Posts by Rick Newman

  • How ETF investors messed up during this week’s market scramble

    Rick Newman at Yahoo Finance 4 days ago

    During tumultuous trading on the morning of Aug. 24, the S&P 500 stock index never fell by more than 6%. But some exchange-traded funds meant to mimic the performance of the S&P 500 plunged by 30% or more.

    Something obviously went wrong. And it had more to do with ordinary investors making mistakes than with flaws in the exchanges or technical glitches.

    ETFs have become popular because they let investors purchase a pool of securities, just as mutual funds do, but trade all day at varying prices, similar to the way stocks trade. Mutual funds, by contrast, only price once per day, usually at the end of a trading session. The free-floating prices of ETFs allow active investors to take advantage of price swings and other market dynamics in real time. Americans now hold about $2 trillion worth of ETFs, more than twice the value of just 5 years ago.

    But in a panicky market with heavy selling, there can be major distortions. Bid and ask prices can change abruptly, and the largely automated market makers who match buyers with sellers might create large gaps between the two, to signal a problem and coax traders to chill on the sidelines until prices normalize.

  • It’s foolish to blame Obama for stock-market woes

    Rick Newman at Yahoo Finance 5 days ago

    It’s Obama’s fault.

    Expect to hear that a lot during the next 15 months as Republican presidential hopefuls blame everything imaginable on the president whose party they want to bounce from the White House.

    Recent turmoil in the stock market, for instance, is Obama’s fault, according to Republicans Donald Trump, Scott Walker, Chris Christie and others. Trump, for instance, said of China, “they’ll bring us down. We have nobody that has a clue.” Then he said President Obama should cancel the upcoming state dinner with Chinese president Xi Jinping and give him a double Big Mac instead. Walker argued that “We need to see some backbone from President Obama on U.S.-China relations." And Christie said the stock-market sell-off resulted from “a history of failed policies by this president.”

    Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman .

  • 5 reasons to stay calm as the stock market quakes

    Rick Newman at Yahoo Finance 7 days ago

    Okay, so it’s not the best way to end the summer. August is usually a dull month on Wall Street, but this year it’s an all-hands event as stocks plunge and investors brace for more. So far, the S&P 500 stock index (GSPC) has fallen by about 9% for the month and 8% for the year.

    But that doesn’t mean end times are nigh or we’re facing another recession. A falling stock market usually damages consumer confidence, as investment accounts fall in value and scary headlines dominate the news. But the market doesn’t always reflect what’s happening in the real economy, and most ordinary people aren’t harmed by short-term declines in the stock market. Here are 5 reasons not to worry too much about the latest market gyrations:

    Stocks are still up sharply over the last 6 years. The bull market rally began in March of 2009. The S&P 500 is still up 187% since then -- a huge rally. In that context, the 8% decline we’ve seen this year is a tiny squiggle on an otherwise upward line.

  • Ashley Madison needs way more women

    Rick Newman at Yahoo Finance 11 days ago

    Infidelity may be big business, as the founder of cheating site Ashley Madison used to insist. But a glimpse at its customers’ activity shows that the business depends heavily on men with unrealistic expectations—bordering on fantasy—of what they’re likely to get for their money.

    Since hackers posted records on roughly 36 million Ashley Madison customers, with more possibly to come, the world has been gorging on titillating insights into the habits of cheaters. The data, however, may highlight disappointment more than anything else. The real product Ashley Madison is selling may be the hope of sexual excitement, rather than excitement itself.

    Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman .

  • Donald Trump’s first 100 days as president

    Rick Newman at Yahoo Finance 12 days ago

    What if the political-media establishment is wrong? What if Donald Trump really is electable? What if donkeys fly and Trump actually wins the White House in 2016?

    What then?

    We studied economic and social policies Trump has endorsed--and applied a bit of imagination--to conjure this rendition of how President Trump’s first 100 days in office might go:

    January 20, 2017: In his inaugural speech, Trump assures the nation it now has a “dealmaker in chief” who will renegotiate all the lousy agreements from the last two administrations. He singles out Iran, Iraq, South Korea, China, Mexico, Rosie O’Donnell and Heidi Klum by name. Stock markets fall 4% on fears of trade wars and global tension.

    First full day in office: After his first close-up glimpse of Air Force One, Trump decides to fly on his own 757 instead because the presidential jet is "too dumpy." "Leave it to the govenrment to build a piece of crap like that," he tells reporters in a kickoff press conference.

  • Here are the politicians Donald Trump has 'bought'

    Rick Newman at Yahoo Finance 24 days ago

    Donald Trump has given more than $1 million to politicians during his multifaceted career. But he’s not as generous as he made it sound during the first debate among leading Republican presidential candidates.

    During the Aug. 6 debate, Trump said of his nine fellow candidates: “Most of the people on stage, I've given to. A lot of money.” But state and federal donation records show Trump has only given to three of those nine candidates, and not in very large sums. He’s donated to just one of the other seven GOP candidates who weren’t included in the debate. And Trump has also given to Hillary Clinton, so of the 22 major declared candidates of both parties, Trump has donated to five of them.

    Here’s a breakdown:

    Mike Huckabee. In 2012, Trump gave $2,500 to the former Arkansas governor’s political-action committee, known as Huck PAC. As donations go, that’s a fairly small one.

  • How to get rich by running for president

    Rick Newman at Yahoo Finance 26 days ago

    The year 2008 was great for Mike Huckabee—but not as a politician. The former Arkansas governor bailed out of the presidential race in March of that year after losing steam in the early primary elections. But simply running for president elevated Huckabee to the status of celebrity, while helping him build a devoted following among southern and Midwestern evangelicals. Huckabee has since converted the renown that comes with running for national office into a business enterprise that has made him wealthy, with a palatial beachfront home, access to private jets and other perks of the 1%.

    Figures in most cases are for the 15 months ended March 31 of the year in question.

    Sources: Federal Election Commission, Center for Responsive Politics 

  • The rugged SUV is dying

    Rick Newman at Yahoo Finance 1 mth ago

    A decade or so ago, Honda guessed wrong. It styled the next version of the Pilot, its mainline SUV, after the audacious Hummer H2, at the time one of the hottest vehicles on the road.

    Whoops. When the bulky, square-jawed Pilot finally hit the market a few years later, in the spring of 2008, gas prices were soaring toward $4 per gallon for the first time ever. Then the stock market imploded, followed by mounting layoffs and a grueling recession. The Hummer symbolized conspicuous consumption during its heyday in the early 2000s. But by 2008, crass excess was firmly out of favor and Hummer sales tanked. General Motors (GM), which marketed the Hummer, killed it after going through bankruptcy in 2009.

    We’re probably better consumers these days, more likely to shop for what we need and less likely to splurge on frills. Good for us. But our sense of adventure has gone AWOL, and marketers know it. Maybe they knew it would happen all along.

  • Prosperity may not get much better than this

    Rick Newman at Yahoo Finance 1 mth ago

    Sure, there are problems with the economy. But there are always problems with the economy, even during the halcyon days. And today, things are better in some ways than they were during past periods we tend to regard as times of peak prosperity.

    The unemployment rate has been falling for 6 years and is now at 5.3%, which is lower than the average during the 1990s (which was 5.7%). Layoffs have become so uncommon that initial claims for jobless insurance just came in at the lowest level since 1973. The employee-confidence index maintained by job-search firm Glassdoor is at the highest level since 2009, when the series began. “We are seeing clear signs that the economy is in really good shape,” says economist Joel Naroff of Naroff Economic Advisors.

    Meanwhile, gas prices and interest rates are low, inflation is tame, a six-year stock market rally has restored billions in lost wealth, and the world economy barely hiccupped at the much-feared prospect of a financial meltdown in Greece a few weeks ago. If you’re wondering when the economy is going to get hot, the answer might just be -- now.

  • Hillary Clinton targets the rich--with a Nerf gun

    Rick Newman at Yahoo Finance 1 mth ago

    Sock it to ‘em!

    That’s Hillary Clinton’s attitude toward the wealthy, if you go by the letter of her latest economic proposal. There are a few unstated aspects of her plan, however, that sharply weaken its impact.

    The Democratic presidential candidate wants to revamp the capital gains tax in a way that would reduce financial speculation and encourage public companies to focus more on long-term investments. As part of the bargain, the plan would raise taxes on some wealthy investors and funnel a few extra bucks to the U.S. Treasury.

    The logic behind the plan is solid. One common complaint of CEOs is the pressure to maximize shareholder value (also known as doing whatever necessary to pump up the stock price), sometimes at the expense of other priorities that would be better for the company in the long term. Not everybody thinks “quarterly capitalism” is a problem, but it’s certainly worth exploring at a time when economic growth is chronically weak.

    Her plan, however, is also somewhat disingenuous. Here’s why: