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The government reported this morning that personal income was unchanged in April. Economists were expecting an increase of 0. The stat in the personal income report that I find most interesting is real personal income after transfer payments. It rose by 0. The big jump at the end of last year was due to the dividend payouts. What I find interesting is that, looking past the December spike, the rising trend is continuing.
Last Wednesday, May 22nd, the stock market experienced a very rare event. Why did this put everyone on edge? Because the last two times this happened were just before the market crashes of and The fact is that the bears have not been treated well by this market. As always, I urge all investors to take a conservative approach and focus on high-quality stocks like the ones you see on our Buy List. Since April 18th, our Buy List is up Several of our financial stocks have also been performing very well.
I still think AFL is a bargain. One dollar in earnings, or expected earnings, is worth more than that same dollar a few months ago.
Every day, it seems like investors become less and less nervous. Interestingly, this week we learned that consumer confidence rose to a five-year high. After hearing warnings of this for months, long-term interest rates have finally started to rise.
On Tuesday, the yields for the middle part and long end of the yield curve had their highest rates in more than a year. Bear in mind, of course, that interest rates are still very low. At the beginning of May, the five-year fetched 0. The move in the bond market is being mirrored by a similar move in the stock market.
Remember last week, when I talked about the Garbage Stock Rally? We can really see evidence of this by looking at the weakness of utility stocks. Interestingly, Warren Buffett just made a big purchase in the utility sector. This time around, these fears are simply nonsense.
For one, stocks are rallying from the down turn in bonds. While this rally has seen cyclicals do well like Ford , the real strength has come from financials as I mentioned earlier. This leads me to think that higher long-term rates signal growing optimism for the economy. For now, I encourage investors not to be rattled by any short-term moves.
Get used to seeing higher interest rates. Mortgage rates have been climbing as well. This is a very good time for stocks. Investors should focus on quality and be careful not to chase any stocks. Wait for good stocks to come to you. The company is due to report earnings in about three weeks. Before I go, I want to make two more adjustments to our Buy Below prices. There are a few important economic reports next week. The ISM has come in at For the latter half of the week, the focus will be on jobs.
On Wednesday, ADP will release its monthly jobs report. The initial claims report comes out on Thursday. Then the all-important May jobs report comes out on Friday morning. Be sure to keep checking the blog for daily updates. Economic Growth Revised To 2. Gox Tightens Identity Requirement.
General Petraeus, the General Partner. Practical Lessons in Assessing Exotic Risks. The Difficulties of Measuring Sentiment. Namely, companies using stock buybacks to mask their executive compensation. Most of that money is going to offset options granted to executives.
Perhaps even better, much of the funding for this transfer of assets or just reward for managerial excellence in a competitive marketplace, if you prefer is being funded by debt. That is pretty much all you need to know as an investor, both about the state of American corporate governance and monetary policy.
Meanwhile, the amount of buybacks done to reduce the overall share count i. In other words, companies buying up shares with one hand and handing them out to employees with the other. And, at least in the first quarter, they were handing out so many that more than half of the billions being spent on buybacks was simply going to keep pace with new share issues, much of which is compensation.
The government revised the first-quarter GDP report down to 2. This is a frustratingly low number, though some the details below the surface are encouraging. Volcker Warns on Limits of U. Last summer, the yield got down to 0. One way of finding good stocks to buy is to wait for an historically strong company to spin off assets of split itself up. Corporate Executive Board was spun off from the Advisory Board in the s.
Tyco recently spun off ADT and Pentair. This can create internal problems. Or a poor merger will mask how well a smaller unit has performed. Once freed from the mother ship, the small company can prosper as its own stock.
One company will be an education loan management business and the other will be a consumer banking business. The two separate companies will initially be owned by Sallie Mae stockholders, but the separation of the businesses does not require a shareholder vote. Earlier this year, Abbott Labs splits itself up. Both look too expensive here. On QE, Inflation and Deflation. Thinks He Should Be King.
Is a Market Crash Imminent? May 31, Eddy Elfenbein , May 31st, at 6: And what is making this latest debt binge possible? May 30, Eddy Elfenbein , May 30th, at 6: May 29, Eddy Elfenbein , May 29th, at 6: