After a big rally last year iron ore prices are rolling over. The FT reports that a glut of supply in China is weighing on prices. The sharp drop on Wednesday is the latest swing for a commodity that raced higher over the second half of last year to more than $90 a tonne. The benchmark 62 per cent ore for immediate delivery into China was trading at $67.9 a tonne, according to the Steel Index, a price reporting agency. Signs of faster economic growth in China helped the rally in the second half of last year, leading to a build-up of iron ore inventories at the country’s ports. With China … [Read more...]
Time to Bring in the Seasoned Hands at the Fed
Will three vacant seats at the Federal Reserve and Yellen's and Fisher’s terms ending next year, Donald Trump has the opportunity to perform a much needed overhaul of the Fed. We could be looking at an entirely new regime for monetary policy in as little as twelve months. Regime change would be a risk to many complacent bond investors, but it would also be a welcome change for income investors who have been starved of yield for years in the name of stimulating the economy. One of the biggest problems with the Fed is that it has been captured by the academic establishment. Below, Joe … [Read more...]
Americans are Screaming for Light Trucks as Gas Prices Remain Low
Before the Great Recession, Americans were buying cars and light trucks at about the same rate. But as gasoline prices have fallen below $3 per gallon and remained there, Americans have cranked up their purchases of light trucks into record territory. … [Read more...]
Is Your Apple Computer Safe from Hackers?
Malware attacks on Apple computers are soaring. Fortune reports there was a 700% increase in malware instances affecting Mac OS in the fourth quarter of last year. If you’re a Mac user, you might want to look out for an increase of unwanted advertisements popping out from your web browsers. Security firm McAfee released a report this week that showed a big jump in 2016 regarding malware hitting the Mac operating system. The McAfee report said there were 460,000 malware instances affecting the Mac OS in the fourth quarter of 2016, an over 700% jump from the previous year during the same … [Read more...]
Are You Safe from Computerized Extortion and Hacking?
Cyber Security and Cyber Crime are booming right now. The internet of things offers profound promise for productivity enhancement, but the more computerized commerce becomes, the more vulnerable it is to hacking. Here The Economist reports on the realities of computer security. COMPUTER security is a contradiction in terms. Consider the past year alone: cyberthieves stole $81m from the central bank of Bangladesh; the $4.8bn takeover of Yahoo, an internet firm, by Verizon, a telecoms firm, was nearly derailed by two enormous data breaches; and Russian hackers interfered in the American … [Read more...]
Fed Finally Admits to Mistakes
Janet Yellen takes the oath of office, administered by Governor Daniel Tarullo, on March 5, 2014. In a farewell speech, the outgoing head of regulation at the Fed, Dan Tarullo, finally copped to damaging impact the Volcker rule has had on market functioning. The Volcker rule was intended to ban proprietary trading at commercial banks, but the rule was written so poorly that it has paralyzed banks from making markets in many fixed income instruments. The FT reports The Fed’s top bank supervisor leaves on Wednesday following eight years in which he earned a reputation as a tough enforcer … [Read more...]
Is the Auto Market Signaling a Peak in Growth?
U.S. auto sales for March were reported this week and they came in below economist estimates. Our chart below has a decidedly toppy look, highlighting the challenge the incoming administration faces in in accelerating economic growth. While the mainstream economic establishment will argue that expansions don’t die of old age, a satiated auto consumer certainly isn’t going to fuel an acceleration in growth. Keep an eye on the auto market. A continued drop in auto sales could foretell a broader weakening in the economy. … [Read more...]
Bubble Stocks Dominate the First Quarter
Stocks overall had a strong first quarter, with the S&P 500 gaining 6%, but it is the FANG stocks and shares of similar companies that performed best over the last three months. In the chart below we show the YTD performance of the NYSE composite index relative to the Young Research Bubble Basket. Our bubble basket is an equally weighted index of Facebook, Amazon, Apple, Netflix, Google, and Tesla. The bubble basket is up over 22% YTD compared to a 4% gain in the NYSE composite. Raging bullish sentiment among the investing public and compelling stories from many of these firms are no … [Read more...]
This is Why You Buy Companies in Strong Competitive Positions
Imagination Technologies shares plunged as much as 69% in London trading today. Imagination Tech develops and licenses silicon and software intellectual property for system-on-chip devices. Shares are down on news that Apple decided to cease using the company’s graphics technology for new products including phones, tablets, and watches in 15 months to 2 years. Why did the stock crater so much on the loss of a single customer? Apple accounts for about half of Imagination’s revenue. At Young Research, we favor durable businesses with strong competitive positions. That isn’t am easily … [Read more...]
Is The Trump Boom Already Over?
President Trump's victory in November set off a monster rally in big stocks, small stocks, stocks with high tax rates, and infrastructure stocks among others. It also led to a sell-off in sectors that were perceived losers from a Trump victory. But as the WSJ explains in a power-packed chart (below), the Trump trade appears to be fading. What's the takeaway for you? Markets, and the investors who make up those markets, have a tendency of over- and under-reacting to news. … [Read more...]
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