Money and Finance
Link to: US companies keep buying and keep borrowing
- Janet Yellen And Hindsight Value – By Andrew Smithers
Link to article: Janet Yellen and hindsight value“Janet Yellen, the Fed’s head, rather bizarrely used the prospective price/earnings ratio, one of the weakest of all measures, to justify a statement that Wall Street was not overvalued. (This was doubly...
- Will Stock Buybacks Bite Back? - By Jason Zweig
Link to article: Will Stock Buybacks Bite Back?As the bull market soars ever higher, investors face big competition for buying the shares of companies—and it comes from the companies themselves. Last year, the corporations in the Russell 3000,...
- Hussman Weekly Market Comment: Too Little To "lock In"
We've regularly observed that corporate profit margins (and economy-wide, profits as a share of GDP) have a strong tendency to "mean revert" over time - specifically, elevated profit margins are associated with unusually weak earnings growth over...
- Recent Buy - T. Rowe Price Group Inc. (trow)
Hi Everyone, Once again, January continues to be a busy month in terms of buying companies for the American Dividend Dream portfolio. I went through my portfolio and noticed that it was lacking an investment management company. I looked around...
- May Passive Income Progress
With my daughter's high school graduation I am a little late to report my May Passive Income Progress. I started tracking my passive income summer 2014. 2014 Passive income June $261.00 July ...
Money and Finance
US companies keep buying and keep borrowing - by Andrew Smithers
Link to: US companies keep buying and keep borrowing
I wrote in an earlier blog that I would become more cautious about US equities if profit margins came down. We have just had the figures for the first quarter of 2014 and profit margins have narrowed. I should therefore keep readers up to date and explain why I do not think the latest data are signalling the top of the market.
As I pointed out in “US corporate debt and cash flow”, US companies have been the key buyers of the stock market and the rate at which they have been buying shares is unsustainable, because debt cannot continue to grow at the pace needed to finance the purchases. The difficulty with things that cannot go on is deciding when they will stop and I will try to explain why I think this point has not yet arrived, despite the uncertainty that anyone must have about such things.
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There are still, of course, some good reasons for caution. The new Z.1 data allow the value of the US stock market to be updated and, as shown on my website, as at June 6 2014 with the S&P 500 index at 1,949 points the overvaluation shown by q was 88 per cent for non-financials and 87 per cent as shown by the cyclically adjusted price/earnings ratio, or Cape, for quoted shares.
- Janet Yellen And Hindsight Value – By Andrew Smithers
Link to article: Janet Yellen and hindsight value“Janet Yellen, the Fed’s head, rather bizarrely used the prospective price/earnings ratio, one of the weakest of all measures, to justify a statement that Wall Street was not overvalued. (This was doubly...
- Will Stock Buybacks Bite Back? - By Jason Zweig
Link to article: Will Stock Buybacks Bite Back?As the bull market soars ever higher, investors face big competition for buying the shares of companies—and it comes from the companies themselves. Last year, the corporations in the Russell 3000,...
- Hussman Weekly Market Comment: Too Little To "lock In"
We've regularly observed that corporate profit margins (and economy-wide, profits as a share of GDP) have a strong tendency to "mean revert" over time - specifically, elevated profit margins are associated with unusually weak earnings growth over...
- Recent Buy - T. Rowe Price Group Inc. (trow)
Hi Everyone, Once again, January continues to be a busy month in terms of buying companies for the American Dividend Dream portfolio. I went through my portfolio and noticed that it was lacking an investment management company. I looked around...
- May Passive Income Progress
With my daughter's high school graduation I am a little late to report my May Passive Income Progress. I started tracking my passive income summer 2014. 2014 Passive income June $261.00 July ...