You can try this one at home. Ask any investor you know how to calculate a company’s market cap and chances are you’ll be met with a blank stare. A company’s market cap is its shares outstanding multiplied by its stock price. It amazes me how such an influential calculation is overlooked and not understood. The popular S&P 500 and Nasdaq indices are both market cap weighted yet investors don’t know what that means. The larger the market cap, the larger the influence a particular stock will have on the direction of the index. The top-10 stocks in the S&P 500 and the Nasdaq have a … [Read more...]
The Monday Melee: Volatility Spikes!
VIX Through the Roof The popular VIX index of volatility spiked upward through its two-standard deviation line last Monday, and has remained well above its mean since then. While the VIX isn't always an indicator of recession, a spike in the index is certainly worrisome for the market. VIX Wild Ride VIX Reality Check [gview file="https://www.youngresearch.com/wp-content/uploads/2015/08/TheVixRealityCheckMay10.pdf" width="600" save="0"] Quotable "Fragility is the quality of things that are vulnerable to volatility." - Nassim Nicholas Taleb "Fear tends to manifest itself much more … [Read more...]
Market Correction: Is this the New Normal?
Over the last five trading days the market has cratered by almost 11%. An 11% decline in stocks is not an out of the ordinary correction. Stock market corrections, defined as a decline of 10% or more happen about once every year. The last 10% correction in the stock market was all the way back in 2011 so we were overdue. The suddenness of this correction and the speed of the uninterrupted decline is what is uncommon and rather disturbing. Over the last seven decades, there have only been seven other occasions when stocks fell by as much as they did over the last five trading days. We … [Read more...]
Home Improvement Surges along with Housing Starts
Housing starts are nowhere near their pre-recession highs, or even their pre-recession averages, but starts are up over 153% per month from the lows of 2009. Likewise the S&P 500 Home Improvement Retail Index (made up of companies like Home Depot and Lowe's) has been surging. Home builder sentiment is also high, with the NAHB/Wells Fargo Housing Market Index rising this month to its highest level since 2005. … [Read more...]
The $18 billion Name
Here’s a head-scratcher. Google announced on Monday that it was changing its name to Alphabet and redoing its organization chart. Seriously, Alphabet? Yup, Larry Page, the company’s CEO said they chose Alphabet because “it means a collection of letters that represent language, one of humanity’s most important innovations.” Mr. Trump might say that name is weak and stupid—I’d say it’s a bit corny too. Alphabet will be the holding company for all of old Google’s businesses. The Google name will now be used for Google’s main business lines (you know the only ones that make money like Search … [Read more...]
Richard Russell on the Bull Market
Richard Russell continues to get the job done at age 91. Here he talks about Monday's market gains. Everything that I read regarding the US economy is bullish. The only newspaper that dares to publish bearish comments on the US economy is Investor’s Business Daily. The mass of comments about the US economy is so lopsided, it makes one wonder if supply and demand has given way to Fed manipulation. I find myself wondering whether the stock market still retains any forecasting ability. But let’s face it: the stock market is all that we have to go on. As I write, one hour before the close, … [Read more...]
The Biggest Losers
We covered some of the biggest winners in the S&P 500 YTD in a prior post. Which companies are the biggest losers YTD? Below is a list of the 10 worst performing stocks in the S&P 500 so far this year. At the top of the list is Keurig Green Mountain Coffee. Apparently single serve coffee has had its best days? Also on the list are five companies in the commodity production or services business. That’s no surprise considering the bear market in commodity stocks. For the contrarian minded this is where you want to be looking for future opportunities. Also on the list are Michael Kors … [Read more...]
Happy 91st Birthday Richard Russell
Richard Russell has been publishing Dow Theory Letters since 1958 and writes at dowtheoryletters.com. He turned 91 in July and writes about the markets and life on a daily basis. Here is my all-time favorite piece. Happy 91st Birthday Mr. Russell. RULE 3: RICH MAN, POOR MAN: In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur and the neophyte trader. The advantage that the wealthy investor enjoys is that HE DOESN'T NEED THE MARKETS. I can't begin to tell you what a difference that makes, both in one's mental attitude and in the … [Read more...]
Top Stocks this Earnings Season
In my last post, I referred to the quarterly earnings season that we are now in the thick of as a circus. And Boy has it lived up to that name. The overreaction of investors to quarterly results never ceases to astound. The main event this season (so far at least) has to be the Google earnings report, but Netflix came in a close second. Google investors had one of the greatest overreactions to a quarterly earnings report in the history of quarterly earnings reports. The company earned about $170 million more in the second quarter than analysts were expecting which is equal to about 0.85% of … [Read more...]
A Short-Cut to the Global Investment Outlook
You can learn a lot about the world simply by observing. The same is true of the global investment landscape. Financial markets provide a short-cut to the global investment outlook. Share prices, for example, reflect the wisdom of millions of informed (some less so) investors with skin in the game. The crowd doesn’t always get it right (see China A-share market), but it is always a worthwhile exercise to listen to what the crowd is saying if only to know where your views differ. What is the crowd saying about the global investment outlook today? The graphic below charts the year-to-date … [Read more...]
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