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Normal Stock Market Losses

 May 15 2017     Matt Woebkenberg
The below chart is from JP Morgan's Guide to the Markets (here).The black dot shows the intra-year decline for the S&P 500, and the bar shows the end of year performance.  As the chart shows, it is normal for the market to fall at least 10% in a given year.  Equity investors need to be able to tolerate losing 10-20% of their investment at any given time (all the way up to 49% in 2008).This is incr...

Friday Financial Terms: Active and Passive Investing

 May 12 2017     Matt Woebkenberg
There has been much debate in the past few years about the relative merits of active vs. passive investing.  In fact we recently wrote about it on our other blog (here).  The idea is fairly simple, passive investing involves owning the market and not making any decisions on where to invest, while active investing involves decision making in an attempt to outperform the market.  Unfortunately, it i...

Brick And Mortar Retail Is A Mess At The Moment

 May 11 2017     David Templeton
It seems anything associated with brick and mortar retailing is an investment that will do anything but go up. The brick and mortar retailers themselves are struggling to figure out how to compete in the internet age. Macy's (M) reported disappointing earnings today and the stock closed down 17%. After the market close, Nordstrom (JWN) reported results with earnings up 37%, yet same store sales we...

Retail: Investors Not Buying It

 May 11 2017     Matt Woebkenberg
Fierce competition, fickle customers, razor thin profit margins, and a high sensitivity to the health of the economy are just a few attributes that make retail a cut-throat business. Retailers that have stood the test of time have done so by adapting to changing consumer preferences and protecting market share against the perpetual threat of new competitors. Traditional retailers, old and new, are...

Intraday Activity

 May 10 2017     Matt Woebkenberg
The Ira Sohn Investment Conference occurred during the trading day on Monday.  At each conference, famous hedge fund managers present some of their favorite stock picks and give CNBC things to talk about for the subsequent few weeks.  The whole investing world turns in because past years have provided some famous and prescient picks (David Einhorn for example famously introduced his short position...

French Election Part Deux

 May 9 2017     Matt Woebkenberg
So Emmanuel Macron defeated Marine Le Pen in the French election runoff.  World order is restored.  The EU lives on. etc. etc.  Among the biggest winners from election night, however, is Germany.With Macron's victory, France will likely remain a member of the EU and euro zone  This is important for both groups, because losing a country as important as France shortly after the BREXIT of last June w...

Unreliable News in Investing

 May 8 2017     Matt Woebkenberg
According to a recent article from planadviser, "The survey found more than three in four (77%) Americans feel it's important to act fast to make financial decisions when breaking financial news becomes available, with 40% saying it's very important to act quickly."  This is horribly horribly wrong.  Please do not make large financial decisions quickly, and certainly do not do it based on any brea...

Indexing Investment Strategy Becoming Increasingly More Risky?

 May 6 2017     David Templeton
Indexing ones investments has turned into the investment strategy of choice for a number of investors. According to a recent Wall Street Journal article, in 2016 82% of new investments coming through financial advisers (more than $400 billion) went into index funds and ETFs. This statistic was highlighted by Consuelo Mack on a recent WealthTrack segment where she interviewed David Winters of the W...

Higher Oil Prices Contend With Too Much Supply And Higher Energy Efficiency

 May 5 2017     David Templeton
Almost to the day one month ago, when oil was trading at $52.25/bbl, I noted higher oil prices faced strong headwinds. I mentioned several factors that would likely result in lower oil prices, with the largest being the oversupply of oil in an environment where drilling activity was picking up. Fast forward to today and the price of spot WTI has fallen 12.8% to $45.55/bbl. Additionally, supply doe...

Friday Financial Terms: Call Options

 May 5 2017     Matt Woebkenberg
Last week we discussed derivatives in general, so this week we will look at one specifically: the call option.  Buying a call option gives you the right, but not the obligation, to buy the underlying asset at the strike price. So if stock A is currently trading at $25, and I think that the stock will go up over the next 6 months, I could buy a call option on stock A with a strike price of $30 that...
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