Michael Burry, played by Christian Bale in The Big Short, was ahead of the market on predicting the financial crisis beginning in 2007. Today Burry is sounding an alarm once again as he tells New York Magazine of the market, "We're right back at it." Where do we stand now, economically? Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest … [Read more...]
Archives for December 2015
The Most Impressive Dividend Records
Ben Graham was one of the most successful investors of all-time and the father of value investing. He also wrote the one and only investment book that most investors will ever need to read, The Intelligent Investor. If you’ve read The Intelligent Investor cover-to-cover, you are head and shoulders above the vast majority of the investing public. The amount of investing insight and wisdom packed into this single volume remains unmatched to this day. The Intelligent Investor's Most Valuable Advice Some of Graham’s most valuable advice was to the defensive investor. In Intelligent Investor, … [Read more...]
What Lies Ahead for Markets is Not Clear
In the December issue of Intelligence Report, Dick Young writes: The rigged (check with the Fed) financial markets are increasingly imperiled by the domination of high-frequency trading and highly leveraged derivatives. Serious investors look on from the outside and make up but a small, insignificant component of daily trading. In other words, you and I are but interlopers. Those that have generated impressive performance over the last four or so years are the ones prescient enough to have projected that (1) the Fed would, for the first time in history, sit on its hands regarding interest … [Read more...]
The Monday Melee: What Could the Saudis be Thinking?
Saudis Producing Near Record Oil at Low Prices Saudis Run Record Budget Deficit Ahmed Al Omran and Summer Said report in The Wall Street Journal: Saudi Arabia on Monday unveiled plans to cut expenditures and sharply raised domestic fuel prices as the world’s top oil exporter attempts to cope with a new era of cheap crude prices. After years of spending its massive oil wealth to bolster the local economy and provide subsidized energy and other utilities to its 30 million people, a steep decline in oil priceshas forced the kingdom to reassess these plans. On Monday, officials said the … [Read more...]
The 2016 Stock Market Outlook
Where are stocks headed in 2016? Will one of the longest bull markets on record finally come to an end in 2016 or is there enough gas left in the tank to push the market to higher highs? According to the strategists at Wall Street’s biggest banks, you should expect moderate stock market gains in 2016. The average estimate according to Wall Street strategists is for the S&P 500 to close the year at 2200—an 8% increase from yesterday’s close and a 10% gain from the time the estimates were made. If an 8% to 10% gain sounds like a familiar forecast from this crowd, that’s because it is. The … [Read more...]
Adam Smith and the Prudent Man
From the WSJ: Adam Smith, “The Theory of Moral Sentiments” (1759): The prudent man always studies seriously and earnestly to understand whatever he professes to understand, and not merely to persuade other people that he understands it; and though his talents may not always be very brilliant, they are always perfectly genuine. He neither endeavours to impose upon you by the cunning devices of an artful impostor, nor by the arrogant airs of an assuming pedant, nor by the confident assertions of a superficial and impudent pretender. He is not ostentatious even of the abilities which he … [Read more...]
The Monday Melee: Headwinds for Manufacturing
Manufacturing Corporation Sales Down 3 of Last 4 Months Steelmakers Hurting USAToday reports: Steelmakers are suffering their worst downturn in at least 15 years, partly because oil producers have drastically cut drilling activity and so have less need for steel pipes. This week's drop in oil prices below $40 a barrel could intensify the pain for steel manufacturers by delaying a rebound in energy investment, saysBarclays analyst Matthew Korn. Yet the oil slump only partly explains the steel industry's woes. Steel producers have been hit by a global nose-dive in commodity prices … [Read more...]
This Chart Should Scare You
Below you are looking at a chart of the S&P 500 versus the Merrill Lynch High Yield Index. High yield bonds have had a dismal year. The Merrill Index is down almost 10% from its highs earlier this year, while the top heavy S&P 500 is only down a couple of percentage points. Bonds are higher in the capital structure than stocks. In the event of a default, bond holders get their money back before stock holders get a dime. So if investors are selling high-yield bonds because they are concerned about the prospect of default, shouldn’t they also be selling stocks? Historically, big losses … [Read more...]
Fed Ends Historic Era by Raising Rates
The Fed ended seven-years of sitting on its hands by finally raising interest rates. Really? One will have to look pretty hard to actually see it. Here’s a thought, how about Janet Yellen testifies in front of a room of retirees at a Town Hall style meeting instead of in front of a room of bureaucrats in D.C. Does she not have a clue what her rock bottom interest rates are doing to retirees? … [Read more...]
The Energy Dividend
Oil and natural gas prices have continued to slide throughout 2015. An unseasonably warm start to the winter and elevated inventories have pushed natural gas prices to one of the lowest levels on record. Oil prices aren’t yet near their inflation adjusted low, but oil is now trading in the range that prevailed during much of the 1980s and 1990s. Low energy prices are nothing to cheer about if you are an oil or gas company or one of their employees, but lower gas, home heating, and electricity bills should, over time, help lift the consumer economy. … [Read more...]