In a paper titled “Value and Momentum Everywhere,” a team of researchers found that “value and momentum ubiquitously generate abnormal returns for individual stocks within several countries, across country equity indices, government bonds, currencies, and commodities.” This conclusion is so widely accepted that value and momentum are considered to be anomalies to the Efficient Market Hypothesis (EMH). Proponents of EMH believe markets efficiently price stocks using all available information. The strictest form… Read More

In a paper titled “Value and Momentum Everywhere,” a team of researchers found that “value and momentum ubiquitously generate abnormal returns for individual stocks within several countries, across country equity indices, government bonds, currencies, and commodities.” This conclusion is so widely accepted that value and momentum are considered to be anomalies to the Efficient Market Hypothesis (EMH). Proponents of EMH believe markets efficiently price stocks using all available information. The strictest form of the hypothesis says that no individual could beat the market because each stock is trading at exactly the right price at all times. #-ad_banner-# However, researchers have repeatedly demonstrated that investors can beat the market by applying value and momentum strategies. We believe that volatility can also be used to outperform a buy-and-hold strategy. Recently, we introduced the Income Trader Volatility (ITV) indicator and provided test results showing that… Read More

On Monday, I explained to readers how a simple trading tool could have shown investors when to sell American Capital Agency (Nasdaq: AGNC) near its peak back in September 2012. And before that I showed readers how the same trading tool could have been used to sell Apple (Nasdaq: AAPL) before its crash started in November. Today, I want to show you a stock you can buy right now according to the same indicator… But first, let me explain a little more about this trading tool. It’s called… Read More

On Monday, I explained to readers how a simple trading tool could have shown investors when to sell American Capital Agency (Nasdaq: AGNC) near its peak back in September 2012. And before that I showed readers how the same trading tool could have been used to sell Apple (Nasdaq: AAPL) before its crash started in November. Today, I want to show you a stock you can buy right now according to the same indicator… But first, let me explain a little more about this trading tool. It’s called relative strength, or RS. I know for many individual investors that may sound overly technical, but it’s really very simple. #-ad_banner-#Relative strength is a factor I use to find stocks that are outperforming the market now. You see, value investors often pride themselves on patience. Relative strength helps eliminate the need for this virtue. Buying value stocks only when RS is high can help you avoid the value trap that comes from buying… Read More

We are on the brink of a potentially epic economic change. Fortunately, this is unlikely to be a “black swan” event that rattles the markets from Main Street to Wall Street. It is also not likely to be a sudden shock that quickly dissipates, leaving everything about the same as before. I am talking about a fully controlled, incremental long-term shift that will forever change the economic landscape. To prop up the U.S. Read More

We are on the brink of a potentially epic economic change. Fortunately, this is unlikely to be a “black swan” event that rattles the markets from Main Street to Wall Street. It is also not likely to be a sudden shock that quickly dissipates, leaving everything about the same as before. I am talking about a fully controlled, incremental long-term shift that will forever change the economic landscape. To prop up the U.S. economy after the financial crisis, the Federal Reserve used monetary tools such as dropping interest rates to the lowest levels in history and flooding the markets with ready cash and quantitative easing measures. Now that the economy is back on track, the Fed has signaled its intention to throttle back on quantitative easing, likely to the point of elimination.  In addition, interest rates have started to spike.  This is a long-term change that is currently in its infancy: the economy’s reversion… Read More

The term “fracking” — referring to the hydraulic fracturing of rock formations to tap into seams of natural gas deep underground — is controversial. Consumers have expressed concerns that fracking may cause groundwater contamination, and regulators are studying the issue. The good news: Proper safeguards can help fracking unlock America’s vast trove of natural gas in ways that don’t despoil the environment, and several companies are gearing up to help the cause. Oil services giant Schlumberger (NYSE: SLB), for example, is now selling… Read More

The term “fracking” — referring to the hydraulic fracturing of rock formations to tap into seams of natural gas deep underground — is controversial. Consumers have expressed concerns that fracking may cause groundwater contamination, and regulators are studying the issue. The good news: Proper safeguards can help fracking unlock America’s vast trove of natural gas in ways that don’t despoil the environment, and several companies are gearing up to help the cause. Oil services giant Schlumberger (NYSE: SLB), for example, is now selling fracking fluids that have a much more benign environmental footprint, and rivals are coming up with their own solutions as well. #-ad_banner-# Still, for these fluids to work effectively, fresh water needs to be trucked in, and post-fracking wastewater needs to be trucked away from drilling sites. One of the leading companies in that effort also happens to be one of the most unloved stocks in the market right now. That’s largely due to a major acquisition… Read More

On Thursday, I told you about the advice Warren Buffett is all too happy to offer, but most investors seem to ignore. Today, I’m going to share with you — in the hopes that we can all heed his words a little more closely — the seemingly “magic” formula he uses to consistently beat the market. Ready for it? Stuff minus debt. That’s it. That’s the golden ticket. That’s how an investor can determine the… Read More

On Thursday, I told you about the advice Warren Buffett is all too happy to offer, but most investors seem to ignore. Today, I’m going to share with you — in the hopes that we can all heed his words a little more closely — the seemingly “magic” formula he uses to consistently beat the market. Ready for it? Stuff minus debt. That’s it. That’s the golden ticket. That’s how an investor can determine the intangible value of a business. A lot of people try to make this more complicated than that, but it’s really not.  After all, the accountants are not trying to trick anyone: Each line is exactly what it says it is. “Cash” is self-explanatory. “Inventory” is stuff. “Receivables” are unpaid bills sent for goods delivered or services rendered. And so forth. Yet balance sheets hold this weird mystique. They scare the hell out of a… Read More

Mutual funds are one of the great success stories in the history of financial services. In 1970, just 360 funds existed in the United States, with assets under management at $48 billion. By the end of 2011, there were more than 14,000 mutual funds — with assets of $13 trillion. Thanks to these funds, new classes of investors could access the market, and the financial services industry enjoyed huge gains. #-ad_banner-# But now, after decades of… Read More

Mutual funds are one of the great success stories in the history of financial services. In 1970, just 360 funds existed in the United States, with assets under management at $48 billion. By the end of 2011, there were more than 14,000 mutual funds — with assets of $13 trillion. Thanks to these funds, new classes of investors could access the market, and the financial services industry enjoyed huge gains. #-ad_banner-# But now, after decades of growth, the mutual fund industry is under attack. With bloated fee structures, insufficient transparency, ongoing conflicts of interest, and years of underperformance, the mutual fund industry is experiencing a tidal wave of capital outflows. Domestic equity funds lost $154 billion in assets in 2012 — the fifth consecutive year the industry has had a net outflow. What’s driving the shift away from mutual funds? Exchange-traded… Read More

Are you looking to buy a new car? Don’t pay cash.  A 48-month loan for a new car is currently just 2.58%, according to Bankrate.com. That’s below the historical rate of inflation (going back over the past half century). By the time your loan is paid off in four years, the inflation rate could exceed that 2.58% rate, meaning your real borrowing costs would actually be less than zero percent.#-ad_banner-# But don’t wait too long. Interest rates have begun… Read More

Are you looking to buy a new car? Don’t pay cash.  A 48-month loan for a new car is currently just 2.58%, according to Bankrate.com. That’s below the historical rate of inflation (going back over the past half century). By the time your loan is paid off in four years, the inflation rate could exceed that 2.58% rate, meaning your real borrowing costs would actually be less than zero percent.#-ad_banner-# But don’t wait too long. Interest rates have begun to rebound and are expected to rise gradually higher over the next few years. That auto loan rate will likely be closer to 5% in a few years.  In fact, this issue is probably being discussed in boardrooms at the top auto companies and just about any firm that relies on low-cost loans to spur demand. Corporate executives realize that consumer confidence and spending trends remain challenged, even with the aid of low interest rates. Read More

The latest rankings of the world’s richest people show that telecom magnate Carlos Slim of Mexico is again on the top of the heap, followed by Microsoft founder Bill Gates. Both of these men amassed dizzying fortunes primarily with one investment: Gates with Microsoft (Nasdaq: MSFT) and Slim with America Movil (NYSE: AMX), one of the largest telecom companies in the world. Fourth on the list is Warren Buffett. The Oracle of Omaha also made his fortune with one company, Berkshire Hathaway (NYSE: BRK-B), but there’s a twist. While Microsoft is focused on software… Read More

The latest rankings of the world’s richest people show that telecom magnate Carlos Slim of Mexico is again on the top of the heap, followed by Microsoft founder Bill Gates. Both of these men amassed dizzying fortunes primarily with one investment: Gates with Microsoft (Nasdaq: MSFT) and Slim with America Movil (NYSE: AMX), one of the largest telecom companies in the world. Fourth on the list is Warren Buffett. The Oracle of Omaha also made his fortune with one company, Berkshire Hathaway (NYSE: BRK-B), but there’s a twist. While Microsoft is focused on software and America Movil on cellphones, Berkshire is a holding company. Its business is to own other businesses. It is Buffett’s uncanny ability to pick winning businesses that has enabled the modest man from Omaha to pile up nearly $55 billion. But is it really all that uncanny? I don’t think so. If you go to the bookstore, you’ll find a whole shelf of books on Buffett in the investing section. They will be chock-full of his witty sayings. His earthy common sense resonates with everyone. No matter… Read More

Every profession has its buzzwords to create the illusion that things are more complex than they really are. Everything from the Latin terms used by medical doctors to the chatter of gearheads talking about the latest car engine, simple concepts are often clothed in complicated-sounding terms.#-ad_banner-# Investing professionals are no different in their use of complicated nomenclature to describe simple things and ideas.  I know I was intimidated when I first heard the term statistical… Read More

Every profession has its buzzwords to create the illusion that things are more complex than they really are. Everything from the Latin terms used by medical doctors to the chatter of gearheads talking about the latest car engine, simple concepts are often clothed in complicated-sounding terms.#-ad_banner-# Investing professionals are no different in their use of complicated nomenclature to describe simple things and ideas.  I know I was intimidated when I first heard the term statistical arbitrage. To me, it sounded like I would need a math Ph.D. or at least an advanced understanding of statistical theory to figure out what it meant. Not being an advanced math person, I was fortunate to have had a trading mentor who patiently explained to me what statistical arbitrage is and how to use it profitably.  Ever since I was made aware of this unique and profitable trading technique, I have used it in a variety of market conditions to capture profits that would otherwise be unavailable. This method’s not for… Read More

Are you looking to buy a new car? Don’t pay cash.  A 48-month loan for a new car is currently just 2.58%, according to Bankrate.com. That’s below the historical rate of inflation (going back over the past half century). By the time your loan is paid off in four years, the inflation rate could exceed that 2.58% rate, meaning your real borrowing costs would actually be less than zero percent.#-ad_banner-# But don’t wait too long. Interest rates have begun… Read More

Are you looking to buy a new car? Don’t pay cash.  A 48-month loan for a new car is currently just 2.58%, according to Bankrate.com. That’s below the historical rate of inflation (going back over the past half century). By the time your loan is paid off in four years, the inflation rate could exceed that 2.58% rate, meaning your real borrowing costs would actually be less than zero percent.#-ad_banner-# But don’t wait too long. Interest rates have begun to rebound and are expected to rise gradually higher over the next few years. That auto loan rate will likely be closer to 5% in a few years.  In fact, this issue is probably being discussed in boardrooms at the top auto companies and just about any firm that relies on low-cost loans to spur demand. Corporate executives realize that consumer confidence and spending trends remain challenged, even with the aid of low interest rates. Read More