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If Trump Delivers, Stocks Are Cheap

Concerns are growing that the stock market overvalued. A number of indicators, including the price-to-earnings (P/E) ratio, are at historic highs. The chart below shows the P/E ratio now and at previous bull market highs. The average P/E ratio at market tops is 19.2. Now, the P/E ratio is 25.6, well above that average. The current P/E ratio is higher than seen at any other market top since World War II except for the 2000 top that ended with the Internet bubble.P/E ratios are just one way to look at the market but they provide important insights into the market. Earnings, ...
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The Best Trades for March

Last month, for the second month in a row, we applied a simple seasonal strategy to find potential buys for January. Now, we can review the results of this strategy. Of the 8 stocks, six moved up, a win rate of 75%. As a group, the stocks in the strategy delivered a gain larger than the gain of the S&P 500 index, also for the second month in a row. The results are summarized in the table below.So far this year, we have a total return of 9.3% for the stocks in our seasonal strategy compared to a gain of ...
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Here’s What Hedge Funds Are Buying and Selling

Hedge funds appear to be a secretive world and, to some degree, they are. Only high net worth individuals who meet the requirements defined by the Securities and Exchange Commission (SEC) and large institutions have access to these investments. Some funds set minimum investments of $25 million or more which limits the pool of potential investors even more.If you can get into a fund, there is no guarantee you will make money. Some funds are very successful but, as a group, hedge funds tend to deliver average or even below average returns. One reason for the poor performance could be ...
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The Charts Will Tell Us When To Sell

In recent days, the Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite index have all hit all-time highs for at least five consecutive days. This was the first time a winning streak like that unfolded since January 1992. The Russell 2000, a benchmark index for small cap stocks, made a new high four days in a row. The last time these four major market indexes made new highs on four consecutive days was in June 1995.New highs generate emotional responses for many investors. Some enjoy seeing new highs, believing rising prices are bullish and that means ...
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Stock Picks From Congress

Congress, for some reason, seems to be filled with wealthy individuals. The median net worth of a member of Congress is more than $1 million, compared with an average American household's median net worth of about $55,000. The majority of members of Congress are millionaires, with 51% reporting assets of at least $1 million. As a whole, about 1% of households in the country are millionaires.With so much wealth, most members of Congress almost certainly have access to great investment managers. But, members of the House and Senate also have an edge over average investors. They have a degree of ...
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Investment Lessons from the President and the Supreme Court

Politics is one of those topics many of us avoid discussing at family meals. We know it can lead to disagreements and ruin a perfectly enjoyable evening. Another topic usually avoided in polite company is money, a subject that can also lead to disagreements. But, there are many times these two topics merge into professional discussions since political decisions can affect financial markets and determine how much money investors earn. Politics and money also come together in disclosure statements that reveal what might be the richest group of Americans own. Members of Congress, senior congressional staff, Cabinet members, the president and ...
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The Key to Success for Investors Is Understanding Your Investment Goals

Russian novelist Leo Tolstoy noted that "happy families are all alike; every unhappy family is unhappy in its own way" in his novel Anna Karenina. I’ve noticed a similar pattern among investors. Successful investors are all alike in some ways while unsuccessful investors all seem to chart their own course away from success. It seems safe to say that successful investors tend to be happy with their results while unsuccessful investors will tend to be unhappy, each in their own way.Among the attributes successful investors share, one of the ways they are alike, is that they understand their objective and ...
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A Strategy Academia Discovered Really Works

Markets are efficient which means the current market price incorporates all available information and represents the true value of a stock. At least that’s what the Efficient Market Hypothesis (EMH) says. If the EMH is correct, there’s just no way to beat the market because the market price is correct and there cannot be any undervalued stocks when every stock is priced accurately. By now, you’ve probably identified some flaws with the EMH.One flaw is that some investment managers do consistently beat the market. The academic community has a ready-made answer to this. They point out that thousands, if not ...
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