As I wrote earlier this week, the plunge in oil prices has dramatically cut profits for energy firms (see the article here). Some of those companies have been using their excess cash over the last few years to buy back shares of their own stock, which reduces the number of shares outstanding held by investors. Last year, I looked at buybacks versus dividends (read the article here) and today I… Read More
Thankfully, Greece has been out of the headlines for a few weeks as the Mediterranean country continues to negotiate their third bailout in five years. In the meantime, some of the capital controls are beginning to lift: banks reopened on July 20 (although withdrawals are still severely limited) and yesterday, the Greek stock market opened again, albeit -16 percent lower. Obviously, that’s an enormous decline – the S&P 500 has… Read More
We are now almost three quarters of the way through the current earnings season and, so far, earnings are down around -1.3 percent from last year according to FactSet. That’s much better than what markets were expecting at the outset of the quarter, which was -4.6 percent as 73 percent of companies reported results better than analyst estimates. Results in the energy sector have been especially terrible, falling -57 percent… Read More
One of the hottest trends in investing over the past five to ten years has been investing in master limited partnerships (MLPs). As the name states, an MLP is a limited partnership that is somehow engaged in the natural resources business. MLPs engage in the exploration and development (upstream), processing and transportation (midstream) and distribution and marketing to end consumers (downstream) of products like timber, coal, minerals, oil natural gas… Read More
As expected, the Federal Reserve Open Market Committee (FOMC) left short-term interest rates unchanged yesterday. Their statement yesterday along with other comments from Fed officials imply that the Fed is on course to raise rates later this year, citing solid job gains and lower unemployment. Specifically, the statement yesterday added the word ‘some’ to a key phrase: ‘The Committee anticipates that it will be appropriate to raise the target range… Read More
When you buy an index fund, it’s natural to expect that your fund will earn basically the same return as the index. In a perfect world, you should expect an index fund to earn the index returns minus the cost of the index fund. If an index fund charges 0.1 percent annually and an index earns 10 percent, you should expect to earn 9.9 percent. There are other reasons why… Read More
Oil entered another bear market after falling approximately 21 percent from the recent high in May, although you can see that the current bear market for oil is nothing like the one that occurred at the end of last year. The rout in Chinse stocks is partly to blame because China is the world’s largest oil importer and second largest oil consuming country and an economic slowdown would further cut… Read More
One of the bedrock ideas behind Modern Portfolio Theory (MPT) is that diversification lowers risk. A simple view of that concept is that a portfolio of many stocks is less risky than a portfolio that contains one stock because the impact of a failure like Lehman Brothers or Enron won’t blow apart your whole portfolio. Of course, all stocks can go down substantially, like they did in 2008, so diversification… Read More
While Greece is getting all of the headlines, the bubble in mainland Chinese stocks that I wrote about in April and June is now bursting (click here or here for refreshers). The Shenzhen index is down -38.5 percent from its peak on June 12th through yesterday and the Shanghai index is down -27.9 percent over the same time period. The following shows these two indexes in yellow and orange compared to the S&P 500 in blue… Read More
While I’m dying to take a break from the ongoing financial crisis in Greece, I also want to show how the calamity isn’t destabilizing markets so far. Importantly, US stocks barely budged yesterday in response to the news, although stocks overseas didn’t fare as well. The FTSE Developed Markets ex North America index fell by -1.61 percent while the FTSE Emerging Markets Index dropped -1.98 percent. While prices tell us… Read More
