The surprising truth about when bear markets occur
The popular wisdom that bear markets occur at expensive valuations is unsubstantiated fiction. The truth is bear markets occur all the time at a wide range of valuation levels.
Read MoreThe exploitation of easy money
Rock bottom interest rates and easy money are nothing new to corporations. The cost of debt capital is hitting 50 year lows across the board. But who has taken advantage and how aggressively?
Read MoreThe bubble nobody can resist
Almost nobody can resist the allure of a market appreciating at triple digits. The rapid increase in the Chinese equity market is driving up global valuations. Even index players are getting into the game. FTSE, the index provider for the popular Vanguard Emerging Market ETF (VWO) has decided to include Chinese A shares in its indexes–further proof that owning a market-capitalization weighted index may be a poor investment strategy. The tech and small cap heavy Shenzhen exchange trades at a price to earnings ratio of 50x. The Shanghai exchange trades at at 33x, and the Hong Kong exchange is at 20x.
Read MoreA paradigm shift for profit margins
Corporate executives have two key objectives: generating profits and allocating firm capital to maximize those profits. A key consideration is whether to finance those objectives through operating cash flow, debt issuance or equity issuance. Given that interest rates are at all time lows and the FOMC is poised to tighten monetary policy, investors should understand the impact of rising interest rates on corporate earnings and profit margins. Below, I look at trends in profit margins, the cost of debt over the last five decades, and the implications for earnings.
Read MoreContinued U.S. dollar strength is not a foregone conclusion
The Dollar Index (DXY) just recorded the 3rd strongest nine month move back to 1967. It appreciated 23.3% from July 2014 to March 2015. In a few short quarters investors have forgotten about the persistent 50 year weakening of the dollar, shown below. The recent move appears on first glance to bear the distinction of being the lone cyclical strengthening which occurred PRIOR to an actual Fed Funds rate hike. One could easily argue, however, that the tapering of quantitative easing served as the de facto rate "hike".
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