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On My Radar: Rut Ro Rastro
At the beginning of each month, I like to look at a series of valuation metrics: Median PE, Price to Sales and Price to Operating Earnings. Let’s look at them today. The logic, of course, is simple. When expensively priced, reduce exposure and reduce return expectations. When inexpensively priced, overweight exposure and increase return expectations. Let’s also take a look at what has been driving the market higher. Some argue that individual investors are still on the sidelines. I don’t think so and I show evidence that they are almost as fully invested as they were at the 2000 and
Weighing the Week Ahead: Is Good News Now Bad for Investors?
Anyone who wants to speculate on what the Fed is thinking must include some actual evidence from past transcripts. If, for example, you want to suggest that the Fed “wants a market correction” (you can’t make this stuff up) then you have to find at least one historical example where some participant raised that idea. Otherwise, shut up!
The Fat Pitch Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Our overall view continues to be that 2015 will not be like 2013 or 2014. This is a year where fundamentals improve while equity prices mark time, allowing sentiment and valuation to fall back inline. This is a common pattern: large parts of 1994, 1996, 1998, 1999, 2004 and 2005 were similar. That November and December were the first back to back down months in 3 years bears out the change in character.
The Official Unemployment Rate is Meaningless
The Bureau of Labor Statistics (BLS) official unemployment report, also known to economic wonks as U-3, has historically been used to give a fairly accurate depiction of the overall employment situation in our country. Not anymore. This "depiction" of the jobs/employment environment is now meaningless.
After a Dismal 2014 Business Development Companies Poised to Outperform in the New Year
After a dismal performance in 2014 business development companies are enjoying a reversal of fortune, floating to the top of the leaderboard in the New Year. They’re outpacing their interest-rate sensitive brethren, utilities and REITs, bonds and the S&P 500 alike amid widespread anticipation that the Federal Reserve will lift interest rates mid year. As the stock market grows ever more expensive and profit margins are reaching record highs, the catalysts that should drive outperformance in BDCs grow stronger and stronger considering that most BDCs are trading at single-digit multiples.
Greek Problems Born from Socialism
by John Browne of Euro Pacific Capital,
Like many of the important discussions in the economic world today, the negotiations between Greece and its European creditors has become increasingly absurd . Late on Friday, February 20, in a tense meeting between the new Greek Finance Minister and a host of ministers from 19 Eurozone countries, Germany apparently 'authorized' negotiators to accept a four-month extension of the $272 billion bailout so long as the Greeks promised to make a series of difficult fiscal steps needed to stay solvent over that time frame.
Municipal Market Perspectives
A much colder than normal winter throughout the United States has impacted daily activities. Folks are remaining indoors and waiting for the March thaw. Not only are there fewer pedestrians, but runners are a rare sight. The logical inference is that many dedicated exercisers have retreated to the warmth of their basements or local health clubs for exercise, and are instead logging miles on stationary treadmills.
January Inflation Turns Negative - Is Deflation Upon Us?
Consumer prices fell in January for the third straight month, while inflation over the past 12 months turned negative for the first time since 2009, largely because of cheaper gasoline. In January, the Consumer Price Index sank by a seasonally-adjusted 0.7%, the biggest one-month drop since the end of 2008, the Labor Department reported Thursday.
Tigers in Africa
This month's Absolute Return Letter is about unrealistic expectations which is something we are all guilty of from time to time. We look at why it is unrealistic to expect equity returns to be in the double digit range over the next several years, why central banks are not printing money like many believe, plus a few other topics.
Are DFA's Funds Active or Passive?
by John Coumarianos,
Larry Swedroe's recent critique of Graham and Dodd value investing mischaracterized DFA's value funds as "passive." Beyond that, he misread James Montier's discussion of "perfect" value investors, made unfair comparisons among funds and didn't measure risk properly.
Markets Pause While Awaiting Federal Reserve Activity
U.S. equities were mixed last week, with the S&P 500 declining -0.2%. The Federal Reserve (Fed) had a busy week, as the nuanced debate continues around when to begin policy normalization. The global policy divergence grabbed headlines, but the focus was mainly on negative yields in Europe and inflows to non-U.S. equities.
What’s Really Driving the Value of the Euro and Yen?
by Bradley Krom of WisdomTree, Inc.,
With a majority of developed markets rallying strongly over the last several years, we think the single biggest determinant for investors actually being able to capture those returns has hinged on their ability to manage currency risk.
Weighing the Week Ahead: Will the Economic News Alter Fed Policy?
The exact timing of the first Fed rate increase does not matter. There is a difference between tight monetary policy and slightly less accommodative policy. Markets do quite well in the early stages of rising rates, especially when starting from a low initial point. This will be ignored by many who will invoke “Don’t fight the Fed.” This will be the fundamental battleground between traders and investors, bears and bulls, and various political types – perhaps lasting for years. The end of the business or stock market cycle is not imminent. Bull markets do not die of old age.
The Fat Pitch Weekly Market Summary
by Urban Carmel of The Fat Pitch,
When SPY has risen 3 weeks in a row, it most often rises further for at least one more week. SPY has been up 3 weeks in a row 19 times in the past 4 years. In 17 of those 19 times (89%), it continued up at least one more week. In one of those 19 instances, SPY gave back half its gains before going higher (yellow arrow); and in just one instance, SPY gave back 100% of its gains (red arrow).
Power Surge for Women as Emerging Consumers
What’s the connection between electricity and women? Electricity is an agent of empowerment, able to transform societies and economies in emerging markets. It paves the way to buying home appliances like electric cookers, refrigerators and washing machines, freeing up women from hours of daily housework. In our view, more access to power in developing countries will be a catalyst for more women to join the workforce, leading to huge changes in consumer spending patterns.
Hasenstab on Global Growth: Headwinds or Tailwinds?
While some forecasters predict gloomy global growth this year, the contrarian-minded Dr. Michael Hasenstab, chief investment officer, Templeton Global Macro Group (formerly known as Templeton Global Bond Group), has a different view. He aims to counter what he sees as “excessive pessimism” surrounding the global economy and outlines why he believes the recent plunge in oil prices could prove a tailwind, not only for economic growth in the United States, but also in Europe. He also offers his scorecard regarding Japan’s monetary policy experiment dubbed “Abenomics.”
Equity Valuations, Recessions and Stock Market Declines
When I initiated the dshort web page in late 2005, one of my routine topics was equity valuations, initially inspired by Nobel laureate Robert Shiller's book, Irrational Exuberance, the second edition of which was published earlier that year. I gradually expanded my focus from his cyclically adjusted price-to-earnings ratio (CAPE) to include Ed Easterling's Crestmont P/E, Nobel laureate James Tobin's Q Ratio and my own monthly regression analysis of the S&P 500.
Monetary Policy Matters
This year we expect the divergence in monetary policy among the world’s central banks to be a key theme and a likely driver of asset flows. For now, the scorecard seems to be tilted toward monetary easing since in the first month of 2015 alone, 14 central banks engaged in some form of monetary policy loosening, generally in the form of interest rate cuts or asset purchases.
Complexity, Critical States and Tributaries of Uncertainty
For long periods of time, the markets can advance relatively smoothly until a sudden onset of chaos occurs, a “tipping point” that quickly changes the picture. Some might say the recent drop in oil would be a case in point. Brooks Ritchey, senior managing director at K2 Advisors, Franklin Templeton Solutions, explores the tipping points that trigger dramatic market turns, and ponders whether he thinks global equities may be teetering on the edge of one today.
The Strange World of Negative Interest Rates
This article examines explanations for negative bond yields. The article argues that central bank policies may be one of the causes. The article also suggests that to make sense of low Treasury yields, investors should be mindful of global yield correlations.
On My Radar: A $9 Trillion Dollar Crisis
Here is the main point of today’s OMR: According to the Bank of International Settlements, non-bank borrowers outside the U.S. have borrowed, in dollars, $9 trillion. This is an increase of $4.5 trillion since the financial crisis and it places that $9 trillion on the wrong side of the dollar bet. The dollar debt is an example of how the Fed’s tightening will impact the world economy. This is a pressure cooker and the pot is starting to boil.
International Equity Commentary: January 2015
by Team of Thomas White International,
International equity prices were mostly unchanged during January as gains in both developed and emerging Asian markets were offset by weakness in Canada and select markets in Europe. Investors turned more cautious after the International Monetary Fund and the World Bank lowered their global growth forecasts for the current year, contrary to expectations.
Global Economic Overview: January 2015
by Team of Thomas White International,
Concerns about the sharp fall in capital investments and earnings growth in select sectors resulting from lower oil prices continue to cloud the global economic outlook. While the decline in fuel prices is revitalizing consumer spending across all the major countries, the energy and mining sectors have already started curtailing their capital outlays.
Middle East/Africa: Economy Trends Update January 2015
by Team of Thomas White International,
This year likely promises mixed prospects for the Middle East and Africa. Among the five economies under our coverage in this region, oil exporters U.A.E. and Qatar are expected to remain under pressure amid the oil price slump. On the other hand, oil-importing South Africa will probably benefit from the downtrend in oil prices as a potential rise in domestic consumption should help the beleaguered economy deal with its various problems.
Hub Group: A Long-Term Investment Thesis
In September 2013, we outlined our favorable view of the domestic intermodal transportation industry driven by cost advantages, continued market share growth opportunities, and improving pricing power. At that time, we viewed Hub Group, Inc. (HUB) and Pacer International, Inc. as the most attractive investment opportunities within the industry. During the last seventeen months there have been material developments in each of these areas, some positive and some negative.
Brighter Days Ahead for the Global Economy?
by Team of Thomas White International,
After seven years of uneven growth trends following the 2008 financial crisis, we believe the global economy is likely to see a moderate acceleration in 2015. While several risks remain, we are reasonably confident that there are now enough growth drivers in place to help most major economies advance.
International Equity Commentary: December 2014
by Team of Thomas White International,
International equity prices corrected during the month as fears about the negative economic and political fallout of the steep drop in oil prices on energy producing countries unnerved investors. Brent crude oil prices fell to a six-year low during the month, a decline of more than 50 percent in four months.
Emerging Europe: Economy Trends Update -- January 2015
by Team of Thomas White International,
Emerging European economies witnessed renewed volatility as the New Year unfolded. Russia, the largest of the economies covered in this review, appeared particularly vulnerable as President Putin has not yielded his stance on Ukraine despite the damage inflicted to his country by the Western sanctions and plunging oil prices.
February 2015 Economic Update
Consumers in the U.S. are showing their optimism by pushing a key consumer sentiment indicator to its highest level in over a decade. Despite a drop-off in Q4 GDP to a 2.6% annualized growth rate and three consecutive months of slowing manufacturing expansion, the U.S. economy still seems to be on strong footing.
Global Carry Game Over?
The world has changed on the 2nd of February after US Personal Income and Outlays report
or maybe more importantly ISM Manufacturing Index report got released. The Global Carry
trade and Dollar trade got broken and have been broken since. Is it a passing correction
or the time is up and the game is over?
Euro-Area Growth: Reasons to be Cheerful
by Darren Williams of AllianceBernstein,
There are good reasons to be concerned about the medium-term outlook for euro-area growth. But that doesn’t mean the business cycle is dead. We think the conditions for a cyclical rebound in regional growth are currently better than they’ve been at any time since the global financial crisis.
On My Radar: Schumpeter’s Creative Destruction
This week let’s take a look at debt around the globe. I share a great piece from McKinsey & Company that shows just how much more debt, county by country, has been piled on since the 2007 debt induced financial crisis. Evidence is apparent in the commodity market and I also share a few ideas how you may risk manage those allocations.
Can Trees Really Grow to the Sky?
by Jeffrey Saut of Raymond James,
I stopped my rental car in the middle of a cluster of giant sequoia trees while driving to one of my speaking engagements in northern California last week. I have always been overwhelmed with these beautiful “beasts” and last week was no exception. As I lay supine at the base of the behemoth the visual fallacy actually made it look like this monster was indeed growing to the sky. The surreal sensation brought to mind the old stock market axiom, “Trees don’t grow to the sky!”
Africa Could Mine Its Way to Prosperity if It Addressed Instability
Last week I attended the Investing in African Mining Indaba in Cape Town, South Africa, as both a presenter and a student seeking opportunities. One of the highlights of the conference was former Prime Minister Tony Blair’s keynote address, during which he offered some crucial advice to African governments: To attract and foster a robust mining sector, a commitment to fiscal stability must be made.
European Forecast: Clouds Lifting
We understand the general public’s concern with regard to Europe. Just when you get your hands around a cease fire in Ukraine, the “Greexit” hits the newsstands with hardline headlines. If this Greek drama ever ends - which is unlikely as we noted two weeks ago detailing Greece’s restructuring –-rescheduling or outright default on debt occurs over 45% of the time since 1800, one still has to deal with the constant threat of a deepening recession.
Results 8,251–8,300
of 10,317 found.
