Tag Archive: stocks

Buybacks Get All The Macro Hate, But What About Dividends?

When it comes to the stock market and the corporate cash flow condition, our attention is usually drawn to stock repurchases. With good reason. These controversial uses of scarce internal funds are traditionally argued along the lines of management teams identifying and correcting undervalued shares. History shows, conclusively, that hasn’t really been true.

Read More »

Global Asset Allocation Update

The risk budget is unchanged this month. For the moderate risk investor the allocation to bonds and risk assets is evenly split. There are changes this month within the asset classes. How far are we from the end of this cycle? When will the next recession arrive and more importantly when will stocks and other markets start to anticipate a slowdown?

Read More »

Global Asset Allocation Update

The risk budget changes this month as I add back the 5% cash raised in late October. For the moderate risk investor, the allocation to bonds is still 50% while the risk side now rises to 50% as well. I raised the cash back in late October due to the extreme overbought nature of the stock market and frankly it was a mistake. Stocks went from overbought to more overbought and I missed the rally to all time highs in January.

Read More »

Bi-Weekly Economic Review: Investing Is Not A Game of Perfect

The market volatility this year has been blamed on a lot of factors. The initial selloff was blamed on a hotter than expected wage number in the January employment report that supposedly sparked concerns about inflation – although a similar number this month wasn’t mentioned as a cause of last Friday’s selling. The unwinding of the short volatility trade exacerbated the situation and voila, 12% came off the market in a matter of days.

Read More »

Bi-Weekly Economic Review: Embrace The Uncertainty

There’s something happening here What it is ain’t exactly clear There’s a man with a gun over there Telling me I got to beware I think it’s time we stop, children, what’s that sound Everybody look what’s going down There’s battle lines being drawn Nobody’s right if everybody’s wrong Young people speaking their minds Getting so much resistance from behind It’s time we stop, hey, what’s that sound Everybody look what’s going...

Read More »

Bi-Weekly Economic Review: The New Normal Continues

There has been a lot of talk about the economic impact of the recent tax reform. All of it, including the analyses that include lots of fancy math, amounts to nothing more than speculation, usually informed by little more than the political bias of the analyst. I am guilty of that too to some degree but I don’t let my personal political views dictate how I view the economy for purposes of investing.

Read More »

Global Asset Allocation Update: Tariffs Don’t Warrant A Change…Yet

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. We have had continued volatility since the last update but the market action so far is pretty mundane. The initial selloff halted at the 200 day moving average and the rebound carried to just over the 50 day moving average.

Read More »

Bi-Weekly Economic Review: One Down, Three To Go

We pay particular attention to broad based indicators of growth. The Chicago Fed National Activity Index and the Conference Board’s Leading Economic Indicators are examples. We watch them because we are mostly interested in identifying inflection points in the broad economy and aren’t as interested in the details. Why? Because, while bear markets do happen outside of recession, it is rare and unpredictable.

Read More »

Global Asset Allocation Update:

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. Despite the selloff of the last week I don’t believe any portfolio action is warranted. While the overbought condition has largely been corrected now, the S&P 500 is far from the opposite condition, oversold. At the lows this morning, the S&P 500 was officially in correction territory, down 10% from the...

Read More »

Bi-Weekly Economic Review: Markets At Extremes

Production ended the year on a strong note but early readings from January are not as positive. The December industrial production report headline was strong at a 0.9% gain but a lot of that strength was in the mining (oil drilling) and utility sectors. Mining has actually led the way the last year as rig count has risen with drilling activity. I’d love to see our economy less dependent on the price of oil but that is what we’ve become over the...

Read More »

Bi-Weekly Economic Review: A Weak Dollar Stirs A Toxic Stew

We received several employment related reports in the first two weeks of the year. The rate of growth in employment has been slowing for some time – slowly – and these reports continue that trend. The JOLTS report showed a drop in job openings, hires and quits.

Read More »

Bi-Weekly Economic Review: Housing Market Accelerates

The economy ended 2017 with current growth just slightly above trend. In general the reports of the last two weeks of the year were pretty good with housing a standout performer going into the new year. We are still trying to get past the impact – positive and negative – from the hurricanes a few months ago though so it is probably prudent to wait for more evidence before making any definitive pronouncements about the economy.

Read More »

Bi-Weekly Economic Review: Animal Spirits Haunt The Market

The economic data over the last two weeks continued the better than expected trend. Some of the data was quite good and makes one wonder if maybe, just maybe, we are finally ready to break out of the economic doldrums. Is it possible that all that new normal, secular stagnation stuff was just a lack of animal spirits?

Read More »

Three Years Ago QE, Last Year It Was China, Now It’s Taxes

China’s National Bureau of Statistics reported last week that the official manufacturing PMI for that country rose from 51.6 in October to 51.8 in November. Since “analysts” were expecting 51.4 (Reuters poll of Economists) it was taken as a positive sign. The same was largely true for the official non-manufacturing PMI, rising like its counterpart here from 54.3 the month prior to 54.8 last month.

Read More »

Global Asset Allocation Update

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. The extreme overbought condition of the US stock market did not correct since the last update and so I will continue to hold a modest amount of cash.

Read More »

Bi-Weekly Economic Review: A Whirlwind of Data

The economic data of the last two weeks was generally better than expected, the Citigroup Economic Surprise index near the highs of the year. Still, as I’ve warned repeatedly over the last few years, better than expected should not be confused with good. We go through mini-cycles all the time, the economy ebbing and flowing through the course of a business cycle.

Read More »

Bi-Weekly Economic Review: Gridlock & The Status Quo

The good news is that the economy just printed its second consecutive quarter of 3% growth, a feat not accomplished since Q2 and Q3 2014. The bad news is that the growth spurt in 2014 was better, quantitatively and qualitatively. Those two quarters produced gains of 4.6% and 5.2% (annualized) in GDP, much better than the most recent 3.1% and 3% prints of Q2 and Q3 2017.

Read More »

Global Asset Allocation Update

The risk budget this month shifts slightly as we add cash to the portfolio. For the moderate risk investor the allocation to bonds is unchanged at 50%, risk assets are reduced to 45% and cash is raised to 5%. The changes this month are modest and may prove temporary but I felt a move to reduce risk was prudent given signs of exuberance – rational, irrational or otherwise.

Read More »

The (Economic) Difference Between Stocks and Bonds

Real Personal Consumption Expenditures (PCE) rose 0.6% in September 2017 above August. That was the largest monthly increase (SAAR) in almost three years. Given that Real PCE declined month-over-month in August, it is reasonable to assume hurricane effects for both. Across the two months, Real PCE rose by a far more modest 0.5% total, or an annual rate of just 3.4%, only slightly greater the prevailing average.

Read More »

Bi-Weekly Economic Review: Yawn

When I wrote the update two weeks ago I said that we might be nearing the point of maximum optimism. Apparently, there is another gear for optimism in this market as stocks have just continued to slowly but surely reach for the sky.

Read More »