That cookout will cost you 29% more this year New York Post OECD urges Fed and BoE to raise rates FT.com Swiss Move to End Nuclear Era The WSJ Chanos on China Stocks, Real Estate Bloomberg Americans say 'no' to electrics despite high gas prices USA Today Local Governments Hit as Tax Revenue Falters The WSJ … [Read more...]
Archives for May 2011
Outliving Your Money
Just over thirty years ago, the 3-Month Treasury-bill yielded 16.3% in the secondary market. At the beginning of this month, as you can see in the chart above, it yielded only 0.01%. That’s 1 basis point, or a difference of 16.29%. It can’t possibly go below zero. Though the yield is already negative when accounting for inflation, as investors line up to pay to lend the government money. Investors are in a real predicament, especially those living on a fixed income. How many investors built their retirement savings plans using such low rates as inputs in their models? Not many to be sure. … [Read more...]
Apparel Stores Hit Hard by Rising Costs
This week’s Market Mover is an entire industry, apparel stores. In the past week stock prices of many apparel stores like Gap (NYSE:GPS), Pacific Sunwear of California (NASDAQ:PSUN), Aeropostale (NYSE:ARO), and New York & Company Inc. (NYSE:NWY) have fallen by more than 5% (Chart 1). With a combination of high raw materials costs for clothing inputs like cotton and rayon still elevated and continuing weak customer demand, the apparel industry is in a vice. While prices for cotton have come down, they are still well above prices of a year ago. Americans are buying less, as their real wages … [Read more...]
The Two Most Important Words in Investing
The two most important words in investing are “compound interest.” Albert Einstein referred to compound interest as the eighth wonder of the world. And Ben Franklin said compound interest is “the stone that will turn all your lead into gold.” Many investors are familiar with compound interest, but few appreciate its awesome power. Until you fully appreciate the power of compounding, attempts at crafting a successful long-term investment strategy will likely fall short. If you are among the millions of Americans who still believe investing is buying a security today and selling it at a … [Read more...]
A Bundle of Dismal Data
It has been a week of dismal economic data releases. On Monday, the Chicago Fed released its National Activity Index (CFNAI), a weighted average of 85 monthly indicators. The CFNAI is intended to provide a real-time statistical measure of coincident economic activity. That latest reading came in at -0.45, well short of the 0.20 estimate from economists. The weak April reading pushed the all-important three-month moving average to -0.12. When the three-month moving average falls below -0.70, the likelihood that the U.S. economy has entered recession is strong. On Tuesday, new home sales and … [Read more...]
Sell in May and Go Away
The following charts illustrate the irrefutable stock market power in the year before a presidential election. As you can see there is no other year quite like year three in the presidential election cycle in terms of consistent gains from stocks. The average return in year three is 16.9%, compared to 6.7%, -0.1%, and 5.9% in years 1,2,4 respectively. Year three also has the lowest standard deviation of the four. “In the first seven months of the third year since 1960, Year 3 has returned 2.5% per month for a total of 20% real (after inflation adjustment). In contrast, the … [Read more...]
Housing Turns Ugly: South Hurt Worst
The number of new housing starts reported in April was a big disappointment. The 523,000 starts didn’t even break into the consensus range predicted by a Bloomberg survey of economists. The economists figured on 570,000 starts as the most likely number, but were disappointed when results came in 8.2% below their expectations. There were regional pockets where the numbers looked very bad. In the South, the number of new housing starts fell by 23% compared to March, the largest single-month decline since 1988. There were only 255,000 housing units started in the South in April, the lowest … [Read more...]
Capacity Utilization: 2 Sectors That Win
This month’s Industrial Production and Capacity Utilization report from the Federal Reserve fell short of economists’ predictions. Capacity utilization remained essentially flat in April, with growth failing to meet analysts’ expectations. Parts shortages created by the continued troubles in Japan contributed to the lackluster performance of American industry. If you’re not familiar with capacity utilization rate, it is the percentage of total possible production an industry is employing at any given time. In other words, if I own a machine that can make 1,000 baseballs a day, and I’m … [Read more...]
China Ghost Cities
Kentucky Derby Owner Hits 52-Week High
This year a record-breaking 164,858 people attended the 137th running of the Kentucky Derby, breaking a 37 year record. The race was watched by an additional 14.5 million people on television. The stock price of the Derby owner, Churchill Downs Inc. jumped to a new 52-week high on the news, and in response to an earnings report that showcased strong revenues from a number of recent acquisitions. Shares of Churchill Downs (NASDAQ: CHDN) climbed to $45.08 on May 12. The acquisitions helped boost the results at Churchill Downs. To diversify away from horse racing, a seasonal industry, … [Read more...]