Over the past year, there's no doubt that Europe has dominated the headlines of the world's financial news - and for good reason too. With one country after another falling victim to the "bond vigilantes," the Eurozone's very existence is being called into question. As investors small and large look for an exit, anything that smells of the region is … Continue reading Wheat in Euroland
With reference to my post about Cisco in August, I think it's time to ring the register. I still think Cisco is a solid company, and CSCO the stock may not be done with its rally. However, having just ended the trading day at $18.64, I think it's close enough to my $19 fair value estimate. From the August 10th … Continue reading CSCO Revisited
Going into 2011, analysts up and down Wall Street were calling for stocks to outperform bonds. As of October 31st, U.S. stocks are down 2.6% year to date. Meanwhile, U.S. bonds are up 7.01% over the same period. Figure 1 shows the change in prices for the S&P 500 and the Barclay's Aggregate year to date. … Continue reading Herd on the Street
This morning Euro Zone policymakers announced an agreement where certain private investors (mainly banks and insurance companies) would take 50% haircuts on their holdings of Greek debt. This is basically a managed default. And though it runs totally contrary to what policymakers were promising earlier this year (aka that Greece would not default), it really should have been expected. Back … Continue reading Old Euro Dogs
The markets are quivering in anticipation of what the Federal Reserve may or may not announce later today. The consensus is that it will decide on implementing "Operation Twist." In this situation, the Fed would maintain short-term rates while reaching out to lower long-term rates, effectively "twisting" the yield curve. The idea is that lowering long-term rates will encourage borrowing, spending, and investment. However, … Continue reading Twist and Shout
All year long, corporate earnings have been the rationale for lower stock market valuations. Typically, the arguments go something like "earnings are strong... earnings are increasing... earnings are making new highs." And while those things are true, nobody is talking about where the earnings are coming from. Fortunately, there are some seasoned-pros, like Jeremy Grantham at GMO, who read between the lines and are … Continue reading Between the Lines
This is going to be a busy week for economic data, and maybe for the markets as well. Consumer confidence, FOMC minutes, the ISM, and the employment report will all be released over the next few days. Given that various economic indicators have been implying that the economy is heading towards recession, this fresh set of information will be closely watched. Special attention … Continue reading Just Looking
The markets seem to be hoping that good ol' helicopter Ben will come through with another round of quantitative easing (QE) tomorrow. Doing so would extend the legacy of the "Greespan Put" and probably ignite a speculative risk-on rally. Analysts like Dave Rosenberg and Bill McBride have pointed out how equity markets seem to be dancing around the Fed's QE activities, shown for … Continue reading Bernanke Put
Given that it does, in fact, look like the "kitchen sink" is being tossed out the window, I thought I'd provide an example of something I consider to be a reasonable opportunity. Cisco Systems (CSCO) designs, manufactures and sells products and services related to networking and information technology in general. Over the past year, CSCO stock has … Continue reading Battered but not Broken
So what did the stock market think about S&P's downgrade? We got an answer today, in bright flashing red. The Dow sank 634 points today - the sixth largest single-day drop in history. To be fair, the sell-off wasn't rooted entirely in the downgrade (which was widely expected). Rather, as I have written before, it looks like the market is … Continue reading Patient Trigger Finger
It was a wild week for US markets. Volatility was off the charts and on Thursday the Dow dropped 512 points - its ninth largest single-day drop in history. Stocks are down about 7% from their peak in April and are now negative for the year. Then on Friday, adding insult to injury, Standard and Poors stripped … Continue reading Here Comes the Sink
People often say that the stock market is a leading indicator for the economy. And it is, that is until it isn't. The market is a leading indicator in so much that current prices can be influenced by expectations of future economic growth. Of course, those expectations can simply be incorrect. The huge 90% … Continue reading Playing Catch Up
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