The bull market in cyclical stocks that began in March of last year is officially over. The YRPI Early Cyclical Index is down 23% from its April 2010 high. Early cyclicals are now in a bear market. As is evident on our chart, in relative terms, stable growth stocks are surging relative to cyclicals. The YRPI Stable Growth Index has outperformed the YRPI Early Cyclical Index by 22% since late April. … [Read more...]
Archives for June 2010
Fund Firms Try ETFs
Mutual-Fund Firms Jumping Into ETFs – Chuck Jaffe, The Wall Street Journal “Last week, the news out of Chicago was that there might soon be a day when at least half of the mutual-fund community converts its traditional funds into ETFs. The changes about to hit both the fund and ETF business were on display last week, and ordinary investors should be aware of what is coming, because it will change the landscape of the business.” … [Read more...]
The Most Important Takeaway from the BP Oil Spill
The oil spill in the gulf is an economic and environmental catastrophe. BP made some serious missteps that have cost the company and gulf coast residents dearly. While tragic, there are many lessons to be learned from the spill. There will be important takeaways for everyone involved or affected by the disaster. Most obviously, the oil and gas exploration and production firms will put greater emphasis on prevention and disaster response. For investors there is one vital takeaway that must not be overlooked. Prior to the spill, BP was a global blue-chip. It was, and still is 3rd largest … [Read more...]
5 Energy Market Insights
The 2010 edition of the BP Statistical review of World energy came out this month. BP’s Statistical review has been published for 59 years. It provides data on energy consumption, production, and reserves for all of the world’s major fuels broken down by country. Any investor seriously considering investing in energy commodities or companies should not be without the BP Statistical Review. It is an invaluable resource for investors, economists, industry executives, and even government officials. I keep a copy of the report on my desk—usually buried under piles of annual reports and 10Ks. I … [Read more...]
States Hurt as Federal Dollars Dry Up
States Face New Pinch as Stimulus Ebbs – Deborah Solomon, The Wall Street Journal "Stimulus is going to run out and there isn't sufficient economic growth and revenue growth that's going to come in and make up for the loss of those funds," said Scott Pattison…Thirty states have budgeted for the Medicaid funds, which would provide additional money for six months beginning Jan. 1. Of those states, only nine have contingency plans in place if the money doesn't arrive, according to the National Conference of State Legislatures…Already, state and local governments have cut more than 230,000 jobs … [Read more...]
Henrik Fisker and the Auto Industry
Driven: How Henrik Fisker Aims to Floor the Auto Industry – Chuck Squatriglia, WIRED.com The big automakers are bogged down by excessive management and staff. They’re inefficient. We’re modern, fast, and light. Take the design process: At a typical car company, it lasts about 12 months. At Fisker it’s two. And we don’t feel the need to create every component in-house, either. We encourage suppliers to use our vehicles as a test bed for new ideas. Then we help them develop the technology and adapt it to our car. … [Read more...]
Dow Industrials vs. Gold
In the last 115 years there have been three secular bull markets in gold versus the Dow. The current secular bull market in gold is the third. In each of the last two gold bull markets, the ratio of financial assets to gold fell to a ratio of less than three. The current ratio of the DJIA to gold is 8.3. Based on historical precedent the secular bull market in gold still has a ways to go. At the extremes, before this bull market is finished, gold could rise to over $5,000 per ounce or the Dow could fall to less than 2,500. … [Read more...]
Are Small-Cap Stocks Running Out of Steam?
Is the strength in small-cap stocks running out of steam? I’m not talking about the recent correction in small stocks, but rather the relative performance of small cap stocks versus large cap stocks over the past decade. My chart shows the ratio of small stocks as measured by the Russell 2000 index to large stocks as measured by the S&P 500. When the ratio is climbing, small stocks are outperforming large stocks, and when the reverse is true large stocks are outperforming. You can see clearly from the chart that the decade of the 1980s and 1990s was a period when large-cap stocks were in … [Read more...]
Yuan Revaluation
The China Currency Syndrome – Review & Outlook, The Wall Street Journal “To the extent that a revalued yuan raises production costs in China, some of its manufacturing will move to Vietnam, Bangladesh or other lower-cost countries…As for the U.S., the yuan has become a convenient scapegoat for Washington's policy mistakes. The neo-Keynesians who've been running U.S. economic policy since 2007 promised that their stimulus would deliver millions of new jobs. Now that those jobs have failed to materialize, Democrats blame China's exchange-rate policy. But no country in history has devalued … [Read more...]
Muni Debt Trap
You know how hard it is to be retired on a fixed income these days, especially with a risk-free rate (three-month T-bills) at less than one-tenth of one percent and with an historical expansion of government almost assuredly set to increase taxes next year. Caution: You don’t want to be like other investors who are reaching for yield and snapping up municipal bonds. Investors are not paying attention to the inherent risks they are buying. That’s why your smartest income move right now may be to avoid or reduce your exposure to these so-called “high-quality” credits. Little Rhode Island may … [Read more...]