Despite markets having more moves than a MLB shortstop hitting .200, not all that much has changed in the past three weeks. We are still awaiting the latest iteration of a "plan" out of Europe, coincident economic data for the US remains ok, though leading indicators continue to forecast that a recession is already...
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This week we saw a coordinated effort by central banks to use their bazookas to head off another 2008-style credit disaster. The market reacted as if the crisis is now over and we can get on to the next bull run. Yet, we will see that it wasn't enough. Something more along the lines...
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An emergency ejection of liquidity to prevent immediate Armageddon is not even a first step toward solving Europe's deep-seated problems. It's more or less the equivalent of the proverbial doctor telling a patient to "take two aspirin and see me in the morning". It treats the symptoms, but not the disease. ...
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From Naufall Sanaullah of Shadow Capitalism we get a nice overview of the world economy and markets.
Doug Kass sets down some reasonable scenarios moving forward. I believe the potential for profit margin contraction more severe than he does, even without a deep recession. In general the scenarios and probabilities seem reasonable to me though and the whole piece is well worth reading...
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What ultimately determines stock returns? Is it earnings? No. It is dividends, even for companies that presently pay none. Today we discuss why dividends are the key to long term returns, even when we discuss growth stocks that pay little or no dividend.
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Unsurprisingly the long term bearish Albert Edwards looks at the recent declines in productivity (and the associated rise in Unit Labor Costs) and sees profit margins falling a lot. Where have we heard that before?Thus investors are urged to "Time to stiffen the sinews, summon up the blood and gird the loins."
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When the investing world seems to be emphasizing the artificial and the stupid, we should be looking at the real and the important.
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In what stock market analysts are pointing to as a rare bright spot in an otherwise gloomy period for Wall Street, manufacturers of downward arrows posted record profits this week. Details at the Borowitz Report. Download article as PDF
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Robert Shiller, famous for predicting the Crash of 2000 and the bursting of the housing bubble discusses the role of psychology on stocks, housing and the economy.
Comstock Partmers expounds on the dynamics of debt deflation and its implications for today's environment.
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True diversification is hard to achieve in this environment using traditional tools. The rise of indexing, ETF’s and high frequency trading and Quantitative investment techniques all exacerbate this trend. From Felix Salmon:
S&P 500 stock correlation now at an all-time high, beating the peaks seen during the portfolio insurance debacle of 1987. (From Birinyi Associates)
Now that the "relief rally" we expected has arrived, we encourage investors to think carefully about how to use this respite.
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I know we keep hearing from many quarters that stocks are cheap. We disagree vehemently and today we bring you an expert witness. Having called the last few bubbles economist Robert Shiller discusses why he believes stocks are at least 40% overvalued and Real Estate could fall in real terms (meaning adjusted for inflation) another 25%. Click read more to see second video. Hat tip: Prag Cap
Over at dshort.com there is an interesting look at valuation and regression to the mean (click image to link to larger version) The peak in 2000 marked an unprecedented 160% overshooting of the trend, which is double the overshoot in 1929. The index has been above the trend for 17 years. We also see...
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