The proliferation of the no-thought required approach to investing (index investment) along with other quantitative and algorithmic based strategies has created some disturbing cross-currents for the dwindling group of fundamental investors. Here J.P. Morgan (via Zerohedge) estimates that only 10% of trading volume originates from fundamental discretionary investors. That is a truly stunning statistic If 90% of the volume in stocks is driven by value-agnostic investors, the obvious implication that we see is bigger booms and much bigger busts that are far removed from underlying … [Read more...]
Bill Gross Sounds Scared of This Market: Should You be Too?
Janus Global Unconstrained Bond Fund manager and market guru, Bill Gross, sounds scared of today's stock market. At the Bloomberg Invest New York summit on Wednesday, Gross said "If there’s a common factor it’s the expansion of credit. And the credit that’s being generated by central banks. Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced." … [Read more...]
Portfolio Strategy: Is This What is Driving the Asset Bubble?
Here’ s an interesting chart from Bespoke Investments that may go a long way toward explaining the exuberance among some sectors of the stock market today (think FAANG type stocks). This shows the share of Millennials who say they are taking more or much more risk with their investment assets now compared to last year. The Millennials are of course too young to have any battle scars from the dotcom bust. They may not appreciate the damage that can be done in the investment markets when valuations reach pie-in-the sky levels. If the history of markets is any guide, it looks like … [Read more...]
Will Germany’s Auto Makers Be Pulled Apart by Activist Investors?
Germany's equity market has traditionally been resistant to pressures from activist investors. But recently the country's big corporations are feeling some pressure to maximize stock prices. Some investors are suggesting that big German auto companies spin out their truck manufacturing businesses, which appear undervalued compared to pure-play competitors. Stephen Wilmot writes at The Wall Street Journal: It is the classic conglomerate problem: Daimler Trucks, which dominates U.S. highways with the Freightliner brand, is trapped within the Daimler automotive empire. The fearsome challenges … [Read more...]
They Call This Investing?
The FT reports how tech stocks have electrified the stock market, overtaking the so-called Trump trade. The performance has been driven by FANG stocks. Mutual funds that have been lagging for years are now jumping on the bandwagon to try to outperform the S&P 500. If you have been active in the markets for more than the bull phase of this market cycle, you already know how this ends. Emphasis is mine. The US stock market climbed another 1.4 per cent last week to close at a fresh record high but the tech industry has been the rally’s dominant fuel, particularly the “FAANGtastic five” — … [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...]
When Will this Bull Market End? Because it Will End
Here, "stocks are advanced on hopes and expectations” - Robert Rhea When will this bull market end? Because it will end. The market is simply a collection of people’s emotions. How stable can that be? Over the weekend I re-read The Dow Theory Today by the late Richard Russell. It’s a collection of twelve articles which were written and published in Barron’s during the period of December, 1958, through December, 1960. This is not a history lesson because the articles were written, much like writing about today’s markets, while taking on live fire. The future was not known. That’s the life … [Read more...]
Apple’s Headquarters Reminds Me of this Stock
Do you remember Polaroid? It was a "Nifty-Fifty" stock back in the 70s. It constructed a huge headquarters building to signify its greatness. Below are some pictures of just how run down Polaroid's Waltham, MA location was before demolition in 2008. Apple, Facebook, Amazon, and Google are also putting up structures of their own. How will this movie end? I’ll point out that these four companies, plus Microsoft, are responsible for a huge chunk of this year’s advance in the markets, especially NASDAQ. … [Read more...]
Portfolio Strategy: Do Trees Grow to the Sky?
Speculation seems to be alive and well in the stock market. Young Research’s Bubble Basket index is up 32% YTD. Meanwhile, high quality stocks represented here by the Nasdaq Dividend Achievers Index, or if you prefer the NYSE composite, are up about 5%. Did the value of the six businesses in Young’s Bubble Basket really increase by over 32% in just four months? Hard to see how this ends well for those who still believe trees can grow to the sky. Retired investors and those soon to be retired are still best served by quality and balance. … [Read more...]
Calculating Shareholder Yield
To calculate the shareholder yield, pick up the annual report for a company you are interested in (preferably a non-financial company), and turn to the Statement of Cash Flows. In the Statement of Cash Flows, move down to the section labeled - Cash Flows from Financing Activities. For most companies, this is the last section of the Cash Flow Statement. To calculate shareholder yield, you have to determine the total amount of dividends that were paid to shareholders, the net amount of stock that was repurchased, and the net amount of debt that was repaid. Before you get started, remember you … [Read more...]
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