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By , CNN Money, 08/31/2015

MarketMinder's View: We agree with a couple of tidbits here. For example, we also see recent negative volatility as a correction—not the beginning of a bear market. Also, while stocks stabilized a bit late last week, more volatility could lie ahead—equities can be quite bumpy in the short term, and calling the bottom of a correction is futile, in our view. However, we disagree with the fearful take on the month of September, fed-funds target rate hikes and earnings data. The first two are pure mythology—it is a mere coincidence stocks perform worst (on average) in September, not anything predictive. Fed funds target rate hikes have no history of derailing bull markets, whether they come in September or not. And three, the earnings data cited here are skewed by the Energy sector. Strip out the big, widely known drop in Energy earnings tied to cheap oil and the -0.7% y/y Q2 figure becomes +5.9%. As for the expectations of a -4.1% y/y Q3, you should note that analysts projected very similar figures at this point in Q1 and Q2. They were wrong because they overstated the negative effect of the stronger dollar on revenues and understated the positive effect on costs. For more, see today’s cover story, “Parsing Profits.”        

By , MarketWatch, 08/31/2015

MarketMinder's View: Now, depending on how you interpret this table of interpretations, you may conclude the Fed will hike rates in September, later this year or even next year. However, we strongly recommend against projecting what the Fed will do based on words, words, words alone. As this piece admits, “Some have spoken on Friday, while others last spoke on the issue since June and those remarks may not represent their current stance.” Heck, some of these folks did speak on Friday and even “those remarks may not represent their current stance.” People change their minds all the time, and we’re pretty sure Fed governors are people too. (Like 80% sure.) Already, rate hikes were supposed to come “something on the order of around six months or that type of thing” after QE ended, which would have meant roughly May 2015. Before that, we were told to anticipate hikes after unemployment hit 6.5%, a level pierced in April 2014. Forecasting the Fed is impossible. Fortunately, it isn’t necessary either, since there is no evidence initial rate hikes knock bull markets or economic expansions. Now we (and probably you as well, dear reader) would prefer if the Fed just gets on with it so investors can put this false fear in their rearview mirror, but until that happens, we suggest doing your best to tune out the rate hike noise as best you can.  

By , The Wall Street Journal, 08/31/2015

MarketMinder's View: Those three questions are: When will the Fed raise rates?; did the correction bottom out?; and is the bull market ending? Our answers: we don’t know (and nobody else does either, though, more importantly, initial rate hikes aren’t bearish); we don’t know (and nobody else does either, as we aren’t aware of anyone with a successful track record of timing corrections); and no, not in our view. Bull markets end in one of two ways: they run out of steam as reality can no longer match investors’ euphorically driven expectations or a big, unforeseen negative wipes away trillions of dollars of global GDP. While China certainly is a big, integral part of the global economy, it isn’t in the dire straits many believe—which is also a sign skepticism persists. So while corrections are definitely unpleasant to endure, this isn’t the time to jump out of stocks and wait in cash until volatility passes. For more, see our 8/31/2015 commentary, “Dry Powder Doesn’t Pay.”

By , MarketWatch, 08/31/2015

MarketMinder's View: There are so many problems with this “analysis” that we don’t really know where to begin. Here’s a stab: It’s the Dow, a price-weighted, 30-stock gauge that is a faulty measure of markets. But more problematic is the methodology. That 18-month prediction was conjured like this: Take the 52-week high and the 52-week low. Calculate the number of days between. Multiply by 5.5 because it takes 5.5 days of recovery to per day of decline to reach a new high. Oh and all this only works if the drop was within a 100-day window. Folks, this is going to be very skewed by bear markets. What we just went through was a correction—and we’re presently only about 7% from all-time highs. 7% may sound big but the average quarterly move (up or down) is 5%. It wouldn’t take much to get that 7% back. Finally, the method of calculation here is a complete misuse of market history assuming past patterns are predictive.

By , The Wall Street Journal, 08/31/2015

MarketMinder's View: Retail sales in the eurozone’s largest economy rose 1.4% m/m (3.3% y/y) in July—a solid report after June’s -1.0% m/m slip. Now, we highlight this with the usual caveats: Retail sales are limited since they don’t account for services spending, and a single month of data (positive or negative) matters less than the overall trend. However, when markets get bumpy and headlines highlight seemingly universal weakness, folks may easily lose sight of the fact reality isn’t nearly as bad as it may feel. Economic data don’t usually make the front pages, but they are more telling than narratives based on little more than assumptions and feelings.   

By , Bloomberg, 08/28/2015

MarketMinder's View: While we have another 14-plus months to go before 2016’s election, campaigning is heating up, and occasionally candidates wade into issues that could impact markets. As always, our analysis is non-partisan and intended to interpret events solely for potential market impact, regardless of personality, ideology or party creed. So here is our non-partisan analysis of the fact that candidates from both parties have talked tough on China lately, even threatening new trade barriers, which we suspect markets wouldn’t much like (stocks generally hate protectionism and prefer free trade). While this is a risk to watch, as this piece documents, past Presidents have threatened Chinese trade barriers on the campaign trail before, only to moderate significantly once in office.

By , The New York Times, 08/28/2015

MarketMinder's View: We’re sort of ambivalent about this one. The half discussing how bubbles are events of mass psychology is interesting and worth a read, and we largely enjoyed the debunking of momentum as a reliable investment strategy. The trend is always your friend until it isn’t. However, this good discussion is sandwiched between an odd discussion of valuations—chiefly the oddly calculated, bizarrely inflation-adjusted cyclically adjusted P/E ratio, also known as CAPE or the Shiller PE—and a noncommittal exploration of whether recent volatility is a correction or bear market, also based on CAPE. As we wrote here and here, CAPE’s alleged predictive powers are myth and are based largely on coincidence and three data points. We award a point to this for acknowledging one of CAPE’s false signals, mid-1998, but we’d be remiss not to point out another: December 1996, when former Fed head Alan Greenspan—inspired by above-average CAPE—suggested investors might be irrationally exuberant. They weren’t, and the bull lasted another three-plus years.

By , The Wall Street Journal, 08/28/2015

MarketMinder's View: At the risk of sounding dismissive, which isn’t our intent, there is a lot of overthinking in this piece, which discusses “sequence risk” (the risk the market’s ups and downs don’t coincide wonderfully with when you need to add and withdraw money) and its impact on retirees when markets are volatile. Look, we agree it is best not to have to sell stocks to fund cash flows when markets are down, if you can help it. But instead of fiddling with annuities and reverse mortgages, which introduce new risks (and costs!), investors with high cash flow needs can guard against the risk of forced-selling when markets are down by keeping several months’ worth of distributions in cash. But also, this is primarily an issue during bear markets—deeper, longer, fundamentally driven declines of 20% or worse. Presently, we’re in a correction—shorter, shallower declines of -10% to around -20%. Also, as we type, stocks are just 6% below their most recent high. Stocks can move fast.  So we suggest simplifying your life, thinking longer-term and considering your long-term needs (and time horizon) first, without overthinking volatility. If your goals require stock exposure, own stocks, invest when it’s time to contribute, remember the time value of money, and keep a cash cushion if need be. It isn’t necessary to get finicky with purchase-timing.

By , The Telegraph, 08/28/2015

MarketMinder's View: So much for the strong pound choking UK trade: Exports jumped 3.9% q/q. Consumer spending held steady at 0.7% q/q, and business investment sped to 2.9% q/q. Some suspect the strong pound will take its toll in the coming months, but we’re skeptical. Sterling began strengthening a year ago and remains lower than levels seen throughout the late-1990s, a fairly robust time for UK exporters. If it was going to be a problem, we suspect we’d have seen tangible evidence by now. More likely, sentiment is just taking a while to catch up with reality—fairly typical. For now, expectations remain low, extending the wall of worry for UK stocks.

By , The Wall Street Journal, 08/28/2015

MarketMinder's View: Here is some real-time proof staying cool during a correction is one of the hardest things for investors to do: “Daily fund flows showed a massive $19 billion in redemptions from stock funds on Tuesday, the largest day since 2007, according to data from EPFR Global analyzed by Bank of America/Merrill Lynch. And Tuesday was not an anomaly—since the sharp stock selloff began last week investors have been taking money out of the market in droves. Between Thursday, Aug. 20 to Wednesday, Aug. 26, investors took out a net $29.5 billion from stock funds. It was the largest weekly outflow on record since data began being calculated in 2002, BofA/Merrill said in a note.” These folks, sadly, missed a big bounce during this week’s second half. Market declines aren’t losses unless you sell.

By , Bloomberg, 08/28/2015

MarketMinder's View: Errr, we weren’t aware stabilizing stock markets was in the Fed’s remit or that they had a preferred level of market volatility (something they can’t even control anyway, since it is so sentiment-driven). Transcripts show they monitor stock markets as a leading economic indicator, but they also spend ample time discussing the difference between short-term volatility (which is largely noise, not an economic signal) and an actual change in trend. Notions otherwise—including all this speculation about quantitative easing and Fed reactions to this week’s volatility—seem mostly cooked up by our central-bank-obsessed society. Yes, we say all this with full knowledge of New York Fed President Bill Dudley’s remarks about a rate hike being “less compelling” now. Jawboning is central bankers’ favorite pastime, and it often differs from actual policy—and Dudley appeared to be talking more about the global economic outlook than three days of market volatility. For more, see these comments from other Fed people.  

By , Financial Times, 08/28/2015

MarketMinder's View: Speaking of strong currencies and their potential economic impact, Swiss GDP rose in Q2, too! Exports there did fall, but growth in consumer spending and investment outweighed it. Switzerland’s economy is far more export-oriented than the US and UK, and the franc has soared since the year began (due almost solely to the central bank’s decision to scrap its currency floor, which held it artificially low versus the euro). If export-heavy Switzerland can overcome an even stronger currency, we reckon the US and UK can, too.

By , The Wall Street Journal, 08/28/2015

MarketMinder's View: China sold a bunch, continuing the months-long trend, but others bought. And long-term interest rates have stayed low. Which should pretty much gut fears China can wreck interest rates and imperil US debt by fleeing Treasurys. China is the biggest foreign holder of US debt, but it owns just a small slice of the total pie. With or without China, demand is strong, among private and official-sector buyers alike.

By , CBC News, 08/28/2015

MarketMinder's View: These five reasons are: high and rising employment, rising home prices, low gas prices, declining consumer debt delinquency rates and rising household net worth. None of these are leading indicators for Canadian stocks or the economy, which is struggling. Canadian stocks have lagged badly this year, and it is difficult to envision things getting materially better for the oil-heavy nation over the foreseeable future—particularly considering Canadian oil benchmarks are well below global prices. For Canadian investors, this underscores the importance of global diversification.

By , Jiji Press, 08/28/2015

MarketMinder's View: Japanese retail sales rose 1.6% y/y in July, but total household spending fell once again—as in the US, services represent the bulk of consumer spending in Japan. We’d chalk this up as more evidence Japan’s economy isn’t on terribly firm footing and sentiment toward Japanese stocks is probably too high.

By , EUbusiness, 08/28/2015

MarketMinder's View: But Syriza’s lead has slimmed since now-former Prime Minister Alexis Tsipras finalized the full bailout and several party members defected. Plus, 25% of voters remain undecided, and pre-election polling has been increasingly unreliable worldwide this year. So, it’s too early to handicap this contest, and only time will tell whether Syriza stays in power, with or without Tsipras at the helm, and how the changing political landscape will impact Greece’s future in the euro. Whatever the outcome, however, Greek contagion risk remains minimal.

By , The Wall Street Journal , 08/27/2015

MarketMinder's View: Data! Revised Q2 data(!) show US GDP grew at a 3.7% seasonally adjusted annual rate, up from the 2.3% initially reported. Now then, here are a few things to consider: Exports rose 5.2% in the quarter, against a backdrop of fears the strong dollar would quash them. That didn’t happen, but it isn’t stopping pundits from saying it will! As noted here, “A stronger dollar and lackluster overseas growth may be a headwind for the rest of the year.” Why it would suddenly become one now when it hasn’t been for over a year is a bit beyond us. We guess these fears are just persistent. (As an aside, this article also notes “Net exports contributed 0.23 percentage point to GDP, only the second time since the start of 2014 that trade hasn’t been a drag on top-line economic growth,” which precedes the prior quote about the strong dollar. However, you should consider that net exports (exports minus imports) is a totally flawed way to view trade’s economic impact. Imports aren’t a negative. Also, this doesn’t mean exports haven’t grown because of a strong dollar, it means imports rose more, which is good.) But another meme included here that seems widespread today is relatively quick growth is all about inventories. Which isn’t correct. Initially, the US Bureau of Economic Analysis reported inventory change detracted -0.08 percentage point from headline growth. Now they say it added 0.22. So even if inventories hadn’t been revised, growth would have been 3.4%. Oh and corporate profits grew. Anyway, it’s all backward looking, but it basically serves as further confirmation the US economy was on solid footing as recently as June. It likely still is.

By , The Wall Street Journal, 08/27/2015

MarketMinder's View: Yeah, but the IMF, World Bank, Fed and other supranational organizations have warned about this or that since this bull market began. Heck, Yellen warned last spring that biotech stocks were overvalued, and they went up big over the next year and a half. The World Bank has warned of a China “slowdown” since 2012. The IMF since mid-2011. Even a broken clock is right twice daily. It would have cost you a lot of money to heed those warnings. Particularly since this downturn seems mostly like a correction, which tend to come and go quickly and aren’t tied to fundamentals. We have never seen anyone with any ability to accurately time corrections, and that “anyone” includes Fed officials, the World Bank, World Bank, IMF (et al), too.

By , CNBC, 08/27/2015

MarketMinder's View: This article strikes us as very strange. It operates on the premise small business owners and mom-and-pop shops are now (read: post-2008) alert to stock market volatility because it could trigger a negative wealth effect, slamming their sales. But in open, liquid markets, cyclical turns in stock markets are a pretty darn reliable indicator of future economic conditions, so they have always been relevant to small business owners and Main Street. (Whether those business owners fretted volatility is a separate matter.) However, stocks’ moves do not cause those conditions. Now then, the present market move, at its low, was -11.9% (S&P 500 total return, source: FactSet)—a correction. Corrections can and do happen with regularity in bull markets and they don’t signal anything about the economy’s fundamentals.

By , Vox, 08/27/2015

MarketMinder's View: The titular idea is a fed-funds target rate hike in September. Now, the Fed erring is always a risk worth assessing, so in that sense we agree. And we agree inflation is presently low. However, this article errs by arguing for keeping interest rates super low until inflation perks. Here is why: Economists generally agree monetary policy affects the economy at a lag, but no one is certain as to what the lag actually is! So using currently low inflation to support the argument is driving by looking exclusively out of the rear window. (Or side window, to the extent inflation data could be considered coincident.) Now, the Fed says it is targeting 2% inflation, as measured by the headline Personal Consumption Expenditures (PCE) Price Index. But that gauge could easily change (and arguably should, particularly considering it was selected before oil collapsed). Currently, core PCE is running at 1.3% y/y. Might the Fed think that by acting now they will prevent an acceleration beyond their target? What’s more, this places far too much emphasis on monetary policy for the economy’s health. The low fed-funds rate is not, as it happens, to the economy as oxygen tubes and saline drips are to a hospital patient. What’s more, the connection between rates and unemployment isn’t nearly as direct as cited here. And low rates reducing the government’s financing costs is directly counter to what the Fed aims to do, and it would be very troubling if that were their rationale. What’s more, all of this is odd because the article closes by presuming the Fed should basically target inflation and do nothing else. So why list all the other stuff?

By , Bloomberg, 08/27/2015

MarketMinder's View: Valuations always matter, but they aren’t predictive. They matter in the sense they are a signpost of sentiment (except the Shiller PE or cyclically adjusted price-to-earnings ratio, which is twisted beyond recognition). No matter how you torture this data series, what you will find is, historically, cheap stocks sometimes get pricier. Expensive stocks sometimes get cheaper. But roughly the same amount of the time, expensive stocks get pricier and cheap stocks get cheaper. There is no there there.

By , The Wall Street Journal, 08/27/2015

MarketMinder's View: We are sure some overleveraged investors did get margin calls when volatility struck last week. But a couple points here as to why we think this is massively overstated in this article: First, the outstanding loan balances here are all in the tens of billions, which is a drop in the bucket relative to global markets, these firms’ capital and assets under supervision as well as pretty much any metric you might cite. The growth rate is fairly quick, but the level is small. Hence, we don’t see this as a threat to the banks in question. Second, this is all being driven by a correction that, to this point, isn’t even that large by historical standards. It’s fast! But it isn’t that big.

By , The Telegraph, 08/27/2015

MarketMinder's View: Wait. It seems like about 10 minutes ago that the fear du jour was eurozone deflation, not inflation. Well, whatever. Yes, eurozone M3 money supply did grow at a post-Financial Crisis high 5.3% y/y in July, and lending to households rose 1.4%. However, we’d suggest this is mostly a sign of eurozone banks’ improved health and not due to quantitative easing (QE), which is a deflationary policy, not an inflationary one. When a central bank creates new reserve credits (the source of the allegedly hot 12.1% y/y M1 money supply growth figure cited herein) and buys bonds with them, that depresses long-term interest rates. For this to boost money supply and inflation, banks must then lend those funds. However, as the M3 figures show, banks aren’t lending as fast as the ECB is creating reserves. Why? Because by buying those bonds to reduce long-term rates, it narrows the gap between banks’ funding costs (short-term rates) and loan revenue (longer-term rates). Neither the UK, US nor Japan saw loan growth and inflation surge after launching big QE programs. We doubt it is so very different here.

By , Bloomberg, 08/27/2015

MarketMinder's View: It is thoroughly unclear to us what you are supposed to glean from an analysis of how the Fed historically reacted to volatility. The people are, you know, different. Of the current rate-setting committee, only Chair Janet Yellen and Jeffrey Lacker were there the last time the Fed hiked rates. Half of them joined the fold in 2009 or later. Chalk this one up as more useless Fed speculation.

By , The Wall Street Journal, 08/26/2015

MarketMinder's View: The issues discussed here—exchange traded funds briefly trading below their underlying securities’ aggregate market value and circuit breakers preventing speedy price discovery—are indeed worth considering, and there may be room for improvement. But, this isn’t reason to abandon stocks, and we think some perspective is in order: These anomalies primarily impacted people who panicked and sold as stocks tumbled. This is just one more reason to stay patient and disciplined and avoid hasty decisions based solely on market movement in the heat of the moment.

By , The New York Times, 08/26/2015

MarketMinder's View: This is a very sensible take on why fears over an imploding Chinese economy are off the mark. Slowing Chinese growth is nothing new—China’s economy has gradually decelerated for several years now, and there are no signs the slowdown is materially steepening.  Consumption and services now account for about half of China’s economy, and they are growing quite nicely these days. Plus, the Chinese government has implemented targeted fiscal and monetary stimulus to goose growth, and there is a lot more they can do if needed. Even if China is not growing at 7% as some suggest, 5% or even 4% growth in the world’s second-biggest economy isn’t a drag on global output. It helps offset the weak spots.  

By , Bloomberg, 08/26/2015

MarketMinder's View: Well, the market has certainly dropped double digits many times in the last 75 years, but the title refers to the fact the S&P 500 fell more than 12 standard deviations below its 50-day moving average from Friday through Tuesday. The last time this happened was 1940, and some analysts have had some fun comparing the run-up to both drops in search of clues for what might happen next. (The analysis might also be a bit tongue in cheek.) We would suggest skipping the charting exercise and opening a history book instead, because if you do so, you will discover why markets plunged in mid-May 1940: France fell as German troops and tanks maneuvered around the Maginot Line. That was a huge, negative surprise—no one expected Germany to skirt France’s vaunted defenses by way of Belgium (and the forest). Everyone had faith in that massive, heavily fortified network of forts and trenches. When it failed, markets were forced to price in even more terrible destruction than they already had. World War II was a huge, fundamental negative for stocks, which had been in a bear market for about two years by the time Germany invaded France. We aren’t in a world war today, thankfully, and we can’t identify any huge, fundamental causes for the last three days’ plunge. It has all the hallmarks of a furious correction selloff, albeit a big one. We expect markets to rebound as they resume weighing the overall positive long-term fundamentals (though as ever, short-term moves are impossible to predict).

By , MarketWatch, 08/26/2015

MarketMinder's View: This scenario—where the Dow Jones Industrial Average (DJIA) would fall an astounding 70%—is based on Tobin’s Q ratio, which divides stocks’ market capitalization by the amount of money all companies would have to spend to replace all physical and intangible assets.  The ratio—currently around 1—has averaged about 0.7 since World War II and bottomed out at around 0.3 in the early 1980s’ bear market. Reverting to its all time low is how we get to DJIA 5,000. Should Tobin’s Q fall to its post-war average, the Dow would fall more than -25%. The problem is: There is no Q ratio level that consistently signals a bear market. The 1990s bull did not end until the ratio topped 1.6, and the 2007-2009 bear began when the ratio was below 1. Using valuations as a market forecasting tool ignores the fact valuations often exceed their long-term average for long stretches as bull markets mature and investors become more optimistic. Markets don’t necessarily revert to some mean level, and there is no such thing as an inherent fair value. Stocks rise until they run out of steam or get walloped by a huge, unseen negative, neither of which appears to be happening right now. The wall of worry remains alive and well, and we see no no big, bad negatives investors are ignoring. For more, see our discussion here.

By , The New York Times, 08/26/2015

MarketMinder's View: This piece expresses a litany of long-running, widely held and largely misperceived fears: the strong US dollar relative to emerging market currencies, extreme Chinese stock market volatility, bloated Chinese debt and bank balance sheets, plunging commodity prices and slowing global growth. Currency issues (and other signs of trouble) in Russia, Brazil and Turkey are tied mostly to political factors and, in the case of Russia and Brazil, reliance on oil. Those are local issues, not global, and the US outperformed these and other Emerging Markets because it was (and remains) on stronger economic and political footing, alongside far lower expectations. Moreover, Emerging Markets currency crises, historically, have not ended global bull markets. As for the rest? China’s stock market is disconnected from its economy. China’s local government debt issues are well-known, and the banks and state have ample firepower to deal with them (officials have already taken several steps to do so—some centrally planned, some market-oriented). Cratering commodity prices reflect a supply glut, not weak demand. Despite fears of faltering global growth, the Conference Board’s Leading Economic Indexes for many major countries point to continued expansion. To us, these are just more bricks in the proverbial wall of worry bull markets love to climb. For more on China, see our thoughts here.

By , The Telegraph, 08/26/2015

MarketMinder's View: William Dudley, president of the New York Federal Reserve, said this morning a Fed rate hike next month now seems “less compelling” given recent market turmoil. Some cheered his comments, thinking the Fed putting off tightening monetary policy is a good sign for the economy. But in our view, even if the Fed does raise rates in September, this will very likely not derail the expansion—it would take much tighter credit conditions to do this. Exactly when the Fed will begin raising rates doesn’t mean all that much, and trying to figure out when this will happen isn’t actionable for investors. Bull markets usually go on for several years after rates begin rising, and we have no reason to think it will be any different this time around. Also, Dudley is just one of the FOMC’s 10 voting members, and they all have different opinions, preferences, biases and interpretations of economic developments, so nothing here makes the Fed’s next move any easier to predict.

By , New York Magazine, 08/26/2015

MarketMinder's View: The deeper dread being that should the economy tip into recession, policymakers have little ammunition to battle it, given interest rates remain near zero and high debt may dissuade politicians from fiscal stimulus. This is an entirely academic question, though. Recessions don’t just come out of nowhere. They are usually preceded by tight credit conditions—which show up in inverted yield curves, falling lending and monetary contraction. Today, the yield curve is positive, lending is rising, broad money supply (M4) is accelerating, and several indicators show private-sector demand and activity are healthy. Also, the policymakers-are-out-of-ammunition theory assumes fiscal or monetary stimulus is necessary for the economy to break out of recession. This isn’t necessarily the case either, as economic cycles happen naturally—the economy won’t just contract forever. At some point, things need to be produced, new technologies emerge, and banks resume lending. Finally, central banks have lots of tools at their disposal beyond slashing rates and quantitative easing (which isn’t stimulative anyway). They can cut reserve requirement ratios and focus injections of liquidity where needed, as well as other measures they can create as conditions warrant. For more, see our thoughts here.

By , The New York Times, 08/25/2015

MarketMinder's View: Story of the day—if not the week—hands down. We recommend reading twice daily for maximum results.  

By , The Wall Street Journal, 08/25/2015

MarketMinder's View: So the first six paragraphs here are fine as a brief discussion of how (and why) many investors struggle to scale volatility properly. But those nuggets are overshadowed by the rest of the piece, which uses the cyclically adjusted P/E (CAPE) ratio to gauge whether stocks were attractively cheap at Monday’s intraday low. This exercise holds two big problems for investors. First, that intraday low lasted for microseconds, and assessing its attractiveness as an entry point is entirely academic. Second, as we’ve written many times, CAPE is a poor and largely useless valuation metric. The past 10 years of earnings don’t predict the future. Nor does past price movement. That doesn’t just make CAPE’s long-term average meaningless, it makes CAPE itself entirely meaningless. As for the conclusion, while it has kernels of truth—indeed, you can’t identify the perfect entry point until long after it has past—it also sort of overlooks the obvious: If you accept as historical fact and exceedingly likely future that stocks rise over time, and your long-term goals require that growth, seeking perfect “bargain” buying opportunities is rather fruitless.

By , The Washington Post, 08/25/2015

MarketMinder's View: Dour headline aside, this is actually a fairly even-handed, objective look at what’s happening in China’s economy and what it means for the world. Yes, there does seem to be a bit of a disconnect between the government’s market-oriented reform plans and its actions, and that has folks a bit spooked. But that is a political issue for Chinese stocks, not really a global economic issue. Chinese domestic stocks (A-shares) are rather disconnected from the Chinese economy, which is in better shape than many presume. “Also lost amid the talk of collapse is the fact that, despite real and worrying problems, China’s economy is still making gains. There is a debate about how fast China is growing—the government predicts 7 percent GDP growth, but some experts believe the true figure could be as low as 4 or 5 percent. Even if the figure is near the lower end of that range, it is growing still. China’s industrial sector is struggling badly, but there have been positive signs in terms of services and consumption—the very sectors China hopes to develop. The latest data show the services sector has become the biggest driver of economic growth in China, expanding 8.4 percent in the first half and accounting for 49.5 percent of GDP, according to government statistics—which, while not perfect, are generally thought to give a sense of trends.”

By , Bloomberg, 08/25/2015

MarketMinder's View: This has some interesting factoids on Chinese demand, which appears far firmer than most feared as WTI crude oil prices slid below $39 per barrel on Monday. But in our view, it is a bridge too far to call these factoids evidence oil is too low today. Maybe it is, or maybe supply growth remains far higher than demand growth and continues exceeding expectations and US shale producers try to squeeze out every last drop of revenue and Iran ramps back up in anticipation of eased sanctions. The technical indicators highlighted here won’t tell you any of that. Moreover, whether oil is at $45, $35 or lower, it doesn’t really change the fact low prices whack producers’ profits, making Energy firms relatively unattractive for the foreseeable future.

By , Bloomberg, 08/25/2015

MarketMinder's View: While this piece isn’t perfect, it does highlight the fruitlessness of trying to pin volatility on any one thing. Yes, corrections often have a scary story—this one has China—but whether you can pinpoint a cause or not isn’t really actionable. Volatility happens, and accepting this as the tradeoff for stocks’ long-term returns is vital.

By , Financial Times, 08/25/2015

MarketMinder's View: We highlight this rundown of Brazil’s many headwinds to illustrate a broader point: Attempts to paint Emerging Markets as uniformly weak ignore the country-specific issues facing the troubled nations. Brazil’s troubles stretch beyond commodity-related weakness to include corruption, weak political institutions and the fallout from years of misguided government intervention (which left the country with high inflation, an inverted yield curve and sky-high interest rates). These issues aren’t illustrative of the broader Emerging Markets landscape—particularly the commodity importers. On balance, the developing world is still contributing to global growth and should keep doing so as the strong more than offset the weak.

By , FiveThirtyEight , 08/24/2015

MarketMinder's View: While pithy, the advice here is sound: Selling based on short-term negative market volatility, no matter how sharp, is the wrong move for longer-term, growth-oriented investors. As this piece points out regarding short-term declines, “every one of those declines has been followed by a rebound. Sometimes it comes right away. Sometimes it takes weeks or months. But when it comes, it comes quickly. If you wait until the rebound is clearly visible, you’ve already missed the biggest gains.” Now, this may linguistically overstate the scope of the present decline—calling a correction a “crash” seems a stretch to us—but that is a minor quibble. We aren’t arguing you should never reduce equity exposure. Just that it only makes sense to get out of stocks when you see a bear market—an extended market drop of -20% or more due to deteriorating market fundamentals or an unforeseen big negative—forming. Otherwise, remaining in the market and weathering the bumps is the price to pay for stocks’ long-term returns.    

By , The Wall Street Journal, 08/24/2015

MarketMinder's View: We present this as a sampling of the reactions to Monday’s volatility with this caveat: Read this article at a higher level rather than buying into any of the commentary. Instead of wondering about the possibility of markets being stuck in a “vicious cycle” that may deter the Fed from raising rates, take note of the fact the ongoing correction is spurring all the typical kind of correction-like fears. It isn’t being dismissed or explained away by a euphoric public. As the old saw goes, bull markets climb a wall of worry, and doesn’t that seem to have gotten a few more bricks lately? For more, see today’s commentary, “Navigating a Choppy Stock Market.”        

By , The Economist, 08/24/2015

MarketMinder's View: Yes, China’s domestic equity markets have plunged over the past two months. Yes, Chinese economic growth overall has slowed, and the declines have been more acute in certain sectors (e.g. heavy industry). No, this doesn’t mean impending doom for the entire Chinese economy (and by extension, the global economy). As this piece points out, “The services sector supplanted manufacturing a couple of years ago as the biggest part of China’s economy, and that trend has only accelerated this year. The alarm on Friday stemmed from an unexpected fall in the purchasing managers’ index (PMI) for manufacturing sponsored by Caixin, a respected Chinese financial magazine. That gauge has been lilting southward for a while. By contrast, Caixin’s PMI for the services sector jumped to an 11-month high in July.” Nothing in recent data suggests something has fundamentally changed: China continues transitioning from industrial- and export-led growth to consumer- and services-driven growth.    

By , The Washington Post, 08/24/2015

MarketMinder's View: According to this take, a Fed rate hike sometime in the near future will unleash chaos, threatening price stability, employment and the overall financial picture. But this presumes the Fed is propping up the economy, whether through near-zero interest rates or, before last October, quantitative easing (QE). However, many of the Fed’s actions (QE2, Operation Twist, QE3) flattened the yield curve and likely stymied loan growth rather than accommodating the non-financial economy with loans. That is one reason why growth hasn’t been particularly fast, in our view. But either way, US GDP has been at record highs for about three years—ditto for corporate profits, R&D spending and overall business investment. Even late-lagging unemployment has fallen significantly. We believe the economy can handle an initial fed funds target rate bump up from near zero to a smidge more than near zero. We also think the Fed finally getting on with a hike would actually be beneficial from a sentiment perspective, too. We expect a Fed hike that ends in the rather benign fashion would remove a long-standing false fear, allowing investors to finally move on.  

By , Financial Times, 08/24/2015

MarketMinder's View: There are lots of good tidbits here about the limitations of stock indexes—especially the media’s preferred market proxies, like the US’s Dow Jones Industrial Average. As this piece sensibly notes, the Dow is price-weighted—share price influences a component’s index weighting, causing an awful lot of skew. When you factor in how few stocks the Dow actually holds—20 in 1916 and its current 30 starting back in 1928—the index just doesn’t represent today’s universe of US stocks very well (even though the media acts as it does). While no index is perfect, we prefer using broader, market cap-weighted indexes with a global emphasis rather than any one domestic index—investors seeking long-term growth are better served investing globally, in our view.

By , Calafia Beach Pundit, 08/24/2015

MarketMinder's View: While most seem to blame China for recent volatility, there is an undercurrent of fear pointing to Energy prices and commodity firms. This does an excellent job overall of putting that fear into perspective. Enjoy.

By , The Guardian, 08/21/2015

MarketMinder's View: Anything is possible, but markets move on probabilities, not possibilities, and we see little evidence a hard landing is likely in China. Weak China fears have cycled in and out of headlines since 2011—this is just another iteration of a long-running theme, and things aren’t much different today. Growth has slowed, but the numbers remain enviable by most standards. Most countries would kill (not really, it’s a metaphor) for 6.0% y/y industrial production growth, 10.5% retail sales growth and 11.3% growth in annual fixed investment. Not to mention 7% y/y GDP growth or even 5%, if private sector estimates are more accurate than China’s official figures. 5% growth this year would still add about $500 billion to world output. That isn’t a crisis, folks. As for other Emerging and Frontier Markets, yes, those depending on commodities will have a hard time. But others—Korea, Taiwan, India, Malaysia, Vietnam and more—benefit from cheap energy and raw materials. Markets are focused on fear right now, but over time, they should resume weighing fundamentals, which are far better than most appreciate.

By , The Wall Street Journal, 08/21/2015

MarketMinder's View: So first of all, we’re perplexed by the headline, as it implies an investor’s relationship with their broker or adviser is adversarial. That really isn’t how it should be. You hire an adviser, and technically they work for you, but the best ones work with you, managing a portfolio to meet your long-term needs as they evolve. And second of all, extending a fiduciary standard to every investment professional advising on a retirement account—advisers and brokers alike—won’t do what this article implies it will. It won’t destroy brokers’ traditional business model, as it doesn’t ban trading commissions, and it has several loopholes to preserve the sale of pricey products that might benefit the broker more than the client. Under the proposed standard, a broker could sell someone a variable annuity in their retirement account so long as they disclose the conflicts of interest and reasonably believe it is a good fit for the client. That isn’t hard to rationalize, folks. Overall, if the traditional fiduciary standard doesn’t ensure all registered investment advisers provide top-notch advice and low-cost, high-value services, we fail to see how the watered-down version proposed by the Department of Labor would do any better. In our view, it actually makes things worse, as it further blurs the line between investment sales and service. Congress and the SEC drew that line for a reason in the 1930s and 1940s, and the brokerage industry’s constant attempts to muddy the waters have done investors a big disservice over the last several decades, in our view. For more, see our commentary, “Be-Laboring the Fiduciary Standard.”

By , The Wall Street Journal, 08/21/2015

MarketMinder's View: So first of all, we’re perplexed by the headline, as it implies an investor’s relationship with their broker or adviser is adversarial. That really isn’t how it should be. You hire an adviser, and technically they work for you, but the best ones work with you, managing a portfolio to meet your long-term needs as they evolve. And second of all, extending a fiduciary standard to every investment professional advising on a retirement account—advisers and brokers alike—won’t do what this article implies it will. It won’t destroy brokers’ traditional business model, as it doesn’t ban trading commissions, and it has several loopholes to preserve the sale of pricey products that might benefit the broker more than the client. Under the proposed standard, a broker could sell someone a variable annuity in their retirement account so long as they disclose the conflicts of interest and reasonably believe it is a good fit for the client. That isn’t hard to rationalize, folks. Overall, if the traditional fiduciary standard doesn’t ensure all registered investment advisers provide top-notch advice and low-cost, high-value services, we fail to see how the watered-down version proposed by the Department of Labor would do any better. In our view, it actually makes things worse, as it further blurs the line between investment sales and service. Congress and the SEC drew that line for a reason in the 1930s and 1940s, and the brokerage industry’s constant attempts to muddy the waters have done investors a big disservice over the last several decades, in our view. For more, see our commentary, “Be-Laboring the Fiduciary Standard.”

By , The Wall Street Journal, 08/21/2015

MarketMinder's View: So first of all, we’re perplexed by the headline, as it implies an investor’s relationship with their broker or adviser is adversarial. That really isn’t how it should be. You hire an adviser, and technically they work for you, but the best ones work with you, managing a portfolio to meet your long-term needs as they evolve. And second of all, extending a fiduciary standard to every investment professional advising on a retirement account—advisers and brokers alike—won’t do what this article implies it will. It won’t destroy brokers’ traditional business model, as it doesn’t ban trading commissions, and it has several loopholes to preserve the sale of pricey products that might benefit the broker more than the client. Under the proposed standard, a broker could sell someone a variable annuity in their retirement account so long as they disclose the conflicts of interest and reasonably believe it is a good fit for the client. That isn’t hard to rationalize, folks. Overall, if the traditional fiduciary standard doesn’t ensure all registered investment advisers provide top-notch advice and low-cost, high-value services, we fail to see how the watered-down version proposed by the Department of Labor would do any better. In our view, it actually makes things worse, as it further blurs the line between investment sales and service. Congress and the SEC drew that line for a reason in the 1930s and 1940s, and the brokerage industry’s constant attempts to muddy the waters have done investors a big disservice over the last several decades, in our view. For more, see our commentary, “Be-Laboring the Fiduciary Standard.”

By , Xinhua, 08/21/2015

MarketMinder's View: The index hit 47.1, which means only 47.1% of the 420-plus firms surveyed reported rising business activity, which most interpret as a contraction in the manufacturing sector. So, a couple things about this. One, Caixin’s purchasing managers’ index (PMI) includes small and private firms, which have struggled amid tighter credit for years now—the official manufacturing PMI, which concentrates on the large state-run firms comprising most of Chinese output, is usually higher. Two, this index has bobbed in and out of contraction for years now, yet China’s economy never actually shrank. It grew. A lot. Its growth rate just slowed modestly. Same goes for China’s industrial sector. So this isn’t some new reason to be massively bearish or fear a Chinese hard landing. It is really just more of the same in China’s long, gradual slowdown (and this global bull market).

By , Bloomberg, 08/21/2015

MarketMinder's View: The latest standoff on the Korean Peninsula sent South Korean stocks to a two-year low, and volatility could very well continue as tensions mount—not just in Korea, but globally. However, history overwhelmingly shows regional conflicts—even those involving major powers—don’t end bull markets. After correcting at the outset, stocks rose throughout the Korean War. Barring an extremely unlikely global escalation of Korean tensions, the risks for world stocks appear small. Stocks did fine in 2013, the last time North Korea said it was in a state of war with its Southern neighbor.

By , The New York Times, 08/21/2015

MarketMinder's View: As a wise man once said, irony can be pretty ironic sometimes. When he became Greek Prime Minister in January, Alexis Tsipras was a radical anti-austerity firebrand who vowed to tear up the bailout memorandum and shift the balance of power in the eurozone. Now he is a pro-euro pragmatist who signed his very own bailout memorandum, chock full of austerity, and who vows to implement every last measure, restore Greece’s fiscal and economic credibility, and shepherd Greece through tough times while making nice with Europe. Some people in his party, Syriza—an acronym for Coalition of the Radical Left—have decided he is no longer sufficiently radical or leftist and split into a new party, the Popular Unity Party, last night. Now they are vowing to tear up the bailout memorandum and leave the euro, making them the populist firebrands everyone fears. So eurozone leaders all seem to hope Tsipras capitalizes on his sky-high poll ratings and wins a solid, bailout-supporting pro-euro mandate. But only time will tell. Anyway we don’t have a dog in this fight, and as ever, we favor no political party regardless of the country. We just find the twists and turns utterly intriguing and entertaining. As for markets, Greek political uncertainty is nothing new. The country has had five governments in five years and two big votes this year alone. Markets are quite adept at handling all this, and the risks of contagion remain low.

By , The Washington Post, 08/21/2015

MarketMinder's View: While this is overall a mixed bag, we quite liked the discussion of markets’ alleged reaction to Wednesday’s release of the Fed’s most recent meeting minutes: Blaming the minutes for Thursday’s volatility assumes it took efficient markets over a day to fully digest the report, which just isn’t how markets work. We also enjoyed the thorough thrashing of the bizarre circular logic behind this week’s Fed-related jitters. That said, we’d hesitate to pin Thursday’s drop on China, Greek electoral uncertainty or oil prices—or any one thing. Volatility just happens sometimes. Beyond that, we find the comparison between today’s potential “rate rage” and quantitative easing’s “taper tantrum” a bit revisionist. When former Fed head Ben Bernanke first alluded to tapering the Fed’s bond buying in May 2013, he didn’t put a date on it. He just said it was out there and on the table. So there was no timing to delay—they were always going to taper when they tapered. Also, despite some initial volatility (which never even reached -10% to become an official correction), stocks recovered swiftly and had one of their best years since WWII. Rate rage (which Google tells us is indeed a thing) does remind us of taper terror, but only because both are widely held Fed-related false fears—bricks in the “wall of worry” bull markets climb.

By , The New York Times, 08/21/2015

MarketMinder's View: We agree with the headline and the last sentence: “The best response for most investors trying to grapple with the latest bout of volatility is to take a deep breath, appreciate the remarkable run-up of the last five years, and remember that if you panic at the thought of losing 4 percent of your money in four days, that money really shouldn’t be invested in the stock market to begin with.” But most of what’s in between is a real head-scratcher. Markets didn’t look bubbly before this week. Nor did stocks overshoot fundamentals from 2009 through 2014. There is no law saying stocks must move one-to-one with corporate earnings or GDP—which would actually be really weird, because GDP isn’t the economy. Imports detract from GDP, but some companies—like a big one whose name rhymes with Mall-tart—thrive by selling imports. Yes, stock earnings yields are lower today than at most points of the last four years, but that is normal and expected as a bull market wears on and increasingly optimistic investors pay more for future earnings (the earnings yield is the inverse of the P/E ratio)—and earnings yields aren’t abnormally low by historical standards. Oh, and if equity earnings yields exceed bond yields, then stocks are compensating for excess risk. As for the allegedly negative fundamentals discussed, low oil prices are a big whopping positive for every sector but Energy (and we guess Materials, which suffer relatedly from low metals prices) and countries that don’t depend on oil rents for economic growth or fiscal revenue. Low oil prices’ positives vastly outweigh the negatives. And “emerging market strains” today aren’t any worse than early 2014, summer 2013, 1997 or 1998. They brought pullbacks in 2013/2014 and corrections in 1997 and 1998 and didn’t end either global bull market. Considering Kazakhstan is only a tad bigger than Greece—and the impacted nations in the late 1990s were far more significant globally—we rather doubt it will end this bull market.

By , Vox, 08/21/2015

MarketMinder's View: This chart is just cool, and the write-up has fun factoids, to boot! Enjoy!

By , The Telegraph, 08/21/2015

MarketMinder's View: We’ve occasionally written in this space that OPEC is increasingly obsolete, as its ability to control global prices isn’t exactly what it was in the 1970s, thanks to the US shale boom. This piece explores the other reason for OPEC’s increasing fecklessness: The cartel is fracturing, as members have competing interests and different degrees of reliance on oil revenues for economic growth and public spending. Saudi Arabia is really the only member with the capacity to cut output, but all signs suggest it doesn’t want to, lest it lose market share to America. And that doesn’t make Venezuela, Iran and others happy, as they need higher prices. Especially Venezuela, which basically has no economy outside the state-run oil industry and is starving for hard currency (and, as a result, toilet paper). So it is entirely possible OPEC goes the way of the dodo—yet another reason we don’t see oil prices soaring any time soon.

By , The Wall Street Journal, 08/21/2015

MarketMinder's View: Actually, Markit’s services and manufacturing purchasing managers’ indexes rose a tad from July, so, cool. We aren’t going to shout from the rooftops about growth accelerating this month, as PMI fluctuations don’t translate directly to the economy’s direction, but this should help put to rest fears China and Greece are denting the rest of the world.

By , The Wall Street Journal, 08/21/2015

MarketMinder's View: Tip of the day: Articles packed full of jargon like this will rarely provide clarity or an actionable takeaway. We have tried for years to figure out what “risk off” and “risk on” mean, and we are pretty sure they are merely an elaborate hoax perpetrated by sell-side analysts, who toss them around and then point and laugh at everyone who thinks they’re real. As for bond markets, it is fairly normal for investors to flee to the safety of Treasurys when they get spooked, and maybe we’re seeing that now. But it is really just the Treasury market version of normal volatility, and this stretch doesn’t change our longer-term outlook any more than stocks’ wiggles change the outlook for equities. Like stocks, bonds move most over time on supply and demand. In bond markets, supply and demand have played tug of war with each other all year, keeping bonds volatile but largely flattish for the year. We expect that to continue. 

By , Bloomberg, 08/20/2015

MarketMinder's View: The title here tells you pretty much everything you need to know. Greek Prime Minister Alexis Tsipras resigned on Thursday, largely due to him losing the support of 49 left-leaning members of Parliament from his own Syriza party. While Moody’s warns this could threaten the third bailout, we’d suggest this may actually yield the opposite result: Holding a vote soon reduces the chances his popularity wanes as the Greek economy sags and higher taxes bite voters. He polls stronger than virtually every other politician in Greece, so chances are he could win and form a coalition, solidifying his power. This is probably also why the head of the opposition New Democracy, Evangelos Meimarakis, “has pledged to ‘explore all avenues’ to avoid snap elections” according the Guardian, which live-blogged the proceedings. (Last Friday we suggested on these pages that, “We half expect major media sources to live blog some country’s parliamentary debate next week.” We just didn’t really expect that debate to occur in Athens.) At any rate, we believe Greece doesn’t pose a threat to markets, which would likely benefit most from a Grexit proving Greece fears false. For more, see our 8/20/2015 cover story, “Greece Is Having a Good Week,” which we titled before all this happened.

By , Bloomberg, 08/20/2015

MarketMinder's View: Currency pegs and bands are inherently unstable—we’ve already seen that three times this year (Switzerland, China and now Kazakhstan). Kazakhstan, an oil-reliant Frontier Market, has some economic issues in front of it, given that it is a) oil-reliant and b) trades heavily with Russia, which is in a deep recession and is sanctioned by most of the developed world. In the short run, the drop’s suddenness may exacerbate instability in the Central Asian nation, but freeing its currency from an unsustainable peg is actually a positive pro-market step in the longer run. For those who fret a currency war, take note: If the result of an alleged currency war is a host of nations the world over ceasing to artificially peg and restrict the market movement of their currencies, we’ll all be better off for it. Oh and this is trivia, but in case you are not terribly familiar with the former Soviet Republics ending in “stan,” this map will show you where Kazakhstan exactly is.

By , Bloomberg, 08/20/2015

MarketMinder's View: The Fed’s minutes from the July 28-29 meeting are out, and the early reviews are not positive. Most claim they show a “divided” Fed sent a “wishy-washy,” “reluctant” and “mixed” message about whether it would actually hike next month. As a result, Bloomberg suggests the likelihood of a September rate hike is now down from 50% on Tuesday to 36% today. This article, however, is jam packed with speculation regarding what they Fed may or may not do and when, which is not a good way for you to spend your precious time. Take it from Laurence Meyer, the analyst and former Fed governor quoted here, who said: “What are you worrying about, September or December? It doesn’t matter. Just pull the trigger.” Ultimately, there is no history of initial Fed rate hikes derailing a bull market, and there is little reason to think the US economy can’t handle rates somewhere north of zero today, when it is well into expansion.

By , Bloomberg, 08/20/2015

MarketMinder's View: This article accepts the premise that stocks have higher volatility than bonds and return more as a result, so don’t think that it is attempting some earthshattering find. Rather, this article seems shocked to find that, occasionally, stocks with fewer wiggles outperform those with more. Here is a simple statement—and it is true!—this article’s entire operating motif rejects: Stocks are stocks. There aren’t high-risk stocks and low-risk stocks, there are stocks. No high fliers and stabilizers. Stocks. The fact a stock hasn’t been volatile in the last five years doesn’t tell you anything about what it does going forward. That means you can’t invest on a principle that says, “Hey! Low volatility stocks do better!” even if it is true, because nothing is categorically low volatility. Ultimately, this article concludes, “But if this really is the resolution of the puzzle, it means that markets aren't very efficient in the short run. If anomalous market behavior can't be traded away, it means that prices will tend to deviate from long-term fundamental value.” Maybe that seems like a really big deal, but it is actually the fundamental basis for active and value investing, a point raised first by Benjamin Graham decades ago.

By , MarketWatch, 08/20/2015

MarketMinder's View: We offer this up not because we are drawing some big, growthy conclusion from it, but rather as a counterpoint to this article we discussed yesterday, in which the press drew big conclusions from a contractionary Empire State reading. As we wrote then, these regional gauges are extremely noisy. Take the data with a grain of salt.

By , The Wall Street Journal, 08/20/2015

MarketMinder's View: Yes they do. And, with oil supply likely to remain elevated, headwinds for Energy firms in general remain. But this is especially true in Canada, as this article explains cogently: “Western Canadian heavy crude costs more to extract than other oil sources because it must be separated from deposits of sand. It also trades at a discount to other crudes, in part because of the distance it must be transported from remote boreal forests in Alberta. Benchmark West Texas Intermediate oil cost less than $41 a barrel in Wednesday trading, which although at multiyear lows was still well above the Western Canadian Select average of around $24 a barrel.”

By , The Wall Street Journal, 08/20/2015

MarketMinder's View: After an IMF staff recommendation hit newswires two weeks ago proposing exactly this, it’s unsurprising news board formally delayed the yuan’s potential addition to its “special drawing rights” bailout currency (largely an accounting device). Even if the board approves the yuan for membership later this year, it won’t join the SDR until October 2016 at the earliest. Now, this has been the source of plenty of unwarranted fears the dollar’s demise was nigh, which we guess even the proponents will now be forced to admit is not as nigh as earlier feared. That being said, including the yuan in the SDR would not threaten the dollar’s role as a primary reserve currency, and even that role isn’t very important to markets or the economy. The US doesn’t get a brokerage fee or royalty when foreigners transact in dollars to buy things like oil. And we don’t rely on foreign central banks to keep interest rates low. That being said, China’s move to make its exchange rate more market-oriented—the source of the roughly 3% devaluation versus the dollar since—was welcomed by the IMF as a step toward open the currency to markets. So, China, maybe next year.

By , Investopedia, 08/19/2015

MarketMinder's View: Probably not, actually. It signals some firms in New York reported falling activity. Regional manufacturing surveys like this (and similar gauges from Chicago and Philly) are narrow and myopic, often with little relationship to the rest of the country.

By , The Wall Street Journal, 08/19/2015

MarketMinder's View: Though hydraulic fracturing (“fracking”) has experienced explosive growth in the US, not so much in the UK, where political concerns have stalled it as the government—which holds all mineral rights—feared upsetting voters. However, with a 12-seat majority and the next election nearly five years away, Prime Minister David Cameron’s government bit the bullet, accelerated the approval process and just announced it will award 27 exploratory drilling licenses, in hopes a big economic boost (and cheaper natural gas) will win over the electorate. Time will tell whether prices provide firms enough of an incentive to see these projects through—chances seem fair, as UK natural gas prices are higher, but you never know. Should this all come to fruition, it would be a long-term benefit for UK households and businesses, but as in the US, the biggest benefits will likely accrue outside the Energy sector, which won’t see huge profits unless prices are sufficiently high.   

By , CNBC, 08/19/2015

MarketMinder's View: Age-based investing—a widely used strategy—suggests investors should own more stocks when they are young and less as they age, and we agree this cookie-cutter approach has some problems. It flat ignores an investor’s time horizon, long-term goals, needs and overall financial situation, and it often yields a suboptimal asset allocation. A 50-year old seeking long-term growth with no withdrawal needs likely needs a different asset allocation than one who took early retirement, relies on their portfolio for income and has college tuition to pay. We do have one minor quibble, though, with this piece’s discussion of risk tolerance, which implies comfort with volatility and short-term losses should play a large role in determining asset allocation. It is an important consideration, but overemphasizing it—at the expense of time horizon and long-term needs—can lead you away from the asset allocation that provides the best chances of reaching your long-term goals.

By , USA Today, 08/19/2015

MarketMinder's View: Ostensibly because the bull market is “tired,” while investors are skittish over high stock valuations, stalled earnings growth and a tepid economy. Also, more stocks are down than up, which creates a “stalemate” that holds back returns, and investors are pulling money out of mutual funds, putting downward pressure on stocks. Look, we understand the temptation to search for meaning in a range-bound market, try to decipher what caused markets to flatline, and figure out what this means for the future. But in our view, this is a fruitless exercise. No one knows for sure why markets behave as they do—especially over short periods—and the fact markets have traded more or less sideways so far this year is not at all predictive of where they are headed next. In the long run, stocks weigh fundamentals, and fundamentals suggest the bull market has further to run.

By , US News & World Report, 08/19/2015

MarketMinder's View: Are mergers and buybacks a smart, shareholder-rewarding use of firms’ strong balance sheets? Or are they stealing money from other uses, limiting organic growth (and wages)? That’s the question explored in this article. We tend to side with the first half, which argues in favor of mergers and buybacks, but with a catch. Cash-based mergers are generally good, as they reduce overall share supply, setting the stage for prices to climb higher (assuming demand stays firm). Stock-based mergers are far less grand, as they increase stock supply, which does the opposite. Buybacks also reduce stock supply, and they usually don’t reduce organic growth—many firms fund buybacks with debt. That -0.6% slide in business investment in Q2 isn’t evidence to the contrary, as it was tied largely to cutbacks by oil producers—a well-known side effect of low oil prices, not a sign of corporate malaise.

By , Financial Times, 08/18/2015

MarketMinder's View: Why? Because even though the Fed, BoE and BoJ inflated asset prices through quantitative easing (QE) and near-zero interest rates, still-accommodative monetary policy puts a floor under stocks, preventing the (implied) bubble from bursting. Look, we get that they all said one of the goals of QE was to drive stocks higher and create a “wealth effect” where rising stocks boost sentiment and economic activity, but that jawboning didn’t match reality. In reality, central banks bought long-term bonds from banks, who were supposed to use the newly created reserves to boost lending. They didn’t, because those bond purchases flattened the yield curve, reducing the incentive to lend enthusiastically. So all this theoretical stimulus was more of a sedative that weighed on stocks. Now, QE is over in the US and UK, helping their yield curve steepen, which is what will really help their economies sail through the first rate hike or three. Oh, also, stocks aren’t overvalued. The average P/E isn’t fair value or anything, just an average of extremes. Valuations have climbed far, far higher during past bull markets.

By , Bloomberg, 08/18/2015

MarketMinder's View: This is a fantastic discussion on why China is not waging economic war on the US by devaluing their currency, and that US presidential candidates on both sides of the isle are barking up the wrong tree by claiming they are. Last week’s currency move was too small to make China’s exports enough cheaper than US goods to materially take away market share: “If China were really trying to close factories in Detroit and Seattle, its devaluation would have been on the order of 15 percent or 20 percent, not a mere 3 percent.” Also, China is moving away from a manufacturing- and toward a services-driven economy. A stronger Chinese consumer is good for US firms exporting goods to them!  US politicians will likely continue to criticize China over “manipulating” their currency, but this is just politicking. A gradually more market driven currency market in China is a positive for the world.

By , The Street, 08/18/2015

MarketMinder's View: By “crushing stock market correction,” the article means “bear market.” The allegedly ominous signs are 659 (and counting) trading days without a -10% drop, a low VIX, a high cyclically adjusted price-to-earnings ratio (CAPE), slower GDP growth, debt, slowing productivity gains, weak developed-world population growth, low corporate revenue growth and looming interest rate hikes. What do they all have in common? None are predictive or cyclical market drivers. Past volatility (or lack thereof) doesn’t predict future volatility or returns. Nor does a low VIX, which just tells you options prices are low right now. CAPE is a backward-looking indicator as it compares today’s stock prices to the last 10 years of corporate profits, which still reflect the huge earnings drop in 2008/2009 (and don’t predict future profits). Global GDP growth may not be gangbusters right now, but GDP is an imperfect economic measure, and stocks and the economy aren’t joined at the hip. As for debt, the evidence included—a paper showing countries with high debt-to-GDP tend to grow more slowly—was widely discredited two years ago, after fellow economists discovered errors in the dataset. Weak productivity? Most economists believe (and we’re inclined to agree) traditional productivity measures can’t capture actual efficiency gains from technology. Population growth? A structural issue, not an economic swing factor.  Low revenue growth does not mean a market fall is imminent, and revenue (and earnings) growth often slows as a bull market progresses and year-over-year comparisons become more difficult to beat. Finally, rising interest rates don’t spell doom for stocks, and the economy can very likely support rates rising modestly from multi-generational lows. Rising long-term rates steepen the yield curve—100 years of theory and data tell us this is a big positive.

By , NerdWallet , 08/18/2015

MarketMinder's View: We agree knowing your investments’ total costs is crucial to doing a proper cost-benefit analysis and gauging whether you’re getting a good value for what you’re buying. But accurately assessing the benefit part is just as important, and it often isn’t as simple as comparing total cost with total return. There are qualitative benefits, as well, like service: helping you remain disciplined during turbulent times, putting sometimes confusing events into perspective, and helping you capture those returns and stay on track to reach your goals.

By , Reuters, 08/18/2015

MarketMinder's View: Many tout the supposed benefits of cheap currencies—they boost exports by making domestic goods cheaper to foreigners. This piece highlights an important caveat to this: Most companies import components, and a cheap currency makes these more expensive. Russian carmakers are currently learning this lesson, as the weak ruble—resulting from cratering oil prices and Western sanctions over Russia’s stance in the Ukraine—has raised input costs so much that they are forced to raise prices, making them less competitive. The opposite is also true: A strong currency is not the export killer some claim because it reduces the cost of foreign-sourced components. Incidentally, US firms benefited from this freebie cost cut as the dollar strengthened—a big reason the strong dollar isn’t the growth-killer many fear.

By , Bloomberg, 08/17/2015

MarketMinder's View: Though Japan’s preliminary Q2 GDP estimate beat expectations, it still contracted -1.6% q/q annualized, halting two quarters of growth. Exports (-16.5% q/q annualized) suffered as China (Japan’s largest trading partner) imported less, and consumption (-3.0% q/q annualized) also pulled back. Government spending comprised most of the positive contribution to GDP, highlighting the degree of the private sector’s struggles and the limitations of fiscal or monetary policy in spurring sustainable economic growth. Though some expect a mild recovery in Q3, headwinds persist, and sentiment still looks too elevated. In our view, better investment opportunities exist elsewhere.  

By , Bloomberg, 08/17/2015

MarketMinder's View: Though Japan’s preliminary Q2 GDP estimate beat expectations, it still contracted -1.6% q/q annualized, halting two quarters of growth. Exports (-16.5% q/q annualized) suffered as China (Japan’s largest trading partner) imported less, and consumption (-3.0% q/q annualized) also pulled back. Government spending comprised most of the positive contribution to GDP, highlighting the degree of the private sector’s struggles and the limitations of fiscal or monetary policy in spurring sustainable economic growth. Though some expect a mild recovery in Q3, headwinds persist, and sentiment still looks too elevated. In our view, better investment opportunities exist elsewhere.   

By , The Wall Street Journal, 08/17/2015

MarketMinder's View: So according to this, because China has been the biggest contributor to the current global expansion, any slowdown risks tipping the world into recession. This seems like a mix of two stories we’ve heard before: a weak global economy and a Chinese hard-landing spelling doom for all, both false fears, in our view. Now, we aren’t understating China’s importance to the global economy: At 7% annual growth, it is projected to add the equivalent of three Greeces to world output. But despite all the hubbub in its closed off equity markets and a couple of high-profile operational moves, China’s economy has continued growing at a steadily slower rate for years now—some weaker numbers aren’t surprising. And though some economies—particularly commodity-dependent ones—face headwinds, others keep heading higher. The US, UK and the eurozone are all growing, and while global growth isn’t gangbusters, it is likely better than many expect. Also, the IMF’s whole sub-2% global growth = global recession thing is just arbitrary. But it does help keep expectations low, so on the bright side, it creates more bullish bricks in the wall of worry.      

By , Bloomberg, 08/17/2015

MarketMinder's View: Reason number 33 that the Energy sector’s headwinds likely persist in the near-future: “OPEC could potentially boost crude oil production to 33 million barrels a day, the most ever, after international sanctions are removed against Iran amid a global supply glut, according to the country’s OPEC representative.” OPEC has exceeded its monthly target of 30 million barrels a day for 14 straight months as member states all have their reasons to keep up production. Saudi Arabia doesn’t want to lose market share while countries like Iraq and Venezuela simply need the cash, even if they’re receiving less of it. With Iran potentially adding even more to the global supply glut, oil prices probably won’t jump any time soon: a problem for a price-sensitive sector like Energy.

By , CNN Money, 08/17/2015

MarketMinder's View: “Too much” is a subjective level that varies greatly among individual investors. For some investors, lower equity and greater fixed income exposure may make sense. But for others—especially those with longer time horizons—a higher stock allocation may be necessary to obtain the growth to meet their specific needs. Our hunch, based on life expectancies, is that still-working Boomers fall into that second category. So while this piece worries that 35% of these have “too much” stock exposure, based on the descriptions, we’re inclined to flip and warn that 65% might not own enough equities. And heck, those descriptions are arbitrary too, suggesting anyone but the 10% of respondents with 100% in stocks may need more equity allocation. Age alone shouldn’t determine anyone’s asset allocation. Long-term needs, goals and your total investment time horizon—the length of time your portfolio must work toward your goals—are the biggies.

By , China Daily, 08/17/2015

MarketMinder's View: Look, we agree the Chinese yuan’s rise as a more prominent global currency is probably inevitable (over the very very long term, and probably with several hiccups along the way) and also not the big negative many folks think it is—particularly for the US dollar. This ascent will probably mirror the euro’s climb: gradual and over many years, rather than a rapid, overnight jump (except slower, because the eurozone had a much larger pre-existing pool of marketable sovereign debt). However, reserve currency status and inclusion in the IMF’s “Special Drawing Rights” (SDR) designation is entirely symbolic. Countries don’t gain privileges, power, low interest rates or anything else from being reserve currencies—or from having more global trade denominated in their own currency. (Also, for all the big numbers thrown out here, the yuan has about a 2% share in international transactions.) For more, see our 6/8/2015 commentary, “The Yuan’s Rise Doesn’t Doom the Dollar.”

By , Financial Times, 08/17/2015

MarketMinder's View: When Mexico’s much-ballyhooed first auction of private investment blocks in its Energy industry fell flat last week (only two of 14 on offer sold), observers were largely discouraged and ready to write off Mexico’s reforms. However, as this shows, that reaction is fairly overwrought. One, the projects on offer weren’t exactly the good stuff, so to speak. Two, “Equally important, Mexico proved it could run an auction transparently and fairly, even without obtaining the results which were both desired and anticipated.” Plus, while Energy is taking a while to get off the ground due to low oil prices, reforms in other sectors like banking and electricity generation are bearing fruit. El Chapo might get all the headlines, but Mexico’s steady opening is on track, and due to its robust trade relationship with the US, an improving Mexico is a positive north of the border. More broadly, Mexico is just one more example of sentiment badly underestimating Emerging Markets—a positive that should benefit more developed markets, too, as growth in the developing world exceeds expectations.

By , The New York Times, 08/14/2015

MarketMinder's View: Here is a great, pithy debunking of long-running fears about the dollar losing its status as the world’s primary reserve currency. It’s a little sociological in places, but we tuned all that out because the economic and market-related aspects are chock full of good sense. Being the world’s reserve currency doesn’t give America special influence, powers, low borrowing costs, prosperity, stability or anything else: “while reserve-currency status may have political symbolism attached, it’s essentially irrelevant as an economic goal.”

By , The Wall Street Journal, 08/14/2015

MarketMinder's View: Well this is cool! The Commerce Department has agreed to let Mexico and the US swap crude oil—they send us heavy crude, we send them light, sweet crude from shale wells. This is a win-win, as Mexico has more capacity to refine light crude, and America has more capacity to refine heavy crude, so it should boost gasoline production and, eventually, help low oil prices filter through to gas prices more than they have to date. This probably does nothing to ease the oil supply glut and looks like another reason not to expect a rapid rise in oil prices, but it should be a net benefit on both sides of the border.

By , The New York Times, 08/14/2015

MarketMinder's View: The biggest rebellion yet, with 42 members of Greek Prime Minister Alexis Tsipras’ Syriza party voting against him, leaving him with just 118 votes from his side of the aisle—two below the minimum he needs to demonstrate he still has a mandate. Meanwhile, one of the rebels, former Energy Minister and leader of Syriza’s “left platform” Panagiotis Lafazanis, is on the verge of creating his own splinter party, which would pull the radical left out of Syriza. Syriza is an acronym for “Coalition of the Radical Left,” so we guess they’d need a new name if the left platform leaves? Anyway, it looks like Tsipras will call a confidence vote once the bailout is set in stone and Greece has paid its most urgent bills, and snap elections look likely whether or not he wins the motion. He remains wildly popular and has no clear political rival, so there is every chance the contest could strengthen his hand, give him a more unified caucus in Parliament and increase the chances of implementing everything in the bailout. Though, there is also a chance the government could splinter and Grexit risk comes right back. So, stay tuned, but either way, the global market risks remain minimal.

By , CNBC, 08/14/2015

MarketMinder's View: We highlight this one mostly for its second half, which shows how Social Security’s lifespan can easily (and probably will) extend well beyond 2034, when some long-term projections show the trust depleting. Congress created Social Security, Congress has tweaked it several times to extend its life, and Congress can tweak it again. The last tweak, passed in 1983 and phased in over 22 years, modestly raised the retirement age. Future tweaks might include raising the cap taxable earnings, changing inflation adjustments or gradually raising the retirement age again, consistent with lengthening life expectancies. All of this is a long, long way out and not an issue for markets today, but it does show rumors of Social Security’s impending demise are greatly exaggerated.

By , The Wall Street Journal, 08/14/2015

MarketMinder's View: This sets up a false conflict between 401(k)s and IRA rollovers. Neither is inherently superior, and what’s right for any investor depends on their needs, goals and circumstances. Consolidating retirement accounts into one IRA can be handy and offer more flexibility in some cases, but 401(k)s have their advantages, too. As for the fee angle, IRAs themselves aren’t inherently higher-fee. While some brokers do peddle pricey products for investors’ IRAs, this isn’t unique to IRAs or a reason not to roll over your savings. Nor will a fiduciary standard prevent them from doing this. The Department of Labor’s version has several loopholes, and ultimately, any broker or adviser’s recommendations will come down to their values, biases, beliefs, resources and expertise. For more, see our recent commentary, “Be-Laboring the Fiduciary Standard.”

By , The Guardian, 08/14/2015

MarketMinder's View: We wouldn’t read much into any of this. Growth rates fluctuate, and they’ll always vary among members of a 19-country bloc. GDP is also an imperfect measure of economic activity, so it really doesn’t mean much that growth slowed from 0.4% q/q in Q1 to 0.3% in Q2. Because of the way GDP math works, counting imports as negative (even though they represent domestic demand), activity could very well have sped up even as GDP slowed. Without having the breakdown of individual components, there just isn’t much we can glean here. Also, stocks look forward, and eurozone Leading Economic Indexes are in long uptrends, signaling more growth ahead.

By , Financial Times, 08/14/2015

MarketMinder's View: Hey, whaddaya know! Rumors of opposition from Finland, Slovakia and Germany were all just politicking and jawboning! And eurozone finance ministers’ approval includes a few interesting nuggets. They apparently solved one big outstanding item—how to recapitalize and “bail in” Greek banks—by agreeing only bondholders will take a hit. Depositors small and large will be spared, which is good for Greece, as most of the country’s “uninsured” deposits are small businesses’ working capital, and wiping them out would be tantamount to wiping out the private sector. So that’s good. Greece also won a pledge from the bloc to consider debt relief, which should raise the odds of IMF participation. Now, this isn’t final, as a few national parliaments must ratify the deal, but most evidence indicates they’ll rubber stamp it (though they’ll probably grumble about it). We half expect major media sources to live blog some country’s parliamentary debate next week.

By , Bloomberg, 08/14/2015

MarketMinder's View: “‘Summer is when refineries are all running hard, so actual demand for crude is as good as it gets,’ Seth Kleinman, London-based head of energy strategy at Citigroup Inc., said by e-mail. OPEC’s biggest members are pumping near record levels to defend their market share and U.S. production is withstanding the collapse in prices and drilling. The oil market is still clearly oversupplied and ‘it will get more so as refiners go into maintenance,’ Kleinman said.”

By , The Guardian, 08/14/2015

MarketMinder's View: More like “five false fears about China.” Slowing growth isn’t a hard landing, and the highlighted indicators—electricity use and rail freight—are less significant as China shifts from manufacturing to services for the bulk of its growth. Services are less energy- and commodity-intensive than factories and infrastructure buildouts. As for interest rates, it is totally, totally normal to cut rates to shore up growth and money supply as needed—see every developed country on Earth for evidence. Government intervention in the stock market? Chinese officials have long intervened in financial markets to ensure social stability. Last month’s moves weren’t anything new, just a more high-profile version of the status quo. Fear four, declining exports, is vastly overstated. Exports didn’t drop 8.3% “in the 12 months to July.” Rather, July 2015 exports were 8.3% below July 2014. That’s just volatility, folks. Year-to-date, total Chinese exports are just 0.6% below 2014’s first seven months. That’s fairly consistent with efforts to shift from exports to domestic demand-driven growth. Finally, this week’s currency moves aren’t “a return to the growth model [China] is supposed to be abandoning.” The central bank simply stopped artificially propping up the currency. The market took over. This is how it’s supposed to work.

By , The Wall Street Journal, 08/14/2015

MarketMinder's View: Industrial production rose 0.6% m/m, and the manufacturing component rose 0.8%. Just one month and all that jazz, but still, yay growth!

By , The Washington Post, 08/14/2015

MarketMinder's View: The hook here—Senator Paul’s suggestion that the US should carry no debt—is very political, so we ask that you set aside your ideological leanings, party preferences and opinions about 2016 Presidential candidates. We’re party blind and favor no candidates or sitting politicians, and bias blinds investors. So let’s all look past the names and people and focus on the pure analysis and subject matter, because this is a great take on US debt, with a wonderful (and often overlooked) historical perspective. The last time America went debt-free, it sowed the seeds of a financial panic and deep recession. It would probably do the same today, because debt underpins our financial system, as this shows quite well. Abolish the debt, and you face a huge monetary contraction. Debt isn’t problematic on its own. Unaffordable debt would be a risk, but we’re nowhere close to that. Interest payments are less than 8% of tax revenue—one of the cheapest debt loads among major countries. 

By , MarketWatch, 08/13/2015

MarketMinder's View: This article’s discussion of the death cross—an alleged indicator of trouble when stocks’ 50-day moving average falls below their 200-day moving average—is spot on. This is a useless reflection of past returns that isn’t telling about the future. Now, the concluding part counseling caution because valuations are high is less great, because valuations have never been predictive on their own either. And it’s normal for them to expand as investors gain confidence. But to us, the discussion of the death cross makes this article very much worth reading.

By , The New York Times, 08/13/2015

MarketMinder's View: Currency wars are not when countries, "let the value of their currencies slide on international markets." They are when governments actively intervene to devalue. In that way, what China has done is the opposite of a currency war, because it was intervening to prop the currency up and now it is doing so less, hence the drop. Besides, this is a whopping 3% devaluation. That is miniscule, folks. And there is ample news suggesting the PBoC is intervening at the end of the day to mitigate the rate of decline. We are very skeptical of the assertion we've had currency wars for the last six years, but if we have, that's pretty bullish because the economy has grown throughout.

By , Bloomberg, 08/13/2015

MarketMinder's View: No, this is not a typographical error, nor does it seem the Hellenic Statistical Authority forgot to put a minus sign in front of the 0.8% q/q (1.4% y/y) Q2 GDP growth rate. Greek GDP actually and surprisingly grew in the quarter, easily beating estimates. Now, there are some important caveats to this. First, GDP actually contracted in nominal terms—the growth that’s grabbing headlines is partly due to deflation adjustments. Second, part of this growth is likely attributable to fear over Grexit pulling forward demand in late Q2, as Greek citizens reacted to the increasing probability capital controls would be installed. We suspect Q3 data, especially early Q3, will be awful. And third, these data are preliminary. But other than those things, yay growth! There is a term for this in investing, and it rhymes with Red Bat Pounce.

By , The Wall Street Journal, 08/13/2015

MarketMinder's View: Our takeaway from this is: Sentiment is still haunted by the ghosts of 2008. Rising commercial real estate prices is fairly typical in a lengthy economic expansion, and there is little evidence to suggest any of this is detached from economic reality. Finally, consider: The residential real-estate bubble in didn’t cause 2008’s panic anyway. It was part of the sentiment backdrop, but it popped in 2006, not 2008. And, absent mark-to-market accounting (FAS 157), it is unlikely the fallout would have been anything like it was, because that rule put banks’ paper losses around 10 times their actual loan losses.

By , Bloomberg, 08/13/2015

MarketMinder's View: The theory here is tapering quantitative easing (QE) was the Fed’s first move to tighten policy, and by doing so, the Fed has unwittingly already slowed the economy down sufficiently, so rate hikes could result in policy far tighter than the Fed believes. As evidence we’re shown charts of interest rates showing a spike in 10-year Treasury rates in mid-2013 (when the Fed began talking taper in earnest), equity markets which are allegedly flat since QE’s end, and oil down significantly over the same time frame. Hiring and GDP, we’re shown, have both slowed since. Yet there are big holes in this theory. First, it presumes the Treasury market moved ahead of widely expected events, but stocks didn’t. Equally liquid and open markets discount likely events simultaneously—bonds don’t lead stocks. Same goes for oil prices. Why would traders in one market move in anticipation of a widely expected event, but sit on their hands in another? The GDP and unemployment claims presume QE was accommodative policy. But by narrowing the spread between short- and long-term yields, the Fed made bank lending less profitable. Less profitable lending likely means less plentiful lending, which is the opposite of accommodative. This isn’t new theory, it’s a century old. The yield spread matters more than long or short-term rates in isolation. What’s more, there is a big logical disconnect here: While the analysis claims GDP and hiring slowed since QE’s end, the very same analysis showed us bond markets reacting in 2013, not 2014. GDP accelerated in 2014, after that event. So, if bond markets reacted in 2013 and GDP accelerated immediately after that, where is the evidence tapering QE slowed the economy? But also, the Fed still owns the Treasurys and Mortgage-Backed Securities it bought under QE, and it rolls over the proceeds when they mature. It isn’t like the Fed is selling Treasurys to actively boost rates. It is merely not increasing the size of its balance sheet any longer, which is akin to standing pat.

By , The Wall Street Journal, 08/13/2015

MarketMinder's View: We’ve cautioned all this year and much of last against trying to bottom-fish Energy stocks and, short-term blips like a refinery outage and minor volatility in China aside, this article hits on many facets of the reason why. US production is hovering near levels last seen in the early 1970s, OPEC production rose substantially last month, and with Iraq production at a record in July and Iran close to being able to export again, there are few signs global production will materially fall soon. Now, that said, you also shouldn’t eliminate Energy stocks from your portfolio. It’s a big sector, and having some exposure to it is wise in case there is a turnaround sooner than we expect. We merely and humbly suggest emphasizing Energy in your portfolio today isn’t justified by the imbalance between supply and demand.

By , The Wall Street Journal, 08/13/2015

MarketMinder's View: Remember when Greece’s Syriza government claimed the EU’s planned privatization fund amounted to a coup because it ceded so much authority over Greek property to non-Greeks? Well, it seems like that was overstated, considering the details emerging about the third bailout’s privatization fund are basically the same darn thing they’ve been doing for five years, under this flashy website. This article is a great summation of all that, one that helps show why it’s wise to be skeptical this third time will be the charm. (It is also written in an entertaining fashion.) For a little Greek privatization flashback, might we recommend our 3/12/2013 commentary “Greek Privatization Physics”?

By , The Wall Street Journal, 08/12/2015

MarketMinder's View: Or so say the EU’s forecasts, so all the usual caveats apply. Elsewhere in your daily Greek update, Greece’s Parliament will vote on the bailout memorandum in the wee hours of Friday morning, and most expect it to pass with the opposition’s support, but the real question is how many Syriza members vote against it—the more rebel, the greater the likelihood of snap elections. Meanwhile, Germany is apparently waffling on whether it thinks the memorandum is sufficient, though that could just be internal politicking at work—Angela Merkel’s government putting on a tough front to ease lawmakers’ concerns that Greece is getting off too easy. Overall, not much has changed. Progress is progress, but Greece remains in limbo, and there is plenty of room for this to fall through, whether next week or next year, but the global risks remain minimal.

By , CNN Money , 08/12/2015

MarketMinder's View: Ostensibly because the yuan’s drop may dent US sales to China, slow the global economy and export deflation to the US.  Also, if global stocks extend Tuesday’s sharp decline (which was sparked by China’s currency move) a Fed rate hike might spook already spooked investors even more. But the yuan falling a few percent isn’t the game changer many presume. It puts the RMB/USD exchange rate back where it was in 2012, which was a fine time for the global economy and stocks. Plus, a freer Chinese currency market and financial system is likely a good thing—the less China’s central bank manipulates the exchange rate, the more transparency there is. China’s action doesn’t put the Fed in a pickle, it just gives policymakers one more data point among countless others to determine when to begin hiking rates.

By , The Washington Post, 08/12/2015

MarketMinder's View: While this is mostly sociological, it shows a crucial point for investors: When pundits galore say policy X will automatically have impact Y on the economy, take it with a grain of salt—whether the claim is bullish or bearish. When the Affordable Care Act passed, many presumed its various incentives would lead employers to replace full-time jobs with part-time. Yet early data suggest that hasn’t happened. Turns out other variables influenced staffing decisions, too. This illustrates why rushing to conclusions about legislation—and acting on widely discussed theories and opinions—can do more harm than good. Had you left US stocks fearing the Affordable Care Act would hollow out the economy, you would have missed out on big bull market returns.

By , Financial Times, 08/12/2015

MarketMinder's View: This is a fantastic read, putting China’s recent currency move into proper perspective. Allowing the market to drive the currency down -1.9% in one day instead of maintaining an unofficial peg to the dollar isn’t a gigantic devaluation by any stretch. Currencies move that much in a single day all the time. Over the last few decades, other countries have experienced much bigger currency devaluations than Tuesday’s yuan retreat, as they discarded unsustainable currency pegs. Heck, China devalued -35% in a single day in early 1994. Neither that nor other big devaluations in Mexico, Asia, Brazil, Argentina and the UK derailed global stocks, and the yuan’s latest hiccup likely won’t either. Heck, moving to a more market-oriented exchange rate should be a net benefit over time, as it makes China more of a mature, open market.

By , Bloomberg, 08/12/2015

MarketMinder's View: “Fast and wild swings” might seem like an odd observance considering stocks have traded in one of the tightest ranges ever year-to-date, with near-flattish cumulative returns for the S&P 500, but those range-bound moves were awfully wobbly, so we guess it’s in the eye of the beholder.  Anyway, this is all just a lot of searching for meaning in flat-yet-bouncy times. Maybe stocks are stuck in limbo because traders are playing the little ups and downs! Or maybe stocks just behave oddly over short periods, driven in unpredictable ways by sentiment, before they resume weighing fundamentals over time. Neither changes the fundamental long-term outlook for stocks—continued economic growth, better-than expected corporate earnings, a tame political backdrop and mixed sentiment all point to more bull market. Pauses like this are normal and shouldn’t disrupt your long-term strategy.

By , Marketwatch, 08/12/2015

MarketMinder's View: Um, no, it isn’t. The Dow Jones Industrial Average, a bizarrely constructed group of just 30 stocks, does not represent the broad stock market. But also, the so-called “death cross”—when stocks’ 50-day moving average drops below the 200-day moving average—does not signal trouble ahead as some suggest. It simply means stocks have gone down. They might fall much further or they may rebound, but neither is predicted by past movements, as evidenced by many false death cross signals over time. Stocks zoomed higher after the late-2011 Dow death cross highlighted in the article. As for the discussion of January 2008’s death cross and ensuing stock market plunge, don’t let the verbal gymnastics fool you. Bear markets begin the day stocks peak, and mild declines always precede the -20% bear market signpost.  Bear markets usually feature death crosses, but not all death crosses signify bear markets.

By , Reuters, 08/12/2015

MarketMinder's View: Nope. And we doubt it will, as China’s economic fundamentals haven’t changed (they’re still solid) and mainland stock markets have never been a leading economic indicator. Markets there are too immature, with too much government meddling, to accurately register economic fundamentals. Plus, as this piece highlights, compared to much of the developed world, China’s stock market is small relative to its economy (though we’d compare market cap with GDP, not M2 money supply), corporations raise much less money through stocks, relatively few Chinese citizens own stocks, and those that do tend to place more money in real estate and bank deposits. The so-called “wealth effect”—the idea rising stocks make people feel wealthier and thus boost spending while falling stocks do the opposite—is even less of thing in China than it is in the US (and it isn’t even a thing in the US). Disposable income primarily drives consumer spending, and per-capita disposable income in China is growing swiftly, powering retail sales to double-digit year-over-year growth. China’s recent stock market decline is eye-catching, but the economy is insulated.

By , The New York Times, 08/11/2015

MarketMinder's View: Stock buybacks are an easy target for politicians, and we won’t be shocked if the buyback blowback escalates as 2016’s contest approaches. Politicians’ beef with buybacks is largely misplaced, though. Buybacks don’t interfere or compete with business investment, they aren’t an accounting trick, and they aren’t market manipulation. Markets have functioned fine since the SEC made buybacks easier in 1982. US markets have outperformed UK and Hong Kong stocks since then, which largely shatters the theory markets work better there because they have stricter buyback disclosure requirements. Buybacks are a tax-efficient way (compared to dividends) to return cash to shareholders, and limiting them seems like a solution in search of a problem (and one that would disadvantage individual investors). At the same time, it is far too early to handicap the chances of the next administration passing something. We don’t know who the Presidential nominees are yet, never mind how much Congressional support the ultimate victor will have. 

By , The Wall Street Journal, 08/11/2015

MarketMinder's View: … is still something you should do thorough due-diligence on! We won’t wade into the debate over whether rechristening “liquid alternative” funds and the like with less-jargony names is a benefit or effort at obfuscation, because it really doesn’t matter. The lesson, always, is never to get sucked in by flashy tactics, jargon or cool-sounding terms. Look past the marketing spin and make sure you understand a strategy’s ins and outs (and actual performance record over at least a market cycle) before you dive in, and always consider how any investment stacks up against your long-term needs, goals and time horizon.

By , The Wall Street Journal, 08/11/2015

MarketMinder's View: The headline should come with an asterisk, as they haven’t yet decided on key items like debt restructuring, the IMF’s involvement and how big the first check should be. Greece’s Parliament also has to pass the thing, and members of the ruling Syriza party are already rebelling, once again threatening Prime Minister Alexis Tsipras’ government and raising the specter of snap elections. Parliaments in several eurozone states must ratify the deal, too, and several members of German Chancellor Angela Merkel’s government are rather cool on the notion. So are Finland and Slovakia. Even if they seal the deal, whether Greece can implement it and meet all the targets remains a huge question. Privatization targets, for one, are far more ambitious than what Greece managed to accomplish under governments that weren’t ideologically opposed to the concept. In short, we suspect we haven’t heard the last of “Grexit” brinksmanship, though the global risks remain minimal.

By , Reuters, 08/11/2015

MarketMinder's View: So first off, let’s clarify what China actually did. Before today, the government set a daily reference rate for the renminbi (also known as the yuan), then allowed the currency to trade within a 2% (in either direction) bandwidth. Today, they set that reference rate about 1.9% lower than yesterday’s close, and announced all future reference rates will be based on the prior day’s closing price and “market makers’ quotes.” This theoretically loosens the government’s control over the currency and allows markets to play a greater role, and it probably ends their efforts to prop up the currency in the wake of capital outflows. Some have interpreted this as a sign of desperation, believing officials are devaluing the currency to gain an export edge because they’re out of other ways to boost flagging growth—considering the service sector’s overall solid growth, however, that theory seems quite suspect. Fears of retaliatory devaluations, more colorfully known as currency wars, also seem wide of the mark. For all the talk of currency wars since 2010, we have yet to see one. When Japan weakened the yen in 2013, everyone thought Korea would devalue—it didn’t, and exports held up fine.

By , Financial Times, 08/11/2015

MarketMinder's View: Russia’s economy contracted -4.6% y/y in Q2—its second quarter of contraction, putting it in recession by one common definition and resurrecting crisis fears as sanctions, high inflation and low oil prices continue wreaking havoc. More trouble could very well be in store, but considering how disconnected Russia is from the global financial system—not to mention the fact it is a fraction of global GDP—global risks seem minimal. Plus, Russia is a well-known basket case. Nothing here shocks global markets.

By , The Wall Street Journal, 08/11/2015

MarketMinder's View: Here is one (big) reason we continue to believe now is not the time to load up on Energy stocks: Even with supply at a three-year high, production is nowhere close to slowing down as OPEC looks to maintain market share rather than boost prices by cutting supply. Saudi Arabia cut back a tad, but rising production in Iran and Iraq was more than enough to offset it, and the cartel doesn’t appear likely to cut total production any time soon, as other members rejected Libya and Algeria’s calls for cutbacks. US production is steady, too, as cost-cutting reduces wells’ breakeven prices, giving firms an incentive to keep pumping. As this highlights, breakeven prices in North Dakota range from $24 to $41 per barrel. So long as production outweighs demand, oil prices will likely remain low—pinching Energy firms’ profits.

By , The Telegraph, 08/10/2015

MarketMinder's View: Read this article and embrace its mantra to always think longer term in investing. Live it. Love it. The longer you are invested in stocks, historically, the greater your chances of earning a positive return. Now, this article is specific to British investors, but the same holds true for US stocks. On a daily basis, stocks are positive about half the time. But when holding periods reach ten years, stocks have been near uniformly positive (the S&P 500 rose in 93.8% of rolling 10-year periods since 1926). That doesn’t mean the next ten will be positive, but it is a powerful reminder to think longer term. And yet more evidence supporting our view the biggest risk investors face usually isn’t a bear market: It is missing out on bull market returns by reducing or staying out of stocks, and therefore losing the chance to experience equities’ long-term gains necessary to grow your portfolio.

By , Barron’s, 08/10/2015

MarketMinder's View: Highlighted by oil’s latest declines, commodities overall have been slammed, and in a vacuum, they may seem “due” for a rebound, as this article suggests. However, we’d suggest what goes down doesn’t necessarily come right back up, and in commodities markets today, global supply growth is outpacing demand. Now, demand hasn’t cratered—supply is just up due to myriad factors. In general, strong production spurred by a long cycle of higher prices from 2002 - 2011 built up a huge supply glut, which in turn knocked prices down—and it will likely take a while for that glut to correct. In particular, take the numerous headwinds in the oil industry: OPEC refuses to give up market share; US shale oil producers keep innovating and finding ways to cut costs while maintaining production (drillers have added oil rigs in recent weeks); potential new sources of oil beckon, too. These drivers suggest oil prices will remain low, and given the Energy sector’s price-sensitivity, their struggles likely persist—a big counterpoint to buying in now. And oil isn’t alone.    

By , The Wall Street Journal, 08/10/2015

MarketMinder's View: This started from an interesting—and important—premise: How much foreign exposure should American investors have in their portfolio? And it answers it more or less sensibly, at first, noting that most Americans have far too few foreign stocks, which represent over 40% of developed world market capitalization. But the rationale offered for going global is off target, in our view, and too short term. To us, investing globally is a key diversifier mitigating country-specific risks like political risk. You can’t get that from multinationals. And, from an opportunity standpoint, leadership constantly rotates: While the US is ahead in this bull cumulatively, it hasn’t led permanently—foreign and US stocks often trade leadership. Yet the theory here doesn’t acknowledge any of that, instead arguing investors should seek foreign stocks due to more accommodative central bank policy in the eurozone and Japan. Which is a continuation of the widespread fallacy correlating  “loose” monetary policy—highlighted by quantitative easing (QE)—with the current bull market. Yet history has shown markets have both risen and fallen during “easy” monetary conditions, and in our view, stocks have risen despite central bank policy, not because of it. Relative valuations also aren’t a great reason to buy abroad because valuations have little history of predicting market direction. We also don’t buy the potential risks foreign stocks allegedly face (contagion or uncertain monetary policy)—those are more false fears than reasons to avoid investing globally. Folks, once again, invest globally for the longer term because no one country’s stocks are best for all time.     

By , Bloomberg, 08/10/2015

MarketMinder's View: In our view, this gives Fed Chair Janet Yellen far too much credit for her role in financial markets. For one, asset market stability isn’t the Fed’s main job—rather, it is to act as lender of last resort for financial institutions. Second, we fail to see evidence “Yellen’s Fed is proving to be more effective than her predecessors’ at communicating to investors what comes next.” Does this sound particularly clear to you? “But, you know, it probably means something on the order of around six months or that type of thing. But, you know, it depends.” This article just seems like the latest in the erroneous global central banker lovefest we’ve seen since 2008. We’re sure Ms. Yellen is personally wonderful, but volatility in asset markets is volatile. Sometimes it’s up, sometimes down. Don’t overthink it. And don’t overthink “Fedspeak” either. Focus on central bankers’ actions, not their words, words, words.

By , Bloomberg, 08/10/2015

MarketMinder's View: For those worried that the US could be “held hostage” by foreign investors of US debt, consider: Not only did China trim its holdings, Japan—the second-largest holder of US debt—also cut its position by about $9.4 billion. Did the 10-Year yield skyrocket after the two largest foreign debt holders sold some Treasurys? Nope—after Monday’s market close, the 10-year Treasury yields 2.23%, down from 2.43% a year ago, before China reduced its holdings a bit. Global forces, not any one country, determine long-term rates, always and everywhere.  

By , Jiji Press, 08/10/2015

MarketMinder's View: After the Great Tohoku Earthquake and tsunami in 2011, Japan shut down its nuclear power plants, forcing the country to import most of its energy—a heavy toll on both businesses and consumers (until the last year’s falling energy prices eased that burden a bit). This triggered a debate over Japan’s use of nuclear power, pitting those fearful of nukes against economic interests. Japanese Prime Minister Shinzo Abe vowed to restart these plants as part of his (alleged) laser-like focus on the economy more than two years ago. Yet the Kyushu Electric Power Co. bringing its Sendai nuclear power plant back online tomorrow will mark the first nuclear reactor activity in Japan in that span. So while this marks a nice milestone, the restart of one plant isn’t a big gamechanger for Japan’s energy prospects. In our view, this shows how difficult a time Prime Minister Shinzo Abe is having in making his campaign pledges a reality.

By , The Wall Street Journal, 08/10/2015

MarketMinder's View: Congress didn’t address some tax provisions, known as “extenders,” before they went on their summer break, and many expect lawmakers to wait until the last minute before acting on them. These include the relatively popular ability for investors above the age of 70 ½ to directly donate their IRA required minimum distribution to charity and various other provisions. We aren’t in the tax advice business, but we’d suggest this article is a sensible look reminding folks that this behavior is typical for Congress: Using expiring tax breaks as bartering chips for other legislation is business as usual. They could also always retroactively apply tax breaks after they expire. So if you’re worried about the potential impact on you, talk with your tax professional, but we wouldn’t take the threat of these extenders lapsing too seriously at this point.

By , The Wall Street Journal, 08/07/2015

MarketMinder's View: The main sign being lackluster wage growth, which most take as a sign inflation will stay below-target and consumer spending will weaken. Thing is, nominal wage growth doesn’t tell you much about future inflation or spending. Inflation influences wages, not the other way around. If prices aren’t rising much, employers don’t need to crank up wages to attract and keep workers, even if the labor market is tight. A modest increase would suffice to keep wages ahead of inflation. As for spending, that is based more on an individual’s real (inflation-adjusted) disposable income, not pre-tax and pre-inflation hourly wages. As ever, there is little to no forward-looking value in the monthly jobs report.

By , The Washington Post, 08/07/2015

MarketMinder's View: This look at some retirees’ biggest financial regrets is a smorgasbord of life lessons and sage advice for folks at every stage of life. Here, as an appetizer, is one of our favorites: “One of the biggest regrets, of course, is not saving enough, especially when they were young. The power of compound interest is critical in retirement — you would have so much more in that retirement account had you been serious about saving in your 20’s or 30’s and not waited until your 40’s or, for some, their 50s. (For example, $10,000 invested at 4 percent with compound interest becomes $14,802 in 10 years. That $10,000 turns into $48,010 over 40 years.)” Save more! And don’t let that 4% quote discourage you. Stocks have achieved significantly higher long-term returns, historically, and your savings could easily compound at a higher rate.

By , The New York Times, 08/07/2015

MarketMinder's View: Throughout history, markets have proven remarkably adept at solving environmental problems and helping the Earth adapt to burgeoning population. These days, it’s fashionable to say society can battle pollution only if we curb growth and set strict artificial limits. But as this piece shows, the market is pretty darned good at sorting this stuff out, without limiting growth. “Market forces have accomplished in just a few years what environmentalists and social advocates have struggled for decades to achieve. Coal prices have plunged about 70 percent in the last four years. This year the number of underground and surface coal miners in the United States dropped more than 10 percent, to just over 80,000 workers. There are now more than twice as many workers in the fast-growing solar power industry than there are coal miners. … ‘It’s kind of the ultimate irony that market forces, and not the administration or environmentalists, have displaced coal,’ said Jorge Beristain, head of Americas metals and mining equity research for Deutsche Bank. ‘It’s human ingenuity that found a cheaper, cleaner way to skin the cat, which is by producing natural gas from fracking. They’re both fossil fuels, of course, but burning natural gas puts out a lot less carbon than coal.’” We suspect markets can deal as efficiently with similar issues in the future, without denting global prosperity.

By , Project Syndicate, 08/07/2015

MarketMinder's View: This is chock full of facts and good sense, a pithy explanation of why blaming austerity and the euro for Greece’s horrific recession is rather myopic—and why the country can prosper again, eventually, even without debt relief and bigger spending allowances. The kicker—and the question mark—is structural reforms to root out corruption and cronyism and level the playing field so innovators and entrepreneurs can flourish. Many believe Greece is doomed to perpetual bailouts and “debt colonialism,” keeping a permanent sense of crisis in the eurozone, but that isn’t the case. The future is wide open.

By , The Wall Street Journal, 08/07/2015

MarketMinder's View: Negotiations seem to be going well, though big gaps remain between Greece and its “quartet” of creditors on issues like privatization. We wouldn’t get too antsy about the supposed August 20 deadline, however. If Greece can’t reach a deal and run it through Parliament in time to get its first aid tranche before that August 20 ECB loan repayment is due, the EU can just extend another bridge loan, as it did when Greece had bills to pay last month.

By , MarketWatch, 08/07/2015

MarketMinder's View: The ETF in question tracks an equal-weighted S&P 500 index, which—as the name implies—holds an equal amount of all 500 companies. The index itself is weighted according to each company’s size, so large-cap firms take up more space. The equal-weighted index has underperformed the main index lately, which troubles people who view narrowing market breadth (a declining percentage of index constituents outperforming the whole) as a bad omen. But it really isn’t. In a cap-weighted index, when market breadth narrows during a bull market, it doesn’t mean the index is rickety. It just means large cap is outperforming, which normally happens for long stretches as bull markets mature. Declining market breadth isn’t a reason to be bearish—in our view, it is a reason to own the biggest stocks in the index.

By , The Telegraph, 08/07/2015

MarketMinder's View: And we agree! As the data here show, the start of a new tightening cycle isn’t inherently bearish, and returns can be quite strong after the central bank begins hiking. That’s true in the US, where no initial rate hike since 1970 has ended a bull market, and in the UK.

By , The Wall Street Journal, 08/07/2015

MarketMinder's View: US monthly oil production hit a record 9.7 million barrels per day (bpd) in March, and new data reveal it fell just a tad afterward, to 9.5 million bpd in May, continuing the long-running supply glut. Analysts estimate supply exceeds demand by about 500,000 bpd, but prices haven’t yet fallen far enough to motivate them to stop pumping in earnest. They’re still trying to cut costs without cutting production, lest revenues fall even more. Until pumping isn’t at all cost effective, supply will probably stay elevated. Notably, oil rig count has risen three weeks straight.

By , The Telegraph, 08/07/2015

MarketMinder's View: A 6.6% q/q jump—huzzah! Though we’d caution against expecting UK trade to soar in a straight line from here. Growth rates fluctuate. But still, this is another sign of UK economic strength. So, huzzah!

By , The Wall Street Journal, 08/07/2015

MarketMinder's View: Falling industrial production (IP) in Germany, France and Italy in June isn’t great news, but it doesn’t spell doom for the eurozone economy. IP has been choppy since the recovery began two years ago, yet the eurozone kept growing, as service sectors held up better. Growth might not speed up just yet, but the bloc doesn’t need gangbusters growth to rise—just results that beat expectations. Considering many expect Greece’s problems to tear the region’s economy asunder, we suspect continued modest, uneven growth should suffice to beat expectations.

By , Bloomberg, 08/07/2015

MarketMinder's View: Actually, it shows the Dow is a broken index whose bizarre construction and small number of constituents make it possible for a few companies to drag down the average. As for the death cross—a technical indicator that warns of trouble when an index’s 50-day moving average crosses below its 200-day average—that doesn’t really mean anything, either. Past performance doesn’t dictate future returns, and false signals abound no matter the index.

By , MarketWatch, 08/06/2015

MarketMinder's View: Why not? Because wages don’t drive inflation. The wage-price spiral is a myth. “The notion that wages push prices up is one of those bad ideas that keeps coming back to haunt us. On the surface, it makes perfect sense. If employers can’t fill open positions at the going rate, they have to lure workers with higher wages. Higher labor costs mean lower profits, so businesses raise prices to compensate. Now think about the implication for a moment. Why would a business passively pay a worker more than his marginal revenue product, or the additional revenue that worker generates? That would mean a reduction in profit margins and eventually operating at a loss. The late Milton Friedman taught us that there is no such thing as ‘cost-push’ inflation. In Friedman’s world, an increase in money-supply growth leads to increased demand for goods and services, which encourages firms to raise output, employment and selling prices. Eventually workers realize that all prices are rising and demand a higher wage. Labor costs follow. … Higher wages are a symptom of higher inflation, not a cause of it.”

By , The Telegraph, 08/06/2015

MarketMinder's View: Perhaps there is some froth in Silicon Valley’s venture capital scene, but lofty startup valuations aren’t evidence of a broad bubble. Publicly traded firms are on a much tamer run. As for all the pricey perks some firms offer employees, markets ultimately care about earnings, and Tech earnings are growing. If you have to look far outside equity markets for signs of unwarranted euphoria, that is usually a sign publicly traded firms aren’t overextended.

By , Bloomberg, 08/06/2015

MarketMinder's View: Reality being another round of falling oil prices, expiring hedges against falling prices, and difficulty raising cash from capital markets—all well-known. The writing has long been on the wall for Energy firms, particularly the smallest and less integrated. We’d expect to see a wave of consolidation before the sector turns the corner, and the fact that this hasn’t really started yet is one sign it is still too early for investors to go bottom-fishing in Energy. Another sign: As this article notes, producers have cut costs so much that their breakeven price is down to around $40 per barrel. As long as prices are above that level, firms still have incentive to produce, which keeps supply elevated and pressures prices.

By , The Economist, 08/06/2015

MarketMinder's View: The Fed has gained significant regulatory power since 2008, and as this highlights, officials aren’t done writing new rules. The aim—safeguarding the financial system—is noble enough, but in practice it is impossible. You can’t remove risk from the financial system. Stress tests, high capital requirements and living wills don’t ensure no big bank will ever fail, but they increase banks’ costs and weigh on loan supply. Everything in play at the moment has been around a while, so stocks have already discounted the impact. Investors are well aware of the winners and losers past Fed changes created. But future rule-writing opens the door for more unintended consequences in the future, so the Fed remains an under-the-radar source of political risk for stocks. Congress gets most of investors’ attention because its debates are so public, but Fed rules can impact stocks, too. And unlike Congress, the Fed writes and debates its rules behind closed doors, sometimes with only limited public comment periods, making it harder for stocks to pre-price the potential side effects. Again, we don’t see anything specific on the horizon today, but keep an eye on them.

By , The New York Times, 08/06/2015

MarketMinder's View: The mill’s story is a great tale of resilience and perseverance, and we quite enjoyed it. But the broader economic commentary and takeaways are backward-looking and give no insight into what lies ahead for the US economy or stocks. Yes, this cycle’s GDP growth is slower than past expansions, but stocks have already proven they don’t need rip-roaring growth—just a reality that outpaces expectations. Expectations remain fairly low, so modest growth is good enough. Also, there is more potential for reacceleration than this piece suggests. It cites demographics as a headwind, but population trends aren’t cyclical economic drivers. Nor are overseas economies in as bad of shape as the article implies. Leading indicators in non-commodity-dependent nations are still rising. The global economic outlook is much better than most give it credit for.

By , CNBC, 08/06/2015

MarketMinder's View: Though the West Coast ports labor dispute ended in late March, it took ports a few months to get back up to speed. But it was back to business as usual in June, when container volumes jumped in Los Angeles and Long Beach. Though anecdotal, this suggests the bottlenecks have cleared, which should help boost imports and exports, an incremental positive.

By , The Wall Street Journal, 08/06/2015

MarketMinder's View: Of course it hasn’t. The Fed will decide on that in September, when they meet and discuss all the new data. They’ll interpret and analyze and debate their (probably) competing opinions, and then they’ll vote, and then they’ll tell the world the result. There is no way anyone today can foresee how that entire process goes. We can’t even know the numbers, much less how humans with various beliefs and biases interpret them.

By , The Fiscal Times, 08/05/2015

MarketMinder's View: The global pressures being weakness in US factory orders, the Japanese economy, Chinese manufacturing, tepid European bank lending and slumping commodities.  It’s true the global expansion is not uniform across all sectors and countries, but some of the alleged weak spots discussed here are head-scratching. It cites weak US factory orders in July—July figures aren’t out yet. The Census Bureau released June’s final tally Monday, and it showed a small rise in core orders (excluding volatile transportation and defense). The article also cites the deep contraction in China’s Caixin manufacturing PMI, ignoring the official PMI’s higher reading (50, right on the line between growth and contraction), and failed to mention that the Caixin PMI has spent much of the past three years in contraction without derailing China’s expansion. (China’s service sector numbers are also much stronger.) Eurozone lending might be tepid if you view June’s 1% growth rate in a vacuum, but when you consider business lending is finally growing again after declining for a long while, we suspect things start looking better.  Most of all, this overlooks how falling commodity prices create winners as well as losers. They’re an instant cost-cut for firms outside the Energy and Materials sectors. Earnings outside Energy are on track to grow again. Overall, the global economy isn’t weak. Most of the Conference Board’s Leading Economic Indexes are in a solid uptrend, suggesting the world likely isn’t tipping into recession.

By , Christian Science Monitor , 08/05/2015

MarketMinder's View: Probably, which isn’t at all surprising considering Energy comprises a large chunk of Canada’s economy. While this is more evidence of commodity-dependent economies’ struggles, it likely isn’t a harbinger of the broader global economy. Brazil and Russia are either in, or likely soon to be in, recession, also largely due to sharply falling oil prices. Their combined economies are roughly twice Canada’s, yet the rest of the world continues to grow. Even if Canada joins them in recession all three countries combined still account for a small slice of the global economy. Continued growth in the US, UK, eurozone and China—all of which benefit from lower commodity prices—should pull up the weak parts of the world.

By , Financial Times, 08/05/2015

MarketMinder's View: The IMF’s board will decide to add China’s remninbi to its Special Drawing Rights (SDR) currency basket later this year, but in the meantime, a report from IMF staff suggests the renminbi isn’t ready for prime time just yet, citing incomplete liberalization of China’s currency exchange system. The renminbi is currently fully convertible for international trade, but not for investment, and the IMF appears to prefer a more open capital account, with greater foreign access to local stock and bond markets. Even if the IMF adds the renminbi to the SDR basket, this doesn’t mean central banks will immediately shed the dollar in favor of the renminbi. The dollar is the most deep, liquid and stable world currency, and the renminbi’s ascendance will likely be gradual, as supply of reserve-eligible renminbi-denominated assets is quite low. Rumors of the dollar’s looming demise as the world’s reserve currency remain greatly exaggerated.

By , The Wall Street Journal, 08/05/2015

MarketMinder's View: As always, we look past the trade deficit and focus on total trade—exports plus imports. Trade deficits get all the attention, but they don’t indicate economic health. They count imports as negative, even though rising imports signal healthy demand. So June’s import rise is encouraging, as this article notes! But exports were another matter, falling a tad month-over-month, and year-to-date exports remain behind 2014. That isn’t great, but about half of the year-to-date decline comes from oil-related products, making falling prices the primary culprit. Also, once you adjust for inflation, things look much better. Real exports, year to date, are 1.2% higher than 2014 at the same point.

By , The Guardian, 08/05/2015

MarketMinder's View: While we always take PMI-based GDP estimates with a grain of salt, this is more evidence the eurozone is weathering Greece’s troubles just fine. Greece’s problems, as bad as they are, are well-contained and haven’t prevented the region from continuing to grow. Spain’s current star-performer status also shows, once again, the peripheral countries are roaring back, and Germany and France don’t have to do all the heavy lifting. Austerity has not been the growth killer many predicted. Spain not only made tough cuts, but also implemented pro-growth economic reforms and is now leading the way. As for the -0.6% drop in June retail sales, while this isn’t great news, this doesn’t include spending on services. The eurozone’s service sector is huge and has been strong of late.

By , CNBC, 08/05/2015

MarketMinder's View: Cyber-crime is indeed an issue, for the people and businesses impacted, though we’d take that $400 billion number with a grain of salt, as it incorporates a lot of unknowns and uses assumptions to quantify opportunity cost. There is no counterfactual, so this is really just a guesstimate. But whether the cost is higher or lower, it likely isn’t sufficient to trigger a recession in the $77 trillion global economy. Also, protecting against cyber-crime adds to global output, as firms increase IT spending to beef up security to guard against system breaches. We don’t dismiss the damage hacking does to people and businesses, but it likely won’t derail the global expansion.

By , Associated Press, 08/05/2015

MarketMinder's View: Hip hip! Though, we also feel compelled to offer the same perspective we would if the non-manufacturing PMI were weak. It is a survey showing growth’s breadth, but it doesn’t measure actual output. So while the record high is fun, we’d caution against interpreting it as a sign of gangbusters growth.

By , Bloomberg, 08/05/2015

MarketMinder's View: Yes, but for completely different reasons. Commodities cratered in late 2008 because the economy was spiraling into recession, causing demand to fall sharply. The recent slump is due to a global supply glut, resulting from years of strong production to correct a supply shortage, ultimately going too far. Not good for commodity producers, but good for consumers and industries who benefit from lower input costs. Other than commodity prices dropping, the current environment is nothing like 2008.

By , Bloomberg, 08/04/2015

MarketMinder's View: And that trend is: Rising loan supply, demonstrated by the increase in banks’ willingness to lend. We highlight this less for its implications on consumer spending and more for its broader economic impact. Business lending is an important source of working capital, particularly for small businesses. The more eager banks are to lend, the easier it is for businesses to finance investment. Folks, there is a reason the yield spread (a proxy for banks’ profit margins) and the Leading Credit Index are part of the Conference Board’s Leading Economic Index: more credit typically leads to more economic activity. This broadly overlooked positive is one of the many reasons we expect the US expansion to continue.

By , Bloomberg, 08/04/2015

MarketMinder's View: And that trend is: Rising loan supply, demonstrated by the increase in banks’ willingness to lend. We highlight this less for its implications on consumer spending and more for its broader economic impact. Business lending is an important source of working capital, particularly for small businesses. The more eager banks are to lend, the easier it is for businesses to finance investment. Folks, there is a reason the yield spread (a proxy for banks’ profit margins) and the Leading Credit Index are part of the Conference Board’s Leading Economic Index: more credit typically leads to more economic activity. This broadly overlooked positive is one of the many reasons we expect the US expansion to continue.

By , Bloomberg, 08/04/2015

MarketMinder's View: While this focuses on banking supervision, regulations and culture, its themes and observations apply much more broadly. The notion that values influence behavior at least as much as rules do, for example, relates directly to the efforts to establish a uniform fiduciary standard to the investment advice/sales world—and explains why the proposed changes won’t guarantee advisers and brokers act in their clients’ best interest. “Fostering trust demands a pervading culture of doing the right thing even if the rules don’t require it. When serious money is at stake, that’s a tall order. Leaders therefore have to live that principle, not just talk about it.” Doing thorough due diligence to find whether an adviser walks the walk, instead of merely talking the talk, is key to finding the firm that’s right for you and likeliest to put you first. For more on this topic, see Todd Bliman’s column, “The Compass” and our 2/24/2015 commentary, “Be-Labor-ing the Fiduciary Standard.”

By , The New York Times, 08/04/2015

MarketMinder's View: Or mostly defaults, anyway. The issuer—a subsidiary of the Government Development Bank (GDB)—indeed missed about $58 million in interest payments on “moral obligation” bonds today, but there is some debate about whether this is an actual legal default. They missed the payment because the legislature didn’t appropriate the necessary funds, and the bonds don’t appear to carry a legal requirement for the agency to pay if funds aren’t appropriated. There is also some confusion on whether the GDB guaranteed the bonds, and it looks like it will ultimately be up to the courts to decide whether this is an official default. As far as markets are concerned, though, a missed payment is a missed payment, and this lapse—coupled with the administrative hijinks—probably hurts Puerto Rico’s standing on global capital markets and might cloud other ongoing debt restructuring talks there. Whatever the outcome, though, the impact for investors is likely slim, provided folks aren’t overconcentrated in Puerto Rican debt. Always diversify! For more, see our 7/8/2015 commentary, “Puerto Rico Can’t Afford Its Debt.”

By , Kathimerini, 08/04/2015

MarketMinder's View: Don’t hold your breath or anything, but talks between Greece and creditors over bailout number three appear to be going better than expected, and both sides are optimistic that they’ll reach a deal in time for Greece to repay a big ECB loan on August 20 without needing a separate bridge loan. However, the to-do list remains pretty long and includes contentious issues like privatization and phasing out early retirements. So there is still plenty of room for things to go awry.

By , EUbusiness, 08/04/2015

MarketMinder's View: The Trans-Pacific Partnership might be in limbo, but trade is still getting freer. The latest deal comes courtesy of the EU and Vietnam, which inked a broad pact on Tuesday. This probably won’t have a gigantic impact on global trade or growth, but stocks always enjoy free trade.

By , The Wall Street Journal, 08/04/2015

MarketMinder's View: Perhaps it is—at least, that is the conclusion of a new study by economists from the World Bank and Harvard, who compared the World Bank’s flagship report (which surveys mostly lawyers and accountants) with its surveys of business enterprises. They found that business people report much, much shorter permitting lag times than “Doing Business” displays. On the one hand, this speaks to weak institutions, lax enforcement, corruption and limited rule of law in many of these countries—rules are easy to get around if you know the right people or have the means to grease some palms. On the other hand, the discrepancy is a good reminder that no one report can fully capture how competitive any country is (or isn’t). Broad surveys like “Doing Business” and The Heritage Foundation’s “Index of Economic Freedom” are handy, but nothing is airtight or foolproof, and all are only as good as the data, biases and assumptions underpinning them.

By , FoxBusiness, 08/03/2015

MarketMinder's View: Let’s clear up some misperceptions about the implications of a Puerto Rico default. While it’s true some notable bond mutual funds and hedge funds hold a big chunk of Puerto Rican debt, only a couple of muni bond funds have outsized positions—unless the majority of your portfolio is in Puerto Rican debt, your pain will be limited. Second, many Puerto Rican bonds are insured, which likely means bond insurers work out deals to stave off default for as long as possible. Third, Puerto Rico’s potential fallout on broader markets is limited—its economy is half the size of Detroit, and if Detroit didn’t roil muni markets when it went bankrupt in 2013, we fail to see how Puerto Rico will do so either. Fourth, most of this is old news to markets—Puerto Rican yields have been elevated for a long while (prices fall when yields rise). Though the commonwealth’s issues are real and its struggles will persist, “average Americans” just aren’t likely to get knocked much (if at all) by a Puerto Rico default. For more, see our 7/8/2015 commentary, “Puerto Rico Can’t Afford Its Debt.”

By , The Wall Street Journal, 08/03/2015

MarketMinder's View: While this piece isn’t perfect, it does highlight how Greece’s problems truly are its own and why eurozone contagion fears are overwrought. The eurozone periphery outside Greece—Spain, Portugal, Ireland and Italy—is well on the road to recovery. Ireland and Spain are among the region’s fastest-growing economies, and Irish GDP is back at pre-crisis levels. Portugal and Italy have also resumed growing, albeit at slower rates. Greece, on the other hand, is likely back in recession, the degree of which will be known later this year. With The Conference Board’s Leading Economic Index (LEI) for the eurozone up 0.4% m/m in June, the region’s uneven, choppy growth looks likely to continue, despite Greece’s longstanding struggles.

By , CNN Money, 08/03/2015

MarketMinder's View: We agree with the general tenor of this piece—we’re optimistic about the US economy and market too! But not for the reasons laid out here, which are mostly backward-looking—handy confirmations of what has happened, but not telling about what will happen. For example, employment data tell you what businesses did in the recent past—they tell you nothing about what’s to come. Same with consumer confidence, which only tells you how folks felt at one given moment in the past (and nothing about how they’ll act). If it is data you seek, we suggest looking at The Conference Board’s Leading Economic Index (LEI), which was up 0.6% m/m in June—the 15th monthly rise in the past 16 months—as no US recession began while LEI was high and rising like it is now. And on the last note, while we caution investors from viewing a September Fed rate hike as inevitable, we agree the economy could handle it—and we’d actually prefer if the Fed finally got on with it already.

By , The Wall Street Journal , 08/03/2015

MarketMinder's View: Though the Trans-Pacific Partnership (TPP) is “98% concluded” according to Australia’s trade minister, a major sticking point has soured progress: dairy products. Canada doesn’t want its domestic producers milked by foreign exporters, an argument filled with holes as far as New Zealand is concerned. The disagreement has spilled over to other areas: Japan has suggested New Zealand could be excluded from talks, and the Kiwis, for their part, are annoyed at the Americans for forcing pharmaceutical protections on them while ignoring New Zealand’s dairy interests. Thus, trade officials have ended the current round of negotiations without a clear future meeting set. As disappointing as a lack of a deal may be, this isn’t reason for investors to cry over spilt milk—huge trade deals are notoriously difficult to complete due to all the vested interests at play. If it does become reality, great—markets love more free trade! But if doesn’t, it’s the absence of a positive rather than a real market negative, and the bull won’t cower if the TPP falls through.

By , Financial Times, 08/03/2015

MarketMinder's View: This piece gives you seven reasons why gold is struggling as an investment, from lower central bank demand to lower “everyday” use—most of which seem off-base to us. Maybe some of those factoids do influence sentiment, but assuming they drive gold’s price assumes gold is an inflation hedge and safety blanket. Neither of those things is true. Gold is a commodity with limited physical demand, making it subject mostly to sentiment. Something so fickle has little to no place in a diversified portfolio, in our view. For long-term investors, owning comes with a huge opportunity cost.

By , The Telegraph, 08/03/2015

MarketMinder's View: Here is some positive news from across the Atlantic: UK bank lending to businesses is up year-over-year for the first time since the Financial Crisis. Given how tepid UK loan growth has been—due to monetary policy’s effect on the yield curve and burdensome regulations—this is a nice tidbit to consider within the broader story of the UK’s current expansion.