It’s a familiar story. A hurricane makes landfall and devastates a large area of land. There is a sad story from a human perspective. This year, the story is centered in North Carolina. Factset summarized the financial impact in a headline that read, “Insurance Industry and Financials Sector Earnings at Risk Again Due to Hurricane Florence.” The analyst noted, “Hurricane Florence is expected to cause significant property damage and business losses across the southeast coast of the U.S. over the next few days." From a corporate earnings perspective, what sectors or industries in the S&...

It’s been ten years since Lehman Brothers collapsed, plunging the global financial system into chaos. Regulators and legislators have taken steps to ensure that crisis won’t happen again. But, like the general who is always fighting the last war, legislation and regulation can’t address the next crisis. That leaves investors and financial analysts always on the lookout for the next crisis. They have had several scares over the years with nearly endless crises in the euro zone and deep market plunges in China. Lesser known problems could also develop into unexpected problems. While China ...

Traders might disagree on whether a stock should be bought or sold. They might disagree on the name of the pattern they spot on the chart. But, one thing they do seem to agree on is that indicators should be added to charts because these tools are useful. The price chart depicts the price action and traders have been searching for patterns on the charts since at least the early 1900s. By the 1940s, many traders had added moving averages which were designed to highlight the trend. Then, they began adding indicators to charts as shown below. This is a chart of the SPDR S&P 500 ETF (NYS...

In many ways, the stock market is nothing more than a large pool of data. That means whenever something happens, even something that appears to be unprecedented, that is almost certainly a precedent. That’s the case with Facebook (Nasdaq: FB). A Bad Earnings Report Becomes a Very Bad Day for the Stock Facebook released its earnings for the second quarter shortly after the market closed last Wednesday. The stock sold off on the report which was not as strong as analysts had come to expect. As the conference call with management began, the stock was off about 10%. The problems began with...

Good news for the economy continues to appear. The Wall Street Journal noted that “Economists expect the low U.S. unemployment rate to go even lower over the next year, reaching levels not seen in a half-century. Private-sector economic forecasters surveyed in recent days by The Wall Street Journal on average saw the jobless rate—4% in June after touching 3.8% in May—falling to 3.7% by the end of 2018 and 3.6% by mid-2019.” It hasn’t been below that level since December 1969, when it was 3.5%. Unemployment has rarely been lower than it is now outside of wartime, when defense productio...

The price of oil is widely followed because oil is critical to economic growth. But, it’s also a chicken and egg type of question. Economic growth drives demand for oil. That raises the price of oil. But, high oil prices choke off economic growth. When oil is priced “just right” we have economic growth. Just right pricing also helps to maintain stability in one of the most volatile regions in the world, the Middle East. Right now, prices are higher than they were a year ago, but they seem to be just right. However, it seems unlikely prices will remain near their current level. The pri...

Chart reading has been the subject of analysis for almost 100 years. The first book on the subject was likely published in 1930. Richard W. Schabacker published Technical Analysis and Stock Market Profits, that year. It was originally a series of lessons but was in a book form by 1932. Schabacker covered reversal patterns, continuation patterns, trend lines, support and resistance, how to develop price targets from chart patterns and how to trade the patterns. It’s all been explained for many years yet many traders still struggle with charts. Buffett’s View on the Subject May Not Be Right ...

Many analysts point to the fact that, as a group, hedge funds tend to deliver average to below average performance. That is true, but that is also not really a relevant fact to most investors. To begin with, remember that there is no requirement to be a hedge fund. Anyone can claim to be a hedge fund and self report performance to the indexing agencies. Regulation is required for larger funds but if an investment manager has few investors, regulations may not apply. That alone explains some of the performance. To some degree, for some participants, starting a hedge fund is like buying a ...

Wall Street analysts often focus their research on up and coming companies. They do this for a couple of reasons. One reason is that they hope to generate new business. Another reason is that they hope to have some big winners to enhance their records. In focusing on cheap companies, analysts are exploiting an attribute that many individual investors already understand, which is that low priced stocks are the most likely ones to produce large gains. Individual investors that low priced stocks could be appealing for two reasons. One reason is that the low price means they have little down...

Recently Walmart announced plans to acquire a 77% stake in India’s Flipkart for $16 billion. Flipkart is an Indian eCommerce company that was initially focused on book sales, but soon expanded into other product categories such as consumer electronics and fashion. The story sounds similar to Amazon and the company has been able to fend off challenges from Amazon, a company that also started with a focus on books and then moved into all areas of commerce. Given that Walmart is now positioned to capture significant sales in India and bring Flipkart’s technology to other markets, it could b...