Quarter-to-date, the market is up almost +12%: At the same time, yields on U.S. 10-Year Treasurys dropped from 3.0% to 2.5%: Not surprisingly, volatility has collapsed as the markets have rallied: The one factor that connects these three charts is the U.S. dollar. Over the past two years, a stronger U.S. dollar signifies an avoidance … Read more
There are quotes that frequently come to mind when we try to make sense of the market”s periodic bouts of increased volatility. The first quote is from the Intelligent Investor written by Benjamin Graham: “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting those … Read more
"When new money is created on a grand scale, it must go somewhere and have some major consequences. One of these will be greatly increased volatility and instability in the economy and financial system." — J. Anthony Boeckh We are frequently asked for our opinion on matters that relate to the macroeconomic environment. Normally, we … Read more
The January 22, 2010, edition of the Global Investment Strategy published by BCA Research contained a comment that we found interesting: Investors are agitated to be in the market, but also agitated to be out of it. With interest rates at zero, bond yields at 3.6%, a world economy expanding and plentiful central-bank liquidity, we … Read more
Given the state of the U.S. fiscal predicament and current monetary policies, one has to question why a rational investor would loan money to the United States government for thirty years at 4.2%. Even the Treasury itself stated such in a recent report that it thinks rates will rise. Report: U.S. Treasury Report In the … Read more
With little to rally on, the markets have cheered the uptick in global M&A activity in the second half of 2009. St. James portfolio holding, Kraft, publicized their desire to take over Cadbury early in September. On September 21, Dell announced the $3.9b takeover of Perot Systems, and one week later Xerox announced the $5.7b … Read more
The equity market’s incredible rise over the past seven months verifies that a weak economy does not necessarily correlate the poor performance of stocks. The global economy collapsed in 2008; however, this economic slump prompted governments around the world to respond with expansionary monetary policies and near zero interest rates. The economy has apparently stabilized, … Read more
We define wealth as the universe of goods and services we wish to consume or the assets (factories, machinery, educated workforce, etc.) that provide us the ability to produce more such goods and services. When we postpone the desire for consumption today, money is saved and allocated to financial assets — either for precautionary reasons … Read more
A significant disparity currently exists between top performers (mostly financials, cyclicals) and the bottom tier (healthcare and staples). The top 25% of the S&P 500 is up over 80%, representing the smallest (market cap) and most expensive stocks (P/E) with the lowest dividend yields. In contrast the largest, cheapest and highest yielding stocks are down … Read more