Greece is back on the front pages of the financial press. Why is a country whose GDP is a rounding error in the $75 trillion global economy making headlines? Even at 175% of GDP, Greece’s outstanding government debt is about one-half of one percent of the world’s total. Greece made its way back into the headlines when its parliament failed to elect a new President in December, which resulted in snap elections. The snap elections were held on January 25th and the victor was the left-wing anti-austerity party Syriza, led by Alexis Tsipras (pronounced sipras). Tsipras campaigned on a … [Read more...]
40 Years is a Helluva Long-time
Cashing in on the Fed’s zero percent interest rates while the going is still good, Microsoft is issuing $10.75 billion in bonds—an increase from an originally planned $7 billion offering. With the world’s major central banks holding or promising to buy an inordinate amount of the world’s safe debt, the supply of high-grade bonds is falling short of demand. Microsoft is one of the few remaining triple-A-rated borrowers around, so investors have jumped all over the offering. Reuters has reported investor orders of $37 billion. The offering is broken into seven tranches ranging from … [Read more...]
What are They Waiting For?
The January jobs numbers were released this morning. The monthly gain in payroll employment topped expectations by a modest amount, but there were 147,000 more job gains in November & December than originally reported. The three month moving average of private monthly payroll gains is now at a post recovery high and higher than at any point during the last economic expansion. The last time private payrolls were increasing as fast as they are today was November of 1997—over 17 years ago. Wage growth also picked up last month after falling in December. Average hourly earnings are … [Read more...]
The Brady-Belichick Curse
This falls under the heading of correlation does note equal causation, but so what. It gives me a reason to write about football—and to put up a Dick Butkus video. If you are a Patriots fan, I have some bad news for you. Your team is in the Super Bowl, but that probably means your portfolio is headed into the tank. When the Patriots play in the Super bowl with Brady as the Quarterback and Belichick as the head coach, the stock market goes on to have a stinker of a year. Check out the numbers in the table below. Brady-Belichick Super Bowl appearances are a curse for investors. In the … [Read more...]
A Dismal Forecast
“Who are you gonna believe, me or your own lying eyes” Groucho Marx From Bloomberg on October 23, 2014: Caterpillar Climbs After Raising Forecast on Construction “Caterpillar Inc., the largest construction-equipment maker, climbed the most in more than eight months after topping analysts’ profit estimates for the third quarter and raising its full-year earnings forecast.” Fast forward three months. Yesterday, Caterpillar reported fourth quarter results that disappointed Wall Street. The company lowered its forecast for 2015 on the back of falling oil prices. CEO Doug Oberhelman said … [Read more...]
The Cure for Oil Prices
There is a popular axiom in commodity markets that says the cure for high prices is high prices. The opposite is also true, and more relevant today. The cure for low commodity prices is low prices. In the oil market, low prices are already beginning to cure low prices. How? Drilling activity is plummeting as seen in my oil rig count chart. At oil prices below $50 per barrel, some U.S. oil wells aren’t profitable so companies are slashing capital budgets and reining in drilling activity. Lower investment and drilling should ultimately lead to lower supply and higher prices. … [Read more...]
A Rising Tide Lifts all….er… Index Boats
Before you give your investment manager an ear full for trailing the S&P 500 last year, check out this article from Barron’s. Lots of useful insights that can help you stay the course and avoid the emotionally charged decisions that often sabotage long-term portfolio performance. It is no secret that index funds have gained in popularity in recent years. The proliferation of ETFs has been a big boon for the index fund community. According to the Investment Company Institute, in the first 11 months of 2014, investors pulled $96 billion from active U.S. equity funds and purchased over … [Read more...]
Is a 28% Investment Tax in Your Future?
I didn't catch President Obama’s state of the Union Address this week as I am sure many of you didn't either. There more pressing issues to address (like scrubbing the grout on my kitchen floor) than listening to a lame duck president boxed in on policy by an opposition Congress. I read about Obama’s speech though. His message was predictable—tax more and spend more. But the president did catch my attention with his proposal to raise the capital gains tax rate. He wants to hike the capital gains rate to 28%, as if 24% isn't high enough already. Raising the capital gains tax rate is … [Read more...]
Obama’s Motives for Raising the Capital Gains Tax
All you need to know about Obama’s motives for wanting to raise the capital gains tax in a one minute video. This is from the 2008 campaign. Does it sound as half-baked to you as it does to me? … [Read more...]
Swiss Franc Soars
The Swiss National Bank announced today that it was dropping its three year-long peg to the euro. The franc soared on the news gaining as much as 30% against the euro and as much as 25% against the dollar before settling in with about a 15% gain against the USD. The revaluation was a punishing blow to Swiss exporters. The Swiss stock market is down about 8.5% on the news, but in USD terms it is up better than 5%. … [Read more...]
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