Posts Tagged ‘stock advisors’
Carlo and I went to high school together about 30 years ago. We remained friends after we left school even though we went our separate ways. Our common thread is that we are both entrepreneurs running our own businesses. After years of not seeing each other, last night we spent a couple of hours together discussing the economy and investing.
Carlo’s complaint last night, which is characteristic of many investors today, was that he worked hard all his life, watching what he spent and saved. “But I’m being punished for it,” he lamented. Why? Carlo looks at other investors who had less than him, but who borrowed heavily after the credit crisis of 2008 to either buy stocks or buy real estate. And they’ve done remarkably well.
“I worked hard, saved, and bought bonds. Meanwhile, I lost money because the return I’ve gotten over the years hasn’t kept up with real inflation. What the government tells me is the inflation rate is a lie. I’m upside down!”
Carlo went on and on: “I know people with no education, people who have never ran a business, people who never saved, but they made millions since 2008 because they bought properties, interest rates went down, and real estate prices went up.”
The government, by lowering interest rates so aggressively since the credit crisis and keeping them low, “punished savers but boosted speculators,” he noted.
Yes, Carlo would have been better off to close his business in 2008 or 2009, take all his money, borrow as much as he could and either have bought stocks or real estate. He would be further … Read More
The second-quarter earnings reporting season is underway, and mainstream stock advisors have high hopes. But what we are seeing is “more of the same” of what we saw in last quarter’s S&P 500 company corporate earnings: revenues are lower; corporate earnings are mediocre, and share buyback programs are boosting per-share income.
Take E. I. du Pont de Nemours and Company (NYSE/DD), a constituent of both the S&P 500 and the Dow Jones Industrial Average, as an example. The chemical giant reported corporate earnings of $1.03 billion, or $1.11 per share, for the second quarter. These earnings were 12% lower than the same period one year ago.
Caterpillar Inc. (NYSE/CAT), the mining and construction company that is also a component of both the Dow Jones Industrial Average and the S&P 500, reported a decline of 43.5% in its second-quarter corporate earnings compared to the same period one year earlier; Caterpillar slashed its outlook for the entire 2013 year. The company’s profit fell to $960 million in the second quarter from $1.7 billion a year earlier. On a per-share basis, the company’s corporate earnings declined from $2.54 to $1.45. (Source: Reuters, July 24, 2013.)
This April, Caterpillar announced its first share buyback in more than four years. The company has or will purchase $1.0 billion worth of its own shares at market prices. (Source: Associated Press, April 25, 2013.) And, of course, this will boost per-share earnings.
Halliburton Company (NYSE/HAL) is one company that reported corporate earnings slightly above estimates at $0.73 per share compared to $0.72 expected. But the company’s profit actually went down for the second quarter to … Read More
There has been increased volatility in gold bullion prices as investors run from precious metals. According to data compiled by Bloomberg, gold bullion’s 60-day historical volatility reached 28.9% on June 13. This was the highest level since December of 2011. Average volatility over the past five years for gold bullion prices has been around 20%. (Source: Bloomberg, June 14, 2013.)
As the volatility continues in gold bullion prices, the fundamentals remain strong. Actually, demand for gold coins is unprecedented right now.
Aside from individual investors buying gold bullion, central banks continue to diversify their reserves into gold bullion as fiat currencies fail to protect their wealth. In spite of the decline in gold bullion prices, as has been well documented in these pages, central banks form Russia, Turkey, and Kazakhstan continue to add precious metals to their reserves.
Bullish stock advisors are forgetting that we are standing on the cusp of a global economic slowdown—an event that bodes well for gold bullion. It may be difficult for my readers to envision right now, but with the recent exodus by investors out of U.S. bonds, once the stock market starts declining, there will be few other “stores of wealth” for investors to seek aside from gold.
Major economic hubs have been slowing down for some time and now, they are taking with them smaller nations that rely on their demand. China, Japan, India, Australia, Germany, and France—they are all begging for economic growth.
But instead of getting growth, world economies are slowing. The World Bank lowered its forecast for global growth last week. It now expects the global economy … Read More
According to an analysis done last week by the Wall Street Journal, in the first quarter of 2013, corporate earnings growth of companies in the key stock indices like the S&P 500 wasn’t really due to companies doing better. Rather, “research tax breaks” are what pushed 1Q13 earnings up for many S&P 500 companies. (Source: Wall Street Journal, June 14, 2013.)
Consider Intel Corporation (NASDAQ/INTC). The company spent $10.1 billion on research and development, which essentially lowered its effective tax rate from 28.2% in the first quarter of 2012 to 16.3% in the first quarter of 2013! This bolstered Intel’s corporate earnings.
Other big names in the S&P 500 like Google Inc. (NASDAQ/GOOG), Abbott Laboratories (NYSE/ABT), The Boeing Company (NYSE/BA), Yahoo! Inc. (NASDAQ/YHOO), and Xerox Corporation (NYSE/XRX) were able to use “research tax breaks” to also boost their corporate earnings.
While this technique helped companies boost 1Q13 earnings, profit expectations aren’t so rosy going forward.
Expectations for corporate earnings for the S&P 500 companies continue to drop. At the end of the first quarter (March 31), second-quarter corporate earnings were forecasted to grow at 4.5%. Now, corporate earnings growth for the second quarter is estimated to be only 1.3%. (Source: FactSet, June 7, 2013.)
Only four out of 10 industry sectors in the S&P 500 are expected to show corporate earnings growth in 2Q13. The information technology sector of the S&P 500 is expected to report a decline of 6.3% in corporate earnings this quarter and the health care sector could see its profits slide four percent!… Read More
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