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Markets increasingly think Fed’s end of bond buying will be no big deal

Markets increasingly think Fed’s end of bond buying will be no big deal

I wouldn’t call it the consensus yet, but financial market thinking seems headed toward a belief that the end of the Fed’s $120 billion a month in purchases of Treasuries and mortgage backed assets won’t be a big deal. Certainly not enough to upset the bond market or produce another temper tantrum. The belief hinges on forecast of demand and supply that sees them roughly in balance even after the Fed stops its buying. An end to Fed purchases would be a significant hit to demand. But it looks like the U.S. Treasury will be cutting back on bond auctions as about the same time. And that would leave demand and supply roughly where they are now.

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Resurgent virus takes a bite out of China’s GDP

Resurgent virus takes a bite out of China’s GDP

With China closing tourist sites, cancelling flights and beginning the hard work of testing all 12 million residents of Wuhan (again), economic activity in China is taking a hit. (And don’t forget horrific flooding in parts of the country.) Securities firm Nomura lowered projections for third-quarter GDP growth to 5.1% (from a previous 6.4%) and for the fourth quarter to 4.4% growth down from 5.3%

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Selling Meituan and Naspers to cut China exposure

Selling Meituan and Naspers to cut China exposure

Last Wednesday, July 28, Chinese financial regulators told big investors–banks and investment groups heavily exposed to China’s stock market–not to worry. China’s financial markets were sound and despite the fears engendered by the government’s crackdown on the country’s private, for-profit, education companies, the government was not looking to reverse decades of growth by companies in China’s private sector. The meeting worked. Stocks of companies like Meituan (MPNGF), China’s dominant food delivery company (with ambitions to become a full-range e-shopping competitor) rose to $30.07 on the day from $26.00 the day before. But the reassurance worked for only a few days. Today, August 3, for example, Meituan was back in the red, falling 4.48% to $26.95 to erase almost all of its “re-assurance” bounce. Today, I’m selling Meitun and Naspers (NPSNY), a South African company with a huge position in China’s Tencent Holding (TCEHY) out of my Volatility and Jubak Picks Portfolios, respectively.

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Saturday Night Quarterback (on a Monday) says, For the week ahead expect…

Saturday Night Quarterback (on a Monday) says, For the week ahead expect…

I’m looking for answers to two big questions that earnings from Amazon (AMZN) and Caterpillar (CAT) left us with last week. In the case of Amazon, where the company reported a slide in revenue growth after a big bump in sales due to everybody ordering everything on line during the Pandemic shutdown, the question is What is the actual sales growth trend once you remove all the plus and minuses from the Pandemic? This isn’t a question just for Amazon, of course. It’s important for figuring out the valuation of everything from Las Vegas hotel and casino play MGM Resorts International (MGM) to streaming champion Netflix (NFLX) to Starbucks (SBUX). The other question left hanging at the end of the week is whether or not we’re about to see a string of companies forecasting lower margins due to rising prices for raw materials. That was the takeaway message from Caterpillar’s (CAT) earnings report.

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Markets increasingly think Fed’s end of bond buying will be no big deal

10-year Treasuries: Long-term bucket pick #6 for my Special Report on how to fix your income investing crisis

Long-term bucket pick #6: 10-year Treasuries. On first (and probably second and third) look, 10-year Treasures wouldn’t seem to have a place in my long-term bucket. After all how can they fix any income investing crisis? They are the income investing crisis. The yield on the 10-year Treasury was a meagre 1.22% on July 29. Retire on that! But yield is only one part of the return you can earn if you hold a Treasury bond to maturity–if interest rates fall.

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Deere: Long-term bucket pick #5 for my Special Report on how to fix your income investing crisis

Long-term bucket pick #5: Deere (DE). Any stock that goes into a long-term bucket for a relatively conservative portfolio like this one, faces a tough test. You want the company to be tapped into some explosive long-term trend that will drive growth–but since this is a conservative portfolio you don’t want that trend to be totally or even mostly speculative.

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VISA: Long-term bucket pick #4 for my Special Report on how to fix your income investing crisis

VISA: Long-term bucket pick #4 for my Special Report on how to fix your income investing crisis

Long-term bucket pick #4: Visa (V). Think of Visa not as a credit card but as a network. We know from watching other networks–Amazon (AMZN) and Apple (AAPL), for example that a the more customers are plugged into a network, the more attractive that network is for merchants, and therefore the more convenient the network is for consumers. All this adds up to extraordinary profitability with operating margins of 65% in 2020

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Saturday Night Quarterback (on a Monday) says, For the week ahead expect…

Q2 GDP grew by an annualized 6.5%, which gets the economy back to where it was before the pandemic–now for the tough part

U.S. gross domestic product grew 1.6% in the second quarter of the year, the Commerce Department said today, July 29. That’s up from 1.5% growth in the first quarter of 2021. On an annualized basis, second-quarter growth was 6.5 percent. Which brings the economy back to where it was before the pandemic (adjusted for inflation.) That’s a remarkable quick rebound. After the Great Recession ended in 2009, it took two years for the economy to recover the ground that it has lost. But the recovery now faces two tougher jobs: replacing all the growth that didn’t happen because of the pandemic and fixing problems like anemic productivity growth and soaring economic inequality that troubled the U.S. economy before the pandemic recession. .

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Selling my AMD September 17 Call Options (strike price of $92.50) out of my Volatility Portfolio

Selling my AMD September 17 Call Options (strike price of $92.50) out of my Volatility Portfolio

I got another 50% pop (aso f 3:30 p.m. New York time) today in the price of the Advanced Micro Devices (AMD) September 17, 2021 Call Options with a strike price of $92.50 (AMD210917C0009250). I’m going to take my profits here. With the end of earnings season in the next two weeks, I think the risk/reward ratio for holding stocks is shifting toward risk. And I’d rather be more in cash rather than less as we head into what I see as a volatile fall.

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Dems and Reps agree on $1 trillion infrastructure deal–now for the vote

Dems and Reps agree on $1 trillion infrastructure deal–now for the vote

Senate Democrats and Republicans on Wednesday appeared to clinch a deal that would invest roughly $1 trillion into the nation’s infrastructure. The new agreement — announced separately by two of its lead negotiators, Senators Rob Portman (R-Ohio) and Kyrsten Sinema (D-Ariz.), ends the wrangling over the policy specifics in a bipartisan infrastructure deal outlined back in June. The agreement puts the Senate on track to hold a key procedural vote today, July 28, that would allow the chamber to actually begin debating the contents of the infrastructure measure

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