Housing starts released today came in far below consensus estimates. Government efforts to stimulate the housing market have once again failed. The federal tax credit for home buyers simply pulled demand forward. We are now seeing the giveback. … [Read more...]
Archives for June 2010
A Troubling Trio of Economic Indicators
In over four decades in the investment business, I have found that the most reliable economic indicators are not those released by government statistical agencies, but those that are available real-time in the stock, bond, and commodities markets. Three charts I have been monitoring regularly to gauge the strength of the economic recovery are Young Research’s Moving the Goods Index, lumber prices, and copper prices. Young Research’s Moving the Goods Index is a market-cap-weighted, non-airline transportation index. If the Moving the Goods Index is in a bull market, chances are the … [Read more...]
Simple Arithmetic Vital to Your Investment Success
My arithmetic of portfolio losses chart shows the return necessary to break even after incurring a loss. The horizontal axis shows the assumed portfolio loss incurred. The vertical axis shows the portfolio gain required to break even. My chart clearly illustrates that the bigger the loss you take, the harder it is to recover. You can recover from a small loss. If your portfolio drops 10%, you only need a gain of 11.1% to get back to even. But if your portfolio drops by 50%, you need a gain of 100% just to get back to even. And if you take a loss of 70%, you need a staggering 233% return … [Read more...]
Avoid This Losing Strategy
Using a buy and hold strategy to invest in agricultural commodities futures or funds that buy agricultural commodities futures is a loser's game. Agricultural commodities futures routinely trade in a state of contango. Contago occurs when distant month futures contracts trade at a premium to near month contracts. When a futures contract reaches expiration investors must sell it and buy a contract expiring at a later date. This is called rolling futures. But when a futures market is in a state of contango the near month contract being sold will trade at a lower price than the contract being … [Read more...]
Continuing Claims Remain Stubbornly High
Total Continuing Claims remain stubbornly high. For the recovery to become self sustaining continuing claims must start falling much faster. … [Read more...]
A Strategy for Picking ETFs
Since the first ETF was launched in 1993, assets under management have increased to $830 billion as of April 30, 2010. Over the last 10 years the compound annual rate of growth in ETF assets has exceeded 30%. The remarkable success of ETFs is grounded in their many advantages over actively managed open-end mutual funds. ETFs offer intraday liquidity; open-end funds can only be purchased once per day at the closing price. ETFs disclose their entire portfolio daily; open-end funds are only required to disclose their portfolios semi-annually. Through the use of in-kind transfers, ETFs are able to … [Read more...]
Natural Gas Breaks Out to 3-Month High
Big upside breakout is bullish for natural gas. Excess inventories are coming down and investors are likely realizing that as a result of BP oil spill, now more than ever higher U.S. natural gas use is necessary. … [Read more...]
The Crash
The Regional Economist from the Federal Reserve Bank of St. Louis is a must-read for any serious investor. The quarterly review provides business and economic commentary for the states in the eighth Federal Reserve District—which are “central to America’s economy.” I’ve been studying the most recent review and want to discuss with you a table in the cover story, “Economic Hangover: Recovery is Likely to be Prolonged, Painful ,” by Bill Emmons. I’ve customized the table to help illustrate that easy money and out-of-control government spending lead to reduced stock-market returns. The crash was … [Read more...]