The amazing resilience of the stock market

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NorthReport

People who bot stock to hold for the long term must be doing very well.

 

https://ca.finance.yahoo.com/echarts?s=%5EGSPC#symbol=%5EGSPC;range=my

 

NorthReport
NorthReport

All four major U.S. equity benchmarks climbed to record highs as oil jumped on optimism OPEC will agree to cut output. The yen rose as markets digested reports of a tsunami warning in the Fukushima region.

The S&P 500 Index, the Dow Jones Industrial Average, the Nasdaq Composite Index and the Russell 2000 Index rallied together to their all-time peaks for the first time since 1999. Oil surged as Iran signaled optimism that OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster unity before next week’s meeting in Vienna. The dollar halted its longest advance ever against the euro. The yen climbed after a magnitude 7.3 earthquake struck Japan off the coast of Fukushima, home to the nuclear power plant badly damaged in a March 2011 quake, triggering a tsunami alert.

American stocks achieved the new milestone as companies ended a five-quarter profit slump and Donald Trump’s election fueled optimism that his plans to cut taxes and boost fiscal spending will benefit industries more geared toward economic growth. Acknowledging the strength in the economy, Federal Reserve Chair Janet Yellen said Thursday that the central bank is close to lifting interest rates.

“There’s optimism that it’s more likely that Trump is going to put us on an economic fast track versus Clinton,” said Terry Morris, manager director of equities at BB&T Institutional Investment Advisors in Wyomissing, Pennsylvania. “The election had something to do with this, and I also think there’s some short covering going on. People that were hedging the election had to rush to cover after the news, and I think generally the perception is the economy is starting to pick up as the Fed is likely to raise rates in December.”

Traders are now pricing in a 100 percent chance of a move next month, compared with a 68 percent probability in the beginning of November. If the Fed doesn’t act as expected, it may bring on more market turmoil, says Seven Investment Management’s Ben Kumar.

 

NorthReport

A heavy dose of reality is what the naysayers around here need.

These Charts Show That Trump Is Bringing the 1990s Back to Markets
https://www.bloomberg.com/news/articles/2016-11-23/these-charts-show-tha...

NorthReport
NorthReport

The business community appears to be very happy with Trump at least so far, and as far as Canada is concerned it looks like Trudeau dodged a trade bullet

Investors' Economic Optimism Surges to Level Not Seen Since 2011

https://www.bloomberg.com/news/articles/2017-02-14/investors-economic-op...

NorthReport

Nonsense, buy Amazon. It would not surprise to see it hit $1,500 a share over the next year.

http://www.cnbc.com/2017/04/25/amazon-gets-downgraded-on-wall-street-for...

 

NorthReport

Amazon Prime Now Has 80 Million Members

http://fortune.com/2017/04/25/amazon-prime-growing-fast/

SeekingAPolitic...

http://www.marketwatch.com/story/central-bank-buying-still-only-flow-tha...

https://seekingalpha.com/article/4064824-central-banks-massive-incursion...

http://www.reuters.com/investigates/special-report/usa-buybacks-cannibal...

Why are stockmarkets going up? Unlike NR which seems to be booster for the stockmarket I will try to take more quantifiative approach.

In the first article we see a graph from 2006 to 2017 where the central banks have purchased around 11 trilion in variuos asset classes.  This how stockmarkets are influenced by central bank buying.  Even if the banks do not buy stock directly(Which they certainly do) for example buying mortages bonds.  How does buying bonds affect stockmarket for example 500 billion a year in housing mortage bonds, when the central bank buys the 500 billion someone else does have ability to buy those assets.  Other investors wanted to buy those bonds but now they are no longer available on the market.  These investors have money sitting cash because they then buy the mortage bonds.  Generally speaking cash wants to be invested in somesort asset class, these individuales have been taught the money not in the market is a wasted opportunity.  The official term used "opportunity cost" you are getting zero in profit on that 500 billion, they will spend that money of other bonds, or most likely the stock market assets to earn a return.  This how central bank purchase of 500 billion of bonds will indirectly bost the stockmarket.  Its important that the major  central banks can create cash/credit at will. 

The second article talks about direct purchases of stock equity by the banks.

And the third is my favorite, the buy backs and divident rises.  Buy backs are when company uses is retained profit or bank loans to purcahse its own stock.  How do but backs raise the stockmarket?  The mechanics are as such. Here is simple example company Babble has gone public.  The company has issued 100 shares of certicate stock.  Each share is valued at $20 so the value of the company is $2000 dollars.  Its important to keep in mind the 100 shares are held by the public.  Now the Babble issues a call that will buy back 20% of floating shares held by the public.  This where finincial magic happens, to purchase the 20 shares of its own stock it has rise the pay higher price than when the stock was orginally sold.  It sold 100 shares at $20 per share.  Now it buy back 20 shares at $30, the new market value is $2400 of Babble.  80 shares are left in the float held by the public valued at $30 a piece.  What are the implacations for the events for the general public.  The stockmarket goes up by $400.  The investors that sold their shares back to the company have been made a profit $10 per share sold because they purchased at 20 and sold at 30.  What about public that holds the 80 shares, they now make paper profit 10 at per share which will be realized when they see their stock to other indivduals.  What about the employess in the company, generally most companies pay the majority a wage while  top management is payed with shares.  From example some CEO's point out they have wage of 1 dollar for the year but what do generally say they are paid by new shares issued by the company.  So it in the interest of top management to keep the value of their shares high and growing bacause that is generally where they make their money.  What are the implactions of top management compensation being tied to value of the stock, easy they will ever thing in the power to raise the price of Babble stock.  What are the implactions for companies, you have discuss where the money comes from to pruchase there own stock(buyback).  Either the money comes from retained profit for basic operations of the company, or they can borrow from the bank or issue bonds--- basicly debt. 

The other piece is dividens which is a distribution of profit the owners for the owners of the stock.  Higher dividens means higher prices of stock and general raise of the stock market.

Here are couple quotes form the article 3 for more context.

Almost 60 percent of the 3,297 publicly traded non-financial U.S. companies Reuters examined have bought back their shares since 2010. In fiscal 2014, spending on buybacks and dividends surpassed the companies’ combined net income for the first time outside of a recessionary period, and continued to climb for the 613 companies that have already reported for fiscal 2015.

In the most recent reporting year, share purchases reached a record $520 billion. Throw in the most recent year’s $365 billion in dividends, and the total amount returned to shareholders reaches $885 billion, more than the companies’ combined net income of $847 billion.

So all profit is being returned to the owners of stock through buybacks and dividens, this naturally raises the stock market numbers.  What the implacations of this stragety? Companies have borrow money in invest in training, increase production, deal with deprecation of equipment(wear and tear), and of cousre Reasearch and Development.  If want to give employees a raise you to borrow as well.  But this drives up the stock market so it must be good?

NorthReport

Hum......

Amazon at $914. this morning.

https://www.google.com/finance?cid=660463

NorthReport

Buy COSTCO as well. Trading at $175 this morning.

https://ca.finance.yahoo.com/quote/COST?ltr=1

Here's why Costco may be the one company Amazon can't destroy

http://www.cnbc.com/2017/04/21/heres-why-costco-may-be-the-one-company-a...

 

NorthReport

Nasdaq composite hits fresh intraday record

http://www.cnbc.com/2017/04/27/us-markets.html

NorthReport
NorthReport

Amazon trading at $945 this morning

NorthReport

Oh, my!

Amazon up again, and again, and again, trading at $953 US, up over $28 US on the NASDAQ today.

NorthReport
NorthReport

Why Don't These Winning Stocks Pay Dividends?

Many big companies could easily pay dividends. Should they?

https://www.fool.com/investing/general/2015/03/01/why-dont-these-winning...

NorthReport
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NorthReport

This is probably the best possibly financial investment one can make 

 An excellent  book ‘Take a random walk down Wall Street’ explains why

https://www.bloomberg.com/news/articles/2019-08-09/meet-the-spy-11-kids-with-250-billion-riding-on-their-lives?srnd=premium-canada

NorthReport

The Dow is presently off 529 points today - oh woe is me. Ha! Ha! Ha!

bekayne

Amazing resilience of the stock market, meet Donald.

NorthReport

Buffett who went into a cash recently probably bot lots of stocks today and will soon be adding to his fortune. Too bad we don't have legitimate inheritance taxes, eh! No one should be inheriting that much.

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