Most seasoned investors have long suspected that Wall Street research is compromised. Wall Street is not in the research business. Wall Street’s big banks are in the business of distributing securities. The “research” departments at banks are best viewed as branches of their marketing departments. Sell recommendations are rare from the big brokerage houses because they are bad for business. Corporations don’t hire banks to issue stock or bonds if the bank has a sell rating on the company’s shares. If you are still relying on Wall Street’s buy and sell recommendations to manage your … [Read more...]
Housing Slowdown: The Explanation You Haven’t Heard
There have been many explanations of the apparent slowdown in the housing market over recent months. If you haven’t been following the news on housing, new home sales fell 14% last month and have stagnated since early 2013. Existing home sales also dipped in March and on a seasonally adjusted basis they are down nearly 15% since July of last year. The Federal Reserve says it must be higher mortgage rates that have dented housing demand. Others attribute the softness in housing to demographic factors. And some think falling demand can be explained by harsh winter weather. While … [Read more...]
A Surprising Inflation Forecast
In a speech at the New York Economics club on Wednesday, Fed Chairwoman Janet Yellen gave a speech on monetary policy that signaled her easy money bias is alive and well. After six years of zero percent interest rates and with trillions sloshing around the financial system, Mrs. Yellen handicaps the chances of too high inflation as significantly below the chances of persistently low inflation. Mrs. Yellen’s comments echoed the comments of another economist that is ostensibly in the know, Christine Lagarde, the managing director of the International Monetary Fund (IMF). At the IMF’s spring … [Read more...]
This Can’t End Well
Empty Chinese city. Bob Davis and Esther Fung report on the worrying glut of vacant property in China’s third and fourth tier cities. In big international cities like Beijing and Shanghai, prices continue to rise. But evidence is mounting that in dozens of third- and fourth-tier Chinese cities rarely visited by foreigners, overbuilding is out of control and a major property-market slowdown is now under way. The 200 or so Chinese cities with populations ranging from 500,000 to several million account for 70% of the country's residential-property sales. In many of these cities, developers … [Read more...]
Top Gold Mining Stocks for Long-term Profit
Although the stock market is basically flat YTD, there is rampant speculation bubbling under the surface. The bubble conditions in the stock market are evident in the flood of junk IPOs the investment banks are unloading on the public, the ridiculous valuations of the social networking stocks, the bidding wars for start-ups without a viable business plan, and the massive buildup in margin debt. The speculative conditions in the market are best captured by the ratio of the NASDAQ to the blue-chip Dow Jones Industrial Average. When NASDAQ stocks are beating the blue-chips by such a large … [Read more...]
China’s Deception
According to official statistics, China’s economy has grown at an average rate of about 7.5% in recent years. But PhD Copper says something has gone awry with the Middle Kingdom’s command style economic model. China is the world’s largest consumer of copper. If Copper prices are plummeting, the odds are China has something to do with it. The red flag that copper prices are sending on the Chinese economy is also being confirmed by the weakness in the Shanghai Composite Index. The performance of Chinese stock prices don’t seem to correlate with robust economic growth. … [Read more...]
Is Tesla a Buy?
If you've been following the financial headlines this week you no doubt caught wind of a major upward spike in shares of Tesla Motors. Tesla has been one of the hottest stocks on the market over the last year. It is a bubble-lover’s bubble stock. While the S&P 500 has gained over 30% over the last twelve months, Tesla is up over 600%. The catalyst for the spike in Tesla stock earlier this week was an upgrade from Adam Jonas, the Morgan Stanley analyst covering the company. Mr. Jonas decided that Tesla wasn't worth the $153 per share he had estimated only a few weeks prior, but $320 … [Read more...]
Can Your Portfolio Take a 50% Loss?
It's impossible to have it all ways. In order to craft an investment portfolio that can act as an all-weather armadillo, you must be willing to forgo potentially substantial upside rewards to balance against the horror of a downside wipeout. If you are retired or saving for retirement in the not-too-distant future, you can easily get a knot in your stomach when you look at the basic math of downside portfolio protection. By example, when you lose 50% on an investment, you must make 100% the next trip to the plate just to get back even. And that's without considering the negative drag of … [Read more...]
The Hidden Good News on the Labor Market
On February 15, Barron’s ran what many economists (especially those at the Federal Reserve) would consider a provocative piece on the labor market. Barron’s reporter Kopin Tan points out for readers that the labor market may be tighter than many economists are presuming. At Young Research we’ve long held the view that a meaningful portion of the high unemployment rate is structural. Structural unemployment is a problem, but not one that can be remedied with short-term stimulus. If you are a Barron’s subscriber the article is well worth a thorough read. Below are the highlights with the chart … [Read more...]
Fed Warns of Dangerous Markets
In a study that could only be sanctioned by the independent (read unaccountable) Federal Reserve, the astute researchers at the Fed Bank of Chicago have come to the profound conclusion that faster and less transparent markets (aka high-frequency trading) pose dangers that aren’t properly appreciated. The investing public recognized the dubious role of high frequency trading about 2 hours after the 2010 flash crash. Leave it to the Fed to slam the barn door long after the horse has bolted. Bloomberg reports: Faster and less transparent markets pose risks that require more study, according … [Read more...]
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