Spiking Rates: The Fed Doesn’t See Economy’s Deceleration
After trading in a narrow range (2.80%-3.10%) for much of Q2 and Q3, interest rates broke wildly to the upside as Q4 began. The real wonder was not the rise in rates, but why they stayed so benign for so long, especially in the face of record low unemployment and what seems to be a […]
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 […]
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 […]
An Overview of Brexit
The Reaction of the European Bourses On June 14th, the FTSE closed at 5923.50. On June 15th, the world’s major bourses began their run-up in anticipation that “remain” would win in the U.K. referendum. The FTSE rose 7% from its June 14th level until June 23rd (to 6338.10), the day of the referendum. The day […]
Recognition shock
The wave of anti-establishment, anti-globalization sentiment, evident in the U.S. primary election cycle, manifest itself bigtime in the U.K. with its vote on Thursday, June 23rd, to exit the European Union (E.U.). Wall Street hates uncertainty; that is why it loves the status quo. In the days leading up to this historic British decision, the […]
OPEC’s lunacy behind market’s volatility
Market volatility was present throughout January with no calming so far in February. We saw a 565-point intraday slide on the Dow on Jan. 20; then a few days later, the market closed up nearly 400 points! As February began, the Dow gave back most of that 400-point gain only to regain nearly half of […]