When most people are sleeping, I’m either working out or researching. Today, how about I just share my weekend research with you?
“In the short-run, the market is a voting machine… but in the long-run, the market is a weighing machine.” – Warren Buffett paraphrasing his mentor Benjamin Graham
My interpretation of this brilliant, succinct statement of the types we’ve come to expect from Warren Buffett, is that in the short-term, markets trade based on investor emotions (or things like high-frequency trading), but, over the long-term, fundamentals ultimately determine price. In other words, over the long-term, price will accurately reflect the fundamental value of a company even if there is a bunch of noise in the interim. Continue reading “Updated: The Price You Pay Determines Your Return”
There have been a couple interesting developments since my last commentary from even a couple days ago. Most important of which is that the Federal Reserve openly acknowledged the slowing growth I warned about previously here, here, here, here, here, here, and here.
In response, the Federal Reserve announced they do not expect to raise interest rates again in 2019 and will end their balance sheet tapering in September. Therefore, the balance sheet will stand at about $3.5 trillion once the Fed is done. That’s about 4x larger than it was on the eve of the Great Recession of 2008! Continue reading “A Couple Interesting Market Stats”
“Thru 55 trading days, 2019 is now the 4th best start to any year ever on [the S&P 500 Index].” – @OddStats
Here’s a list of those four best years, the return through day 55 and the return from that point forward for the rest of the year.
Also, yesterday the Federal Reserve essentially announced they are aborting quantitative tightening (interest rate hikes and balance sheet reduction) due to concerns of slowing growth as I also mentioned yesterday.
Yesterday afternoon, FedEx reported disappointing global revenue and earnings. This is important because package delivery tends to be closely correlated with the strength (or weakness) of the economy.
But not only did they report weaker-than-expected results, FedEx also issued an overt warning about the global economy. Specifically, FedEx’s chief financial officer stated, “Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue.” [emphasis mine] Continue reading “FedEx’s Warning, Slowing Growth and Valuations”
Danielle DiMartino Booth, a former Federal Reserve insider, recently wrote a great article for Bloomberg. In it she provides a couple informative stats involving the relationship between unemployment rate changes and recessions.
First, she points out, “According to historic payroll data and the National Bureau of Economic Research, every time the three-month average unemployment rate exceeded its six-month average at cycle peaks over the past 50 years — like it did in January — the U.S. economy has experienced a recession.” Continue reading “Every Time This Has Happened Over the Last 50 Years A Recession Followed”