What’s the smart money been doing with their money this year? Other than losing a lot of it (see hedge fund hotels Sun Edison and Valeant Pharmaceuticals for example), they are net sellers of U.S. stocks. According to the latest from Bank of America Merrill Lynch, BofA’s institutional and hedge fund clients, the so-called smart money, have yanked a net $24 billion out of U.S. stocks YTD. Who is buying what they are selling? Retail investors are net buyers of U.S. stocks for the first time in seven years, but if you exclude ETFs, they too are net sellers (I’ll come back to this in a minute). … [Read more...]
Archives for November 2015
Stock Market Beauty Contest: Part II
You know from Part I that this stock market is a beauty contest. Five companies account for two-thirds of the returns year-to-date for the S&P 500 Index. They are: Apple, Google, Microsoft, Facebook, and Amazon. It has been my experience that investors make the grave mistake of confusing index investing with diversification. Owning the S&P 500 does not mean you’re diversified. Owning the S&P 500 means you own a market-cap weighted index of stocks where the companies with the largest market-cap have the most influence over its direction. Like sheep heading to slaughter, … [Read more...]
What is Amazon Stock Really Worth?
CNBC: Amazon is now the most expensive stock in the S&P. Discussing a fair price on Amazon stock, with Aswath Damodaran, Professor at NYU Stern School. … [Read more...]
The Monday Melee: Dividends Break Records
Third Quarter Dividend Explosion CNBC reports that dividend growth hit a new quarterly record of 23.4% in the third quarter. A wobbly third-quarter stock market didn't stop companies from shelling out cash to shareholders, with U.S. investors getting the bulk of the benefits. American companies issued a staggering $107.9 billion in dividends for the three-month period, a 23.4 percent quarterly increase that "comfortably" set a new record," according to data released Tuesday by Henderson Global Investors. How to Choose a Dividend Stock Spreading the Wealth Reuters reports … [Read more...]
Investing Lessons From my Father’s Father
Do you remember your first job? I forget what my father’s first job was, but I know he started working at a very young age scooping ice cream, pumping gas, and later selling Fuller Brushes. In addition to that, he was responsible for collecting rent from a number of his father’s rental properties in New Bedford, MA—where my dad was taught the most important lesson of all about money: compound interest. The rental properties, according to my dad, were not in the best neighborhoods and sometimes he was knocking on doors to collect late rent. My dad was instructed by his father to never knock … [Read more...]
Is this the End of Cash?
The Wall Street Journal reports that "Apple Inc. is in discussions with U.S. banks to develop a payment service that would let users zap money to one another from their phones rather than relying on cash or checks, according to people familiar with the matter." … [Read more...]
The 1% Recovery
If you thought 2% growth during this “economic recovery” was bad, I have even more discouraging news for you. On a per person basis, economic growth has been even worse than 2%. Since the recovery began, growth in GDP per capita has averaged only 1.35%. That is an embarrassingly low number coming off of the deepest recession since the great depression. At some point, don’t we have to stop blaming the great recession for the slow recovery and instead examine the economic policies that might be holding back growth? … [Read more...]
The Fed has Sat on Its Hands
In the November issue of Richard C. Young's Intelligence Report, Dick Young writes: The Fed has sat on its hands throughout the duration of the current business cycle recovery from the financial crisis. In my five decades in the investment industry, there has not been a period where the Fed has refused to increase rates during an extended economic rebound. As I have been writing, we are now in the winter stage of the economic cycle. Gauges of employment momentum indicate that the cyclical upturn now has nowhere to go but down. Yet the Fed and the White House Council of Economic Advisors … [Read more...]
Danger: 2 Stocks You’ll Be Glad You Missed
The Wall Street Journal has been chock-full of teachable moments lately. Last week we pointed readers to two pieces that highlighted the risk of investing in low-barrier to entry businesses. This week the journal brings us two pieces that should make it crystal clear why diversification is so vital to your long-term investment success. The subject of both WSJ articles is activist investors. Activist investors often take out-sized positions in stocks and then agitate the board for change to increase shareholder value. Casablanca is an activist hedge fund that took a 5.2% stake in Cliffs … [Read more...]
Stock Market Beauty Contest
This stock market is like a beauty contest where the recognizable names get all the attention. So far this year Apple, Google, and Microsoft account for about a third of the return for the S&P 500. Worse yet, Apple, Google, Microsoft, Facebook and Amazon account for about two-thirds of the return for the S&P 500. And how about all the attention from Wall Street? According to Bloomberg the number of analyst recommendations on each of these five stocks is: Apple 51, Google 50, Microsoft 37, Facebook 53, and Amazon 42. The rest of the stocks in the S&P 500 have an average of only 23 … [Read more...]