The current bull market which started in March of 2009 is now the third longest bull market on record. I’m using the Dow as the yardstick for bull and bear markets. Bear markets are defined as a 20% drop from a prior peak. The fuel that has kept this bull running is of course the most aggressive and prolonged use of monetary stimulus in U.S., and probably world, history. How do stocks perform following historic bull markets? The chart below shows the four longest Dow bull markets on record. The table on the chart shows the subsequent ten year capital gain performance from the day prior to … [Read more...]
One More Reason You Should Avoid Index-based Bond ETFs
The index-based ETF investment craze continues to lead to distortion in financial markets. Many investors are buying funds without fully understanding the risks. The risk of large-cap equity indices has increased over recent years as a handful of the market’s most expensive shares have become such a large portion of the index. The risk of bond index ETFs has also increased. The chart below shows that the duration of the Bloomberg Barclay’s U.S. Aggregate Index has increased 20% over the last five years and 35% since 2009. Duration is a measure of interest rate risk. The higher the … [Read more...]
Net Worth to Income Exceeds Prior Bubble Highs
Here is a chart that should make the Fed uncomfortable. You are looking at the net worth of American households as a percentage of their disposable income. The three lines in the chart are the mean, and plus and minus one standard deviation. What should stand out immediately is how for five decades the ratio moved in a relatively narrow range than then soared and crashed, and then soared again and crashed. Now the ratio has soared again and it has exceeded prior highs. Part of the driver here is that growth in household liabilities has slowed from its historic path, but the biggest … [Read more...]
Why is Gold Going Up?
Typically when stock market prices are rising, the price of gold is falling. But that's not the case today. Gold prices have been trending upward since 2016, with a slight retrenchment after the election. Most of that "Trump Trench" has been eliminated as prices rise again. Gold is holding near new 2017 highs. David Hodari writes at The Wall Street Journal: Gold’s rally paused Wednesday, after hitting fresh 2017 highs on Tuesday on the back of increased macroeconomic and political risk. Gold for August delivery settled down 0.3% at $1,293.20 a troy ounce on the Comex division of the New … [Read more...]
Are These Popular Funds in a Mini-Mania?
For 11 weeks straight tech focused mutual and exchange traded funds have been pulling in investor money. Since the start of 2017 the funds have gathered $8.7 billion in new investment according to BofA Merrill Lynch and EPFR Global. The tech funds are on their way to the fastest pace of growth in at least 15 years. Chris Dieterich writes at the Wall Street Journal: It’s not hard to see why big-cap tech names have been en fuego. These companies have well-known brands and dominant businesses. At the same time, middling economic growth in the U.S. has made fast profit and earnings growth harder … [Read more...]
Can Summer Save the Automakers from a Slump?
Adrienne Roberts and Mike Colias write in the Wall Street Journal that automakers are hoping a surge of summer buying will save their bottom lines from what appears to be a rapidly cooling market for automobiles. They write: Overall, auto makers sold 1.43 million vehicles in the U.S. in April, down 4.7% from a year earlier, according to Autodata Corp. Detroit is hoping its traditionally strong summer sales season will get it out of the rut. Car makers plan to offer plenty of discounts, and rely on low gasoline prices and broad economic strength. The U.S. auto industry has been on a … [Read more...]
Sell in May and Go Away? Not Vanguard GNMA
Work hard and play hard. My dad used to tell me that a lot. He still does. One year he and I drove down south to look at colleges and we stopped in Myrtle Beach to play golf. As we were eating breakfast I noticed his hair looked a little too shiny. One of the shampoo bottles in his travel kit had the sunscreen. Work and play in investing terms is called counterbalancing. Looking at the average annual return for the last ten-years it’s easy to overlook the years that can decimate a portfolio. Vanguard GNMA was up 4.36% and the S&P 500 was up 7.51% per year. But, did you know … [Read more...]
These Are the Weak Spots in the Economy
Despite strong sentiment in surveys, a stock market that won't seem to quit, and overall decent data, there are some weak parts of the economy. Two of the most concerning are the declining growth rates in automobile loans and commercial and industrial loans. … [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...]
Solar on Track for Another Record Breaking Year in Canada
The year 2016 was a record breaker for shipments of solar modules in Canada. Canadian Solar expects to see another record-breaking year in 2017. Renewables Now reporter Ivan Shumkov writes: The company expects to ship between 6.5 GW and 7 GW of solar modules this year, including some 6.17 GW recognised in revenue. This compares to the just-reported total solar module shipments for 2016 of 5.23 GW, of which 5.2 GW were recognised in revenue. Full-year revenue is projected to be between USD 4 billion and USD 4.2 billion, with 50%-60% coming from the solar module and components … [Read more...]
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