Archive | ETF Philosophy

Zero Rate Hikes In 2016? It Still Won’t Be Enough To Help The Economy Or Stocks

According to the Goldman Sachs Current Activity Indicator (CAI), economic well-being peaked in November of 2014. The erosion from 4.1% down to 1.3% over the last 18 months demonstrates just how vulnerable the U.S. economy currently is. Not surprisingly, economic weakness has taken its toll on stock assets. The S&P 500 has not gained meaningful ground [...] Continue Reading...


Time In The Markets, Not ‘Timing’ The Markets? At Least Know The Facts

What do China, Japan, India, England, Germany… heck, most of the significant economies around the globe, share in common? Bear market declines in stock prices of 20% or more. Several ETFs demonstrate the breadth of the global depreciation in equities. For example, SPDR EURO STOXX 50 (FEZ) illustrates the doggedness of the downtrend in Europe. [...] Continue Reading...


Are You Willing To Be The ‘Greater Fool’ By Acquiring More Stocks Today?

It does not matter if stocks are insanely overvalued, as long as there’s a more foolish participant who is willing to pay a higher price. That’s the essence of the “greater fool theory.” And right now, there are more foolish buyers that want “in the game” than risk-reducing sellers who want to scale back. It [...] Continue Reading...


The Silliness Of Buying Stocks Solely Because They Yield More Than Bonds

One argument in favor of buying U.S. stocks today? Regardless of traditional valuation extremes? The S&P 500 SPDR Trust (SPY) offers an annual dividend yield (2.06%) that is significantly higher than a 10-year Treasury bond (1.71%). Unfortunately, risk assets do not morph into risk-free assets when the former yields more than comparable treasuries. On the [...] Continue Reading...


Why Stocks Have Gone Nowhere For 18 Months (And Counting)

Some charts are more interesting than others. For example, Rob Isbitts at Sungarden Investment Research pointed out that the three-year return for the S&P 500 has dipped below 30%. Why might that matter? When the three-year return disappointed investors with single-digit annualized gains (< 10% per year) in 2001 and again in 2008, bearish stock sell-offs came [...] Continue Reading...


Treasury Bond Yield Curve Is Telling Stock Investors To ‘Wake Up’

How dependent is the U.S. economy on stimulus by the central bank of the United States? Take a look at what has happened in the bond market since the Federal Reserve began to reduce asset purchases as part of its quantitative easing program (“QE3″) in 2014. The spread between longer-term maturity treasuries and shorter-term maturity [...] Continue Reading...


Add More Stocks To Your Mix? Not Unless This Time Really Is Different

Companies primarily generate revenue by selling goods and services. When their sales peak, and subsequently decline, stock prices tend to move lower. Will this time be different? Granted, public corporations represented by the S&P 500 SPDR Trust (SPY) have been able to manipulate perceptions of profitability by surpassing exceptionally low earnings estimates. Yet they’ve been [...] Continue Reading...


Cash-To-Debt Ratio Demonstrates Why Riskier Assets Have Limited Upside Potential

Cash on corporate balance sheets grew at a 1% pace to $1.84 trillion in 2015. That’s a record level of dollars on the books. On the other hand, debt grew at a clip of nearly 14.8% to $6.6 trillion from $5.75 trillion. That’s a 15% surge in debt obligations. In fact, American companies have grown [...] Continue Reading...


Why Low Interest Rates Do Not Imply Perpetual Increases In Stock Prices

Some investors have come to believe that ultra-low interest rates alone have made traditional valuations obsolete. The irony of the error in judgment? Experts and analysts made similar claims prior to the NASDAQ collapse in 2000. (Only then, it was the dot-com “New Economy” that made old school valuations irrelevant.) The benchmark still trades below [...] Continue Reading...


When You Exit The Stock Market, Don’t Let The Door Hit You On Your Way Out

You cannot make this stuff up. The median stock in the S&P 500 has never been more overvalued on price-to-earnings growth (PEG) and price-to-sales (P/S). On a forward price-to-earnings (P/E) basis – where profitability expectations already reflect pie-in-the-sky speculation – the median company’s shares trade in the 96th percentile. That’s pretty darn pricey! Credit Goldman [...] Continue Reading...


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