The past few years have been cruel to gold, a casualty of a relentless bull market in stocks and, more recently, the U.S. dollar. Since October 2013, the price has plunged from nearly $1,800 an ounce to about $1,150 — roughly a 35% drop. The bear market in gold blindsided most precious metals investors. In the early days of the Great Recession, many were convinced that gold — and not stocks — had many years of big gains ahead. These gold bulls assumed that the Federal Reserve’s massive “money printing” program would lead to runaway inflation. Yet six… Read More

The past few years have been cruel to gold, a casualty of a relentless bull market in stocks and, more recently, the U.S. dollar. Since October 2013, the price has plunged from nearly $1,800 an ounce to about $1,150 — roughly a 35% drop. The bear market in gold blindsided most precious metals investors. In the early days of the Great Recession, many were convinced that gold — and not stocks — had many years of big gains ahead. These gold bulls assumed that the Federal Reserve’s massive “money printing” program would lead to runaway inflation. Yet six years and three rounds of stimulus later, inflationary pressures remain non-existent. This is why you may be surprised to hear that now could be the best time in a while to own the yellow metal. With the global economy in flux, there are several potential catalysts for substantially higher gold prices in 2015. A Hamstrung Fed After a long stretch of zero-rate policy, investors are finally realizing the Fed wants to start raising interest rates as soon as possible, maybe as early as June. This has been a headwind for gold recently, because higher rates would further boost an already… Read More

Are wage increase announcements bad news for share prices? That’s the easy conclusion to draw after seeing the recent pullback in shares of Wal-Mart Stores, Inc. (NYSE: WMT) following an announcement that the retailer would raise wages for hundreds of thousands of its employees. The starting wage for associates will increase to $9 per hour in April and further to $10 an hour by February of next year. Department managers will also see their starting wages increase to $13 an hour this summer and to $15 an hour next year. #-ad_banner-#The raise will affect as many as 500,000 associates and… Read More

Are wage increase announcements bad news for share prices? That’s the easy conclusion to draw after seeing the recent pullback in shares of Wal-Mart Stores, Inc. (NYSE: WMT) following an announcement that the retailer would raise wages for hundreds of thousands of its employees. The starting wage for associates will increase to $9 per hour in April and further to $10 an hour by February of next year. Department managers will also see their starting wages increase to $13 an hour this summer and to $15 an hour next year. #-ad_banner-#The raise will affect as many as 500,000 associates and could cost the company upward of $1 billion in additional annual wage expenses. Shares have now slid more than 3% since the late February announcement. Investors saw this coming. Back in November, Greg Foran, CEO of Wal-Mart’s U.S. operations, warned the company would see pressures to the bottom-line as it balances wage leverage with higher customer service standards. Though investors see the wage hikes as bad news, the opposite is true. Higher wages should strengthen the company’s competitive position and even boost bottom-line earnings. Much Ado About Nothing First, understand that the impact of the wage increase is likely overstated. Read More

One of the best ways to lose money in the markets is to be a perma-bear. We all know that there will be another bear market in stocks one day — nothing goes up forever — but we have no way of knowing when that decline will begin. So while the bears will eventually be proven right, those who heed their growls too early will, at best, miss out on gains and, at worst, lose a significant amount of money. As investment guru Peter Lynch noted, “Far more money has been lost by investors preparing for corrections or trying to… Read More

One of the best ways to lose money in the markets is to be a perma-bear. We all know that there will be another bear market in stocks one day — nothing goes up forever — but we have no way of knowing when that decline will begin. So while the bears will eventually be proven right, those who heed their growls too early will, at best, miss out on gains and, at worst, lose a significant amount of money. As investment guru Peter Lynch noted, “Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.” Lynch was the manager of Fidelity Magellan Fund from 1977 to 1990 and delivered an average annual return of 29.2%, nearly double that of the S&P 500 during that time. This time frame included Black Monday, the largest one-day crash in market history in October 1987 and three separate declines of 20%. Below is a chart that illustrates how listening to perma-bears could be hazardous to your wealth. It shows some highly publicized market calls following the 2009 market bottom. Nouriel Roubini is an economist who earned the nickname “Dr. Read More

Six years after the collapse of global financial markets, it seems most countries missed their invitation to the economic growth party. Massive monetary stimulus was supposed to jumpstart economies, but it seems the United States is dancing by itself.  China is still growing impressively, but mostly by state-led investment spending, and growth is slowing every year. Japan has yet to really benefit from its own monetary stimulus, as Prime Minister Shinzo Abe’s arrows seem to have missed their mark.  Europe is really the place to watch. Acting the old codger, Europe completely shunned the monetary stimulus party in… Read More

Six years after the collapse of global financial markets, it seems most countries missed their invitation to the economic growth party. Massive monetary stimulus was supposed to jumpstart economies, but it seems the United States is dancing by itself.  China is still growing impressively, but mostly by state-led investment spending, and growth is slowing every year. Japan has yet to really benefit from its own monetary stimulus, as Prime Minister Shinzo Abe’s arrows seem to have missed their mark.  Europe is really the place to watch. Acting the old codger, Europe completely shunned the monetary stimulus party in favor of restrictive fiscal cuts. The European Central Bank (ECB) only recently, and grudgingly, accepted the invitation. But there are signs that its stimulus program may be the economic story of 2015. #-ad_banner-#Taken together, the euro zone is the largest economic region on the planet at $18.45 trillion. If the region meets its expected 1.5% growth rate for 2015 it would be the fastest growth since 2010. This should help boost investor confidence as the region finally digs itself out of five years of economic stagnation. The central bank just started its 19-month program to pump… Read More

In search of income-producing stocks, it’s always wise to check in with the dividend aristocrats. Only companies with top-flight management teams and a recession-tested, profitable track record can pay a growing dividend for more than 25 years.   But you shouldn’t just focus on past performance. You want to look for strong dividend growth in coming decades as well. #-ad_banner-#To get a sense of whether companies can sustain a growing dividend, investors often use the payout ratio, which measures dividends against net income. Yet that ratio can only be helpful up to a point. Net income can… Read More

In search of income-producing stocks, it’s always wise to check in with the dividend aristocrats. Only companies with top-flight management teams and a recession-tested, profitable track record can pay a growing dividend for more than 25 years.   But you shouldn’t just focus on past performance. You want to look for strong dividend growth in coming decades as well. #-ad_banner-#To get a sense of whether companies can sustain a growing dividend, investors often use the payout ratio, which measures dividends against net income. Yet that ratio can only be helpful up to a point. Net income can be affected by depreciation, goodwill and other factors unrelated to a company’s ability to send cash to shareholders every three months (sometimes monthly). As a result, the best metric to determine dividend strength is the dividend payout compared to free cash flow, or FCF. The lower the FCF payout ratio, the more flexibility management has to raise it or make other investments to fuel growth. Searching through the list of dividend aristocrats, you’ll find two companies with warning signs. By my math, they will be hard-pressed to boost their dividends in the future. The good news: I’ve… Read More

All major U.S. stock indices closed lower last week with the exception of the small-cap Russell 2000, which gained 1.2%. Recent market weakness has left the Russell and tech-heavy Nasdaq 100 as the only two in positive territory for 2015. This is actually a subtle positive for the overall market heading into the second quarter, because technology and small-cap issues typically lead. As I said last week: “As long as technology and small-cap issues continue to outperform the broader market, as has been the case thus far this year, I view the recent weakness as a temporary countertrend correction rather… Read More

All major U.S. stock indices closed lower last week with the exception of the small-cap Russell 2000, which gained 1.2%. Recent market weakness has left the Russell and tech-heavy Nasdaq 100 as the only two in positive territory for 2015. This is actually a subtle positive for the overall market heading into the second quarter, because technology and small-cap issues typically lead. As I said last week: “As long as technology and small-cap issues continue to outperform the broader market, as has been the case thus far this year, I view the recent weakness as a temporary countertrend correction rather than a sustainable decline.” #-ad_banner-#From a sector standpoint, only health care and financials posted gains last week. Two of the weakest sectors were energy and materials, both of which have been adversely affected by recent strength in the U.S. dollar. It appears that the greenback has been influencing a lot more than just these two sectors though. My work shows that the currency is currently inversely correlated to a number of commodity prices, including crude oil, copper and the CRB Index, and positively correlated to the U.S. stock market. Influential U.S. Dollar at a Critical Level This week’s first chart… Read More

About a year ago, our colleague Frank Bermea, publisher of StreetAuthority’s sister company, Profitable Trading, met a man named Jared Levy, who knows more about options trading than anyone we’ve ever met. #-ad_banner-#Jared is something of a wunderkind. He began trading options at age 16 and quickly found himself making upward of $600,000 a year. Nowadays, you might find him regularly featured as a guest on financial news programs like CNBC or Fox Business. (In fact, he appeared on Fox Business, to discuss Apple, among other things. You can check out the video at… Read More

About a year ago, our colleague Frank Bermea, publisher of StreetAuthority’s sister company, Profitable Trading, met a man named Jared Levy, who knows more about options trading than anyone we’ve ever met. #-ad_banner-#Jared is something of a wunderkind. He began trading options at age 16 and quickly found himself making upward of $600,000 a year. Nowadays, you might find him regularly featured as a guest on financial news programs like CNBC or Fox Business. (In fact, he appeared on Fox Business, to discuss Apple, among other things. You can check out the video at this link.) If you’ve been a regular reader of StreetAuthority Daily, then you know that we’ve been growing concerned about the possibility of a market correction. No, I’m not saying you should sell all of your investments and run for the hills (yet), but you need to have a plan for when this bull market turns on its head. Jared agrees. In fact, in his second official issue of Profit Amplifier, a new options service launched by our friends at Profitable Trading, Jared warned his readers about… Read More

  While many investors like to pursue hot stocks, others prefer investing in companies in the midst of an operational turnaround.   #-ad_banner-#In today’s market, I see potential for one high-profile stock that has been underperforming the market lately: auto industry icon Ford Motor Co. (NYSE: F).   Ford’s post-recession sales momentum has cooled a bit in recent months. For example, the company’s February sales in the United States fell roughly 2% year over year, well below analyst forecasts for nearly a 6% gain.   However, main rivals Toyota Motor Corp. (NYSE: TM), General Motors Co. (NYSE: GM) and Honda… Read More

  While many investors like to pursue hot stocks, others prefer investing in companies in the midst of an operational turnaround.   #-ad_banner-#In today’s market, I see potential for one high-profile stock that has been underperforming the market lately: auto industry icon Ford Motor Co. (NYSE: F).   Ford’s post-recession sales momentum has cooled a bit in recent months. For example, the company’s February sales in the United States fell roughly 2% year over year, well below analyst forecasts for nearly a 6% gain.   However, main rivals Toyota Motor Corp. (NYSE: TM), General Motors Co. (NYSE: GM) and Honda Motor Co. Ltd. (NYSE: HMC) all boosted U.S. sales in February, posting year-over-year gains of 13%, 4% and 5%, respectively. This news wasn’t the type that inspires confidence in Ford, especially following a tough 2014. Sales fell a modest 2% to $144 billion and per share profits fell by more than half to $0.80 a share for the year.   So what’s been holding Ford back?   For one thing, the automotive division stumbled in North America last year, posting declines in revenue and pretax profits of nearly 5% and 22%, respectively, in the region. The problem was Ford just… Read More

It’s not every day that four words have the potential to upend an entire industry, but that’s exactly the implication of the Supreme Court case King v. Burwell, which began on March 4.  #-ad_banner-#The fate of The Affordable Care Act, and potentially the country’s entire healthcare industry, lies in the court’s final interpretation of the words “established by the state,” which are buried in one line of a 906-page document. In order to make the Affordable Care Act “affordable,” the federal government offers subsidies that make insurance accessible to even the lowest income brackets. But according… Read More

It’s not every day that four words have the potential to upend an entire industry, but that’s exactly the implication of the Supreme Court case King v. Burwell, which began on March 4.  #-ad_banner-#The fate of The Affordable Care Act, and potentially the country’s entire healthcare industry, lies in the court’s final interpretation of the words “established by the state,” which are buried in one line of a 906-page document. In order to make the Affordable Care Act “affordable,” the federal government offers subsidies that make insurance accessible to even the lowest income brackets. But according to the strict letter of the law, only people who signed up through an insurance marketplace that was “established by the state” qualify for a federal subsidy.  The federal government says the language should be interpreted within the context of the law as a whole. They argue that if you consider the document in its entirety, then the law clearly intends for all Americans — not just those who signed up under-state exchanges — to be eligible to qualify for subsidies. This is where King v. Burwell comes in. Only 13 states elected to create their own exchanges, while the… Read More

Companies that take radical steps in pursuit of growth are often accorded very rich valuations. Case in point: Amazon.com, Inc. (Nasdaq: AMZN), which as I recently wrote, has a valuation that bears no relation to it’s financial measures, such as free cash flow. #-ad_banner-#In one respect, such companies are fortunate. In the absence of traditional valuation measurements, they are often given a free pass from a fundamental analysis perspective. Of course, when a once-hot growth company starts to mature, such valuations start to matter a lot. A deep look at grocer Whole Foods Market, Inc. (NYSE: WFM) provides an example… Read More

Companies that take radical steps in pursuit of growth are often accorded very rich valuations. Case in point: Amazon.com, Inc. (Nasdaq: AMZN), which as I recently wrote, has a valuation that bears no relation to it’s financial measures, such as free cash flow. #-ad_banner-#In one respect, such companies are fortunate. In the absence of traditional valuation measurements, they are often given a free pass from a fundamental analysis perspective. Of course, when a once-hot growth company starts to mature, such valuations start to matter a lot. A deep look at grocer Whole Foods Market, Inc. (NYSE: WFM) provides an example of an absurdly overvalued stock — one you should avoid or outright short. The Air Pocket Becomes Permanent Roughly a year ago, shares of Whole Foods hit an air pocket as heightened competition from firms such as The Fresh Market, Inc. (Nasdaq: TFM) and Sprouts Farmers Market, Inc. (Nasdaq: SFM) led to slowing growth. Yet, in recent months, shares of Whole Foods have staged a remarkable rebound. The explanation for this stock’s sudden renaissance is quite simple: Whole Foods has delivered 8% same stores sales growth and 23% annual profit growth since 1994, and investors have recently… Read More