You wouldn’t know it if you rely on CNBC for your financial news, but outside of a select group of U.S. growth stocks, global equity markets are down YTD. The MSCI All-Country World Index is down 2.4% for the year, while the same index excluding U.S. stocks is down 9.34%. Emerging equity markets have already dipped into bear market territory (down 20% from high), and developed equity markets outside of the U.S. are not far behind, falling 15% from their January peak. Two thirds of the 3,000+ stocks in the FTSE All World Index (similar to the MSCI All Country Index) are down … [Read more...]
Robinhood Markets? No Such Thing as a Free Lunch
Despite offering no-fee stock trades, Robinhood Markets is still getting paid. The company is using a controversial process called "payment for order flow," to generate revenue. Despite its "free" trades, investors should always remember that there's no such thing as a free lunch. Bloomberg's Simone Foxman, Julie Verhage and Suzanne Woolley report: Here's how it works: Retail brokers like Robinhood focus on recruiting customers and building the trading interface, but don't actually execute their clients' orders. They outsource that to firms—including Citadel, Two Sigma and Wolverine … [Read more...]
Higher Rates Help Banks
Higher interest rates and a steepening yield curve, driven by strong economic growth and a winding down of global central bank stimulus are helping banks. Interest margins are expanding at some of the nation’s biggest banks as interest rates on loans rise faster than the interest cost of deposits. So long as higher interest rates don’t dent loan demand, a rising interest rate environment can be positive for the banking industry. The WSJ has more. Finally, there was no sign anywhere that consumers or businesses are having trouble staying current on their loans. Both JPMorgan and Wells Fargo … [Read more...]
Government Inflation Measures Miss the Mark
The CPI Inflation numbers for September came in below economist estimates. A big driver of the miss was a drop in used car prices which fell 3% in September vs. the prior month. That matched the biggest drops on record for used car prices, but did used car prices really plunge 3% in the face of a booming economy? Not likely according to Manheim Consulting’s used Vehicle Value Index which hit a record for the third consecutive month in September. As is typical with many of the prices the government reports in the CPI, the reality on the ground tells a different story than is being … [Read more...]
Higher Interest Rates are a Positive
Yesterday’s stock market rout has been at least partly attributed to rising interest rates. With bond yields up, investors who were once pushed into the stock market by the likes of Ben Bernanke and Janet Yellen are finally getting some well deserved respite under Chairman Powell. The President isn’t happy about rising interest rates, blaming the Fed for the sell-off, but he should be. Many of his retired and soon to be retired supporters are in favor of higher interest rates. A little air coming out of the stock market isn’t a bad thing. Stock prices have been distorted for years by … [Read more...]
The Internet: The Perfectly Competitive Market We’ve Been Waiting For
Jacob Passy, writing at MarketWatch, explains that the Internet is taking what was once difficult—finding the best price—and making it easy. Because e-retailers can't have the physical advantages a location can generate, they are forced to compete on price. In economics, perfect competition is sometimes just a theory, but the Internet is bringing that theory closer to reality for retail consumers. Passy writes: As more shoppers move online, the competition they are fueling between e-retailers like Amazon AMZN, -0.50% and traditional retailers like WalmartWMT, -0.08% and … [Read more...]
Can Bonds Restore Health to the Market?
James Mackintosh, writing in The Wall Street Journal, explains that as the term premium rises on bonds, hardest hit could be the so-called "acronym stocks," also known as the FAANGs. With rates on Treasuries rising, the discounted future profits of these tech giants look less attractive to investors. Mackintosh gives investors in the FAANGs three reasons to worry, writing: There are three reasons to worry. The first is that the acronym stocks— Facebook, Amazon, Apple, Google parent Alphabet, Netflix, Microsoft and others arranged into the FANGs, FAAMGs and so on—flew too high, and will now … [Read more...]
Is Your Broker a Used-Car Salesman?
Charles Schwab tells Financial Advisor IQ that many investors believe their brokers are used-car salesmen. He says brokers should keep their eye on the big ball, the millions of investors with 401(k)s who need help. He warns against reinforcing negative industry stereotypes and encourages advisors to act as fiduciaries for their clients. Rita Raagas De Ramos writes for Financial Advisor IQ: The “advice portion” of what the investing public needs worries Schwab, he says, referring to the quality of advice investors are getting – especially elderly and so-called mom and pop investors. “The … [Read more...]
Trump Trade Deal with Neighbors to Bring Auto Manufacturing to North America
After the recently negotiated USMCA trade deal, foreign auto companies are considering bringing more of their parts manufacturing to North America. Chester Dawson and William Boston report in The Wall Street Journal: Foreign car makers are considering moving more manufacturing to North America from their overseas plants following the recent U.S. trade deal with Canada and Mexico. Within days of the U.S. and Canada reaching a pact to replace the roughly 25-year-old North American Free Trade Agreement, executives at several foreign car makers said they are considering changes to their supply … [Read more...]
Is Zinc the New Lithium?
A promising zinc-based battery technology could revolutionize the economics of energy storage. Ivan Penn reports in The New York Times about the innovations of Patrick Soon-Shiong and Nant Energy. He writes: Over the past six years, 110 villages in Africa and Asia received their power from solar panels and batteries that use zinc and oxygen. The batteries are the basis of an innovative energy storage system created by NantEnergy, a company owned by Patrick Soon-Shiong, a biotech entrepreneur and surgeon originally from South Africa. Thomas Edison tried to develop batteries made with zinc … [Read more...]
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