Indexes might not be in correction territory, but they're getting closer. Now's the time to consider what moves to make.
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With staples like soda, chocolate and toothpaste seeing new strength in emerging markets, these funds have shown remarkable resilience this year.
By Stan Luxenberg, TheStreet
Through all the market turmoil of recent months, some consumer funds have stayed in the black. While the S&P 500 ($INX) has lost 9.5% this year, Vanguard Consumer Staples (VCSAX) has returned 2.4%, while Rydex Consumer Products (RYCIX) has gained 4.1%, according to Morningstar.
The resilience of consumer funds is not surprising. Consumer stocks include companies that sell things customers buy constantly, such as food, beverages tobacco, and beauty products. The group includes rock-solid blue chips such as Coca-Cola (KO), Procter & Gamble (PG) and Kraft Foods (KFT). Such stocks generate stable cash flows year after year.
Consumer stocks may seem unexciting in bull markets, but they can shine in downturns. This year many consumer stocks have done particularly well because companies are recording strong sales gains in emerging markets.
Global currencies are losing value, miners aren't finding much new gold, and the Fed has no good news.
The race to debase. That's what's fueling gold right now. The desire of almost all countries in the world -- from Japan to Switzerland, from all of Europe to the U.S. -- to get their currencies down in order to export their way out of the worldwide economic slowdown.
When everyone believes in a weak currency, you need a strong currency, and the strongest currency is gold.
I have liked gold for years and years, mostly as a hedge to the chaos and a belief that it is way too hated as an asset class. I base that view on the notion that gold represents about 1.55% of the world’s portfolios, down from about 5% historically.
That's only one reason to buy, though. We have also seen emerging middle classes around the world purchase gold as a way of passing on wealth or showing wealth, as is the case in the upcoming Indian wedding season. We see wealthier central banks buying gold in order to keep a store of assets that can't be debased by governments.
The company cut its plant budget at its London heaquarters, roiling a workforce already hit by hard times.
Yes, the friendly office plant. The kind that studies show boosts morale, especially in hard times. And times are tough for Goldman. The chief executive just hired his own defense attorney. The company is not-so-affectionately called the great vampire squid. Its role in the 2008 financial crisis is still being investigated.
Investors are too hopeful about finding bargain deals. That's not a good sign of a market bottom.
Once the symbol of innovation, the company is being dismantled by its high-pedigreed board and the CEO of the hour.
We still haven't returned to the market peaks of 2000. Could the bear market have a few more years left?
But what about long term? One market observer argues that we could be in for a few more years of downtime. We're still in the middle of a bear market, with a little bit longer to go, writes Barry Ritholtz.
Look back over history, he writes in The Washington Post. The Dow Jones Industrials ($INDU) hit 1,000 back in 1966 and then did not return to that mark for 16 years.
Fast-forward to 2000, when the Nasdaq ($COMPX) was above 5,000, the S&P 500 ($INX) topped 1,500 and the Dow was just shy of 12,000. We still haven't returned to those levels.
Should the superrich be taxed more? Not if the government keeps spending money unwisely, some wealthy folks say.
As you can imagine, that didn't sit well with them, and now they're fighting back.
The former chief executive of American Express (AXP) published an opinion piece in The Wall Street Journal saying taxes are being collected and spent unfairly. In the essay, Harvey Golub argues that the tax code is filled with favors to various industries and other groups.
Billionaire Charles Koch is also annoyed. He sent a statement to The National Review saying that "much of what the government spends money on does more harm than good." That sounds fairly hyperbolic, but let's give him a chance:
After a massive rally in the price of the yellow metal, shares of gold miners begin to perk up.
A combination of recessionary fears, whiffs of possible bank failures in Europe and the widely held belief that the Federal Reserve will have no choice but to unleash additional, inflationary monetary stimulus has gold prices going vertical and rapidly nearing $1,900 an ounce. Really, gold's rise started back in July on fears over a default by the U.S. Treasury. Although disaster was avoided, the cloud of fear and uncertainty hasn't lifted. It's just gotten darker.
Unlike what was seen during silver's parabolic rise in the spring, precious-metals mining stocks haven't participated. But that's changing now, creating promising new opportunities for nimble investors and skeptics, like me, who are worried about speculative overheating in the physical gold market.
Not only do the newly empowered mining stocks give you exposure to the underlying commodity, but they give you an exposure to undervalued equities as an asset class. That's the smart bet since, as history shows, stocks tend to outperform raw commodities over the long haul. Here's why, along with a few specific recommendations.
Further weakness in three high-yielding oil stocks will present great buying opportunities and allow investors to earn steady income with less risk than Treasuries.
Behavioral-finance experts counsel clients who are ready to throw in the towel.
By Frank Byrt, TheStreet
American investors, panicky after a steady drumbeat of bad economic news and steep declines in almost all types of investments except gold, are ready to call it quits.
They pulled $23.5 billion from U.S. stock funds in the week ending Aug. 10, more than in any entire month since October 2008, the time of the last market crash. And no wonder. The benchmark S&P 500 ($INX) has tumbled 17% from its April 29 peak, edging close to a bear market.
For this year, the S&P 500 is down 10%, while over the past five years, its average annual return is a loss of 0.52%. In other words, many investors have made no money for half a decade or longer.
Chairman Ben Bernanke is unlikely to come up with a miracle plan that will jolt the economy, so stick to dividend-paying investments and gold.
We love to fool ourselves in this market, don't we? Monday people were buying futures as they "awaited" statements from Federal Reserve Chairman Ben Bernanke from the central bankers conference in Jackson Hole, Wyo. They are hoping for good news that will ignite "growth" and promote stability. No one wants to miss the "miracle" that Bernanke might have up his sleeve.
That's just like last week, when people stopped selling and started buying because of the potential for good news coming from the pending Merkel-Sarkozy meeting. Traders didn't want to miss good news that would ignite "growth" and promote stability. No one wanted to bet against a potential for the "credit miracle" and the "sovereign solution."
There was no miracle.
Watch out for the next leg lower
Enough is enough. The plunge in stocks returned last week with the S&P 500 dropped more than 4%. Bond yields sank and gold skyrocketed.
Something is truly amiss and I’m not talking about the standard bear fare of debt defaults or runs on banks in Europe. I’m talking about earnings.
The market sell-off that began in July is fast becoming a self-fulfilling prophecy. Consumers are rightly frightened with growth slowing, stocks losing value, home prices still crumbling and policy makers with little ammunition to change things.
The next step is for earnings to drop. At the moment Wall Street estimates are too high if indeed we slip into recession. The market is pricing in a recession, but the numbers many investors use to discount future cash flows has not.
In a market like this the cream will rise to the top. Other stocks are likely to fall as earnings performance falls short.
It may be late in coming, but I’m moving to a more conservative position with my ETF’s to buy this week by switching to the ProShares Short Russell 2000 (RWM).
We won’t know for a while whether the bulls have been truly slaughtered, so investors would do wise to wait for the near-term rally that will likely follow Friday’s down close.
Use earnings reports to capture gains long or short
What I like about trading stocks of companies about to report earnings is separating fact from speculation. At the moment we are in the midst of a massive speculative selling phase that has the market close to bear market territory.
When a company reports results, for a brief moment in time the shock of real news distracts market participants from the worry of the day. In an efficient market a stock is priced based on the discounting of future cash flows. Doing so requires using up to the minute available information to best accurately determine what those future cash flows will be.
That is why obtaining tangible information even if that information is looking backward, earnings reports allow the market to reset the price on a stock releasing profit numbers. On many occasions the inefficiency of a market has gotten that price so out of whack that the resetting of the price moves the stock in a big way.
Some are selling stocks into any rally. I’m making money for my subscribers buying stocks of companies reporting earnings. Last week at a time when the market was down significantly, I made 4 consecutive winning trades that made big profits for my subscribers. One of those trades was on graphic chip maker, NVIDIA (NVDA).
The investment world loves to pit value investing vs. growth investing. Good investors know that both should play a role in your portfolio.
Coke or Pepsi? Magic or Larry? The Beatles or the Stones? Life is full of such "either/or" questions. The investing world is no different, with perhaps the greatest being "growth, or value?" And, like most of those other debates, the growth or value question is misleading by its very nature, presupposing that you must embrace only one or the other -- not both.
For investors, such thinking can cost you a lot of money. That's because, as I've found after more than a decade of studying history's most successful investment strategies, the best approaches usually use a combination of value and growth criteria. As Warren Buffett has said, "growth is simply a component -- usually a plus, sometimes a minus -- in the value equation."
Of course, certain strategies will focus more on growth criteria, and others focus more on valuation criteria. But even so, there's no reason an investor should restrict themselves to one or the other. Look, for example, at James O'Shaughnessy, whose book What Works on Wall Street forms the basis for one of my best performing "Guru Strategies" (each of which is based on the approach of a different investing great). O'Shaughnessy back-tested a myriad of investment approaches, eventually landing on one growth-focused approach and one value-focused approach. Both strategies handily beat the broader market over time, but he found that he could build an even better portfolio (as judged by risk-adjusted returns) by using some stocks picked with the value model and some picked by the growth model.
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The company has made at least 4 acquisitions in the space, and few people have paid any attention.
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