20
Jan
2016
Stock Prices are Lower. Are They Cheap?
Yesterday, Mike Lissner came over to my desk and asked what the Price Earnings-ratio (PE-ratio) was for the S&P 500. I leaned over to my handy-dandy Bloomberg terminal, and looked it up and told him that it was 16.8. He then asked what the average was and moving to a different screen, I showed him that the average PE-ratio for the S&P 500 since 1954 was 16.4 and the median… Read More
19
Jan
2016
Does the Stock Market Selloff Make Sense?
Years ago, I read a book by highly regarded hedge fund manager Joel Greenblatt, where he explains why he thinks that markets aren’t efficient. As I recall it, he asks his students to pick out a handful of their favorite stocks and then tells them to look up the 52-week high and low for the stocks and record those prices. Then, in class, they report those numbers to each other. For… Read More
15
Jan
2016
Portfolio Insights
We are pleased to provide a digital copy of Portfolio Insights, our quarterly newsletter. Table of Contents: Stock Market Summary Bond Market Review The Fed Awakens Volatility Strikes Back Click here to read the issue: 2015 Q4 Portfolio Insights
15
Jan
2016
Insight: Fed’s Backing Down
Comments from central bankers have been dovish in recent days – they seem to be backing down from earlier statements that suggested that the fed funds rate could increase by one percent or more this year. St. Louis Federal Reserve President James Bullard noted that ‘with renewed declines in crude oil prices in recent weeks, the associated decline in market-based inflation expectations measures is becoming worrisome.’ He further said that… Read More
14
Jan
2016
Insight: More Bears are Growling
The widely followed Dow Jones Industrial Average (DJIA) fell -365 points, bringing it perilously close to correction territory, which is generally defined as a decline of -10 percent from the recent peak. The S&P 500 is already in correction territory having not fully recovered from the steep losses last August. The rally in October offset most of the losses, but a new peak was not reached since last May. While… Read More
13
Jan
2016
Insight: David Bowie, Finance Wizard?
You may or may not be a David Bowie fan, but either way, you’ll probably be surprised by his contribution to finance. In 1997, David Bowie was a wealthy man, but didn’t have enough cash to buy out the other 50 percent co-owner of the songs that he had written. He was buddies with an investment banker who proposed a novel idea: sell bonds using his song library as collateral… Read More
12
Jan
2016
Earnings Season is Upon Us
The headlines have been filled with major macroeconomic news from China and elsewhere that have pushed stock prices lower. It’s perfectly legitimate to factor this news into stock prices because our collective fortunes are tied together whether we like it or not. If Chinese gross domestic product falls substantially, you can be sure that ours will drop as well along with growth prospects for US companies. Last night, earnings season… Read More
11
Jan
2016
ALM Insights – January 2016
ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: We Have Liftoff! But I Thought Rates Went Up? Is The Canary Still Singing?
8
Jan
2016
China Rocks Markets
Last April, I wrote that the Chinese stock market was red hot and that I didn’t watch China closely enough to say whether it was in a bubble, but it was an expensive market (click here for the article). By the end of summer, it was pretty clear that there was a bubble and that it was bursting (click here for the article), as we can see in the chart… Read More
5
Jan
2016
Oil Prices Drop on Middle East Tension?
One of the puzzling aspects of yesterday’s trading was that oil prices fell. When I read about the malaise between Saudi Arabia and Iran over the weekend, I assumed that oil prices would gap higher yesterday morning. Violence in the Middle East has always meant threats to output, which meant potentially lower supply or other disruptions that resulted in higher prices. In this case, though, the geopolitical tension between these… Read More