Posts Tagged ‘ Stock Market ’

Wealth Effect; gaining steam from asset returns and persistence

April 29, 2014
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Wealth Effect; gaining steam from asset returns and persistence

The ongoing economic tug-of-war remains tied. Growth spurts with better momentum (housing, auto, healthy corporate profits, job market) are almost immediately met by numerous automatic stabilizers (higher mortgage rates, deteriorating housing affordability, satiation of replacement cycles). But weighing the good and the bad, we are in a fine environment for the stock market. The environment is good enough to drive slow, yet relatively stable, economic growth but weak enough for corporate input costs (labor, materials, interest rates) to remain very well contained. Margins are elevated, cash flow is healthy, and the market performs well (big picture). The wealth effect is a key item on the “good” side of the economic ledger that is set to gain steam in terms of economic drivers. “Wealth” matters because it is the secondary...

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Bernanke’s Labor Market Speech – The Case for Continued Accommodative Policy

March 30, 2012
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Bernanke’s Labor Market Speech – The Case for Continued Accommodative Policy

Ben Bernanke made a highly referenced speech earlier this week, credited with fueling a sharp rally in the stock market. The speech is colorfully titled: “Recent Developments in the Labor Market” and is a worthwhile read for investors and those interested in the US economy. The speech highlights a growing controversy in the labor market regarding the constraints on hiring. The traditional school of economic thought focuses on the cyclical factors which have depressed hiring and constrained labor market improvements. In Fed speak this is described as insufficient “aggregate demand”. A new school of thought is emerging focusing on the bottlenecks in the job market stemming from; the aging of the workforce, globalization, and technological change. Obstacles based on these reasons are described as “structural impediments”. Ben Bernanke’s answer...

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Why the Market Will Bottom Higher than 2009 – An Analysis of S&P 500 Free Cash Flows

September 13, 2011
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Why the Market Will Bottom Higher than 2009 – An Analysis of S&P 500 Free Cash Flows

The market is in the midst of a crisis. The US sovereign credit rating has been downgraded. Developed market economies are demonstrating an inability to create jobs. Greece is about to default on its sovereign debt which will lead to contagion through the financial system in Europe. French and other European financials will be downgraded this week and markets are in a period of exceptional volatility and uncertainty. How does one invest in the crisis that everyone sees coming? I continue to hold a constructive view with respect to investing and taking risk. In order to be rationally bullish, one must have some view with regard to the amount that will be lost if a crisis gets out of control. Knowing what you can lose ahead of time, while an...

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Obama’s American Jobs Act Speech – Implications for Markets

September 8, 2011
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Obama’s American Jobs Act Speech – Implications for Markets

The S&P 500 futures were about unchanged heading into his speech and at last glance they were down 3 points – but this may be due to the 9/11 anniversary terror threat announcement more so than anything said in the speech. I come away moderately encouraged by Obama’s speech tonight. He stated at the outset that our economic recovery won’t be led by the government but by businesses – which is refreshing. I felt the tone was still somewhat abrasive but the fact that the size of the Jobs Act is larger than expected ($447B) may be a slight positive. I think the gist of the plan makes sense. While you are trying to emerge from recession you spend in order to stimulate. So long as the spending is...

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“Recession Trade” – Clear by Investor Actions Today

August 8, 2011
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“Recession Trade” – Clear by Investor Actions Today

                 The immediate observation for those watching this macabre sell-off is that stocks are pretty much being sold off based upon how they would be expected to hold-up in a recession, that will presumably be starting within the next 6-months or so. Any stocks that have a very high valuation, are particularly leveraged, are pro-cyclical or are discretionary look out! Stocks in these categories are down indiscriminately, regardless of near-term or current business trends. The market is being forward looking and pricing in a much higher probability of a recession on the horizon. There is no way to prove or dis-prove the recession prediction until more time goes by. Some stocks of note at 3:00PM: Goldman Sachs (GS) – (down 9%) Coach (COH) – (down 11%) Sears (SHLD) –...

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