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Is There a Market Bubble?

September 29, 2016 by Finance Gourmet

Recently, an increasing number of pundits (and a smaller number of actual stock market analysts) have begun using the word, “bubble,” to describe the U.S. stock market. That chatter has picked up even more lately, when Donald Trump began saying that the stock market is a bubble propped up by the Federal Reserve keeping interest rates low. But, is the stock market really in a bubble? What is a stock market bubble, anyway? How can you tell if there is a stock market bubble? What Is a Stock Market Bubble Really? Let’s start with the fact that you should NEVER listen to a politician (including candidates) when they talk about the stock market or the economy. They are always campaigning, even in off years, and getting people to think the right thing outweighs any allegiance to the truth. In the case of Donald Trump, he is campaigning on the economy being bad, but a rising stock market is shooting holes in that claim. By saying it’s a bubble, he’s trying to imply that it isn’t a REAL sign of economic growth, and that the economy actually is bad. But, beyond politicians, how can we tell if a bubble is real? …

Twitter Buyout Coming?

September 23, 2016 by Finance Gourmet

Today’s big news is rumors of a Twitter buyout. According to “sources,” whatever that means, Twitter is close to receiving a formal takeover offer. This makes Twitter the latest so-called business with a huge internet presents, but no way to make money, to be snapped up by another company that thinks that they know what Twitter doesn’t: how to make money. Twitter is, of course, a huge internet icon. Unlike Tumblr before, which never made a penny, and was inexplicably snapped up by Yahoo. Yahoo came to find out that Tumblr not making any money may not have been by choice. The company never reached anything even close to the modest $100 million goal set for it, and was eventually written down by Yahoo as essentially worth nothing, despite having paid $1 billion for it. See my Credit Check Total review. Which brings us to Twitter. Twitter does make some money. Twitter’s second quarter filing showed revenue of $602 million for the quarter, but a loss of $107 million. A little math shows that it costs over $700 million just to run Twitter each quarter. And, that may be where other companies think they can do better. Although Yahoo was naive to …

Apple Stock iPhone 7

September 15, 2016 by Finance Gourmet

I write more about Apple stock than I ever mean to, but people just love to talk to me about it, so here we go. New iPhone New Apple Stock Moves Apple stock is one of those stocks that gets a lot of attention, and action, from people who otherwise don’t invest in individual stocks much at all. That is, among your own friends, chances are that there are people who own Apple stock, and nothing else other than some company stock, or maybe some ETFs or mutual funds. These investors are, not surprisingly, often moved by news, other than any sort of analysis. In addition to these investors, there are a lot of very experienced investors with Apple stock in their portfolio, and they both watch the fundamentals, AND try to guess how others will reaction to Apple stock. All of this adds up to a stock that likes to move A LOT based on any single news event or earnings report. For the last several months, Apple stock has not done well. There were concerns that the company could no longer innovate, and the momentum left behind by Steve Jobs had finally run out. But, last week, Apple …

Calling a Market Top

August 17, 2016 by Finance Gourmet

As a financial planner a few years back, I noticed that my clients’ attitudes about stock market investing changed along with the tenor of media reports. That isn’t surprising. Many of our ideas are influenced by various media. But, if you look closer, you can see that it isn’t really the media, it’s the same mindset that occurs in the general population about any phenomenon in live. Trendy Stock Market Opinions Think about a recent trend. Not some edge trend that never was mainstream, but some big trend that “everyone” got into at one point in time. It doesn’t really matter what the trend was, whether it was a new band, a fashion trend, or something else. How about we use Pokemon Go as an example? These trends follow a familiar pattern. First, the initial wave of popularity gets going. These people love whatever it is, and tell everyone they know about it: friends, family, co-workers, you name it. Your friends ask you to download the app. The news is all about how there is this great new thing. Their motivation is just that they like something and want to spread the word. The next phase are the people who …

Walmart Buys Jet.com

August 8, 2016 by Finance Gourmet

A couple years ago, when Yahoo bought Tumblr for $1 billion, I wasn’t the only one who wondered what value Yahoo saw in the acquisition. It takes a special kind of Silicon Valley mind to think that a money losing internet business plus a money losing internet business somehow adds up to profit. It turns out that even the modest goal of $100 million in annual REVENUE, not profit, set by Yahoo, was too much for the internet property supposedly worth so much that Yahoo shelled out $1.1 billion for it. It seems that the great lesson of the internet bubble years earlier, that eyeballs and name recognition, do not equal money, still isn’t something tech companies are ready to learn. Which brings us to today’s multi-billion dollar buyout of Jet.com, a money-losing online retailer that goes head to head with Amazon. It’s just over a year old now, and it crossed the $1 billion in revenue line earlier this year. Revenue, not profit. The company, by all accounts, hemorrhages cash and funds its operations by taking on more investors. But, somewhere in there, Wal-Mart sees something worth $3 billion, plus an additional $300 million in Wal-Mart stock. I guess tech companies …

Sell In May and Go Away 2016

August 5, 2016 by Finance Gourmet

There are all manner of investing sayings and “wisdom” out there. One of the most common is a little rhyme that goes: Sell in May and go away. Don’t come back ’til Labor Day. This saying comes from older days when traders actually needed to be in New York City. So, when they ran for the cooler pastures of their summer homes, the volume of trading would decrease, and the volatility would ramp up. Of course, these days, you can trade from anywhere at any time, and a great deal of the market’s volume is actually made up of computers that don’t care how hot it is outside. Does Sell in May and Go Away Actually Work? Pretty much everything works sometimes if it is a Yes/No question. If you go to Vegas and bet on black, you’ll win eventually. Same thing with betting whether it will or will not rain. For 2016, the sell in May and go away strategy isn’t officially over, so it might still end up being correct. But, today, the S&P 500 hit an all time hight, making the strategy a loser, so far at least. In fact, very little of this summer has been …

Elections and Investing

July 24, 2016 by Finance Gourmet

Here it comes (actually, we’ve been seeing it for a while), the pontification about which U.S. Presidential candidate will help or hurt the American Economy, and by extension, the U.S. Stock market. As you might expect, in the world we currently live in, these articles are tinged, if not rife with, political bias. If you are a Republican, then obviously, the Democratic candidate will destroy the economy and ruin your investments, and vice versa. However, some “neutral” economists and financial journalists will write similar articles. So, how do you know the difference? The reality is that it doesn’t matter as much as everyone likes to pretend. Presidential Reality People love to forget that the U.S. President is not a king. No matter who is elected this November, the reality they inhabit involves a grid locked Congress, among other things. While there is a great deal of power invested in the American President, much of that is policy based. While these decisions will eventually influence the course of American business, such changes will not immediately effect either the economy or the U.S. stock market, both of which are enormous in size and scope. Just like spinning the wheel on a super tanker slowly makes …

Did He Really Recommend Stock Picks?

July 13, 2016 by Finance Gourmet

“He recommended Amazon and Apple. What is he recommending now?” “He predicted the market crash of 2007. Here’s what he says now.” And so on. You may have seen ad headlines just like the ones above recently. The specifics change, but the idea is always the same. Here is a person who predicted a certain event, or recommended certain stocks at the perfect time, and if you would have followed that advice, you would have made a ton of money. That being the case, shouldn’t your find out what they are recommending or predicting now? Did He Really Predict Stock Market Moves? If you doubt that these people made these recommendations, or predictions, I admire your skepticism. However, these ads and their subjects can often back up these statements with records showing that they did, indeed, predict or recommend the perfect stock moves at the perfect time. So, should you run out and give them your money and subscribe to their newsletters? To answer that question, let’s backup for a second. There is a scam whereby a company claims to be able to predict the winners in certain sporting events so you can bet on them and make money fast. …

Microsoft’s LinkedIn Mistake

June 15, 2016 by Finance Gourmet

There is an interesting post over at Mashable about the failure of Tumblr to make any progress in righting the ship at Yahoo. The author makes the argument that Yahoo, and Marissa Meyer, somehow “derailed” Tumblr, when the reality is that Tumblr was a money burning machine about to go bankrupt without yet another infusion of financing when Yahoo rode to the “rescue” with a billion dollar buyout offer. Most analysts expect Yahoo to write off every single dollar related to the acquisition. In other words, it was a billion dollar waste of money. Microsoft’s $26 Billion Blunder This brings us to this week’s stunning blunder by Microsoft. The company announced that it would pay $26 billion to acquire LinkedIn. LinkedIn, like Tumblr, does not make a profit, though it isn’t teetering on the verge of shutdown. LinkedIn, like Tumblr, has a very specific user base that has peaked. The company reported a $66 million loss for last quarter, and a loss of $166 million for 2015. In other words, Microsoft just paid billions of dollars for a company that will cost it hundreds of millions of dollars. The truly bizarre part of this acquisition is that Microsoft’s current CEO, came on …

There is a catch…

May 27, 2016 by Finance Gourmet

More coming later today, but a quick note this morning: A MarketWatch article talks about “the most accurate” market timing system but notes that while it is accurate over the long-term, it has “trailed the market for the last decade.” So, long does it take to become inaccurate?