An article by StreetAuthority’s David Sterman recently caught my attention. It highlighted an indicator that I haven’t looked at for a while —  it measures the market cap of the Wilshire 5000 relative to gross domestic product of the United States. It is one of Warren Buffett’s favorites, has been incredibly prescient in detecting changes in the market and is now flashing a sell signal. The measure, shown in the chart below, is simple and intuitive. When the value of the stock market surpasses the value of the economy, it indicates that investors are… Read More

An article by StreetAuthority’s David Sterman recently caught my attention. It highlighted an indicator that I haven’t looked at for a while —  it measures the market cap of the Wilshire 5000 relative to gross domestic product of the United States. It is one of Warren Buffett’s favorites, has been incredibly prescient in detecting changes in the market and is now flashing a sell signal. The measure, shown in the chart below, is simple and intuitive. When the value of the stock market surpasses the value of the economy, it indicates that investors are paying a premium for assets. Going back to the last two market busts, when the indicator crosses the 100% threshold, the 12-to-18 month outlook has not been promising. This threshold was breached in March of last year and now signals stocks are about 15% overvalued. While the indicator defied all reason to reach nearly 137% before the 2000 selloff, it only made it to 105% before the last market bust. With the Federal Reserve set to raise rates next year, and global growth not picking up the slack, 2015 could bring the… Read More

Just a few months ago, all was quiet on the investing front, as most market indices continually broke new all-time highs. But in early August, the quiet was broken by a sudden surge by the dollar against the euro, the yen, Australian dollar and other currencies. At the time, the rallying dollar was merely seen as the beneficiary of a relatively robust U.S. economic growth rate in 2015, at least compared to Europe and Japan. #-ad_banner-#In hindsight, the currency shifts now appear to be the result of something more concerning: European economic activity has slowed to a crawl, the Chinese… Read More

Just a few months ago, all was quiet on the investing front, as most market indices continually broke new all-time highs. But in early August, the quiet was broken by a sudden surge by the dollar against the euro, the yen, Australian dollar and other currencies. At the time, the rallying dollar was merely seen as the beneficiary of a relatively robust U.S. economic growth rate in 2015, at least compared to Europe and Japan. #-ad_banner-#In hindsight, the currency shifts now appear to be the result of something more concerning: European economic activity has slowed to a crawl, the Chinese government is leaning towards a policy of reform over stimulus — compounded by brewing political troubles in Hong Kong — and U.S. investors are finally waking up to the reality that global economic growth will likely be subpar in 2015. That dim view may also explain why West Texas Intermediate Crude Oil has now slipped below $90 a barrel for the first time in 17 months. Then again, oil prices may be slumping because the dollar is rallying, which always hurts the price of commodities such as oil. Or perhaps it’s the fact that too much… Read More

All major U.S. stock indices finished in the red last week, led lower by the small-cap Russell 2000, which lost 2.4% and is the only major U.S. index in negative territory for the year. #-ad_banner-#The key takeaway heading into this week is that the U.S. stock market is at another near-term decision point: Assuming the market’s larger 2014 advance is still healthy and intact, we should see its September pullback end. Put another way, if U.S. stocks can’t get any traction from their current level, a deeper correction could potentially extend well into October. Watch Key… Read More

All major U.S. stock indices finished in the red last week, led lower by the small-cap Russell 2000, which lost 2.4% and is the only major U.S. index in negative territory for the year. #-ad_banner-#The key takeaway heading into this week is that the U.S. stock market is at another near-term decision point: Assuming the market’s larger 2014 advance is still healthy and intact, we should see its September pullback end. Put another way, if U.S. stocks can’t get any traction from their current level, a deeper correction could potentially extend well into October. Watch Key Support Levels This Week The first chart displays what is probably the most influential index and price level to watch this week. In the Aug. 25 Market Outlook, I pointed out major overhead resistance in the market-leading Nasdaq 100 (NDX) at the 4,147 September 2000 high, which the index has been testing and holding ever since. Last week’s decline from 4147 has positioned NDX right on top of underlying support at 4,007 to 3,998, which represents its July 24 high and 50-day moving average. Read More

They’re popping the champagne corks in Denver, Colorado, where fund management firm Janus Capital Group, Inc. resides. Shares of Janus surged more than 43% on today, inflating the company’s market value by nearly $1 billion. Investors figure the sudden and unexpected hiring of legendary bond fund manager Bill Gross will generate massive amounts of new business for Janus. Yet, it may be time to put the cork into the champagne bottle. The road ahead for Bill Gross — and the bond market — is likely to be much more challenging. #-ad_banner-#Make no mistake, Bill Gross is one of the brightest… Read More

They’re popping the champagne corks in Denver, Colorado, where fund management firm Janus Capital Group, Inc. resides. Shares of Janus surged more than 43% on today, inflating the company’s market value by nearly $1 billion. Investors figure the sudden and unexpected hiring of legendary bond fund manager Bill Gross will generate massive amounts of new business for Janus. Yet, it may be time to put the cork into the champagne bottle. The road ahead for Bill Gross — and the bond market — is likely to be much more challenging. #-ad_banner-#Make no mistake, Bill Gross is one of the brightest minds in the bond business. His wise prognostications helped draw $270 billion into his firm’s Pimco Total Return Fund (Nasdaq: PTTRX). And Janus executives hope he will have a similar magic touch at his new firm.  Even before his arrival, Janus rebounded from its tarnished dot-com legacy and now manages more than $30 billion in bond assets.  According to various media reports, Gross will oversee Janus’ Global Unconstrained Bond Fund (Nasdaq: JUCAX) — which was launched in May 2014 — and he will also help further develop the firm’s fixed-income investment strategies. An unexpectedly long rally When I started… Read More

On March 11, 2011, a massive 9.0-magnitude earthquake erupted about 45 miles east of the Japanese coast. The earthquake let loose a huge tsunami that struck the Fukushima Daiichi nuclear power plant and caused a reactor meltdown. This was the worst nuclear disaster since the 1986 Chernobyl incident and caused bitter backlash against the nuclear power industry around the world. Japan immediately shut down its remaining nuclear plants and Germany followed suit. Both countries vowed to be nuclear free by 2030 and 2022, respectively. Was this the end to atomic energy?… Read More

On March 11, 2011, a massive 9.0-magnitude earthquake erupted about 45 miles east of the Japanese coast. The earthquake let loose a huge tsunami that struck the Fukushima Daiichi nuclear power plant and caused a reactor meltdown. This was the worst nuclear disaster since the 1986 Chernobyl incident and caused bitter backlash against the nuclear power industry around the world. Japan immediately shut down its remaining nuclear plants and Germany followed suit. Both countries vowed to be nuclear free by 2030 and 2022, respectively. Was this the end to atomic energy? As you can see from the chart below, major uranium producer Cameco (NYSE: CCJ) plummeted on the news:   But here’s where the story gets interesting… The Fukushima nuclear incident in Japan — an event that singlehandedly sparked a 50% plunge in uranium prices and raised speculation about the “end of atomic energy” — has actually had no impact whatsoever on global uranium demand. You see, most of Japan’s nuclear fuel is purchased under long-term supply agreements. Uranium fuel is thus delivered regularly to utilities there. Here’s… Read More

If you’ve been watching the market action in recent days, you’ll notice a growing sense of unease. The S&P 500 has repeatedly scaled past 2,000, only to be rebuffed. Is it simply buyers’ fatigue or instead the result of growing concerns about the economies in China and Europe and military action in the Middle East? Frankly, the news outside our borders has been mostly negative, and we may be hearing about the rising set of challenges being faced by export-focused U.S. multinationals as earnings season gets underway in a few weeks. To be sure, the stocks that comprise the S&P… Read More

If you’ve been watching the market action in recent days, you’ll notice a growing sense of unease. The S&P 500 has repeatedly scaled past 2,000, only to be rebuffed. Is it simply buyers’ fatigue or instead the result of growing concerns about the economies in China and Europe and military action in the Middle East? Frankly, the news outside our borders has been mostly negative, and we may be hearing about the rising set of challenges being faced by export-focused U.S. multinationals as earnings season gets underway in a few weeks. To be sure, the stocks that comprise the S&P 500 aren’t in crisis mode — most of them trade near their all-time highs. Yet further down the food chain, small caps and micro caps are quickly breaking down. The Russell 2000 index has begun to drift steadily lower, and many of the underlying components in that index are now 30%, 40% or more from their 52-week highs.  In fact, more than 140 stocks hit 52-week lows on Monday, September 22, on each the Nasdaq and the New York Stock Exchange. That’s the largest number we’ve seen all year. The divergence between small cap stocks and their larger peers… Read More

As investors scan the business news each morning, they often gloss past major acquisition announcements. Most deals don’t involve and don’t have much impact on stocks in your portfolio. But such news can be a fertile source of investment ideas. You can look at these deals, including the valuations, and start to gain an idea of what it means for rival stocks. Sometimes, you’ll find a sharply undervalued rival, simply by connecting the dots. Let me give you an example. Two years ago, I noted that ad agency MDC Partners, Inc. (Nasdaq: MDCA) may soon rally because French advertising and… Read More

As investors scan the business news each morning, they often gloss past major acquisition announcements. Most deals don’t involve and don’t have much impact on stocks in your portfolio. But such news can be a fertile source of investment ideas. You can look at these deals, including the valuations, and start to gain an idea of what it means for rival stocks. Sometimes, you’ll find a sharply undervalued rival, simply by connecting the dots. Let me give you an example. Two years ago, I noted that ad agency MDC Partners, Inc. (Nasdaq: MDCA) may soon rally because French advertising and marketing agency, WPP Plc (Nasdaq: WPPGY), spent $540 million to acquire a rival digital-focused ad firm. On an apples-to-apples basis, MDCA, which became a key player in digital marketing strategies, would be worth more than $30 a share. At the time, shares traded for just $11. I thought the $30 price target seemed too rich: “Frankly, I don’t see this stock going much past $20,” I concluded.  Shares eventually surged to $26 before a recent pullback to $20. In this very same industry (digital advertising), the connect-the-dots trade has just happened again. And it all starts with the September 12,… Read More

Despite ongoing worry about the risk of a big correction, the market is having quite a good year. The S&P 500 is up about 10%, and the financial media is packed with reports about high-profile takeovers, major initial public offerings and soaring tech and biotech stocks. So investors may be shocked to hear which sector is leading the pack in 2014 — and by a sizeable margin. In fact, the sector is up around 15% year-to-date, placing it more than 4% ahead of the highly-publicized tech sector and even a tad out in front of the red-hot biotech… Read More

Despite ongoing worry about the risk of a big correction, the market is having quite a good year. The S&P 500 is up about 10%, and the financial media is packed with reports about high-profile takeovers, major initial public offerings and soaring tech and biotech stocks. So investors may be shocked to hear which sector is leading the pack in 2014 — and by a sizeable margin. In fact, the sector is up around 15% year-to-date, placing it more than 4% ahead of the highly-publicized tech sector and even a tad out in front of the red-hot biotech industry. Some other sectors aren’t even in the same ballpark as utilities. This outperformance is a surprise, considering the negative sentiment toward utilities at the start of the year. At that point, many analysts expected the sector to underperform because of a greater risk appetite among equity investors and gradually rising interest rates, which analysts surmised might begin pushing more conservative income-oriented investors back toward bonds. However, utilities have retained their appeal in 2014 because in many cases their yields still well-exceeded those of government bonds and high-quality corporate debt. What’s more, many equity investors sought refuge… Read More

Every quarter, I sift through a list of thirty billionaire asset managers and their holdings, uncovering the biggest similarities and differences that might be ripe for in-depth study. All the favorites are on my list: Warren Buffett, George Soros and Carl Icahn are some of the more notable names.  Big earners like David Einhorn, Stanley Druckenmiller and Donald Yacktman add extra weight to the group, joining twenty-four others who have amassed a ten-figure (or higher) bank balance through market speculating.   One of my favorite studies is to see which stocks appear most often in the portfolios of these gurus. … Read More

Every quarter, I sift through a list of thirty billionaire asset managers and their holdings, uncovering the biggest similarities and differences that might be ripe for in-depth study. All the favorites are on my list: Warren Buffett, George Soros and Carl Icahn are some of the more notable names.  Big earners like David Einhorn, Stanley Druckenmiller and Donald Yacktman add extra weight to the group, joining twenty-four others who have amassed a ten-figure (or higher) bank balance through market speculating.   One of my favorite studies is to see which stocks appear most often in the portfolios of these gurus.  They must have a broad following from billionaires for a reason, so let’s make it a point to find out why.  See below for a list of six stocks that at least half of the thirty managers I follow own. Stock Symbol No. of Funds That Own (out of 30) Apple, Inc. AAPL 18 Anadarko Petroleum Corp. APC 18 Facebook, Inc. FB 17 Liberty Global PLC LBTYK 16 Micron Technology, Inc. MU 15 Actavis PLC ACT 15 You’d be hard-pressed to visit any stock research website and not see tons of commentary about Facebook and Apple.  In the interest of… Read More

Around the office, we call them “secret wealth investments.” That’s because they’ve been almost exclusively used by the wealthiest investors and institutions for decades now. #-ad_banner-#Yale has used them to generate average returns of 30% every year for their endowment funds since 1973. High net-worth individuals have used them to beat S&P 500 investor returns by an average of 7 percentage points every year for the past decade. And because federal law has stipulated that only millionaires with annual incomes above $200,000 per year can invest in them,… Read More

Around the office, we call them “secret wealth investments.” That’s because they’ve been almost exclusively used by the wealthiest investors and institutions for decades now. #-ad_banner-#Yale has used them to generate average returns of 30% every year for their endowment funds since 1973. High net-worth individuals have used them to beat S&P 500 investor returns by an average of 7 percentage points every year for the past decade. And because federal law has stipulated that only millionaires with annual incomes above $200,000 per year can invest in them, about 94% of investors have been blocked out of this private-market investment. That is, until we found a backdoor way for all investors to invest in them… If you’ve been reading StreetAuthority for the past couple of weeks, you know some my colleagues and I are big fans of these ultra high-yield investments. Some of these “secret wealth investments” I’m referring to are known as private equity firms. And over the last decade, they’ve slowly become open to individual investors. Today, roughly a dozen of these firms sell shares on the… Read More