The markets in Europe saw its recent rally extend once again today. This rebound comes following the recent swoon in the overall overseas indices. The U.S. markets are doing their best to follow the lead in Europe, even as we see several economic data points coming in worse than expected today (CPI, Philly Fed, Empire Manufacturing Survey, Jobless Claims). Without a surge in buying volume, my guess is that a lot of short-sellers overstayed their welcome and are now covering. This trend, I believe, is what’s pushing global equities markets higher. And despite all the band-aids world regulators have applied, the true determining factor for a sustained market recovery will be healthy economic activity without constant governmental intervention.
UBS (UBS) shares hit a new 52-week low today as a trading scandal hit the news wires. Apparently, a rogue trader made several unauthorized moves within the firm, costing it $2 billion in losses. It’s hard to believe that sirens weren’t sounded within the company sooner, so it’s no wonder investors are scrambling to hit the exits. With so much uncertainty surrounding the banking sector, we continue to remain super cautious within this embattled space.
As the equities markets have rallied, Gold (GLD) prices are heading in the opposite direction. Gold is approaching certain short-term technical levels, where if they break, the downside could potentially see gold prices back under $1,500 an ounce. Pay attention if you have been trading the gold move.
Elsewhere, Wall Street analyst upgrades helped push up shares of Peabody Energy (BTU), Kohl’s (KSS), and Union Pacific (UNP). Other names gaining in today’s run-up include Prudential Financial (PRU), Coach (COH), and Cummins Inc. (CMI).
Be sure to check out our weekly “Top 50 Watchlist Names” post that is out today, only for Dividend.com Premium members. Some high-beta dividend stocks will certainly be on this list as we keep everyone up-to-date on names that are working better than others in this current market environment. Our focus is more on yield, so be sure to recognize the risk of buying lower-yielding stocks.Poor IPO Performance Hurting Investors
The Wall Street Journal recently highlighted a study from Dealogic showing 63% of the 76 new stock listings this year are underwater (trading below their IPO offer price). Investors that have been aggressive in buying these deals from their brokers have clearly been burned the majority of the time. Unfortunately for many of the companies that are not profitable (amazingly, being profitable is still not a criteria to come public even after many companies imploded back in the Internet/Tech IPO mania of years past), the market wasn’t too understanding when it came to wanting a timetable for profitability. I point this fact out to highlight the danger of investing in unproven businesses. Often times, retail investors will take a flier on cheaper priced IPOs as a way to gain exposure to the next Google, Microsoft, or other tech giant. It’s not unheard of to make money investing in IPO’s, but be careful the next time your broker fires you off an e-mail prospectus of the latest “can’t-miss” story in IPO land. Much of the time, these new stocks are bound for failure.Who Wants to Be the Next Paper Tiger?
There is certainly no shortage of opinions when it comes to the financial markets, albeit on television, internet, radio, or other media. Traditionally, television was the gold standard of trying to make a name for yourself as an analyst. These days, however, the web has been gaining a lot of momentum. Increasingly, pundits are taking to sites like Twitter, Facebook, or their own blogs to get their message out to their readers and followers. Social media sometimes becomes a drug for some analysts who are obsessed with reaching thousands of people instantly with a single tweet or blog story. The problem comes in when a pundit spends the majority of their trying to stay in front of his or her audience, instead of analyzing the markets.
There’s just no way these financial experts can be doing all things social media, handling client calls, trading for accounts, and all of the other daily tasks that go into getting a solid feel for the markets. It’s true that social media can put you on the radar for many traditional media outlets. I have seen financial analysts go from giving an in-your-face honest opinion on what is really happening in the markets, to eventually landing a regular gig on one of the business shows, only to evolve into nothing more than a “paper tiger.” Once you get involved with a major media outlet, your ability to bee 100% unbiased and wear your heart on your sleeve becomes muted.
No one is asking to have a business channel focused on ripping every guest that appears, but the edge is certainly lost when the questions become watered down, along with the analysis. Unfortunately Wall Street conflicts of interest are all around us, and the media stops well short of pointing them out. It’s tough to remain objective when the people signing your paychecks are funded exclusively by advertising dollars. So for all those wanna-be financial media superstars, you may want to be careful what you wish for. I guess this little rant of mine reflects my own decision to skip spending my days at a Wall Street firm pushing product I didn’t believe in.
Thanks for reading, and I’ll see you tomorrow! P.S. Please pass this e-mail on to someone you think can use some financial motivation as well as being kept in the financial news loop that could affect them.