In 2011, S&P 500 profits expanded 15%. And yet, the benchmark’s price finished in the very same place that it started the year. In essence, since prices flat-lined and earnings experienced double-digit growth, a fundamentally inexpensive stock market via the price-to-earnings ratio (P/E) became even cheaper.
The most common reason cited for P/E contraction in 2011? The Euro Zone debt crisis.
Obviously, sovereign [...] Continue Reading...
The prospects for corporate earnings haven’t mattered much to the markets in 2011. Instead, European debt news drives stocks dramatically higher or lower.
Last week, stock assets tanked on less-than-anticipated demand for Italian bonds. This week, stocks skyrocket on better-than-expected desire for Spanish bonds.
Traders used to profit from this kind of volatility. They haven’t been doing [...] Continue Reading...
On the first day of December, 2011, a number of brand name corporations hit new 52-week highs. Here are a few that caught my eye: McDonalds (MCD), Phillip Morris (PM), Diageo (DEO), Kraft (KFT) and Treehouse Foods (THS).
Keep in mind, most of the media attention centers on the discretionary spending of the consumer (e.g., “Black Friday” widescreens, ”Cyber Monday” acquisitions of [...] Continue Reading...
The troubles in Italy, Portugal and Greece are shockingly serious. How serious? Many insist that these 3 little piggies will eventually succumb to disorderly bankrupties, causing Armageddon for world stock markets and the global financial system.
For the doomsday crowd to be right, however, everything has to go wrong. Ev-er-y-thing!
For instance, coordinated Eurozone plans for aid to Greece would have [...] Continue Reading...
Motivational speakers frequently explain that the Chinese word for “crisis,” or “wei-ji,” represents a combination of “danger” (wei-xian) and “opportunity” (ji-hui). That said, how much opportunity can be found in crisis after catastrophe after calamity?
For instance, the PIGS (Portugal, Italy, Greece, Spain) have been responsible for staggering levels of market volatility for 24 months. Time and again, one or more [...] Continue Reading...
In the dark days of late September/early October, China hinted that it was nearing the end of its monetary and fiscal tightening campaign. At the same time, leaders in the European Union demonstrated several “come together” moments that removed the probability of an imminent collapse. And virtually every fundamental measure of “value” favored stocks over alternative assets.
In fact, I extolled the virtues of a [...] Continue Reading...
Factual headlines are often misleading. For example, a popular financial portal offered, ”October consumer confidence weakest since March 2009.” Most people might interpret this to mean that consumers aren’t spending and/or won’t be spending their money, resulting in less revenue for economically sensitive corporations. However, actual consumer spending has been on the rise… 1.1% in September alone.
Equally important, Retail ETFs [...] Continue Reading...
Many folks are “banking” on a year-end rally. The catalyst? The European Union (EU) will come up with a massive recapitalization (a.k.a. bailout) of their financial institutions.
In theory, if we no longer need to fret the collapse of the EU — the solvency of member nations, the functionality of its banks, etc. – investors should be able to return to corporate earnings. And most should like [...] Continue Reading...
Since 7/25/2011, market participants have been dealing with extraordinary volatility. In fact, for the past 11 weeks, the CBOE Volatility Index (VIX) hadn’t closed below a 50-day moving average.
Until now, that is. On 10/10/2011, the current price of the VIX closed below a key trendline.
In a similar vein, the S&P 500 hadn’t closed above a 50-day MA since 7/27/2011. [...] Continue Reading...
Last October, enthusiasm for Brazil had reached epic proportions. And why not? Not only had the iShares MSCI Brazil Fund (EWZ) risen 175% off its November 2008 lows, but the country constitutes one of the essential building blocks in the BRIC (Brazil, Russia, China, India) fortress.
Indeed, the country boasts the world’s 7th largest economy, a consumption-oriented middle [...] Continue Reading...
