We’ve written often on this site and in our monthly strategy report about the speculative nature of the stock market rally in recent years and most especially in recent months. The leading lights of the stock market year-to-date are companies trading at levels that leave no margin of safety for the serious long-term investor. Here, I am talking about the Netflix, Amazon, Facebook, and Googles of the world. These four companies plus Apple are responsible for over 75% of the return on the S&P 500 year-to-date. Fund managers who eschew these stocks are taking serious career risk, but it is … [Read more...]
Archives for October 2015
Stock Market Update: Has the Window of Opportunity Closed?
Many investors and strategists have been arguing that the Fed lost its window of opportunity to hike rates when the good professors panicked during the stock market correction in August. The decision backfired as the Fed told the public that global financial conditions were bad enough not to hike in September, but not so bad that the Fed wouldn’t hike sometime in 2015. The market took the Fed’s panic as a sign of weakness. If the Fed didn’t hike in September what would encourage them to hike later in the year? Investors pushed interest rates down sharply over ensuing weeks and the … [Read more...]
How High are Your State’s Corporate Income Taxes?
Do you live in a bustling corporate tax paradise like Texas? Or are enduring a confiscatory nightmare like the small business owners of Washington D.C.? This map from The Tax Foundation lays out the details on where in America you can go to find the most favorable tax rates for your small business. … [Read more...]
The Next 5,000 Points for Stocks
I have no idea if the next 5,000 points for stocks will be up or down. But I do know your ability to stick with your plan will be tested in a 5,000 point drop. Don’t forget how easy it is to lose money. It may have been a while since some of you have worked, but remember how hard it was to save your money. Next, think about how you felt the last time the stock market took a big hit. Were you able to stick to your plan? Remember, you can’t control the market. But, you can control how you deal with it. In my experience investors discover they can’t tolerate losing money until after … [Read more...]
The Monday Melee: The Cost of a Hurricane
The costs of disaster can be massive. Economies can be crippled by hurricanes, typhoons, earthquakes and tidal waves. Mexico narrowly avoided a massive catastrophe by Hurricane Patricia by competently utilizing disaster planning and evacuation. Act of God: The Cost of Disaster The Costliest Year of Natural Disasters: 2011 Patricia : Strongest Landfalling Pacific Hurricane on Record Speaking of Worst Hurricanes: This Saturday, the Miami Hurricanes suffered the worst loss in school history. They lost to Clemson: 58-0. … [Read more...]
This Company can Turn $1 into $460
As the late great Yogi Berra might say of this market, “It’s like De Ja vu all over again.” More stimulus from the global central banking cabal (ECB yesterday, Bank of China today, BOJ next week) and the fab five (Facebook, Amazon, Google, Apple, Netflix) are again driving the market to ever higher levels on the back of quarterly earnings reports. Sounds like a replay of, well, anytime over the last three years. The gains these stocks are making on what are regular earnings surprises (h/t analyst enablers) is confounding to the serious long-term investor. Amazon is poised to add $55 per … [Read more...]
Reagan on the Gold Standard
In the October issue of Intelligence Report, Dick Young wrote: Richard Russell is now 91 years old. In a recent Dow Theory Letters, Russell wrote, "I spend most of my time in bed, which gives me plenty of time to think," an activity that, over the decades, few in the investment industry have done in greater depth than has RR. Russell has been writing Dow Theory Letters since 1958. For decades, Russell, Ben Graham, J. Anthony Boeckh, and Harry D. Schultz have been primary sources of investing wisdom for me. Russell recently wrote about 12-term Congressman Ron Paul, who tells the story of once … [Read more...]
Is this a Sucker’s Rally?
The chart below compares the spread (yield difference with treasuries) of the Merrill Lynch High-Yield Master Index to the S&P 500. The vertical axis for the Merrill Lynch spread is reversed to show falling spreads as rising (a positive). High-yield spreads and stock prices tend to move in lock-step, but tops and bottoms in spreads tend to lead tops and bottoms in stocks. The recent rally in the S&P 500 has not been confirmed by the performance in high-yield bonds. High yield bonds hit a lower low in September and their rally has now only brought spreads back to the level … [Read more...]
What’s on Your Bucket List?
“It’s not how fast you travel, it’s how far you go,” sings my friend Bob Morrison in his recently recorded song A Wheel Is A Wheel. If you live outside of Nashville, TN you may not know the name Bob Morrison, but you most certainly know his songs. He was the straw that stirred the drink turning Looking for Love into a hit for Johnny Lee—the song featured in the movie Urban Cowboy. He won a Grammy in 1980 for You Decorated My Life, was ASCAP Songwriter of the Year four times, and if you don’t know those songs, then you’ll most certainly recognize a few names from his expansive list of song … [Read more...]
The Monday Melee: China’s Unbelievable Growth
China released GDP numbers on Monday and despite claims of a deceleration in the Chinese economy, the official statistical bureau reported that growth was 6.8%, very near the target of 6.9%. "We Don't Believe Them" Danny Gabay of Fathom Consulting, and formerly of the Bank of England, told BBC Radio 4 that "Quite frankly we don't believe them. It's not just that they come in suspiciously close to the target, it's that they're produced remarkably quickly and rarely revised." (Businessinsider.com) Corporate Earnings Fears Corporations have flashing warning signals about China since at least … [Read more...]