For more than five years, the mantra for investing has been, “Don’t fight the Fed.” Despite weak revenue growth and geopolitical crises, continuous calls for a correction have proven foolish and the market has surged 200% since its 2009 bottom.  The reason is simple. As the chart below shows, the injection of nearly $3.5 trillion by the Federal Reserve has made all other issues of little importance. You simply cannot pump that much money into the system without putting a huge driver behind asset prices.  But now the Federal Reserve is talking about increasing rates and… Read More

For more than five years, the mantra for investing has been, “Don’t fight the Fed.” Despite weak revenue growth and geopolitical crises, continuous calls for a correction have proven foolish and the market has surged 200% since its 2009 bottom.  The reason is simple. As the chart below shows, the injection of nearly $3.5 trillion by the Federal Reserve has made all other issues of little importance. You simply cannot pump that much money into the system without putting a huge driver behind asset prices.  But now the Federal Reserve is talking about increasing rates and has already reduced its bond-buying program to just $15 billion a month from $85 billion last year. The flow of free money into the system could soon reverse and investors are getting anxious.  If you sell your stocks and wait it out in cash you’ll lose upward of 2% to inflation every year. Holing up in bonds doesn’t look much better with rising rates threatening prices and yields hovering around all-time lows. Fortunately, the game hasn’t changed, but it may be in a different language.  Don’t Fight the Fed, European Style Europe has yet to see the economic rebound we have… Read More

All the world is abuzz over the Alibaba (NYSE: BABA) initial public offering last Friday. The company came to the market with the largest IPO in history — raising $25 billion from the sale of shares. #-ad_banner-#I haven’t seen this much fanfare since the Facebook (Nasdaq: FB) IPO and we all know what happened with shares of the social networking platform. The stock plummeted more than 50% from its first trading days until the company could prove its monetary worth. No doubt Wall Street will provide innumerable price targets for shares of Alibaba and the stock could surge as investors vie for a… Read More

All the world is abuzz over the Alibaba (NYSE: BABA) initial public offering last Friday. The company came to the market with the largest IPO in history — raising $25 billion from the sale of shares. #-ad_banner-#I haven’t seen this much fanfare since the Facebook (Nasdaq: FB) IPO and we all know what happened with shares of the social networking platform. The stock plummeted more than 50% from its first trading days until the company could prove its monetary worth. No doubt Wall Street will provide innumerable price targets for shares of Alibaba and the stock could surge as investors vie for a piece of the Chinese e-commerce marketplace. There are 302 million internet shoppers in China, nearly equal to the entire population of the United States, and the company’s F-1 SEC filing shows 279 million active buyers as of June. The company has grown mobile revenue by 923% and facilitated the sale of $296 billion in merchandise over the last year. Despite the huge growth awaiting the company, shares of Alibaba may not be where the real money will be made. Beyond the nearly $22 billion in IPO funds, Alibaba will have easy access to debt as a public… Read More

Looking at a recent chart of share prices, you’d think shares of some Latin American companies were on fire and might be tempted to jump in for double-digit gains. #-ad_banner-#Shares of the Global X MSCI Argentina Fund (NYSEMKT: ARGT) are up 28% since February lows, only bested by a 31% gain in the iShares MSCI Brazil Capped ETF (NYSEMKT: EWZ). As an analyst, and someone who lives in the region, I follow the markets and political moods pretty closely. Last November, I warned investors about Brazilian companies and a 21% decline in the market followed. In July, I wrote another… Read More

Looking at a recent chart of share prices, you’d think shares of some Latin American companies were on fire and might be tempted to jump in for double-digit gains. #-ad_banner-#Shares of the Global X MSCI Argentina Fund (NYSEMKT: ARGT) are up 28% since February lows, only bested by a 31% gain in the iShares MSCI Brazil Capped ETF (NYSEMKT: EWZ). As an analyst, and someone who lives in the region, I follow the markets and political moods pretty closely. Last November, I warned investors about Brazilian companies and a 21% decline in the market followed. In July, I wrote another article warning investors about Brazil. To those warnings, I am now adding shares of Argentine Banks. Don’t get me wrong, I like double-digit stock returns as much as the next investor. And I believe that emerging markets offer the best opportunity for long-term profits. But if you are not following the political and economic situation closely in these markets, you are setting yourself up for big losses. A downward spiral in Argentina If you have not been following developments in Argentina lately, you’ve missed drama to rival any day-time soap opera. The country defaulted on its debt… Read More

Insider purchases — when a director or company executive buys shares — are some of the most closely followed events in the market. Who better knows whether a stock is overvalued or undervalued than someone with privileged access to the firm’s deals and daily business? While there are several reasons an insider might make smaller transactions that have less to do with their prospects on the company, it is rare that an insider would take a… Read More

Insider purchases — when a director or company executive buys shares — are some of the most closely followed events in the market. Who better knows whether a stock is overvalued or undervalued than someone with privileged access to the firm’s deals and daily business? While there are several reasons an insider might make smaller transactions that have less to do with their prospects on the company, it is rare that an insider would take a large stake without a solid reason for optimism.#-ad_banner-# And when an insider makes one of the biggest purchases in a decade… people stand up and take notice. James Grosfeld, former CEO of Pulte Homes (NYSE: PHM), has been on the board of directors of BlackRock (NYSE: BLK) one of the world’s largest private equity firms, since 1999. He invested $94 million for 500,000 shares of BlackRock in a series of transactions in October. Grosfeld now holds 700,538 shares worth $130 million with a… Read More

If you follow the constant flux of new retailer slogans, it’s apparent how much the industry is changing. From Staples, Inc. to Target Corp., retailers are grasping at anything to reinvigorate their image and revitalize their sales. #-ad_banner-#​But while individual companies like J. C. Penney Co., Inc.  and Sears Holdings Corp. may be falling on hard times, the retail industry itself is not in such bad shape. The SPDR S&P Retail ETF (NYSE: XRT), which tracks a broad swath of the retail industry, jumped 6.5% in August… Read More

If you follow the constant flux of new retailer slogans, it’s apparent how much the industry is changing. From Staples, Inc. to Target Corp., retailers are grasping at anything to reinvigorate their image and revitalize their sales. #-ad_banner-#​But while individual companies like J. C. Penney Co., Inc.  and Sears Holdings Corp. may be falling on hard times, the retail industry itself is not in such bad shape. The SPDR S&P Retail ETF (NYSE: XRT), which tracks a broad swath of the retail industry, jumped 6.5% in August as retailers reported second quarter earnings that were not as bad as feared. But there is one industry that depends on sales at retail establishments, especially the big-box stores like J. C. Penney, for its profitability. This industry is plagued by overcapacity and a dangerous trend toward low-quality assets. Worse yet, some of the weakest in the industry pay yields of up to 5% and income-hungry investors may be tempted to rush in before they know what they are buying. I am talking about the neighborhood shopping mall and the real estate investment trusts,… Read More

Back in 2012, Stephanie Pomboy, founder of MacroMavens, made a rather scary prediction in a Barron’s interview. She called for the end of fiat money and a return to gold as the backing of global monetary value. The argument wasn’t an uncommon one at the time. Central banks around the world were printing money as fast as they could to dig their economies out of the deepest recession in nearly eight decades. The Federal Reserve was well on its way to quadrupling its assets to $3 trillion from 2007. The Bank of Japan was embarking on a plan to double… Read More

Back in 2012, Stephanie Pomboy, founder of MacroMavens, made a rather scary prediction in a Barron’s interview. She called for the end of fiat money and a return to gold as the backing of global monetary value. The argument wasn’t an uncommon one at the time. Central banks around the world were printing money as fast as they could to dig their economies out of the deepest recession in nearly eight decades. The Federal Reserve was well on its way to quadrupling its assets to $3 trillion from 2007. The Bank of Japan was embarking on a plan to double its own assets by 2015. Even the conservative European Central Bank (ECB) was cutting rates, though it did not join the asset-buying party until recently. #-ad_banner-#The idea was that if debtor nations were going to devalue their own currencies by massive money-printing programs, then creditor nations would demand a return to gold-backed monies. Pomboy’s prediction for a return to gold has obviously not come about yet. To be fair, her five-year window doesn’t close until mid-2017. While I don’t agree that fiat money will come to an end, Pomboy certainly hasn’t been alone in calling for investors to look to… Read More

You wouldn’t know it looking at the market, but income investors are in a tough spot. While prices for stocks keep reaching higher, yields on bonds and other safety investments keep falling lower. Nearly half (45%) of all government bonds globally are yielding less than 1% and just 14 of the 54 companies in the S&P 500 Dividend Aristocrats Index pay a 3% yield or higher. #-ad_banner-#Not only are yields lower but the potential return awaiting investors in stocks may not offer the kind of appreciation required to meet your spending needs. Research shows that at… Read More

You wouldn’t know it looking at the market, but income investors are in a tough spot. While prices for stocks keep reaching higher, yields on bonds and other safety investments keep falling lower. Nearly half (45%) of all government bonds globally are yielding less than 1% and just 14 of the 54 companies in the S&P 500 Dividend Aristocrats Index pay a 3% yield or higher. #-ad_banner-#Not only are yields lower but the potential return awaiting investors in stocks may not offer the kind of appreciation required to meet your spending needs. Research shows that at its current price of 18.97 times trailing earnings, the S&P 500 has gone on to post nominal returns of just 2.3% over the subsequent 10 years. What is an income investor to do when traditional investments fail to live up to their promise of cash returns or price appreciation? My best bet: follow the lead of one of the world’s richest men. Death, taxes and waste removal They say that the only certainty in life is death and taxes. To this short list, I would also add waste removal. No matter how much people try,… Read More

The economy is just starting to work its way out of the funk brought by the historically cold winter last year. With still sluggish wage growth and retail demand, many consumer discretionary companies are trying to claw their way back from the dead. And that is why it is the best time to be buying. #-ad_banner-#While a bad selling season can wreck sentiment in a company’s shares, the institutional knowledge remains. Companies with a strong brand and a track record for surprising investors with innovative products are your best bet for a rebound to come. Not only are these best-in-class… Read More

The economy is just starting to work its way out of the funk brought by the historically cold winter last year. With still sluggish wage growth and retail demand, many consumer discretionary companies are trying to claw their way back from the dead. And that is why it is the best time to be buying. #-ad_banner-#While a bad selling season can wreck sentiment in a company’s shares, the institutional knowledge remains. Companies with a strong brand and a track record for surprising investors with innovative products are your best bet for a rebound to come. Not only are these best-in-class innovators a great long-term bet, but the mountain of cash on corporate balance sheets have made them classic buyout targets. From Darling to Dud LeapFrog Enterprises, Inc. (NYSE: LF) surged after its 2002 market debut, jumping 167% in the following 15 months. The company’s LeapPad, released in 1999, revolutionized children’s electronics. Then a drought in new releases and competition hit the company like a ton of bricks. No new major products were released in the five years to 2008, and other portable electronics started chipping away at the company’s market share. Sales growth slumped from an annualized… Read More

Stock investors are no stranger to the concept of size. The evidence is well-documented that small companies tend to outperform their larger rivals. Since the bottom of the recession in 2009, the Russell 2000 index of small-cap stocks has jumped 196% against a return of 164% for stocks in the S&P 500. But does the same logic apply to master limited partnerships? As it turns out, size does matter, but now how you might think. Because MLPs play by a different set of rules than… Read More

Stock investors are no stranger to the concept of size. The evidence is well-documented that small companies tend to outperform their larger rivals. Since the bottom of the recession in 2009, the Russell 2000 index of small-cap stocks has jumped 196% against a return of 164% for stocks in the S&P 500. But does the same logic apply to master limited partnerships? As it turns out, size does matter, but now how you might think. Because MLPs play by a different set of rules than ordinary corporations, size affects them differently and creates an opportunity for investors that know how to spot the difference. One of the best ways to identify the size sweet spot is the cost of equity and debt. Since they distribute most of their cash flow to unitholders, they must constantly issue debt or equity to fund growth. By virtue of smaller economies of scale and more risk, smaller firms may not have access to cheap debt and may have to rely on revolving credit which is more expensive. Read More

Short selling is a hotly debated topic among investors, especially after a strong bull market when valuations start looking a little stretched. Some investors have no problem with borrowing shares to sell, hoping to make money as prices fall. Others see short sellers as manipulators — or worse. One thing is certain: Short sellers can sometimes be their own worst enemies and may give you the opportunity to make fast money with a risk-reduced strategy. #-ad_banner-#You see, short sellers eventually have to buy back the shares they borrowed to close out their position. They also may… Read More

Short selling is a hotly debated topic among investors, especially after a strong bull market when valuations start looking a little stretched. Some investors have no problem with borrowing shares to sell, hoping to make money as prices fall. Others see short sellers as manipulators — or worse. One thing is certain: Short sellers can sometimes be their own worst enemies and may give you the opportunity to make fast money with a risk-reduced strategy. #-ad_banner-#You see, short sellers eventually have to buy back the shares they borrowed to close out their position. They also may have to pay a fee to borrow and do not earn interest on the proceeds from the short sale. Worse yet, they are responsible for any dividends paid on the shares while they are short. Unless shares have downward momentum, short sellers start to see their investment falling further into the red. If shares start rising too much, shorts may give up the gamble and start buying back their positions. You can take advantage of this scenario with a covered call strategy that lowers your risk while still offering strong returns. Read More