Assuming most everyone in the United States had a nice Thanksgiving holiday weekend, now it's back to business as usual for Wall Street, the business of making money. The week ahead is packed with fresh data for investors to digest beginning with the release this morning of Construction Spending for October (+0.8% versus the +0.3% consensus) and the ISM Index for November (57.3 versus 55.5), the highest reading since November 2011.
Bond prices fell on these two reports with the 10-year Treasury yield rising to 2.80%. Stocks initially sold off, the idea once again being that the Fed will move up its schedule to taper QE. Don't count on it. U.S. consumers spent an estimated $57.4 billion during the Thanksgiving weekend, down 2.7% from last year, the National Retail Federation has estimated. The U.S. consumer accounts for two-thirds of GDP growth.Read
Entering the holiday-shortened week, investors can reflect on 2013 with a good feeling of being well rewarded for having the fortitude to invest in what has been the strongest rally among all global markets. And by most indicators it's not done yet. If you had asked 100 financial experts back in January what the chances were of the S&P 500 gaining over 25% for the year, I would think that about 99 of them would have responded with a resounding 'no chance.'
Looking back, investors came into the year having to adjust for the 'fiscal cliff,' stagnant employment, the Syrian crisis that caused oil to spike to $110 per barrel, a government shutdown and a failed rollout of the nation's largest government healthcare plan ever designed. These are big issues -- but apparently not big enough to derail the juggernaut bull market fueled by excess liquidity from fiscal stimulus that has boosted spending on housing, autos, services and corporate financing of debt and stock buybacks.Read
The market is welcoming the induction of Janet Yellen as the next Federal Reserve Chair with open arms -- and buy orders for all manner of 'risk on' assets -- after she reassured the investment community that fiscal stimulus in the form of quantitative easing will be perpetuated during the first leg of her time in that office, which will begin in January. She essentially sailed through her Senate banking committee confirmation hearing, and the market rewarded the event, with the S&P 500 hitting 1,800 on Monday.
Bond yields have come up from unprecedented lows. The weak economy, tiny inflation and exceptional Fed policies took bonds to historically low levels that bottomed in late June and have since begun to normalize. At some point, the economy will show more consistent growth, yields will rise to more natural levels and existing bonds with their lower yields will fall in value, a lot of value.Read
About two-thirds of the way through third-quarter earnings season, it's abundantly clear that cost-cutting, productivity gains, headcount reductions and stock buybacks are contributing a disproportionately large amount to bottom-line results for a number of S&P 500 companies. Real growth in terms of rising top-line revenues has been rather unimpressive, but that hasn't kept the bulls from legging into stocks where the earnings come in ahead of estimates.
It seems that the assumption of higher sales growth will eventually show up in 2014 -- and that if quarterly results can come in at or slightly ahead of forecasts (as has been the case for roughly 65% of those companies reporting), then the case for expanding P/E ratios and higher equity valuations is being comfortably embraced by investors. Without over-thinking this scenario, a good dose of the buying lately is simply money rotating out of fixed income, as is being reported by several leading investment-grade mutual funds.
In this week's issue of Cash Machine, I'll go over the current economic and market landscape, including why Fed 'tapering' might not be as far off as previously imagined. I'll also update you on the latest news for our portfolio -- namely, the results outlined in several earnings reports -- and I'll answer your questions in this week's Ask Bryan.Read
As we head into the final two months of the trading year, my brief synopsis of the current investing landscape is that it's shaping up to be about as solid a backdrop for Cash Machine-style income investing as one could hope for when targeting high-yield cash flow. A number of attempts to torpedo the high-yield market this year have been neutralized, with the resultant effect showing a resilient sector in which the appetite for stellar income can be realized in conjunction with growth.
At present, there are several key drivers underpinning not just the strength in the bond and equity markets, but especially that of the high-yield market. Economic data is trending up -- but at a pace that doesn't stoke inflation and is at the same time keeping downward pressure on interest rates. Labor markets are soft, which should evoke further quantitative easing from the Fed within their dual mandate of a 6.5% unemployment rate and cheap lending rates. Massive liquidity created by central-bank intervention is seeking higher yields than those offered by conventional fixed income and common stocks.
In this week's Cash Machine, I'll recap the latest happenings in the broad economy and among our holdings, including several key earnings reports for our portfolio and one new buy in the asset-management space. I'll also answer this week's subscriber questions in my Ask Bryan section.Read
Bullish sentiment overwhelmed both bond and equity markets last week after the government headwinds were removed, if even for a short while. Technology led all sectors and got an even bigger shot in the arm when Google (GOOG) posted solid results, which took its shares above $1,000 for the first time and sparked a feeding frenzy in other leading 'new America' tech names -- while leaving legacy stocks like IBM (IBM), Intel (INTC), Oracle (ORCL), Cisco (CSCO) and Microsoft (MSFT) in the dust.
For the most part, the first wave of earnings is coming in at or slightly better than consensus expectations, with decent forward guidance. The fact that the market can trade so well through big earnings disappointments from the likes of IBM and UnitedHealth Group (UNH) is a testament to the underlying bid in the current trading landscape. Money wants into this market on any dose of bad news that provides a short-term downdraft.
In this week's Cash Machine, I'll explain why I think the bulls are setting us up for a strong rally into the end of the year, and I'll update you on the latest news among our holdings, including a few that are at attractive entry points after making secondary offerings. I'll also answer several of your questions in this week's Ask Bryan section.Read
For more than five years, Bryan has brought his expertise on high-yielding investments to the Cash Machine service. His main goal is to help income investors craft a portfolio that will pay a reliable income even during the worst of times. Read