Today’s Wall Street Journal contains a couple of charts that illustrate a relationship that’s not getting much media attention these days: The fact that tightening labor markets are forcing companies to raise wages, in the process squeezing their own profit margins. Historically this margin compression has been either a cause of or contributor to cyclical […]
Late-Cycle Sadness: Value Investors Give Up And Buy Netflix, Apple
Back in the late 1990s I interviewed for an analyst job with a value-oriented money manager. My main impression of our talk was how sad the guy was. The tech bubble was in full swing, any little nothing company with even a tangential relationship to the Internet was soaring, and this poor guy’s cash-rich, super-safe […]
When Investor Psychology Turns Dark, All News Is Bad News
Big companies report blow-out earnings. Home prices soar. North Korea promises to end its nuke program, possibly averting another Asian war. And stocks fall. Does this mean the news no longer matters? That’s exactly what it means. But it never did matter. In a world this complex, big things both good and bad are always […]
So What Blows Up Next? Investor Psychology Shifts To The Dark Side
Facebook is an epic growth story. It now has an astounding 2 billion active users and a stock that – from an already richly-valued level – rose by 53% in the previous year. In February its market cap peaked at $560 billion, a number that exceeds the GDP of many countries. Over 90 percent of […]
“Tech Wreck,” “Techlash,” “Techmageddon” – Whatever You Call It, Wall Street Is Terrified Of It
Back in the 1990s, critics of the dot-com bubble used to point out that the global economy depended on the US stock market and the US stock market depended on, like, ten Internet stocks with negative aggregate earnings. The resulting inverted financial pyramid was, the critics claimed, very easy to tip over. They were right […]
A Bull Market For The History Books — Bear Market To Follow Shortly
If you’re getting the sense that stocks always go up, that’s because they’ve been doing so for a really, really long time. From CNBC today: On the bull market’s ninth birthday, here’s how it stacks up against history • The Dow has quadrupled during the bull market, which turned 9 on Friday. • This is […]
Remember When Stocks Only Went Up?
Long ago in a distant galaxy called “2017,” stock prices rose every day. And the people were happy. With paper profits in hand they maxed out their credit cards and bank lines to buy flat-screen TVs and cars and cover their student loans. Then one day a darkness began to spread. Stocks began to move […]
The 1% Get A Scare — More To Come?
Most Americans have spent the last few years pressed up against the proverbial bakery window, watching the 1% enjoy a life of ever-increasing wealth and seemingly total indifference to the multitudes who aren’t favored by zero interest rates, big trust funds and political/corporate connections. The one consolation for the have-nots has been that, by owning […]
So That’s What Volatility Looks Like
2017 was literally the smoothest stretch of highway that US stocks have ever traveled. Rising almost every day and seldom falling hard, they made it virtually impossible for investors to lose money. Here’s the Dow Jones Industrial Average over the past two years. Note how unnaturally smooth the recent action was. As a result, measures […]
Some Classic Short-Sale Candidates Get Even Better
Six months ago, recreational vehicle sales were booming and the companies making those expensive, gas-guzzling rolling houses were riding high. See The Perfect Crash Indicator Is Flashing Red. And now? Same story, even bigger numbers – but with a decidedly more skeptical treatment in the media: Hipsters Go Glamping, and RV Makers Soar (Wall Street […]
The Dumbest Dumb Money Finally Gets Suckered In
Corporate share repurchases have turned out to be a great mechanism for converting Federal Reserve easing into higher consumer spending. Just allow public companies to borrow really cheaply and one of the things they do with the resulting found money is repurchase their stock. This pushes up equity prices, making investors feel richer and more […]
Last Time This Happened, Part 2: Consumers Are Both Confident And Broke
Elliott Wave International recently put together a chart (click here or on the chart to watch the accompanying video) that illustrates a recurring theme of financial bubbles: When good times have gone on for a sufficiently long time, people forget that it can be any other way and start behaving as if they’re bulletproof. They […]
This Bubble Gets Its “Alternative Paradigm”
Towards the end of financial bubbles, asset prices behave in ways that can’t be explained with rational/historical metrics. So new ones are invented to make sense of things. In the 1990s tech stock bubble, earnings were “optional” and “eyeballs” – that is, the number of visitors to a dot-com’s website – were what determined value. […]
Rationality Versus The Market
The late stages of financial bubbles are always tough for rational analysts. Focused as they are on the numbers, such analysts are relatively immune to the emotion that drives the action at market extremes, so they find themselves making predictions that turn out to be “wrong” for months and sometimes years. Then the cycle turns […]
Dumb – And Dumber — Money Keeps Pouring In
Someday, stock, bond and real estate valuations will matter again. And the mechanism by which this return to sanity is achieved will probably be the torrent of money now flowing in from people who, for various reasons, don’t care about (or understand) the prices they’re paying. Millennials, for instance, seem to have reached the “beginners’ […]
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