Krugman: Austerity — Not More Debt — Is The Danger

Nobel Prize-winning Economist Paul Krugman is continuing to say that the U.S. needs to spend more — not undertake austerity measures — to get out of its economic malaise. Krugman tells CBS This Morning that European countries now undertaking austerity measures are showing how austerity in such situations makes the economy worse without even making much progress on decreasing deficits, because austerity causes growth and revenue to shrink. “Austerity later,” he says. “Austerity when the economy has recovered — but not now.” He says it could take seven years for the economy to return to form if the U.S. continues […]

Biggs Sees Market Weakness, But No Double Dip

Hedge fund guru Barton Biggs is expecting a few weeks’ worth of weakness for the stock market, thanks to lingering trouble in Europe and a slowing economy in the U.S. “I don’t think that this correction we’re in is quite over yet,” Biggs recently said on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “I just don’t think it’s gone far enough. Europe is still a shipwreck, and the U.S. economy has drifted into this soft patch.” Biggs says he’s taken short positions on the German and French stock markets, but says he doesn’t think the U.S. will have a […]

Grantham on Incredibly Irrational Markets

In his latest quarterly letter, GMO’s Jeremy Grantham offers some very interesting data on the disconnect between the stock market on one hand, and the economy and “fair value” of the stock market on the other. “This difference is massive — two-thirds of the time annual GDP growth and annual change in the fair value of the market is within plus or minus a tiny 1% of its long-term trend,” Grantham writes in the letter, which is available on GMO’s web site. “The market’s actual price — brought to us by the workings of wild and wooly individuals — is […]

El-Erian: Macro Headwinds Battling Micro Strength

PIMCO’s Mohamed El-Erian says that the U.S. economy is having trouble gaining traction, as evidenced by the latest GDP report. El-Erian tells Bloomberg that in addition to the headline growth number being lower expected, the drivers behind that growth were cause for concern. Consumer spending increased, he noted, but the personal savings rate declined, and that trend isn’t sustainable. He says that business investment is needed to drive the economy, and that wasn’t strong in the first quarter. There’s a “tug-of-war” going on between strong companies that are doing well, and macroeconomic headwinds, he says, and that is causing the […]

The Buffett Approach: Invest Like The Oracle

Every other issue of The Validea Hot List newsletter examines in detail one of John Reese’s computerized Guru Strategies. This latest issue looks at the Warren Buffett-inspired strategy, which has averaged annual returns of 6.3% since its December 2003 inception vs. 3.4% for the S&P 500. Below is an excerpt from the newsletter, along with several top-scoring stock ideas from the Buffett-based investment strategy. Taken from the April 27, 2012 issue of The Validea Hot List Guru Spotlight: Warren Buffett With his humble Midwest beginnings, plainspoken wisdom and wit, and incredible wealth, Warren Buffett has become the most-watched investor in the world. […]

Ritholtz: Don’t Believe the Hype; American Future Is Bright

Barry Ritholtz of FusionIQ and The Big Picture blog says that, despite what the doom and gloom crowd says, America is not in decline. Ritholtz tells Yahoo! Finance’s Daily Ticker that “there’s a tendency for people to extrapolate the most recent experience out to infinity”, which is what many have done in expecting that the U.S.’s future will be bleak. He says that investors have to have an ability to “look over the next valley to see what’s on the other side”. He thinks the other side is looking good, citing developments in Silicon Valley as evidence. He also talks […]

Mobius Bullish on Europe

Templeton Asset Management’s Mark Mobius says he is upping his exposure to European stocks, despite the continent’s lingering debt woes. “The stocks in the European countries have gone down excessively as a result of the bad news emanating from this crisis and we find good investment opportunities at bargain price and we are increasing the purchases of these stocks,” Mobius says, according to Bloomberg. Mobius adds that “we don’t think the crisis will last forever and the European economies will recover nicely, there will be much more fiscal disciple in one year or two”. He says he’s buying consumer-oriented stocks, […]

Reese: There’s Value In Defense

Aerospace & defense stocks and those of other firms that rely on the government for their revenues are traditionally thought of as safe, defensive plays. Not today, however, with major budget cuts looming if Congress doesn’t address the nation’s deficit woes. But Validea CEO John Reese says that’s not reason to avoid these types of stocks altogether. “With that [budget cut] threat looming, defense stocks are now being viewed as anything but defensive,” Reese writes in his latest Forbes column. “But keep two things in mind: First, the threat to profits for these companies is known; and second, investors have […]

Shiller: Housing Could Fall Further — But Not By Much

Yale Economist Robert Shiller, who predicted the housing market crash, says he thinks home prices could fall further, but he doesn’t expect more major declines. Shiller tells FOX Business Network that he thinks prices “could fall further — not that much probably — because there’s a readjustment in our thinking. … Our long-run opinions about real estate seem to be changing.” Shiller says people are rethinking the desire for large, sprawling houses and seeing the advantages of renting. 

Tilson on “Panicked Headline Investing”

In a recent interview with CNBC, Whitney Tilson talked about why his firm likes to invest in firms that are the subject of “panicked headline investing”. Tilson says that “we love buying stocks when we think the sellers don’t care about price,” and cites BP as an example, saying that the oil giant had such negative publicity after its Gulf of Mexico spill that investors lost sight of value and sold the stock indiscriminately. He’s made a handsome profit on the stock since then, and says he finds similar panic-triggered opportunities quite often. But he says the key is to […]

Hussman: Profit Margins Skewing Valuations

John Hussman, whose funds had strong long-term track records before getting hit hard the past few years, says those who contend stocks are cheap are way off base. “I can’t emphasize enough how badly standard P/E metrics are being distorted by record (but reliably cyclical) profit margins, which remain about 50-70% above historical norms,” Hussman writes in his latest market commentary. Hussman says valuations are actually more elevated than they were before the 2008 market plunge when margins are accounted for. Stocks are priced to return just 4.5% annually over the next decade, he says. Hussman also talks about why […]

Fisher on Why Today Is Like the Early ’90s

Kenneth Fisher says the market and economic environment right now are reminding him of the early 1990s, and says it’s a good time to buy stocks — selectively. “Let me set the scene,” Fisher writes in his latest Forbes column. “It was just a few years after 1987’s Black Monday market crash and 1989’s Friday the 13th minicrash. The S&L crisis was making headlines, and Saddam Hussein had invaded Kuwait. The stock market fell hard in 1990, and investors were nervous — a psychosis similar to 2008’s.” He adds that Europe was going through a debt-driven tumult, and housing had […]

Yacktman Still Focused on Quality

Top fund manager Donald Yacktman says that he’s sticking with high-quality stocks. Yacktman tells CNBC that his biggest holdings include Pepsi, News Corp., and Proctor and Gamble. He also says he’d stay away from lower-quality stocks and cyclical firms. He thinks many cyclicals are selling at profit margins that may be unsustainable.  

The Downdraft vs. The Flood

Investor sentiment has been on the rise for much of 2012, but Blackstone’s Byron Wien says it may not necessarily be the contrarian indicator it usually is.  In a piece for Gulf News, Wien discusses various improvements in the U.S. economy. He also says things have improved in Europe, with policymakers now “emulating the US during the 2008 crisis, providing funds to avoid a meltdown, a reversal from previous policy focused on controlling the rise in inflation through a restrictive monetary policy.” “However,” he adds, “the mood has changed to optimism. Most investors have been slow to put their money […]

Paulsen likes EMs, Industrials, Financials

Wells Capital’s James Paulsen says he thinks investors would be wise to look at stocks in the emerging market, industrial, and financial areas of the market. In a radio interview, Paulsen told MarketWatch’s Larry Kofsky that he thinks a resurgence in emerging market growth and growing confidence in the U.S. make those areas attractive right now, and discusses why he thinks investors should lighten up in defensive areas like utilities and dividend stocks. Paulsen also talks about first-quarter earnings, and says that with so little expected, it should be easy to top expectations. To listen to the full interview, click […]