Is the stock market a form of legalised gambling?

Is the stock market a form of legalised gambling?

It is very easy to look at stock markets around the world and assume that volatile share prices inject a degree of gambling into the investment world. It is generally those who do not participate in stock market investments who use the term gambling because when you dig down a little deeper there is so much more to investing. There are occasions where you can “gamble” on short-term price movements but investing should be seen as a long-term activity.

Short-term volatility

As we touched on above, short-term volatility can give the impression that investing in stocks and shares is something of a gamble. The fact that you should do research and monitor shares very closely does to a great degree reduce the gambling tag but the fact remains fundamentals do not always dictate short-term price volatility. If stock markets around the world are buoyant or depressed then ALL share prices will be impacted to some degree. However, if you notice the trends of stock markets around the world they will very quickly correct overbought and oversold positions. Think of it like an elastic band, if it is overstretched to the left or to the right it will eventually snap back into place. Continue reading “Is the stock market a form of legalised gambling?”

Musk and Zuckerberg clash over artificial intelligence

Musk and Zuckerberg clash over artificial intelligence

Elon Musk and Mark Zuckerberg have clashed over their views on artificial intelligence (AI) and what this holds for the future. While Zuckerberg described Musk’s comments about the threat of artificial intelligence as “irresponsible” Elon Musk responded by suggesting Mark Zuckerberg has a “limited” understanding of AI. When you bear in mind that these are two of the world’s more prominent entrepreneurs it will be interesting to see how the future develops.

Is artificial intelligence really a threat?

When you bear in mind that artificial intelligence is literally the ability for a machine or robot to learn and be taught then this does obviously pose a degree of risk. If machines were built that were able to “think for themselves” not only would they be a threat to the human workforce but could they be a threat to the human race? Continue reading “Musk and Zuckerberg clash over artificial intelligence”

Are you protecting the downside risk to your portfolio?

Are you protecting the downside risk to your portfolio?

US stock markets continue to go from strength to strength amid signs that controversy surrounding Donald Trump is being ignored. Time will tell but many experts are now of the opinion that valuations are being stretched and there could be a short-term correction and consolidation at lower levels. So, are you protecting the downside risk to your portfolio or do you believe there is further upside?

Insurance policy

There are various insurance policies you can look at to protect your portfolio from any short-term correction in stock markets. They include:-

Traded options

It is possible to buy options in individual indexes and individual shares which give you the option (but not the obligation) to sell a particular asset at a predetermined price over a predetermined period. Effectively these allow you to introduce an insurance policy which will partly offset any losses if the markets or a particular stock fell sharply. The fact that volatility on the US markets is at an all-time low should also help those looking at traded options because the implied volatility risk in these options will also be at its lowest. Continue reading “Are you protecting the downside risk to your portfolio?”

Donald Trump sees steel tariffs as his easy win

Is Donald Trump starting his protectionism crusade?

After failing to secure the replacement of so-called Obama care Donald Trump is now desperate for an easy win to placate his supporters. While he has huffed and he has puffed, Pres Trump has so far failed to deliver any major new policies and investors are showing signs of impatience. For months now the markets have relied upon hope value as a means of continuing the bull rally with Donald Trump promising to improve economic growth, cut red tape and support the US employment market. So, are steel tariffs really Donald Trump’s only short-term path?

Chinese steelmakers dump stock on US

The price of steel has been very volatile over the last few years with Chinese steelmakers circumventing existing import limits to beat the system. It now looks as though Donald Trump will possibly introduce quotas or tariffs or both. Historically the steel industry has been labour intensive and this will play into the hands of his supporters and hopefully improve his rating amongst the general public. It seems fairly obvious that he will portray himself as the champion of the US business market and protector of US jobs. Continue reading “Donald Trump sees steel tariffs as his easy win”

Could changes at White House lead to change in president?

Could changes at White House lead to change in president?

Sean Spicer, the former White House press secretary, was seen by many as Donald Trump’s biggest fan. He forged a close relationship with the president but it appears that a bid to bring in more communications experts forced his resignation. The position of White House press secretary will be taken by Anthony Scaramucci, a Wall Street guru and a former critic of Donald Trump. He is already been described as Donald Trump’s “spin doctor” which does not bode well for the future.

Revolving doors of the White House

Unfortunately we have seen an array of highly skilled and highly experienced personnel exit the White House after seemingly disagreeing with Donald Trump. We have seen problems with the FBI, ongoing investigations into the “Russian connection” and regular accusations of conflicts of interest in Donald Trump’s business dealings. It is common knowledge that a number of US politicians are pushing behind the scenes for Donald Trump to be impeached and removed from office. At this moment in time it is unlikely he will be impeached but with new evidence and new accusations on a daily basis, who could rule this out in the future? Continue reading “Could changes at White House lead to change in president?”

Wall Street volatility index at near record low

Wall Street volatility index at near record low

There is an index in the US known as the CBOE Volatility Index which basically monitors option trades in the S&P 500 index. Just this week the index fell to 9.3 which is just above the 8.89 low from December 1993. This indicates that traders are not expecting great volatility in the S&P 500 which is a little strange when you bear in mind the political arena and the prospects for the economy in the short to medium term.

Calm before the storm?

History tells us that when investors contemplate a long-term continuous rise in indices with little in the way of downward volatility there may be a shock round the corner. The fact is that the rise we have seen in the S&P 500 and other US indices cannot continue forever and a day. An awful lot is being taken on trust by US investors and with Donald Trump yet to deliver on an array of his promises, surely there must be scope for some downside? Continue reading “Wall Street volatility index at near record low”

US rental numbers highest since 1965

US rental numbers highest since 1965

The US rental market is now running at its highest level since 1965 as more people now look to renting as opposed to an outright purchase of their home. A survey showed that in 2016 36.6% of household heads rented their homes, a level which has not been achieved since 1965 when it stood at 37%. When you also bear a mind there are now an additional 7.6 million households in the US over the last decade and household head ownership has remained static in number this just about says everything.

Why the increase in rental numbers?

There are a number of suspicions as to why rental numbers have increased to near-record levels. They include ever increasing amounts of student debt and concerns about a future house price collapse. These would appear to be the main issues in the back of a potential house buyers mind as they look to part with their hard earned cash. This is also reflected in the numbers for those aged 35 and under with household head rental numbers now standing at 65%, up 8% since 2006. So, it does seem as though the younger generation is struggling to climb aboard the property ladder? Continue reading “US rental numbers highest since 1965”

Could you trade on graph trends and nothing else?

Are you protecting the downside risk to your portfolio?

While there is no doubt that share price graphs have their place in the decision-making process, is it possible or sensible to trade purely and simply on graph trends? Could you make money by detaching yourself from the underlying fundamentals and listening to what the markets have to say and nothing else? This is an interesting tactic which many people use for short-term gains and one we will look at below.

Trends change

Very often it will depend upon your risk profile but the emergence of say for example a “double top” pattern may look like a totally different trend in its early days. Before you know where you are, the share price has moved and looking back at the graph it was “obvious” it was a double top formation. There is no risk-free way to invest money, the markets will not deliver returns without effort but learning to read what the markets are saying is a vital skill. Continue reading “Could you trade on graph trends and nothing else?”

Sub-prime loans back under scrutiny

Sub-prime loans back under scrutiny

We can only hope that lessons were learned from the 2007 sub-prime mortgage crash which literally brought down the worldwide economy. Even today the impact is still there for everybody to see although there are concerns that history may be about repeat itself, not with the mortgage market but with the sub-prime auto loan industry. This is an industry which has increased in value from $2.5 billion in 2009 to a staggering $26 billion in 2016. So what is happening?

Growing concerns

There are a number of factors which have come into play to suggest that Wall Street’s insatiable appetite for high yielding bonds is back with a vengeance. Only recently we saw Santander and partner Chrysler repackage $1 billion worth of sub-prime auto loans which were then sold to investors with a 5% yield. Historically a 5% yield was neither he nor there but in this low interest/low inflation rate environment it is becoming more attractive to investors. Even though it is but a drop in the ocean for the $1.2 trillion auto financing sector, it could have a significant knock-on effect. Continue reading “Sub-prime loans back under scrutiny”

Dividend yield or capital growth

Dividend yield or capital growth

When looking to invest in stock markets there are two main strategies, going for dividend yield or capital growth. There will be shares which offer a degree of both dividends and capital growth allowing you to create a portfolio around any investment strategy. There are obviously pros and cons with regards to dividend yield or capital growth which we will cover below.

Dividend yield

Shares offering high dividend yields, assuming they are safe, can help with cash flow and funds for reinvestment. In theory, when looking towards high dividend stocks there is likely to be less chance of capital growth when compared to the average share and especially those with no dividends but potential for capital growth. While some people see high dividend yield stocks as “boring” they can create significant long-term income streams and there is still the potential for limited capital growth. Continue reading “Dividend yield or capital growth”