The stock market in France has been on a tear! Below, I present a chart of the French CAC 40 Index, the main stock market index in France.
Looking at the chart, we see the French stock market is trading at a five-year high. With such a strong stock market, one would expect France, the second-largest economy in the eurozone, to be doing well. But it’s the exact opposite!
As its stock market rallies, France’s economic slowdown is gaining steam. In January, the unemployment rate in France was unchanged; it has remained close to 11% for a year now. (Source: Eurostat, February 28, 2014.) Consumer spending in the French economy declined 2.1% in January after declining 0.1% in December. (Source: National Institute of Statistics and Economic Studies, February 28, 2014.) Other key indicators of the French economy are also pointing to an economic slowdown for the country.
Chart courtesy of www.StockCharts.com
And France isn’t the only place in the eurozone still experiencing a severe economic slowdown. In January, the unemployment rate in Italy, the third-biggest nation in the eurozone, hit a record-high of 12.9%, compared to 11.8% a year ago.
I have not mentioned Greece, Spain, and Portugal because they have been discussed in these pages many times before; as my readers are well aware, they are in a state of outright depression.
Just like how investors have bought into the U.S. stock market again in hopes of U.S. economic growth, the same thing has happened in the eurozone. Investors have put money into France’s stock market in hopes of that economy recovering—but it hasn’t. We are dealing with a global stock market bubble at this point.
Don’t fall for this trap, dear reader. If we look at what happens when a stock market nears a top, we see: 1) stock advisors being too bullish; 2) corporate insiders selling; 3) corporate earnings growth stalling (and companies propping up earning… Read More
Earnings estimates for Microsoft Corporation (MSFT) are going up and the stock, which recently accelerated, finally looks like it has broken out of a 13-year consolidation.
Microsoft has been an income play for quite a while. Currently yielding three percent, the company’s forward price-to-earnings ratio is around 12.5 and is not dissimilar from many other blue chips.
Then there’s Intel Corporation (INTC). This company has been struggling for capital gains, but it’s yielding 3.6% and isn’t expensively priced.
What these technology companies illustrate so well is the business cycle, both in terms of operational growth and also as equity securities. Getting the cycle correct (the right place/stock at the right time) is the toughest thing for any investor or businessperson.
Regarding stocks, both Microsoft and Intel’s long-term charts clearly show how extremely overpriced their share prices were during the bull market of the 90s. Intel’s long-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
The benefit of the very long term is that it provides a normalized but still decent rate of return with these kinds of stocks. No enterprise or investor can escape the business cycle, whether it is industry-specific, a local reality, or the general economy.
Railroad stocks have been super hot over the last several years, but for long periods of time, they were not. The solid dividend-payers that they are, you’d be hard-pressed to find Union Pacific Corporation (UNP) competing with Apple Inc. (AAPL) or Google Inc. (GOOG) for headlines.
I feel that stocks have broken out of their previous consolidation phase in favor of a new long-term cycle. But while last year’s stunning price performance was Fed-induced, it doesn’t mean that stocks won’t experience a material correction and even a technical recession in the economy all within the con… Read More
Halfway around the world, a war has nearly surfaced in Ukraine. At home, there’s an ongoing conflict between the two main political parties on everything from the budget to foreign policy to how best to grow the economy. These conflicts easily make the headlines each day; however, one war that doesn’t make front-page news is the war brewing each morning when consumers grab that cup of java to get their day going.
Sometimes, the choice is a no-brainer but often, it could be dependent on the day at hand or what happens to be closest. Whatever the case may be, when you grab a cup of coffee on the go, you’re participating in the steaming hot competition for business in the coffee market—and it’s only likely to intensify.
The U.S. coffee market had long been shared between two major players. We have Starbucks Corporation (NASDAQ/SBUX) at the premium end, catering largely to the middle-class and upper incomes. For the everyday Joe, there’s “Dunkin’ Donuts,” operated by Dunkin’ Brands Group, Inc. (NASDAQ/DNKN), which also operates the “Baskin-Robbins” brand.
For me, it’s all about the taste and what I feel like drinking that particular day. If I really need a wakeup call, I tend to swing toward Starbucks; but on calmer days, I tend to gravitate towards the milder Dunkin’ Donuts coffee, especially if I also have a craving for a donut.
Yet the coffee market is about to get even more crowded with more decisions to make each morning. Upstart Canada-based Tim Hortons Inc. (NYSE/THI) is quickly becoming the third player in the U.S. coffee market as the chain is nearing 900 stores in the United States. But Tim Hortons is not an unknown, as the company is the biggest coffee operator in Canada with more than 3,500 stores in that country with its sights on aggressive expansion into the United States. Starbucks is also becoming a major player in Canada and abroad, with more than 20,… Read More
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