In a recent interview with Morningstar's Christine Benz, Jack Bogle outlined his views of return possibilities for stocks and fixed income over the next decade. Here's what he had to say about equities: My reasonable expectations for the coming decade--as in my new book, The Little Book of Common Sense Investing, 10th anniversary edition just coming out--I'm pretty conservative. I look at the sources of returns, that's all I do, and the fact that other people don't do it that way doesn't bother me in the slightest. I look at investment return and that's today's dividend yield, which is less … [Read more...]
Will the AT&T-Time Warner Merger Be Stopped?
The Justice department is suing to block the proposed merger between AT&T and Time Warner. The challenge of a so-called vertical merger is rare because the two parties operate in different parts of an industry. The WSJ has more: On Monday, the Justice Department filed a lawsuit challenging AT&T’s $85 billion cash-and-stock deal for Time Warner Inc. after a nearly 13-month review. It was around this time in 2011 that AT&T was forced to withdraw its application with the Federal Communications Commission for a $39 billion takeover of wireless rival T-Mobile US Inc., amid opposition … [Read more...]
Is Chinese Growth Running out of Steam?
Here Michael Pettis makes the case that China’s growth miracle has run out of steam. China’s 19th Communist party congress ended last month with an indication that Xi Jinping’s new administration plans to rein in debt by abandoning the country’s long-term economic targets and allowing gross domestic product growth to fall. Typically, analysts assume that changes in reported GDP reflect movements in living standards and productive capacity. In China, however, this is not the case. Local governments are expected to boost spending by whatever amount is needed to meet the country’s targets, … [Read more...]
Wal-Mart Shares Soar
Wal-Mart shares soared yesterday (up 10.9%) after the company reported its best sales in years. Sales at existing stores rose 2.7% in the latest quarter—the 13th consecutive quarter of gains and the fastest since May 2009. Wal-Mart is making an aggressive push online. Online sales are up 50% over the last year. The WSJ has more. The world’s biggest retailer posted its strongest quarterly U.S. sales growth in nearly a decade Thursday, boosted by a big jump in e-commerce and strong store traffic at a time when many traditional retailers are struggling to keep their business … [Read more...]
Is This the Start of a Major Downturn or Just a Healthy Correction?
The FT reports on the sell-off in the $1.3 Trillion high-yield bond market. We wrote about the shifting landscape in the high-yield bond market last week. The high-volume sell-off in junk bond ETFs is continuing. High-yield bonds are on pace for their worst month since January of 2016, the month of the last major stock market correction. Even if you don’t invest in high-yield bonds, the market should be watched closely as it can be a harbinger of things to come in equity markets. Junk-rated debt has already lost 1.1 per cent in value so far during November, on pace for its worst month … [Read more...]
Are Stocks Cheap Because Interest Rates Are Low?
For the third time in the last 17 years, Federal Reserve researchers are out with a “this-time-is-different” research piece on asset markets. This version seeks to justify the bubble conditions in the stock market that ultra-loose monetary policy has helped foster. Titled Stock Market Valuation and the Macroeconomy, this piece concludes that even though more than a century of stock market data shows that extremes in the cyclically adjusted price-earnings ratio have signaled an overvalued stock market, today’s lower interest rates justify today’s inflated valuations. You can read the full … [Read more...]
Will Telecoms or Automakers Win Smartcar Tech Race?
The FT reports that a battle is brewing between European telecoms and automakers over which technology will be used to power communications with smart cars. The automakers want to use a short-range vehicle to vehicle technology that could be rolled out very soon. Meanwhile the telecoms want car communications to travel over their networks on bandwidths used for cellular communications. Nic Fildes and Peter Campbell write: Carmakers largely favour a short range technology using a dedicated band of spectrum or radio frequencies for car-to-car communication. This vehicle-to-vehicle system, or … [Read more...]
Junk Bonds go Bonkers
Bloomberg is reporting on the sell-off in high-yield bond ETFs (see here). Volume is soaring and prices are plunging. Part of the problem is the new structure of the high-yield bond market. High-yield bond ETFs have become the tail that can wag the dog. Yesterday, the dollar volume of the four big high-yield bond ETFs spiked to over 57% of the average traded value of the total high-yield bond market. The fast money crowd as well as yield chasers are the driver here. The fast money crowd favors junk bond ETFs over individual bonds because they are believed to have better liquidity. And … [Read more...]
What’s Behind the Bull Run in Emerging Market Stocks?
Emerging market stocks have had a solid bull run YTD with the benchmark MSCI emerging markets index up 34%. Good news follows good performance (yes you read that right) so the pundits are out promoting emerging market shares. The story being offered to the investment public is that growth is improving in emerging markets, emerging markets are cheap, and the U.S. is expensive. That is more or less right, though valuations could be debated, but the real story behind the boom in emerging markets shares has much more to do with Tech stocks than it does with growth and valuations in emerging … [Read more...]
The Dow hasn’t done this since 1945
It didn’t take much more to improve the investment climate in America than a more business-friendly resident in the White House. The Dow just put up its best post-election year return since 1945. Remarkable considering how little Trump and the GOP-led Congress have accomplished, but not so surprising when you consider that the greatest post-election year return in Dow history came while Calvin Coolidge was president. Coolidge was a hands off, business friendly president. He once famously said “The chief business of the American people is business.” MarketWatch has more. … [Read more...]
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