The debate about this tax is going on for many months, if not a year now...
Sounds good at first sight but in reality it's a populist measure that won't really raise much money. At least in France it won't work as the additional revenue would be little bigger than the additional cost of administrating the tax.
But it's definitely driving rich investors out of France...
The Fed Is Not Pushing Stock Prices Higher [View article]
Silver,
I think you are right that the Fed indirectly lifts the price of stocks and that happens because of the confidence boost effect of QE.
The author is debunking the myth about the direct flow of QE money into equities because there are so many people that believe that there is a direct link. It that were so then Ben Bernanke could as well start buying Caterpillar or FedEx just to push the stock indexes up.
The Fed Is Not Pushing Stock Prices Higher [View article]
What Paul says sounds more credible to me.
If the money supply (M2) is declining despite QE3 that means most of this new money goes into excess reserves. That is also the reason why there is no inflation in the US.
The other thing is that if what you were saying were true the Fed would have stopped QE as inflating stock indexes is definitely not what they are aiming for.
And finally, why a financial institution that holds a virtually no risk bond will suddenly roll that money into highly risky assets? Just because the Fed buys the bond? Doesn't seem likely to me.
The Fed Is Not Pushing Stock Prices Higher [View article]
Lawrence,
Do you know for sure that what the primary dealers borrow against the primary securities indeed is invested in publicly tradeable stocks? I am sure some of that money goes indeed in stocks but my gut feelings says that those primary dealers must be total nuts (much worse than the traders of CDOs and DSOs in 2006-2007) to put any significant portion of that money into stocks.
Do you have any proof of that or is it just a guess that serves the notion that all QE money goes into the stock market?
My Upcoming 'Swing For The Fence' Investment [View article]
For an investor with at least 2-3 years time horizon even now is not a bad time to buy.
I bought some at USD 117 and thought that's expensive but now looking back I am very pleased with the result. (I slightly regret selling part of my Visa position at 157 to obtain AXP)
As the US economy is picking up speed (unemployment slowly dropping, consumer confidence increasing, housing market recovering) the story about how terribly bad QE was is becoming less and less credible.
The Fed has always been setting the interest rates as lever to boost confidence and borrowing (or to cool down an overheated cycle). And QE is just an extreme extension of the same thing.
It is also factually incorrect to say that the stock market reacts only to QE. It reacts on a daily basis to the information about the basic economic indicators.
After posting Y/Y share gains in the U.S. for much of calendar Q4, the iPhone's (AAPL -3.2%) U.S. share fell 350 bps Y/Y to 43.5% in the 3 months ending February, per Kantar Comtech. Android (GOOG +1%) claimed 51.2% of the market, up 580 bps Y/Y. In "Urban China," the December iPhone 5 launch helped the iPhone's share rise to 25.8%; Android's share is at 68.7%. Windows Phone (MSFT -0.1%) is making slow-but-steady progress (previous): its share is now at 4.1% in the U.S., 6.7% in the U.K., 6.8% in Germany, and 13.1% in Italy. [View news story]
Profit margins are very important. Margin compression means intensification of competition and, all other things being equal, lower profit. That's why people look at them.
The problem is that Apple is not growing EPS much and with the margin compression there is risk profits will go down. I hope not but the risk is there and the market is pricing it in.
Don't worry if you believe in Apple, once they demonstrates strong EPS growth the share price will go up.
That makes it a little more "dangerous". But "danger" here depends on when you bough and what's your temperament and time-horizon. For instance if you bough the SPY at some point in 2011 and are a level-headed, long-term investor no need to freak out at this point.
If your entry point was three months ago and your time horizon is 6 months max then better sell, just to be on the safe side.
People generally don't like bears and pessimism, especially when they are themselves bulls. That's natural.
Besides the economy does not function by some iron, mathematical rules. It goes up when optimism goes up and plunges when pessimism sets in.
We are in a sort of a limbo where there is a real chance things can go right but there's also still a huge risk the US economy will plunge back into recession.
Hence we bulls despise you bears :-), because to some extent you work and contribute towards sabotaging the positive trend. Just at this moment when the US economy really seems to pick up speed! And some of you want even to profit from the misery of the others!
Sodastream Continues Its Growth Strategy In 2013 [View article]
My only regret is I didn't increase my stake in SODA when it was 47-48. Was sucking again my thumb.
10 Undervalued Bank Stocks For The Long Haul [View article]
Ticker - HBAN.
Flying High On Borrowed Wings [View article]
The debate about this tax is going on for many months, if not a year now...
Sounds good at first sight but in reality it's a populist measure that won't really raise much money. At least in France it won't work as the additional revenue would be little bigger than the additional cost of administrating the tax.
But it's definitely driving rich investors out of France...
The Fed Is Not Pushing Stock Prices Higher [View article]
I think you are right that the Fed indirectly lifts the price of stocks and that happens because of the confidence boost effect of QE.
The author is debunking the myth about the direct flow of QE money into equities because there are so many people that believe that there is a direct link. It that were so then Ben Bernanke could as well start buying Caterpillar or FedEx just to push the stock indexes up.
The Fed Is Not Pushing Stock Prices Higher [View article]
If the money supply (M2) is declining despite QE3 that means most of this new money goes into excess reserves. That is also the reason why there is no inflation in the US.
The other thing is that if what you were saying were true the Fed would have stopped QE as inflating stock indexes is definitely not what they are aiming for.
And finally, why a financial institution that holds a virtually no risk bond will suddenly roll that money into highly risky assets? Just because the Fed buys the bond? Doesn't seem likely to me.
The Fed Is Not Pushing Stock Prices Higher [View article]
You are wrong about this:
"we see Germany with its pristine balance sheet and the US with deficits running at 100% of GDP"
Germany runs a huge deficit which amount to around 82% of GDP. In the case of Germany it is more about "do what I tell you to do, don't do what I do".
By the way, nice article! I like your theses!
The Fed Is Not Pushing Stock Prices Higher [View article]
Do you know for sure that what the primary dealers borrow against the primary securities indeed is invested in publicly tradeable stocks? I am sure some of that money goes indeed in stocks but my gut feelings says that those primary dealers must be total nuts (much worse than the traders of CDOs and DSOs in 2006-2007) to put any significant portion of that money into stocks.
Do you have any proof of that or is it just a guess that serves the notion that all QE money goes into the stock market?
Flying High On Borrowed Wings [View article]
QE, low unemployment rate and economic growth are horrible things if you have invested in gold, that useless metal...
My Upcoming 'Swing For The Fence' Investment [View article]
I bought some at USD 117 and thought that's expensive but now looking back I am very pleased with the result.
(I slightly regret selling part of my Visa position at 157 to obtain AXP)
Flying High On Borrowed Wings [View article]
The Fed has always been setting the interest rates as lever to boost confidence and borrowing (or to cool down an overheated cycle). And QE is just an extreme extension of the same thing.
It is also factually incorrect to say that the stock market reacts only to QE. It reacts on a daily basis to the information about the basic economic indicators.
After posting Y/Y share gains in the U.S. for much of calendar Q4, the iPhone's (AAPL -3.2%) U.S. share fell 350 bps Y/Y to 43.5% in the 3 months ending February, per Kantar Comtech. Android (GOOG +1%) claimed 51.2% of the market, up 580 bps Y/Y. In "Urban China," the December iPhone 5 launch helped the iPhone's share rise to 25.8%; Android's share is at 68.7%. Windows Phone (MSFT -0.1%) is making slow-but-steady progress (previous): its share is now at 4.1% in the U.S., 6.7% in the U.K., 6.8% in Germany, and 13.1% in Italy. [View news story]
The problem is that Apple is not growing EPS much and with the margin compression there is risk profits will go down. I hope not but the risk is there and the market is pricing it in.
Don't worry if you believe in Apple, once they demonstrates strong EPS growth the share price will go up.
Sodastream Continues Its Growth Strategy In 2013 [View article]
Up 10%, Are Stocks Now Too Dangerous To Hold? [View article]
I don't agree on many things with Lance but he is right that the current market is not without dangers. I do recognise despite all the bashing.
Up 10%, Are Stocks Now Too Dangerous To Hold? [View article]
If you choose to use Professor Shiller's CAPE ratio then the market is somewhat overvalued.
http://bit.ly/QqZ06c
That makes it a little more "dangerous". But "danger" here depends on when you bough and what's your temperament and time-horizon. For instance if you bough the SPY at some point in 2011 and are a level-headed, long-term investor no need to freak out at this point.
If your entry point was three months ago and your time horizon is 6 months max then better sell, just to be on the safe side.
Sell The SPY On High? [View article]
Besides the economy does not function by some iron, mathematical rules. It goes up when optimism goes up and plunges when pessimism sets in.
We are in a sort of a limbo where there is a real chance things can go right but there's also still a huge risk the US economy will plunge back into recession.
Hence we bulls despise you bears :-), because to some extent you work and contribute towards sabotaging the positive trend. Just at this moment when the US economy really seems to pick up speed! And some of you want even to profit from the misery of the others!
Don't be surprised by this reaction! ;-)