Steeped in rich history, DuPont (NYSE: DD) and Dow Chemical Co. (NYSE: DOW) the massive chemical companies responsible for the development of everything from gunpowder to plastics to pesticides and other agricultural products recently announced plans to merge. Subject to regulatory approval the deal will give shareholders from each company roughly 50% ownership of the new company’s shares. The deal alone is not a shocking development. The two companies have been in talks for years about a possible merger. It’s what this new company will do after the completion of this merger that may… Read More

Steeped in rich history, DuPont (NYSE: DD) and Dow Chemical Co. (NYSE: DOW) the massive chemical companies responsible for the development of everything from gunpowder to plastics to pesticides and other agricultural products recently announced plans to merge. Subject to regulatory approval the deal will give shareholders from each company roughly 50% ownership of the new company’s shares. The deal alone is not a shocking development. The two companies have been in talks for years about a possible merger. It’s what this new company will do after the completion of this merger that may have many scratching their heads.  The combined company, to be named DowDuPont, will immediately begin disbanding the moment it begins running as one business. You see, right now, each of the two separate companies operates a number of separate businesses.  Like I mentioned, Dow and DuPont make a multitude of agriculture products, specialty chemicals for manufacturing and paints, sealants and insulation products for consumers, and that’s only the tip of the iceberg. There are hundreds – likely thousands – of different products sold be each company if you were to list them all. Obviously, when dealing with such a large… Read More

No matter where you look in the financial press, you see predictions about what the Federal Open Market Committee (FOMC) will do with interest rates after its next meeting.  This is nothing new, of course. It’s been happening every few months for years. And it has certainly picked up steam with many inside the Federal Reserve openly discussing the likelihood of a hike.  But journalists aren’t allowed to attend FOMC meetings, and can only report the results when the committee issues a press release.  So whenever an event like this comes up investment “journalists” and speculators are forced to create… Read More

No matter where you look in the financial press, you see predictions about what the Federal Open Market Committee (FOMC) will do with interest rates after its next meeting.  This is nothing new, of course. It’s been happening every few months for years. And it has certainly picked up steam with many inside the Federal Reserve openly discussing the likelihood of a hike.  But journalists aren’t allowed to attend FOMC meetings, and can only report the results when the committee issues a press release.  So whenever an event like this comes up investment “journalists” and speculators are forced to create the story themselves.  The New York Times — amongst many other widely-read outlets — has now made the claim that Friday’s jobs report “all but guarantee[s] that policy makers at the Federal Reserve will raise interest rates” this month. But why is that? What is a jobs report, exactly?  Can One Report Change Everything? Also known as the Employment Situation Report, the jobs report is released monthly by the Bureau of Labor Statistics  that shows how many jobs (non-farm payrolls) have been added in the United States during the previous month. It also gives information about the current unemployment… Read More

On Tuesday, I argued in this article that banks have officially lost it again.  They’re lending people money that they never expect will be able to pay them back… all for a few percentage points of short-term returns.  This chart wraps up this thesis perfectly: As you can see, there is a significant rise in the number of new auto loans for the groups with poor credit. “Near prime” (in yellow) are borrowers who have credit scores of less than 660. “Subprime” (in red) have scores below 600. Yet these two groups have received more new money to… Read More

On Tuesday, I argued in this article that banks have officially lost it again.  They’re lending people money that they never expect will be able to pay them back… all for a few percentage points of short-term returns.  This chart wraps up this thesis perfectly: As you can see, there is a significant rise in the number of new auto loans for the groups with poor credit. “Near prime” (in yellow) are borrowers who have credit scores of less than 660. “Subprime” (in red) have scores below 600. Yet these two groups have received more new money to buy cars than any other. Why would banks do this? Because these groups have to take whatever interest rates they can get. And banks are desperate.  Specifically, there are two lenders doing this more than anyone else. And if you know what’s good for you, you’ll steer clear of them. The first is probably not a huge surprise, if you think about it. Over the last decade, American carmakers have struggled. They have not been able to compete as well with the likes of Toyota and Honda. Resale values for cars made by General Motors, Ford and Chrysler have dramatically… Read More

Mistakes of the past mean little to anyone in the modern banking industry. And now an unforgivable trend may have just hit its tipping point. I want to say upfront that this problem alone won’t be as devastating to the global economy as the housing bubble and burst was. But it could end our nice little — albeit slow — recovery for a while… and it certainly could affect the rate at which the Fed tightens its monetary policy. And if any other major economic disaster accompanies this problem — like, say, a few countries exiting the euro or a… Read More

Mistakes of the past mean little to anyone in the modern banking industry. And now an unforgivable trend may have just hit its tipping point. I want to say upfront that this problem alone won’t be as devastating to the global economy as the housing bubble and burst was. But it could end our nice little — albeit slow — recovery for a while… and it certainly could affect the rate at which the Fed tightens its monetary policy. And if any other major economic disaster accompanies this problem — like, say, a few countries exiting the euro or a full-blown Japanese depression — this could be the trigger to send the U.S. economy over the cliff.  U.S. Banks Are Going To Extremes To Increase Profits Many banking institutions have struggled these past several years. I know, it sounds absurd that after all that government money through TARP and other giveaway programs, banks could still be in trouble. But it’s precisely because of all this so-called “free money” that they are struggling. You see, the bottom line for a typical bank is comprised of the margin between how much they spend on short-term financing of their own and how… Read More

The biggest problem with investing in stocks is not knowing when to buy… it’s knowing when to sell. Or, to put it a better way, it’s knowing how to sell.   You see, anyone can tell that today’s market is overpriced. The average S&P 500 stock is trading at a price-to-earnings ratio of 22. Historically, they average 15 times their earnings. Meaning, on the most basic level, the average U.S. stock is overvalued by as much as 47%. You have tech stocks like Alphabet (Nasdaq: GOOG), formerly Google, and Amazon (Nasdaq: AMZN) trading at even higher valuations. Even boring old… Read More

The biggest problem with investing in stocks is not knowing when to buy… it’s knowing when to sell. Or, to put it a better way, it’s knowing how to sell.   You see, anyone can tell that today’s market is overpriced. The average S&P 500 stock is trading at a price-to-earnings ratio of 22. Historically, they average 15 times their earnings. Meaning, on the most basic level, the average U.S. stock is overvalued by as much as 47%. You have tech stocks like Alphabet (Nasdaq: GOOG), formerly Google, and Amazon (Nasdaq: AMZN) trading at even higher valuations. Even boring old Dow Jones Industrial Average blue chips like General Electric (NYSE: GE) and Johnson & Johnson (NYSE: JNJ) are objectively overpriced. But does that mean you should sell all of your stock positions?  It would be nice if investing was that simple. But it’s not. Stocks can — and often do — remain overvalued for extended periods of time. In fact, they could still go up significantly from here. But more importantly, even if you would sell your stocks, then what? If you trade into bonds, you face huge interest rate risk. More than half of the economists on the news… Read More

On Wednesday, I sounded the alarm about the problems looming for some consumer staples stocks. In short, many of these blue chips have been in business for decades — if not centuries — and have had their growth slowly grind to a crawl of late. I pointed out one stock in particular that might soon have to cut its dividend — which could devastate income investors who rely on those regular checks in their retirement. Kimberly-Clark Corp. (NYSE: KMB) may still seem like a safe place to keep your money. But as I pointed out, it has some fundamental problems… Read More

On Wednesday, I sounded the alarm about the problems looming for some consumer staples stocks. In short, many of these blue chips have been in business for decades — if not centuries — and have had their growth slowly grind to a crawl of late. I pointed out one stock in particular that might soon have to cut its dividend — which could devastate income investors who rely on those regular checks in their retirement. Kimberly-Clark Corp. (NYSE: KMB) may still seem like a safe place to keep your money. But as I pointed out, it has some fundamental problems that should make you think twice before investing in KMB today. Of course, not all stocks are created equal. And it certainly doesn’t mean all income-seeking individuals should avoid all consumer staples forever.  The best consumer staples investments are those that can pass two basic tests.  These tests can also identify good income plays in other industries, such as utilities, telecoms and tobacco plays. Today, I’ve found a consumer staples stock that passes these two tests with flying colors. If you ‘re looking for a great new addition to your income portfolio, read on. But you should also know how… Read More

There are a lot of uncertainties in today’s markets. Worries about China, low oil prices, and fears of deflation are all taking their toll on investors. At the same time, more Americans than ever before are close to retirement age. According to the U.S. Census Bureau, more than 15% of the U.S. population will be age 65 or older by 2020. And most of those retirees will be relying on steady income from their investments to support them through their golden years.  So it is becoming increasingly important to regularly evaluate your portfolio holdings and make sure that all of… Read More

There are a lot of uncertainties in today’s markets. Worries about China, low oil prices, and fears of deflation are all taking their toll on investors. At the same time, more Americans than ever before are close to retirement age. According to the U.S. Census Bureau, more than 15% of the U.S. population will be age 65 or older by 2020. And most of those retirees will be relying on steady income from their investments to support them through their golden years.  So it is becoming increasingly important to regularly evaluate your portfolio holdings and make sure that all of your investments — especially the dividend payers — are safe. Of course, this problem isn’t just one for people done with their careers. Income investing is also crucial to anyone saving for retirement (or any other long-term goal). Income compounding is one of the only tried and true ways to build a nest egg. But you can’t compound anything if one day your stocks stop paying you a dividend. And some of the most popular dividend payers have started showing signs of trouble… Slowing Growth Is Signaling Trouble For This Industry One of the most popular industries that income… Read More

You often hear about recession-resistant investments, especially in the years since 2008… when the financial world was burning to the ground. #-ad_banner-#But if you had to guess which industry performs the best in all bear markets — one that delivered 9.5% returns in 2008 (when the S&P 500 lost a third of its value) and more than tripled in value during the Great Depression (when other stocks lost more than two-thirds of their value) — what would your guess be? Unless you read the same studies and research as me, I’m guessing you wouldn’t answer trees. That’s right… and it… Read More

You often hear about recession-resistant investments, especially in the years since 2008… when the financial world was burning to the ground. #-ad_banner-#But if you had to guess which industry performs the best in all bear markets — one that delivered 9.5% returns in 2008 (when the S&P 500 lost a third of its value) and more than tripled in value during the Great Depression (when other stocks lost more than two-thirds of their value) — what would your guess be? Unless you read the same studies and research as me, I’m guessing you wouldn’t answer trees. That’s right… and it makes sense too. A tree doesn’t know anything about too-big-to-fail banks, tech bubbles or savings and loan scandals. They keep growing, constantly getting bigger… offering more resources to harvest. Timberland is not just a good bet for bear markets, however. Over the last 18 quarters — four and a half years — the NCREIF Timberland Index has only had one negative quarter of performance. And that one barely counts, since the index fell just 0.35%. So even though trees aren’t necessarily a sexy investment, it’s one you should pay attention to… or at the very least… Read More

The energy market is officially broken. That’s according to the International Energy Agency (IEA). On November 10, the group announced that oil prices will remain low for a long time. Next year, the agency is forecasting a barrel of crude will go for just $60… and only $80 by 2020. For hundreds of U.S. companies caught up in the shale oil boom over the last decade, that’s disastrous news. At $60 a barrel, many oil companies will not generate enough revenue to break even. The root cause of this extended period of uneconomic oil prices, according to the IEA, is… Read More

The energy market is officially broken. That’s according to the International Energy Agency (IEA). On November 10, the group announced that oil prices will remain low for a long time. Next year, the agency is forecasting a barrel of crude will go for just $60… and only $80 by 2020. For hundreds of U.S. companies caught up in the shale oil boom over the last decade, that’s disastrous news. At $60 a barrel, many oil companies will not generate enough revenue to break even. The root cause of this extended period of uneconomic oil prices, according to the IEA, is the decision by the Organization of the Petroleum Exporting Countries (OPEC) to continue producing at 2014 levels. OPEC is made up of member countries like Saudi Arabia, Iran and Kuwait. The idea behind OPEC’s production mandate is to force many of the newer unconventional producers out of the market. While this will greatly impact OPEC’s own budgets, that strategy might end up bearing fruit. Nonetheless, there’s a far different winner in this story… one OPEC might not have even considered. To understand this side of the equation we have to first look at a completely different part of the energy… Read More

With the elections around the corner, it only makes sense to bring up the enormous elephant in the room: politicians are rich… and intend to stay that way. Ben Carson left his campaign last month to spend time on a book tour. Trump came out with his own book recently. Of course, none of that’s new. Newt Gingrich did the same last election cycle.  And we know that the Clintons both made the vast majority of their wealth through book sales and speeches. The Obamas too. What might not be so apparent — but surely not shocking all the same… Read More

With the elections around the corner, it only makes sense to bring up the enormous elephant in the room: politicians are rich… and intend to stay that way. Ben Carson left his campaign last month to spend time on a book tour. Trump came out with his own book recently. Of course, none of that’s new. Newt Gingrich did the same last election cycle.  And we know that the Clintons both made the vast majority of their wealth through book sales and speeches. The Obamas too. What might not be so apparent — but surely not shocking all the same — is that the vast majority of politicians are also successful investors. According to the Office of Public Records of the Secretary of the Senate, 50% of federally-elected politicians are millionaires. Much of that was due to “successful investments and portfolio management.” I say that so tongue-in-cheek because of this other simple fact from the same watchdog group: members of the House of Representatives outperform regular investors by 6.8 percentage points. Think about what that means. In years when you make 10%, they make 16.8%. When you lose 5%, they still make 1.8%. You can’t tell me that they are… Read More