WSJ: The Downside of ETFs

By SIMON CONSTABLE

There is a lot for investors to like about exchange-traded funds, but there is also a downside for the stock market, a new study says.


Many investors like ETFs because the funds are an easy way to build a diverse portfolio with fees that generally are lower than those of mutual funds.


Now a group of academics offers a different take. A working paper titled “Is There a Dark Side to Exchange Traded Funds (ETFs)? An Information Perspective,” by professors at the Arison School of Business in Israel, Stanford University and the University of California, Los Angeles, says the popularity of ETFs has led to higher trading costs for some stocks, as well as less coverage of stocks by analysts to help investors make decisions. It also has reduced the responsiveness of some stock prices to information about the companies behind them and made it harder for investors to diversify their holdings in a way that reduces their risk, the report says.

Read more here.

WSJ: What Is the Value Trap?

By SIMON CONSTABLE

What does it mean when investors talk about the “value trap”?

Broadly speaking, not all cheap stocks are a good value. If, like many value investors, you buy a stock that has a better-than-average dividend and is less expensive than other similar securities, then it could be a good deal. But there is also a chance that it isn’t. 

Put another way: Some things are cheap for a reason.

Sometimes a stock’s price falls because sophisticated investors see a longer-term problem with the company and decide to dump their positions, explains Sam Stovall, managing director of U.S. equity strategy at S&P Capital IQ. It could be, for example, that those savvy investors believe the company is in bad shape and will cut its dividend in due course.

Read more here.

OZY: Falling Gold Prices Are The Latest Signs Of Good News

By SIMON CONSTABLE

Be afraid. Be very afraid. Or maybe not so much now.

When people see headlines about a market crash or some government turmoil, they tend to look for something secure, which in some cases includes stocking up on gold the way you might water bottles in a drought. (Yes, people still stick coins in their mattress and bury bars in their backyard.) And yet, with every reason to be afraid about the future of the so-called global economy staring us in the face, that doesn’t seem to be happening these days.

Read more here.

Forbes: How The Calais Crisis Sends A Message

By SIMON CONSTABLE

The so-called Calais Crisis is sending a message to the world that Britain is the place migrants want to be. Well, at least it is when compared to the other rich countries of the European Union. It’s an indicator of something, possibly an economic one. Read more here.

Photo by Jeremy Bezanger on Unsplash

OZY: Why China Might Be in for a Different Kind of Crash

By SIMON CONSTABLE

We’ve all seen the blur of headlines: China’s stock market falls. Really falls — like it was the great Wall Street crash of 1929 all over again, only over there. And then the Chinese government puts the brakes on its financial system for a while and things feel better. Then the fretting continues this week over yet another epic fall. But there is one news flash, one alert in our smartphone that we’re not getting about any of this.

Read more here.

Forbes: 10 Things You Didn't Know About Gov. Rick Perry

By SIMON CONSTABLE

Guess who had lunch at the Yale Club Wednesday? Texas Governor Rick Perry. Here’s what you need to know.

1. Texas Governor Rick Perry was at the Yale Club in New York City Wednesday speaking at a launch meeting of the Committee to Unleash Prosperity. Also at the meeting were CNBC’s Larry Kudlow, former presidential candidate Steve Forbes, The Heritage Foundation’s Steve Moore, and former NYC mayoral candidate John Catsimatidis.

Kudlow and Moore, along with economist Art Laffer, are founding members of the Cmte. which is meant to “end America’s growth slump and restore faith in the American Dream,” according to a written statement about the group. Read more here.

TheStreet: 10 Reasons to Love the Oil Price Drop

By SIMON CONSTABLE

New York (TheStreet) -- Don't let tumbling oil prices darken your outlook on stocks or the economy. Yes, U.S. crude prices have dropped into an official bear market, down around 20% since the beginning of June, which will undoubtedly hurt the oil industry and companies like Exxon Mobil and BP. 

But there are a number of benefits from the decline. Here are 10 of them: Read more here.

Photo by David Thielen on Unsplash