The average daily movement in stocks during the first quarter of 2017 was the lowest since 1965. What did stocks do back in 1965? Basically nothing for the next 16 years or, an entire retirement for many. That’s why you need to get paid to be in this market in the form of dividends. But how do you know which companies have the safest, most sacred dividends, and which companies look out for you, the investor? Allow me to help. My email address is ejsmith@youngresearch.com … [Read more...]
Bubble Stocks Dominate the First Quarter
Stocks overall had a strong first quarter, with the S&P 500 gaining 6%, but it is the FANG stocks and shares of similar companies that performed best over the last three months. In the chart below we show the YTD performance of the NYSE composite index relative to the Young Research Bubble Basket. Our bubble basket is an equally weighted index of Facebook, Amazon, Apple, Netflix, Google, and Tesla. The bubble basket is up over 22% YTD compared to a 4% gain in the NYSE composite. Raging bullish sentiment among the investing public and compelling stories from many of these firms are no … [Read more...]
Record Harvests Hurting Prices of Soybeans and other Crops
The USDA expects American farmers to plant more acres of soybeans this year than any in history. The glut of soybean stockpiles and expectations for another bumper year are driving prices to six month lows (which you can see on my chart below). Corn and wheat are facing similar situations with large inventories sitting in storage. Farmers are trying to cut acreage, but not at a rate fast enough to affect stockpiles. The WSJ reports: Soybean futures closed near a six-month low on Friday after the U.S. Department of Agriculture forecast that nearly 90 million acres of the crop will be … [Read more...]
Could Inflation Be the Big Surprise of 2017?
Inflation, or measured inflation for those who take a more skeptical view of the accuracy of the government’s inflation estimates, has been subdued. Core inflation which strips out food and energy is running at 2.20%--slightly ahead of the Fed’s inflation target. The subdued level of core inflation seems to have led to some complacency in the market. Bond yields and the risk premium for inflation remain near record lows. But an alternative measure of inflation that takes into account the true cost of home prices instead of the fictional owners-equivalent rent measure used by the … [Read more...]
America’s Looming Debt Problem Could Derail it All
Over the last eight years, the federal government has been on an unprecedented spending spree. Since year-end 2007, federal debt outstanding has increased by more than $10 trillion—a number so large it is hard to even wrap your mind around. But let’s try. According to the Census Bureau there are almost 125.8 million households in the United States. The $10 trillion increase in federal debt equates to almost $80,000 per household. Do you and your family feel like you’ve gotten $80,000 worth of value from the government over the last eight years? For $10 Trillion, the U.S. government … [Read more...]
Is the Auto Industry at Risk of Another Meltdown?
One of my favorite columnists, Dan Neil on the automobile bubble: But there’s a lot of paper out—over $1 trillion in outstanding automotive loans in 2016, according to the credit-score company Equifax. About 20% of auto loan originations are subprime and delinquency rates have climbed steadily. And just like risky mortgages, delinquency-prone car loans are securitized, bundled and sold as asset-backed securities (ABS), which never worked out badly for anyone, ever. Quietly, auto execs are worried sick about any contraction in auto-loan credit, but they would tear their tongue out before … [Read more...]
American Manufacturing Hit Particularly Hard Since 2000
The editors of The Wall Street Journal's Daily Shot email recently highlighted that, compared to other major manufacturing hubs in the world, manufacturing employment in the U.S. has been hit quite hard. I have recreated a chart below that the Daily Shot had featured showing that compared to other relatively free manufacturing focused economies like Germany, Japan and South Korea, employment in America's manufacturing sector has been hardest hit since 2000. The editors go on to show that despite rapid automation in both Germany and Japan compared to the U.S., they still performed … [Read more...]
The Fed Signals a Rate Hike for the First Time in 2017
Fed officials are attempting to prepare the market for a rate hike in March as best they can. They proclaimed loudly on Tuesday that March is the right time. The market is listening. On February 22nd traders pegged the chances of a March rate hike at 35%, by Tuesday night odds had risen to an 82% chance. Early morning trading on Wednesday appears to show even more confidence in a March hike. Also illustrating the market's confidence in a March hike is the movement in the 12 month Treasury bill, which is typically sensitive to expectations of Fed funds rate moves. You can see in my chart … [Read more...]
This Has Only Happened Three Other Times in the Last 117 Years
The Dow has now increased for the twelfth day in a row. Since 1900, the Dow has achieved this feat on only three other occasions—once in July of 1929, again in December of 1970, and then finally in January of 1987. The good news is that on all three occasions, the Dow went on to rally double-digits. The bad news: those gains didn’t last. Stocks crashed hard in 1929 and in 1987. The best year out of the bunch was 1970 when over the subsequent 12 months, stocks rallied and then corrected, but never fell far below their December 1970 level. A sample size of three doesn't provide a … [Read more...]
You Don’t Want to Ignore the Risk of a Euro Collapse
The melt-up in U.S. stock prices in February has been nothing short of spectacular. Of the 14 trading days this month, stocks have increased on twelve. The average increase in the S&P 500 on up-days in February has been 0.33%. A third of a percent may not sound like a big number, but if you compound that out over just 60 trading days, you are looking at a return of more than 20%. For novice investors, the relentless rise in stock prices may have led some to believe there is little risk in the market today. That would of course, be a mistake. Because while U.S. shares show few signs … [Read more...]
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