The days of dartboard investing in emerging markets are over.   #-ad_banner-#Over the two years ended April 2008, a basket of these markets, as represented by the iShares MSCI Emerging Markets (NYSE: EEM), surged an impressive 60%. You could have invested in any number of these economies and seen solid returns.   This group of markets eventually swooned and rebounded, but it’s increasingly clear that the days of heady returns are gone. In the two years to 2015, the fund lost 11% and individual country funds are posting huge disparities in returns.   As an emerging markets analyst and an… Read More

  The days of dartboard investing in emerging markets are over.   #-ad_banner-#Over the two years ended April 2008, a basket of these markets, as represented by the iShares MSCI Emerging Markets (NYSE: EEM), surged an impressive 60%. You could have invested in any number of these economies and seen solid returns.   This group of markets eventually swooned and rebounded, but it’s increasingly clear that the days of heady returns are gone. In the two years to 2015, the fund lost 11% and individual country funds are posting huge disparities in returns.   As an emerging markets analyst and an expatriate living in South America, I see the shifting economic environment first hand and it’s not just down here. The Russian market is crumbling and stocks of African countries have not done any better.   Yet you can’t paint these markets with a broad brush. Some markets, notably China and India, have done very well over the last year. The iShares China Large-Cap fund (NYSE: FXI) has risen 14% and the WisdomTree India Earnings ETF (NYSE: EPI) has zoomed 38% higher in that period.   In fact, the disparity in emerging markets has reached the point that Jim O’Neill, the… Read More

  Despite strong resistance from the Republican party,  President Obama has been surprisingly adroit in moving his agenda through the legislative process. From healthcare to environmental policy, the President has crafted his legacy over the last six years.   #-ad_banner-#For adept investors that were able to  stay ahead of policy, profitable opportunities have abounded. For example, David Goodboy cited Centene Corp. (NYSE: CNC) as a key  beneficiary of Obamacare in July 2012, and shares went on to surge more than 250%.   That same month, Nathan Slaughter highlighted Alcoa, Inc. (NYSE: AA) as a rebound story on Obama’s Corporate Average Fuel… Read More

  Despite strong resistance from the Republican party,  President Obama has been surprisingly adroit in moving his agenda through the legislative process. From healthcare to environmental policy, the President has crafted his legacy over the last six years.   #-ad_banner-#For adept investors that were able to  stay ahead of policy, profitable opportunities have abounded. For example, David Goodboy cited Centene Corp. (NYSE: CNC) as a key  beneficiary of Obamacare in July 2012, and shares went on to surge more than 250%.   That same month, Nathan Slaughter highlighted Alcoa, Inc. (NYSE: AA) as a rebound story on Obama’s Corporate Average Fuel Economy (CAFE) standards, suggesting it would have a major impact on demand for aluminum. Shares of the metal giant have beaten the S&P 500 by 35% since that article first appeared.   If you were paying attention when the President gave his State of the Union Address last week, then you might have caught another stock tip from the Commander-in-Chief.   In fact, of the proposals the President laid out in his address, I think this stands the best chance at bipartisan support.   And it could throw a lifeline to one struggling industry.   From The Environmental To The… Read More

Mortgage lending fell to a 17-year low of $1.1 trillion in 2014 as tightening credit standards limited growth in new loans. Housing sales dropped for the first time in four years, down 3% to 4.9 million. #-ad_banner-#There has also been a shortage of homes for sale, with 2 million houses on the market in November, up from a monthly average of 1.8 million in 2012 and 2013, but well under the 2.5 million monthly average between 2001 and 2006. Part of the reason for this is that buyers were underwater or barely breaking even on their current mortgages, so they… Read More

Mortgage lending fell to a 17-year low of $1.1 trillion in 2014 as tightening credit standards limited growth in new loans. Housing sales dropped for the first time in four years, down 3% to 4.9 million. #-ad_banner-#There has also been a shortage of homes for sale, with 2 million houses on the market in November, up from a monthly average of 1.8 million in 2012 and 2013, but well under the 2.5 million monthly average between 2001 and 2006. Part of the reason for this is that buyers were underwater or barely breaking even on their current mortgages, so they lacked the equity to sell their home and buy a new one. With news like this, you might not think it’s the best time to start buying into housing-related stocks. But you may have missed one headline that could mean a stronger housing market this year, especially for one segment in particular.   Housing Boom 2.0 With 97% Loan-to-Value Option In December, Fannie Mae (OTC: FNMA) announced that it and Freddie Mac (OTC: FMCC) would begin offering a new lower-down- payment option. The 97% loan-to-value (LTV) program allows qualified first-time homebuyers to put as little as 3% down.  The news… Read More

  I will never forget what a key mentor told me earlier in my investing career, “You can chase billion-dollar money flows on a daily basis or you can look to trillion-dollar themes that develop over years.”   #-ad_banner-#That one lesson is probably responsible for the majority of my investing profits.   Sure, there is  money to be made by following near-term trends and analysis. The problem is that you will always need to be in and out before the trend reverses. Without the power of a trillion-dollar theme, the trend invariably reverses eventually.   Investments with the power of… Read More

  I will never forget what a key mentor told me earlier in my investing career, “You can chase billion-dollar money flows on a daily basis or you can look to trillion-dollar themes that develop over years.”   #-ad_banner-#That one lesson is probably responsible for the majority of my investing profits.   Sure, there is  money to be made by following near-term trends and analysis. The problem is that you will always need to be in and out before the trend reverses. Without the power of a trillion-dollar theme, the trend invariably reverses eventually.   Investments with the power of a trillion-dollar theme might not deliver quick gains, the kind you can score riding  the latest short-term trend. But massive support coming from a big picture theme will keep prices going higher over the long-term. It worked for emerging market investors with a combined 2004 GDP of $3.9 trillion in the four BRIC countries but with growth that was adding nearly a trillion each year. Even after five years of sideways trading, the iShares MSCI Emerging Markets (NYSEMKT: EEM) has annualized 12.8% since its 2003 launch. Apple, Inc. (Nasdaq: AAPL) is another solid example. Starting in 2007, when… Read More

Metals and mining stocks have taken a hit over the past year as global growth slowed and commodity prices plummeted. The SPDR S&P Metals and Mining ETF (NYSE: XME) lost 27% in 2014 and has retreated another 8.5% so far this year. Yet, one metal has bucked the trend, and a three-year supply deficit looks set to continue in 2015 and beyond. Russia accounts for 41% of global production of this rare metal, but reserves in the country are “pretty much exhausted,” according to one of the largest corporate users. As you can see below, palladium held up as other… Read More

Metals and mining stocks have taken a hit over the past year as global growth slowed and commodity prices plummeted. The SPDR S&P Metals and Mining ETF (NYSE: XME) lost 27% in 2014 and has retreated another 8.5% so far this year. Yet, one metal has bucked the trend, and a three-year supply deficit looks set to continue in 2015 and beyond. Russia accounts for 41% of global production of this rare metal, but reserves in the country are “pretty much exhausted,” according to one of the largest corporate users. As you can see below, palladium held up as other metals like copper and platinum plunged last year. As palladium gets more precious and prices defy market forces weighing on other metals, one company stands to benefit as a major producer and recycler. A Tight Market Could Get Tighter #-ad_banner-#Roughly three-quarters of palladium demand goes to the automobile sector. It is used in catalytic converters, which reduce emissions. With the steep drop in gasoline prices, analysts are expecting continued strength in car sales. This, combined with a growing number of vehicles in China, could increase global palladium demand. Johnson Matthey plc, a London-based company that makes a third… Read More

I highlighted LendingClub Corp.’s (NYSE: LC) successful initial public offering in December, but warned investors that enthusiasm for the stock could wane after the first trading days. #-ad_banner-#Despite triple-digit growth in sales and a healthy outlook, I put a buy-under price of $21 on the shares — 20% below where shares were trading at the time. After a rise to $28 in mid December, the shares fell and are currently hovering around my buy-price, and there could still be risk for further downside.   Even with risk, the growth potential of… Read More

I highlighted LendingClub Corp.’s (NYSE: LC) successful initial public offering in December, but warned investors that enthusiasm for the stock could wane after the first trading days. #-ad_banner-#Despite triple-digit growth in sales and a healthy outlook, I put a buy-under price of $21 on the shares — 20% below where shares were trading at the time. After a rise to $28 in mid December, the shares fell and are currently hovering around my buy-price, and there could still be risk for further downside.   Even with risk, the growth potential of this market is too much to ignore.   The peer lending space is a fraction of the $3 trillion consumer credit market, even with growth averaging 100% annually since 2012 and nearly $6 billion in 2013 loan originations.   And companies like LendingClub have a leg up on big name lenders. Peer lending platforms have a cost advantage of up to 4% on traditional banks, and stricter banking regulations put limits on the amount of capital that traditional lenders can deploy.   Fortunately, another recent IPO in the peer lending space offers investors the opportunity to hedge the risks, but… Read More

As we kicked off the fourth-quarter earnings season this week, one sector got rocked on disappointing results.  #-ad_banner-#The market knew that earnings would be weak for banks, but it looks like investors were underestimating just how bad they’d be.  Citigroup (NYSE: C) reported an unbelievable 86% drop in profits to $0.06 per share, missing analyst estimates by 40% and sending the stock tumbling for a 12% loss for the year.  Citigroup isn’t alone. JP Morgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) both reported results that sent their shares lower. The Financial Select Sector SPDR ETF… Read More

As we kicked off the fourth-quarter earnings season this week, one sector got rocked on disappointing results.  #-ad_banner-#The market knew that earnings would be weak for banks, but it looks like investors were underestimating just how bad they’d be.  Citigroup (NYSE: C) reported an unbelievable 86% drop in profits to $0.06 per share, missing analyst estimates by 40% and sending the stock tumbling for a 12% loss for the year.  Citigroup isn’t alone. JP Morgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) both reported results that sent their shares lower. The Financial Select Sector SPDR ETF (NYSE: XLF) fell as much as 4% this week, partly in anticipation of what the market knew would be a tough month. But is there a silver lining to weak earnings? And are there other catalysts that may send bank shares higher from here?   Betting on the Forest Despite the Trees Lower profits from trading activities were a major culprit for the earnings disappointments. Implementation of the Volker Rule meant that banks could no longer bet their own money in proprietary trading, a lucrative business in previous years. Further, high volatility in December kept many investors from… Read More

  You would think that cuts in defense spending would lead to lean times for defense stocks. And you would be wrong.   The PowerShares Aerospace & Defense ETF (NYSE: PPA) has risen 65% over the past two years, even as the defense budget is set to fall by 20% in fiscal (October) 2016, compared to 2014 levels.   The core defense budget is expected to be $534 billion, while supplemental war-related spending would tack on another $51 billion. That would be the lowest level since 2001.     Talk of spending cuts in Washington is nothing new. Read More

  You would think that cuts in defense spending would lead to lean times for defense stocks. And you would be wrong.   The PowerShares Aerospace & Defense ETF (NYSE: PPA) has risen 65% over the past two years, even as the defense budget is set to fall by 20% in fiscal (October) 2016, compared to 2014 levels.   The core defense budget is expected to be $534 billion, while supplemental war-related spending would tack on another $51 billion. That would be the lowest level since 2001.     Talk of spending cuts in Washington is nothing new. Wall Street analysts have been anticipating them for several years. Yet, the factors that have allowed defense stocks to rally in the face of cutbacks are likely to remain in place.   #-ad_banner-#The reasoning behind the rally lies in Congressional control: Republicans take over leadership in the Senate’s 13 committees and Veterans’ Affairs this year. While the Obama administration will still be able to guide policy through the respective departments and cabinet heads, the GOP has already targeted many cutbacks for a fight.   There is a precedent for the turnover and its affect on stocks of defense contractors. Both… Read More

  Investors rarely have a crystal ball when it comes to market action, but recent events in Europe point the way to some fairly predictable outcomes. I got such clarity after reading comments that German  Chancellor Angela Merkel was ready to accept a Greek exit from the Eurozone. Her comments appear related to the fact that upcoming Greek elections have put the euro under renewed pressure.   #-ad_banner-#Greek elections in 2012 threw global markets into a tailspin when it looked like the Syriza party could take control and push a hard line against European Union bailout demands. The iShares MSCI… Read More

  Investors rarely have a crystal ball when it comes to market action, but recent events in Europe point the way to some fairly predictable outcomes. I got such clarity after reading comments that German  Chancellor Angela Merkel was ready to accept a Greek exit from the Eurozone. Her comments appear related to the fact that upcoming Greek elections have put the euro under renewed pressure.   #-ad_banner-#Greek elections in 2012 threw global markets into a tailspin when it looked like the Syriza party could take control and push a hard line against European Union bailout demands. The iShares MSCI EMU (NYSEMKT: EZU), which tracks the EU countries, plunged 13.5% in  May of that year, while the S&P 500 dropped 7.6% over the same period.   Polls now suggest that Syriza will take control after the January 25 vote. The party’s leader, Alexis Tsipras, has already promised that the country will, “write down most of the nominal value of debt… That’s what was done for Germany in 1953, it should be done for Greece in 2015.”   The potential for a breakup of the euro zone sent the markets reeling just two years ago. While it hasn’t affected the stock… Read More

The markets had investors on edge last year as they waited for the other shoe to drop in the form of a correction so many were predicting. After all, the S&P 500 had been up for five straight years including a blockbuster 2013. My own estimate for 2014 was for a gain of just 7% to 1,970 by the end of the year.  #-ad_banner-#I, along with many others, underestimated the market, and the index of large-cap stocks returned another double-digit year.  As everyone asks whether the market can do it for a sixth year, it seems pretty doubtful. Beyond the… Read More

The markets had investors on edge last year as they waited for the other shoe to drop in the form of a correction so many were predicting. After all, the S&P 500 had been up for five straight years including a blockbuster 2013. My own estimate for 2014 was for a gain of just 7% to 1,970 by the end of the year.  #-ad_banner-#I, along with many others, underestimated the market, and the index of large-cap stocks returned another double-digit year.  As everyone asks whether the market can do it for a sixth year, it seems pretty doubtful. Beyond the age of the bull market, oil has plunged with no bottom yet in sight, and we will face the effects of the end to an unprecedented quantitative easing program in the United States and rising interest rates. One ominous sign is that the typically market-leading Russell 2000 index of small-cap companies underperformed last year with a return of just 3.5% versus 11.4% for the S&P 500. But against all this, the writing is on the wall for positive returns. In fact, the catalysts are so strong that I am going to do something that I rarely do… I’m going… Read More