Wednesday , November 13 2019
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Tag Archives: Cycles

Valuations, Returns & The Real Value Of Cash

Since the beginning of 2019, the market has risen sharply. That increase was not due to rising earnings and revenues, which have weakened, but rather from multiple expansion. In other words, investors are willing to pay higher prices for weaker earnings. The issue, of course, is that while it may not seem to matter in the short-term, valuations matter a lot in the long-run. I know what you are thinking. “There is NO WAY cash will outperform stocks over the next decade.”  I understand. After a...

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Has The Fed Done It? No More Recessions?

“Wow!” That is all I could utter as my brain spun listening to an interview with Chamrath Palihapitiya on CNBC last week. “I don’t see a world in which we have any form of meaningful contraction nor any form of meaningful expansion. We have completely taken away the toolkit of how normal economies should work when we started with QE. I mean, the odds that there’s a recession anymore in any Western country of the world is almost next to impossible now, save a complete financial externality...

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Trying To Be Consistently “Not Stupid”

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” – Charlie Munger As described in a recent article, Has This Cycle Reached Its Tail, an appreciation for where the economy is within the cycle of economic expansion and contraction is quite important for investors. It offers a gauge, a guidepost of sorts, to know when to take a lot of risk and when to take a conservative approach....

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Has This Cycle Reached Its Tail?

We asked a few friends what the picture below looks like, and most told us they saw a badly drawn bird with a wide open beak. Based on the photograph below our colorful bird, they might be on to something.  As you might suspect, this article is not about our ability to graph a bird using Excel. The graph represents the current bull market and economic cycle as told by the yield curve and investor sentiment. As the picture is almost complete, the bird provides a clue to where...

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10-Investing Axioms Every Investor Should Learn

Martin Tarlie of GMO just recently wrote a great piece on the issue of the current U.S. Stock Market Bubble asking the question of whether or not it has finally burst. To wit: “A new model explains this dichotomy between price action and fundamentals by suggesting that a bubble in the U.S. stock market started inflating in early 2017, and continued to inflate through the third quarter of 2018. In the fourth quarter, however, indications were that the bubble had started to deflate. And when...

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The Populist Pathology

The populist pathology is incredibly simple; no one ever takes the blame. Things continually go off-track and officials merely shrug their shoulders and point their fingers. The very idea of accountability is anachronistic. Now that dark clouds are gathering, in the IMF’s words, the fingers are out again. President Donald Trump said Tuesday that he does not like the Federal Reserve’s decision to continue to hike interest rates. He also said that the United States economy does not have...

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29/11/17: Four Omens of an Incoming Markets Blowout

Forget Bitcoin (for a second) and look at the real markets.Per Goldman Sachs research, current markets valuation for bonds and stocks are out of touch with historical bubbles reality: https://www.bloomberg.com/news/articles/2017-11-29/goldman-warns-highest-valuations-since-1900-mean-pain-is-coming. As it says on the tin,“A portfolio of 60 percent S&P 500 Index stocks and 40 percent 10-year U.S. Treasuries generated a 7.1 percent inflation-adjusted return since 1985, Goldman calculated...

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The Same Crossroads

Writing earlier this year on the topic of the Fed’s future balance sheet reductions, Ben Bernanke had occasion to recount his experience from 2013. It was a stressful time for the Fed after they panicked into QE3 (and then QE4) and then almost panicked right out of it. The then-Fed Chairman stressed from his experience the importance of communications as a means to, as he sees it, maintain control. When, as Fed chair, I indicated in testimony in 2013 that the FOMC was considering slowing...

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Durable Goods Grow Indicating Lack of Growth

Total new orders for durable goods, including orders for new transportation equipment, were estimated to have been $238.7 billion in March 2017 on a seasonally-adjusted basis. That is 9% better than the most recent low point figured for June last year. It remains substantially less than the record high reached in July 2014, though an anomaly in Boeing’s order history accounts for that one month being so far out of line. March’s estimate is more comparable to the one for June 2013, which is...

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Durable Goods Groundhog

If the economy is repeating the after-effects of the latest “dollar” events, and it does seem more and more to be that case, then analysis starts with identifying a range for where it might be in the repetition. New orders for durable goods (ex transportation) rose 4.3% year-over-year in January 2017 (NSA, only 2.4% SA), the highest growth rate since September 2014 (though not meaningfully faster than the 3.9% rate in November 2016). Despite the resumption of a plus sign, new orders in...

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