Timing & trends

Iran's Supreme Leader: "No War Nor Negotiations" Ever With This White House

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Posted by ZeroHedge

on Monday, 13 August 2018 12:03


Iran's supreme leader Ayatollah Ali Khamenei announced in a statement Monday that there would be neither war nor negotiations with the United States.

"Recently, U.S. officials have been talking blatantly about us. Beside sanctions, they are talking about war and negotiations," the senior cleric wrote via his Twitter account in English.

He added, using all caps to close the statement, "In this regard, let me say a few words to the people: THERE WILL BE NO WAR, NOR WILL WE NEGOTIATE WITH THE U.S." CLICK for complete article


Timing & trends

Cyclical Heavy-Truck Industry Soars to Cloud 9

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Posted by Wolf Richter

on Thursday, 09 August 2018 11:15


“It’s a bizarre occurrence and it will not be resolved soon.”

Orders for Class 8 trucks in July jumped 187% from a year ago to 52,250 units, the highest number of monthly orders ever. These are the heavy trucks that haul a significant part of the goods-based economy across the US.... CLICK for complete article


Timing & trends

Charts for the beach - 2018

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Posted by Richard Bernstein of Richard Bernstein Advisors

on Friday, 03 August 2018 08:12

It’s time for our annual August report, “Charts for the beach.” Each year we highlight five of our favorite charts we think consensus is currently overlooking. Remember to ask your RBA representative for your official RBA eyeglass cleaning cloth to keep your sunglasses spotless!

Profits (not GDP or politics) drive the stock market.

At RBA, we approach the current environment by staying disciplined, slowing down the investment process, and by staying dispassionate with respect to politics.

Along those lines, our first two charts show US real GDP and corporate profits through time. There has been considerable hoopla about the strength of GDP growth during the second quarter, but US real GDP growth remains within a slow-growth band that has existed since the bursting of the Technology bubble in 2000 (See Chart 1).

(QoQ % Jan. 1946 – Jul. 2018)


Source: Bloomberg Finance L.P.

Chart 2 helps explain why the US bull market has been so powerful despite continued anemic GDP growth by highlighting corporate profits as a percent of GDP. The corporate sector’s proportion of national income rose to all-time highs post-2010. This ratio has smartly rebounded, which has fueled the more recent leg of the bull market.

Contrary to popular belief, the corporate sector (upon which the stock market ultimately focuses) has been historically healthy relative to the overall economy. The combination of tremendous liquidity provided by the Federal Reserve and an historically healthy corporate sector seems to justify both the length and magnitude of the 9-year bull market.

US Corporate Profits as a Percentage of GDP 
(4Q 1947 – 1Q 2018)

Source: Richard Bernstein Advisors LLC, BEA, Bloomberg Finance L.P.

We prefer fixed liabilities, not fixed income, during inflationary periods.

Data demonstrate that investors continue to focus on disinflationary asset classes and have yet to re-orient portfolios toward assets that outperform during periods of accelerating inflation. Unfortunately, inflation expectations troughed more than two years ago, and asset classes that benefit from accelerating nominal growth (stocks and commodities) have appreciated significantly whereas broad fixed- income has provided negative total return.

Chart 3 compares the returns of stocks, commodities, and various popular fixed-income benchmarks since July 2016. The ongoing popularity of income-oriented investments shows investors have yet to understand the implications of higher potential inflation.

Household and corporate balance sheets constructed with general combinations of fixed asset values and floating liabilities tend to outperform during periods of disinflation/deflation. However, a combination of floating assets and fixed liabilities has proven more beneficial during periods of inflation. FIXED-income is unlikely to be a successful core holding if we are correct and inflation continues to be higher than investors expect. Inflation is the kryptonite of income.



Timing & trends

“Buffet Indicator” Suggests Stock Market Crash Is Looming

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Posted by ZeroHedge

on Thursday, 02 August 2018 11:37


Warren Buffett’s favorite indicator is telling us that stocks are more overvalued right now than they have ever been before in American history. 

That doesn’t mean that a stock market crash is imminent.  In fact, this indicator has been in the “danger zone” for quite some time.  But what it does tell us is that stock valuations are more bloated.... CLICK for the complete article


Timing & trends

Debt Is Through the Roof, and the Market Loves It

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Posted by Brian Christopher via Banyan Hill

on Thursday, 02 August 2018 07:05

Screenshot 2018-08-02 07.08.44Life would be different if you had a rich, generous aunt, wouldn’t it?

If you would indulge me … imagine for a moment that you do.

We have seen a stock market over the past nine years that is simply great.

Imagine that you consulted with your rich, generous aunt at the start of the period.

Doing so would have allowed you to post better-than-market returns.

I explain why below … and tell you how long this market continues in bull mode.

Using Debt to Sweeten Profits

Brokerage customers — like you and me — can incur margin debt.

When you buy stocks through a broker, you can do so using a cash account or a margin account.

A cash account is what it sounds like. You buy stocks using the cash in your account.

If you buy using a margin account, your broker funds a portion of the investment. The portion you pay is known as the margin. The portion the broker pays is margin debt.

You can amplify your cash returns using margin debt.

Let’s think about it with an example. If you buy $1,000 of stock and it grows 13% per year for nine years, you will have $3,000 by the end of the ninth year … $3,004 to be exact.

Remember your rich aunt? She’s so sweet. Let’s call her Aunt Judy.



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