Markets fall on heightened trade concerns

Donald Trump blocks acquisition of US semiconductor by Chinese investment fund

Despite very public comments to the contrary, investors are still extremely concerned about the fragile trade relationship between the USA and China. Despite positive comments at various press conferences, we have yet to see concrete news of an amicable arrangement between the two parties. As a consequence, markets have suffered a sell-off and there could be further bad news in the short to medium term.

Defence stocks in favour

It says everything when you realise that 10 out of 11 sectors in the S&P 500 index fell on Friday. The only sector to stay in positive territory was utilities where generous dividend payments offer a welcome degree of support. The Dow Jones, NASDAQ and S&P indexes are all showing a triple bottom graph pattern. In summary, the markets have tried to rally on three separate occasions only to return to their recent lows. Further weakness from this level could prove challenging with few obvious support levels in the short term. Continue reading “Markets fall on heightened trade concerns”

Are tracker funds the way forward for investors?

Are tracker funds the way forward for investors?

As the chasm between passive investment and active investment continues to grow, many are now looking towards tracker funds. On one side, we have tracker funds literally tracking the make-up of a particular index such as the Dow Jones industrial average or the NASDAQ, while on the other side we have investors using artificial intelligence and complicated mathematical formulas to beat the markets. Is it time to go back to basics?

What are tracker funds?

Tracker funds are basically investment funds which reflect the make-up/weightings of a particular index. If for example Google had a weighting of 2% of a particular index then 2% of the tracker fund investments would be in Google. As the make-up of individual indexes changes on a regular basis, any adjustments to Google’s weighting would mean either buying more shares or selling shares. It is fair to say that tracker funds are extremely popular because they are a passive type of investment which “follows the market”. Continue reading “Are tracker funds the way forward for investors?”

Should we feel more comfortable investing in the longer-term?

Should we feel more comfortable investing in the longer-term?

The truth is that nobody knows with any real certainty how stock markets will perform tomorrow, next year or over the next decade. This degree of risk is what creates potential profit and different investor strategies and views. Be honest, when was the last time you looked at the long-term investment picture with concern? When was the last time you looked at the short term investment picture with concern?

Short-term pain long-term gain

It is highly unlikely you have looked at the long-term investment picture and not had a modicum of hope for the future. We have all seen the graphs, stock markets outperforming other assets in the longer term even if short-term the picture can be mixed. On the flipside of the coin, whether you are investing in the UK, Europe or the USA, there is more than enough scepticism and concern out there to put you off investing in the short term. So, surely we should all be focusing on the longer term and riding the short term fluctuations? Continue reading “Should we feel more comfortable investing in the longer-term?”

The dangers of low long-term wage inflation

The dangers of low long-term wage inflation

The intricacies of economies around the world can often be difficult to understand and how they are impacted by various subtle issues. Two such elements are wage inflation and cost of living inflation which tend to vary significantly and can eat away at the relative value of your money. The best way to demonstrate the dangers of low wage inflation and high cost of living inflation is to give you some figures.

Household budget

Let us look at household budgets and the ever increasing cost of living. To simplify matters we will assume household income of $1500 a month and household expenditure of $1000 a month. This leaves a surplus to spend in other areas of everyday life of $500 a month. Let us assume wage inflation is running at 1% per annum while cost of living inflation is running at 4% per annum. Continue reading “The dangers of low long-term wage inflation”

Apple supplier indicates weak iPhone demand

Apple supplier indicates weak iPhone demand

While there has been no comment from Apple, one of the company’s suppliers, Lumentum, has released a reduced outlook for the quarter. Even though Apple was not mentioned in the report, the company confirmed that “one of its biggest customers” had delivered a reduced shipping request. There was already speculation that Apple was reducing production of its latest iPhone products and this announcement would seem to be the next bit of the jigsaw.

Life as an Apple supplier

Lumentum is a supplier of facial recognition products for use in the latest iPhones with Apple accounting for around 30% of revenues. While no figures were announced, there is speculation that Apple may have cut its shipment request by up to 30%. This would indicate there is reduced demand for the latest iPhone products which has led to some broker forecast adjustments. As we stand the Lumentum share price is down more than 17% at just under $39 with Apple shares down 4.5% at just over $195. Continue reading “Apple supplier indicates weak iPhone demand”

Cash flow is King

The dangers of low long-term wage inflation

The term cash flow is King is one used quite often in the investment world. To all intents and purposes a business with negative cash flow will eventually run out of funding no matter what the level of “paper profits”. Just recently it was announced that Tesla “should be” cash flow positive in each quarter from here on in. This is a massive about turn for the company after a very troubled period in its history.

Financing debts

Is all good and well buying assets today which could make you three or four times your investment in five years. The problem here is that your funds will be tied up for the next five years and you may have insufficient cash flow to cover your expenses/loan repayments. In essence, the potential future returns for your company may seem very attractive what happens when you run out of cash? Continue reading “Cash flow is King”

Stock market corrections, when reality hits home

Stock market corrections, when reality hits home

The recent volatility in worldwide stock markets seems to have “taken many by surprise” (one of many Stock market corrections over the years). Despite the fact there have been warnings from months it seems the reality of recent issues impacting the worldwide economy are only hitting home now. Human nature is in very predictable thing; we take markets to record highs on the back of overexuberance and then crash them to levels which are oversold on fear. So, what has been on the cards for many months now but been ignored by so many investors?

Base rates

Base rates around the world are still near record lows despite the fact that the worldwide recession which caused the collapse of base rates occurred more than a decade ago. Talk of an improvement in economic activity over the last decade has to a great extent been based upon cheap finance. This is the type of finance which cannot go on forever and will eventually need to be repaid. The latest concerns regarding economic growth in the US and around the world may delay any further short-term increases in base rates but they will still maintain their upward trajectory. Continue reading “Stock market corrections, when reality hits home”

Stock markets crashing, or a dose of reality?

Stock markets crashing, or a dose of reality?

It is fair to say the last few weeks have been difficult for worldwide stock markets for various reasons. It is also fair to suggest that some investors have been looking for a “reason” to bank some profit and retreat to the sidelines. So, why are markets struggling and what does the future hold?

US stock market

In reality the US economy is performing much better than many people had expected. Indeed the Federal Reserve is currently in the middle of a programme of controlled interest rate rises to rein in inflation and over-exuberance by consumers. However, we have also seen some relatively disappointing figures from leading US companies which had been on a very strong growth path. Continue reading “Stock markets crashing, or a dose of reality?”

Trading programs back under the microscope

Trading programs back under the microscope

After the S&P 500 Stock Index posted its largest one-day fall since February, much focus is back on computer trading programs. These computer generated programs react to market movements buying and selling stock, in large amounts, in a split second. In many ways they can exacerbate the situation on the upside and the downside as similar programs react at the same time.

A staggering $1.5 trillion under management

An academic paper back in 2017 highlighted the growing issue of risk parity funds, volatility targeting funds and trend followers. Amid suggestions that $1.5 trillion of investment funds is effectively under the control of “computer trading programs” it is not difficult to see the potential issues. If sale programs are undertaken at the same time then a partial sell-off can lead to more stock sales, falling share prices and the vicious circle begins. This is not the end of the story….. Continue reading “Trading programs back under the microscope”

3 Most Expensive Houses in the World

Villa Leopolda

A few decades back, a house worth a million wasn’t too many. Today, if you live in places like Vancouver, you are already worth a million. Most, if not all houses in Vancouver, are worth a million or two. However, when it comes to the most expensive houses in the world, they surely are worth a lot more than a few million.

What do the Most Expensive Houses in the World Cost?

House prices always climb steadily and never experience a downward fall. According to research by Grand View Research, the global real estate market will hit $4,263 billion by 2020.

That being said, some houses sell for prices that are as high as the sky! Continue reading “3 Most Expensive Houses in the World”