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Investment Research Since 1978

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Archives for June 2016

No Way Stocks Are Cheap

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This chart is from John Hussman's latest comment. It shows the price-to-sales ratio of the typical S&P 500 stock. The typical stock is now trading near a historic peak in relation to sales. With valuations so high, if you are still counting on double-digit returns to fund your retirement, this chart should give you pause. … [Read more...]

Dividend Growth is Key

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BlackRock’s Global Chief Investment Strategist Richard Turnill on the importance of dividend growth. This week’s chart shows how U.S. dividend stocks have outperformed the S&P 500 over the past year, a trend we have also seen in other regions, as ultralow bond yields have intensified the hunt for income. Year-to-date flows into dividend-focused exchange traded products (ETPs) have reached $7.4 billion, more than seven times the 2015 total, according to our data. So what’s next for dividend stocks? We don’t see strong demand for dividend stocks dissipating anytime due to low interest … [Read more...]

Worthy Reads: Mortgage Lending Accelerates

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Mortgage Lending Accelerates (WSJ) Humans Strike Back Against Stock Market Robots (Bloomberg) Morgan Stanley Asks If This Is Just A "1937 Redux" (ZeroHedge) The next president will likely face a recession (Money) Natural gas shortage could cause rolling blackouts in Southern California (MarketWatch)   … [Read more...]

RAGE Gauge: The Real Unemployment Rate

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The typical headline unemployment numbers the American news media reports (U3) are inadequate for measuring not just unemployment, but underemployment. Many part time employees would prefer full time employment. The U6 unemployment number you see above includes more of the employees left out by the headline number; those who are marginally attached to the workforce, and those who are employed part time for economic reasons. The effect of the expanded definition is a fuller understanding of how many Americans aren't working as much as they would like to. The U6 rate is an important component … [Read more...]

The Monday Melee: New Housing Reality

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Credit Scores Strengthening Banks are licking their lips over the reduction in the number of Americans who are considered sub-prime borrowers. The Wall Street Journal reports: The share of U.S. adults with credit scores that are considered “subprime” fell to 20.7% in April, the sixth consecutive year-over-year decline and the lowest level since at least 2005, when Fair Isaac Corp., or FICO, started tracking the data. The ranks of subprime borrowers swelled during the financial crisis, peaking at 25.5% in 2010 as mortgage payments, credit-card bills and other debts went unpaid. The … [Read more...]

These are the Guys in Charge of the Economy?

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Jim Bullard, the President of the St. Louis Federal Reserve Bank, and one of the Fed members calling for rate hikes as recently as March (and just last month said he was considering one in June) has moved from hawk to uber-dove. Mr. Bullard now thinks the Fed should stay on hold for two and a half years.  It would seem that a single weak employment report was the catalyst to drive Mr. Bullard to change his outlook and model for the U.S. economy. He now says the economy is in a new regime. It is more than a little concerning that the guys in charge of the economy are basing their decisions … [Read more...]

Worthy Reads: The Fat Police score a Victory

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The Fed Surrenders (WSJ) The World Economy Looks a Bit Like It's the 1930s (Bloomberg) Fed rate hike spells crisis for China's banks (Reuters) Hawkish Bullard turns ultra-dove on Fed rate rise (FT) It Begins: Members Of European Parliament Beg Draghi To Unleash Helicopter Money (ZeroHedge) The Fat Police score a Victory (WSJ) … [Read more...]

Pensions: Left on the Hook will be the Taxpayer

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Ike Brannon, a visiting fellow at the Cato Institute, explains how the Puerto Rico rescue makes state pensioners the big winner. Right now, states cannot declare bankruptcy, which is one reason why states have traditionally been able to borrow at such low rates of interest. However, financial markets have come to realize, belatedly, that Illinois (along with other states) is making promises to its lenders that it will have trouble keeping. Puerto Rico was not supposed to be eligible for bankruptcy either, but the legislation before Congress will allow the territory to reduce its debt, both … [Read more...]