What an ideal time to be in the market! Long-term stock investors are reaping the benefits of a massive, eight-year-long bull market. Driven by ultra-low interest rates, fiscal stimulus, economic growth, and a pro-business White House, equities just keep pushing higher.  No one knows how long these glory days will last. Investors are scrambling to find the safest way to invest right amid mounting uncertainty. Despite the bullish environment, there are a wide variety of bearish pressures that could quickly quash the bullish advance.  Anything from terrorism fears, geopolitical worries, or overly aggressive Federal Reserve actions could bring the bull… Read More

What an ideal time to be in the market! Long-term stock investors are reaping the benefits of a massive, eight-year-long bull market. Driven by ultra-low interest rates, fiscal stimulus, economic growth, and a pro-business White House, equities just keep pushing higher.  No one knows how long these glory days will last. Investors are scrambling to find the safest way to invest right amid mounting uncertainty. Despite the bullish environment, there are a wide variety of bearish pressures that could quickly quash the bullish advance.  Anything from terrorism fears, geopolitical worries, or overly aggressive Federal Reserve actions could bring the bull market to a screeching halt. Savvy investors are aggressively seeking to diversify and protect their gains. Protecting gains must be on the forefront of everyone’s mind as the market keeps climbing the wall of worry.  The Safest Places To Invest For The Days Ahead 1. Cash Most people do not consider money itself as an investment. However, cash is the one must-have for any and all investment strategies. As crazy as it might sound, you should consider selling highly profitable stock investments to build your cash reserves.  Nearly every stock brokerage offers the ability to hold cash in a… Read More

I wasn’t a very good physics student in high school. I was a writing, reading, and history guy. But I do remember Newton’s Third Law: “For every action, there is an equal and opposite reaction.” The operative word is “opposite”.  That’s what the bond market experienced last week after the Federal Reserve raised its benchmark Fed Funds rate by 25 basis points, or one quarter of one percent. If the Fed raises rates, yields are going higher, right? Nope. Newton’s Third Law reared its head and proved itself. As the Fed announced its intentions, the yield on the… Read More

I wasn’t a very good physics student in high school. I was a writing, reading, and history guy. But I do remember Newton’s Third Law: “For every action, there is an equal and opposite reaction.” The operative word is “opposite”.  That’s what the bond market experienced last week after the Federal Reserve raised its benchmark Fed Funds rate by 25 basis points, or one quarter of one percent. If the Fed raises rates, yields are going higher, right? Nope. Newton’s Third Law reared its head and proved itself. As the Fed announced its intentions, the yield on the 10-Year U.S. Treasury fell. Along with raising the Fed Funds rate, the central bank also articulated its plan to shrink its holdings of government securities.  During the financial crisis of 2007-2008 as part of its quantitative easing (QE) strategy, the Fed created excess liquidity in the monetary system by buying up U.S. government securities. Their holdings ballooned to nearly $4.5 trillion. #-ad_banner-#As the economy improved, the Fed first slowed its purchase schedule (the “Taper Tantrum”). Now, the Fed has announced that as its holdings mature, the cash will not be reinvested. This is the Fed’s long game. Rather than increase… Read More

When setting up a covered call trade, it is important to estimate ahead of time what that trade is likely to return. Not only will this allow you to evaluate the expected return on your current trade, but it will also give you a benchmark for comparing this trade with other opportunities that may be on your radar. I have set up a simple spreadsheet that allows me to input the necessary data to determine what a covered call setup will return if the position is called away at expiration. The sheet also tells me the amount of risk that… Read More

When setting up a covered call trade, it is important to estimate ahead of time what that trade is likely to return. Not only will this allow you to evaluate the expected return on your current trade, but it will also give you a benchmark for comparing this trade with other opportunities that may be on your radar. I have set up a simple spreadsheet that allows me to input the necessary data to determine what a covered call setup will return if the position is called away at expiration. The sheet also tells me the amount of risk that the covered call protects me against should the stock trade lower. Below is a screen shot of the spreadsheet, which can be easily replicated in Microsoft Excel. The blue cells represent numbers that are entered manually, and the white cells represent data calculated by the formulas. The first three cells are fairly clear. For a covered call setup, we will enter the market price of the stock, the strike price of the call option that we are selling, and the premium (or price) of the option. So, for the example above, we are interested in buying… Read More

At a recent conference, a question was asked about whether it’s still possible to get rich from the stock market. My reply… It has never been easier to get rich from stock investing. Now, that’s a bold statement. But it’s absolutely true. You see, humanity will change more in the next 20 years than in all of recorded history! In fact, the changes coming over the next two decades will dwarf the introduction of the automobile, the airplane, the computer, and even the internet. The average American will soon be receiving four or five packages every week by drone —… Read More

At a recent conference, a question was asked about whether it’s still possible to get rich from the stock market. My reply… It has never been easier to get rich from stock investing. Now, that’s a bold statement. But it’s absolutely true. You see, humanity will change more in the next 20 years than in all of recorded history! In fact, the changes coming over the next two decades will dwarf the introduction of the automobile, the airplane, the computer, and even the internet. The average American will soon be receiving four or five packages every week by drone — everything from groceries and prescriptions to building supplies. Americans will spend 40% of their commuting time in driverless cars, use 3D printers to “print” custom meals, and spend most of their leisure time on activities not yet invented. #-ad_banner-#We will see nearly 2 billion jobs disappear, everything from physicians and lawyers to grocery clerks. Now, the vast majority of those jobs will come back in a different form, with more than 50% of them being self-employed freelance jobs.  In the next 20 years, half of the companies that currently make up the S&P 500 index will be gone. The same… Read More

Compared to the past, there’s something fundamentally different about the challenges central banks face today — further proof that we’re in uncharted economic waters. Low interest rates, even negative rates in some countries, are a prime example. A couple of years ago, a chart of interest rates over the past 5,000 years began to circulate. One version of that chart, shown below, highlights that rates fell to a nearly 400-year low in the Great Recession. One noted economic commentator, James Grant, asked, “If these are the first sub-zero interest rates in 5,000 years, is this not… Read More

Compared to the past, there’s something fundamentally different about the challenges central banks face today — further proof that we’re in uncharted economic waters. Low interest rates, even negative rates in some countries, are a prime example. A couple of years ago, a chart of interest rates over the past 5,000 years began to circulate. One version of that chart, shown below, highlights that rates fell to a nearly 400-year low in the Great Recession. One noted economic commentator, James Grant, asked, “If these are the first sub-zero interest rates in 5,000 years, is this not the worst economy since 3,000 BC?” I don’t believe this is the worst economy in history, but I am seeing more and more indicators that this is an unprecedented economy. Within the past few years, we have seen many longstanding economic relationships change. Among them is the number of unfilled jobs. Historically, we’ve come to expect that there will be more job seekers than jobs. That relationship changed in 2015. Now, there are more job openings (the blue line in the chart above) than jobs (the red line). In theory, this should lead to higher wages… Read More

2017 will go down in history as a very unusual year for the stock market. Traditional rules appear to have been discarded, with the major indexes pushing higher in the face of macro-bearish pressure. The search for reliable investments that can carry a portfolio through the rest of 2017 has many investors scratching their heads. Time-tested market wisdom has been tossed out the window as the world changes at breakneck speed.  Finding the best stocks to buy and hold for the rest of 2017 requires identifying the major themes of the year. Then, you’ll need to locate stocks that are… Read More

2017 will go down in history as a very unusual year for the stock market. Traditional rules appear to have been discarded, with the major indexes pushing higher in the face of macro-bearish pressure. The search for reliable investments that can carry a portfolio through the rest of 2017 has many investors scratching their heads. Time-tested market wisdom has been tossed out the window as the world changes at breakneck speed.  Finding the best stocks to buy and hold for the rest of 2017 requires identifying the major themes of the year. Then, you’ll need to locate stocks that are most likely to benefit from these themes. Obviously, there will be multiple stocks that will profit from each theme, helping you to  diversify your portfolio while still hitching your boat to these all-important market movers. The 3 Leading Themes Of 2017 1. Donald Trump There is very little middle ground when it comes to our new president. People seem to either love him or hate him, and it is this dichotomy that’s signaling significant changes in our country.  So far, Trump’s largest contribution to the economy is his focus on deregulation. In his first 100 days in office, he… Read More

If you only read the headlines on Friday, June 9, you might have thought that financial Armageddon was upon us. Major tech companies like Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT) and Google parent Alphabet (Nasdaq: GOOGL) fell as much as 6% in intraday trading. Meanwhile, the technology sector fell 1.53% and dragged the Nasdaq Composite Index down 113 points, or about 1.8% for the day. The selloff in tech stocks continued into Monday. Headlines screamed that this could be the start of the next major selloff and warned that this major bull market could be nearing its end.  I hope you… Read More

If you only read the headlines on Friday, June 9, you might have thought that financial Armageddon was upon us. Major tech companies like Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT) and Google parent Alphabet (Nasdaq: GOOGL) fell as much as 6% in intraday trading. Meanwhile, the technology sector fell 1.53% and dragged the Nasdaq Composite Index down 113 points, or about 1.8% for the day. The selloff in tech stocks continued into Monday. Headlines screamed that this could be the start of the next major selloff and warned that this major bull market could be nearing its end.  I hope you didn’t listen. Since June 8 — the day before the selloff — the Nasdaq Composite Index is down only 2.5%. Meanwhile, its counterparts the S&P 500 and Dow Jones Industrial Average have fared much better, with the S&P 500 up 0.52% and the Dow Jones up 1.57%.  But what’s perhaps more interesting is the fact that just a handful of stocks caused Nasdaq to slide. The companies I mentioned above — Apple, Microsoft and Alphabet — plus Amazon (Nasdaq: AMZN) and Facebook (Nasdaq: FB) account for nearly 75% of the index’s weighting.  Just consider, the Nasdaq Composite Index is comprised… Read More

Even if you believe economic growth and corporate earnings will pick up, it’s difficult to make the case that shares of U.S. companies are fairly-valued. Companies in the S&P 500 are expected to book earnings growth of 9.9% through 2017 according to analysts surveyed by FactSet Research.  That brings the index’s valuation to 17.7 times forward earnings, a premium of 26% on the S&P’s average of 14.0 over the last decade. Against this pricey environment, evidence has started to build that could disrupt the market.  We’ve already seen the eight-year bull market waver, with the S&P… Read More

Even if you believe economic growth and corporate earnings will pick up, it’s difficult to make the case that shares of U.S. companies are fairly-valued. Companies in the S&P 500 are expected to book earnings growth of 9.9% through 2017 according to analysts surveyed by FactSet Research.  That brings the index’s valuation to 17.7 times forward earnings, a premium of 26% on the S&P’s average of 14.0 over the last decade. Against this pricey environment, evidence has started to build that could disrupt the market.  We’ve already seen the eight-year bull market waver, with the S&P 500 struggling to move higher through March and April. A few tech stocks managed to drag the market higher in May but investors seem to be getting skittish. When the music stops on the second-longest bull market in history, the only investors left with chairs may be the ones that looked for growth outside U.S. markets. How Long Can The U.S. Bull Market Last? Just last week we got disappointing retail sales growth, and job growth has slowed this year compared to last. The Federal Reserve held to its outlook last week, withdrawing monetary support by raising rates and… Read More