Category Archives: Stock market

Larry Kudlow said the single biggest news story is the economic boom

Nobody believed in a 4,1 percent growth in the U.S, but now it can jump to around 4,6 percent. The economic boom in the U.S is awesome. There is no doubt that President Trump has given the U.S economy a new life.

Larry Kudlow know what he is talking about. A man who began his career as a junior financial analyst at the New York Federal Reserve. He soon left government to work on Wall Street at Paine Webber and Bear Stearns as a financial analyst.

Kudlow joined the administration of Ronald Reagan as associate director for economics and planning in the Office of Management and Budget. Kudlow is a man I have been watching many times on CNBC, and now he is serving as Director of the National Economic Council under President Trump.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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S&P 500 P/E ratio is 24,34 and the bull market is similar to the 50`s

The bull market continues and the S&P 500 went up in April, May, June and July. So, «Sell in May and go away» would be a disaster for any investor on this planet this year. Just like it was in the 50`s under president Eisenhower. This is not a normal situation in the midterm election.

As you can see from the chart below, similar situation happened in 1954 and 1958. Apple Inc is a big contributor to the bullish market right now, and it just hit a $1 trillion market cap. A milestone we have never seen before for a U.S publicly traded company.

Not only Apple Inc are hitting milestones. Many of the stock exchanges around the world are also hitting now all-time highs. But how expensive are the U.S stocks? The P/E ratio of the S&P 500 has fluctuated from a low of around 6x in 1949 to over 120x in 2009.

The long-term average P/E for the S&P 500 is around 15x, meaning that the stocks that make up the index collectively command a premium 15 times greater than their weighted average earnings.

The trailing P/E ration will change as the price of a company`s stock moves, since earnings are only released each quarter while stocks trade day in and day out. Current S&P 500 PE ratio are down -0,13 percent on Thursday 2 August 2018 (based on trailing twelve month) to 24,34.

Some investors prefer forward P/E which is similar to the trailing P/E, but uses estimates of projected future earnings, typically forecast over the next twelve months. If the forward P/E ratio is lower than the trailing P/E ratio, it means analysts are expecting earnings to increase. If it is higher, analysts expect a decrease in earnings.

These measures are often used when trying to gauge the overall value of a stock index, such as the S&P 500 since these longer term measures can compensate for changes in the business cycle.

A business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles are generally measured using rise and fall in real inflation-adjusted GDP, which includes output from the household and nonprofit sector and the government sector, as well as business output.

Output cycle is therefore a better description of what is measured. The business or output cycle should not be confused with market cycles, measured using broad stock market indices; or the debt cycle, referring to the rise and fall in household and government debt.

To put it into perspective. Apple`s P/E is 18,04. Facebook; 24,56. Netflix; 144,43. Amazon; 165,60. Yelp; 625,17. Groupon; 230,15. Godaddy; 227,27. Under Armour; 136,36. Alibaba; 48,25. S&P 500 is 24,34, so how expensive are they all?

It looks like Amazon are expensive, but that company is up 84,75 percent YoY, while Apple with its 18,14 is up only 35,26 percent. Facebook has lost a lot of money in a few days, and the stock is up only 5,45 percent YoY. Estimated P/E for Tesla in 2019 is – 177,68. The stock went up over 16 percent on Thursday.

Investors need to be aware that the P/E ratio can be misleading a lot of times, especially when the underlying business is cyclical and unpredictable. Cyclical businesses have higher profit margins at the peaks of the business cycles. Their earnings are high and P/E ratios are artificially low. It is usually a bad idea to buy a cyclical business when the P/E is low. A better ratio to identify the time to buy a cyclical businesses is the P/S ratio.

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This is the best start for the S&P 500 in nearly 20 years

What a great start of the year 2018. The best weekly gain in more than a year and the bull market continue to surprise many investors. Dow Jones Industrial Average jumped over 25,000 and nearly all of the 100 companies in the Nasdaq rose.

It is also the best start for the S&P 500 since 1999. Analysts forecasts looks pretty good and economic fundamentals are strong enough to lift the stocks higher. President Trump`s tax cut will also be good for the stock market.

It is difficult to find any reasons for a backdrop in the market. A rate hike or two wont stop investors to continue the party. What they really like is Mr Trump`s lower corporate taxes and that will not only help the U.S but also the global economic growth.

U.S stocks are looking good but European stock look even better. A great rally in European stocks so far is based on growth data for the Euro Zone. Services PMI data showed the Euro area was near its best growth in 7 years.

It has been a boost for STOXX 600 and we can thank European banks like Bank Santander and BNP Paribas for that. The outlook for European equities looks good and it is estimated a close to 10% earnings growth in 2018.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Tax revenues increased from $94 billion in 1961 to $153 billion in 1968 with lower taxes

The Gross Domestic Product in the United States expanded 2,30 percent in the third quarter of 2017 over the same quarter of the previous year, and President Donald Trump is not satisfied with that. His next action to fix that is to cut the taxes.

John F Kennedy was also dissatisfied with economic growth in the early 60s with a growth rate at «only» 2 percent. What he wanted is 4 or five 5 percent growth. Exactly what Mr Trump want, but what happened to Kennedys taxes and is it something to learn?

In a speech John F Kennedy said: “We have to secure 25,000 new jobs a week for the next 10 years in order to provide jobs for all of the people coming into the labor market. That is a terribly difficult task at a time when automation and new machinery has taken the jobs of men. And at the present rate of economic growth or productivity increase, we are not going to have those jobs for people.”

So, automation and new machinery made it difficult in the 60`s? Wow.

The labor force in the U.S in 1960 was 70 million. Now, it is more than twice (160,381 million as of October 2017). The unemployment rate under President Trump is 4,1 percent as the number of unemployed persons decreased by 281,000 to 6,5 million in October 2017.

The unemployment was 5,2 percent in 1964, but it sooner declined to 3,8 percent later on the same year. It continued to fall to 3, percent in 1969. In other words: JFK`s tax cuts were working, and economic growth creates jobs.

Kennedy`s tax cuts were not passed by Congress until his death on February 26, 1964, in the Revenue Act of 1964. Kennedy had the right mindset. Their tax rates was too high and their tax revenues too low.

In 1964, the bill reduced the top marginal rate from over 90 percent to 70 percent. Tax revenues increased from $94 billion in 1961 to $153 billion in 1968. Cutting taxes at that time was not to incur a budget deficit, but to achieve the more prosperous, expanding economy which could bring a budget surplus. And it did.

After the tax bill, made by President Lyndon B Johnson, real GDP grew at 5,8 percent in 1965, and 6,6 percent in 1966. Lower taxes generated more revenue for Uncle Sam.

The concept is very simple but difficult for many to understand. When people have more money, they spend it which means additional tax receipts. Not only that.

Lower taxes will reduce risk-taking which is good for the U.S entrepreneurship. You can imagine what entrepreneurs like Steve Jobs, Mark Zuckerberg, Jeff Bezos, Sergei Brin and Elon Musk have added to the growth of the economy using their ideas to create new firms and jobs?

What would have happen if they all had taken a new job as an ordinary employee with IBM? The answer is very simple: a slower tech industry.

John F Kennedys tax cut model were the model for Reagans. Now, it is time for Mr Trump and it remain to see his model.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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The total value of publicly-traded securities that have switched from NYSE to Nasdaq is more than $1 trillion

Nasdaq is an American stock exchange and it is the second-largest exchange in the world by market capitalization, behind the New York Stock Exchange (NYSE). Nasdaq was founded in 1971 and when the Nasdaq Stock Market began trading, it was the world`s first electronic stock market.

NYSE, also nicknamed «The Big Board», is the world`s largest stock exchange by market capitalization of its listed companies at US $21,3 trillion as of June 2017. NYSE was founded 225 years ago, but they are losing to Nasdaq.

 

 

Don`t forget that both Nasdaq and NYSE are helping great companies do great things. They help companies raise capital that raises the world.

Many companies are switching from NYSE to Nasdaq, and more than 300 firms have jumped from NYSE to Nasdaq since 2005, which means that the total value of publicly-traded securities that have switched is more than $1 trillion.

Nasdaq is the home to the largest tech and biotech companies from Apple to Gilead Sciences. NYSE is the home for companies like Ford and Exxon but they also have some tech companies like Snap.

A company is listed on the stock exchange because of their need for money and hopefully growth, but a company will not be more valuable on Nasdaq vice vers NYSE for instance. So, why are they changing the stock exchange?

It can be many reasons. Kraft Foods had a cost-cutting reason. The tech-oriented roster at Nasdaq was the main draw for T-Mobile.

The increase in Nasdaq listings transfers including T-Mobile, CSX, Kraft Heinz, Marriott and many others is a signal of the growing momentum of publicly-traded sector leaders to the market.

Companies are also switching from Nasdaq to NYSE. More than $1 trillion in market cap is transferred from Nasdaq to NYSE since year 2000.

The tech-company Blackberry Ltd will transfer from Nasdaq to NYSE on October 16 this year. Marriott International Inc is the largest publicly traded hotel chain in the U.S, and they are moving to Nasdaq Stock market from the NYSE.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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