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Archives for July 2015

The 2% Economy

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The latest GDP report came out yesterday and it showed economic growth of 2.3% in the second quarter. First quarter GDP was revised up from a drop of .2% to a gain of .6%. Yesterday’s release also included the BEA’s (Bureau of Economic Analysis) annual revisions to GDP. The annual revisions incorporate newly available, more accurate, and more complete source data. What did the revisions show? This won’t come as a surprise to Mom and Pop on Main Street, but economic growth over the last few years was weaker than originally reported. The compounded annual growth rate of GDP from 2011-2014 was … [Read more...]

Wisdom from The Intelligent Investor

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Wisdom from Benjamin Graham’s The Intelligent Investor, first published in 1949: The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should … [Read more...]

Is a Correction in the Cards?

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U.S. markets had a nice bounce yesterday and they look poised for another bounce today, barring any hawkish comments from the Fed in today’s policy announcement. But all may not be fine and well as market internals have a real troubling look. The chart below shows the NYSE cumulative advance-decline line for stocks compared to the S&P 500. The advance-decline line measures market breadth. The YTD trading range of the headline indices may be masking underlying weakness in the market that is evident in the downtrend in the A/D line. Narrowing markets are often a sign that stocks are … [Read more...]

Dick Young’s Maximizers

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In the July issue of Richard C. Young's Intelligence Report, Dick Young introduced his Maximizers idea. It's worth a read for any serious investor. Royal Road to Riches Since I began writing these regular monthly strategy reports in 1973, I have emphasized an approach based on dividends, interest, diversification, patience, and compounding. As Richard Russell has advised subscribers since I first started reading Dow Theory Letters decades ago: "Compounding is the royal road to riches. Compounding is the safe road, the sure road, and fortunately, anybody can do it. To compound successfully … [Read more...]

The Monday Melee: Iran’s Impact on the World

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Bring on the Oil Don't Freak Out Wired tells readers not to freak out over the flood of Iranian oil about to hit the market. According to projections from three energy monitoring agencies, the global demand for crude oil amounts to 30 million barrels a day. Iran wants to double exports up to 2.3 million barrels per day, a far cry from the 6 million barrels per day it was making in the ’70s, before the 1979 revolution. The country’s oil minister says it can increase exports by 500,000 barrels per day as soon as sanctions are officially lifted (expected late this year), with another 500,000 … [Read more...]

This Doesn’t Have an Encouraging Look

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Copper is said to have a PhD in economics because it’s price tends to be correlated with global economic growth. Unless Dr. Copper has lost its relevance, there is reason to be concerned about global growth. The continuing rout in commodity prices has pushed copper below a key long-term support level. Technical analysts would tell you the next support level for copper is at least another 15% away from the current price. But copper isn’t the only indicator sending a signal of caution. Oil prices are in the tank. The media paints this as a supply story and there is no doubt an excess of … [Read more...]

Americans are Getting Stronger

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From Benjamin Graham’s, The Intelligent Investor, first published in 1949: “Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five-year-old can do it. —Henny Youngman” … [Read more...]

Top Stocks this Earnings Season

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In my last post, I referred to the quarterly earnings season that we are now in the thick of as a circus. And Boy has it lived up to that name. The overreaction of investors to quarterly results never ceases to astound. The main event this season (so far at least) has to be the Google earnings report, but Netflix came in a close second. Google investors had one of the greatest overreactions to a quarterly earnings report in the history of quarterly earnings reports. The company earned about $170 million more in the second quarter than analysts were expecting which is equal to about 0.85% of … [Read more...]

Jerks or Angels?

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I like this piece from Rich Karlgaard, publisher at Forbes: “BUSINESS WAS ORIGINATED to produce happiness, not pile up millions.” So wrote FORBES founder B.C. Forbes–Steve’s grandfather–in the magazine’s premiere issue, almost 98 years ago. B.C. was a walking encyclopedia of business wisdom. His adages had a moral quality to them. “The man who has won millions at the cost of his conscience is a failure.” “The bargain that yields mutual satisfaction is the only one that is apt to be repeated.” And not to be forgotten: “Jealousy … is a mental cancer.” B.C. believed good people would win in … [Read more...]