Posts by Jeff Macke
- Jeff Macke at Yahoo Finance13 hrs ago
July brokerage statements are going to be sent out today and for the first time in five months the percentage of you who throw them away unopened will rise. In fact, while ratings on financial TV and traffic on stock websites will almost certainly show an impressive spike this week the number of you who log in to your e-broker to see how your portfolio is doing will drop.
The reason is simple: If you're an average investor, or even a better than average investor, there's a good chance you lost money in July. You don't want to look at your statements because you know there's bad news inside. The impulse isn't any different than when you'd want to hide a bad report card from your parents as a kid. That isn't an indictment of your maturity or sophistication. It validates your humanity. We are hard wired to avoid what is painful. The last few days have reminded us that investing can be a scary, painful experience.
- Jeff Macke at Yahoo Finance15 hrs ago
Like life in the middle ages this weeks sell-off in equities has been nasty, brutish and short. Also like the the forgotten centuries prior to the enlightenment there isn’t much of a legacy to speak of just yet. With a nearly 3% drop over the last five trading days the Dow Jones Industrial Average (^DJIA) has given away its meager gains for the 2014 but the S&P500 (^GSPC) is still well into the green heading into August. Related: The 20% market correction has already started
Perhaps most importantly to the collective psyche, Apple (AAPL) and Facebook (FB), the twin sweethearts of the American stock market are both well over 30% higher for the year. It’s basically too late to pretend all is well but too soon to buy the dip.
It’s a psychological fact that human beings are horrible at gauging their own emotional state. If there’s a thin line between love and hate the distinction between greed, boldness, prudence and fear can only be determined after the outcome is known. In real time your body just knows you’re stressed. If the trades you make while under pressure turn out to be profitable your actions are retroactively defined as bold, not reckless. If you sit the sidelines for years waiting for a crash that never comes your prudence morphs into money-losing fear.
This week seems to mark an aggressive shift in market behavior. After months of small moves and complacency the volume has been turned up in a huge way. The shift started when Facebook’s (FB) earnings beat triggered a big move that left many investors feeling left out of the party. Something in the collective mindset started to shift from a fear of getting caught exposed to stocks to panic over the prospect of missing the next big rally.
After a three month search Target (TGT) has found a new CEO. 55-year old Brian Cornell will become only the fourth person to head the company since 1984 and the first outsider to move straight into the top post. It's a smart move by Target's board. The nation's second largest mass-market discounter is coming off years of missteps and a humiliating 2013 full of scandals, revolts and credit card fraud. The place needed new blood and Cornell, with ten years experience at Pepsi (PEP) and three years heading Walmart's (WMT) Sam's Club stores seems like the right man for the job.
That doesn't mean it's going to be easy. I'm sure Brian has a pretty good handle on the situation but as the only person I know who actually gets choked up at the sight of a well-run store I can't help but offer a three step strategy that I think will get the Cornell era off to a bang-up start.
Step 1: End the revolt
Of the many disconnects between investing strategies suggested by financial media and reality, none is so glaring as the binary fiction of investing decisions on TV and the gray-scale reality of portfolio management. In a Bulls vs. Bear medium suggesting investors might be wise to tweak their portfolios systemically is frowned upon if not disallowed entirely.
Welcome to reality as presented by the irrepressible Jonathan Hoenig author of founder of Capitalistpig Asset Management. In the attached clip Hoenig puts forth the radical idea that, while the bull market remains intact, this is still a good time to move some money out of mega-cap U.S. stocks.
Yes, the economy is strong and momentum, though flagging a bit, remains bullish. Hoenig isn’t picking a fight with the Fed or the stock market. He just sees better opportunities overseas and in some assets other than equities.
- Jeff Macke at Yahoo Finance2 days ago
Social Media advertising works. It's an explosive growth medium whether you put the ads on smartphones, tablets or phablets. On that point there can be no debate, not after what we've heard from the two social titans this week. We expect great growth from Facebook (FB) but when it's weak little brother Twitter (TWTR) comes up with a quarter of a billion in mobile ad revenue it's clear that a sea change has taken place.
The existence of social media as an ad platform business model has been justified but whether or not those ads sell anything other than more advertising somewhat in doubt. Last night Facebook quietly announced that it would be shutting down its Facebook Gifts initiative. The business was really an afterthought for Zuckerberg and Co. It started with large ambitions but by the end was simply a largely forgotten spot where customers could buy gift cards to places like Starbucks and iTunes.
- Jeff Macke at Yahoo Finance2 days ago
For those who only watch the headlines, the stock market looks as if it’s doing a pretty decent job digesting 6 years of gains. The Dow ( DJI ) is hanging out near record highs in the 17,000 area, the S&P 500 (^GSPC) is within 2% of the once unthinkable 2,000 mark and the Nasdaq (^ICIX) is higher than anytime in the last decade.
Or maybe this is just the lull before the storm. As Josh Brown of the Reformed Broker CEO of Ritholtz Wealth Management notes in the attached clip, under the surface things are worse than they seem. Small caps are underperforming, the Nasdaq is being led by a tiny fraction of major stocks and it’s all but impossible to find ideas that are particularly fresh by any reasonable standard.
- Jeff Macke at Yahoo Finance3 days ago
History doesn't repeat itself on Wall Street but the mergers and acquisitions spree of the last few months has the same basic rhyme of another era. No it's not 2000 or 2007. The drumbeat today goes back the 80's and a certain pulsing beat that calls to mind Prince music, mullets and unforgettable predator's balls.
It was about 1983 that a bond trader named Micheal Milken and his firm Drexel Burnham Lambert popularized the use of so-called junk bonds as a way to finance takeovers. Formerly the source of funds of last resort for firms on hard times, junk bonds became the preferred tool for what were then called "raiders" making audacious deals. One of those pioneers was a guy named Nelson Peltz who in 1985 bought National Can, a company six times his firm's size, using Drexel junk funding. A year later Peltz doubled down on American Can. Two years after that Peltz and his partners sold his levered can conglomerate for nearly $850 million in profit.
- Jeff Macke at Yahoo Finance3 days ago
The headlines don’t reflect it yet but according to Brad Lamensdorf a 10 to 20% correction isn’t just possible, but has actually already started. In the attached clip the manager of the Ranger Equity Bear Fund ETF (HDGE) says he’s seeing some key breakdowns that don’t bode well for the tape as a whole in the coming months.
Like many of the bearishly inclined investment class Lamensdorf is concerned about how far the market has come without any meaningful pullback. He takes it beyond a hunch when he points out some of the flaws in the bullish argument that the public isn’t taking part in this widely despised rally yet.
Professional sentiment in the form of research from Institutional Investors is of course widely bullish. At this point the fund managers who’ve been sitting in cash for the last couple years are either out of business or simply long out of necessity. Being long defensive sectors is about as close to bearish as many are willing to get.
- Jeff Macke at Hot Stock Minute4 days ago
Dollar Tree (DLTR) is buying its larger rival Family Dollar (FDO) in a cash and stock deal valued at about $8.5 billion. "This acquisition will extend our reach to lower-income customers and strengthen and diversify our store footprint," Dollar Tree CEO Bob Sasser said in a statement.
Discount chains have been struggling to boost sales as Walmart (WMT) and other retailers invaded their space by offering more items for a buck or less to lure more low-income consumers.