Despite a series of boulders thrown in its path, the market has managed to march steadily higher throughout 2013. The 23% gain for the S&P 500 Index thus far in 2013 is higher than even the most bullish forecasts anticipated. Yet a look at why the market is reaching new heights can give us a clear read into what to expect in the year ahead. The S&P 500 has risen in eight of the past 10 months Here’s a look at five key themes from this year, and what to expect in 2014. 1. The Fed’s long-awaited… Read More

Despite a series of boulders thrown in its path, the market has managed to march steadily higher throughout 2013. The 23% gain for the S&P 500 Index thus far in 2013 is higher than even the most bullish forecasts anticipated. Yet a look at why the market is reaching new heights can give us a clear read into what to expect in the year ahead. The S&P 500 has risen in eight of the past 10 months Here’s a look at five key themes from this year, and what to expect in 2014. 1. The Fed’s long-awaited tapering For the past six months, the Federal Reserve has inched ever closer to ending the massive quantitative easing (QE) program that has pumped $85 billion into the economy every month. The Fed seemed poised for an imminent move in the spring, which led the markets to slump in late May and early June. The fact that Fed decided to wait a bit longer led investors to conclude that it was still safe to buy into a liquidity-fueled market. Few have expressed concern that the Fed’s inaction is the result of an economy that just can’t build… Read More

Short sellers love to focus on major themes, and one of their favorite themes involves unsustainable dividends. The shorts know that any time a dividend must be cut or eliminated, shares can drop sharply as the primary appeal of such high-yielders disappears. Case in point: Frontier Communications (NYSE: FTR), which currently has a short position in excess of 200 million shares. (I recently discussed this telecom’s impending dividend woes.) But Frontier’s not alone. A few of its peers in the telecom industry are also at risk of a painful dividend cut, and it’s unwise to focus on their current unsustainable… Read More

Short sellers love to focus on major themes, and one of their favorite themes involves unsustainable dividends. The shorts know that any time a dividend must be cut or eliminated, shares can drop sharply as the primary appeal of such high-yielders disappears. Case in point: Frontier Communications (NYSE: FTR), which currently has a short position in excess of 200 million shares. (I recently discussed this telecom’s impending dividend woes.) But Frontier’s not alone. A few of its peers in the telecom industry are also at risk of a painful dividend cut, and it’s unwise to focus on their current unsustainable dividend yields. 1. Consolidated Communications (Nasdaq: CNSL )  Current yield: 8.3% This local and long-distance phone company has supported an impressive $1.55 a share annual dividend since 2006. Trouble is, over the years, business has steadily deteriorated as its client base slowly defects to large wireless service providers. In years past, Consolidated typically generated around $15 million in annual operating cash flow, which was just enough to support the dividend. But operating profit fell 40% in 2012 to below $10 million, and of greater concern, free cash flow turned negative for only the second time in the past eight… Read More

As a rule, most investors are utterly preoccupied with earnings.  That’s understandable, of course. At the end of the day, the goal of any business is to turn a profit. The problem comes when we focus on the bottom line to the exclusion of everything else.  At best, this offers an incomplete view of how a company is performing. At worst, it can mask underlying weakness.  In response to the last recession, businesses of all shapes and sizes streamlined their operations to cut costs and preserve cash. Many did an outstanding job of erasing red ink from the books. The… Read More

As a rule, most investors are utterly preoccupied with earnings.  That’s understandable, of course. At the end of the day, the goal of any business is to turn a profit. The problem comes when we focus on the bottom line to the exclusion of everything else.  At best, this offers an incomplete view of how a company is performing. At worst, it can mask underlying weakness.  In response to the last recession, businesses of all shapes and sizes streamlined their operations to cut costs and preserve cash. Many did an outstanding job of erasing red ink from the books. The deeper they slashed, the more money they pocketed.  At first, this delighted investors. They saw growing earnings each quarter and cheered. But eventually, they began to realize that the phantom “growth” was nothing more than belt-tightening. In many cases, revenues were actually flat or sometimes even falling.  You can boost your household disposable income by eliminating the $100 weekly maid service and the $100 weekly lawn care service — but you’d much rather get a $200 weekly pay raise.  #-ad_banner-#The same rings true in the business world, where you’d much rather attract new customers or increase prices. There’s a limit… Read More

There are few legal monopolies.#-ad_banner-# One commonly cited example in the public markets is Sirius XM (Nasdaq: SIRI). Sure, Sirius is the only satellite operator in the market, but radio listeners have alternatives — including the likes of local broadcast radio. Even other common monopolies have alternatives, such as the U.S. Postal Service, where you can opt to use FedEx (NYSE: FDX) or UPS (NYSE: UPS). However, is there any market in which customers don’t have a choice? But what if there were a legal monopoly that embodied “customer captivity”? Imagine a company that has agreements that give it unrivaled… Read More

There are few legal monopolies.#-ad_banner-# One commonly cited example in the public markets is Sirius XM (Nasdaq: SIRI). Sure, Sirius is the only satellite operator in the market, but radio listeners have alternatives — including the likes of local broadcast radio. Even other common monopolies have alternatives, such as the U.S. Postal Service, where you can opt to use FedEx (NYSE: FDX) or UPS (NYSE: UPS). However, is there any market in which customers don’t have a choice? But what if there were a legal monopoly that embodied “customer captivity”? Imagine a company that has agreements that give it unrivaled power. And imagine that this same company operates in the fastest-growing industry in the world — the Internet. That company is VeriSign (Nasdaq: VRSN), which has a virtual monopoly on Internet domains. This company has a high level of customer captivity, meaning that its customers rely heavily on its services and cannot get said services elsewhere. VeriSign offers domain name registry services. What this means is that VeriSign operates the authoritative directory of dot-com, dot-net, dot-cc, dot-tv and dot-name domains. The company saw a sizable pullback in late 2012, after the Internet Corporation for Assigned Names and Numbers (ICANN) approved… Read More

With a 23% spike since Labor Day, the Spanish stock market may be the hottest in the world right now.#-ad_banner-# Considering that Spain has one of the world’s highest unemployment rates (exceeding 25%), and that its economy that grew a scant 0.1% this summer, the euphoria is simply unexpected. But investors are often well-served by focusing on distressed assets that may have hit bottom. In fact, three of the world’s richest men (Warren Buffett, Bill Gates and Mexico’s Carlos Slim) are taking the plunge. They’re not buying Spanish companies because business conditions are good. They’re doing it because Spanish assets… Read More

With a 23% spike since Labor Day, the Spanish stock market may be the hottest in the world right now.#-ad_banner-# Considering that Spain has one of the world’s highest unemployment rates (exceeding 25%), and that its economy that grew a scant 0.1% this summer, the euphoria is simply unexpected. But investors are often well-served by focusing on distressed assets that may have hit bottom. In fact, three of the world’s richest men (Warren Buffett, Bill Gates and Mexico’s Carlos Slim) are taking the plunge. They’re not buying Spanish companies because business conditions are good. They’re doing it because Spanish assets are quite cheap in relation to both the money that has been invested in them already, and in comparison to other European assets. News of an emerging Spanish revival among global investors was triggered by a $150 million purchase by Gates’ investment firm of Fomento de Construcciones y Contratas (FCC), which is not traded on U.S. markets. The company has cleaned up its balance sheet and diversified its country exposure, but more than half of sales are tied to Spain, mostly in cement-making. Yet Spain, like China, has a massive glut of unsold homes that were built at the height… Read More

Derivatives are simply investments that trade based on the price of something else. In other words, the price of a derivative is “derived” from something else. #-ad_banner-# Often that something else is an index, a stock or an exchange-traded fund (ETF). While derivatives can be customized and complex, there are also “plain vanilla” derivatives, and this variety includes ordinary call options and put options on stocks and ETFs. An option is a derivative because the price of the option is based on the price of the underlying stock or ETF. Options give… Read More

Derivatives are simply investments that trade based on the price of something else. In other words, the price of a derivative is “derived” from something else. #-ad_banner-# Often that something else is an index, a stock or an exchange-traded fund (ETF). While derivatives can be customized and complex, there are also “plain vanilla” derivatives, and this variety includes ordinary call options and put options on stocks and ETFs. An option is a derivative because the price of the option is based on the price of the underlying stock or ETF. Options give buyers the right to buy (in the case of a call option) or sell (with puts) a stock or ETF at a predetermined price (the strike price) before the option expires. Options are typically used to leverage a move in an underlying stock or ETF, and they can potentially be used to provide portfolio insurance for individual investors. In order to understand the costs and potential benefits of portfolio insurance, we will use an example. Imagine an investor with an account worth $10,000 invested entirely in the stock market. If the investor believes that stocks are… Read More

Manhattan is the most exclusive real estate market in the world. The tiny, 34-square-mile island is home to Wall Street, the global headquarters of the United Nations and some of the most powerful and influential companies in the world. That exclusivity has driven big gains for one of Manhattan’s most prized properties. Since going public in the spring of 2010, Madison Square Garden (NYSE: MSG) is up a market-crushing 198%. #-ad_banner-#But if you missed out on that impressive run, don’t worry. The most exclusive real estate market in the world is setting the stage for another big winner. Read More

Manhattan is the most exclusive real estate market in the world. The tiny, 34-square-mile island is home to Wall Street, the global headquarters of the United Nations and some of the most powerful and influential companies in the world. That exclusivity has driven big gains for one of Manhattan’s most prized properties. Since going public in the spring of 2010, Madison Square Garden (NYSE: MSG) is up a market-crushing 198%. #-ad_banner-#But if you missed out on that impressive run, don’t worry. The most exclusive real estate market in the world is setting the stage for another big winner. Clocking in at $1.3 billion, this company’s recent IPO was the second-largest ever for a U.S. REIT (real-estate investment trust). It controls more than 8 million square feet of some of the most desirable commercial real estate in the world. And it also pays investors to own shares with a solid dividend yield that is higher than the benchmark 10-year Treasury. Empire State Realty Trust (NYSE: ESRT) went public in early October. The REIT owns 12 office properties and six retail properties. The trust’s prized asset is the iconic Empire State Building, which is the second-tallest building in New York… Read More

Have you heard about the “death gene”? Not to worry — I’ll tell you about an antidote in a moment, but first consider this… The death gene is the genetic variant that apparently can determine — with disconcerting accuracy — your likely departure time from this planet. Researchers in Boston inadvertently made the discovery in the aftermath of a study that looked at sleep patterns. The scientists found that subjects with one particular genetic arrangement died just before 11 a.m., while another group with a different makeup passed away around 6 p.m. Dave Forest, Chief Investment Strategist for StreetAuthority’s Junior… Read More

Have you heard about the “death gene”? Not to worry — I’ll tell you about an antidote in a moment, but first consider this… The death gene is the genetic variant that apparently can determine — with disconcerting accuracy — your likely departure time from this planet. Researchers in Boston inadvertently made the discovery in the aftermath of a study that looked at sleep patterns. The scientists found that subjects with one particular genetic arrangement died just before 11 a.m., while another group with a different makeup passed away around 6 p.m. Dave Forest, Chief Investment Strategist for StreetAuthority’s Junior Resource Advisor, recently discovered a new kind of death gene. It may not predict the demise to the hour like the Boston findings do, but it does tell us to the year — and even the month — when some of the biggest companies in the market might suddenly implode, and perhaps even cease to exist. This potential terminal switch is something investors have grown so accustomed to that few think of it as a problem. But I believe it’s going to rear its ugly head soon and perhaps often — destroying billions in shareholder value, as formerly vibrant businesses… Read More

The past year has not been great — generally speaking — for mining stocks.  Just look at the chart of the Amex Gold Bugs Index below — comprising some of the biggest names in the precious metals mining space. The index has fallen nearly 49% so far in 2013.      Most investors cringe when they look at a chart like this. But many of the savvy industry experts I know in Canada love seeing these big drops, especially when we’re nearing the end of the calendar year.  #-ad_banner-#You see, I’ve worked in the mining and oil and gas sectors… Read More

The past year has not been great — generally speaking — for mining stocks.  Just look at the chart of the Amex Gold Bugs Index below — comprising some of the biggest names in the precious metals mining space. The index has fallen nearly 49% so far in 2013.      Most investors cringe when they look at a chart like this. But many of the savvy industry experts I know in Canada love seeing these big drops, especially when we’re nearing the end of the calendar year.  #-ad_banner-#You see, I’ve worked in the mining and oil and gas sectors for more than a decade, traveling as far as Russia, Chile and Madagascar to inspect natural resource projects. But these days, I call Canada home. And, as editor of StreetAuthority’s premium advisory, Junior Resource Advisor, my job is to provide readers with investment opportunities they won’t find from analysts who sit at a desk all day. And I’m excited when I see a chart like this for one simple reason. It has to do with a “quirk” in the way the Canadian tax system works — a quirk that lets watchful investors buy good resource stocks at double-digit discounts within… Read More

If you were to cross a Bugatti Veyron with a McLaren F1 — two cars capable of reaching 60 mph in less than 3.2 seconds — you’d get a super machine able to leap tall buildings in a single bound. #-ad_banner-# You get the same power when you take two high-flying sectors of the market and combine them into a single exchange-traded fund (ETF). That is the true beauty behind ETFs: the ability to invest in very precise niches of the market that, when multiplied, result in head-turning returns. Today, let’s look at a combination of small caps with health… Read More

If you were to cross a Bugatti Veyron with a McLaren F1 — two cars capable of reaching 60 mph in less than 3.2 seconds — you’d get a super machine able to leap tall buildings in a single bound. #-ad_banner-# You get the same power when you take two high-flying sectors of the market and combine them into a single exchange-traded fund (ETF). That is the true beauty behind ETFs: the ability to invest in very precise niches of the market that, when multiplied, result in head-turning returns. Today, let’s look at a combination of small caps with health care and technology. Small-caps stocks have been on a tear and are poised to continue their streak for some time longer. The iShares S&P Small-Cap 600 ETF (NYSE: IJR) hit an all-time high Oct. 29 and is up about 28% year to date. In fact, this index of core small caps is up 36% over the past 12 months, 50% over the past two years and 130% over the past five, outpacing the Dow Jones Industrial Average on all fronts. As Bloomberg reports, in three out of the past four periods in which small-caps trounced the Dow so dramatically, equities… Read More