Category Archives: Readings

Market Recap

Posted on July 27, 2018 by Gemmer Asset

  Corporate Earnings – A Solid Foundation   If you are a Facebook investor, it was a tough week. The stock opened Thursday morning 20% lower than where it closed on Wednesday. As part of its second quarter earnings report it predicted slower growth in future quarters.     For all the wailing, we shouldn’t lose sight of the fact that the shares had been on a tear going into this week. Before the earnings…
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Always Look Under The Hood

Posted on by Gemmer Asset

“FANG” has become a popular term in finance circles over the past few years (or more recently “FAANG”). It’s an abbreviation for 4 (or 5) major US tech companies Facebook, Amazon, Netflix and Google – the second A in “FAANG” stands for Apple. And because these days there is an ETF for everything (see here and here), there is an ETF for this new acronym – its ticker is of course: FNG.   This new…
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Housing – Is the Bloom off the Rose?

Posted on July 24, 2018 by Gemmer Asset

There has been some interesting housing data over the last couple days that might point towards a marked slowdown coming, at least in certain markets.   June Existing Home Sales   Existing home sales slipped 0.6% in June from the previous month and are now down 2.2% year-over-year. This is now the third month in a row of lower sales. The decline is pretty small given the run up of the last few years, but…
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Is High Yield Worth The Risk?

Posted on July 19, 2018 by Gemmer Asset

Given where credit spreads are (see below) and the fact that we’re late in the economic cycle, it’s worth asking the question: is taking high yield credit risk worth it?     If you look at yield alone, the roughly 6% you’re getting from junk bonds is certainly appealing, but we’d argue that there are three main risks to having this type of credit exposure at this stage in the cycle.   High Yield Spreads…
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Market Recap

Posted on July 13, 2018 by Gemmer Asset

  Inflation Heats Up – Bond Yields Go Nowhere   Sometimes the link between the economic data and the market reaction can leave you scratching your head. For example, this week’s inflation report was on the hot side. The Consumer Price Index (CPI) increased at an annualized rate of +2.8% in June while the core rate was up +2.0%. Both were slightly above expectations. The graph below shows four different measures of inflation, but you…
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Market Recap

Posted on June 29, 2018 by Gemmer Asset

  Stocks were broadly lower this week as trade worries sat heavily on investor’s minds. For the week the S&P lost -1.3% while small-caps dipped -2.5%. For the first time in a while the international markets were in line with the domestic. Both the EAFE and emerging markets indexes were off about -1.3%. The Chinese market cleared a notable hurdle – it officially fell into bear market territory this week with losses from January high…
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Emerging Markets – An Alternative View

Posted on June 28, 2018 by Gemmer Asset

Over two centuries ago, famed British banker Nathan Mayer Rothschild coined the trading phrase, “buy on the sound of cannons; sell on the sound of trumpets.” He was insinuating that markets tend to panic at the outbreak of wars (“the sound of cannons”), presenting good long-term values. On the other hand, markets typically become sanguine once a conflict comes to an end (“the sound of trumpets”), driving them to elevated levels where traders may want…
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Valuations Are High – So What?

Posted on June 26, 2018 by Gemmer Asset

For years market prognosticators have been saying that valuations are high.  And if you look at the data, it’s true.  The Cyclically Adjusted PE or CAPE Ratio (see definition here), a measure of valuation that is generally thought to be more stable than other relative valuation measures, has been above its historical average since August of 2009 (S&P 500).     Here is the same chart with two additional horizontal lines showing +/- two standard deviation bands…
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Market Recap

Posted on June 22, 2018 by Gemmer Asset

  A New Recession Call   With President Trump’s new trade agenda and fears about Fed policy inverting the yield curve, the drumbeat of recession calls is picking up.   This week David Rosenberg of Gluskin Sheff & Associates garnered a lot of attention by calling for a recession in 12 months (read more here).   Rosenberg has been unfairly tarred as a perma-bear over the years. He was certainly bearish in the late 90’s…
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Corporate Earnings – The Future Looks Good

Posted on June 21, 2018 by Gemmer Asset

“Prediction is very difficult, especially if it’s about the future.” – Nils Bohr, Nobel laureate in Physics   I don’t think Bohr was referencing corporate earnings estimates when he made the above quip, but his words do make a point about predicting the future…   When discussing the state of the U.S. economy, one of the things analysts often point to is the health of corporate earnings – not just reported earnings, but future earnings….
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