Archive for the ‘Finance & investing’ Category

Feldstein called it: Stocks are headed for a fall …

February 9, 2018

“The Fed’s easy monetary policy has led to overvalued equities”
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A couple of weeks ago, we posted Feldstein: Stocks are headed for a fall …

Now that the stock market has “corrected” by over 10%, it feels like time for a flashback.

Feldman called it … and, decades ago, I had researched (and confirmed) the basis of his forecast.

So, did Iact of Feldstein’s prognostication?

Of course not …

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Let’s start by taking a stroll down memory lane ….

Over 40 years ago, an economist-wannabe co-authored a study in the Journal of Finance titled “The Supply of Money and Common Stock Prices”.

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The article summarized an econometric study (think: big, hairy financial model) that demonstrated a tight link between the amount of money floating around and, on a slightly time-delayed basis, the price of stocks.

That is, when the Fed adds liquidity into the market (think: “quantitative easing”), much of money flows into the stock market – rocket-boosting stock prices.

And the opposite is true. When the Fed tightens, stock prices fall back into earth orbit.

OK, fast forward to today.

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Feldstein: Stocks are headed for a fall …

January 18, 2018

“The Fed’s easy monetary policy has led to overvalued equities”

==========

Let’s start by taking a stroll down memory lane ….

Over 40 years ago, an economist-wannabe co-authored a study in the Journal of Finance titled “The Supply of Money and Common Stock Prices”.

clip_image001

The article summarized an econometric study (think: big, hairy financial model) that demonstrated a tight link between the amount of money floating around and, on a slightly time-delayed basis, the price of stocks.

That is, when the Fed adds liquidity into the market (think: “quantitative easing”), much of money flows into the stock market – rocket-boosting stock prices.

And the opposite is true. When the Fed tightens, stock prices fall back into earth orbit.

OK, fast forward to today.

(more…)

Why did the stock market get over valued?

August 28, 2015

This was a week that market analysts retroactively tag “a long anticipated correction”.

Yeah, right.  That’s what you guys have been saying.

DJIA 08-24-15 5 years
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This week’s market dynamics beg a bigger question:

Why, given a sluggish economy and DC disarray, did the stock market keep marching forward to record highs … that met their come-uppance this week?

Easy.

Let’s start by taking a stroll down memory lane ….

(more…)

Why does the stock market hit record highs despite a sluggish economy?

November 15, 2013

Yesterday, the stock market soared to a new high, again.

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Why, given a sluggish economy and DC disarray, is the stock market still moving higher??

Easy.

Let’s start by taking a stroll down memory lane ….

(more…)

Why did the stock market hit record highs despite a sluggish economy?

September 19, 2013

Yesterday, the stock market soared when Bernanke announced the continuation of the Fed’s Quantitative Easing program … that is, the Fed plans to continue pumping $85 billion dollars per month into the economy.

stocks surge on Fed action

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So, why did the market reach record highs?

Easy.

Let’s start by taking a stroll down memory lane ….

(more…)

Why has the stock market has been strong despite a weak economy?

August 14, 2012

Back about 40 years ago, an economist-wannabe co-authored a study in the Journal of Finance titled “The Supply of Money and Common Stock Prices”.

image

The article summarized an econometric study that demonstrated a tight link between the amount of money floating around and, on a slightly time-delayed basis, the price of stocks.

OK, fast forward to today.

Now, when the Feds expand the money supply, it’s called “Quantitative Easing” … or QE, for short.

Recently, Jason Trennert of Strategas Research Partners published a revealing chart that visually relates stock prices (the S&P 500) to the recent periods of quantitative easing.

Hmmm.

Looks like the supply of money and common stock prices are still related.

Partially explains why the Dow is over 13,000 despite a sluggish and uncertain economy.

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Move over Suze … Thugga is dishing what’s what.

August 7, 2012

The Business Insider says …

He might cavort with video vixens and rap about diamond-encrusted grills, but Houston rapper Slim Thug knows a thing or two about living within his means.

The self-proclaimed Black Suze Orman  penned a 47-page e-book (ahem, “financial manifesto”) called “How to Survive the Recession”.

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Some of Thug’s wisdom:

  • “If you can’t buy it THREE times over, you can’t afford it.”
  • “Never buy a house with unnecessary space”
  • “Never have a Bentley with a Benz salary.”
  • “Why pop a hundred bottles when it only takes a couple to get drunk?“
  • “Dude, say you got a million dollar check … You got to pay damn near half of it to taxes.”

Couldn’t have said it better myself, Thugga.

Now, off to pop the minimum number of bottles …

Thanks to SMH for feeding the lead.

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Apple stock tumbling … You may be surprised how much YOU own !

April 17, 2012

Apple’s stock has lost about 9% of its value since hitting its most recent all-time high of $644, and is on a week-long skid.

Even if you don’t own any AAPL sahres outright, if you’re holding any mutual funds or ETFs, you probably own a boatload.

For example, if you’re holding the PowerShares QQQ (QQQ), you’re holding a big slice of Apple … 17.5% is in AAPL/

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What’s the top holding in the SPDR S&P 500 (SPY)?

You guessed it, APPL …4.37% of the SPY

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Ditto for many of the most popular mutual funds.

For example, APPL is almost 10% of Fidelity’s Contrafund.

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A couple of other biggies:

  • Fidelity Magellan (FMAGX) … top stock … 6.24%%
  • American Funds Growth Fund of Amer A (AGTHX) … top stock … 4.85%

You get the picture, right?

Two major takeaways:

First, If you’re holding any popular ETfs or mutual funds — individually or in, say, 401-Ks — then you probably own a bunch od Apple.

Even more important, so many big dogs — ETFs and mutual funds — are so heavily invested in Apple that, as Apple goes, so will the market.

I’m surprised that more hasn’t be written about about Apple’s influence on the total stock market.

You might want to start worrying

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