New Adds: One Name at a Deep Discount and Another Long-time Favorite
August 27, 2015
Shown above: The carnage in the S&P 500. One of the most important measures that we strive to portray is balance. In our recent writings, we’ve demonstrated a very bearish slant on recent developments, and we still hold those views, but our actions within the newsletter portfolios are also very important in understanding how we react to such views. As we’ve outlined many a time before, global economic developments and US equity markets are not always inextricably linked, meaning that there could be times–seemingly more often than not–when the economy is heading south and equity markets hold up fairly well or even advance, and vice versa. Part of the core Valuentum process, however, centers on finding undervalued stocks and letting
Understanding the Market Melt-Up Wednesday
August 27, 2015
The broader US markets continued their roller-coaster ride Wednesday with the Dow Jones Industrial Average (DIA) closing up more than 600 points. There are a number of dynamics at work that explain the large move, which only partially retraces the large declines over the past couple weeks. First, the extreme level of volatility that we are experiencing today in the markets is a direct result of the Fed’s actions to prevent the onset of a modern-day Great Depression toward the latter part of this decade and into this one. By slashing interest rates and engaging in round and after round of quantitative easing for the past several years, the Fed coincidentally pushed yields on fixed-income instruments to insufficient levels for
The Damage Has Already Been Done
August 26, 2015
The Shanghai Index only fell another 1.3% yesterday. The US markets are cheering at the open Wednesday on hopes that last month’s July durable goods number is foretelling of what investors can expect after the latest leg down in the Chinese market and the collapse in US equity markets the past few weeks. Though “core” July durable goods orders were better than expected, pre-collapse data is no longer indicative of the true state of the US economy and what lies ahead, in our view. The Chinese government has gone “all-in” to prop up its bubbly market, one that is trading at 60 times reported earnings, but the impact, while arguably successful in preventing Armageddon in China for now, has only
Valuentum’s Guide to Recent Market Turmoil
August 25, 2015
The global equity markets continue to face immense selling pressure. Chinese markets have wiped out roughly $4.5 trillion in wealth the past couple months alone, and the Dow Jones Industrial Average today racked up its fourth consecutive 200-point loss, the longest streak in its storied history. Major US market indices, including the S&P 500, are in “correction” territory, which is defined as a 10% decline or more from their recent highs. For those that have been following Valuentum’s work, you know that we’ve been all over the recent developments, putting readers far ahead of the market movements. From the email alerts on removing the positions in Kinder Morgan and Energy Transfer Partners to trimming the position in Apple to retaining outsize 30%+ cash positions in both newsletter
The Nelson Tweet
August 25, 2015
The following is what Mr. Nelson wrote at ~6:30am this morning in advance of the day’s trading. Open up 600, finish lower on China fears? — Brian Nelson, CFA (@ValuentumBrian) August 25, 2015
China Eases to Support Country’s Stock Bubble; US Markets Cheer Behavior?
August 25, 2015
Roughly $4.5 trillion has evaporated from the Chinese markets (FXI) since the middle of June – real, tangible wealth that no longer exists. Equities on mainland Chinese exchanges still trade at a median reported earnings multiple of 60+ times, according to Bloomberg. After direct government intervention in the country’s markets failed, China has now moved to cut interest rates and reduce bank reserve requirements, and this somehow has the US markets cheering. Does such irrational behavior by US investors finally mark the peak? Here are 5 observations worth noting. 1. The Financial and Capital Markets are Fragile If the Financial Crisis of 2008-2009 taught this generation anything, it was a lesson in the fragility of the financial and capital markets
Is the Time Right to Invest in Home Improvement?
August 25, 2015
The US housing market has been hot this summer. Both purchases of previously-owned homes and residential housing starts reached their highest monthly levels in the month of July since 2007. The improved demand has been driven by a resilient labor market, historically-low mortgage rates and “pent-up” demand from the Great Recession. Purchases of previously-owned homes advanced 2% sequentially in July to an annualized rate of 5.59 million houses, handily beating consensus estimates of 5.43 million. The increased levels of demand come despite limited support from first-time buyers, however. Millennials, now coming of age, are making their first “rent-versus-buy” decisions, and many, having witnessed the housing bubble burst late last decade, aren’t viewing ownership as the wise investment decision that their
The Debt Bubble Is Deflating; Will It Pop?
August 24, 2015
The fundamental concerns surrounding the financial health of China-dependent companies across the globe are tangible, and the risk of a currency crisis and eventual credit crunch are real, if they aren’t already happening. Fortescue Metals Group (FMG), the fourth-largest iron ore producer in the world, announced over the weekend, that profits were nearly completely wiped out (down nearly 90%) for the fiscal year ending June 30, even as the firm shipped 33% more tons of iron ore during the period over last year’s mark. The largest iron ore producers, BHP Billiton (BHP) and Rio Tinto (RIO), are only adding to production overcapacity, conditions that are wreaking havoc on the commodity price. Iron ore prices are to remain under pressure as
Dividend Increases/Decreases for the Week Ending August 21
August 24, 2015
Below we provide a list of firms that raised/lowered their dividends during the week ending August 21. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Altria (MO): now $0.56 per share quarterly dividend, was $0.52. Brinker (EAT): now $0.32 per share quarterly dividend, was $0.28. Community Bank System (CBU): now $0.31 per share quarterly dividend, was $0.30. Connecticut Water Service (CTWS): now $0.2675 per share quarterly dividend, was $0.2575. Dillard’s (DDS): now $0.07 per share quarterly dividend, was $0.06. Ferrellgas Partners (FGP): now $0.51 per share quarterly dividend, was $0.50. FirstMerit
The Dow Crashes 531 Points
August 22, 2015
Missed Vauentum’s pre-crash commentary? See here. Memories of the Financial Crisis are still vivid in our mind. The framed front pages of the Wall Street Journal reporting the demise of Lehman, AIG and WaMu on those fateful days in 2008 drape the walls of the Valuentum office as a stark reminder of the fragility of the financial and capital markets. We’re not alone. Many investors remember seeing their savings cut to pieces at the depth of Financial Crisis. The Dow Jones Industrial Average (DIA), in collapsing 531 points Friday, has captured those same individuals’ attention…again. They haven’t forgotten the pain of the years of the credit crunch when they wondered whether they’d ever be able to retire during the dreadful
