Todd Sullivan | TalkMarkets | Page 40
Hedge Fund Manager, Owner of ValuePlays and Angel Investor
Contributor's Links: ValuePlays Rand Strategic Partners
Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. ...more

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Employment, Interest Rates And Housing
Total Non-Farm and the Gallup Job Creation Index show labor demand at all time highs. Economic expansion continues.
China & Emerging Markets
FXI soared more than 60% from lows of 32 to a high over 52 (the Shenzhen Stock Exchange Composite Index rose from 1,000 to over 3,200 over the same period).
“Surprising” Asset Quality?
Let's not forget Credit Suisse has been the most vocal Sears (SHLD) bear the past few years. Credit Suisse’s Balter has said SHLD is worth only $20/share (~$2.1B) and the the real estate case for the company is bunk.
S&P Intrinsic Value Update - June 26, 2015
Dallas Fed reports 12mo Trimmed Mean PCE(inflation) at 1.6% which has been roughly the same for the past 18mos. Inflation is the only input to the SP500 Intrinsic Value Index which does not trend smoothly.
Housing Supply Remains In Expansion Territory
That housing prices have been rising is a reflection of the fact that we still have a higher than normal portion of cash-only buyers. In other words it is those with existing wealth who dominate home buying at the moment.
Chemical Activity Indicates More Growth & The Fed Follows Market Rates
The Chemical Activity Barometer (CAB) reaches a new high for the current economic cycle at 100.6. The previous high was 101.1 in May 2007.
Ignore The "Buffett Indicator"
If we get a SP500 over $5,000 at its peak due to current Fed action to keep rates low, the correction will likely be more painful than any since 1990.
“Consensus Opinion”
Rising rates are and have always been a signal that investors are selling fixed income to buy equity as they seek higher returns.
Economic Trends Are Not Short Term
For generations nearly everyone viewed every security and market move as being related to economics. Even today if a security shifts in price, there will likely be someone, somewhere who says the 'market knows' something or other as an explanation.
“Davidson” On Shiller
Market P/Es tend to expand later in the economic cycle and severely contract during economic contractions. Why? Most would agree that this is due to changes in market psychology.
Economic Data Continues To Indicate Higher Markets
The data keeps supporting a rate hike sooner rather than later. Like the end of QE, this will be viewed as “bad for the markets” when the reality will be it is only ending because higher rates are in fact needed at this point.
Bond Funds Becoming Increasingly Risky
Losses can come very, very quickly once enough investors decide to shift funds out of fixed income for higher returns elsewhere.
Stocks Follow The Economy……Which Continues To Improve
The stock market is not a ‘get rich quick’ investment? It is the market which tracks the economy over the long term and not the reverse.
Home Data Indicates A Continued Expansion
Monthly Supply of New Home Sales (XHB) was reported at 4.8mos. This continues to signal that housing demand remains strong.
Oil Prices And Rig Count
At what price do drillers add/reduce rigs this time? If one looks closely one can see a 2mo lag before drillers (XOP) (IEO) cut back on rigs in response to collapse of oil (USO) (OIL) prices.
Housing Starts Rise 20% ... Still Well Below Normal
Low rates do not boost lending! Low rates do not stimulate the economy! What is required for wider lending is a wider spread. In the current climate, I estimate that mortgage rates in the 5%-6% range would make banks more willing to lend.
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