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A Bubble in Search of a Pin – The Unintended Consequences of Low Interest Rates

October 25th, 2016|

World’s Central Banks Lowered Interest Rates

In response to the Great Recession of 2008, The Federal Reserve and other central banks of the world artificially lowered interest rates. Their thinking was that lower interest rates would spur economic growth.

So the Fed has left rates near zero for about eight years.  The Japanese and European central banks have gone even further by introducing negative interest rates as a means of stimulating their respective economies.  So how have they done?  Have they successfully promoted economic growth?  Unfortunately no.  After eight years of ultra-low interest rates the world economy is teetering on recession.

But the Fed believes its policies have worked, that without their strong intervention the Great Recession would have been far worse.  Other respected economists believe otherwise.  They believe The Federal Reserve policies of interest rate repression and quantitative easing have thwarted the normal recovery process.  I generally agree with their opinion but that’s not the point of this article.

Regardless of who’s right and who’s wrong there are several unintended consequences.  So let me first begin by identifying the winners and losers resulting from the decisions made by the world’s central banks.  And then let’s look at potentially the most egregious unintended consequence of low interest rates which is still looming on the horizon. (more…)

Proof that Soros and Buffett are Betting Against the Market

September 7th, 2014|

It’s no secret that the U.S. stock market has soared in recent years. The Dow Jones Industrial Average closed last week above 17,000, an all-time high. Since March of 2009, the S&P 500 index has gone from 638 to closing last Friday at 2,007. That’s more than a 300 percent increase in just over five years! The question that all prudent investors need to be asking themselves is how long will this bull market continue? I believe the answer to this question is quite obvious for both George Soros and Warren Buffett, two highly respected investors in U.S. equities: they’re both planning for a market slowdown. (more…)

Warren Buffett’s View: What You Can Learn From Investing in Commercial Real Estate

March 15th, 2014|

I recently read an article by Warren Buffett in the March 17th issue of Fortune magazine.  His thoughts on commercial real estate are very instructive and I thought you would enjoy understanding the insights of one of the greatest investors of our generation.  I have quoted it verbatim without any commentary.

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Three Not So Obvious Reasons Why Investing in Commercial Real Estate is Better Than Owning Stocks

February 27th, 2014|

Let’s get the obvious out of the way first. There are four well known reasons for favoring commercial real estate investments over owning stocks. They are:

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Four Factors That Will Affect CRE in the Next 12 Months

July 12th, 2013|

While it’s routine to make predictions at the beginning of the year, it’s not so common to do so when the year is half over but I feel compelled to do so. There are a number of factors that have been set in place over the past several months that will start having an impact on commercial real estate. Let’s go through four of them:

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Are we experiencing a stock market bubble?

March 8th, 2013|

The Dow Jones Industrial Average closed today (March 8th) at another record all-time high of 14,397.07. On the surface this seems like great news.  At long last we are emerging from the Great Recession of 2008.  I read an article in today’s Oregonian which stated that with the recent rise in home prices and the robust increases in the stock market that most Americans have regained the net worth they lost five years ago due to the collapse of the economy.  Wouldn’t that be good news if it were true?  It makes me want to sing a round of “Happy Days Are Here Again.” (more…)

S&P 500 Earnings Are Down Dramatically

March 25th, 2009|

By Doug Marshall
Market Assessment
Published March 25, 2009

It’s no secret that the economy is doing poorly. But until I saw this chart by Chart of the Day, I didn’t know how poorly. This chart provides some perspective as to the magnitude of the current economic decline.

Twelve month earnings, as-reported by the S&P 500, have declined over 80% over the past 18 months, making this by far the largest decline on record (the data goes back to 1936).


In fact, real earnings have dropped to a level not seen since the 1930s and 40s – the back end of the Great Depression.

While earnings have been struggling since the third quarter of 2007, it was the latest quarter, (fourth quarter 2008) the first full quarter following the financial meltdown, where the real damage was done.

During fourth quarter 2008, the S&P 500 came in with its first negative earnings quarter ever and the amount lost during the quarter was more than the index has ever earned during a single quarter.

Sorry for the dismal news but I thought you’d be interested in seeing this very revealing chart.

Source:
Chart of the Day is provided by Barron’s. Go to chartoftheday.com to subscribe.