"The perception is sort of the driving factor." It's a "psychological boost." These words spoken by directors at wealth funds refer to stock splits. Despite having little to no effect on the value of a company's shares, stock splits are popular with investors. Tesla recently announced it would seek to split its stock again. The Wall Street Journal reports: Tesla Inc. on Monday said it would seek to split its highly priced stock for the second time in two years. Already in 2022, both Google parent Alphabet Inc. and Amazon.com Inc. have unveiled plans for 20-for-1 splits. Stock splits … [Read more...]
Stock Market Games Are Teaching Kids All the Wrong Lessons
You rarely encourage your children to take “extreme risks.” That, unfortunately, is what’s happening with stock picking games played by high schoolers around the country. To “win,” you have to earn the most and to do so, you must take on massive leverage and perform risky trades. Does anyone really think that’s the lesson kids should be learning about their finances? Jason Zweig of The Wall Street Journal reports on the counterintuitive lessons being taught by the stock-picking games at school, writing: Every year, more than a million high-school students across the U.S. learn about … [Read more...]
CHINA COVID OUTBREAK: Stocks Plummet as Lockdowns Linger
Stock prices are falling rapidly in Hong Kong as China is hit with a renewed COVID-19 outbreak in important cities like Shenzhen. Dave Sebastian reports for The Wall Street Journal: The rout in Chinese stocks deepened as the country’s escalating battle with Covid-19 rattled a market already contending with potential U.S. delistings, domestic regulatory pressure and the global economic consequences of the war in Ukraine. After a recent surge in coronavirus infections, authorities have imposed restrictions on cities including Shenzhen, the southern financial and technology hub where … [Read more...]
TECH WRECK: Scale of Wealth Destruction Underappreciated
Is the "Tech Wreck" a new dot-com bubble bursting? In the Financial Times, Robin Wigglesworth suggests that the scale of wealth destruction currently happening in the market is underappreciated. He writes: At what point does the slump in US technology stocks stop being dismissed as a mere “tech wreck” primarily centred on the most speculative companies and become considered a fully-fledged dotcom crash 2.0? The combination of increasingly hawkish central banks and Russia’s invasion of Ukraine has been toxic for equity markets this year. The MSCI All-Country World index is now down 12 per … [Read more...]
A Penny Saved Is a Penny Burned
Investors are reducing their bets on speculative "penny" stocks. According to FINRA, trades of over-the-counter (OTC) stocks have fallen each month for the last 11 months straight. Nicholas Megaw reports for FT: Many of the riskiest areas of financial markets experienced a surge in activity at the height of the coronavirus pandemic, with amateur traders attracted by rebounding asset prices, government stimulus cheques and an escape from lockdown boredom. However, the Finra figures are the latest sign of their retreat as volatility rises and the Federal Reserve prepares to raise interest … [Read more...]
Has the Day of the Shorts Finally Arrived?
Short bets on the S&P 500 are soaring, and the price of the index has dropped for days. Has the day short investors have been waiting for finally arrived? Bloomberg reports: Whatever happens in Ukraine or how it affects Federal Reserve policy, the outcome will land in markets where investors have had time to prepare for the worst. It may be one reason the worst has so far been avoided. They’ve been steadily boosting bets against equities, shaking off a reluctance to short tracing to last year’s meme stock upheaval. Bearish bets on the largest exchange-traded fund tracking the S&P … [Read more...]
CAPE FEAR: Investors Paying Nearly Record Prices for Earnings
Judging by the popular CAPE ratio, investors are paying prices for earnings from publicly traded companies near their all-time highs. Jason Zweig reports in The Wall Street Journal: Robert Shiller, a finance professor at Yale University, who won a Nobel Prize in economics in 2013, measures how expensive stocks are by taking the price of the S&P 500 index, dividing by the average of its past 10 years of earnings and adjusting both the price and the earnings for inflation. The gauge is known as the cyclically adjusted price/earnings ratio, or CAPE. And, by that yardstick, stocks were … [Read more...]
How Do You Know When You’re Too Heavily Invested in Stocks?
With years of stock bull markets behind investors, it's no surprise that equities are a large part of many portfolios. But as investors get older, it's important to balance their holdings with bonds. How do they know when their stock portfolio is too large for their age? Anne Tergesen explains in The Wall Street Journal: Older investors’ decision to keep so much in stocks is facing a test right now. Major market indexes all declined sharply in the past week, with the Nasdaq Composite entering a correction. Intraday trading has seen the S&P 500 swing more than 3% some days. Despite the … [Read more...]
Your Survival Guy’s Stock Market CARNAGE Stress Test
Look, it’s been a good run for stocks. It’s reflected in your net worth—if you can keep it. Because there comes a time when you need to ask: Do I NEED this STRESS? One of the hardest decisions for stock investors is not when to buy, but when to SELL. Here’s a back of a napkin stress test for you and your spouse: How will you feel if your stocks fall by 50%? Now sell stocks to the point where a 50% loss in stocks would be SURVIVABLE. That’s what my focus is for you: SURVIVABILITY. Because Your Survival Guy knows what you sound like when disasters like that happen. But lo and behold, after … [Read more...]
Down goes Frazier!
Cathie Wood, manager of the ARK Innovation ETF and 2020’s heavyweight champ portfolio manager has just given up an over 200% return advantage to the S&P 500. From its peak in February of last year, the ARK Innovation ETF is down 57%. On a three year basis, the ARK ETF is now trailing the S&P 500. Just another reminder not to invest on the basis of past performance. … [Read more...]
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