Insight and Action

The Hedge Fund Problem -- and the Solution 

Hedge funds have a problem... and we have a solution.

Equity hedge funds are significantly lagging the S&P 500 this year, according to data tracked by www.hedgefundresearch.com on over 7,000 funds globally.

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Merry Christmas from Europe.

One of the most reliable technical indicators we know has just flashed a buy signal in time for Christmas. The percentage of stocks in the Euro 600 Index (the European equivalent of the S&P 500 Index) has dropped below 20 percent, suggesting the market has become oversold. We've witnessed five similar occurrences in the past two years.

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Best Wishes for Many Happy Returns -- From Europe

Minimum wage is getting maximum exposure.

Fifty-three Congressmen have signed a letter sent to fast food companies Burger King Worldwide Inc. (BKW), Domino's Pizza Inc. (DPZ), McDonald's Corp. (MCD), Wendy's Co. (WEN) and YUM! Brands Inc. (YUM), calling on them to raise employee pay above the current minimum wage set by states. The President agrees, and he'd even support a new national rate of $10.10 per hour.

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How Higher Labor Costs Could Bite Into Fast-Food Profits 

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Buying Begets Buying, or Why the Bulls May Be Right

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Retail Results Have Been Counted, So We Know Who Wins

I'd never have believed it had I not seen two charts this morning courtesy of www.strategasrp.com. Each shows banks relative to gold, expressed as a price ratio. The first is U.S. banks, the second is European banks.

Banks are outperforming gold for the first time since 2008. While the shift is due in part to gold's first annual decline in 12 years, banks are also outperforming the broader market (the KBW Banks Index has added almost 33 percent so far this year vs a gain of almost 27 percent for the S&P 500 Index).

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What's Better Than Hard Assets? Financial Assets

European markets rallied 0.5 percent this morning on economic data confirming Europe's recovery:

So, there are three pieces of hard evidence that point to an economic rebound in Europe. In addition, two U.S.-based strategists joined us on-air this week to make the case for investing in Europe. One is Jay Pelosky, who built the emerging-markets business for Morgan Stanley and now runs his own firm (J2Z Advisors). He says the European Central Bank has more flexibility to lower rates and more inclination to supply capital than the taper-talking Fed. The other is Anne Lester of JPMorgan Asset Management, who argues that European stocks are better value than the U.S. given the 30 percent discount measured by cyclically-adjusted P/E ratios (that is, price divided by 10-year average earnings adjusted for inflation).

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Five Reasons for Investors to Like Europe

Bankers have never had it so good:

- The S&P/Experian Consumer Credit Default Index is near a record low of 1.38 percent.

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Bank Stocks, Small-Caps May Be Headed for a Happy New Year

We spend a lot of time talking about earnings growth... and with good reason! Growth generates cash flow and drives returns.

We spend less time however, talking about the other key driver of stock performance: multiple expansion. When earnings growth accelerates, investors "pay up" for higher future cash flows and multiples expand.

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About Insight and Action


Insight & Action identifies trends across global markets and finds ways investors may profit. We crunch our own numbers, spotlight commentary from influential thinkers and try to arm investors with insights into what's moving and what's not. Analyses or commentary are the views of the author, and do not necessarily reflect the views of Bloomberg News.

Contributors

  • Adam Johnson
    Adam Johnson