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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JJ Abodeeley says we are likely embarking on an era where high quality stocks will significantly outperform low quality stocks as we work our way through what will be the third, and perhaps final, painful market decline of the secular bear market and continue that outperformance as the seedlings of the new secular bull...
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“My friends, I had not intended to discuss this controversial subject at this particular time. However, I want you to know that I do not shun controversy. On the contrary, I will take a stand on any issue at any time, regardless of how fraught with controversy it might be.”
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Doug Kass updates Where I now Stand with a recitation for why the Fed is now powerless. As before I find his thoughts reasonable when it comes to the market, but with some caveats on the risk reward ratio.
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Advisor Perspectives magazine has just published our latest:
"The return on equities is driven by dividends, since companies must ultimately distribute their hard-earned cash to shareholders. Given that reality, recent history of dividend yields portends a disappointing future for US equity investors, one of sub-par returns relative to historical averages."
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Dr. Ed Yardeni who has been very bullish on earnings now believes that even if we don't have a recession earnings will slow dramatically next year and fourth quarter earnings are likely to have more negative guidance and downside surprises. We think he may be a tad optimistic from looking at the information he...
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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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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.
John Hussman has warned for a few weeks now (as he did in late 2007) that we are now observing a set of conditions that every recession has exhibited, as well as conditions that when they have appeared have always been during or immediately prior to a recession (though the confirmation that it...
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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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Most of us can relate to driving and having children ask "Are we there yet?" JJ Abodeeley tries to answer that question. Like us, JJ sees what we have been going through since 2000 as a long process of the market working itself from an expensive peak to a cheap bottom. JJ calls...
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JJ Abodeeley hits a pet peeve of ours here at Risk and Return, the misuse of forward operating estimates to claim that markets are cheap. Of course, we have spent ten years listening to people claim stocks were cheap no matter the environment.
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For the second straight year we have seen the old saw about selling in May work out. Selling July 22nd would have been wonderful as the market has been down almost every day since. Good things come from every crisis however and we welcome investors...
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Mark Hulbert addresses a topic that is quite timely. When different advisers or commenters arrive at different conclusions, especially when they seem to be using the same type of reasoning, how do we know what to think? Frankly, most of the time we humans tend to choose the conclusion which we want the data...
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Stocks Cheapest in 26 Years as S&P 500 Falls, Earnings Rise 18% There is so much wrong with that statement, so many misleading claims. Feel free to point out the issues in the comments if you see any I don’t mention. Read the article here. My short list: 1. Operating earnings are compared to...
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Butler|Philbrick & Associates have published the full report we discussed here. One aspect of the report we touched on earlier was that it combines a number of different methods to test their effectiveness as well as show the returns each projects. In our own research we use components of returns analysis such GMO and...
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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
One of the positives that we have seen since 2008 is that more and more advisors are looking at ways of legitimately projecting future returns rather than just plugging in what has happened in the past with some minor adjustments. Long time readers know that we feel that future returns can be projected within...
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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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We keep hearing about positive signs month after month, but the latest data on the housing markets shows the pace of declines has been accelerating and widening, not slowing down. In my opinion this is good. The decline in prices of overvalued assets is a good thing, whether houses, stocks or debt. The problem...
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