Elizabeth Warren's Tax Warning - WSJ Argentina Shifts Right - The Guardian Why Housing Hasn't Lifted the Economy Much - WSJ Reining in a Sprawling Federal Reserve - WSJ The Downside of Stock Buybacks - Reuters The Best Year-end Tax Moves - Fortune … [Read more...]
Smart Money Bailing on Stocks
What’s the smart money been doing with their money this year? Other than losing a lot of it (see hedge fund hotels Sun Edison and Valeant Pharmaceuticals for example), they are net sellers of U.S. stocks. According to the latest from Bank of America Merrill Lynch, BofA’s institutional and hedge fund clients, the so-called smart money, have yanked a net $24 billion out of U.S. stocks YTD. Who is buying what they are selling? Retail investors are net buyers of U.S. stocks for the first time in seven years, but if you exclude ETFs, they too are net sellers (I’ll come back to this in a minute). … [Read more...]
Stock Market Beauty Contest: Part II
You know from Part I that this stock market is a beauty contest. Five companies account for two-thirds of the returns year-to-date for the S&P 500 Index. They are: Apple, Google, Microsoft, Facebook, and Amazon. It has been my experience that investors make the grave mistake of confusing index investing with diversification. Owning the S&P 500 does not mean you’re diversified. Owning the S&P 500 means you own a market-cap weighted index of stocks where the companies with the largest market-cap have the most influence over its direction. Like sheep heading to slaughter, … [Read more...]
What is Amazon Stock Really Worth?
CNBC: Amazon is now the most expensive stock in the S&P. Discussing a fair price on Amazon stock, with Aswath Damodaran, Professor at NYU Stern School. … [Read more...]
Danger: 2 Stocks You’ll Be Glad You Missed
The Wall Street Journal has been chock-full of teachable moments lately. Last week we pointed readers to two pieces that highlighted the risk of investing in low-barrier to entry businesses. This week the journal brings us two pieces that should make it crystal clear why diversification is so vital to your long-term investment success. The subject of both WSJ articles is activist investors. Activist investors often take out-sized positions in stocks and then agitate the board for change to increase shareholder value. Casablanca is an activist hedge fund that took a 5.2% stake in Cliffs … [Read more...]
Stock Market Beauty Contest
This stock market is like a beauty contest where the recognizable names get all the attention. So far this year Apple, Google, and Microsoft account for about a third of the return for the S&P 500. Worse yet, Apple, Google, Microsoft, Facebook and Amazon account for about two-thirds of the return for the S&P 500. And how about all the attention from Wall Street? According to Bloomberg the number of analyst recommendations on each of these five stocks is: Apple 51, Google 50, Microsoft 37, Facebook 53, and Amazon 42. The rest of the stocks in the S&P 500 have an average of only 23 … [Read more...]
The Prudent Strategy for Building Wealth
We’ve written often on this site and in our monthly strategy report about the speculative nature of the stock market rally in recent years and most especially in recent months. The leading lights of the stock market year-to-date are companies trading at levels that leave no margin of safety for the serious long-term investor. Here, I am talking about the Netflix, Amazon, Facebook, and Googles of the world. These four companies plus Apple are responsible for over 75% of the return on the S&P 500 year-to-date. Fund managers who eschew these stocks are taking serious career risk, but it is … [Read more...]
This Company can Turn $1 into $460
As the late great Yogi Berra might say of this market, “It’s like De Ja vu all over again.” More stimulus from the global central banking cabal (ECB yesterday, Bank of China today, BOJ next week) and the fab five (Facebook, Amazon, Google, Apple, Netflix) are again driving the market to ever higher levels on the back of quarterly earnings reports. Sounds like a replay of, well, anytime over the last three years. The gains these stocks are making on what are regular earnings surprises (h/t analyst enablers) is confounding to the serious long-term investor. Amazon is poised to add $55 per … [Read more...]
Is this a Sucker’s Rally?
The chart below compares the spread (yield difference with treasuries) of the Merrill Lynch High-Yield Master Index to the S&P 500. The vertical axis for the Merrill Lynch spread is reversed to show falling spreads as rising (a positive). High-yield spreads and stock prices tend to move in lock-step, but tops and bottoms in spreads tend to lead tops and bottoms in stocks. The recent rally in the S&P 500 has not been confirmed by the performance in high-yield bonds. High yield bonds hit a lower low in September and their rally has now only brought spreads back to the level … [Read more...]
Biggest Stock Market Rally in Almost Four Years
The S&P capped its biggest 8-day percentage gain in almost four years yesterday—rising more than 7%. The catalyst for yesterday’s gains was the minutes of the latest Federal Reserve meeting. Investors decided the meeting minutes were dovish (they weren’t, they were neutral at best) and bid up shares in a fast and furious late day rally. … [Read more...]
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