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Friends
by Jeffrey Saut of Raymond James,
“Friends” . . . except in this case I am not referring to the 1994 TV sitcom, but the true friends I have met over the past 45 years in this business. I thought about this theme two weeks ago as I was sitting in Bobby Van’s, across from the NYSE, listening to great stories from my friend Art Cashin and Eric Kaufman (captain of the sagacious VE Capital), and other members of Friends of Fermentation (FOF). As I listened to Arthur, I could not shake the feeling that these classic Wall Street stories need to be scribed lest they be lost forever.
Why Reforms Are Sparking Growth in These Two Regions
In the U.S., we see other countries’ economic developments play out in news snapshots or opinion pieces—often focusing on short-term data or what’s perceived to be wrong. But here’s what the headlines may not be telling you: Non-U.S. regions from Asia to Europe are home to economic comebacks and companies that are growing their earnings. Let’s take a closer look at developments in Japan and Italy and then contrast the risk/reward dynamic with the current market environment in the U.S.
European Union Challenged from Right and Left
by John Browne of Euro Pacific Capital,
The heinous ISIS attack in Paris is a game changer in Europe. In addition to the horrific amount of individual casualties, the attack has also threatened severe damage to the long term survivability of the European Union as a political entity. Based on the unpopularity and unfeasibility of immigration controls under the EU's Schengen Plan, the events have opened up the Union to renewed attacks from the right, just as its support from the left is crumbling as a result of opposition to EU-mandated fiscal austerity. This two-front onslaught may be too much for the Union to endure.
Equities Decline, But Long-Term Trends Look Positive
U.S. equities came under pressure last week, with the S&P 500 Index falling
3.6%, its largest pullback since late August. A number of issues contributed to
the decline, including valuation concerns driven by the recent price rally and
struggling earnings. Some negative earnings results from department stores
and ongoing unease over Fed policy also contributed to souring sentiment.
For the week, utilities was the only sector to advance, while energy, technology
and consumer discretionary led the way lower.
How to Kill a Unicorn
The market was strange last week. No real direction in credit or equities. The Fed turned from mildly dovish to decidedly hawkish with several Governors advocating the December rate rise. It's like watching a debate team convince themselves that they are absolutely right, so let’s do it right? All with me? There were also announcements of new Fed governors. Next year’s voters are more hawkish which means we’ll hear less about “one and done” and more about stepped increases through 2016.
Why We Believe Emerging-Markets Stocks are Attractive
by Rajat Jain of Litman Gregory,
There is certainly no arguing that over the short term, investing in emerging-markets stocks can be a bumpy ride. This is especially true if you invested in the asset class during the crisis-prone years of the late 1990s and early 2000s. When asked why we believe in investing in the asset class, we point to our overarching belief that emerging markets' macroeconomic fundamentals are much better now than they were during those crisis-prone years. In this update, we provide further background on our analysis.
Weighing the Week Ahead: What is the Message from Falling Commodity Prices?
Attention quickly shifted from the perceived strength in the monthly employment report to the stock market decline. While some blamed this on the expectation of higher interest rates, there was also plenty of focus on the commodity markets. I expect this interest to continue in the week ahead.
Little League Trophies
The financial markets have worn many masks this year. Like a ping pong ball, wide and powerful swings from Fed pronouncements, movements in the dollar, and the price of oil have contributed to violent and swift changes in mood. Perception and reality are almost entirely a function of macroeconomic news, but for the very brief period in time each quarter when company specific news arrives in the form of earnings season.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
After rising 6 weeks in a row, equities fell hard this week. SPY has returned to the bottom of its former trading range. NDX, which is leading, closed an important open gap that should now provide initial support. So far, no foul for either. A number of studies suggest an upside edge in the short term. Overall, however, risk is rising, as the market now has a potentially bearish technical pattern that it didn't have in August.
On My Radar: Poking At The Beehive
“The European Central Bank is likely to continue negative rates, extend and enlarge QE, and acquire more balance sheet assets over time. ECB policy influences other nearby non-euro jurisdictions. Essentially, all short-term interest rates of higher-credit-grade and mid-grade countries in Europe are negative, and the policy of negative rates is spreading as the rates go even lower (more negative).” – David Kotok
The Shadow Rate Casts Gloom
by Peter Schiff of Euro Pacific Capital,
Nearly 92% of economists surveyed this week by the Wall Street Journal expect that our eight-year experiment with unprecedented monetary easing from the Federal Reserve will come to an end at the next Fed meeting in December. Since we have had the monetary wind at our back for so many years, at least a few have begun to question our ability to make economic and financial gains against actual headwinds. But in reality, the tightening cycle that the forecasters are waiting for actually started last year. Sadly, the markets and the economy are already showing an inability to handle it.
Celgene: A Primer on Growth Stock Value Investing (GARP): Part 2
by Chuck Carnevale of F.A.S.T. Graphs,
This article is the second in a two-part series on applying the principles of value investing. In part 1 found here my primary focus was on the benefits of investing in fundamentally strong dividend growth stocks when they are out of favor, and therefore, undervalued as a result. In this part 2, I will be turning my attention to determining the fair value of growth stocks. Although the underlying principles of value investing apply, assessing the fair value of a true growth stock differs greatly from valuing a dividend paying company.
A Wooden Horse Full of Acorns?
by Gary Stroik of WBI Investments,
Today’s investor doesn’t have to look far to find someone predicting dire consequences just around the bend. Forecasts of impending doom have been around a long time. According to legend, Cassandra was a Trojan princess cursed by the god Apollo with the ability to see the future, but to have no one believe her.
Taking Grounders In Spring Training
If there’s one thing that all of ‘the greats’ throughout history have in common, it’s a mastery of the fundamentals. Grammy award winning singers warm their voices up before every performance and Hall Of Fame baseball players take grounders every spring training. Unfortunately, investors continue to focus on noise instead of the basics of investing.
Are We at a Market Peak?
The question that seems to be occurring to more and more people is, “Are we at a market peak?” It has been a multiyear bull market, stock prices have tripled from the base, profit margins have been at record highs for years, and now interest rates are going up. It’s not a crazy thought.
Global Earnings Update: Europe and Japan Coming up Short
by Burt White of LPL Financial,
Earnings overseas have generally not kept up with the U.S. We spend a lot of time dissecting earnings season in the U.S. because we believe earnings are the single biggest driver of stock prices over the long run. But earnings are not just important for U.S. stocks, they are also important for stocks overseas. This week we provide an earnings update in Europe and Japan, where results thus far have mostly fallen short of those in the U.S.
U.S. Rates, ECB Asset Purchases Driving Euro Lower
by Jennifer Thomson of GaveKal Capital,
The euro fell 3 cents last week– a significant decline, certainly, but not the most extreme weekly drop witnessed so far this year: Most of the fuss associated with the rapid retreat of the euro can be attributed to the level of the currency in relation to important levels of recent support.
Remember Greece? Neither Does the Market.
by Tere Alvarez Canida, Alan Habacht, William Canida, Scott Kimball, Daniela Mardarovici of BMO Global Asset Management,
Global conditions are absolutely impacting the U.S. markets in known and established manners, but the Fed’s recent introduction of the language confused markets away from a perception of Fed support to one of Fed fear. The resulting move to wider in spreads, which was largely undifferentiated by issuer, caused the past quarter to be a very difficult one for investors. Looking forward, that undiscerning move in spreads has afforded the opportunity to purchase potentially mispriced assets in anticipation of a return to rationality.
Lessons from Guiding Blind Triathletes
by Dan Solin,
At a conference I recently attended, I was listening to a talk by Caroline Gaynor, an associate at Dimensional Fund Advisors. Gaynor is an Ironman triathlete, which is impressive. But Gaynor’s ability to complete those grueling events was the least impressive part of her presentation. She also serves as a guide during races for blind athletes.
The October Jobs Report Gives the Fed a Green Light
by Carl Tannenbaum of Northern Trust,
The first Friday of each month is filled with tension for those in my line of work. The U.S. employment data, arguably the most important international economic release that we receive, comes out on those days.
Crime in the Jobs Report
by John Mauldin of Mauldin Economics,
In today’s letter, we are going to look briefly at the latest employment numbers. Then we’ll explore some of the deeper, less understood facets of the employment data. For some of you this may be a lot of detail, but for those of us who think about employment (and you should, as it is THE ultimate driver for your business and investments), understanding how the numbers work and what they mean is important.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities have risen strongly after the first sell off of more than 10% in 3 years. They are doing so into the seasonally strongest months of the year for equities. Sentiment has not yet become overly bullish. Macro is supportive. Normally, this combination would be a set up for higher prices ahead. That said, after a 12% gain in one month, the normal pattern is for at least a minor retrace. Post-NFP and into the often soft mid-month period, that pattern might well be next.
The Markets’ Teddy Bear
The sharp market gains seen over the last month are unlikely to persist at the same pace, and investors should be prepared for more volatility. Uncertainty about interest rates will persist, but the US economy continues to chug along at a decent, although not robust, pace. Similarly, global growth seems to be perking up, and helping to stymie predictions of an impending global recession. There are still pressures on global growth, but we believe the upside surprise potential in Europe should benefit stocks in that region.
Quarterly Letter
by Team of Grey Owl Capital Management,
In 2008, most investors were driving a fast car down a country road at night with no headlights. They ignored widening credit spreads and kept their allocation to risk assets too high. Value investors bought financial securities because they seemed cheap relative to book value, and neglected to size the position with any consideration to the idea that these entities had so much financial leverage, a bad quarter could entirely wipe out equity value.
QE’s Creeping Communism
by Peter Schiff of Euro Pacific Capital,
Most economists and investors readily acknowledge that the current period of central bank activism, characterized by extended bouts of quantitative easing and zero percent interest rates, is a newly-blazed trail in economic history. And while these policies strike some as counterintuitive, open-ended, and unimaginably expensive, most express comfort that our extremely educated, data-dependent, central bankers have a pretty good idea as to where the trail is going and how to keep the wagons together during the journey.
Bank Is not a Four-Letter Word
Since the Great Recession, banks have been a dirty word used by politicians and other pundits. However, banks play an important role in the economy.
The pace of interest rate normalization will be slow and long, which should lead to an acceleration of credit, which will create a cycle of economic expansion.
Our investment in commercial banks has been a welcome source of alpha, and we continue to be optimistic on the forward fundamentals for the U.S. economy and U.S. lenders.
Economic Review and Outlook
The third quarter proved difficult for investors as apprehension about slowing global growth and monetary and fiscal policies converged. Volatility soared while equities declined sharply and commodities plummeted. Heading into the final months of the year, our positioning is cautious but reflects our view that the markets offer many opportunities, particularly among growth-oriented equities and convertibles, along with high yield.
Have Commodities Reached an Inflection Point?
This week the Federal Reserve announced that it would delay the interest rate liftoff yet again, but while everyone seems concerned about nominal rates—the federal funds rate, in this case—real rates have already risen about 5 percent since August 2011. This “invisible” rate hike is much more impactful to commodity prices and emerging markets than a nominal rate hike, which is simply the “tip of the iceberg.”
The Weather Will Change for MLPs
The advantages and competitiveness of North American shale assets will only grow over time and we expect production to resume its increase at some point. We believe the recent sell off in MLPs is due to forced selling and a typical equity market cascade and overshoot, which has created a potentially attractive opportunity for investors to allocate to the asset class. Adapting Mark Twain to the MLP market, the reports of its demise are greatly exaggerated.
The Upside Potential in Buying Some Puerto Rico’s Bonds Now
by Robert Kane of BondView,
Puerto Rico’s municipal bonds have crashed just like Greek bonds did three years ago. Puerto Rico issues hundreds of different types of bonds. They shouldn’t be viewed as a homogeneous h?oard??. They have varying degrees of credit quality and risks. Some are insured. Many have become mispriced because of the company they keep and are trading at a steep discount to face value.
Schwab Market Perspective: Bulls, Bears…and Hippos?
When trying to describe our view of the market, we realized that bullish and bearish were quite limiting and could cause confusion. Bullish, for example, could mean anything from skyrocketing markets to very modest gains—one word, very different environments. So, we are introducing a new animal descriptor that should more accurately describe our view of the stock market—the hippo. While not initially obvious, we think this is the perfect descriptor, and who doesn’t love hippos?
On My Radar: I’m Rooting For Ray
There is a great deal of research around investor behavior. For example, our brains notice when a group provides an answer that is different from ours, the disparity is unpleasant. For many, aligning with the group is more rewarding for the brain than being independent and correct.
Will Voters Force Lawmakers to Loosen the Purse Strings?
With stocks soaring after Mario “Whatever It Takes” Draghi’s latest comments, it’s clear markets still like easy money from central banks, says US Investment Strategist Kristina Hooper. But fiscal stimulus induces spending more directly—and voters might start demanding it.
Conditions Remain Uneven, but Equities Again Charge Higher
Equity markets climbed for the third consecutive week, with the S&P 500 Index gaining 2.1%.1 Much of the strength came from additional signs of easing from the European and Chinese central banks. Corporate earnings were mixed, with some health care and retail industries coming under pressure, while the technology sector provided impressive results. Overall, however, the majority of companies reported better-than-expected earnings results, which added to improved market sentiment.
Results 7,501–7,550
of 10,166 found.
