Give credit where it’s due. Ever since China’s government pursued vigorous reforms 35 years ago, the country’s economic growth rate has been simply remarkable.#-ad_banner-# According to the World Bank, roughly half a billion Chinese people have been lifted out of poverty, and the economy is now 90 times larger than it was back in 1978.  Rumors of the imminent demise for this growth machine in recent years have been clearly premature. I noted these concerns more than two years ago, as have noted short seller Jim Chanos and others, and the Chinese economy has still managed… Read More

Give credit where it’s due. Ever since China’s government pursued vigorous reforms 35 years ago, the country’s economic growth rate has been simply remarkable.#-ad_banner-# According to the World Bank, roughly half a billion Chinese people have been lifted out of poverty, and the economy is now 90 times larger than it was back in 1978.  Rumors of the imminent demise for this growth machine in recent years have been clearly premature. I noted these concerns more than two years ago, as have noted short seller Jim Chanos and others, and the Chinese economy has still managed to grow more than 7% annually. In fact, the Chinese government believes that this economy will grow an impressive 7.5% in 2014 as well, which would still be the most impressive growth rate in the world. Trouble is, recent signs point to decelerating growth, perhaps closer to 5%, which would create a drag for the dozens of economies that consider China to be their major trading partner. The trouble spots include local government debt, an increasingly uncompetitive wage structure and a tricky set of adjustments that the government is making to shift toward domestic consumption. Document 107… Read More

I recently noticed an interesting disconnect in the world’s stock markets, one that could mean profits in 2014 for those investors who take advantage. This forecast is based on one of the first short-term investing rules I learned in my initial training class with a proprietary trading firm.#-ad_banner-# The rule is that of correlation. Many stocks and markets appear to be correlated with one another. Simply stated, this means that if one stock out of a correlated pair makes a move, the other generally follows. If the other doesn’t follow, this spells opportunity for the trader. Buying or… Read More

I recently noticed an interesting disconnect in the world’s stock markets, one that could mean profits in 2014 for those investors who take advantage. This forecast is based on one of the first short-term investing rules I learned in my initial training class with a proprietary trading firm.#-ad_banner-# The rule is that of correlation. Many stocks and markets appear to be correlated with one another. Simply stated, this means that if one stock out of a correlated pair makes a move, the other generally follows. If the other doesn’t follow, this spells opportunity for the trader. Buying or selling the stock that disconnects from its historical correlated pattern with its match provides strong odds of profits.  Why is this? Well, based on past behavior, the stock that disconnects from the historical correlation generally will migrate back toward the correlation, producing profits for the investor who acts upon this disconnect.   That said, I am not implying that this is a sure thing. After all, there are no sure things in the stock market. Sometimes, previously correlated stocks become uncorrelated and never fall back in line with each other. But even so, this method can provide a statistical edge… Read More

ETFs are designed to decrease risks by offering investors access to a group of stocks. However, the use of highly specialized indexes by ETFs can increase exposure to the riskiest sectors and lead to large losses when trends reverse. To find the right balance, we look for ETFs that have diversified holdings and can benefit from several investment trends.#-ad_banner-# Heading into 2014, we see several important economic themes developing that should have a large impact on stocks. In the U.S., robust retail spending in November and an upward revision to October’s data has led to hopes that consumer spending will… Read More

ETFs are designed to decrease risks by offering investors access to a group of stocks. However, the use of highly specialized indexes by ETFs can increase exposure to the riskiest sectors and lead to large losses when trends reverse. To find the right balance, we look for ETFs that have diversified holdings and can benefit from several investment trends.#-ad_banner-# Heading into 2014, we see several important economic themes developing that should have a large impact on stocks. In the U.S., robust retail spending in November and an upward revision to October’s data has led to hopes that consumer spending will pick up in 2014. Since consumer spending accounts for about two-thirds of GDP, it is unlikely we’ll experience a recession if this trend continues. Recent data also indicates that Europe will finally be joining the U.S. economy in an expansion. And with Asian economies expected to expand too, this could be the first synchronized global expansion since at least 2008, when the credit market crisis sparked deep economic declines around the world. Automakers could be among the biggest winners from a strong global economy. In the U.S., some analysts expect car sales to reach 16.4 million in 2014, the highest… Read More

I recently posed a hard-to-answer question: Where will next year’s top-performing markets be? To answer that question, you have to make certain assumptions:#-ad_banner-# • Will commodity prices rebound? If so, then the iShares MSCI All Peru Capped ETF (NYSE: EPU), which has been the worst country fund of 2013, could post a great rebound. • Will the rebuilding process in the damaged parts of the Philippines lead that economy to resume its recently spectacular rates of economic growth? That was the case in Indonesia, which went on to deliver one of the world’s most impressive growth rates after the… Read More

I recently posed a hard-to-answer question: Where will next year’s top-performing markets be? To answer that question, you have to make certain assumptions:#-ad_banner-# • Will commodity prices rebound? If so, then the iShares MSCI All Peru Capped ETF (NYSE: EPU), which has been the worst country fund of 2013, could post a great rebound. • Will the rebuilding process in the damaged parts of the Philippines lead that economy to resume its recently spectacular rates of economic growth? That was the case in Indonesia, which went on to deliver one of the world’s most impressive growth rates after the devastating tsunami of 2004. • Will it be Turkey, which is aiming to bring down inflationary pressures so the country’s ideal geographic positioning help it again become the trade conduit between Europe and Asia, the Middle East and Africa? • Will it be the BRICs (Brazil, Russia, India and China), which collectively account for more than half of the world’s population — and, as a result, possess huge domestic market growth prospects? Simply using a one-year time horizon for potential gains is the wrong way to focus on the topic. All these countries have great long-term potential, but some are… Read More

I’ve always loved telco stocks.#-ad_banner-# As investors, we’re told to train ourselves to look at stocks rationally and to remove emotion from the process. Warren Buffett warns that your stock won’t tell you it loves you when you come home at night. But dividend investing is also about finding great yield — and, with a tip of the hat to Willie Sutton, telco stocks are where the money is. Investors have almost always done well with domestic heavyweights AT&T (NYSE: T) and Verizon (NYSE: VZ). But I’ve always found more yield and value in international telco stocks. Vodafone Group (NYSE:… Read More

I’ve always loved telco stocks.#-ad_banner-# As investors, we’re told to train ourselves to look at stocks rationally and to remove emotion from the process. Warren Buffett warns that your stock won’t tell you it loves you when you come home at night. But dividend investing is also about finding great yield — and, with a tip of the hat to Willie Sutton, telco stocks are where the money is. Investors have almost always done well with domestic heavyweights AT&T (NYSE: T) and Verizon (NYSE: VZ). But I’ve always found more yield and value in international telco stocks. Vodafone Group (NYSE: VOD) has always been a good holding thanks to the British company’s investment in Verizon (a 41% stake before its recent sale) and its focus on emerging and frontier markets. Telefonica Brasil (NYSE: VIV) has the yield and value characteristics I look for in an international telco stock. The Sao Paulo-based telecom provides fixed-line and mobile communications, broadband Internet and pay TV services, among other offerings. A subsidiary of global telecom conglomerate Telefonica (NYSE: TEF), Telefonica Brasil serves nearly 28% of Brazil’s wireless market under the Vivo brand. Yet VIV is off by more than 30% from its 52-week high. Read More

We are closing the books on a remarkable six-year cycle for stocks, bonds and the global economy. You can break this cycle down into four distinct phases: • In early 2008, global economies began to show some cracks, especially in the all-important U.S. housing sector, yet concerns of global overheating were still evident, as seen by the “super-spike” in crude oil to more than $140 a barrel in June 2008. That surge may have been the tipping point that pushed many economies to the breaking point, and by year’s end, the global economy was in freefall.  • In… Read More

We are closing the books on a remarkable six-year cycle for stocks, bonds and the global economy. You can break this cycle down into four distinct phases: • In early 2008, global economies began to show some cracks, especially in the all-important U.S. housing sector, yet concerns of global overheating were still evident, as seen by the “super-spike” in crude oil to more than $140 a barrel in June 2008. That surge may have been the tipping point that pushed many economies to the breaking point, and by year’s end, the global economy was in freefall.  • In 2009, unemployment surged, a slew of European economies appeared to be on the cusp of collapse, and government policy makers were scrambling to avoid a truly catastrophic global economic meltdown. • In 2010 and 2011, business conditions began to improve, most notably in the U.S. And China’s economic resilience helped many Asian neighbors buck the global malaise.  • In 2012 and 2013, investors finally realized that further global crises wouldn’t derail an impressive market rally in the U.S. (and eventually Europe), and as we wind down this six-year cycle, economists are calling for calmer days ahead in 2014, led by… Read More

As we close the books on 2013, one clear theme has emerged. Investors have flocked to developed economies and shunned emerging markets. The S&P 500 Index is on track for a nearly 30% gain this year, but many emerging markets have tumbled by double digits.#-ad_banner-# That kind of massive performance gap only emerges every decade or so, and for farsighted investors willing to look past near-term headwinds, emerging markets now represent tremendous relative value. You don’t need to tell that to the executives at major U.S. companies. They already know that emerging markets have generated — and will continue to… Read More

As we close the books on 2013, one clear theme has emerged. Investors have flocked to developed economies and shunned emerging markets. The S&P 500 Index is on track for a nearly 30% gain this year, but many emerging markets have tumbled by double digits.#-ad_banner-# That kind of massive performance gap only emerges every decade or so, and for farsighted investors willing to look past near-term headwinds, emerging markets now represent tremendous relative value. You don’t need to tell that to the executives at major U.S. companies. They already know that emerging markets have generated — and will continue to generate — robust growth rates, thanks in large part to ever-rising middle classes. While developed economies are growing at a 2% pace, emerging-market economies are growing at a 4% to 5% pace. Asian emerging markets are rising an even more impressive 6%, according the International Monetary Fund (IMF). The key takeaway: Even if you’re wary of investing in volatile emerging markets directly, you can focus on the U.S. companies that are positioned to derive a rising level of sales and profits in these countries. Thankfully, the strategists at Citigroup have already done the heavy lifting. In a recent report, Citi’s… Read More

The most successful investors on Earth all share a common trait: the ability to see and act on long-term trends.#-ad_banner-# While the majority of investors are focused on short-term results, the top investors are primarily concerned with being on the correct side of global economic growth patterns. Finding and investing in companies that are riding these global growth trends is a recipe for long-term investing success. Right now, China is attracting substantial investor interest due to its demographic shift toward a consumer-driven economy. Following the emerging Chinese bull hasn’t always been easy, thanks to the government’s tight control over the… Read More

The most successful investors on Earth all share a common trait: the ability to see and act on long-term trends.#-ad_banner-# While the majority of investors are focused on short-term results, the top investors are primarily concerned with being on the correct side of global economic growth patterns. Finding and investing in companies that are riding these global growth trends is a recipe for long-term investing success. Right now, China is attracting substantial investor interest due to its demographic shift toward a consumer-driven economy. Following the emerging Chinese bull hasn’t always been easy, thanks to the government’s tight control over the economy. However, this situation is well on its way to changing as China’s leaders are turning their formidable powers toward spurring the economy rather than being strictly focused on rigid controls. Most importantly for investors, the government’s focus on economic growth is combining with the power of the Internet to create one of the most exciting investment opportunities I’ve ever seen. The goal of China’s current five-year economic plan is to increase domestic demand and reduce the population’s high rate of savings. They are accomplishing these goals by increasing incomes, improving social safety nets, altering the tax structure, and actively… Read More

Look over a typical dividend investor portfolio, and you’ll probably find the usual utility stock suspects: Southern Co. (NYSE: SO), American Electric Power (NYSE: AEP), Consolidated Edison (NYSE: ED). These are the biggest of the big domestic power generators. You can set your watch by their cash flow, which means you know what kind of dividends to expect. But they don’t grow much. Because of the highly regulated nature of the business, there’s little opportunity to expand their footprint or unlock special value for shareholders. When this happens, stock prices don’t move much. Just look at the price action of… Read More

Look over a typical dividend investor portfolio, and you’ll probably find the usual utility stock suspects: Southern Co. (NYSE: SO), American Electric Power (NYSE: AEP), Consolidated Edison (NYSE: ED). These are the biggest of the big domestic power generators. You can set your watch by their cash flow, which means you know what kind of dividends to expect. But they don’t grow much. Because of the highly regulated nature of the business, there’s little opportunity to expand their footprint or unlock special value for shareholders. When this happens, stock prices don’t move much. Just look at the price action of the Dow Jones Utility Average over the past half-decade: #-ad_banner-#A five-year average annual return of better than 13% is nothing to sneeze at. Investors have always gravitated toward utilities for their stable income and safety during turbulent markets. However, when equity markets are in full-tilt boogie, utility stocks typically underperform. What about the best of both worlds? Is there an investment that provides dependably high income with growth superior to that of the Dow Jones Utilities? I’ve found a utility stock that provides a great, safe income stream and has outperformed the Dow Jones Utilities by over 70%… Read More

Buying value is an investment philosophy that works. To benefit from a value strategy, investors have to decide on a definition for value. There are numerous ways to decide when a stock offers value, and many of these methods work well as long as they are applied with discipline. For deciding when a stock market in general offers value, we prefer to use the CAPE ratio defined by Robert Shiller. The CAPE ratio — which stands for cyclically adjusted price-to-earnings (P/E) — is calculated with inflation-adjusted earnings over the past 10 years. This smoothes out the sudden spikes… Read More

Buying value is an investment philosophy that works. To benefit from a value strategy, investors have to decide on a definition for value. There are numerous ways to decide when a stock offers value, and many of these methods work well as long as they are applied with discipline. For deciding when a stock market in general offers value, we prefer to use the CAPE ratio defined by Robert Shiller. The CAPE ratio — which stands for cyclically adjusted price-to-earnings (P/E) — is calculated with inflation-adjusted earnings over the past 10 years. This smoothes out the sudden spikes in earnings seen in recessions and at the beginning of an economic expansion, and provides a way to judge a market’s value based on a full economic cycle. In the past, when the CAPE ratio has been high, stock prices have delivered below-average returns over the next few years. Low CAPE ratios highlight long-term buying opportunities. Shiller’s CAPE can be applied to any stock market in the world. Investors looking at CAPE to make investment decisions a year ago may have bought stocks in Greece where the CAPE ratio was 2.6, the lowest of any global stock market. Investors willing… Read More