Tuesday , November 12 2019
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Tag Archives: confidence

Corporate Profits Are Worse Than You Think

Corporate profits are worse than you think. In a recent post, I discussed the deviation of the stock market from corporate profitability. To wit: “If the economy is slowing down, revenue and corporate profit growth will decline also. However, it is this point which the ‘bulls’ should be paying attention to. Many are dismissing currently high valuations under the guise of ‘low interest rates,’ however, the one thing you should not dismiss, and cannot make an excuse for, is the massive...

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Technically Speaking: Everyone Is Swimming In The “Deep End.”

With the market breaking out to all-time highs, the media has started to once again reach for their party hats as headlines suggest clear sailing for investors ahead. After all, why not?   The Federal Reserve cut rates for the 3rd time this year. The Fed is also back in the “QE” game of buying bonds. President Trump has “surrendered” to China in order to end the “trade war.”  Corporate stock buybacks are on track for the second largest year on record. Earnings, due to buybacks, are beating...

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15-Extreme Risks & How You Can Navigate Them

Willis Towers Watson’s Thinking Ahead Institute (TAI) recently revealed what it considers the 15-extreme risks facing investors for 2019, as well as for the years ahead. The risks run the gamut from climate change to nuclear contamination. TAI’s research suggests, broadly, there are three hedging strategies available to institutions: Hold cash. Over long historical periods cash has held its real value through both episodes of deflation and inflation but there is no guarantee that this will...

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Dow 650,000? We Are Already There!

Just recently, CNBC ran an article touting the call of “Billionaire Investor Ron Baron” of the Dow reaching 650,000 in just 50-years. Billionaire investor Ron Baron sees the Dow at 650,000 in 50 years https://t.co/oPElm0nrHT — CNBC (@CNBC) October 25, 2019 As noted in the article: “Speaking from his annual investment conference in New York, Baron predicted the Dow Jones Industrial Average, based on historical moves over decades, will reach 650,000 in 50 years, with an over $500 trillion...

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Technically Speaking: 4-Risks To The Bullish View

When I was growing up, my father, probably much like yours, had pearls of wisdom that he would drop along the way. It wasn’t until much later in life that I learned that such knowledge did not come from books but through experience. One of my favorite pieces of “wisdom” was: “A sure-fire ‘no lose’ proposition is doing exactly the opposite of whatever ‘no lose’ proposition is being proposed.” Of course, back then, he was mostly giving me “life advice” about not following along with my...

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Earnings Season & The Truth About Wall Street Analysis

Earnings results for the third quarter is fast approaching, and investors are getting excited for the “beat the estimate” game where Wall Street continually lowers estimates so companies can beat them. As I noted previously: One of the reasons given for the push to new highs was the ‘better than expected’ earnings reports coming in. As noted by FactSet:  “78% have reported actual EPS above the mean EPS estimate…The percentage of companies reporting EPS above the mean EPS estimate is above the...

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Investors Dilemma: Pavlov’s Dogs & The Ringing Of The Bell

Classical conditioning (also known as Pavlovian or respondent conditioning) refers to a learning procedure in which a potent stimulus (e.g. food) is paired with a previously neutral stimulus (e.g. a bell). What Pavlov discovered is that when the neutral stimulus was introduced, the dogs would begin to salivate in anticipation of the potent stimulus, even though it was not currently present. This learning process results from the psychological “pairing” of the stimuli. What does this have to...

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When A Bond Bull Becomes A Raving Stock Bull

Over the last few years, I have continually battled the “bond bears” about calls for higher rates simply because rates were low.  Here is a short list of some of the more prominent calls for higher rates: Those are just a few, and certainly, there were many other calls for higher rates from every corner of Wall Street. One of the biggest issues with the predictions of rising 10-year bond yields, which started in earnest in 2013, is they have been consistently wrong. For a bit of history, you...

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Technically Speaking: The Lessons Poker Can Teach You About Investing

Over the last couple of weeks, I have laid out the bull and bear case for the S&P 500 rising to 3300, and the case for the Fed to cut rates. In summary, the basic driver of the “bull market thesis” has essentially come down to Central Bank policy. This reliance on the Fed has led to a marked rise in “complacency” by investors in recent weeks despite a burgeoning list of issues. As shown in the chart below, the ratio of the “volatility index” as compared to the S&P 500 index is...

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Technically Speaking: Fed “Hopes” Spark Return Of Bullish Complacency

In this past weekend’s newsletter, I laid out the bull and bear case for the S&P 500 rising to 3300. In summary, the basic driver of the “bull market thesis” essentially boils down to Central Bank policy, as noted by the WSJ yesterday: “U.S. indices hit record highs last week on rate cut expectations. We’ve shifted from fiscal stimulus to monetary stimulus as the driver of the rally.” In other words, it is all about “rate cuts.” This reliance on the Fed has led to a marked rise in...

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