By SIMON CONSTABLE
Michael Spence
Photo by Niccolò Caranti, CC BY-SA 3.0,
via Wikimedia Commons
Tuesday, October 23, 2012
NBR: Should You Trust Wall St.? Maybe Not
By SIMON CONSTABLE
Something has vanished from Main Street: Trust in Wall Street.
How do we know this? Small investors are dumping stocks.
Even as the stock market has soared close to record highs, retail investors sold $138 billion in shares.The data comes from The Investment Company Institute and tracks mutual and exchange-traded fund investments, a rough proxy for the retail sector.
Some people will tell you that small investors are bailing on stocks because they are too emotional and so they make terrible decisions. They were burned by the credit crunch and the popping of the tech bubble and are now gun shy.
In short, the message is, they are stupid because they’ve missed the recent rally, but maybe they aren’t. Maybe they are justly shy of the shenanigans on Wall Street.
New research shows that one in five chief financial officers of public companies admit to cooking the books, according to a recent study from professors at Emory and Duke Universities. In a survey they found that about 20 percent of CFOs used accounting tricks that didn’t reflect the companies’ underlying operations. The size of the misstatements—about 10 percent of earnings.
Wow! If that sounds bad, it’s actually worse than you think.
This type of book cooking is completely legal. And because it’s legal, nothing will be done about it. If you don’t know what the company’s truly making, why would you invest?
Maybe that's a good reason to steer clear of the U.S. stock market.
Something has vanished from Main Street: Trust in Wall Street.
How do we know this? Small investors are dumping stocks.
Even as the stock market has soared close to record highs, retail investors sold $138 billion in shares.The data comes from The Investment Company Institute and tracks mutual and exchange-traded fund investments, a rough proxy for the retail sector.
Some people will tell you that small investors are bailing on stocks because they are too emotional and so they make terrible decisions. They were burned by the credit crunch and the popping of the tech bubble and are now gun shy.
In short, the message is, they are stupid because they’ve missed the recent rally, but maybe they aren’t. Maybe they are justly shy of the shenanigans on Wall Street.
New research shows that one in five chief financial officers of public companies admit to cooking the books, according to a recent study from professors at Emory and Duke Universities. In a survey they found that about 20 percent of CFOs used accounting tricks that didn’t reflect the companies’ underlying operations. The size of the misstatements—about 10 percent of earnings.
Wow! If that sounds bad, it’s actually worse than you think.
This type of book cooking is completely legal. And because it’s legal, nothing will be done about it. If you don’t know what the company’s truly making, why would you invest?
Maybe that's a good reason to steer clear of the U.S. stock market.
Sunday, October 21, 2012
WSJ: Five Light Reads for Your Financial Library
By SIMON CONSTABLE
Now that the kids are back in school it's time for you to hit the books. Here are five light reads that will boost your financial acumen and (hopefully) inspire you to a more fulfilling career. (Most are available in multiple formats, both in print and as eBooks.) See original post here.
Saturday, September 29, 2012
Barron's: Rice Price Ready to Snap Crackle and Pop
By SIMON CONSTABLE
In May I warned Barron's readers in this column that rice prices were set to surge. And they did, rising 9% on the Chicago Mercantile Exchange, to more than $16.30 per hundredweight in early August from just shy of $15 three months earlier. Prices have retreated since, to around $15 recently. But that doesn't mean the rally is done.
Analysts say the market is poised for a price surge that could take rice even higher, with futures prices exceeding $20. Read more here.
Photo by Mgg Vitchakorn on Unsplash
Thursday, September 13, 2012
NBR: Congress Needs to Stop Playing Chicken with the Budget
By SIMON CONSTABLE
Genius physicist Albert Einstein famously commented that insanity is defined as doing the
same thing over again and expecting a different result. It’s an idea that Congress needs to wake up to
More precisely, it needs to stop playing chicken with its fiscal decisions. The last few years we’ve seen nothing but dysfunction. Remember the debt ceiling debate last year? That was when our elected officials waited until the very last minute to come to a decision.
That sort of behavior isn’t doing us as a country any favors. Quite frankly it’s nuts.
It isn’t just me that thinks so. Ratings agency Moody’s just scolded Congress. The firm that determines the riskiness of a borrower said Tuesday the U.S. risks losing its coveted triple-A rating if Congress doesn’t shape up. Specifically it pointed to the pending tax increases we face starting in January if the government doesn’t act swiftly and prudently.
Why does what Moody’s say matter to you? If the U.S. loses its triple-A rating, it will have to pay more to borrow. If it pays more then you will also, for everything from credit cards and car loans to mortgages.
That’s something you need to think about when you go to the polls in a little less than eight weeks.
Tuesday, September 4, 2012
WSJ: What You Need to Know About Yield
By SIMON CONSTABLE
How much yield you earn from a fund is important. But calculating it can be tricky.
In basic terms, a fund's yield is whatever the dividend or interest payment is divided by the current price. If the annual dividend is $1 and the price of the fund is $20, then the yield is 5%.
But as with most things, it's rarely that simple. That's because fund investments and payouts change over time. So, savvy investors should look at different ways of measuring yield. In simple terms, here's what you need to understand. See original post here.
How much yield you earn from a fund is important. But calculating it can be tricky.
In basic terms, a fund's yield is whatever the dividend or interest payment is divided by the current price. If the annual dividend is $1 and the price of the fund is $20, then the yield is 5%.
But as with most things, it's rarely that simple. That's because fund investments and payouts change over time. So, savvy investors should look at different ways of measuring yield. In simple terms, here's what you need to understand. See original post here.
Monday, August 20, 2012
Barron's: How QE3 is a Mixed Bag for Commodities
By SIMON CONSTABLE
What will it mean for commodities if "Helicopter Ben" Bernanke cranks up the printing press once again?
Some investors simply expect prices to soar across the board if the Federal Reserve chief institutes a new round of quantitative easing, aimed at stimulating economic growth. They see such a move flooding markets with dollars, weakening the U.S. currency, and pushing up the prices of dollar-denominated commodities, as stronger economic activity boosts demand. See original post here.
What will it mean for commodities if "Helicopter Ben" Bernanke cranks up the printing press once again?
Some investors simply expect prices to soar across the board if the Federal Reserve chief institutes a new round of quantitative easing, aimed at stimulating economic growth. They see such a move flooding markets with dollars, weakening the U.S. currency, and pushing up the prices of dollar-denominated commodities, as stronger economic activity boosts demand. See original post here.
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