Author: Andrew Packer

Personal finance

ValueWalk: Demand for Financial Advice Up 20% In Year – What’s Driving the Surge?

Posted on by Andrew Packer

The world has become an increasingly complex place. Finances are no exception. Yet over the past few decades, the rise of investment tools like a company 401(k) plan or IRA have popped up. These tools typically don’t come with much of an instruction manual.

So it’s no surprise that investors are looking for financial advice. The latest data suggests a 21.2 percent jump in the past year alone.

Why the big move? With a jump in inflation to 40-year highs, geopolitical fears, and a never-ending stream of debt-ceiling crises, there’s a lot for investors to take in.

Financial advice helps individuals look holistically at their wealth, not just as an investor or as a saver. Creating a comprehensive plan to cover one’s specific needs, goals, and dreams is key to success. Yet many fail to do so, or fail to change their plans as conditions change.

Today, investors have a choice with human interaction, or the use of financial planning apps and other tools. Plus, artificial intelligence is starting to play a role.

Those who have never sought investment advice, or haven’t in more than 5 years, may want to do so. Even those who feel like they’re on the right track could benefit from having an outside expert weigh in.

 

To read the full article, click here.

Cryptocurrencies

Bitcoin Magazine: How I Preserve My Wealth With Bitcoin

Posted on by Andrew Packer

Investors like cryptocurrencies when they’re moving higher. It’s been one of the best ways to make a quick buck in a bull market. However, those prices can quickly drop, and by much more than a bear market in stocks.

However, investors who look at the space for the long term may want to look at holding rather than trading. And the top crypto for that activity remains bitcoin.

While bitcoin has become the least volatile cryptocurrency, it can have 50 percent drops or more in the span of a year. Even during a bull run. However, over longer periods, owning bitcoin has far outpaced other asset classes.

More importantly, it’s outpaced inflation. Given the cryptocurrency’s use as, well, a currency, storing some wealth in bitcoin that can be used for trade in the future acts as a digital savings account. It’s also a far more liquid asset than real estate, and trades 24/7.

And as investors have seen with this year’s banking crises, bitcoin’s decentralized nature reduces the possibility for a single point of failure. Added to other assets such as stocks and bonds, a portfolio can enjoy more diversification and higher returns.

With the ease of buying and storing cryptocurrencies rising, starting to diversify into this asst class now can help lead to better returns in the years ahead.

 

To read the full analysis, click here.

Commodities

TheDailyGold: Gold Stocks Oversold & Approaching a Bounce

Posted on by Andrew Packer

One simple, but effective, investment strategy is to look for stocks or sectors that are oversold or overbought. A stock that has a fantastic rally might attract attention. However, even a great company can see shares move too far, too fast.

Likewise, it’s best to avoid a stock in a downtrend. At some point, though, assets can become too oversold. Then they tend to have a strong bounce.

Investors who can avoid buying overbought stocks and who buy oversold stocks can likely see market-beating gains. Currently, gold stocks look oversold.

A number of factors drive that analysis. Looking at the percentage of gold stocks under their 20- and 50-day moving average is one sign. It shows that the market is ignoring these stocks. And that could mean shares have now fallen too far given that they’re now out of favor.

In the meantime, gold stocks tend to move relative to gold prices. Gold prices are coming down, but appear to have long-term support in the $1,850-$1,900 range.

Traders looking for a contrarian opportunity here could find one with gold stocks in the coming weeks. A modest move higher in gold prices of 10-20 percent could mean a 20-40 percent move higher for major gold mining stocks.

Just beware that this sector tends to be more volatile than others. And when gold is out of favor, gold mining stocks tend to get heavily punished. That’s why this space works well for oversold bounces.

 

To watch the full analysis, click here.

Income investing

Dividend Growth Investor: Eight Companies Rewarding Shareholders With a Raise

Posted on by Andrew Packer

The stock market has moved higher in recent weeks, even with investors remaining skeptical about the move. While there appears to be rising risks in tech stocks, other strategies remain overlooked at the moment.

Investing in overlooked parts of the market offers a better value. And it likely has more upside potential as tech-oriented stocks peak and decline. Best of all, many overlooked parts of the market also offer strong dividends for investors.

21 companies have announced dividend increases over the past week. Of those, a full 8 companies have raised dividends for at least 10 years in a row.

Companies that can continue to increase their payout over time tend to see continued share growth. Investors who reinvest growing dividends can further compound their wealth more quickly.

One recent dividend increase came from home improvement retail chain Lowe’s (LOW). The company raised its dividend to $1.10 from $1.15, for a 4.8 percent increase. That’s about in-line with the latest inflation number.

It’s also the 61st year that Lowe’s has raised its dividend payout. Over the past 10 years, Lowe’s has raised its dividend at an annualized rate closer to 20 percent.

While the current yield looks low at 2.1 percent, increased dividend payouts, combined with higher earnings, tend to drive shares higher over time.

 

To view the full list of companies raising their dividends now, click here.

Tech stocks

Game of Trades: Why the Tech bubble is About to Trigger the Largest Market Collapse Since 2008

Posted on by Andrew Packer

While the markets have focused largely on the debt ceiling debates in the past few weeks, tech stocks have broken the sideways trend. They’ve moved higher on the back of not only strong earnings, but on the future earnings potential of artificial intelligence (AI).

That’s helped several hardware and software companies see a big move higher. It’s even been a move greater than the mini-AI rally at the start of the year.

While that’s helped a handful of stocks, it’s created a higher likelihood of a market pullback. That’s because the recent market move higher has largely occurred amid a backdrop of a narrow rally.

Big cap tech stocks dominate the market indices, which are weighed by market cap. So it only takes a big move from one big-name stock to rally the market as a whole.

The push into AI stocks in the past few weeks has created one of the narrowest market breadths in history. And it’s not just prices that have jumped higher. The move higher has exceeded an increase in potential profits. The result? Markets are at their highest valuation relative to revenues since the tech bubble.

That could set up the market for a big drop, particularly in tech stocks, in the months ahead.

 

To watch the full analysis, click here.

Stock market strategies

Tastylive: The Most Important Number in Options Trading

Posted on by Andrew Packer

As investors and traders alike have increased the use of options, many have entered the space with limited knowledge. Understanding how options work and can be priced can be crucial to making a fortune… or avoiding a loss.

One overlooked concept is that of implied volatility, or IV. That’s because the concept actually covers three different numbers that need to be broken down.

The first, and most followed concept, is the IVx. This looks at a 30-day return on a underlying asset such a stock. It tells investors what a reasonable one-standard deviation move can look like for an asset over the next year.

This is a way of looking at the potential volatility of an option. Option buyers will want to buy when volatility is low. Option sellers will want to sell when volatility is high.

The second key IV number is to look at IVx by expiration date. Since options have different dates, it can give a better sense of the specific risk for a specific trade. Given the rise of weekly, or even daily, options trades, this number can offer a better return than those looking at monthly options.

Finally, there’s the IV of the individual option. That looks at the specific strike price. And it can indicate the potential risk of a certain strike price.

 

To watch the full video, click here.

Stock market

Phoenix Capital Research: There’s Something “Unusual” About This Market Rally… I Think I Know What It Is

Posted on by Andrew Packer

Stocks are bullish, despite some negative day-to-day headlines. The S&P 500’s 200-day moving average is moving higher. That’s a good sign that the bear market of 2022 is receding rather than likely to swipe again.

However, there are some divergencies between the overall market headline and some specific sectors. They’re warning of potential danger for investors in some parts of the economy now.

For instance, retail stocks are, on average, still trading near their October lows. And tech stocks, which usually trade with inflation-adjusted Treasuries, have soared in value. Yet Treasury yields have dipped instead.

This divergence can largely be explained by the nature of market indices. They have a weighted value. Larger companies make up a bigger part of the markets, and they also make up a bigger part of the index.

Today, a handful of big tech companies account for nearly 25 percent of the S&P 500’s weighting. If there were an equal weighting of S&P 500 companies, the index would be down. Most companies are down this year as well, a fact unseen in the headline market numbers.

A divergence can be resolved in one of two ways. Underperforming assets can catch up. Or overvalued assets can decline. With the fearful headlines right now, it’s likely that smaller stocks can rally. But they’ll need strong earnings to maintain that move higher.

 

To read the full analysis, click here.

Economy

Meet Kevin: The Fed U-Turn & Banking Flip

Posted on by Andrew Packer

The banking crisis has calmed in recent weeks. And the Federal Reserve has suggested that it’s done raising interest rates for now. While those are positive developments, the economy could still face negative consequences ahead.

Recent comments from Fed officials have suggested that there could be more interest rate hikes down the line. It just depends on whether or not inflation continues to trend lower or not.

But there could also be a call for banks to increase their reserves. Rather than keep $0.05 in deposits for every $1 in loans, or 20-to-1 leverage, a move to less leverage, such as 10-to-1 has been proposed. At its extreme, banks may even have to keep $0.40 of every $1.

In that scenario, banks are far less profitable. And they’ll only want to make loans that can get them the highest interest rate.

On the plus side, that high reserve level would likely lead to fewer bank failures. And banks wouldn’t have to make sweet terms in an attempt to increase profitability.

However, recent bank failures have occurred due to their investment in long-dated U.S. Treasuries before interest rates rose. That scenario could still occur, even with higher deposit levels.

These comments suggest that the banking system may still face a crisis. And that regulators are looking into how to prevent it. Investors should still tread with caution in this sector.

 

To watch the full video, click here.

Economy

GMO: The Curious Incident of the Elevated Profit Margins

Posted on by Andrew Packer

For the past decade, profit margins for U.S. firms have been elevated compared to their historic average. Predictions for a normalization of profit margins have yet to come true.

One possible explanation comes from increased leverage in the U.S. financial system. Permanent government deficits and big spending may be the major reason for higher corporate profit margins. Investors who expect this trend to continue can see high returns going forward. Those expecting a reversion back may expect lower prices.

From 1950 until 2000, profit margins for American businesses averaged between 5-7 percent. That moved into a 9-10 percent range by 2010.

One factor may be declining savings and increasing leverage. Essentially, households who save withhold money from the economy. With savings rates declining over the past few decades, there’s been more capital in risk markets like stocks.

With more capital to draw on, companies have been able to find more projects with a high profit margin.

However, no trend lasts forever. And it’s possible that corporate profit margins drop back to their historic average. But, if that happens, prices would need to fall substantially to keep valuations similar to where they are today.

Investors should be prepared for a substantial drop in stocks on a sustained decline in corporate earnings.

 

To read the full analysis, click here.

Stock market

Elliott Wave Options: Debt Ceiling Rally Means Nothing Yet

Posted on by Andrew Packer

The market has been largely rangebound for the past few weeks. Investors have faced the potential of a U.S. government debt default. That’s led to caution.

However, markets broke higher last week, and headlines suggested that an upcoming deal kept markets from falling. That move higher has been impacted as some members of the Federal Reserve have stated that they may not be done raising interest rates. So what can investors expect from these contradictory signals?

Last week’s market pop higher, which continued into Monday, could be the final wave of an Elliott Wave.

In the five-wave pattern, the break higher tends to be bullish. But the overall small move throughout the current wave and contradictory signals have kept the move muted.

This move suggests that markets are waiting for a full resolution on the debt ceiling before they head higher. That’s why bad news isn’t sending stocks down too far. And it’s also why good news tends to prove short-lived.

Meanwhile, the banking sector is tightening credit on its own. So despite some comments to the contrary, it’s possible that the Fed is truly done raising interest rates. That could be good for the stock market going forward, as the economy adjusts to the current levels.

 

To watch the full analysis, click here.