GMO’s Jeremy Grantham says those waiting for the U.S. to return to the 3%+ growth rates it has averaged over the past hundred years are going to be disappointed. “The U.S. GDP growth rate that we have become accustomed to for over a hundred years … is not just hiding behind temporary setbacks,” Grantham writes in his third-quarter letter. “It is gone forever. Yet most business people (and the Fed) assume that economic growth will recover to its old rates.” Grantham estimates that GDP growth going forward will be about 1.4% per year, using conventional measures. But he says that […]
As 2013 approaches, top fund manager Donald Yacktman is focusing on high-quality stocks, as well as some much-maligned contrarian plays. Yacktman tells Forbes that he likes stocks with high returns on assets, which generally means that the businesses have low capital requirements, nice market share, and the ability to fare well in good times or bad. An example is consumer goods giant Procter & Gamble, which makes such well known brands as Tide and Pampers. The firm generates tons of cash and also offers a nice dividend, two key things Yacktman looks for. “We are in an environment where PepsiCo […]
Lakshman Achuthan of the Economic Cycle Research Institute is standing by his previous call about the U.S. having entered recession in the middle of 2012. Achuthan tells Bloomberg Surveillance that, while home prices have increased, “that does not mean you don’t have a recession.” He also says rising housing prices do “not mean an upturn in construction activity.” He says recessions are defined using four areas: production, employment, income, and sales. Both production and income peaked in July, he says.
Validea CEO John Reese says that investors who are worried about the fiscal cliff shouldn’t bail on stocks. “History shows that even if we do go off the cliff, the consequences might not be as dire as many expect,” Reese wrties in his latest Forbes.com column. “A recent study by O’Shaughnessy Asset Management, the firm headed by quantitative investing guru James O’Shaughnessy, found that high or increasing tax rates [which the cliff would trigger] have historically had little impact on the stock market.” For those whose fears are leading them to consider jumping out of stocks entirely, Reese says to […]
Consumer confidence remains tepid but has been rising, recently hitting its highest level in four years. Is that good news for stocks? MarketWatch’s Mark Hulbert says no. Hulbert analyzed three decades worth of confidence data and stock returns, and found that the biggest monthly jumps in confidence tended to be followed by sub-par stock returns, he writes. He also found that changes in the stock market tend to have a bigger impact on confidence than confidence does on the market. When stocks rise, confidence jumps, and when stocks fall, confidence falls. “What these statistical results mean: Consumer confidence tells us […]
Yale housing guru Robert Shiller says he’s still not convinced the housing recovery is real. Shiller tells CNBC that some 10 million homeowners are still underwater on their mortgages, and many will end up in foreclosure. Those foreclosures will add inventory to the housing market, he says, and economic risks at home and abroad are also a concern. “I still think it’s a risky market,” he says. Shiller also says that the potential elimination or reduction of the mortgage deduction as part of fiscal cliff negotiations could lead to a big shift from buying homes to renting homes.
Warren Buffett says Congress should enact a law establishing a minimum tax rate on the wealthy right now. In an op-ed piece for The New York Times, Buffett disputes the claim that higher tax rates on the rich discourages investment. “Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well,” Buffett says. “In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains […]
Forbes’ Kenneth Fisher says his top stock to buy in 2013 is pharma giant Pfizer. “It has near endless top-notch brand names, and a stream of new products will capture growth from an aging developed-world demographic plus new emerging middle classes overseas — all wrapped in a classically cheap stock,” Fisher says for the 2013 Forbes Investment Guide. As for Fisher’s top pick to avoid, it’s food retailer Safeway. “What won’t rise in a bull market falls in downdrafts,” he says, adding that he thinks the firm’s CEO “badly misreads his consumers. Bad merchandising, getting outdanced by competitors of all […]
Wells Capital Management’s Jim Paulsen sees a number of positive signs for the U.S. economy. Paulsen tells Bloomberg TV that third-quarter growth may have been around 3%, and that a number of factors — housing, job creation, and lending activity among them — are providing the economy with a boost. He sees growth coming in at about 3% in 2013.
PIMCO’s Bill Gross says that if the U.S. doesn’t reverse its big deficits and rising debt, it “could resemble Greece within a decade.” In an interview with U.S. News & World Report, Gross also says he doesn’t think the “New Normal” will end anytime soon. “Don’t think that anytime soon we’re going back to the ‘old normal’ because these cycles of de-levering are biblical in nature,” he says. “An investor probably has to look forward to higher inflation. Slower growth and higher inflation — that’s not a positive, by any means. Individuals would want it to be just the reverse. […]
In his latest column for Nasdaq.com, Validea CEO John Reese takes a look at some chemical industry stocks that are attractive right now. “Right now, chemical manufacturers have a couple major factors working in their favor,” Reese says. “First, there is the rise of ‘fracking’ in the U.S., which has made natural gas more abundant and cheaper. Natural gas is one of the key ingredients in a myriad of products made by chemical companies, and it’s also a major source of power that those companies use in creating their products. Cheap natural gas therefore can mean wide profit margins for […]
Warren Buffett says that even if the U.S. goes over the “fiscal cliff”, he doesn’t think it will lead to recession. “I don’t think that’s going to happen,” Buffett tells CNNMoney. He says that even if it takes a couple months after the New Year for Congress and the President to reach a “cliff” deal, the U.S. will continue to grow. “We are not going to permanently cripple ourselves because 535 people [in Congress] can’t get along,” he says. “There are things that will disrupt the economy …. but we have a very resilient economy.”
While some have argued that the U.S. economic recovery has been sub-par, Professors Carmen Reinhart and Kenneth Rogoff — whose research into the aftermaths of financial crises may be the most significant every performed — disagree. In a recent column for Bloomberg.com, Reinhart and Rogoff say “the aftermath of the most recent U.S. financial crisis has been quite typical of systemic financial crises around the globe in the postwar era. If one really wants to focus just on U.S. systemic financial crises, then the recent recovery looks positively brisk.” Those saying that the recovery has been slow compared to past […]
In his latest column for Canada’s Globe and Mail, Validea CEO John Reese says he’s finding lots of opportunities in the resilient consumer sector. “The 2008 stock market crash, the bursting of the housing bubble and the Great Recession were supposed to have given American shoppers a debilitating one-two-three punch that would keep them down for years, if not decades,” Reese writes. “But they’ve shown surprising resilience.” Shares of many consumer plays have thus surged since the market bottomed in 2009 — and Reese says many are poised for further gains. Reese uses his Guru Strategies, which are based on […]
Worried that President Obama’s re-election will be bad news for stocks? Top strategist Kenneth Fisher says that idea is hogwash. “Nonsense,” Fisher writes in discussing the Obama re-election fears in a column for Interactive Investor. “There is scant clear evidence either party is materially better for shares in the long-term. But there is a lot to be bullish about following this election that goes unnoticed.” Fisher notes that stocks have risen every year under Obama, and says that wouldn’t have happened if he were a “market killer”. But, he adds, ” Obama didn’t cause that bull market any more than […]