Back in 2012, Stephanie Pomboy, founder of MacroMavens, made a rather scary prediction in a Barron’s interview. She called for the end of fiat money and a return to gold as the backing of global monetary value. The argument wasn’t an uncommon one at the time. Central banks around the world were printing money as fast as they could to dig their economies out of the deepest recession in nearly eight decades. The Federal Reserve was well on its way to quadrupling its assets to $3 trillion from 2007. The Bank of Japan was embarking on a plan to double… Read More

Back in 2012, Stephanie Pomboy, founder of MacroMavens, made a rather scary prediction in a Barron’s interview. She called for the end of fiat money and a return to gold as the backing of global monetary value. The argument wasn’t an uncommon one at the time. Central banks around the world were printing money as fast as they could to dig their economies out of the deepest recession in nearly eight decades. The Federal Reserve was well on its way to quadrupling its assets to $3 trillion from 2007. The Bank of Japan was embarking on a plan to double its own assets by 2015. Even the conservative European Central Bank (ECB) was cutting rates, though it did not join the asset-buying party until recently. #-ad_banner-#The idea was that if debtor nations were going to devalue their own currencies by massive money-printing programs, then creditor nations would demand a return to gold-backed monies. Pomboy’s prediction for a return to gold has obviously not come about yet. To be fair, her five-year window doesn’t close until mid-2017. While I don’t agree that fiat money will come to an end, Pomboy certainly hasn’t been alone in calling for investors to look to… Read More

Still reeling from the financial crisis of 2008, many low-income Americans are still struggling to gain traction and rebuild their savings. Getting away from a paycheck-to-paycheck lifestyle has been an uphill struggle, and lender World Acceptance Corp. (Nasdaq: WRLD) has done this demographic no favors. According to a series of reports by investigative journalists at Propublica.org, World Acceptance has engaged in a series of predatory lending practices. Key highlights from that report include: • The company targets distressed consumers (often near military bases) and after fees, the firm charges interest rates that can exceed 100%. •… Read More

Still reeling from the financial crisis of 2008, many low-income Americans are still struggling to gain traction and rebuild their savings. Getting away from a paycheck-to-paycheck lifestyle has been an uphill struggle, and lender World Acceptance Corp. (Nasdaq: WRLD) has done this demographic no favors. According to a series of reports by investigative journalists at Propublica.org, World Acceptance has engaged in a series of predatory lending practices. Key highlights from that report include: • The company targets distressed consumers (often near military bases) and after fees, the firm charges interest rates that can exceed 100%. • Unlike payday loans, which are usually paid back in a short time, WRLD focuses on installment loans with long payback periods, encouraging consumers to continually refinance such loans to let interest charges pile up and principal balances go untouched. • When consumers begin to fall too far behind in their growing loan balance, their personal possessions are at risk of being repossessed, leading to a further downward financial spiral. • WRLD sells a range of insurance policies to protect against further financial distress, though such policies rarely pay off for consumers. In WRLD’s 10-K, you… Read More

Although it doesn’t always hold true, the reputation of small companies for explosive growth is very often well-deserved. I mean, if your advisor mentioned a small firm with more than 18-fold earnings growth in the past seven years and stock gains of nearly 600% in the past six, wouldn’t you want to hear more? And the thing is, I’m not just making up these numbers for the sake of argument. They’re real. After being founded in 2006, the company I’m referring to hit the ground running, growing revenues more than 30-fold from $8 million in 2007… Read More

Although it doesn’t always hold true, the reputation of small companies for explosive growth is very often well-deserved. I mean, if your advisor mentioned a small firm with more than 18-fold earnings growth in the past seven years and stock gains of nearly 600% in the past six, wouldn’t you want to hear more? And the thing is, I’m not just making up these numbers for the sake of argument. They’re real. After being founded in 2006, the company I’m referring to hit the ground running, growing revenues more than 30-fold from $8 million in 2007 to $241 million in 2013 and $254 million during the past 12 months. Since 2007, earnings per share (EPS) have spiked to $5.28 from $0.29 — that 18-fold increase I mentioned. Since it began trading on the New York Stock Exchange in September 2008, the firm’s stock has rocketed 590% from $6.09 to $41.70. The price has been even higher, peaking around $54 in December 2013. #-ad_banner-#You may be wondering exactly what this company does to be so wildly successful. It must be something phenomenal like developing a crucial vaccine, creating the most advanced artificial intelligence… Read More

Tuesday, September 9, 2014 is a day that Apple, Inc. (Nasdaq: AAPL) CEO Tim Cook has been anticipating for a very long time. Though he took the reins from Steve Jobs nearly three years ago, Apple’s product rollout plans have been a bit underwhelming ever since. As Laurence Balter, a leading technology analyst, told the New York Times in June, “all we hear from Cook is there are some great products coming down the pike.” #-ad_banner-#Yet, at Apple’s much-hyped new product event slated for Tuesday, Balter and others will likely be silenced. Signs are pointing to a… Read More

Tuesday, September 9, 2014 is a day that Apple, Inc. (Nasdaq: AAPL) CEO Tim Cook has been anticipating for a very long time. Though he took the reins from Steve Jobs nearly three years ago, Apple’s product rollout plans have been a bit underwhelming ever since. As Laurence Balter, a leading technology analyst, told the New York Times in June, “all we hear from Cook is there are some great products coming down the pike.” #-ad_banner-#Yet, at Apple’s much-hyped new product event slated for Tuesday, Balter and others will likely be silenced. Signs are pointing to a blockbuster roll-out, led by a much-improved iPhone and perhaps a long-awaited smartwatch. Expectations are also running high that Apple will share its view of the Internet of Things, which envisions Apple hardware and software powering a wide range of household devices. Analysts at Oppenheimer speak for many with their view of the iPhone 6: “We feel comfortable predicting that iPhone 6 will be the best iPhone to date, with its larger displays, sharper and faster camera, more convenient and intuitive interfaces, more acute contextual awareness, and expanding soft suite and application platforms.” Clearly, investors are already frothing: Since late April,… Read More

Einstein is rumored to have defined insanity as “doing the same thing over and over again and expecting different results.” It’s one of the most useful rules of thumb out there. It’s especially helpful in the money management business.  As the various indices hit record highs, it behooves prudent investors to remember Dr. Einstein’s definition. There is a cycle that investors get caught up in. When they make money, investors feel good. When a large group of people start to feel too good, market discipline gets a little loosey goosey, especially when it comes to stock valuations.  As stock price-to-earnings… Read More

Einstein is rumored to have defined insanity as “doing the same thing over and over again and expecting different results.” It’s one of the most useful rules of thumb out there. It’s especially helpful in the money management business.  As the various indices hit record highs, it behooves prudent investors to remember Dr. Einstein’s definition. There is a cycle that investors get caught up in. When they make money, investors feel good. When a large group of people start to feel too good, market discipline gets a little loosey goosey, especially when it comes to stock valuations.  As stock price-to-earnings (P/E) ratios start to expand, investors start to rationalize: “Well, it went from 18 to 22, that’s not really that much more.” And before you know it, investors have ventured deep into overvaluation territory.  I drew a chart looking at peak P/E ratios for the S&P 500 index going back to pre-crash levels in 2006-2007. Honestly, I was surprised and a little alarmed by what I found. The trailing P/E ratio for the S&P 500 has basically returned to the same level it was before the wheels started falling off of the market… Read More

Marvell Technology (NASDAQ: MRVL), a maker of flash memory drives and semiconductor chips, has had a rough summer. The company faced challenges with one of its Asian customers and a greater-than-expected decline in demand for 3G equipment has caused investors to doubt future growth prospects. Last month, the company announced strong second-quarter earnings of $0.34 per share, up 48% from a year ago and beating analyst expectations of $0.28. Revenue of $961.5 million was in line with estimates and up 19% versus the same quarter last year. But despite the strong performance, the company issued weak guidance of… Read More

Marvell Technology (NASDAQ: MRVL), a maker of flash memory drives and semiconductor chips, has had a rough summer. The company faced challenges with one of its Asian customers and a greater-than-expected decline in demand for 3G equipment has caused investors to doubt future growth prospects. Last month, the company announced strong second-quarter earnings of $0.34 per share, up 48% from a year ago and beating analyst expectations of $0.28. Revenue of $961.5 million was in line with estimates and up 19% versus the same quarter last year. But despite the strong performance, the company issued weak guidance of $0.27 to $0.31 per share for the third quarter, below consensus expectations for $0.32. The lower 3G demand is likely to blame for the stock’s decline this summer. Shares dropped from a spring high well above $16 to below $13 last month. At this point, MRVL appears to have bottomed. Investors have likely priced in the bad news, so it is unlikely that the stock will continue to decline. While the bad news has captured headlines, there is a silver lining. Some analysts believe that with 3G demand waning, the company will be… Read More

The S&P 500 finally managed to close above the psychologically important round number of 2,000 last week. However, on both the daily and weekly chart, there is troublesome momentum divergence, with indicators such as Moving Average Convergence/Divergence (MACD) and the Relative Strength Index (RSI) at lower peaks than when previous new highs were reached. In other words, it is a challenging time to be a bull or a bear. One way to trade this kind of market is to search for pockets of strength. According to a recent… Read More

The S&P 500 finally managed to close above the psychologically important round number of 2,000 last week. However, on both the daily and weekly chart, there is troublesome momentum divergence, with indicators such as Moving Average Convergence/Divergence (MACD) and the Relative Strength Index (RSI) at lower peaks than when previous new highs were reached. In other words, it is a challenging time to be a bull or a bear. One way to trade this kind of market is to search for pockets of strength. According to a recent Commerce Department report, new home construction rose nearly 16% in July to a seasonally adjusted rate of 1.09 million houses. Applications for building permits increased 8.1% last month to an annual rate of 1.05 million. #-ad_banner-#In addition to more new homes being built, when people are feeling flush, they’re more likely to put money into fixing up their existing homes. Consumer confidence hit a seven-year high in August, with the Conference Board reporting an increase to 92.4 this month from 90.3 in July. That leads me the country’s leading home improvement retailers, Home Depot (NYSE: HD)… Read More

All major U.S. indices closed higher for the fourth consecutive week, this time led by the small-cap Russell 2000, which was up 1.2%. Year to date, however, the Russell has by far been the weakest, up just 0.9%. This puts the burden for continued broad market leadership squarely on the other traditional market leader — technology. The tech-heavy Nasdaq 100 has been up to the challenge so far, posting a 13.7% gain year to date, and is a major reason why the S&P 500 is up 8.4% in 2014. But with small caps… Read More

All major U.S. indices closed higher for the fourth consecutive week, this time led by the small-cap Russell 2000, which was up 1.2%. Year to date, however, the Russell has by far been the weakest, up just 0.9%. This puts the burden for continued broad market leadership squarely on the other traditional market leader — technology. The tech-heavy Nasdaq 100 has been up to the challenge so far, posting a 13.7% gain year to date, and is a major reason why the S&P 500 is up 8.4% in 2014. But with small caps already weak, if and when technology stocks stop leading, the overall market is likely to run into some serious problems. My own metric, which is based on ETF asset flows, shows that the largest inflow of sector-related investor assets last week was into defensive utilities and out of industrials. Accordingly, last week’s strongest sector was utilities, up 2%, with industrials the only sector to finish the week in negative territory. Be Aware Of September Seasonal Weakness As we move into September, a good place to… Read More

Like many cash-strapped investors just starting out, I was convinced I could “maximize” my tiny investment account by dipping my toes into the micro-cap end of the stock market pool. Did it make me a millionaire overnight? Put gently: not even close. #-ad_banner-#​I was left with a dwindling account balance and worthless shares of companies that had long-since imploded. In the investing world, we call the sacrifice of those beginner funds a “grudge” account.  I prefer to think of it as tuition paid into an investing career that would live on much… Read More

Like many cash-strapped investors just starting out, I was convinced I could “maximize” my tiny investment account by dipping my toes into the micro-cap end of the stock market pool. Did it make me a millionaire overnight? Put gently: not even close. #-ad_banner-#​I was left with a dwindling account balance and worthless shares of companies that had long-since imploded. In the investing world, we call the sacrifice of those beginner funds a “grudge” account.  I prefer to think of it as tuition paid into an investing career that would live on much longer than most of the stocks I traded back then. Although my initial investments were long-gone, one thing that did remain was a passion for finding healthy companies with smaller capitalizations and real business plans.   Fortunately, there are some real gurus in this space — one, in particular, reigns as king. Chuck Royce, of Royce & Associates, has over four decades of experience in capital markets, making a name for himself in primarily small-cap investing. His methodology seems simple: find stocks that are relatively undervalued with low debt and above-average returns. Read More

For some shareholders, Christmas came a few months early this year. With every earnings season comes announcements of success, failure and future projections.  The outperformers are often rewarded with better analyst ratings, boosted price targets and perhaps an increased stock price.  For shareholders, it can mean increased dividends and some extra percentage points tacked on to their portfolios. #-ad_banner-#​But what about those companies that had blowout quarters and now sit on piles of cash? Those focused on boosting shareholder value often turn toward a one-time event to spread the wealth around, known as… Read More

For some shareholders, Christmas came a few months early this year. With every earnings season comes announcements of success, failure and future projections.  The outperformers are often rewarded with better analyst ratings, boosted price targets and perhaps an increased stock price.  For shareholders, it can mean increased dividends and some extra percentage points tacked on to their portfolios. #-ad_banner-#​But what about those companies that had blowout quarters and now sit on piles of cash? Those focused on boosting shareholder value often turn toward a one-time event to spread the wealth around, known as a special dividend. There are a few things about special dividends that make them… special. First, they are usually issued in addition to the company’s existing dividend. Second, the nature of these one-time payments can catch investors, traders, and algorithms off guard, which can result in a burst of buying to push the stock price up once the stock goes ex-dividend. This creates an opportunity to both collect the dividend and squeeze a small gain out of the stock price at the same time. While shorter-term trades like this… Read More