The most important thing long-term investors need to see today is the market’s response to crisis, courtesy of Dimensional Funds.
The chart above should put the Brexit in perspective. Nobody knows yet what the implications will be, but I’m pretty confident that this is no more significant than any of the six events above. Now of course there are never any guarantees, that’s what risk means. And if you need the money in the next five years, you should not be subjecting it to the risk of the stock market anyhow.
I’m a believer in practicing what I preach, so today in my personal account, I added to the international side of my portfolio. This is definitely not a market call, I am not suggesting the bottom is in, but I also know not to look a gift horse in the mouth. When an entire index falls ten percent in a day, you hold your nose and hit the buy button. Investing is all about giving your future self a chance at a better life, and it’s days like today that determine whether or not you’ll be able to do so via the stock market.
I’m invoking article 50 and resurrecting a Warren Buffett quote, who had this to say when clients reached out to him after stocks fell in 1966:
After the Dow declined from 995 at the peak of February to about 865 in May, I received a few calls from partners suggesting that they thought stocks were going a lot lower. This always raises two questions in my mind: (1) if they knew in February that the Dow was going to 865 in May, why didn’t they let me in on it then and (2) if they didn’t know what was going to happen during the ensuing three months back in February, how do they know in May? There is also a voice or two after any hundred point or so decline suggesting we sell and wait until the future is clearer. Let me again suggest two points: (1) the future has never been clear to me (give us a call when the next few months are
With the voting out of the way, the only thing left is the crying. Oh, and the margin calls which start in just a few hours. And, alongside all of that, forecasts of doom that have to comply with all the scaremongering that was unleashed over the past few months as part of the Remain campaign. Sure enough, here is Morgan Stanley's Andrew Sheets explaining "What Leave Means."
It's not pretty. Here is the summary answer:
We see GBP moving to 1.25-1.30 and 15-20% downside to European equities relative to Thursday's levels. Corporate and sovereign credit present the best opportunities to buy
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This Week's Topics
00:02:09 “Risk off”
00:04:14 Checking on the Markets: CL
00:05:09 Oil Trade Ideas, Contracts
00:14:16 UNG Trade Ideas
00:20:35 Oil Trade Ideas
00:26:35 Checking on the Markets: CL, DX, RB. Trade Ideas
00:38:53 Taker States
00:45:35 Checking on the Markets: CL, RB
00:48:27 UK Bookies betting Brexit will fail; Brexit is a big smoke screen
01:02:29 Greece interest chart
01:06:34 If UK leave the other country will get off they all wanna leave
01:08:57 Checking on the Markets: CL, RB. Trade Ideas
01:15:54 Checking on the Markets: DOW, NASDAQ, RUSSEL, CL, RB, NG, NKD, DX, YG, SI, HG
01:18:46 Options Opportunity Portfolio
01:21:19 It’s not about money, it’s about Time –Phil
01:34:10 More Trade Ideas…
01:37:34 Compound Rate Calculator
01:42:00 Forbes 400 source of wealth
Rick Neaton has been investing and writing about technology for over twenty years. In 2008, Rick founded Rivershore Investment Research (RIR), a subscription-based technology newsletter, to share his work with others interested in technology and investing. RIR covers key technology trends, publicly traded technology companies, and numerous investing themes.
In RIR, Rick focuses on important trends in technology and on how these trends will generate winners and losers. By focusing on technology, product cycles, market cycles, and valuations, Rick identifies timely investment opportunities and helps readers avoid costly mistakes. Further, he touches on major political and economic events as they shape the world's investing environment, helping readers navigate the natural and not-so-natural ups and downs in the financial markets.
Ilene: What is your outlook for the US economy and the global economy over the next 1 to 3 years?
Rick: I think the US economy will continue to grow at a below average annual real rate. That is around 2%.
The world economy will not act in unison. India appears to be capable of producing 7-8% annualized real GDP growth.
China’s problems appear more political than economic in that it is transitioning from being an industrial-based economy to being a services-based economy. People who have made lots of money in China's old economy are fearful of political repercussions to their capital. They have responded by moving more and more of their assets offshore. That is creating tension between the central government plans and the needs of these individuals.
Thus the pressure in China appears to be more centered on the value of assets held there than on the actual growth in the economy. Remember that 6.5% growth in China’s economy is still far more in dollar terms than prior years in which the growth rate was 7%, 8% or 9% in terms of China’s GDP. Because of the problems in China, you don’t want to own Chinese assets like stocks and bonds. But you would want to own the offshore assets that Chinese buyers find attractive. These political issues in China explain the sudden surge in the Chinese corporate interest in acquiring western companies for cash.
Europe continues to muddle along hamstrung by political issues…
On March 7, 1965, 25-year-old John Lewis, already a veteran of the Freedom Rides, Mississippi’s Freedom Summer and Martin Luther King Jr.’s March on Washington, walked ahead of 600 civil rights activists as they crossed the Edmund Pettus Bridge in Selma, Alabama, on the first leg of what was meant to be a peaceful march for voting rights.
As they stepped off the end of the bridge, a posse of 150 state troopers and deputy sheriffs attacked them, wielding clubs, bullwhips and tear gas. Lewis was beaten to within an inch of his life. But he took the horrible pummeling of “Bloody Sunday” and survived to lead another march a week later. This time they kept going — all the way to the state capitol in Montgomery, 50 miles away.
Fifty-one years later, on the floor of the House of Representatives Wednesday, John Lewis, now 76 and a member of Congress for nearly three decades, took another courageous and principled stand. Many of his Democratic colleagues joined him for a sit-in on the floor of the House chamber itself, the same kind of protest he and his fellow activists used so effectively during the 1960s.
This time they were agitating against one of the most grievous human rights horrors of all: the gun violence running amok in America, including the recent abomination of 49 deaths at that nightclub in Orlando, Florida. There have been nearly 100,000 gun deaths in the United States since the school murders in Newtown, Connecticut, just three and a half years ago.
In Selma in 1965, television cameras sent pictures of what was happening on the Pettus Bridge around the country and a shocked American public took to heart how deep the wounds remained between black and white. On Wednesday, Republican House leadership, as cruel and cold-of-heart as…
Desperate, or Distracted? Elon Musk's Tesla has offered to acquire Elon Musk's cousin's SolarCity for 0.122 to 0.133 Tesla shares. Tesla shares are tumbling on the news, as perhaps they read the five reasons why SolarCity pain is only just beginning? As Herb Greenberg asked, "is this even legal?"
Tesla’s mission has always been tied to sustainability. We seek to accelerate the world’s transition to sustainable transportation by offering increasingly affordable electric vehicles. And in March 2015, we launched Tesla Energy, which through the Powerwall and Powerpack allow homeowners, business owners and utilities to benefit from renewable energy storage.
It’s now time to complete the picture. Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.
The SolarCity team has built its company into the clear solar industry leader in the residential, commercial and industrial markets, with significant scale and growing customer penetration. They have made it easy for customers to switch to clean energy while still providing the best customer experience. We’ve seen this all firsthand through our partnership with SolarCity on a variety of use cases, including those where SolarCity uses Tesla battery packs as part of its solar projects.
So, we’re excited to announce that Tesla today has made an offer to acquire SolarCity. A copy of Tesla’s offer is provided below.
If completed, we believe that a combination of Tesla and SolarCity would provide significant benefits to our shareholders, customers and employees:
We would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers. This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered. With your Model S, Model X, or Model 3, your solar panel system, and your Powerwall all in place, you would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing
Here's the problem in a nutshell: job growth, new businesses and wage gains are becoming increasingly concentrated in a small number of geographic regions and a narrow class of workers / entrepreneurs while the overall economy struggles to maintain productivity gains, which are ultimately the only sustainable source of prosperity.
The productivity growth rate has been slumping since 2005.
Longer term, productivity gains have flowed to the top 5%--those workers and entrepreneurs with higher levels of education, ownership of assets and access to cheap credit:
This chart shows the concentration of income in the top tier: the top 5% have garnered the gains while the incomes of the bottom 95% have stagnated.
The overall employment picture has changed for the worse: the percentage of the populace that's employed has fallen from peak periods.
The number of workers with full-time jobs has stagnated in the 2000s, breaking a 50-year trendline of steady growth of full-time jobs.
The growth of new businesses (annual change in the number of firms) has also cratered: business creation never recovered in the "recovery."
Growth in jobs and new business has become increasingly concentrated in a handful of high-population metropolitan counties. In the high-growth early 1990s, half of all new businesses sprouted in 125 counties nationwide. In 2002-2006, the number of counties that were home to half of all
Pimco, the $1.5 trillion fixed-income manager located a stone’s throw distance from my office in Newport Beach, famously (or infamously) coined the phrase, “New Normal”. As former Pimco CEO (Mohamed El-Erian) described years ago, around the time of the Great Recession, the New Normal “reflects a growing realization that some of the recent abrupt changes to markets, households, institutions, and government policies are unlikely to be reversed in the next few years. Global growth will be subdued for a while and unemployment high.”
As it turns out, El-Erian was completely wrong in some respects and shrewdly prescient in others. For instance, although the job recovery has been one of the slowest in a generation, 14.5 million private sector jobs have been added since 2010, and the unemployment rate has been more than halved from 10% in early 2009, to below 5% today. However, the pace of global growth has been relatively weak since the 2008-2009 financial crisis, which has forced central banks all over the world to lower interest rates in hope of stimulating growth. Monetary policies around the globe have been cut so much that almost 25% of global GDP is tied to countries with negative interest rates (see chart below).
Source: Financial Times
The European central banks started the sub-zero trend in 2014, and the Bank of Japan recently joined the central banks of Denmark, Sweden and Switzerland in negative territory. The negative short-term rate virus has spread further to long-term bonds as well, as evidenced by the 10-Year German Bund (sovereign bond) yield, which crossed into negative territory last week (see chart below).
The New Abnormal
The unprecedented post-crisis move to a 0% Fed Funds rate target, along with the implementation of Quantitative Easing (QE) by former Federal Reserve Chairman Ben Bernanke, was already pushing the envelope of “normal” stimulative monetary policy. Nevertheless,…
These are the Federal Reserve’s expectations for where interest rates are headed, by year, from a Washington Post op-ed by Larry Summers. Suffice it to say, it’s not going well.
That orange line – let’s take a guess which direction it’s headed.
Here’s Sir Lawrence:
Watching the Fed over the last year there is a Groundhog Day aspect. One senses they really want to raise rates and achieve a more “normal” stance. But at the same time they do not want to tighten when the economy may be slowing or create financial turmoil. So they keep holding out the prospect of future rate increases and then find themselves unable to deliver. But they always revert to holding out the prospect of rate increases soon, partly for internal comity and partly to preserve optionality.
Equity markets around the globe plunged on Friday in response the Brexit vote outcome. Actually, prior to the Friday selloff, the week was looking rather positive for our eight-member watch list. Ironically, on a week-over-week basis, the UK's FTSE was the best performer, despite its -3.15% Friday loss. For the second consecutive week, Japan's Nikkei has the painful distinction of being the biggest loser, down 4.15%, which, sadly, is an improvement over its 6.03% rout the previous week.
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. We've also included the average for each week so that we can evaluate t...
Great Britain’s decision to extricate itself from the EU has consequences that are at once far-reaching and unknown. By Friday morning, no market was immune. Great Britain’s currency, the pound, had fallen to its lowest levels since 1985, and the FTSE (an index of the London stock exchange) and DAX (a German stock index) plummeted. In the U.S., markets opened in the red, gold (a co...
The most important thing long-term investors need to see today is the market’s response to crisis, courtesy of Dimensional Funds.
The chart above should put the Brexit in perspective. Nobody knows yet what the implications will be, but I’m pretty confident that this is no more significant than any of the six events above. Now of course there are never any guarantees, that’s what risk means. And if you need the money in the next five years, you should not...
By Jacob Wolinsky. Originally published at ValueWalk.
There has been a LOT of discussion about the Brexit vote and what the implications are (although none of us can predict the future), but one interesting point many seemed to miss is the impact on the world’s largest economy after the USA and EU – China. How does a Brexit impact the world’s largest country by population? No one knows for sure but it will likely have a big impact on China. Quartz is saying its bad while Bloomberg News says its good.
UK chancellor George Osborne, meanwhile, promised a “golden decade...
I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.
For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....
One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...
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After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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