If consumers follow through with their purchase plans for major appliances, new homes, and new cars, economic growth is likely to slow significantly over coming quarters. Plans to buy a new car are at record lows and plans to buy a new home are bordering on record lows. … [Read more...]
Earn Safe Profits from Takeover Candidates
There are two strategies that can be used to profit from takeover candidates. Most investors are familiar with the strategy of investing in speculative takeover candidates. Buying takeover candidates just prior to a merger announcement can be highly rewarding. Returns of 30–50% in a matter of weeks are possible, but there is also significant risk. If not done with discipline, investing in prospective takeover candidates can be a perilous strategy. To safely profit from takeover candidates, you want to buy companies that are the target of a publicly announced merger. This is called merger … [Read more...]
90 Million Emotions Wreak Havoc
With the market in a correction and off 10% this quarter, emotions are running high. I want you to take a minute this weekend and get your bearings. Clear your head of the emotions that hinder sound analysis and get yourself on the road to the investment success you deserve. A lesson worth remembering is that, without fail, investors tend to miss out on the market’s biggest gains, getting sucked in when the big money has already been made, and suffering from its biggest losses. I know this from studying money flows, and in part thanks to the 2010 edition of the Investment Company … [Read more...]
Bear Market In Cyclical Stocks
The bull market in cyclical stocks that began in March of last year is officially over. The YRPI Early Cyclical Index is down 23% from its April 2010 high. Early cyclicals are now in a bear market. As is evident on our chart, in relative terms, stable growth stocks are surging relative to cyclicals. The YRPI Stable Growth Index has outperformed the YRPI Early Cyclical Index by 22% since late April. … [Read more...]
The Most Important Takeaway from the BP Oil Spill
The oil spill in the gulf is an economic and environmental catastrophe. BP made some serious missteps that have cost the company and gulf coast residents dearly. While tragic, there are many lessons to be learned from the spill. There will be important takeaways for everyone involved or affected by the disaster. Most obviously, the oil and gas exploration and production firms will put greater emphasis on prevention and disaster response. For investors there is one vital takeaway that must not be overlooked. Prior to the spill, BP was a global blue-chip. It was, and still is 3rd largest … [Read more...]
5 Energy Market Insights
The 2010 edition of the BP Statistical review of World energy came out this month. BP’s Statistical review has been published for 59 years. It provides data on energy consumption, production, and reserves for all of the world’s major fuels broken down by country. Any investor seriously considering investing in energy commodities or companies should not be without the BP Statistical Review. It is an invaluable resource for investors, economists, industry executives, and even government officials. I keep a copy of the report on my desk—usually buried under piles of annual reports and 10Ks. I … [Read more...]
Dow Industrials vs. Gold
In the last 115 years there have been three secular bull markets in gold versus the Dow. The current secular bull market in gold is the third. In each of the last two gold bull markets, the ratio of financial assets to gold fell to a ratio of less than three. The current ratio of the DJIA to gold is 8.3. Based on historical precedent the secular bull market in gold still has a ways to go. At the extremes, before this bull market is finished, gold could rise to over $5,000 per ounce or the Dow could fall to less than 2,500. … [Read more...]
Are Small-Cap Stocks Running Out of Steam?
Is the strength in small-cap stocks running out of steam? I’m not talking about the recent correction in small stocks, but rather the relative performance of small cap stocks versus large cap stocks over the past decade. My chart shows the ratio of small stocks as measured by the Russell 2000 index to large stocks as measured by the S&P 500. When the ratio is climbing, small stocks are outperforming large stocks, and when the reverse is true large stocks are outperforming. You can see clearly from the chart that the decade of the 1980s and 1990s was a period when large-cap stocks were in … [Read more...]
Muni Debt Trap
You know how hard it is to be retired on a fixed income these days, especially with a risk-free rate (three-month T-bills) at less than one-tenth of one percent and with an historical expansion of government almost assuredly set to increase taxes next year. Caution: You don’t want to be like other investors who are reaching for yield and snapping up municipal bonds. Investors are not paying attention to the inherent risks they are buying. That’s why your smartest income move right now may be to avoid or reduce your exposure to these so-called “high-quality” credits. Little Rhode Island may … [Read more...]
Housing Starts Look Weak
Housing starts released today came in far below consensus estimates. Government efforts to stimulate the housing market have once again failed. The federal tax credit for home buyers simply pulled demand forward. We are now seeing the giveback. … [Read more...]
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