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Latest UVA News Posts

Buybacks: The New Magic Beans

Synopsis: Stock buybacks increase corporate leverage. Investors err if they apply the old P/E ratio to the new, now higher EPS, which is solely due to the reduction of outstanding shares. Because leverage has increased, the P/E ratio should fall, as the company is now riskier. Theoretically, via the academic discipline of corporate finance, and used by most Wall Street analysts, management should prioritize its use of cash as follows: …Read More

Before Political Correctness, We Called This “Stagflation”

“Those that cannot remember the past are condemned to repeat it.” (George Santayana 1863-1952). This time, indeed, could be different. It certainly is in the realm of possibility. But, the odds are against it. One doesn’t get up on a particular morning and find an entry in the calendar on our smartphone, like “Cinco de Mayo” or “Mother’s Day,” that says “Start Day: National Recession.” In fact, the National Bureau …Read More

Sources of Uncertainty (Resulting in Market Volatility)

Over the past several months, I have talked a great deal about volatility. The fact is, volatility increases in direct proportion to market uncertainty. So, today’s volatility is just symptomatic of the confusion and uncertainty now prevalent at least in the near-term outlook. The Trade Issue The talking heads on bubblevision would have you believe that the bickering over trade and tariffs, especially between President Trump and China, is the …Read More

A Perspective on Market Volatility

In my last several writings, I emphasized that, after the long tranquil up market in 2017, 2018 markets would display a great deal more volatility. No doubt I was correct on that call. Today’s increased volatility could be symbolic of a healthy correction in an ongoing economic up cycle. It also could be a prelude to something more sinister. Measuring Today’s Volatility Looking back at 2017, there was only one …Read More

The Middle Class Continues to Fall Behind

February’s job growth was significantly stronger (+313,000 Establishment Survey) than market expectations (200,000).  Strangely, though, the unemployment rate (U3) remained at 4.1% (Household Survey) for the fifth straight month.  Why?  Because a significant number of those who had previously stopped looking for work rejoined the labor force, perhaps indicating more labor force slack than the unemployment rate would indicate.  The biggest disappointment, however, was the slowdown in the growth of …Read More

Get used to heightened market volatility

The sentiment surveys indicate that the economy continues to perform well. The underlying data say otherwise. People take their cue from the stock market when it comes to assessing economic health. And, as long as the stock market is near dizzying heights, the sentiment surveys will say the economy is doing well. The hard data  January’s data showed negative retail sales vs. December, negative real weekly income, negative aggregate hours …Read More