In his latest market commentary, GMO’s Jeremy Grantham says the Federal Reserve has caused extensive damage to the economy by its manipulation of interest rates and asset prices, and is continuing to do so. Grantham’s lengthy letter (it runs 16 pages) covers a variety of topics. A few highlights: He says that, contrary to popular belief, high debt levels do nothing to stimulate higher GDP growth rates. “In the real world, growth depends on real factors: the quality and quantity of education, work ethic, population profile, the quality and quantity of existing plant and equipment, business organization, the quality of […]
Barry Ritholtz of FusionIQ and The Big Picture blog has been moving back into stocks, and says a “Don’t Fight The Fed” viewpoint is a big factor in his moves. “When the Fed comes out and says, ‘Gee, the economy is worse than we expected,’ that things are taking much longer to get back to normal, therefore we want to do another round of quantitative easing, it’s tough for an investor to stand in the way of that,” Ritholtz tells Barron’s. You can’t step in front of a locomotive with your hand out and say ‘halt.’” Ritholtz says he’s high […]
Lackshman Achuthan, director of the Economic Cycle Research Institute, says the threat of a double-dip recession is over. Achuthan, whose group has an excellent track record of forecasting economic cycles, tells CNBC that ECRI’s leading indicators are now definitively showing that a double-dip is off the table. He says the economy is likely headed for a “soft landing”, and says the Federal Reserve is again behind the curve in recognizing that a double-dip is no longer a threat.
In his latest Forbes column, newsletter guru Jim Oberweis says small-cap stocks are primed for a strong run. “Ironically the best time to buy small caps is when investors are shunning them — typically at the tail end of difficult recessions,” Oberweis writes. “Interest rates have no place to go but up, and I believe that nimble small-cap companies will benefit as a bond bear market drives investors back into equities.” Oberweis says that because of human psychology, investors tend to vastly under or overestimate risk. “In extreme situations we tend to dramatically overweight recent experiences and end up with […]
While many firms have been posting strong profit numbers recently, many investors have been worrying about top-line revenue growth. Cost-cutting can only go on so long, the logic goes — if companies can’t generate demand and grow sales, they eventually will run into a profit-growth wall. But while top-line growth has been a big concern, Validea CEO John Reese says a number of companies are finding ways to post strong growth in revenues, despite the current economic climate. And in his latest Seeking Alpha article, he highlights a handful of firms that are doing just that — and passing one […]
While many continue to fret over GDP growth, employment levels, forclosure fraud, and a myriad of other concerns, Charles Schwab’s Liz Ann Sonders says it’s the fretting itself that may be the biggest impediment to market gains. “I’m always most intrigued by the story that the least amount of people are telling, and the story people aren’t telling is really the optimistic story,” Sonders told CNBC at Schwab’s Impact 2010 investor conference. She sees reasons for concern, but overall thinks the economy is moving toward a “Goldilocks” state, one in which growth is moving along at just the right speed. […]
While hopes of another round of quantitative easing from the Federal Reserve have boosted the stock market, PIMCO’s Bill Gross says such a tact is fraught with dangers. In his latest market commentary, Gross says the Fed’s expected announcement of more easing next Wednesday “represents a critical inflection point in determining our future prosperity.” He says that huge check writing by the Fed and years and years of fiscal deficits has resulted in a giant Ponzi scheme, and an incredibly difficult situation. “We are, as even some Fed Governors now publically admit, in a ‘liquidity trap,’ where interest rates or […]
Yale economist Robert Shiller offers his latest take on the housing market. Shiller tells Yahoo! TechTicker that right now, making big bets on real estate — as hedge fund guru John Paulson has done — is a “risky bet”.
Each week, we take a look at which stocks John Reese’s Validea.com Guru Strategy computer models have newfound interest in, and which they have soured on. Here’s a look at some of the stocks John’s strategies have upgraded or downgraded today. Among the bigger-name movers: Amazon.com and Vodafone.
While many investors are fearing that the U.S. will slide into a lengthy deflationary spiral similar to that which Japan has endured, top value manager Whitney Tilson says that is unlikely. Tilson offers Business Insider three reasons that the odds of the U.S. entering such a period are less than 5%: Compared to the size of the country, Japan’s bubble was much bigger than the U.S.’s; The U.S. is more “vibrant” economically than Japan; The U.S. is writing down loans more quickly than Japan did. Tilson doesn’t think all’s well, however — he sees years of weak economic growth for […]
While many investors are focusing on emerging market stocks, which have done quite well in the past decade, Vanguard found John Bogle is skeptical of them. Bogle tells Morningstar that investors keying on such stocks may be suffering from “rowboat syndrome” — much like someone rowing a boat, they have their eyes on where they are coming from, but not where they are going to. He says he doesn’t invest internationally because he expects the market will be an “equalizer”, and that international and emerging markets will do more or less the same as the U.S. market over the coming […]
Top fund manager Steven Leuthold says he’s bullish on stocks for the rest of 2010. But he tells Bloomberg that he’s hesitant to look beyond the end of the year because of the looming U.S. budget deficit, which he calls a “giant gorilla in the room”. Leuthold says he has about 60% exposure to equities in his funds and close to 70% in his hedge fund.
Legendary Legg Mason fund manager Bill Miller is seeing a variety of factors aligning to make this the best time for long-term investors to buy stocks since the early 1980s. Miller, who beat the S&P 500 for 15 straight years before falling on hard times in recent years, also tells CNBC that he’d “be surprised if the market isn’t up 20% in the next 12 months”, thanks to Federal Reserve policy, a strengthening economy, and “the fact that stocks are incredibly cheap” relative to bonds.
Stocks have been on the rise recently, thanks in large part to speculation that the Federal Reserve will engage in more quantitative easing to spur the economy. But fund manager John Hussman says there’s just one problem with “QE2”: It addresses issues that aren’t actually the cause of the economy’s problems. In his latest market commentary, Hussman says further easing is presumably designed to lower long-term interest rates and drive real interest rates into negative territory, which would theoretically stimulate loan demand; and to increase the supply of reserves that banks could lend. But Hussman says the current problem isn’t […]
Each week, we take a look at which stocks John Reese’s Validea.com Guru Strategy computer models have newfound interest in, and which they have soured on. Here’s a look at some of the stocks John’s strategies have upgraded or downgraded today. Among the bigger-name movers: Hewlett-Packard, The Gap, and Union Pacific.