While the melt-up in equity prices has likely given some investors the impression that stocks are impervious to risk today, one risk that will surely get the markets attention if it materializes is the risk of a euro breakup. MarketWatch has the story. First there were “Grexit” fears, then the “Brexit” shock and now investors have started to brace for “Frexit”. The latest of the exit scenarios to spook financial markets, the risk of France leaving the eurozone has heightened in recent days after far-right candidate Marine Le Pen last weekend launched her presidential campaign with a … [Read more...]
Portfolio Strategy: When Hope and Reality Collide
Since the election, markets have seemed to trade on hope and improved sentiment the new administration will enact a pro-growth agenda that will be bullish for American business. The U.S. stock market is up 9% since the election and some sectors which would presumably benefit the most from President Trump’s proposed policies are up much more. But now that Trump and many of his key cabinet members have been sworn in, the honeymoon is nearing its end. Markets will no longer be able to trade on the hope of the best possible policy outcome, but on the reality of what can actually get done. That … [Read more...]
This is a Detailed Account of Why You Can’t Trust Brokerage Research
The Wall Street Journal has a must-read story that lays out in detail why brokerage research must not be relied upon. Brokers are first and foremost in the business of distributing securities. As you will read here, the research departments are a part of the package of gaining underwriting business. The more favorable the opinion on an issuer the more money business for the bank. On the Sunday after Donald Trump won the U.S. presidential election, sparking turmoil in emerging markets, J.P. Morgan Chase & Co. downgraded Indonesia’s stock market. The move set off a chain reaction that … [Read more...]
Will Soaring Smallcap Valuations Now Collapse After Euphoria?
After the election of Donald Trump, U.S. small-cap stocks saw their prices explode upward on the hopes that tax and regulatory reform would boost performance. But can the hype match reality, and if it does, has all the opportunity already been priced in? Robin Wigglesworth writes in the FT: US small stocks guru Henry Ellenbogen is concerned that the ferocious post-election equity rally could unravel unless the economy accelerates sharply to justify the frothy valuations, warning that most gains were powered by fickle inflows into exchange traded funds. So-called “small-caps” — or smaller … [Read more...]
Unstoppable New Killer Bacteria Growing on Chinese Farms?
The FT reports that bacteria resistant to the so-called "last resort" anti-biotic, colistin, are growing on farms in China. In the absence of new medical innovations, these bacteria could become unstoppable. The 2015 discovery in China of bacteria with mcr-1, the colistin resistance gene, sparked fears over the future of human health. Margaret Chan, head of the World Health Organization, said last year that medicine risked “going back to the dark ages” without action to spur development of new antibiotics and to preserve the dwindling numbers that remain effective. Since the discovery in … [Read more...]
A Canary in the Commercial Real Estate Coal Mine?
Commercial real estate is a famously cyclical business. Booms and busts are a part of the landscape. Eight years of near-zero interest rates has resulted in nothing but boom for the sector. Today the WSJ reports some real-estate investors are reducing their holdings and getting more selective about deals. Could this be an early-warning signal of the next bust? Some prominent real-estate investors are reducing their holdings and getting more selective about new deals, in a sign that the eight-year bull market for U.S. commercial property is coming to a close. Asset managers at pension funds … [Read more...]
China Reserves Fall Below $3T for the First Time In Years
Despite China's draconian policies that aim to maintain high foreign currency reserves, the country is leaking wealth fast as citizens rush to convert their yuan into foreign currency. Bloomberg reports: Key Points Reserves fell $12.3 billion to $2.998 trillion, the People’s Bank of China said Tuesday That compares with the $3.004 trillion estimate in a Bloomberg survey of economists The central bank’s intervention in foreign-exchange markets drove the drop, as did seasonal factors such as high demand for other currencies during the week-long Lunar New Year holiday, the State … [Read more...]
This is a $100 billion Dividend Opportunity
If there is one sector of the stock market that has been damaged most by burdensome regulation and ultra-loose monetary policy over the last decade it is the Financial sector. Here the WSJ outlines the potential for the six biggest U.S. banks to return more than $100 billion to investors if Trump succeeds in a push to loosen bank regulation. The six biggest U.S. banks could potentially return more than $100 billion in capital to investors over time through dividends and share buybacks if the Trump administration succeeds in a push to loosen bank regulation. President Donald Trump on Friday … [Read more...]
Are you Missing an Opportunity in European Stocks?
After a strong rally following the election, U.S. stocks are trading near all-time highs and at some of their richest valuations on record. European shares have also rallied, but trade at lower valuations on earnings that are below their prior peak. The FT explains the opportunity that some investors see in Europe. If you aren’t at least looking for opportunities in foreign markets, you could be missing a compelling opportunity. “American investors have pretty much given up on Europe,” says Joseph Oughourlian, founder of the $1.5bn activist hedge fund Amber Capital. “Europe is seen as the big … [Read more...]
Facebook Fatigue: Tired Network Attempting Pivot to Video
Revenue growth is decelerating at Facebook. The company has saturated most developed markets, and to continue increasing its active user base, the social network must push further into low-income regions with fewer dollars for advertising. To stem the tide, Facebook wants to forge into the already crowded video business in an attempt to steal ad dollars from TV and YouTube!. Miriam Gottfried reports at The Wall Street Journal: The trend explains why the company, with its shares fetching a still-rich 32 times 2017 earnings estimates, is pushing aggressively into video as the next frontier. … [Read more...]
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