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Full-Text Articles in Business
Income And Spending, Steven D. Dolvin
Income And Spending, Steven D. Dolvin
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Normally higher incomes lead to higher spending, but recent increases in income seem to be headed into savings. This creates a mixed picture for consumer stocks. See article here, LA Times.
Negative Interest Rates, Steven D. Dolvin
Negative Interest Rates, Steven D. Dolvin
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Sweden's central bank has followed other major countries and further reduced its interest rate -- making it even more negative. With negative interest rates, banks that store money with the central bank must pay to do so (rather than earning interest as would normally be the case). The goal is to induce banks to hold less money (thereby lending more and increasing economic activity). See article here, The Telegraph.
Are Junk Bonds Signaling Trouble Ahead?, Steven D. Dolvin
Are Junk Bonds Signaling Trouble Ahead?, Steven D. Dolvin
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High-yield (or so-called junk) bonds are set to experience their first annual loss since the recent credit crisis. Because of the higher risk involved with these borrowers, they tend to be the first to experience trouble. Thus, many investors believe that they represent a leading indicator for overall market performance. If this is true, it could indicate trouble to come. See article here: WSJ.
Consumer Confidence Keeps Rising, Steven D. Dolvin
Consumer Confidence Keeps Rising, Steven D. Dolvin
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According to a recent article from US News, consumer confidence is at an 8-year high. It will be interesting to see how this impacts the economy and markets in light of the negative impacts of international problems, particularly in China.
Early Recession Signs, Steven D. Dolvin
Early Recession Signs, Steven D. Dolvin
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In economics, leading indicators are believed to give a forecast of the direction of the economy. In a recent survey, the CFA Institute asked its members which early warning signs (or leading indicators) they follow.
Behavioral Biases, Steven D. Dolvin
Behavioral Biases, Steven D. Dolvin
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The CFA Institute recently conducted a member survey regarding which behavioral biases are most impactful.
China Cuts Interest Rates, Steven D. Dolvin
China Cuts Interest Rates, Steven D. Dolvin
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In an attempt to spur growth, the People's Bank of China (i.e., the Chinese central bank) recently cut interest rates. As a result, the Chinese stock market rose another 3 percent. See article here, Yahoo.
International Investing, Steven D. Dolvin
International Investing, Steven D. Dolvin
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Investing is a global activity, so there is often very little difference with regard to many activities (such as how margin works, order types, etc.). The biggest difference, however, is the possible impact of currency on returns. One argument is that currency fluctuations reduce return correlations, so they should not be hedged within a portfolio. Others, however, have recently turned to currency hedged investments to protect against the rising dollar when invested in foreign assets. See article here, Yahoo.
2015 Macro Trends, Steven D. Dolvin
2015 Macro Trends, Steven D. Dolvin
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While it is still early, Goldman Sachs has posted its 10 market themes for 2015. These may be useful in top-down analysis. See article here, Barrons.
Going Global, Steven D. Dolvin
Going Global, Steven D. Dolvin
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For diversification reasons, most investors should consider investing internationally. However, many investors have limited knowledge about how to do so or about how to determine how much exposure to have internationally. Click here for a recent WSJ article that provides some guidance on these issues.
How Many Stocks Are In The S&P500?, Steven D. Dolvin
How Many Stocks Are In The S&P500?, Steven D. Dolvin
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Traditionally, the answer is 500, as the index was constructed using the 500 largest companies. However, Google's upcoming stock dividend will change all this. As of April 3, 2014, Google is undergoing a 2:1 split via a stock dividend, as owners of record will receive an additional share -- but of a different nonvoting class stock. This means that there will be two Google share classes being traded. To keep the value in place, the S&P will retain both share classes, meaning there will now be 501 stocks in the S&P500. See article and related video here, CNBC.
Rising Interest Rates, Steven D. Dolvin
Rising Interest Rates, Steven D. Dolvin
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Interest rates have remained at historically low levels since 2008; however, with the recovering economy and the prospect of the Fed reducing its intervention, it is likely that interest rates will rise. Such a move will reduce bond prices, particularly longer-term bonds, so what asset classes should investors consider? A recent Wall Street Journal article suggests that certain equity sectors (e.g., energy, financials, and consumer discretionary) tend to perform well (at least relatively) in such environments. See article here.
Floating Rate Notes, Steven D. Dolvin
Floating Rate Notes, Steven D. Dolvin
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As interest rates rise, bond prices fall. Given historically low interest rates, many investors are concerned about bond prices, particularly since the loose monetary policy being implemented by the Fed may trigger inflation and therefore higher future interest rates. To hedge away this interest rate risk, some investors have used inflation protected securities. The Treasury, however, just launched another alternative -- floating rate notes. The interest paid on these notes rise as market rates rise, thereby also protecting the bond's price. See article here, WSJ.
Central Banks Propel Equity Markets, Steven D. Dolvin
Central Banks Propel Equity Markets, Steven D. Dolvin
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Japan's central bank recently instituted a significant expansionary monetary policy. The market's immediate response was to increase, and the rise has continued since the announcement. Easy money provides liquidity. While this can be offset by inflation, the lack of wage growth has kept inflation muted. Thus, equity markets have responded favorably. See article here, The Economist.
Fiscal Cliff, Steven D. Dolvin
Fiscal Cliff, Steven D. Dolvin
All Chapters
There has been much discussion surrounding the impending "fiscal cliff." So, what exactly is this? Well, it is a combination of items that effectively equate to about $600 billion in potential spending cuts and tax increases. This represents about 4% of US GDP. So, failing to address these issues would likely result in a deep, prolonged recession. Read a good summary here, American Action Forum.
Step On The Gas, Steven D. Dolvin
Step On The Gas, Steven D. Dolvin
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With the economy hitting a "speed bump," market participants increasingly believe the Fed will "step on the gas" to get it going again. Similar thoughts seem to exist in regards to potential action by the Chinese central bank. As a result, markets around the world were up. See the articles here (xinhuanet) and
"Dumb Money" Pushing Treasuries, Steven D. Dolvin
"Dumb Money" Pushing Treasuries, Steven D. Dolvin
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Demand for Treasury bonds pushes prices up and yields lower. Given that Treasury yields are at all-time lows, the implication is that demand for these securities has increased. Many attribute this to buying by the Fed, but this demand is really being driven by retail investors. For contrarian investors, this would be an indicator to sell Treasuries, as retail investors are often referred to as "dumb money." See the article here, CNBC.
Leading Or Lagging, Steven D. Dolvin
Leading Or Lagging, Steven D. Dolvin
All Chapters
Economists and investors often look to the index of leading indicators to predict the economic future. One measure included in this index is unemployment. However, some debate whether this is more of a lagging indicator since high unemployment hinders spending. In either case, recent news related to initial jobless claims has been positive. See the article here, Reuters.
The Ecb Is Not The Fed, Steven D. Dolvin
The Ecb Is Not The Fed, Steven D. Dolvin
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Although both the ECB and Federal Reserve are central banks, they are much different in their approach to managing their respective economies. The Fed's mandate includes both promoting growth and controlling inflation, while the ECB is really only designed to mitigate inflation. Thus, the ECB is not equipped to act in a speedy fashion as the Fed did in response to our financial crisis. (See the article here, Wall Street Journal.)
Expect Low Interest Rates To Continue, Steven D. Dolvin
Expect Low Interest Rates To Continue, Steven D. Dolvin
All Chapters
As the "flight to quality" continues, interest rates will likely remain low for the nations considered to be the most stable (such as the U.S. and Germany). This is a simple supply and demand relationship, as interest rates represent the price of money. (See the article here, the Wall Street Journal.)
Germany Sells 0% Ytm Bond, Steven D. Dolvin
Germany Sells 0% Ytm Bond, Steven D. Dolvin
All Chapters
With the problems in Greece (and other Euro countries), investors are seeking out safe havens. Similar to Treasuries during the Crash of 2008, investors are willing to accept no return, simply for the assurance that funds will be kept safe. (See article here, Reuters)