Elite Wealth Management Blog

The Stealth Bear Market That Could Take Markets By Surprise

Article SummaryChina’s stock market correction might only be the first sign that a global recession is coming.Stock valuations are 28% above historical averages while economic growth is stagnating which could trigger a major correction.A Fed rate hike would be a disaster for stocks and another round of QE could be in order.Margin levels are at dangerous new highs and broad based buying could mean an unsustainable atmosphere without new cash flow to support it.Investors have been on a bit of a rollercoaster ride the past several days as the markets dipped down and back up by hundreds of points. Volatility rocketed up with the VIX ending Thursday the 20th at 19.14 and reaching a staggering high of 53.29 intraday on Monday the 24th – an increase of more than 178% in less than two trading days… Read full article at Seeking... read more

Great Expectations And Truth In Earnings

Article Summary 72% of companies that have reported earnings issued negative guidance, which is higher than the 5-year average. Revenues have fallen for two back-to-back quarters, indicating a bearish signal for US stocks. The Fed is propping up stocks right now based on speculation of a rate hike that is looking more and more unlikely next month. The broader indices continue to tread water at or near all-time highs despite unconvincing mixed economic data and crises in both Europe and China. While the Greek debt issue seems to have come back under control, the collapse in the Chinese stock market has yet to bleed over into domestic markets. Yet the threat of a possible loss has not seemed to faze stocks…   Read full article at Seeking Alpha... read more

Arbitrage Opportunities Abound

Article Summary Increased volatility in the global marketplace has created some interesting arbitrage opportunities. Two mergers present an opportunity for investors looking to speculate on mispriced equity valuations. Pair trades using ETFs that follow China and gold are highly correlated and could be a way to diversify against speculating on market direction. Financial markets around the world have been roiling over the past few weeks. The Greek debt crisis, Chinese stock market crash, and plunging oil prices have triggered a wave of selling and have reintroduced volatility back into the markets.   Read full article at Seeking Alpha... read more

Is Space The Next Big Investment Venture?

• Private investment into the space industry is expected to reach $10 billion this year with around 800 companies currently involved with space operations in some form. • SpaceX’s reusable rocket technology could lower the cost of launches from $70 million to under $10 million. • The natural resources that can be found in asteroids could prompt a space mining boom within the decade or so. Beyond the standard business cycle of expansionary and recessionary phases where certain stock sectors outperform or underperform more than others, a larger cycle exists. It’s a much longer cycle that can take time to develop but once it gains enough momentum, could last for decades. In the 19th century, railroads were the booming industry. Beginning in the mid-1800’s, the advancement of transportation led to a nation interconnected for the first time in a way that fundamentally changed how businesses operated. As the economy expanded and technology forged onward, it gave way to the oil boom which lasted well into the 20th century. Some of the companies founded back then are still around today. Names like Exxon Mobil, ConocoPhillips, and Chevron all stemmed from the early days of the oil rush. The growing production demand from factory output and economic growth led to the creation of the wealthiest man in U.S. history – the oil baron John D. Rockefeller. In today’s dollars, he would have been worth more than $330 billion. The advent of the computer gave birth to a new era – the digital age. The computer transformed businesses overnight and allowed transactions to take place instantly even over long distances. Companies like... read more

Emerging Economies In Growth Mode

Article Summary A global sell-off will hit economies whose markets are considered overvalued and could spill over into neighboring economies as well. India has surpassed China as the fastest growing large economy in the world and should continue its upward momentum despite the current global crisis. Vietnam’s economy may be about to break out from its tiger status to an emerging one with strong growth and a lack of correlation to major global economies. As domestic markets become filled with turmoil, investors may start to feel disillusioned about equities. While the first two months of 2015 started off well enough, the broader indexes tapered off and began to tread water until late June. Now volatility has leaped up and threatening to cross the 20 threshold amidst mixed economic data, the Greek debt crisis, and a Chinese stock market selloff that has dragged the S&P 500 down 3.43% since June 23rd…   Read full article at Seeking Alpha... read more

Where Did All The Volatility Go?

Article Summary Volatility has hovered near historical lows for the past several months, which could be a sign that risk is not being accurately reflected in the stock market. Margin levels are near all-time highs, which historically indicates a market correction could be imminent. A healthy amount of volatility is needed for stocks to go higher from here. There’s something interesting happening in the financial markets right now. And the way the markets reacted to the Greek debt crisis on Monday could be a precursor to a far bigger problem. There’s been irrational behavior displayed by traders and investors for the last several months – it’s not quite the kind of “irrational exuberance” once coined by Alan Greenspan, but there are some disturbing correlations that are being displayed in the markets starting with a peculiar lack of volatility…   Read full article at Seeking Alpha... read more

What the Sudden Wave of IPOs Mean for the Stock Market

Article Summary June is on track to register the highest number of initial public offerings in 15 years. The mix of low volatility and sudden IPO activity could be a dangerous mixture as investors look for growth opportunities in a stagnant stock market. There is a correlation between heavy IPO activity and stock market corrections. Investors haven’t had a whole lot to cheer about in recent months. The constant threat of a Greek default, wild swings in the price of oil, and uncertainty about the upcoming Fed Funds rate hike has infiltrated investor sentiment. The markets have basically traded sideways since late February waiting for either good news or bad news to finally tip the scales to send them higher or lower…   Read full article at Seeking Alpha    ... read more

What Effect A Yield Surge Will Have On Stocks

Article Summary An increase in yields might bring short term volatility, but could also be a good sign long term. History shows that a steady increase in interest rates won’t adversely impact yields. The bond sell-off in Europe is helping to drive yields higher in the US but could be tempered by stronger foreign currencies. This year, investors will be faced with something that they haven’t seen in a long time – a Fed Funds interest rate hike. Last year saw the tapering and eventual completion of the historic quantitative easing program designed to inject liquidity into financial markets and restart the economy. The normally dovish Fed made a statement recently that seems to confirm that there will be a rate hike in 2015…   Read full article at Seeking Alpha... read more

Disruptive Companies To Watch Out For

Article Summary Disruptive technologies in 3-D printing and the “Internet of Things” is a breeding ground for high growth disruptive companies. The 3-D printing market is expected to increase fivefold by 2020 from $4 billion to $21 billion. Growth in the IoT industry is estimated to climb to $7.1 trillion by 2020. The biggest impacts on the world by corporations don’t come by being the same – it’s what stands out that makes a difference. Disruptive innovation is a powerful force that almost everyone strives for but few succeed at. When the opportunity arises, companies face a dilemma – keep growing in the current market and strive to make a product or service better or embrace a new way of doing things that will open up an entirely new and undiscovered market…   Read full article at Seeking Alpha... read more

3 Key Drivers For Economic Growth

Article Summary Oil at $60 per barrel will stem worker layoffs and revive the energy sector while stimulating further economic growth. Corporate earnings are improving with more upward revisions and upside EPS surprises, evidence that the weakness in the first quarter was only temporary. April’s jobs report was a positive sign that the economy is still healthy while additions in the construction industry shows strength in consumer demand. U.S. financial markets have been touch-and-go this year and mixed economic data points to a murky outlook for growth. The S&P 500 is up just 1.93% year-to-date while the NASDAQ has posted a far more impressive 5.19% gain. The yield on the 10-year Treasury note has fluctuated quite a bit from a low of 1.65% to a high of 2.29% – its current yield. However, volatility as measured by the VIX has dropped over 27% – currently hovering below 14…   Read full article at Seeking Alpha... read more

The Dollar Could Fall, But That’s Not A Bad Thing

Article Summary The U.S. dollar faces many headwinds that could force it downward over the next several months. A falling dollar could benefit the U.S. manufacturing sector and stimulate growth. Large cap companies in the S&P 500 derive around 40% of their earnings from international sales and a decline in the dollar should positively impact 2015 earnings. The almighty dollar has been the war cry of the U.S economy for more than six months and the stock market has risen along with it. Take a look at the correlation between the U.S. Dollar Index and the S&P 500 (SPX) since late October of last year…   Read full article at Seeking Alpha... read more

How To Play The Second Quarter

Article Summary The 2nd quarter is on track for growth of 3.5% as opposed to the 1st quarter’s anemic flat performance. The Fed will drive market performance as the interest rate hike draws near. Lowered guidance during the 1st quarter could become a tailwind during the 2nd quarter as companies stand to surprise on the upside. The first quarter of 2015 officially ended March 31st and the results are disappointingly lackluster. Data is often revised backwards to adjust for new information, but it would take a huge revision to change the outlook most economists have for the 1st quarter. GDP growth is expected be between zero and 2% with many firms predicting growth of less than 1%. The Federal Reserve Bank of Atlanta lowered its estimate from 0.3% to 0.2% following a weaker-than-expected report on business spending and investment…   Read full article at Seeking Alpha... read more

How Much Of A Correction Do We Really Need?

Article Summary The money supply is at all-time highs and grown around 40% in the last 5 years. The velocity of money in the 80’s is similar to what we’re seeing right now and could be an indicator that inflation may be headed back up this year. Housing and jobs need to improve before we will see real sustained economic growth. We’re three months into 2015 and the markets haven’t given investors a lot to be confident about. The S&P 500 is slightly positive year-to-date – up 1.33% – and disappointing economic data seems to point to an inevitable pullback. Certainly stocks are trading at relatively high valuations. The P/E for the S&P right now is 19.69 compared to its historical mean of 15.53 although it’s nowhere near its all-time high of 123.73 back in May of 2009…   Read full article at Seeking Alpha... read more

Here’s The Hottest Sector For A Slowing Economy

Article Summary Silver and gold are safe haven assets that are undervalued relative to equities and currencies. Industrial applications for silver are expected to increase demand by 27% by 2018. The dollar doesn’t have room to continue its upward trend which should translate into gains for gold. There might have been a positive vibe for stocks coming into 2015, but relentlessly negative economic data seems to be doing everything it can to warn investors that a correction is upon us. Just take a look at how indecisive stocks have been trading for the past several months…   Read full article at Seeking Alpha... read more

Is Low Volatility Lulling Investors Into A False Sense Of Confidence?

Article Summary Volatility appears underwhelming given the many headwinds facing equities. Guidance issued by 84% of companies for the first quarter has been negative beating the 5-year average of 68%. There are 5 key issues that need to be resolved in order to change investor sentiment from complacency to confidence. We’ve all had that perfect day – muted wind, mild temperatures, and a blue sky without a cloud in sight – yet couldn’t help but feel that something was wrong. By the next morning, a storm raged outside and all vestiges of sunshine and pleasantries were gone…   Read full article at Seeking Alpha... read more

A Look Inside Hedge Fund Holdings May Tell Us Where The ‘Smart Money’ Thinks Stocks Are Headed

Article Summary The top 50 hedge funds were overweight on large cap materials and consumer discretionary stocks for the 4th quarter. Hedge funds added 1% equity exposure to their portfolios for the 4th quarter. An under-weighted portfolio in small cap stocks implies fund managers expect muted stock gains in 2015 compared to 2014. There’s a lot of different methods investors use to gauge the market’s direction. Charts can reveal trading patterns, ratios give way to valuations, and macroeconomic analysis can predict future trends. Another way to get an idea of what’s happening is to simply look at what the institutional money is doing. And the highest echelon of institutional money management is the hedge fund…   Read full article at Seeking Alpha... read more

What’s Fueling Stock Gains Overseas?

Article Summary U.S. stock gains have been relatively mild compared to the strength occurring overseas. Stocks in international markets remain undervalued based on the underlying CAPE ratio and average dividend yield. Currency devaluation is triggering new multi-month highs for Purchasing Managers Indices in Europe, China, and Japan. It’s gone unnoticed for most of the year, but U.S. stocks aren’t the biggest bull market. While domestic markets have performed fairly well just two months into the year, markets overseas are outperforming them by a considerable margin. Based on the blasé performance of U.S stocks over the last week, the secret could be out…   Read full article at Seeking Alpha... read more

What Corporate Earnings Are Telling Us About Equity Valuations

Article Summary According to FactSet’s latest release, 77% of earnings beat analyst expectations, but 85% of revisions guided negatively. S&P 500 forward P/E along with the CAPE ratio is pacing higher than its historical 10-year average. which may indicate a bearish signal. In a low-yield interest rate environment and weakness overseas, and regardless of historical valuation metrics, stocks may still be the best asset class option. Just six weeks into 2015, stocks are hitting new record highs. The S&P 500 briefly closed above 2100 this week, a historic high for the index, and it’s up nearly 2.5% YTD. Despite macroeconomic headwinds like oil prices and the European stimulus plan, investors seem to be inexorably optimistic…   Read full article at Seeking Alpha... read more

The Myth Of Central Bank Stimulus And Economic Recovery

Article Summary Three significant QE phases in the United States has quadrupled the monetary base, kept interest rates low and stimulated job growth. The inflationary effects have yet to be fully realized. The effects of Abenomics in Japan has helped to prop up inflation but still haven’t led to significant GDP growth. The markets have reacted favorably to the ECB QE announcement, necessary in an 11.5% unemployment environment, but time will tell regarding the positive effects of this and other QEs. The United States wrapped up its unprecedented quantitative easing program late last year and now Europe is wading into those very same waters in the hopes that it will kick-start its economy and prevent deflation. Considering that we’re facing improving growth this year, it seems – on the surface at least – that central bank action works to prevent recessions and trigger economic booms…   Read full article at Seeking Alpha... read more

Finding Value Stocks In Energy

Article Summary Oil will balance itself and trend higher as growth kicks in from depressed prices and eats into oversupply concerns. Devon Energy, Pioneer Natural Resources and Southwestern Energy are a few onshore drillers that have stronger balance sheets to weather the storm. Alternatively solar stocks have seen selling pressure due to lower energy prices creating a potential value play in the sector. If there’s one thing experienced investors know, it’s that volatility and panic creates opportunities. Thanks to the global oil crash, volatility has spiked erratically since the fall of last year. From mid-October, the VIX has broken above 20 four times. Once in October, once in December, and now twice in January. The uncertainty regarding the direction of oil prices and the duration of the fall has impacted the broader indices, although the most notable change has occurred in energy stocks…   Read full article at Seeking Alpha... read more

Why The U.S. Will Dominate Markets In 2015

Article Summary Falling energy prices may be cause for volatility but historically has limited negative correlation to broad equity prices. There is a very strong correlation of broadly falling commodity prices and the strengthening of the U.S. Dollar. A combination of factors such as lower energy prices, strengthening U.S. Dollar and continued inflation in an expected rising interest rate environment should help propel the U.S. market to outperform. It’s the beginning of 2015 and investors are speculating on what market will be the best performing for the year. China’s immense growth over the past decade has finally begun to wane and other major markets like Japan and Europe are signaling difficulties as well. Emerging markets are always a popular place to seek out exceptional growth, but the BRIC countries may not offer the kind of strength investors are looking for. Ironically, investors may not have to widen their search at all to find the best performing market for 2015 – the United States…   Read full article at Seeking Alpha... read more
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