The February jobs numbers were released this morning and they were smoking hot. With unemployment already at its lowest level over 17 years, 313,000 jobs were added last month—that’s the most jobs created in a month since the summer of 2016. Not only were hundreds of thousands of jobs created, but over 800,000 people entered the labor force. Manufacturing employment increased by 31,000 jobs last month following a gain of 25,000 jobs the month before. Since Trump took office, manufacturing employment has gained steadily following a two-year period of stagnation. Clearly, despite the … [Read more...]
Never Stop…
The FT reports here that a new wave of automated artificial intelligence software is replacing routine office work now done by people. Forrester Research estimates that 4 Million office employees are likely to have their jobs taken over by such software over the next five years. “There are a lot of tedious processes that involve taking information from this place and entering into that place,” says Rich Wong, a partner at venture capital firm Accel, which led a $153m investment this week in UiPath, giving the company founded in Bucharest and now headquartered in New York a valuation of … [Read more...]
Finally a Long Overdue Volcker Rule Review
The overly complex and opaque Volcker rule is finally getting a review. The Fed and the other agencies tasked with enforcing the Volcker rule are working together on a long overdue examination of the rule's complexity and effectiveness. Lalita Clozel reports at The Wall Street Journal: The Federal Reserve is considering “broad revisions” to how banks comply with a rule that prevents them from engaging in certain types of trading and investing. “I believe the regulation implementing the Volcker rule is an example of a complex regulation that is not working well,” Fed Vice Chairman for … [Read more...]
Are Fewer Commercials the Answer for Broadcast TV?
Fox Network Group’s ad chief wants to reduce TV ad time to two minutes an hour by 2020 from over 13 minutes today. Fox would need to boost price in order to cut volume, but an 85% reduction in commercials would be a hit with consumers. The WSJ has more. The shift is contingent on the industry changing the way it buys and sells media. Mr. Marchese wants to sell ads using a metric based on time spent with content, versus the number of views. “The two minutes per hour is a real target for Fox, and also our challenge for the industry,” said Ed Davis, chief product officer for ad sales … [Read more...]
This is Why Dividends are Better than Buybacks
The WSJ reports that U.S. companies have announced $200 billion in share buybacks over the last three months. That’s double the pace of last year. Management teams love buybacks because they boost share prices, which in turn make executive stock options more valuable. The problem with buybacks is that they are discretionary. And corporate boards and management teams have terrible timing. Buybacks tend to be highest late in the business cycle. During recessions, when share prices are at their most attractive levels, buyback activity falls as companies look to conserve cash. Buying back … [Read more...]
Digital Ads a Waste Says P&G
Despite projections that the market for digital advertising will grow to $120 billion by 2021, the world's biggest advertiser, P&G is opting for different ways to reach customers. Writing in the Wall Street Journal, Suzanne Vranica reports that P&G cut its digital advertising budget by $100 million in the second half of 2017. With new data, P&G discovered it wasn't getting what it wanted out of its ads. Vranica writes: Once armed with more measurement data, P&G discovered that the average view time for a mobile ad appearing in a news feed, on platforms such … [Read more...]
Where’s the Value in this Market?
Value may be difficult to spot if you load your portfolio with market capitalization weighted exchange traded funds like those that track the S&P 500. Apple, Amazon, Facebook, Microsoft, and Google, the top five components of the S&P 500, trade at an average P/E of 84X and a median P/E of 29X earnings. One way to think about P/E is the number of years it would take to earn back your investment at the current rate of profit. Worse than the elevated P/E of the S&P 500 and its top constituents is the average dividend yield of the top five. America’s five biggest companies pay an … [Read more...]
Companies Top Up Pensions Before Losing Tax Break
After neglecting their pensions for years, companies are racing to use a tax break on debt to shore up their funds before its gone. Bloomberg explains how borrowing now will save companies money. Molly Smith and Katherine Chiglinsky write: If a company acts now, a $1 billion contribution would only cost $650 million after taxes, based on 2017 rates. But once the corporation has passed the due date of its 2017 return, including extensions, the $1 billion contribution would cost $790 million after taxes. On top of that, the cost of government insurance on unfunded pension obligations has … [Read more...]
Is Housing in Another Bubble?
House prices may not be as high as they were at their 2006 peak, but they are close. And as Bloomberg reports, we are starting to see the type of activity that should worry regulators and central bankers. 35% of home-buyers in the U.S. are now buying houses sight unseen. Even with a planned 3 interest rate hikes in 2018, the Fed may be behind the curve. Thirty-five percent of homebuyers in the U.S. aren’t even visiting the property before they put in a bid, amid torrid competition in a tight market, according to the latest survey by Redfin Corp. The survey, conducted in November and … [Read more...]
A Bet on Emerging Markets is a Bet on Asia
MSCI is revamping the rules for inclusion in the widely followed MSCI Emerging Markets index. MSCI plans to cut the weight of stocks with unequal voting rights. If implemented, the rule would increase the weight of Asian stocks in the index to over 75% while lowering the weight of Latin American stocks to about 11%. The biggest country weights in the MSCI Emerging Markets index are China, South Korea, and Taiwan. Like most market capitalization weighted indices, the MSCI Emerging Markets index is top heavy. The top five countries (out of 24) account for 73% of the weight of the index. If … [Read more...]
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