A recent analysis by Goldman Sachs says the last time valuations were so high for so many parts of the market-including stocks, bonds and credit-was 1900. That figure should be startling to anyone invested today looking for return tomorrow. Recently I wrote to you about Jack Bogle and his predictions of 4% returns for some time. Even those may be too optimistic in the future reality painted by Goldman. Bloomberg reports: A prolonged bull market across stocks, bonds and credit has left a measure of average valuation at the highest since 1900, a condition that at some point is going to … [Read more...]
Are Telecoms Doing Better than They Seem?
Jack Hough writes in Barron's that there's more than meets the eye to telecom performance. Verizon Communications shares have been laid low by the Great Wireless Price War of 2017. But how many of its customers feel as though service has suddenly gotten cheap? Not many, we’d wager. The truth is, cellular competition this year has been little different than before, apart from some statistical quirks that made it appear as if the bottom were falling out of the market this past spring. If anything, a long price war is now easing, not worsening. For the third quarter, Verizon reported its … [Read more...]
YWMF Bull and Bear Portfolio Update 11.22.2017
About two months in, how is my Short-term bull-bear model performing? I couldn’t be happier. The bull-bear model has made almost 8.8% on the longs and lost only 6.4% on the shorts. If you started with $90,000 in capital and invested $10,000 in each of the long positions and sold short $10,000 of the three short positions, you are sitting on a gain of 6.4% in only two months. The Dow is up 5.6% over the same time-period. So six of one, half dozen of the other, right? Not exactly, a 6.4% return in the bull-bear portfolio was achieved with only two-thirds of the stock market exposure … [Read more...]
Bogle: What to Expect for Stocks in the Coming Decade
In a recent interview with Morningstar's Christine Benz, Jack Bogle outlined his views of return possibilities for stocks and fixed income over the next decade. Here's what he had to say about equities: My reasonable expectations for the coming decade--as in my new book, The Little Book of Common Sense Investing, 10th anniversary edition just coming out--I'm pretty conservative. I look at the sources of returns, that's all I do, and the fact that other people don't do it that way doesn't bother me in the slightest. I look at investment return and that's today's dividend yield, which is less … [Read more...]
Wal-Mart Shares Soar
Wal-Mart shares soared yesterday (up 10.9%) after the company reported its best sales in years. Sales at existing stores rose 2.7% in the latest quarter—the 13th consecutive quarter of gains and the fastest since May 2009. Wal-Mart is making an aggressive push online. Online sales are up 50% over the last year. The WSJ has more. The world’s biggest retailer posted its strongest quarterly U.S. sales growth in nearly a decade Thursday, boosted by a big jump in e-commerce and strong store traffic at a time when many traditional retailers are struggling to keep their business … [Read more...]
Are Stocks Cheap Because Interest Rates Are Low?
For the third time in the last 17 years, Federal Reserve researchers are out with a “this-time-is-different” research piece on asset markets. This version seeks to justify the bubble conditions in the stock market that ultra-loose monetary policy has helped foster. Titled Stock Market Valuation and the Macroeconomy, this piece concludes that even though more than a century of stock market data shows that extremes in the cyclically adjusted price-earnings ratio have signaled an overvalued stock market, today’s lower interest rates justify today’s inflated valuations. You can read the full … [Read more...]
The Dow hasn’t done this since 1945
It didn’t take much more to improve the investment climate in America than a more business-friendly resident in the White House. The Dow just put up its best post-election year return since 1945. Remarkable considering how little Trump and the GOP-led Congress have accomplished, but not so surprising when you consider that the greatest post-election year return in Dow history came while Calvin Coolidge was president. Coolidge was a hands off, business friendly president. He once famously said “The chief business of the American people is business.” MarketWatch has more. … [Read more...]
Pfizer Prepares Sale of Consumer Health Business
In November, Pfizer will begin an auction process for its consumer health business, which could sell for $15 billion. The business owns great brands like Chapstick, Centrum and Advil. A number of companies have already expressed interest. Reuters reporters Pamela Barbaglia, Martinne Geller, and Ben Hirschler write: Several global companies, including GlaxoSmithKline and Reckitt Benckiser, have expressed interest in bidding for the unit, which had sales of about $3.4 billion in 2016. The prospective sale, which is being led by Centerview Partners, Guggenheim Securities and Morgan Stanley, … [Read more...]
Where to Find Opportunity in a Follow the Leader Market
At Young’s World Money Forecast a few weeks back Dick wrote, “What we are looking at in 2017 is a “follow the leader” momentum based market move completely untethered from the long term anchor of dependable cash flow for shareholders.” That was no joke. The chart below shows the difference in the annual return of the MSCI Momentum Index (follow the leader index) and the Russell 1000 Value Index (2017 return is YTD). This is only the third time in almost four decades that momentum has performed this much better than value. The only other occasions when a “follow the leader” strategy worked … [Read more...]
The Bears have Punched Themselves Out
You are investing through what has become the third longest bull market in history. Over recent months it has also been one of the calmest markets on record. The first chart in this post by James Mackintosh shows the percentage of newsletter writers who are bullish versus those who are bearish. Bull-bear sentiment is often used as a contrary indicator. The greater the percentage of bulls, the greater the likelihood the market will fall is the thinking. After more than eight years of a relentless bull market, most of the bears seem to have punched themselves out. … [Read more...]
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