JPM

Debt, Debt and More Debt

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Image Source: Michael Fleshman Many readers may be familiar with the rhetoric of the Presidential Election Cycle of 2016 and Democratic hopeful Bernie Sanders’ view on making “college tuition free and debt free.” You can take a read of the 6 steps Bernie will take as president to make college debt-free here. Many may find his last point rather intrusive to the heartbeat of the American economy and the driver behind innovation and standard-of-living improvements, but we’ll leave that conversation for another day. But what’s the shocking statistic, right? Get this – and I hope you are sitting down. According to an article by the Journal, “more than 40% of Americans who borrowed from the government’s main student-loan program aren’t … Read more

Recent Add Cracker Barrel Surges Ahead; BHP Cuts

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February 23 was met with intense selling as investors digested news that the crude oil (USO) markets won’t become rational anytime soon. As we had outlined in our opening piece to the Best Ideas Newsletter a few days ago, “,” Saudi Arabia is not going to back down, and the Oil Minister of the member nation of OPEC even went so far as to say he “welcomes new additional supplies,” suggesting that the global glut of crude oil will continue for the foreseeable future. Commodity-oriented equities led the selling pressure. For those that have been reading our work for the past several months, none of this is new “news.” We’ve been warning about the risk for some time, and we … Read more

We Like the News! Buffett Scoops Up Kinder Morgan; FVE: $20

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It looks like crude oil (USO) overproduction will continue. Dashing hopes that any rational behavior would prevail in the energy resource markets, member nations of OPEC February 16 said not that they would cut output but that they would not increase crude-oil output any further, as if the current pace of production isn’t already drowning the world in the black liquid. It turns out the rumor from last week had some basis to it, “Your Hard-Earned Money,” but it didn’t have much substance, in our view, especially since the deal hinges on cooperation from Iran, which remains dedicated to increased production to reach pre-sanction levels. We’re not reading much into the news, as Saudi Arabia, while included in the parties … Read more

Your Hard-Earned Money

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By Brian Nelson, CFA It was Thursday afternoon, February 11, crude oil prices just hit a 13-year low, and the S&P 500 (SPY) was about to break below key technical support. Then, just as the markets were to fall further, rumors again emerged that OPEC may be scheduling a meeting to curb crude oil output, driving crude oil prices from the depths and the market higher off technical support. A barrel of crude oil continues to trade below the $30 mark, but it was quite the “save.” From where we stand, the market hasn’t been this fragile than at any time during the past decade or so, including during much of the Financial Crisis. Optimists may be whistling past the … Read more

Excited About Putting Cash to Work…Eventually

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Investors are fretting over a lot of things as of late. China (FXI) announced January 19 that fourth-quarter GDP fell to 6.8%, with many noting that the measure was a 25-year low. Even if you believe that number, which may be a stretch in light of collapsing local stock markets in Shanghai and Shenzhen, the outlook can’t be much better. Steel mills across the country are reeling, and while published housing numbers don’t look that bad, we have a difficult time believing the Chinese banks are in good shape. HSBC (HSBC), Standard Chartered, and Citigroup (C) remain most exposed to what we would describe to be the growing likelihood of a contagion from weakening commodity-dependent sectors in the country. Intel … Read more

Investment Banking Round Up: Citigroup’s Equity To Rapidly Converge to Tangible Book?

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Though junior analysts cheating on internal exams at Goldman Sachs (GS) and JP Morgan (JPM) has probably garnered more headlines than the results of the two entities themselves, one thing remains clear: the US financial system remains on very healthy ground. While robust capital ratios speak to this, not all banks are doing great, and volatile economic and market conditions are posing challenges for many, even if such conditions are an inescapable characteristic of the financial system itself. Morgan Stanley’s (MS) third-quarter results, for one, left much to be desired. Reported net revenue dropped to $7.8 billion from $8.9 billion in the year-ago period, while net income fell to $0.48 per share from $0.83 in the September quarter-end last year; … Read more

The Fed Freezes; Outlook as Bad as Feared or Worse?

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The cheering on CNBC has been short-lived. The sell-off we had expected irrespective of the Fed’s decision has ensued. Selling pressure in the markets may only intensify in coming weeks as uncertainty regarding Fed policy continues to take center stage. Broader market valuations remain stretched, market technicals remain weak, and sentiment is the worst it has been in some time. On September 17, the Fed announced that it has reaffirmed its view that the current 0%-0.25% target range for the federal funds rate “remains appropriate.” Though acknowledging US economic activity is expanding at a moderate pace and that both the housing sectors and labor markets have improved, it also indicated that “recent global economic and financial developments may restrain economic … Read more

As the World Turns

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Our growing concern over market participants’ lackadaisical approach to what will inevitably become a contractionary monetary cycle has been evident for months. The US market crash of August 24 has disrupted the comfort levels of many investors, however, but it has not derailed the confidence of long-term planners, nor has it interrupted the conviction of optimists that believe the sky is the eventual limit for equity prices in their lifetimes. We take a more measured and cautious view of risky assets at Valuentum, and we’ll never tell investors to ignore the information contained in market prices. The risk of a recession in the US beginning this year is remote, but concerns are mounting for 2016. US gross domestic product continues … Read more

Unemployment Rate Falls to 5.1%! Great Times in America!

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Image Source: BLS The future is all that matters. This is a basic tenet of the stock market, where prices of equities are forward-looking discounting mechanisms. August is now over, and we learned that the job market in the United States is close to the healthiest it has been in a long time—that is, if you buy into the data calculations behind the national unemployment rate, which now stands at a 5.1%. The mark is the lowest level since the Great Recession of late last decade and is now roughly half the levels experienced at the “height” of the Great Recession, which drove 10% of Americans that were willing to work out of a job. The Fed has worked a … Read more

Extreme Volatility in Crude Oil Prices Continues

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After a short-lived reprieve on hopes that OPEC will suddenly abandon its strategy of share retention instead of price support and that US oil production was modestly lower through the first five months of the year than previously expected, reality is now setting back into the oil futures market (USO). At the time of this writing, West Texas Intermediate crude oil prices for October delivery are hovering in the $43-$45 per barrel range, and futures have traded wildly between “recession” and “bull market” the past several months and days, respectively. There are three major areas of concern that may continue to impede any sustainable rise in crude oil prices, however. 1. OPEC is not caving in. OPEC’s strategy to deal … Read more