SPY

5 Minutes with Valuentum’s Brian Nelson

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Valuentum: Brian, thanks for joining us today. Nelson: It’s my pleasure. Valuentum: So the markets continue to make all-time highs. What are you telling investors? Nelson: That depends. If you’re going to be in the market for more than 10 years, then you don’t have much to worry about. For long-term investors that are decades away from retirement and have absolutely no liquidity or income needs from their investments, one particular event resonates in my mind as to why they should have a full risk allocation to stocks. That event is the stock-market recovery from the Financial Crisis of 2008-2009 — which is the worst financial event of our generation. In just 5 or so years after the credit crunch, … Read more

Beige Book: Expansion in All 12 Districts

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<< Source All twelve Federal Reserve Districts report that economic activity expanded during the current reporting period. The pace of growth was characterized as moderate in the Boston, New York, Richmond, Chicago, Minneapolis, Dallas, and San Francisco Districts, and modest in the remaining regions. Compared with the previous report, the pace of growth picked up in the Cleveland and St. Louis Districts but slowed slightly in the Kansas City District. Consumer spending expanded across almost all Districts, to varying degrees. Non-auto retail sales grew at a moderate pace across most of the country: Although improved weather generally gave a boost to business, lingering wintry weather in the Northeast continued to weigh on sales in parts of the Boston and New … Read more

The Risks of Dividend Growth Investing

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Did you know that if you invested in retail-focused REIT Realty Income’s (O) stock in October 1994 with an original investment of $8,000, your current annual dividend income would be $2,190, equivalent to a yield on cost north of 27%?!?! For any dividend growth investment, yield on cost is the current annualized dividends divided by the original investment, or $2,190/$8,000 in this example. The benefits of dividend growth investing have never been more evident, and a prudent, well-defined dividend growth plan targeting the ‘right’ companies over the next 20 years could result in your portfolio generating a 27% yield on cost in a couple decades, too! Though this sounds fantastic (and perhaps, unreal), investors must be aware of the significant … Read more

Use a Margin of Safety in This High-Risk Market Environment

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“One major criticism that we always hear about value investing is “what’s your risk management, how do you know when you’re wrong”? Well, a great value investor gives himself a margin of safety, in other words you don’t have to know how much a fat person weighs to realize they’re overweight. Like John Keynes said “It is better to be roughly right than precisely wrong.” If you come to a conclusion that a $100 stock is trading at $65, even if you’re overestimating the stock’s value by 25%, at $81.25 there is still plenty of room for the stock to appreciate to $100.” — The Irrelevant Investor The markets faced some tough sledding this week, with the S&P 500 (SPY), … Read more

Three Charts That Make You Go Hmmm…

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We came across three fascinating charts from infamous tech-bubble analyst Henry Blodget that we wanted to make you aware of. Source: Don’t Be Surprised If This Is The Start of A Stock Market Crash…  1) The cyclically-adjusted price-to-earnings ratio of the S&P 500 (SPY) is higher than at any point in the 20th century with the exception of the peaks of 1929 (right before the market crashed) and 2000 (right before the market crashed). Image Source: Robert Shiller, Business Insider, Henry Blodget 2) Today’s profit margins are the highest in history, and investors are assigning peak-margin valuations to equities to justify prices instead of applying mid-cycle margin valuations to approximate intrinsic value. Image Source: Business Insider, St. Louis Fed, Henry Blodget … Read more

Small Capitalization Stocks Officially in Bubble

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Tulip mania was a period in the 17th century during which prices for tulip bulbs reached irrationally high levels and then collapsed almost overnight. The picture to the right is a tulip, known as “the Viceroy”, as displayed in a Dutch catalog of the time. The picture serves as a reminder to us of the potential madness of crowds, perhaps no better popularized by Charles Mackay’s 1841 book Extraordinary Popular Delusions and the Madness of Crowds, which outlined such behavior: Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last … Read more

Highlighting the Fed’s Statement Regarding Asset Purchases

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<< Board of Governors of the Federal Reserve System, Release Date December 18 Release Reproduced Below: Information received since the Federal Open Market Committee met in October indicates that economic activity is expanding at a moderate pace. Labor market conditions have shown further improvement; the unemployment rate has declined but remains elevated. Household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. Fiscal policy is restraining economic growth, although the extent of restraint may be diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, … Read more

Stock Market Euphoria Continues; Dow Surpasses 16,000, S&P Jumps Above 1,800

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Disclaimer: This article is for informational purposes only and should not be considered a solicitation to buy or sell any security or to engage in any asset allocation decisions. Please seek professional advice from your financial advisor who knows your individual needs and risk tolerances. Key Takeaways è Stock prices have become disconnected from current fundamentals, and euphoria in the stock market is running wild. è We encourage investors to assess their exposure to small caps (equities with market capitalizations under $2 billion) and determine whether a price fall of 25% or more in coming years would be tolerable. Still, we’ll likely see higher prices for small caps before we see lower ones. è The current forward 12-month P/E ratio … Read more

How We’re Prepared for the Debt Ceiling Deadline

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Dr. Peter Venkman: This city is headed for a disaster of biblical proportions.Mayor: What do you mean, “biblical”? Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath of God type stuff. Dr. Peter Venkman: Exactly.Dr Ray Stantz: Fire and brimstone coming down from the skies! Rivers and seas boiling!Dr. Egon Spengler: Forty years of darkness! Earthquakes, volcanoes… Winston Zeddemore: The dead rising from the grave! Dr. Peter Venkman: Human sacrifice, dogs and cats living together… mass hysteria!Mayor: All right, all right! I get the point!– Ghostbusters (1984) If you turned on the business channel today, you might have seen a certain network compare the potential repercussions of the ongoing debt-ceiling debate in Washington to a scene from … Read more

President Obama Tells Wall Street to Worry

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“I think this time is different. I think they (Wall Street) should be concerned.” — Barack Obama Wednesday afternoon, President Barack Obama sat down with CNBC’s John Harwood to discuss the government shutdown, the next debt ceiling debate, and other pertinent topics. Obama’s warnings are very real, and we’re taking notice. Government Shutdown The government shutdown remains top of mind since it occurred earlier this week, and it continues on with no clear end in sight. President Obama made a fiery speech Thursday morning blaming House Speaker John Boehner for not allowing a vote on the issue in the House of Representatives. Regardless, the primary issue remains that certain members of the Republican Party would like to repeal the Affordable … Read more