Posts by Michael Santoli
Michael Santoli at Yahoo Finance 4 hrs ago
Puerto Rico failed to meet a $58 million bond payment Monday, placing the U.S. territory in default and deepening concerns over its ability to service its $72 billion in debt.
Here are a few key points about Puerto Rico’s financial difficulties and what they might mean for investors and the economy.
Was this default a surprise?
No, investors have been bracing for a possible default for at least two years. Puerto Rico’s debt level has been building toward unsustainable levels for more than a decade.
Governor Alejandro Garcia Padilla last month stated that the $72 billion in public debt could not be paid back. Its bonds have traded at steep discounts to face value, signaling the market’s concern that a default or a debt restructuring would occur.
How did Puerto Rico get here?
Persistently weak economic performance has eroded the tax base and the government and other agencies piled on debt from eager lenders to maintain public spending.
Puerto Rico has more than three times the debt per resident as the most heavily indebted U.S. states.
What does it mean for U.S. investors?
Might the U.S. government bail out Puerto Rico?
Michael Santoli at Yahoo Finance 6 hrs ago
One company’s oil and gas is the same as any other's, and there’s more of it than the world’s demanding at the moment. Even longer term, growth in petroleum demand is running at only half the rate of world GDP. And the president just unveiled a new environmental plan to squeeze the industry further.
But one thing that big energy companies do offer that is relatively scarce is generous cash dividend yields on their stocks.
As the shares of the integrated energy majors have been blasted along with sinking crude-oil prices, their dividend yields have been lifted far above prevailing market yields.
The fat yield premium on bellwether energy stocks reflects the market’s assessment that these companies are under heavy and increasing pressure to maintain their heavy cash payouts.
This is not to say that the companies’ dividends are in any immediate danger of being cut. But weak oil-and-gas prices and declining cash flows mean that the companies will have to continue maneuvering to maintain their payouts, perhaps in ways that jeopardize the long-term value of their businesses.
Michael Santoli at Yahoo Finance 1 day ago
In other markets, they’ve been cancelling trading to keep prices from falling too fast. Here in the American stock market, people can trade all they want - yet the indexes have hardly budged.
China’s heavy-handed moves to halt trading in many stocks and restrict selling has now gone further, as authorities there froze a Chinese account of Chicago trading giant Citadel, while they villain-ize foreign short sellers.
The Greek stock market opened today for the first time in five weeks and promptly shed 20% of its value – a move surprising, if at all, for how relatively modest the losses were.
The stock market here, though, remains stalemated, with the Dow Industrials’ total return for the year up just half a percent, and the S&P 500 finishing July within a single point of where it closed February.
We’ve wandered pretty far off that script, even if the S&P is holding a couple of percent into the black, seven months into the year.
Michael Santoli at Yahoo Finance 4 days ago
Big retail chains are bidding for workers by promising hourly pay well above the legal minimum wage. The number of new unemployment claims two weeks ago fell to a 42-year low. Technology companies are desperate for skilled workers and are posting big recruitment bounties for new engineers.
So how to explain that last quarter saw the most anemic increase in wages and salaries in the 33-year history of the employment cost index – just as economists were growing certain that incomes were finally poised to grow smartly?
On the surface, it appears to be yet another deflating turn in a long but lethargic economic recovery. The ECI – a broad measure of cash compensation and employer-paid benefits – inched higher by only 0.2%, below the 0.6% economists’ had forecasts and a sharp slowdown from the first quarter’s 0.7% gain.
Michael Santoli at Yahoo Finance 4 days ago
Software designed to deliver individually tailored recommendations: It powers your Facebook app, your FitBit band and, increasingly, your finances.
The young, fast-growing firms built around online asset-allocation engines are typically portrayed as occupying a niche, providing a digital alternative to traditional investment services for young and plugged-in investors.
Naturally, grander ambitions drive the pioneers of this business, such as Jonathan Stein, founder and CEO of Betterment.
“In the future, this automated online investing is going to be the way everybody does it,” Stein says in the attached video. “I think in the future we’re going to look back at people who do their own investing without advice like people who do their own dental surgery on themselves – something you’d be just crazy to do.”
Of course, the tens of thousands of wealth advisors offering comprehensive guidance to investors, and the Big Four discount brokerage firms enabling cheap trading of stocks, bonds and funds don’t see this shift as quite so inevitable.
Michael Santoli at Yahoo Finance 5 days ago
The premise of the Pixar movie “Monsters Inc.” is that monsters only scare children as a job, and they’re at least as afraid of the kids as kids are of them. The stock market this year brings this conceit to mind.
Not every night at bedtime, but often enough, some nasty-looking threat pops out of the closet to frighten investors, but then retreats – lacking the true malice or resolve to maintain the menace.
Playing the role of ugly intruder in the night have been the oil and commodity bust, Greece teetering on insolvency and abandonment, the Fed’s planned march to its first rate boost and a chaotic surge-and-crash pattern in Chinese stocks.
Standard worries about U.S. growth, stalled corporate earnings and ragged action in the market itself have lingered close, to ensure anxiety levels never fall too low.
So far, at the index level, not much damage has been sustained. As more than one cut-to-the-chase market observer has noted, the market can register bad news or scary threats by not going up, as well as by going down.
As we ride this range, here’s a dog’s breakfast of market observations:
Michael Santoli at Yahoo Finance 6 days ago
How is Major League Baseball in midsummer like the Federal Reserve on the verge of a policy change?
Once you start considering the question closely, the similarities pile up. The lopsided majority of baseball trades in a given season happen in the week before the July 31 trade deadline – with this year’s cutoff being 4 pm on Friday.
Teams like to wait as long as possible to determine if they’re positioned to contend as they are, or if they need to add one more player to gain a solid edge, or if it’s time to give up and rebuild for next year. They decide, in other words, if the pre-season plan is working fine, or if they need to be buyers or sellers of talent.
The Fed doesn’t have a strictly defined deadline for lifting interest rates from zero, but its preseason plan was to get there by the end of this year and September is now the focus. So Fed officials need to assess how their expectations for growth and jobs and inflation are playing out before they decide whether to become a “buyer” of the sustainable economic improvement idea by bumping up rates a bit, or a seller by waiting until next year.
Michael Santoli at Yahoo Finance 7 days ago
Time for your daily dose of trending tickers, the stocks you're following based on your Yahoo Finance ticker searches.
United Parcel Service
UPS helped the S&P 500 to stay on the green. Shares of United Parcel Service (UPS) gained after delivering better-than-expected second quarter profit of $1.35 a share. Revenue, however fell short from a year ago on the stronger dollar and lower fuel surcharges.
U.S. traded shares of Baidu (BIDU) dropped after falling short on earnings and outlook. The Chinese internet search company posted second quarter profit of $1.81 a share. That's 7 cents shy of analysts estimates. Baidu's current quarter outlook also came in below expectations.
Michael Santoli at Yahoo Finance 7 days ago
Maybe it’s time again for investors to list a “hierarchy of fears.”
This is how therapists start treating post-traumatic stress disorder, by ranking the most-scary things that haunt a sufferer.
With possible Grexit on hold, sapped of its ability to frighten for the moment, the list of fearsome forces looks something like this:
-China’s caustic stock market is looking just about “unriggable”by the government there.
-Commodities and related emerging-markets stocks and currencies are caught in a sloppy liquidation.
-Junk bonds are getting roughed up pretty badly, in a typical sign of building credit stress, at least in the dicier pockets of the market.
-The U.S. stock market itself has been misfiring noisily, with a now widely noticed weakness in the broad majority of stocks no longer obscured by the handful of growth-stock darlings and levitating bank shares.
Where all these global concerns meet, I’d argue, is at the Federal Reserve committee room in Washington.
Michael Santoli at Yahoo Finance 11 days ago
Market cycles don’t always unfold according to the familiar script, but they tend to trace similar story arcs.
And right now, the U.S. stock market is moving through plenty of the plot points associated with a gradual, tantalizing topping process.
This, at least, is the view of veteran market watcher Doug Ramsey, chief investment officer at the Minneapolis research and asset-management firm Leuthold Group.
During the past several months of range-bound trading in the vicinity of its all-time high above 2100, the Standard & Poor’s index has been increasingly reliant on a narrowing group of strong stocks and has largely masked significant beneath its calm surface.
“Over the last six months specifically,” Ramsey says in the attached video, “it’s been some of the usual characters that tend to tire out and start to lag late in a bull market.”
Ramsey notes, in particular, the widely discussed drop of more than 10% in the transportation sector and similar damage to utility stocks as typical features of a “distribution” process that can precede a more important peak in the broad indexes.
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