EWJ

Economic Commentary: Robots, Value Trap, and Politics on the Markets

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Tickerized for stocks in the DIA. Valuentum sat down for the latest installment of its periodic economic commentary, and the team tackled a wide array of topics, from robots on Wall Street, to President of Investment Research Brian Nelson’s new book Value Trap, to political influence on the markets and boyond. Let’s set the stage with a prompt from a recent Bloomberg article, “The Master of Robots…Coming for Wall Street:” “The problem is, computer-powered strategies are struggling to live up to the hype, with a Eurekahedge index of AI hedge funds lagging peers in recent years. That spells opportunity for the likes of Lopez de Prado with his outfit True Positive Technologies — a dig at the erroneous conclusions derived … Read more

The Valuentum Team Talks Powell Speech and Threat of Global Recession

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Last week, China issued retaliatory tariffs on US goods, and Trump responded in kind, escalating trade tensions. Caught in the middle of this US-China trade war is the Fed, however. Let’s sit down with the Valuentum team and kick things off with our thoughts on Fed Chairman Powell’s speech, Challenges for Monetary Policy issued August 23 in Jackson Hole, WY. Our latest Economic Roundtable can be accessed here. Matthew Warren: Powell is certainly leaving the door open for cuts if needed. To me, it’s largely pushing on a string. I don’t think cost of capital is the problem. Capital is already cheap. Mortgages aren’t even following the 10-year (TLT, TBT) down fully. Banks (XLF) won’t take credit card rates down … Read more

What’s on the Valuentum Team’s Mind?

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Let’s get the Valuentum team’s thoughts on recent developments. No changes to newsletter portfolios. Last Friday, August 16, Bank of America (BAC) CEO Brian Moynihan said in a Bloomberg interview, “We have nothing to fear about a recession right now except for fear of recession.” We sat down with the Valuentum team to get their thoughts. Let’s go around the horn. Callum Turcan: Interesting take, and I get why he thinks that way. The feedback loop of recession fears prompting businesses to invest less which in turn hurts consumer spending by weakening wage growth/employment growth rates thus leading to additional reductions in business investment. However, I think we are past the point of fear being the main enemy. Poor industrial … Read more

Join the Conversation on the Market Plunge

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The Valuentum team shares its thoughts on the recent surge in volatility and collapse in interest rates amid a trade and currency war between two of the largest economies in the world, the US and China. No changes to the newsletter portfolios at this time. During the past few days, the US (SPY, DIA) and China (FXI, MCHI) have escalated a trade war, turning it into a currency war, the latter allowing its yuan to drop to lower levels against the U.S. dollar. The US has now labeled China a “currency manipulator,” and China has responded by suspending U.S. agricultural purchases. China is one of the largest buyers of U.S. agricultural goods. The Valuentum team builds on its previous conversation … Read more

Tiffany Rallies 20%+ on 1Q’18 Report; Positive Read-Through for China, High-End Retail Margins

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Tiffany’s first-quarter 2018 results were from another planet! Strong increases in comparable store sales almost across the board, blowing by consensus estimates, and the company’s free cash flow outlook has only improved. The read-through is significantly positive for aspirational and luxury players, in our view, and Ralph Lauren’s gross-margin improvement during its quarterly release bodes well for many brands across most of the high-end apparel space. Foreign tourism and high-end consumer spending remain very strong on the basis of Tiffany’s quarterly results, and geopolitical concerns did not impact the breakneck pace of jewelry sales in China or the Korean Peninsula. It’s hard to imagine Tiffany having a better first quarter than it did. By Brian Nelson, CFA On May 23, … Read more

Recent Material Fair Value Estimate Changes

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By Kris Rosemann Let’s begin this edition of ‘Recent Material Fair Value Estimate Changes’ with a discussion of some of the highest-profile names that made the list. If you require background reading on why we make changes to our valuation models, please see: What Causes Fair Value Estimates to Change? We’ve raised our fair value estimates for two of the holdings in the newsletter portfolios, General Electric (GE) and Union Pacific (UNP). The sprawling and evolving industrial portfolio of General Electric is one of the more exciting portions of our portfolios, as the industrial giant boasts assets with authoritative positions in areas from the rapidly expanding Industrial Internet of Things to the rebounding energy services space. An increase in near-term … Read more

Dividend Growth ‘Bubble’ To Continue But For How Long?

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You’ve heard about low interest rates. You may have even heard about a ZIRP, zero interest-rate policy, as had been the case in the US for years, but have you heard of NIRP, negative interest-rate policy? Well, that’s the latest with respect to Japan (EWJ), which is home to the third-largest national economy in the world after the US and China. On January 29, the Bank of Japan (BOJ) introduced a negative benchmark interest rate of -0.1%, meaning that instead of paying interest on deposits, it will charge commercial banks to hold their money. This may make Japanese exports cheaper to stimulate growth, but my goodness, talk about a move to push “parked” assets out of the country. The US … Read more

General Electric Is Still in Good Shape

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General Electric (GE) continues to represent a rare opportunity for dividend growth investors. Most (not all) dividend growth investors seem to dedicate their analysis to what has happened to the dividend in the past, instead of thinking about what will happen to the dividend in the future – not next quarter or next year, but over the next 5, 10, 20 years. Holdings in the Dividend Growth portfolio aren’t chosen because they are heroes of yesteryear, but instead, they are chosen because we think they will be the best dividend growth performers in the future. In this light, we think GE continues to be shunned by new dividend growth investors that are looking to its dividend cut in 2009 as … Read more

LINK –> Massive Unrest In Europe, Energy Crisis Could Be the Catalyst to Topple the Global Markets

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Image Shown: The SSGA ETFS Europe II PLC SPDR MSCI Europe Industrials UCITS ETF, listed in the UK, tracks large and mid-sized European industrial firms. Shares of the ETF have fallen sharply year-to-date as recessionary fears across Europe have grown substantially in the wake of the Russian invasion of Ukraine in February 2022 and the related European energy crisis. “Surging energy prices in Europe are decimating consumer spending power and forcing industrial companies to sharply scale back production. It is estimated that six in 10 British factories could fold as a result of the crisis, according to reports from Bloomberg.” — The Valuentum Team By Callum Turcan The European energy crisis continues to unfold, and we’ve been keeping our members … Read more

2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?

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Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that … Read more