Morningstar used to be a one-trick pony. The company rated mutual funds… and they weren’t particularly good at it. For instance, in 1999, nearly every investment in the Janus stable held 4 or 5 stars. The primary reason? Janus products demonstrated superior performance on a relative basis in most stock categories over popular time frames (e.g., 1 year, 3 year, etc.). Did [...] Continue Reading...
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...
Even an ardent trend-follower who diligently tracks the price of the S&P 500 must be frustrated. Granted, had he/she sold when the heralded benchmark fell below its 200-day moving average in August, he may have protected principal… temporarily. However, the strategy would have left one buying-n-selling for losses in October, November and December. Yikes! Fundamental valuation wonks have [...] 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...
In my 10/27/11 commentary, “3 Reasons Stock ETF Investors Should Continue To Tread Lightly,” I pointed to the fact that the month-long stock surge had not come from the spectacular earnings season; in fact, the average return for individual securities on the session following a Q3 earnings report was -0.21%, suggesting that the entire October run-up emanated from enthusiasm for pan-European cooperation. It follows that articles [...] Continue Reading...
Here’s a disclaimer from the get-go. If the European Union fails to persuade the world that they’ve got a workable, TARP-like plan on Wednesday, feel free to disregard these 3 reasons to add more Stock ETFs to your current allocation. 1. 2008 Or 1998? Endless comparisons have been made between 2011’s sovereign debt toxicity and 2008’s subprime loan [...] 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...
The U.S economy has been faltering. Politicians have been blaming one another. And confidence is about as bad as it gets. However, what you read or hear in the media about recessions and economic progress will not explain the success or failure of stock assets. For example, Australia boasts a mere 5.3% unemployment, the highest interest rates among [...] Continue Reading...
Last month, the mere rumor that China was looking at purchasing Italian bonds sent stocks surging higher. However, it is far more likely that China will take a ”wait-n-see” approach. Consider the contentious nature of international trade and currency disputes between China and the developed world. In response to a widespread belief that China keeps its currency artificially low, the U.S. Senate has been advancing [...] Continue Reading...
In the 5-year bull market from 10/2002 through 9/2007, large-cap indexes typically carried price-to-earnings (P/E) ratios ranging from 17-18. Perma-bears harped on these “valuations” throughout the period, expressing that major benchmarks had not reverted back to a historical average of 15. With the real estate lending bubble bursting in dramatic fashion, stock assets plummeted 40%. Separately, the P/E price tag for the S&P [...] Continue Reading...
