Have heard this from your broker or advisor? “The stock market is a discounting mechanism.” “That’s factored into the price.” “Investors know about that risk, so it is in the price.” I have been guilty of this myself in the past, but it is a poor use of language. It can misguide and confuse those who aren’t deeply familiar with financial markets. It is of course true that financial markets are a discounting mechanism, but asset prices only discount the risk of future events. They never fully discount the event until it happens. So if your broker tells you some future event is discounted in … [Read more...]
Dot Plot Confusion
Did the Fed really get more dovish at its last meeting? St. Louis Fed President James Bullard explains that market participants may have misinterpreted the Fed’s view on the economy based on its interest rate projections. The Fed should lose the dot plots and give us its base case projections each quarter. … [Read more...]
Moving the Goal Posts
The Federal Reserve met yesterday and Chair Yellen held a press conference to announce the results of what America’s monetary politburo decided. As was widely expected, Yellen & Co., dropped language about being patient on hiking interest rates. The implication is that the Fed can now hike rates at any meeting. But don’t get too excited. In an apparent effort to keep Goldman flush, and to avoid another spasm in interest markets as occurred during the so-called taper tantrum in 2013, Yellen & Co. struck a much more dovish tone on the economy and rates. The Fed downgraded its forecast … [Read more...]
Deflation “Crisis”: How Will it End?
Unemployed men queued outside a depression soup kitchen opened in Chicago by Al Capone. The Bank for International Settlements, or the “central bankers’ central bank,” is out with an important new study on deflation. Economists’ obsession with deflation and the new made-up problem of “low-flation” (inflation below the central bank’s target) has the world’s central bankers flooding the global financial system with liquidity in an effort to turn the tide. Sweden’s central bank was the latest to pump more liquidity into its economy by further reducing its policy rate into negative territory … [Read more...]
Buying Panic in the Board Room
Wondering why stocks rose the most in over three years in February? Bloomberg reports that $104 billion in repurchases were announced last month—the most since TrimTabs Investment Research began tracking the data in 1995. You can read the full story here. The highlights are below. Even with 10-year Treasury yields holding below 2.1 percent, economic growth trailing forecasts and earnings estimates deteriorating, the stock market snapped back last month as companies announced an average of more than $5 billion in buybacks each day. That’s enough to cover about 2 percent of the value of shares … [Read more...]
Blood-Letters: The Intellectually Sophisticated?
Wellington Denahan, the Chairman and CEO of Annaly Capital, a Mortgage REIT, ripped into the global Central Banking Cabal on her company’s conference call yesterday. It is well worth a read. The video below on Janet Yellen’s Senate hearing on Tuesday is also necessary viewing for all investors, but especially those unsure of the costs and risks of Fed policy. Wellington’s text and the Yellen video provide compelling perspective on just how distorted the global financial system has become. Wellington J. Denahan: Thank you, Willa. Good morning and, again, welcome to Annaly Capital's … [Read more...]
Market Cap Indicator: Snapchat Edition
You can learn a lot about the valuation of a company by comparing it to the valuation of other companies. That is especially true in the land of social media stocks where revenues and earnings sometimes don’t exist. Snapchat, a social-media startup that only recently started generating revenue is valued at $19 billion. Don’t know what Snapchat does? Me either. According to Quartz, Snapchat allows users to share disappearing photos. Hmm…I guess that qualifies as innovation today. The table below comes from Quartz. It compares Snapchat’s market value to companies with similar market … [Read more...]
Trading Short-term Pleasure for Long-term Pain
Should you take investment advice from the mainstream internet (if I can coin a phrase)? Bloomberg posted an article on their website yesterday with the following headline: “Goldman Sachs Sees More Value Outside of ‘Stretched’ U.S. Stocks” Bearish views from Wall Street’s eternally bullish big banks are always of interest to me. Bearish views from Wall Street strategists are few and far between. Why? Being bearish on Wall Street is like opposing motherhood and apple pie. The big banks make more money when their clients are bullish. When investors are bearish fewer deals get done, fewer … [Read more...]
The Most Bullish Economic Indicator Nobody is Talking About
Household formation in the U.S. is soaring to heights not seen since the economic recovery began. According to the Census Bureau, over the last 12 months, almost 2 million new households were formed in the U.S. Rising household formation is positive for the housing market and the economy. A rising number of households signals greater demand for housing units. The broader economy should also get a kick from rising household formation as newly formed households spend to furnish their homes and stock them with consumables. … [Read more...]
How Much can you Lose in the Stock Market?
If your portfolio isn't properly diversified, the answer is a lot, but even if you craft a diversified equity portfolio your losses can be substantial. How substantial? Most would agree than an S&P 500 index fund qualifies as a diversified portfolio, so let’s look at the maximum losses sustained on an investment in the S&P 500. In the chart below, I show the drawdowns of the S&P 500 (not counting dividends) over the last 65 years. Drawdown sounds a bit jargony for a Friday. What does it mean? A drawdown is simply the maximum loss on a portfolio or an index from the prior … [Read more...]
- « Previous Page
- 1
- …
- 178
- 179
- 180
- 181
- 182
- …
- 218
- Next Page »