Friday, July 29, 2016

The Summer 2016 Outlook

Let's review the current situation.
  • The stock market indices are at, or near, all-time highs.
  • Interest rates are near zero.  They've never been this low.
  • Housing prices have recovered from the 2008 slump and are making new highs.
  • Unemployment is low and GDP is growing, albeit slowly.
It hardly makes sense to buy bonds, except maybe short-term bonds.  They pay little interest.  The market doesn't think interest rates will rise anytime soon, but if rates rise, bonds will drop.  Interest rates can hardly go lower, so the risk is all one-way. Keynes showed, in his General Theory, that interest rates do not have a natural rate that they return to.  Instead, interest rates can stay low (or high) indefinitely.

As to stocks, they're not cheap.  The S&P 500 price to earnings ratio is about 25, on the high end historically.  So one would tend to think the top is near and that it's not a good time to buy.

As to housing, it's high-priced, as I'm sure you know.  The very low interest rates of recent years have allowed buyers to pay more, as their mortgage payments are lower than they would be if interest rates were higher.  I also think housing prices have gone up because there is so much immigration - these folks have to live somewhere.

Scenario One:  Interest rates stay low.  Bonds hold steady, stock market ditto, maybe grows a little.  Housing must surely be reaching a top.  If immigration is curbed, it could go down.

Scenario Two: Interest rates rise.  Bonds crash, stock market crashes, housing slumps. Banks need rescuing.

So not a good outlook.  Be cautious.  On the plus side, technology is changing the world.  Today, the top five stocks by market cap were Alphabet (Google), Amazon, Apple, Facebook and Microsoft.  You need to have positions in these or risk getting left behind.

Monday, October 14, 2013

Debt Crisis: Here We Are Again

Once again we have the crisis of raising the US government debt ceiling, or defaulting on the national debt.  The last time this happened, I sold my regular Treasuries ETF and glad that I did.  I still own a TIPS (Treasury Inflation-Protected Securities) ETF, however.  It's down quite a bit this year, but still above what I paid for it.  So I'm wondering if I should sell it ahead of Thursday's possible default by the federal government.  I'm inclined to think so, for two reasons: (1) the default, if it happens, will surely hit the prices of all government bonds, including TIPS, and (2) TIPS, or at least my TIPS fund, are mostly long-term bonds.  Interest rates have nowhere to go but up from today's near-zero levels, and that will hit all long bonds.

Sunday, April 28, 2013

Orders to buy

I should mention that the rules for selling apply also to buying.  If the next earnings announcement is a week away or less, use a market order, else a limit order.

The one thing that's different is that there should be less urgency to act to initiate a position than to close one out.  You know what they say, the best way to double your money is to fold it in half and put it back in your pocket.

Wednesday, April 24, 2013

The best order form for selling a stock

So you've decided to sell, for whatever reason.  What form of order should you use?

Normally, I like to put in a limit order a little bit above the latest trade price.  There is a certain amount of natural fluctuation from day to day, or within a day.  If you put in a market order, you'll probably get the current price or maybe a little lower.  The limit order will in most cases get you more.

How much is more?  I'm thinking a little bit above the most recent day's high.

BUT if there is an earnings announcement due soon, then this misfires.  Stocks will go up if it's a good report and down if it's bad.  If a bad report, your limit order then won't be filled and you'll own the stock at a lower price.  If it's a good report, you'll get your price alright, but then it will trade higher and you'll miss out on that.

If there's an earnings report due within the next week, then use a market order to sell.  Yahoo! Finance will show the next earnings date and it's free.  I'm sure there are other sites as well.

Some folks advocate using a trailing stop order, so that if the stock continues to rise, they'll get in on that.  This has never worked well for me.  There are too many flash crashes these days.  Just yesterday a hacked AP tweet caused one.  So no more stop orders for me.

Wednesday, June 6, 2012

SharePost - Private Stocks

I found another place to buy and sell private stock - SharesPost. They also have the nice feature of listing the stocks they deal in, without you needing to register or log in.

S&P Highest Yields

Like a nice dividend?  These stocks have the highest yields of the S&P 500.  (EPS1 is this year's estimated earnings, EPS2 is next year.) Not that they are necessarily a good investment, just saying.


Pitney Bowes Inc.
R.R. Donnelley &
Diamond Offshore
Avon Products, In
PEPCO Holdings In
People's United F
Leggett & Platt,
Hudson City Banco
Reynolds American
Health Care REIT,

Monday, June 4, 2012

Downloading Yahoo! data

One of the things I like best about Yahoo! Finance is the ability to download data from it to a spreadsheet.  Here's a page of tips on downloading Yahoo! data. As an example, I prepared this table of data from today, showing the lowest Price/Earnings ratio among S&P 500 stocks, based on estimated earnings for this year and the latest quoted price.

Ticker  Price      EPS    Name                 P/E
FSLR   $12.28    $4.08    First Solar, Inc.    3.0
HIG    $16.10    $3.63    Hartford Financia    4.4
LNC    $19.34    $4.11    Lincoln National     4.7
GT      $9.44    $1.96    Goodyear Tire & R    4.8
BBY    $18.22    $3.62    Best Buy Co., Inc    5.0
HPQ    $21.06    $4.07    Hewlett-Packard C    5.2
MET    $27.82    $5.22    MetLife, Inc. Com    5.3
CLF    $45.74    $8.40    Cliffs Natural Re    5.4
TSO    $22.17    $4.06    Tesoro Corporatio    5.5
VLO    $20.37    $3.72    Valero Energy Cor    5.5