Author: Brian Barnier

From Yahoo! Finance http://finance.yahoo.com/news/how-investors-should-pick-stocks-to-beat-a-go-nowhere-market-201215257.html In a market more sensitive to the Federal Reserve than fundamentals, what’s the right move for investors? In a sideways market, the classic answer is smarter stock picking. Yet, investors face more challenges today than ever before because they’re fighting the wake of the Fed, credit bubble bursting and even remnants of the tech bubble bursting. What does this mean for past “go to” investment styles? Growth and value styles have struggled to differentiate from each other, leaving investors looking elsewhere. For more, see “Step 2: Don’t be fooled by investing “styles” – how to tell…

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When voting and polling results don’t match political analysts’ expectations, political analysts quickly look for what they missed. Economic results haven’t matched central banker expectations, central bankers are far overdue to reevaluate. Donald Trump and Bernie Saunders forced political analysts to revise polling methods and look fresh for messages in the data. As one analyst phrased it in the Washington Post, “I feel like in some ways my brain has to think differently than it ever has.” Central bankers could learn from the openness of political analysts to new data. The European Central Bank, U.S. Federal Reserve and Bank…

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From Yahoo! Finance http://news.yahoo.com/what-everyone-is-getting-wrong-about-the-american-worker-202830414.html Most people think of productivity like Henry Ford said, “Work smarter, not harder.” The word “efficiency” might also come to mind. Yet, that common notion is different from “measured” productivity. Measured productivity, through surveys of employers, comes in several flavors: “labor productivity,” “multifactor productivity,” (MFP) “total factor productivity” (TFP) and dozens (maybe hundreds) of variants. At least since Adam Smith (1723-1790) there has been debate over exactly what “productivity” measures and the ability to measure it. In the 20th Century, a more formal debate was ignited by key studies published in the 1960s. It is wrong…

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“The Fed caused 93% of the entire stock market’s move since 2008: Analysis” at Yahoo! Finance generated hundreds of comments. For those who asked about data and techniques, these replies are for you… Yes, for many people this is widely known – “Captain Obvious.” Data has been published for decades by the Federal Reserve Board of Governors and the Bureau of Economic Analysis. Causes in each era have been long discussed and predictive value widely used. Regarding the recent “Fed era,” then-Chairman Bernanke laid out the history and expectations nicely in his 2012 Jackson Hole speech. The chart of Fed…

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Henry Ford said “Work smarter, not harder.” For many people that’s what productivity is – better skill and tools to produce more. But, that’s not what is measured by all productivity ratios. So, no need to fear some falling ratios. Instead, investors can focus on companies with “work smarter” business models. Productivity is a sense of “bang for the buck” or efficiency. Henry Ford’s comment sees skills as a mark of more productive people. You’ve also heard the joke about the plumber’s bill to the disgruntled customer. The plumber fixes the problem in 10 seconds and hands the customer…

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Despite buzz about “buying industries,” industries are not appropriate plays for most investors. Why? Today’s data and tools have made that “rough cut” approach obsolete. Instead, investors should look to the “fundamental farm” to more easily buy into their desired gain-driving characteristics. It’s tempting to see a chart like this and then buy the winning sectors. This chart is especially helpful because it uses the Zacks Research System 16 sectors and each is shown relative to the S&P 500 benchmark. Are you ready to buy the top sectors? The problem is that the winning sectors change leads depending on…

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It’s true, worker wages today are better than ever. It’s also true that growth was once better. Clearing up confusion about wage health starts with the timeline. Real pay per person — the “pocketbook” measure – is the wages and salaries portion of employee compensation. It excludes other sources of Disposable Personal Income – benefits (including medical), proprietor and rental income, interest, dividends and government support payments. Given the buzz around the Federal Open Market Committee’s (FOMC) evaluation of the labor market, it’s time to update a few of our “go to” pictures. Real wages and salaries per worker…

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“Deflation” is good if purchases grow. Obvious to shoppers, people buy more when prices fall, especially when products have better features and it’s easier to find lower prices. This reveals growing abundance. Purchases grow when price falls Central banker fear of “deflation” (a word too loosely used) is that if aggregate price indices fall so will purchases, meaning recession or worse. What’s happening with stuff people actually buy? Thanks to the U.S. Bureau of Economic Analysis, we can take a shopping trip through about 360 product types of Personal Consumption Expenditures (PCE). For example: Goods with prices falling at…

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Investing “styles” are often difficult to distinguish due to fuzzy definitions and returns; then there is “drift.” To overcome these difficulties, look to contrast in cyclical versus stable companies to bring clarity to stock-picking. Investing “styles” such as growth, value and blended are often difficult to distinguish due to fuzzy definitions in marketing, SEC filings and portfolio manager decisions, as described in “Step 1 in 2016 – Buy the right stock “dots.” More, returns are often difficult to distinguish. For example, consider the popular Vanguard U.S. Growth (pink line) and U.S. Value (gray line) funds on a cumulative performance,…

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Editor’s note: this is a summary of commentary at CNBC. Pictures and more at http://cnb.cx/1mdXxkt Cause matters Confusion results when “deflation” as a word is used loosely. What matters is the cause of price changes. Is it “deflation” in the strict sense — money and central bank rates? Falling amounts purchased? Rising taxes cutting purchases? Falling costs of production? Excess liquidity searching globally for yield? Smarter shoppers searching for lower prices? Other? “Deflationary mindset” is not bad when consumers are buying more – it’s good. Purchases have been growing Over the past 20 years, purchases have been growing with falling…

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The myth of interest rates predicting equities just won’t die. It hasn’t been true for decades. Proof is in the pictures of the “shifting snakes.” To find safety, fundamentals matter. “High market multiples are justified by low inflation” and “equities and bonds are alternatives so their yields should track” are flavors of this myth. For decades, enlightened analysts have tried to drive a stake through the heart of this vampire myth with math. Yet, the myth lives on though herd effect. So is the myth alive or undead like a zombie? Zombie? If zombie, let’s try to bust this…

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Fed-watching is foggy and frustrating, with predictions often wrong. Six insights help explain why. Understanding these six is step one to protecting yourself. What fogs-up Fed-watching? First, “Fed” is not a monolith. “Fed” is the Board of Governors of the Federal Reserve System plus twelve district banks. Each bank has a board of directors and appoints a president. The body that votes on monetary policy is the Federal Open Market Committee (FOMC). The FOMC is also not single-minded. The FOMC is individuals — the Governors, NY Federal Reserve Bank President and four rotating district bank presidents. Each member brings life…

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A sluggish stock market is a stock pickers market. Finding opportunity in 2016 is a step-by-step process starting with the big picture in stock scatter plots. Finding opportunity starts with the simple realization that equity markets are not a monolith. Averages hide answers. The easiest way to bust the myth of the monolith is the view through scatter plots, as with Zacks Research System (ZRS). What axes to plot? As we wrote in “Five reasons Earnings per Share is over-hyped” no one gets EPS. Investors receive price appreciation and dividends. Those create the basic plot. With this picture, investors…

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S&P 500 member revenue for 3Q2015 was flat from the prior quarter and down 5% from the same quarter a year ago. Some of the drop is explained by the stronger U.S. Dollar and some by specific price changes. Because effects vary by country and product, it matters how the puzzle pieces are assembled. To more clearly see the picture of company stock values and economic health, 3 steps help fit the puzzle pieces together. Revenue comparison period Compared to the prior quarter, revenue was flat. Compared to the YEAR prior quarter, revenue was off 5.5%. Period choice matters.…

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When was the last time you received a check for Earnings per Share (EPS)? Never. Five reasons illustrate why EPS is over-hyped and contributes to short-termism. What do investors actually receive? Generally, it is price appreciation and dividends (including capital gains). Given this, why does EPS matter? A common reason is that EPS looks ahead to price appreciation and dividends. How true is that? Clicking around Zacks Research System (ZRS), we can investigate. EPS engineering EPS is sales minus all costs and then divided by shares. When EPS moves, the key question is, “Why?” Because EPS is so hyped…

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