Tag Archives: S&P 500

All About the ETF (Exchange Traded Fund), The Creation and Growth (Part 1)

(Those on the edge of your seats… this post accidentally set for 10:30 PM… such the delayed email today… carry on)

Working on the Q2 Newsletter and with a fabulous article about ETF’s (Exchange Traded Fund) in the making, as promised from last week, wanted to share in short version, here in this format, in advance….

ETF Index SPY is Born

This first Index ETF, traded (s) on the exchanges as SPY can be purchased just like a stock, during market hours and even after market hours in the much less stable and liquid extended market hours. Today just like when it was established, trades at 1/100 of the actual index value.  I.e. Index 3300, SPY 330.

This Index ETF allowed investors the ability to purchase one asset, under the ticker SPY, just like an individual stock, but hold 500 stocks, in this case the Standard and Poor’s 500, generally known as the largest US public companies in the world all at once and have throughout the day ability to buy or sell.

Prior to the SPY, there were certainly Mutual Funds (and still are today) that represent the same index, but were only tradable at the end of each day, also called end of day settlement.

In an ever faster moving world, the ETF has gaining appeal and continued money flows through low cost purchase.

Time Flies When We Are Having Fun – National Quote 1.5 Decade Ago Still Pertinent

Oddly, the following quote in 2006, actually still hits to the heart of an important topic of this article today…

Managers Look Ahead To Era Of Rate Declines



Posted 10/6/2006

“The interim period while we’re not raising or lowering rates is a time to build ETF watch lists,” said John Kvale, a Dallas- based adviser. “If it’s a soft landing for the economy, then our belief is that we’ll gravitate much more toward higher-quality stock funds.” He’s moving clients away from small-cap ETFs. The funds he favors now include S&P 500 tracker SPDRs. (SPY) “We’re holding off right now on investing in more sector-specific ETFs,” Kvale said.

Fast Forward to the Growth of ETF’s

From Ishares/Black Rock and Visual Capitalist

HIstory of ETF

As long as there is demand, Wall Street will Build!

Next up, beginnings of Danger!

Have a Great “ETF Creation” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Let’s Pace Ourselves … Whoa Market Whoa … Points Versus Percent Reminder

Most of our Posts are a work in progress for 3-5 business days prior (at least, many take months) till the actual post. We started our theme of Too fast of a Pace way before the Capital Markets started pulling back the reins. We left the title on this post as an odd coincidence of good timing!

One quick note before we start.

Points Versus Percentage

It has been a LOONG time since we have had a meaningful pause in the capital markets.

While we watch all indexes but not the Dow Jones as much, we do understand that this index is one of the most watched. “The Market” in most circles means the Dow Jones .. such the reminder.

As the Dow Jones Index has risen over the last few years, a percentage move has become a greater number of Points.

Today a 2% move is around 500 Dow Points. At the lows of the great recession of 07-09 a 500 point move would have been near an 8% move … just a friendly reminder to keep things in perspective.

Whoa Baby Whoa

Don’t get us wrong, we like growth, but just like starting a long distance race too fast, this year started too fast … proving even too much of a good thing, is still too much !

2-2-18 SPX w JK Notes and Trendlines

The first white trend line is a high double digit (~20%) annual growth line … unsustainable in itself over a longer period. The second “Super Aggressive is an approximate 40% annual rate, only to be out done by the third trend line which is over a 60% annual clip. This last line is 3x an aggressive pace … clearly unsustainable!

It would not surprise us to rest a while … a much needed rest that is.

Oh, we have plenty of excuses (rates, hot economic numbers, Fed Reserve talk) but we think the unsustainable pace was the key

Have a Great “Paced” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.





Congrats to Donald and Randi – Amateur Hour at the NYSE — Friday

It gives me great pleasure to announce that Donald and Randi are expecting a second Son in December!  AWESOME !!Isaac Little Brother

Congrats Randi and Donald !


The Reins are still in weak hands

The summer doldrums continue to leave their mark… Don’t bite !

  • Low Trading Volumes
  • Wall Streeters still on Vacation
  • Newsy Headlines – China’s “Dramatic” currency moves…nah (more next week on this)
  • Doogie Howser’s flying the plane

These are just a few reasons market moves like the one below occur:

8-13-15 SPX 1 minute chart

Way down here, at the bottom left of this two-day one minute chart, the S&P 500 was once again negative for the year … Frothy and Doldrums = Jumpy Capital Markets …

Ah… but it is a Friday….almost the end of the summer…but that is next week. Enjoy your weekend!

John A. Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225




First published article is live … Paddling Duck Markets … Friday — Remote Working

The first nationally published article is now up on credit.com. Here is the link. The subject of this article came directly from you, the most awesome clients and friends in the country. Thanks for providing the subject to help others in a comprehensive manner.

Paddling duck Markets

Just like a duck on a pond, his head is still, but underneath there is usually a lot of action with the feet. The Dow Jones or S&P 500 Indexes are moving, but not near as much as the feet underneath. Duck Paddling

Summer doldrums, narrowing market, and long-in-the-tooth economic cycle are much of the contributors. Diversification is once again our friend …. opportunities are beginning to present themselves — Feet underneath are busy.

Ahhh… but this is a Friday, and this one begins our annual trip to a cooler climate. Clearing the head, daily multi-hour tennis workouts for the kids, visit with family members, share time with several friends and business acquaintances, and solve the financial worlds problems, are our goals this year– as the summer doldrums turn to the end of summer …. of course always tethered by electronics.

Have a Great Friday .. Talk to you next week !

John A. Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225

JK Street Cents Logo

Stumbling and Bumbling into the end of the month and quarter

After almost five years of unabated levitation in capital markets, a few chinks are starting to show in the capital market armor.

Why the Weakness ?

Under the belly it has been much weaker, this recent Bloomberg article stated almost 50% of stocks on the NASDAQ are already in a correction. Note in the following chart how small stocks are not following their big capitalization brother to new highs.

Russell 2000 (Small Stock Index) V S&P 500

R2k V SP 500 9-26-14

Does this mean the correction we have long been waiting for is here ?

Maybe, but as we mentioned in this middle of the month post, the coming quarter is seasonally the best.

Irony would be after five years of near unstoppable gains the correction finally begins in historic “Best” time of the year!

Have a Great Day!
John A. Kvale CFA, CFP
8222 Douglas Ave # 590
Dallas, TX 75225



Algo’s aka SKYNET, A Bigger Problem than High Frequency Trading

Earlier we mentioned Michael Lewis along with his new book Flash Boys has brought much attention to the world of High Frequency Trading.  There is a bigger problem in our eyes that should garner more. As a side note, Jack Bogle, Founder of Vanguard in this Bloomberg TV segment totally supports HFT and trashes Lewis and his book promoting.

Algorithmic Trading is the Elephant in the Room

Algorithmic trading is a computer driven program that is used to automate some type of trading system, also called Algo’s.  We have nick named them SKYNET, from the Terminator series.  The Algo’s we have a problem with are the ones that create extreme volatility in markets without cause.  There are Algo’s in control of so much money that when the program moves a direction it is best to step aside.

Automated trading with big money behind it creates higher volatility and may someday lead to a dramatic market event.

Take a look at this chart from 4-15-14. This is the S&P 500, 1 minute chart for the day.

S&P 500 1 minute chart 4-15-14

There was very little news on this day. This swing is most certainly the  Algo’s at work.

While no major damage has been done YET, we fear this may not always be the case.

Our answer to Alog’s …. Well just another reason terrific diversification in today’s investing world is a must.

Have a Great Day!

John A. Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225


Interest Rate Forecast…Easy and Hard Calculation

Interest rates are in total control lately as we have been mentioning frequently. Uncle Ben (Bernanke) looks set to begin taking the punch bowl away on September 22, 2013 their next scheduled meeting by backing down on the $85 billion monthly purchases.

So Where will Rates go? (stop)

Of course, no one knows where rates will stop, but a move from the lows of 1.60% to almost 3% is an enormous move on a percentage basis and we are happily surprised how other asset classes have held up. How much farther can they go?

Let’s start by using a hard/technical or text-book calculation. Generally rates should be the sum of economic growth (GDP) and Inflation (CPI). Using a smoothed trailing estimate of each of these, we feel comfortable with a 2%+2% or 4% total, under current economic conditions.

For our easy calculation, let’s use a graph of the 10 year with the S&P 500 together, which is one of my personal favorites.

!0 Year V SPY 8-23-13

With rates currently at 2.81%, if your eye gravitates to the same area as most, 4% looks like our target!

So there you have it, 4% the technical way or the easy way from our perch.  We are fine with this, but let’s just GO SLOW (12 months at least), if we move quickly to our target, there will be trouble!

Have a Great Monday!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225 

March 2013 is gone…Capital Market events and Video Summary

March is gone, our succinct summary of events for the month!

Here is our video that incorporates your suggestions…please KEEP THEM COMING!!

The last earnings (90 day treadmill) trickled in lower than expected, printing a year over year loss in the S&P 500 companies. Analysts were undaunted and kept their rosy forecasts.

2-22-13 Factset 2013 S&P 500 Estimates

As the first week of March ended, interest rates stole the show as the 10 year popped over 2% for the first time in a while  this time holding on adding ammunition to a fast money move out of bonds and into stocks.

10 Year Yield Over 2%

10 Year Yield Over 2%

During the second week, retail sales surprised us with a very strong showing despite the recent tax increase digestion, a positive for the continued strength of the consumer.

Econoday Retail Sales as of 2-13-13

Econoday Retail Sales as of 2-13-13

Next up….Cypress, the little country that was taken to the wood shed.. As depositors get scalped after being told just months before, Not to Worry! Who to trust and Contagion!


April should be fun as we enter another earnings season not to mention Uncle Sam’s favorite dip in our pocket month.

Have a great day!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

90 Day Treadmill Final Update for Q4 2012 …aka Earnings Season

Often times our posts and articles act as a diary for us as we are able to clearly look back in the future and see what the expectations and results were at a point and time.  Just as that old saying goes “An analysts, economist or forecasters worst enemy is someone with a good memory.”

So for the record, with all but a few stragglers (less than 2% left) in the S&P 500 reported, how did it go?  Again, we turn to our friends at Standard and Poors and Factset for our information since they do a superb job of recording and presenting the results with no biases or opinions….just the facts, so to speak.

Key Metrics From Factset

  • Earnings Growth: The estimated earnings growth rate for Q1 2013 is -0.6%. If the final number is negative, it will mark the second year-over-year decline in earnings for the index in the past three quarters.
  • Earnings Revisions: On December 31, the earnings growth rate for Q1 2013 was 2.2%. All ten sectors have recorded a decrease in expected earnings growth, led by the Materials, Consumer Discretionary, and Information Technology sectors.
  • Earnings Guidance: For Q1 2013, 82 companies have issued negative EPS guidance and 25 companies have issued positive EPS guidance.
  • Valuation: The current 12-month forward P/E ratio is 13.4. This P/E ratio is between the 5-year average (12.8) and 10-year average (14.2).
  • Earnings Scorecard: Of the 489 companies that have reported earnings to date for Q4 2012, 71% have reported earnings above the mean estimate and 64% have reported revenues above the mean estimate.

Our View on the Year End 2013 S&P 500 Earnings

Here is where we chime in…the Valuation point above is based on estimates that are entirely too high in our opinion. The following chart of the total all in public analysts estimates for the rest of the year 2013 paints a laddered picture of rungs that are just too high in our opinion…BUT we of course COULD be wrong….we are comfortable in our skeptical opinion…here is your chart, again from

Factset 3-8-13 SP 500 FWD EPS est

Factset 3-8-13 SP 500 FWD EPS est

We are not saying numbers are going to fall off a cliff, however, blending the historical views to current from our friends at Standard and Poors, the following chart shows an optimistic view from early 2012, falling to more reasonable, but still too high levels in our opinion.

Standard and Poors 3-8-13 EOY S&P EST 2013

Standard and Poors 3-8-13 EOY S&P EST 2013

We hope we are wrong but we do not think so. Time will tell.

Thanks for reading our “diary” in this case….two graphs and an extra long post…I must still be on spring break….sorry too much java !!!

Have a Great Day!


8222 Douglas Ave # 590
Dallas, TX 75225

Show Us the Money…..90 Day Treadmill aka Earnings update..Chinese New Year

From our perch we are happily surprised at the continuation of efficiencies companies are churning out. We also feel a bit snookered as many managers were VERY conservative on their prior Q 3 2012 call (tax, fiscal cliff concerns) driving estimates somewhat lower.

A total of 343 companies out of 500 have reported thus far in our favorite monitored pool, the S&P 500. Here’s the bottom line from the horse’s mouth, Standard and Poor’s:

  • 224 out of 343 or 65% beat their estimates
  • 79 missed  their consensus estimate

More important facts from Standard and Poor’s:

  • $23.53  S&P 500 adjusted earnings for the quarter (Q4 2012) so far (78.4% reported)
  • $23.73 YEAR AGO (12-31-11)  S&P 500 adjusted earnings for the quarter

New accounting treatment for pensions is weighing down earnings a bit, but companies ARE NOW PRINTING YEAR OVER YEAR NEGATIVE GROWTH ($23.53-$23.73= NEGATIVE 20 cents.) This has us concerned, brow raised, slight perspiration, but no towel necessary….yet.

According to Factset, guidance for the next quarter has not been good, however there is a small sample size of only 80 companies, 67 of which have guided negatively. We are watching this closely as well and will give the small sample size the benefit of the doubt.

Show Me the Money….this is why we are concerned..

Earnings Estimates for the remainder of 2013 by quarter

S&P Estimates 2013

While this chart does not look too threatening, take a closer look…the growth rates assumed are too much in our opinion. Just looking at the year-end quarter growth rates (12-31-12/12-31-13)  that is a 26% year over year expected growth rate. WE DON’T THINK SO!

For now market participants are either ignoring this or expecting this, either way, dangerous in our opinion. Time will tell, but caution is advised!

Have a Great Monday and sorry to be so heavy this early in the week!


PS If it is that easy to review, why are others not doing it ?? We are glad they are not as market inefficiencies allow profit opportunities….

PSS Gong Xi Fa Cai…Happy New Year to our Chinese Friends as their country celebrates for the week (Their Capital Markets will be closed all Week)

8222 Douglas Ave # 590
Dallas, TX 75225