Over the last six months or so, small-cap stocks have enjoyed one of their strongest periods of relative performance in history. In the five months that ended in February, the S&P 500 is up 14.1 percent, which is a terrific return, but the S&P 600 Small-Cap index, is up 50.3 percent, which is tremendous. This month isn’t over, so it’s too soon to say for sure, but as of Friday,… Read More
Last week, I wrote that that frenetic trading of a handful of stocks was affecting our portfolios, albeit moderately. I noted that GameStop was the largest holding in the S&P 600 small-cap index, which meant that we owned it through the index fund that tracks that index (and a few other places: for more, click here). Last week, GameStop stock fell -80 percent, but it didn’t hurt us too badly… Read More
Have you been hearing a lot about SPACs? They are one of the current poster-boys for market froth, along with Tesla, IPOs, bitcoin, and Robinhood traders. Officially, SPACs are ‘special purpose acquisition companies,’ but are often called blank-check companies. Historically, a relatively well-known investor would raise cash and form a SPAC, which is publicly traded. But, until the SPAC went out and bought a company with the cash they raised,… Read More
Last week, I saw an interesting table from Goldman Sachs that estimated economic growth across the globe. The table looked exactly like the first four columns of this table, including the various highlights. Those columns show the annual inflation adjusted (or ‘real’) growth rates for those economies. I took their data and annualized 2020 through 2022 to see what they expect in the first year of the downturn and what… Read More
In response to the economic shutdown caused by covid-19, the government has effectively printed almost $5 trillion dollars. Congress passed a fiscal stimulus package of $2.9 trillion and the Federal Reserve has bought more than $2 trillion in bonds from the open market. Moreover, there is a debate in Washington to see whether Congress should pass another stimulus package and the Fed has committed unlimited funds to fight the economic… Read More
One of the phrases that we see over and over again these days is ‘since the Great Depression.’ For example, the employment situation reports on Friday showed that the unemployment rate was the worst since the Great Depression. In the Great Depression, unemployment reached 25 percent, and the second worst reading until last week was 10.8 percent. While perfectly accurate, I worry a little that using this phrase too much… Read More
About one month after Lehman Brothers collapsed during the 2008 financial crisis, Warren Buffett penned an opinion piece for the New York Times that I found immensely comforting. You can read the article by clicking here, but the thrust of it was that even if he didn’t know what stock prices would do in the short-run, that stocks would make record profits in the future and he was buying stocks. My… Read More
Yesterday, the Commerce Department announced that the economy contracted by -4.8 percent in the first three months of 2020, the worst reading since the last quarter of 2008. Analysts expect that next quarter, GDP will drop by more than 30 percent, the worst in our lifetimes. Stocks surged. Surprised? One of the phrases that you see me write all the time is ‘better than expectations,’ or ‘worse than consensus.’ Investors… Read More
Even in today’s economic environment, coming up with topics daily can be a challenge. So, when a reader asks a question, I am more than happy to answer it in this forum. Last week, I received a question in response to my article, ‘Chance of Recession: 100 percent.’ The reader wanted to know what the recession meant for bonds, especially in the coming months when markets will be volatile. That’s… Read More
Last year, the researchers at Bloomberg developed an index that assigned the probability of a recession to the US economy (and others around the world) based on a variety of economic data. I find the index interesting because, unlike a lot of other signals that attempt to do the same thing, this one seems to predict the recession before the recession actually hits. That’s the good news. The bad news,… Read More
