Investing

Markets have been rather tetchy recently, and analysts are scratching their heads. Is it the price of oil? The Swiss National Bank’s ditching of the Euro peg? Nervousness about a bubble in stocks, dangerously inflated by loose monetary policy? The reason for historically high P/E ratios is indeed low interest rates, but not because monetary […]

When we invest in stocks or bonds, we’re buying the right to cash flow. Bonds usually pay a higher % because companies must pay interest on time or face bankruptcy. Stocks are riskier because companies don’t have to disperse cash to shareholders. They can lose money for years on end with no dividend in sight, or they […]

Whenever I’m scouring the markets for investment ideas, I try to fish in pools where there’s value rather than growth. For example, when using Google’s stock screener, I’ll look for low P/E ratios, low price/book ratios, low price/sales ratios, large 52-week negative declines, a reasonably-sized market cap and decent dividends. Maybe all of those will apply, maybe just […]

What is going on? Volatility is back. The oil market is collapsing. Europe may fall apart. And stocks seem set to move sideways. Pundits are claiming the bubble is about to burst. And stocks are trading at a multiple of GDP not seen since the early 1960’s. Below are some recent stories that caught my […]

With oil hovering near $50 a barrel, markets at record highs and Fed tightening in sight, a lot of smart people are predicting a crash. I even did a blog post not long ago on whether American stocks were overvalued. I don’t think so. Let me explain why. During periods of slow nominal GDP growth […]

I recently read a fascinating post (Fixing the Shiller CAPE) about how changes in financial reporting are affecting everyone’s favorite measure of stock market valuation. P/E ratios are popular for a good reason, but I was wondering how the S&P index has done against something broader like nominal GDP. Below is a graph that indexes […]

I sold off my losers to reap the tax benefit, then realized that a lot of other investors are likely doing the same. Not only is this time of year a great time to sell, but it’s also a great time to buy stocks that have dropped, and that may be dropping more. Some of […]

As an avid reader of TheMoneyIllusion, I’ve been surprised to learn that monetary policy since 2008 has been very tight, and this is a major factor in America’s slow recovery from the Great Recession. The ECB, though its interest rates hover around 0%, is currently pursuing an ultra-tight monetary policy. Read more