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The Financial Lexicon  

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  • Here's Some Old-Fashioned, Reliable Dividend Growth
    Tue, Mar. 3 SPY 5 Comments

    Summary

    • In addition to individual stocks, index investing is another way to get reliable dividend growth.
    • Since the S&P 500 debuted in March 1957, it's dividend has grown at a 5.54% compounded rate.
    • At a 5.54% compounded growth rate, the S&P 500 yield on cost from March 1957 has grown to nearly 90%.
  • Why The Housing Market Won't Go Ballistic This Spring
    Sat, Feb. 28 XHB, ITB, PKB 17 Comments

    Summary

    • Fortune.com recently published an article explaining why housing might "go ballistic" this spring.
    • A rising stock market, increasing numbers of 35-to-39 year-olds, and the possibility of higher interest rates is not reason enough to create an upward spiral in housing this spring.
    • Anemic real wage growth, questionable job security, student debt, and unfavorable marriage trends will continue to act as headwinds for housing.
  • This Chart Is Worth 1,000 Words
    Thu, Feb. 26 LQD, AGG, HYG 100 Comments

    Summary

    • Wall Street has long had a clear bias of being bullish of stocks and bearish of bonds.
    • Professional interest rate forecasters have a terrible track record of predicting the 10-year Treasury yield.
    • Instead of spending your time playing the interest-rate guessing game, it is more productive to focus on the credit risk and present-day yield of the bonds on your watch list.
  • Buying LQD Is A Waste Of Time
    Wed, Feb. 25 LQD 40 Comments

    Summary

    • Investment grade bond funds dominate the bond allocation of far too many investor portfolios.
    • Nowadays, low bond commissions and low minimum purchase requirements, make it possible for many investors with smaller portfolio sizes to create a diversified individual bond portfolio.
    • This article outlines an individual bond portfolio that beats LQD on a yield, duration, fees, and credit-risk basis, while also providing more predictable cash flows and better principal protection.
  • Making Sense Of The Broad-Based Weakness In Retail Sales
    Wed, Jan. 14 XRT, SPY, IVV 6 Comments

    Summary

    • December retail sales was nothing short of disappointing.
    • Even when adjusting for lower gasoline sales, retail sales missed expectations.
    • Where did all the money go that people saved at the pump?
  • The Most Expensive Sector In The Market Today
    Nov. 17, 2014 SPY, VDC, FXG 6 Comments

    Summary

    • Do you consider a P/E near 20 and growth in the low single digits to be cheap?
    • On a sector basis, Consumer Staples is the most expensive in the S&P 500.
    • If you're looking to put new money to work and looking for value, Consumer Staples isn't the sector to focus your efforts on.
  • A Brand New Way To Track The Labor Market
    Nov. 15, 2014 SPY, DIA, QQQ 7 Comments

    Summary

    • The Fed recently released a brand new way to track labor market conditions.
    • The Labor Market Conditions Index has 19 underlying indicators.
    • The LMCI is a useful tool for predicting recessions.
  • It's Official: Twitter Is Junk
    Nov. 14, 2014 TWTR 20 Comments

    Summary

    • S&P issued a double-B minus credit rating for Twitter.
    • Double-B minus is three notches into non-investment grade territory.
    • If Twitter's credit rating is three notches into junk territory, what does that say about the stock?
  • A Confusing Message From The Fed
    Nov. 14, 2014 SPY, QQQ, DIA 8 Comments

    Summary

    • On Friday, James Bullard was quoted as saying inflation expectations have increased since mid-October.
    • Data from the St. Louis Fed contradicts Bullard's statement.
    • As time goes on, it becomes increasingly more difficult to think the Fed's top priority is anything other than stock prices.
  • Stocks Are Now More Expensive Than At The 2007 Peak
    Nov. 13, 2014 SPY, SH, SSO 31 Comments

    Summary

    • On both a trailing- and forward-estimates basis, the S&P 500 is more expensive now than it was at the market peak in 2007.
    • Current 2015 earning projections are for the fastest earnings growth in several years.
    • With anemic revenue and wage growth, buybacks and cost cutting will need to have another banner year in 2015, lest investors end up disappointed.
  • A Properly Diversified Portfolio Includes Gold
    Nov. 12, 2014 GLD 117 Comments

    Summary

    • People purchase insurance for all sorts of things in life.
    • Gold is an insurance policy for your portfolio.
    • Gold acts as a bridge from one fiat money regime to the next.
  • AMD's High-Yielding Bonds Now Offer 8% To 9%
    Nov. 12, 2014 AMD 33 Comments

    Summary

    • There is currently an ongoing spirited debate in the Seeking Alpha community regarding the prospects of Advanced Micro Devices.
    • Rather than only focusing on the common stock, which sits at the bottom of AMD's capital structure, investors should also consider the company's bonds.
    • AMD bonds are currently yielding between 8% and 9%.
  • These Two Things Will Not Help The Homebuilders
    Nov. 11, 2014 XHB 4 Comments

    Summary

    • Jim Cramer thinks he's identified two catalysts for the homebuilders - lower gasoline prices and a "thaw in lending".
    • Lower gasoline prices will not embolden people to purchase a home.
    • Lower lending standards may help in the short term but will put the housing market at risk over the longer term.
  • QQQ Is Not The Technology ETF You Think It Is
    Nov. 10, 2014 QQQ 11 Comments

    Summary

    • QQQ is known as a "tech" ETF.
    • But QQQ is far less of a tech ETF than many investors realize.
    • Even the most widely-followed ETFs should be fact checked before buying.
  • Here's Why Gold Prices Have Been Declining
    Nov. 6, 2014 GLD 271 Comments

    Summary

    • There is an abundance of commentaries on gold's price declines.
    • I generally find that commentary to be lacking in terms of identifying the underlying causes of gold's price declines.
    • In addition to poor sentiment and poor technicals, there are five other things currently contributing to gold's declines.
  • Pouring A Little Cold Water On Apple Investors
    Nov. 5, 2014 AAPL 155 Comments

    Summary

    • Conventional wisdom tells us that everything Apple touches turns to gold.
    • Apple Pay and the iWatch will be important for future earnings growth.
    • But challenges exist before Apple Pay and the iWatch can come to dominate their respective markets.
  • Update: A 25% Return From BNY Mellon's Preferred
    Oct. 31, 2014 BK 2 Comments

    Summary

    • Just because we've lived in a low-yield environment in recent years, doesn't mean there haven't been fantastic opportunities in fixed-income.
    • BNY Mellon's Series C Preferred was one such opportunity.
    • On a risk-adjusted basis, a 25% return from a high-quality preferred stock is hard to beat.
  • Putting The Gold Selloff Into Perspective
    Oct. 31, 2014 FXY, GLD, IAU 166 Comments

    Summary

    • Gold, priced in U.S. dollars, has been getting crushed of late.
    • Whether the recent selloff is a concern to you depends on why it is that you own gold.
    • Investors who own gold as a store of value are unconcerned with the recent price moves.
  • The Only Thing That Matters This Week: An Update
    Oct. 31, 2014 DIA, IWM, QQQ Comment!

    Summary

    • The Bank of Japan surprised markets with a previously unknown whopper of an announcement.
    • The Fed ended QE on Wednesday, and, less than 36 hours later, the BOJ stepped in to make sure the QE bucket remains full.
    • If you made a directional trade on the Fed's QE announcement, it's now time to think about making adjustments.
  • Freeport-McMoRan - Broken Stock Or Broken Company?
    Oct. 31, 2014 FCX 18 Comments

    Summary

    • When a stock is getting beaten up by investors, one might assume the company is in trouble.
    • Sometimes the stories told by a company's stock and a company's bonds are quite different.
    • Freeport-McMoRan looks like a case of a broken stock, rather than a broken company.
  • The Underappreciated Reason For Oil's Weakness
    Oct. 30, 2014 BNO, FXE, USL 4 Comments

    Summary

    • The are several reasons for oil's multi-month declines.
    • One of those reasons is the strength of the U.S. dollar.
    • Understanding what is causing U.S. dollar strength is important for anyone interested in trading oil.
  • The Cheat Sheet For Whether The Fed Will Raise Rates
    Oct. 30, 2014 SPY, DIA, IWM 7 Comments

    Summary

    • For years, far too many people have been far too wrong about when the Fed will raise rates.
    • The Fed has said it is data dependent when it comes to interest rate and QE decisions.
    • One diagram can sum up what you need to know about whether the Fed will raise rates.
  • The Real Reason The ECB Didn't Model For Deflation
    Oct. 28, 2014 EFA, VEU, EWP 3 Comments

    Summary

    • The ECB decided not to model deflation as an adverse scenario in the latest banking industry stress test.
    • The most recent European inflation/deflation data shows deflation is already happening in parts of Europe.
    • There must be another reason the ECB left deflation out of the stress test.
  • The Only Thing That Matters This Week
    Oct. 27, 2014 QQQ, IWM, SPY 9 Comments

    Summary

    • The Fed started the latest rally.
    • On Wednesday, the Fed may very well end this rally.
    • The most prudent way to make a directional bet on Wednesday's FOMC announcement is to use options.
  • 3M: A Dividend-Growth Investor's Dream
    Oct. 25, 2014 MMM 15 Comments

    Summary

    • 3M has an impressive history of both paying a dividend and raising its dividend.
    • Before buying 3M for its current and future dividends, consider whether fixed-income alternatives exist that may provide more income over your time horizon.
    • Just because a stock may be a dividend-growth investor's dream, doesn't alone make it suitable for your portfolio.
  • McDonald's: 'It's A Treasury Equivalent'
    Oct. 22, 2014 MCD 15 Comments

    Summary

    • Jim Cramer compared McDonald's stock to a Treasury.
    • There are several reasons he is wrong.
    • Income alone is not a prudent way to evaluate the safety of an investment.
  • Who's Afraid Of The Big Bad Deflation?
    Oct. 18, 2014 JCP, SPY, DIA 111 Comments

    Summary

    • Falling oil prices are making some people question whether deflation is on the horizon.
    • There are several reasons often cited for why we should all want to avoid deflation.
    • Those reasons don't hold a lot of weight in today's reality.
  • QE Forever Is What Stocks Want
    Oct. 16, 2014 SPY 79 Comments

    Summary

    • Investors can thank the Fed for Thursday morning's big bounce.
    • How can value investors trust that their analysis holds long-term weight when QE is propping up stocks.
    • The longer the Fed postpones ending QE and raising rates, the worse the selloff will be when those things eventually happen.
  • As Yields Plunge, Are You Focused On The Wrong Thing?
    Oct. 15, 2014 SPY, DIA, QQQ 6 Comments

    Summary

    • I've recently come across several articles referencing the Fed's dot plot as a reason to expect higher interest rates in the near future.
    • The Fed has a poor history of predicting when it will hike rates.
    • Investors should not rely on the Fed's dot plot as an accurate gauge for predicting interest-rate movements.
  • One Thing Stock Market Investors Need To Understand
    Oct. 15, 2014 DIA, EEM, EFA 3 Comments

    Summary

    • At the end of bull markets there are value traps galore.
    • Earnings estimates take time to catch up to prices.
    • Serious investors must consider the possibility that a bear market has commenced.
  • Equity Investors: Now Is The Time For Patience
    Oct. 14, 2014 SPY, DIA, SH 8 Comments

    Summary

    • In the post-financial-crisis world, the stock market hasn't performed well without QE.
    • San Francisco Fed head John Williams indicated he'd be open to more QE if the economic outlook changes "significantly".
    • For a variety of reasons, it's time to be patient.
  • Commodities And The Dollar: This Chart Says It All
    Oct. 13, 2014 DBC 4 Comments

    Summary

    • After the price declines of recent months, investors may be tempted to try to pick a bottom in commodities.
    • Before buying commodities, there's a chart you need to see.
    • Gold isn't the only commodity that seems to have an anti-dollar component to its pricing.