Brendan O'Boyle

Long only, value, growth at reasonable price, medium-term horizon
Brendan O'Boyle
Long only, value, growth at reasonable price, medium-term horizon
Contributor since: 2012
Is this correct? Of the ETFs I follow RSP is the equal weighted S&P500 and is down 9.0% vs. 5.8% for the S&P500 over the past year (QQQ vs. QQEW is the best one I can find for the NASDAQ - down 3% vs. 8.4%).
If the author is making the assertion that poor market breadth is foreshadowing a decline that is well enough. However, I can assure you that declines in AMZN, TSLA, LNKD, FB, GOOGL, AAPL, etc. are factored in to the S&P 500.
There are some obvious inconsistencies in this article:
1) "The bond market, as measured TLT, has actually outperformed the stock market over the past five years"
TLT is not a proxy for the bond market, it is a very small segment of the bond market
2) "investors should anticipate a further pullback in the broad market indexes, as they have not yet reflected the carnage under the surface of the stock market."
So your contention is that the S&P 500 is incorrectly calculated? That somehow stocks that have fallen in value are not properly reflected in the index?
I liked it better before, it's too white. Leave the color scheme alone, we're used to it!
If you think the Massachusetts case how so much validity it would be good to remember that the exact same thing occurred in Pennsylvania.
And GILD immediately had the lawsuit thrown out:
GILD competes with ABBV. If ABBV's sales are down it is just as likely GILD's sales are up. As for discounting GILD has not announced further discounts, if VP isn't selling it says discounts aren't working - a huge plus for the company with the superior drug.
Yet somehow GILD is down more than ABBV? Just silly...
Saying KMI should not be correlated to WTI is silly when it's clear that KMI revenues are correlated to WTI.
They already started 500k bpd over the weekend. WTI is down another 2% to sub $29 on that development.
I'm sure oil prices will rebound eventually, but there may be a good deal of pain and bankruptcy before that happens. I think you are underestimating the risk in this situation.
I think it's normal to expect a move back toward the mean, but that doesn't mean oil can't stay low for years first.
This is a severe supply/demand imbalance, I don't know why to expect things to change without cuts in supply. And for that to happen a significant number of these firms have to go bankrupt unless OPEC caves in.
For a while I disagreed with the use of the term "financially-engineered dividend," but I think I'm coming around. However, these dividends were always financially-engineered and that wasn't always a bad thing.
Question for the author: if oil does go to $20 and stays there for at least a year and mlps cut their distributions entirely what percentage of up/down and midstream mlps will survive? Because when you say the model won't survive that's what that brings to mind for me.
Am I correctly reading your graph on US oil production? It actually rose after April of 2015. I suppose oil was in the $50s then, but still I am quite surprised by that statistic.
A 15% drop during a market correction is brutal?
Do you have much experience with the stock market, because this happens all the time.
Not longest between recessions. In July 1990 the US went into recession, emerged and did not experience another until mid-2000.
It makes especially little sense when one considers that it is SA who has pushed prices down. Shouldn't they have made this move BEFORE doing so?
Jeremy Siegel on the subject. The highest yielding quintile of stocks ranked by dividend yield were found to outperform the index by over 3% per year.
I've always wondered something. Perhaps this is short sighted, but what if Apple had a listing in Europe and repurchased its shares on a foreign exchange. Could they then buy back without repatriation?
This article is rather obvious. If the dividend and distribution of OKE and OKS had no risk they would not yield 10 and 11% respectively.
"What would have happened to those stocks if the entire market declined to the tune of 20-30%?"
It's possible they would have gone up.
This market is starting to remind me of the tech bubble, when overvalued stocks went mindlessly higher while boring stocks fell continually lower. When the tech bubble burst this trend reversed.
Look at the relative performance of BRK.B and the Nasdaq between 1998 and 2002 if you don't believe me.
I will note that the first and last lines of your comment are contradictory. You can't assure me, but I can take it to the bank? Literally we won't have two recessions, but it's virtually assured?
Neither you nor anyone else can date recessions within 18 months. This is simply a fact and it causes trying to be folly rather than good investing.
All you need are two numbers.
1. The average annual gain during a bull market - ~23%
2. The average drawdown during a recession - 30-35%
If you can't time it within 18 months you're wasting your time.
How in the world can you know we'll have two recessions in the next decade when the brightest financial minds in the world cannot predict the next one?
Just an observation: stocks bottom when the maximum number of investors think it's going to get worse.
I don't know if this is the case yet for BHP, but the stock is definitely in deep value territory. I only have a 1% weighting in RIO in materials. I may add BHP in a similar weighting.
I wonder how housing would do if we had a 5% 30 year mortgage rate?
Who am I kidding, where I live everyone has an ARM...
After everything that has gone on this year I would have expected these results to be priced in. The market is surprised revenue is down? I don't see anything new here.
"Valuations are still high: The current 12-month forward P/E ratio of 15.2 is above both the 5- and 10-year average."
You may as well simply say "we are in a bull market."
Valuations nearly always expand during bull markets, thus later on valuations are nearly always above long-term averages. This tells you nothing about when the present cycle will end.
Why are you compounding a monthly dividend four times?
The interesting note about your observation is that high flying stocks in this bull market have still been greatly outpacing everything else.
The NASDAQ is still barely negative for the year and outperforming the S&P.
IBB still has a positive return YTD also. In fact the gains of the S&P have been increasingly concentrated in stocks whose valuations have become harder and harder to justify (NFLX, TSLA, AMZN, FB, maybe even GOOGL).
I expect phase 1 would start with >50% corrections in many of these names. The current market action still looks like a garden variety correction to me, particularly with the lack of any discernible catalyst.
I think what you are saying is you want to buy long-dated futures contracts. I don't trade futures, but this is about as simple as it gets you just buy the contract.
I don't understand why a recession would reduce equity returns from over 90% to 23% by 2025?
Recessions are simply a part of the business cycle, there is a very low probability that we will run from here until 2025 without a recession.
Stocks average returns (8-9%) already have recessions baked into them. A better reason to assume returns by 2025 will be lower would be valuation.
I feel like announcing layoffs right before a quarterly report bodes poorly for the quarterly report...
I guess we'll see tomorrow.
Saying bonds are going down and investors should move from funds to individual bonds is like saying a bear market is on the horizon and you should sell your mutual funds and buy individual stocks.
There is a chance you will do better if you pick bonds (stocks) well, but I wouldn't count on it.
Think about it, if individual bonds could be chosen that automatically outperformed funds it would be the arbitrage opportunity of the century.
If Europe stops funding the Greek banks Greece will be forced to issue its own currency. No bailout means Greece will be forced to abandon the Euro. So I would say your statement is incorrect.
At that time the phrase 'bloodbath' might become appropriate.
But that is what might happen, not what has happened.
It depends on the REIT. Down 25% is pretty bad, but the overall index isn't a bloodbath IMHO.
10% is a correction, not a bloodbath.