. Rising 13-week Twiggs Momentum continues to indicate a healthy primary up-trend. Failure of support (84.50) is unlikely, but breach of the secondary trendline would warn of a correction to the primary line.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

The yield on ten-year Treasury Notes is again testing primary support at 2.30. Breach would signal a decline to 2.00*. A 13-week Twiggs Momentum peak below zero suggests a continued primary down-trend. Recovery above 2.65 is unlikely, but would indicate an advance to 3.00.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

Low interest rates would weaken the Dollar and strengthen demand for gold.

October 9, 2014

Gold finds support

Gold rallied off support at $1180 and is likely to test $1250/ounce. But the primary trend, as indicated by 13-week Twiggs Momentum (below zero), remains down. Respect of resistance at $1250 would confirm this. Breach of primary support at $1180 would offer a long-term target of $1000*.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

Silver is also in a primary down-trend, retracing to test the new resistance level at $18.50/$19.00 per ounce. Respect would confirm the target of $15.50/ounce*.

Spot Silver

* Target calculation: 18.5 – ( 21.5 – 18.5 ) = 15.5