RANDOM MARKET MUSINGS

The last correction low in the Dow Jones Industrial Average happened on 10/3/2011. Since then the famous index has gone 33 straight months without a 10% correction or pullback. The Dow is now up 59% since that last low occurred. Usually, in most bull markets, there is at least one 10% pullback in the Dow every 12 months.

Small cap stocks after an earlier run-up have faded of late, but by many metrics hardly appear cheap, trading at a forward p/e on the Russell 2000 index around where they started 2014 at 21. That compares with an average of slightly over 19 times earnings.

Another area worth watching is emerging and frontier debt markets where international sovereign bonds sales soared to record levels, hitting nearly  $70 billion in the first half of 2014. Concerns about the quality of these bonds are beginning to surface some quarters.Ecuador, the tiny Latin American country that defaulted on  its debt six years ago and has been locked out of the international financing market since, recently floated $2 billions in new debt.

Greece, Cyprus and Kenya are similar examples of recently holding bond offerings that most were over-subscribed to by yield-hungry investors. With the apparent end of Fed tapering on the horizon, some worry what will happen when it ends.
--
Besides the bond market, the Fed recently expressed concerns about another sector, biotech, and investors have apparently been  listening as the funds flowing this month into the sector receded, turning fund flows negative so far for 2014. That's a marked change from a sector that not too long ago captured Wall Street's love and admiration. Though investors were pulling funds before the Fed put small caps, bonds and biotech in their cross hairs, $440 billion left the sector since the beginning of this month, bringing the total for the year so far to a negative $77 billion.
--
 Macro is out and event-driven investing appears for the time to be in among successful hedge funds, according to recent blubs in Barron's and the Financial Times. At the center of this strategy is merger and and acquisition activity now at  booming levels. One such aspect of these events is the so-called tax inversion deals going on that the failed Pfizer-Astra seemingly kicked off earlier. As the FT put it; "the economy  may be miserable in the US, but takeovers are at boomtime levels." 
--
The European Banking Authority  supposedly put a cap on bonuses for high bank earners.But as the saying goes, where there's a will there's apparently a way as, according to recent research, 55% of banks in Europe and 47% of non-Europe banks plan to use allowances to circumvent the caps for  bank high earners.
--