The Wall Street Journal reports on the risks a reversal in interest rates presents to the bubble conditions in commercial real estate created by far too easy money from the world's central banks for far too long. The commercial real-estate boom of the past few years has been driven by global investors seeking out returns better than those found in low-yielding bonds. But that dynamic could start reversing, analysts said, as ultrasafe government bonds start to offer yields that make commercial property look less desirable in comparison, given the potential risks. Bonds have sold off beyond … [Read more...]
Archives for November 2016
Happy Thanksgiving!
Portfolio Strategy: This is the Opportunity in Small Company Stocks
Small-cap stocks are on a tear. After crashing into bear market territory early this year, small company shares are up almost 40% from their lows. Since the election, small stocks have been smoking hot. Trump’s surprise victory lit a match under small company shares. The Russell 2000 index is up 11.6% from its November 8 closing level—that was only 11 trading days ago. According to Bloomberg’s exchange traded fund (ETFs) flow data, the four largest small-cap ETFs have gathered over $7 billion in assets since the election. As our chart shows, the magnitude of the inflows dwarfs anything … [Read more...]
New Wave of Annuities Likely to Fall Short of Investor Expectations
I've been warning investors about the perils of buying variable annuities for a long time (read: here, here, here and here). Now Investment News has reported that variable annuity sales are headed for their lowest year in nearly two decades. That's the good news, but I am concerned about the continued increase in indexed annuities which are likely to fall short of investor expectations. More from Investment News here: As independent broker-dealers have pulled back from variable annuities, they've embraced indexed annuities, according to Mr. Geising, who said sales grew 60% in the IBD channel … [Read more...]
The Explosion in Lightweight, Flexible, Plastic Food Pouches
The editors of Plastic Make It Possible explain the striking benefits of food packaged in plastic pouches rather than cans. As I walked down the canned food aisle in my grocery store, it struck me that “canned” fish is not sold solely in cans anymore. Tuna fish, for example, is also sold in flexible plastic pouches. I picked up one of these pouches and compared it to a can of tuna and thought: huh, this plastic pouch seems to weigh a bit less. So I put both in my shopping cart to examine at home. As I walked up and down the aisles, I noticed that all sorts of other products typically sold … [Read more...]
These Companies have the Highest Sales Per Employee
The table below shows the top five industry groups that have the highest median sales per employee according to Bloomberg. Real Estate, Energy, and Utilities make the top five. Why are these industries so profitable? All three are highly capital intensive. Owners are earning returns on the capital investments they make more than the labor they manage. Insurance and diversified financials also make the list. Diversified financials includes investment banking, investment management, and mortgage REITS. The financial industry is one of the most competitive industries, but also one of the most … [Read more...]
Thank You Mr. Johnson
Yesterday, Edward “Ned” Johnson announced he is stepping down as Chairman of Fidelity Investments. What I remember most from my time working at Fidelity Investments circa 1995 is how Mr. Johnson’s imprint on the company, and his desire to run it like a small family business, were felt by all 30,000 of us. Dick Young’s relationship with Johnson goes back to circa 1971. He wrote in the February of 2013 issue of Intelligence Report, "I have done business with the Boston-based Fidelity Funds since the early seventies, when the iconoclastic J. Stewart Harvey was director of research. And I first … [Read more...]
Is the World Witnessing a Frenzy of Better Robo-Retail?
After years of development, Lowe’s has rolled out its Lo Bot, a helpful machine created to guide customers around the company’s massive big-box stores. Ask Lo Bot where an item is and the robot will take you right to it. The Lo Bot isn’t the only robot showing up at retail operations. Another robot, a humanoid known as Pepper, has been showing up in different stores around the world. A version of Pepper has been infused with IBM’s Watson cognitive computing technology. The Watson integration is open to app developers and could lead to all new capabilities for the robot. Behind the … [Read more...]
This is What You Want to Hire a Stockpicker For
In recent years, the active investment management industry has taken a beating in the financial press and at the hands of the exchange traded funds market. That is partly an issue of the press putting too much emphasis on returns instead of focusing on risk-adjusted returns, but also a result of bad investment management. There is no doubt it is a tall order for investment managers to beat the large-cap U.S. indices on a return only basis. This is especially true if you are running a big mutual fund that doesn’t have the agility to move into or out of positions without incurring meaningful … [Read more...]
Trump Tax Code Implications for Investors
There’s a lot to like about the Trump tax code reform, especially on the estate tax front: Republicans’ race to rewrite the U.S. tax code on the heels of this month’s election relies on years of work that is suddenly—and quite unexpectedly—poised to pay off. A 2017 tax overhaul would be a case study in the benefits of dead ends and behind-the-scenes preparation. Failure would show again how hard it is to reshape the U.S. tax system, even with rare political momentum and one-party control of government. Republicans have long sought a rate-lowering, base-broadening revamp of the tax code, … [Read more...]
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