Indicators that Spot a Crash

  Is the stock market ready to crash? This is a near constant concern for some investors. But, it probably shouldn’t be. Crashes are rare, having occurred just a few times in market history. There are many ways to define a crash but the most significant stock market crash in history might have come in 1929. Near the end of that year, stocks sold off sharply. The selloff occurred as the economy was entering the Great Depression, an economic downturn that lasted throughout most of the 1930s. The Dow Jones Industrial Average collapsed after the 1929 crash, losing almost 90% of its value ...
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Playing Defense in an Overvalued Market With Ben Graham

Ben Graham was Warren Buffett’s professor in business school. Graham was also the author of one of the widely cited investment books of all time, Security Analysis, which he cowrote with David Dodd. This book is considered to be the first text on value investing and it is still read by investment analysts. Graham believed that individual investors should begin by understanding how much time they have to devote to the investment process. Graham described the difference in terms of the amount of "intelligent effort" they are "willing and able to bring to bear on the task." He cited the example of ...
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How to Use the P/E Ratio and Other Tools When the Market Is Overvalued

In the current market environment, it almost seems as if value investing is dead. It’s been this way for at least the past few months. This means value investors have been struggling in many cases and at least one hedge fund manager is discussing his concerns with investors. In October of last year, David Einhorn of Greenlight Capital described the problem in his quarterly letter to investors: “Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value. What if equity value has nothing to do with current or future profits and ...
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Analysts Tap These Cheap Stocks for Growth

One big story keeps coming up in the stock market. It’s tax reform. Analysts are still sorting through the implications of the new rules but there is a general agreement that changes to the tax code are bullish for most companies. This week, we searched for individual companies that analysts believe could be winners under tax reform. We searched our database for companies that are followed by at least four different Wall Street analysts and are priced below $20 a share. Then, we looked for companies where at least one analyst raised their earnings per share (EPS) estimate by at least 5% ...
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Interest Rates Could Trigger the Bear Market

One of the best investors in the world made a very bold and precise forecast about the stock market trading in 2018. That investor is Jeff Gundlach, the man who replaced Bill Gross as the Bond King in the mind of many analysts. According to Forbes, “Gundlach is known for his arrogance and bold calls--having correctly predicted the housing crash in 2007 and the decline of interest rates in 2013 and 2014.” The magazine estimates Gundlach’s personal net worth at more than $1.8 billion. Gundlach is the founder of DoubleLine Capital LP, an investment firm with more than $100 ...
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Are Commodities the Best Trade of 2018?

Inflation is a concern, for now, but in recent years it hasn’t been widely evident in the economic data. After its most recent meeting, the Federal Open Market Committee (the FOMC which is the operations arm of the Federal Reserve) confirmed that in a statement. The FOMC noted, “Inflation on a 12 month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term.” This has been their outlook for months, but more recent data brings that conclusion into question. The consumer price index (CPI), when ...
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Commodity Stocks Priced Under $2

Commodities, as an asset class have delivered gains for two years in a row. This could be the beginning of a new up trend in commodities after an extended bear market. One widely followed commodity index, the S&P Goldman Sachs Commodity Index ended 2017 with a gain of more than 11%, building on 2016’s gain of 27.18%. Prior to that, the index recorded three consecutive years of losses and over the past ten years, the index shows an average annual return of a loss of 3.2%. Analysts point to several factors that could be bullish for the sector. The global economy is ...
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These Stock Markets Could Be 2018’s Biggest Winners

In 2017, investors were largely focused on FANG stocks. Facebook, Apple, Amazon, Netflix and Alphabet (parent of Google) were the subject of countless stories and as a group delivered excellent performance. But, that was last year. As investors know, they need to always be looking for next year’s winners. This year, that search may take them away from the shores of the United States. They may find more luck looking at Europe where many Wall Street analysts are looking for better returns. Russell Investments is typical of the analysts highlighting European stocks in their year ahead forecasts. Analysts with the firm ...
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