Last year around this time, Apple was viewed by the market as a company that could do no wrong. Coming off of the successful launch of the iPhone 6 and 6 Plus, Apple reported what was then the largest quarterly profit of a public company in history—a whopping $18 billion. That was up over 37% from the same quarter a year ago. Impressive numbers to be sure. In the first two months of 2015, Apple shares catapulted higher by over 20%. During those two months Apple’s market value increased by over $150 billion dollars—that’s about equal to the total market value of Walt Disney or IBM or Visa or … [Read more...]
Archives for January 2016
US$ Print til’ You Die
You would never believe it today, but there was a time when The New York Times' editorial board supported sound money. And the person writing sound money editorials against a proposed Bretton Woods agreement was Henry Hazlitt. Today the first name that comes to my mind when thinking about The New York Times and monetary policy is the “print til’ you die" economist Paul Krugman. Contrary to the Keynesian crowd, Hazlitt believed it was irresponsible to make the dollar a reserve currency, as good as “gold”, knowing full well there would never be enough gold to satiate government spending … [Read more...]
Expect an Easy Money Message from the Fed
Just last month, the Fed hiked interest rates for the first time in almost a decade and told the public that it would gradually raise rates—four hikes were supposedly in the cards for 2016. Today, the Fed meets again and many are hoping Yellen & Co., will deliver a dovish message. Some are even agitating for more bond buying. Could the Fed really change its mind on the outlook for the economy after just six weeks? You betcha. I give you exhibit A and exhibit B below. The Fed claims that its monetary policy is data dependent, but by data they really mean the level of stock prices, … [Read more...]
Why Rollover Your 401(k)
You wouldn't be the first person to wonder who in the world comes up with these phrases: "Rolling over your 401k." As if investing isn't confusing enough, the wording is so bad you can't help but think about a dog trick. This is supposed to be serious stuff. Most of you corporate warriors that have a 401k, and are in or near retirement, have figured out what a rollover is by now. It's when you transfer your 401k contributions into an IRA. 401k Contributions Are Free Money I love the 401k as a savings vehicle. It's a great way to get free money from your employer. But it is lacking … [Read more...]
The Monday Melee: Is Russia About to Collapse?
Russia Deteriorating Kalyeena Markortoff writes at CNBC: Data released Monday shows Russia's economy "worryingly" deteriorated at the end of last year with oil prices in a tailspin only bolstering the odds of a second year of recession for Moscow, an analyst has told CNBC. Russia's state statistics agency, Rosstat, reported preliminary figures Monday that showed its gross domestic product contracted by 3.7 percent in 2015, much worse than the 0.6 percent growth tracked in 2014 but roughly in line with forecasts. Billionaires Hear Russia's Outlook at Davos Russia Burning Through … [Read more...]
Has Oil Hit Bottom?
Oil prices have been crushed over the last 18 months. From its high in June of 2014, the benchmark U.S. oil price is down 74%. Over the long-run prices follow fundamentals, but in the short-term, psychology and sentiment can play the dominant role. We may be seeing that today. Where is the sentiment on oil now? I don’t have to tell you that it is dismal. Just pick up a newspaper. All I see are calls for lower prices for longer and that oil is going to $10 or $15 per barrel. That wasn’t the case at this time last year. The market was still expecting a quick recovery to $60-$70 oil. When it … [Read more...]
Good ‘Ole Vanguard GNMA
When times are tough, Vanguard GNMA (VFIIX) is a friend you’d never dream of living without. Check out the action for GNMA for just the first few weeks of this year compared to that of the more speculative NASDAQ Composite Index (both rebased to 100 at 12/31/2015). I don’t need any more than this to prove the importance of counterbalancing, in other words diversifying your portfolio with less risky assets like Vanguard GNMA. Remember, one of the keys to your success as an investor is to be an i-n-v-e-s-t-o-r. If you’re sitting on the sidelines you’re missing the boat on some wonderful … [Read more...]
The Silver Lining to the Correction
It has been a painful start to the year for equity investors. The S&P 500 is down 10% YTD and the smaller Russell 2000 is down 14%. Corrections are never fun when you are in the midst of one, but it is from corrections and bear markets that profound opportunity arises. The S&P hasn’t fallen enough from its May 2015 high to enter official bear territory yet—that would take another 7% from current levels, but there are many individual stocks that have. The chart below shows the percentage of Russell 3000 stocks (the largest 3,000 US stocks) that are down more than 20% from their … [Read more...]
The Fright of Squandered Capital
In the December issue of Intelligence Report, Dick Young wrote about helping investors protect and preserve their capital acquired over a lifetime. My focus, first and foremost, is on keeping you out of trouble. I do not write to needy investors—those who require the financial markets to make something happen to save their bacon—nor to novice investors or rank speculators. If you have been with me over the decades, you know that my primary concern is your comfort and security in your retirement years, whether today or in the future. In other words, my aim is to help you protect and preserve … [Read more...]
Recession Here
The latest industrial production numbers were released this morning and they came in below estimates with the prior month revised down. The year-to-year rate of change in industrial production is now -1.75%. In the post WWII period, industrial production has never contracted by 1.75% or more without that contraction being associated with a recession. One data point does not a recession forecast make. And this time could of course be different as the industrial sector is a much smaller part of the economy than it was decades ago, but investors should have their antennae up sensing for signs of … [Read more...]