SPY

The Markets Swoon Again

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The broader US markets (SPY) swooned again January 7 as fears of a slowdown in China (FXI), or worse, a dislocation in Asia’s currency markets, and ongoing concerns about the sustainability of some of the most leveraged “players” in the energy complex took the spotlight again. None of this should be surprising. As we’ve done many a time before with the mortgage REITs, namely American Capital (AGNC) and Annaly (NLY), SeaDrill (SDRL) and the latest with Kinder Morgan (KMI), our members are far ahead of developments. That’s our job – we’re not reporters. We strive to get the right information to our members before it becomes “information,” and using the newsletter portfolios as an indication of our views on capital … Read more

Seeking to De-risk the Newsletter Portfolios

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There’s never a good reason to panic in investing, but the 276-point slide in the Dow Jones Industrial Average (DIA) January 4, the worst start to a year since the credit crisis in 2008, reminded us why we hold more than a 30% cash position in both newsletter portfolios at the moment: with a US stock market still near all-time highs, we like having ample capital available to scoop up bargains as stocks inevitably give back some of their gains. The question for us is not whether the broader US stock market will decline from here but whether such a decline will be 10%, 20% or more. After all, the S&P 500 (SPY) has essentially tripled from the March 2009 … Read more

Is the Worst Behind Us? Not Likely

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By Brian Nelson, CFA US natural gas prices (NGAS) recently dropped to the lowest level in nearly 14 years. Unseasonably warm weather may be to blame for the near-term drop, but we point to more structural concerns that may keep natural gas prices low for some time. Including both unconventional and conventional global natural gas resources, for example, there are more than 200+ years’ of supply based on the current trajectory of demand, and that doesn’t account for technology advances that will inevitably be made in the coming decades. Can you believe it? The situation with crude oil prices is not much better. West Texas crude oil prices (USO) dipped below $35 per barrel recently, still the high end of … Read more

Correction: Understanding the MLP Valuation Conversation

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A correction was performed to the table in this article October 29, 2015, at 7:20pm. How to interpret the changes: In this illustrative example that includes both growth capital spending and a marginal cost of capital of 10%, holders of MLPs will have to wait years before the intrinsic value of the security catches up to the present market price (comparison shown in orange). Said differently, units in this example are significantly overpriced in today’s market. 

Janet Yellen, the Positive GDP Revision, and Nike’s Swoosh

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Though it may seem much worse, the S&P 500 (SPY, DIA) is down only a few percentage points from the all-time highs set in May this year. We continue to remind equity investors that the US stock markets have roughly tripled from the March 2009 panic bottom only six short years ago, so further declines in the form of profit taking may still be ahead. However, the throngs of investors looking to “get back to even” before selling may account for more overhead supply than we care to admit. Returns have been so wonderful in yesteryears’ upward-sloping bull market that even flat equity market performance may become unbearable going forward, adding to yet more selling pressure. The swoon in late … 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

Talking Technicals: The “Golden Triangle of Destiny”

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The markets recently reminded me of a Sesame Street episode that my little boy loves to watch, involving Minnesota Mel, Texas Telly, and the Golden Triangle of Destiny! If you’ve missed that episode, here it is. It’s a good one. A so-named “Golden Triangle of Destiny” is now developing in the S&P 500 (SPY) – i.e. a “symmetrical triangle pattern” forming in advance of the Federal Reserve meeting September 17. Chart readers will tell you that such a pattern signals a dampening of volatility as the market bounces between the upper (resistance) and lower (support) bounds as the day of the Fed meeting nears. We frankly can’t wait for the news. The suspense is near-unbearable, and the repercussions are far-reaching. … Read more

5 US-Centric Undervalued Stocks with Fantastic Economics

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“In business, I look for economic castles protected by unbreachable moats.” – Warren Buffett << Read more about Economic Castles Image Source: Rob Faulkner The see-sawing action in the US markets has not let up, with the latest wave of the upward variety. The S&P 500 (SPY), however, remains nearly 8% off its all-time highs, as global markets continue to ebb and flow with news of negative economic data followed by the prospects of an ever-easing monetary environment and so on. Several major economies across continents are in technical recession (Brazil, Canada, etc), while others continue to face a slowing pace of economic expansion, not the least of which are Australia (EWA) and China (FXI). The global economic outlook is … Read more

Things Are So Bad They’re Actually Good?

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Brazil’s (EWZ) economy, nearly 60% of South America’s (ILF) gross continental output, entered into technical recession following the second consecutive quarter of GDP declines, the latest reading a fall of nearly 2%. Economic data assessing the health of Brazil’s largest South American trade partner, Argentina (ARGT), remains “flawed”, according to the International Monetary Fund, which believes the country will only grow marginally in 2015 and remain stagnant in 2016. Including contributions from Venezuela, which is dealing with near-hyperinflation, the combined gross national product of the three struggling countries accounts for approximately three-fourths of South America’s entire economy. Though less than half the size of Brazil’s, Canada’s (EWC) economy has also fallen into recession during the first half of the year, … Read more