Posts tagged ‘Ukraine’

After 2014 Stock Party, Will Investors Have a 2015 Hangover?

Group of Young People at a Party Sitting on a Couch with Champagne

This article is an excerpt from a previously released Sidoxia Capital Management complementary newsletter (January 2, 2015). Subscribe on the right side of the page for the complete text.

Investors in the U.S. stock market partied their way to a sixth consecutive year of gains during 2014 (S&P 500 +11.4%; Dow Jones Industrial Average +7.5%; and NASDAQ +13.4%). From early 2009, at the worst levels of the crisis, the S&P 500 has more than tripled – not too shabby. But similar to recent years, this year’s stock bubbly did not flow uninterrupted. Several times during the party, neighbors and other non-participants at the stock party complained about numerous concerns, including the Fed Tapering of bond purchases; the spread of the deadly Ebola virus; tensions in Ukraine; the rise of ISIS; continued economic weakness across the eurozone; the decline of “The Fragile Five” emerging markets (Brazil, India, Indonesia, Turkey and South Africa), and other headline grabbing stories to name just a few. In fact, the S&P 500 briefly fell -10% from its mid-September level to mid-October before a Santa Claus rally pushed the index higher by +4% in the last quarter of the year.

Even though the U.S. was partying hardy in 2014, it was not all hats and horns across all segments of the market. Given all the geopolitical trepidation and sluggish economic growth abroad, international markets as measured by the Total World Stock ETF (VT) gained a paltry +1.2% for the year. This dramatic underperformance was also seen in small capitalization stocks (Russell 2000 Index ETF – IWM), which only rose +3.7% last year, and the Total Bond Market (BND), which increased +2.9%.

Despite these anxieties and the new Federal Reserve Chairwoman Janet Yellen removing the Quantitative Easing (QE) punchbowl in 2014, there were still plenty of festive factors that contributed to gains last year, which should prevent any hangover for stocks going into 2015. As I wrote in Don’t Be a Fool, corporate profits are the lifeblood for stock prices. Fortunately for investors, the news on this front remains positive (see chart below). As strategist Dr. Ed Yardeni pointed out a few weeks ago, profit growth is still expected to accelerate to +9.3% in 2015, despite the recent drag from plummeting oil prices on the energy sector.

Source: Dr. Ed's Blog

Source: Dr. Ed’s Blog

While a -50% decline in oil prices may depress profits for some energy companies, the extra discretionary spending earned by consumers from $2.24 per gallon gasoline at the pump has been a cheery surprise. This consumer spending tailwind, coupled with the flow-through effect to businesses, should provide added stimulative benefit to the economy in 2015 too. Let’s not forget, this economic energy boost comes on the heels of the best economic growth experienced in the U.S. in over a decade. More specifically, the recently reported third quarter U.S. GDP (Gross Domestic Product) statistics showed growth accelerating to +5%, the highest rate seen since 2003.

Another point to remember about lower energy prices is how this phenomenon positively circulates into lower inflation and lower interest rate expectations. If energy prices remain low, this only provides additional flexibility to the Federal Reserve’s monetary policy decisions. With the absence of any substantive inflation data, Chairwoman Yellen can remain “patient” in hitting the interest rate brakes (i.e., raising the Federal Funds rate) in 2015.

Geographically, our financial markets continue to highlight our country’s standing as one of the best houses in a sluggish global growth neighborhood. Not only do we see this trend in our outperforming stock indexes, relative to other countries, but we also see this in the rising value of the U.S. dollar. It is true that American exports become less competitive internationally in a strong dollar environment, but from an investment standpoint, a rising dollar makes U.S. stock markets that much more attractive to foreign investors. To place this dynamic into better perspective, I would note the U.S. Dollar index rose by approximately +13% in 2014 against a broad basket of currencies (including the basket case Russian Rouble). With the increasing likelihood of eurozone Quantitative Easing to take place, in conjunction with loose monetary policies in large developed markets like Japan, there is a good chance the dollar will continue its appreciation in the upcoming year.

On the political front, despite the Republicans winning a clean sweep in the midterm elections, we should still continue to expect Washington gridlock, considering a Democrat president still holds the all-important veto power. But as I have written in the past (see Who Said Gridlock is Bad?), gridlock has resulted in our country sitting on a sounder financial footing (i.e., we have significantly lower deficits now), which in turn has contributed to the U.S. dollar’s strength. At the margin however, one can expect any legislation that does happen to get passed by the Republican majority led Congress will likely be advantageous for businesses and the stock market.

When Will the Party End?

What could cause the party to come to a screeching halt? While I can certainly point out some obvious potential negative scenarios (e.g., European financial mayhem, China economic speed bump, interest rate spike), history shows us it is usually unforeseen events (surprises) that cause significant downdrafts in stock market prices. The declines rarely come from factors you read in current newspaper headlines or hear on television.

Just like any party, this year is likely to include high points and low points in the financial markets – and of course some lull periods mixed in as well. However, with the economy improving and risk appetites increasing, we are bound to see more party poopers on the sidelines come join the celebration in 2015. It will be a while before the cops arrive and stop the party, so there should be plenty of time to prepare for any hypothetical hangover.

Investment Questions Border

www.Sidoxia.com

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own a range of positions, including positions in certain exchange traded funds positions (including BND), but at the time of publishing SCM had no direct position in VT, IWM or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

January 3, 2015 at 10:00 am Leave a comment

Stock Talk: The Value of Media in Finance

Man Speaking Into Microphones

I recently caught up with 50-year investment veteran Bill Kort to answer his questions regarding the media’s impact on the financial industry. After working for Kidder Peabody, A.G. Edwards, Wachovia, and Wells Fargo, Bill called it quits and decided to retire. Besides enjoying retirement with his wife, children, and grandchildren, Bill now also devotes considerable time to his blog Kort Sessions (www.KortSessions.com).

In a recent interview published on his Kort Sessions blog (KS), here’s what we discussed:

KS: Today, when you recommend a client take on, or increase equity exposure, what are the most common push-backs that you get? Have these changed in the past few years? If so, could you explain.

Wade Slome: “Given the events that have transpired over the last 15 years, I expect to receive a healthy dosage of pushback. Many investors have naturally been scarred from the 2008-2009 Financial Crisis, so convincing certain people that the 100-year flood will not occur every 100 days can be challenging. Regardless of the skepticism I receive, I feel it’s my duty to provide the best possible advice I can to existing clients and prospective clients. I can lead a horse to water, but I believe it’s not my job to force clients into a single investment option. At Sidoxia, we customize investment plans that meet clients’ risk tolerances, time horizons, and overall objectives.

With regard to sentiment changes in recent years, it is true that the tripling in equity market values since early 2009 has changed investor moods. Risk appetites have definitely increased. Nevertheless, cynicism is still rampant. Surveys done by Gallup show that stock ownership is near 15-year lows and despite stocks at or near record highs, ICI fund flow data shows money fleeing U.S. stock funds in 2014. With generational low interest rates, I see many long-term investors being too imprudently conservative. However, on the other hand, my responsibility is to also prevent other clients from taking on too much risk, especially if they have shorter investment time horizons or have limited funds in retirement.”

KS: When you speak with clients today, what are prominent worries do they have about their investments: The general level of the market, valuation, the economic backdrop, U.S. political issues or geopolitical concerns (all of the above)? Could you rank or tell me which concerns seem to be paramount.

Wade Slome: “In this 24-hour news cycle society we live in, an avalanche of real-time data gets crammed down our throats daily through our smartphones and Twitter-Facebook pages. As a result, the overwhelming barrage of news gets disseminated instantaneously, which in turn spreads fear like wildfire by word of mouth. In this type of environment it comes as no surprise to me that the general public is on edge. Every molehill is made into a mountain by media outlets for a simple reason…fear sells! Before the internet 20 years ago, virtually no one could find the location of Cyprus, Syria, Ukraine, or Gaza on a map – now we have Google and Wikipedia to show us or the Twitter feed scrolling at the bottom of our television sets reminds us. As far as concerns go, it’s tough to rank which ones are paramount. One day it’s the elections or Iran, and then the other day it’s the stock market crashing or the Ebola virus. Eventually the emotional pendulum will swing from fear and pessimism to optimism and euphoria, it always does. Like a lot of different professions, one of best strengths to have as an investment manager is the experience in knowing what noise to filter out and the ability to identify the relevant factors that drive outperformance.”

KS: Could you share the short-form responses that you might give to your clients when addressing the aforementioned issues.

Wade Slome: “The best advice I can give investors is to ignore the headlines. This principle is just as true today as it was a century or two ago. Mark Twain famously said, “If you don’t read the newspaper, you are uninformed.  If you do read the newspaper, you are misinformed.” This is obviously presented a little tongue-in-cheek, but the main point being is headlines should not drive your investment decisions. It’s perfectly fine to be informed about the economy and politics, but people must realize the stock market often moves independently and in contrarian directions to prevailing media stories. Rather than emotionally react to news flow, it is much more important to create an objective, long-term investment plan that takes advantage of market noise, hype, and volatility.”

KS: Finally, this is a little bit of a leading question that I hope you might run with. Do you find any useful purpose being served by the financial, general or political media that might aid an individual’s investment process?

Wade Slome: “In my view of the financial markets, there are a few underlying principles that drive stock prices over the long-term, and they include such basic factors as earnings, valuations, interest rates, and market psychology. What I would objectively try to argue is that the financial, general, or political media have little to no impact on the first three factors and only modest influence on the last one (market psychology). Part of the reason I have been so constructive on the markets on my Investing Caffeine blog over the last five years is because all these factors have generally pointed in the right direction. I will become nervous when earnings decline, valuations get stretched, interest rates spike, and/or psychology turns euphoric. Right now, I don’t think we are seeing any of that occurring.

With that said, I do believe there are exceptions to the rule that the “media is evil.” If you have the time, interest, and patience to stagger through the endless desert of financial media, you can find a few rare flowers. Although I do consume mass amounts of media, 99% of it ends up in the trash or ignored. I do my best to reserve my media consumption to those successful investors who have lived through multiple market cycles and have a winning track record to back it up. It is possible to find sage investment bloggers; Warren Buffett interviews on CNBC; or newspaper interviews of thriving venture capitalists, if you properly dine on a healthy media diet. Unfortunately there is a lot of junk food financial content out in media land. What should generally be avoided at all costs are rants from economists, journalists, analysts, commentators, and talking heads. No matter how eloquent or articulate they may sound, the vast majority of the people you see on television have not invested a professional dime in their careers, so all you are getting from them are worthless, vacillating opinions. I choose to stick to commentary from the tried and true investment veterans.”

Bill, thanks again for the thoughtful interview questions, and continued success with your Kort Sessions blog!

www.Sidoxia.com

Investment Questions Border

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own GOOG/GOOGL, and a range of positions in certain exchange traded fund positions, but at the time of publishing SCM had no direct position in TWTR, FB, WFC, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

August 23, 2014 at 6:57 pm Leave a comment

The Treadmill Market – Jogging in Place

Treadmill

This article is an excerpt from a previously released Sidoxia Capital Management complementary newsletter (April 1, 2014). Subscribe on the right side of the page for the complete text.

After the stock market raced ahead to about a +30% gain last year, it became clear this meteoric trend was not sustainable into perpetuity. Correct investing should be treated more like a marathon than a sprint. After dashing ahead by more than +100% over the last handful of years, 2014 stock prices took a breather by spending the first quarter jogging in place. Like a runner on the treadmill, year-to-date returns equated to a -0.7% for the Dow Jones Industrial Average index, and +1.3% for the S&P index. Digesting the large gains from previous years, despite making no discernable forward progress this quarter, is a healthy exercise that builds long-term portfolio endurance. As far as I’m concerned, nothing in life worthwhile comes easy, and the first three months of the year have demonstrated this principle.

As I’ve written in the past (see Series of Unfortunate Events), there is never a shortage of issues to worry about. The first few months of 2014 have been no exception. Vladimir Putin’s strong armed military backed takeover of Crimea, coupled with the Federal Reserve’s unwinding $30 billion of the $85 billion of its “Quantitative Easing” bond buying program (i.e. tapering) have contributed to investors’ nervousness. When the “Fairy Godmother of the Bull Market,” Federal Reserve Chair Janet Yellen, hinted at potentially raising interest rates in about 12 months, the mood soured further.

The unseasonably cold winter back east (a.k.a., Polar Vortex) has caused some additional jitters due to the dampening effects on economic conditions. More specifically, economic growth as measured by GDP (Gross Domestic Product) is expected to come in around a meager +2.0% rate during the first quarter of 2014, before picking up later in the year.

And if that isn’t enough, best-selling author Michael Lewis, whose books include Money Ball, The Blind Side, and Liar’s Poker, just came out on national television and sparked a debate with his controversial statement that the “stock market is rigged.” (read and listen more here)

Runners High

But as always, not everything is gloom and doom. Offsetting the temporary price fatigue, resilient record corporate profits have supported the surprising market stamina. Like a runner’s high, corporations are feeling elated about historically elevated profit margins. As you can see from the chart below, the reason it’s prudent for most to have some U.S. equity exposure is due to the clear, upward multi-decade trend of U.S. corporate earnings.

Source: Calafia Beach Pundit (gray areas are recessions)  

Source: Calafia Beach Plundit (gray areas are recessions)

While the skeptics wait for these game-ending dynamics to take root, core economic fundamentals in areas like these remain strong:I didn’t invent the idea of profits impacting the stock market, but the concept is simple: stock prices generally follow earnings over long periods of time (see It’s the Earnings, Stupid). In other words, as profits accelerate, so do stock prices – and the opposite holds true (decelerating earnings leads to price declines). This direct relationship normally holds over the long-run as long as the following conditions are not in place: 1) valuations are stretched; 2) a recession is imminent; and/or 3) interest rates are spiking.  Fortunately for long-term investors, there is no compelling evidence of these factors currently in place.

Employment Adrenaline

The employment outlook received a boost of adrenaline last month. Despite the slight upward nudge in the unemployment rate to 6.7%, total nonfarm payroll jobs increased by +175,000 in February versus a +129,000 gain in January and an +84,000 gain in December. Not only was last month’s increase better than expectations, but the net figures calculated over the previous two months were also revised higher by +25,000 jobs. As you can see below, the improvement since 2009 has been fairly steady, but as the current rate flirts with the Fed’s 6.5% target, Chair Yellen has decided to remove the quantitative objective. The rising number of discouraged workers (i.e., voluntarily opt-out of job searching) and part-timers has distorted the numbers, rendering arbitrary numeric targets less useful.

Housing Holding Strong

In the face of the severe winter weather, the feisty housing market remains near multi-year highs as shown in the 5-month moving average housing start figure below. With the spring selling season upon us, we should be able to better gauge the impact of cold weather and higher mortgage rates on the housing market.

Even though stock market investors found themselves jogging in place during the first quarter of the year, long-term investors are building up endurance as corporate profits and the economy continue to consistently grow in the background. Successful investors must realize stock prices cannot sustainably sprint for long periods of time without eventually hitting a wall and collapsing. Those who recognize investing as a marathon sport, rather than a mad dash, will be able to jump off the treadmill and ultimately reach their financial finish line.

www.Sidoxia.com

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold long positions in certain exchange traded funds (ETFs), but at the time of publishing SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

April 5, 2014 at 12:02 am Leave a comment

Market Expands and So Does Sidoxia’s Team

  

This article is an excerpt from a previously released Sidoxia Capital Management complementary newsletter (March 3, 2014). Subscribe on the right side of the page for the complete text.

After a brief pause at the beginning of the year, the stock market built on the tremendous gains of 2013 (S&P 500 up +30%) by reaching record highs again in February by expanding another +4.3% for the month. My investment management and financial planning firm, Sidoxia Capital Mangement, LLC, has been expanding as well. Just this last month, we added a key investment and financial planning professional (Keith C. Bong, CFA, CPA Press Release) with more than 25 years of experience in the fields.

The Record Setting Advance Continues

Now entering the sixth year of this record setting bull market, many investors and pundits have been surprised by the strength and duration of the advance. At the nadir of the financial crisis, the stock market reached a multi-year low of 666 on March 9, 2009. For comparison purposes, the S&P 500 recently closed at 1,845, almost tripling in value since the crisis lows. Pessimists and skeptics, who locked in losses during the crisis plunge, have watched the explosive gains while sitting on their hands. While I freely admit, the low-hanging fruit has been picked, many of the doubters are still calling for a collapse as “troubling news continues to pour in from all over the planet.” However, what the naysayers neglect to acknowledge is the fact that S&P 500 reported profits, the lifeblood of bull markets, have also tripled in value. Despite what the bears say, not everything is a speculative house of cards.

Late to the Party Because of Uncertainty

Although the stock party has lasted five years thus far, individuals have only begun buying for about one year (see ICI fund flows data in Here Comes the Dumb Money) – about +$28 billion of new money in 2013 and another +$12 billion so far this year (ICI data through February 19th). After approximately six years and -$600 billion in stock sales (2007-2012), it’s no wonder investors have been slow to reverse course. Adding to the angst, investors have been bombarded with an endless stream of political and economic concerns on a daily basis, leading to the late arrival of most individuals to the stock investing party. While it’s true that more people have joined the party in recent months, floods of investors are still waiting outside in the cold. Here are a few reasons for the tardiness:

  • Geopolitical Concerns: Most recently it was Syria, Iran, and Argentina that got short-term traders chewing their fingernails…now it’s the Ukraine. Just yesterday, I had to spend about 10 minutes locating the Ukranian province of Crimea on a map. For those who have not been keeping track, after days of civil unrest that left some 75 protesters dead, Ukrainian President Viktor Yanukovych fled the capital city of Kiev and agreed with opposition leaders to reduce his powers and hold early presidential elections later this year. For context, in 1954, the former Soviet Union leader Nikita Khrushchev transferred Crimea from the Russian Soviet republic to Ukraine on the basis of economic ties that were closer with Kiev than with Moscow. Prior to that transfer, Russia seized Crimea from the declining Ottoman Empire in the 18th century. Fast forward to today, and fresh off a successful Olympics in Sochi, Russia, Russian President Vladimir Putin hasn’t been happy about the citizen uprising in neighboring Ukraine, so he has decided to flex his muscles and move Russian troops into Crimea. The situation is very fluid and the U.S., along with other global leaders, are crying foul. Time will tell if this situation escalates into a military conflict like the 2008 Georgia-Russia crisis, or if cooler heads prevail.   
Source: WSJ – Russia rationalizing military involvement based on large percentage of Russian Crimeans.
  • Fed Policy ConcernsFederal Reserve Chair Janet Yellen gave her inaugural address last month before Congress, where she signaled continuity in policy with former Fed Chair Ben Bernanke. Indications remain strong that the reduction of bond buying stimulus (i.e., “tapering”) will continue in the months ahead, despite mixed economic results. The “Polar Vortex” occurring on the East Coast, coupled with a record draught on the West Coast contributed to the recent reduction of Q4-2013 GDP growth figures, which were revised lower to +2.4% growth (from +3.2%). 
  • Domestic Politics: In a sharply politically divided country like the U.S., is there ever a complete hugs & kisses consensus? In short, “no”. How can there be 100% agreement when sharply divisive issues like Obamacare, immigration, tax reform, entitlements, budgets, and foreign affairs are always in flux? Layer on a Congressional midterm election this November and you have a recipe for uncertainty. 

Because of all this uncertainty, there are still literally trillions of dollars in cash sitting on the sidelines, waiting to come join the fun. But uncertainty is a relative term because there is always doubt surrounding geopolitics, economics, and Washington D.C. Sentiment moves like a pendulum from fear to greed. Eventually panic/fear sways back the other direction as business/consumer confidence overshadow the deep scarred emotions of 2008-09. As the stock markets have grinded to record highs, fear and skepticism have slowly begun to erode.

Sidoxia Uncertainty

Speaking of uncertainty, I too encountered many doubters and skeptics when I started my firm, Sidoxia Capital Management, LLC in early 2008. Great timing, I thought at the time, as our economy entered the worst recession and financial crisis in a generation and the walls of our nation’s financial system were caving in.

With virtually no company assets or revenues at the time, this was the backdrop as I embarked on my entrepreneurial journey. Seemingly secure investment banking pillars like Bear Stearns and Lehman Brothers, which each had been around for more than a century, crumbled within the blink of an eye. As bailouts were occurring left and right, in conjunction with recurring multi-hundred point collapses in the Dow Jones Industrial index, cynics would repeatedly ask me, “Wade it’s great that you have a lot of experience, but how are you going to gain clients?” It was a fair and reasonable question at the time, but perseverance and hard work have allowed Sidoxia to beat the odds. Publishing several books, conducting numerous media appearances, and gaining thousands of social media followers (InvestingCaffeine.com) hasn’t hurt in building Sidoxia’s brand either. 

After achieving record growth in the first five years of the firm, Sidoxia more than doubled its assets under management again in 2013. More important than all of the previously mentioned achievements has been our ability to service our clients with a disciplined, customized process that has demonstrated strong long-term results and helped solidify our valued relationships.

A Few Party Animals Getting Reckless at the Stock Party

Success for Sidoxia or any investor has not come easy over the last six years. As I wrote in a Series of Unfortunate Events, we’ve had to navigate our clients’ investment assets through the following events and more:

  •   Flash Crash
  •   Debt Ceiling Debates-Brinksmanship
  •   U.S. Debt Downgrade
  •   European Recession
  •   Arab Spring – Tunisia, Libya, Egypt
  •   Greek Crisis and Potential Exit from EU
  •   Uncertain U.S. Presidential Elections
  •   Sequestration
  •   Cyprus Financial Crisis
  •   Income Tax Hikes
  •   Federal Reserve Tapering
  •   Syrian Civil War / Military Threat
  •   Government Shutdown 
  •   Obamacare & Its Glitches
  •   Iranian Nuclear Threat
  •   Argentinian Currency Collapse
  •   Polar Vortex
  •   Ukrainian Instability

It is no small feat that stock markets have made new records in the face of these daunting concerns. But simply ignoring scary headlines won’t earn you an investing trophy. Successful investing also requires controlling temptation and greed. At a celebratory bash, there are always irresponsible party animals, just like there are always reckless speculators gambling in the financial markets. It certainly is possible to party responsibly without getting crazy during festivities and still have fun. Even though the majority of investors currently are behaving well, as substantiated by the reasonable P/E ratio being paid (15x’s estimated 2014 profits) there are a few foolish players. Pockets of speculative fervor can be found in several areas of the financial markets. Here are a few:

  • Bitcoin Breakdown: The world’s largest Bitcoin exchanged filed for bankruptcy after it lost 750,000 Bitcoin units, worth about $477,000,000, based on current exchange rates. The popularity of this speculative virtual currency seems eerily similar to the great Dutch Tulip-Mania of the 1630s.
  • Biotech Bliss: Ignorance is a bliss, and apparently so is buying biotech stocks. There’s no need to speculate on gold or Bitcoins when you can invest in the Biotechnology Index (BTK), which has already advanced +21% this year on top of a 51% gain in 2013. Over the last 5+ years, the index has more than quadrupled.
  • Facebook Folly: WhatsApp with Facebook Inc’s (FB) $19 billion acquisition of the cellphone texting company? CEO Mark Zuckerberg is claiming he got a bargain by paying almost 1,000x’s the estimated annual revenue of WhatsApp ($20 million). When only a fraction of the 450 million users are paying for the service, I’m OK going out on a limb and calling this deal kooky.
  • High Ticket Tesla: Tesla Motors Inc (TSLA) has become a cult stock. The company has a price tag of $30 billion despite burning $7 million in cash last year. The announcement of a $4-5 billion battery “Gigafactory” added to the company’s recent hype. To put things into perspective, General Motors (GM) has revenues 75x’s larger than Tesla and GM generated over $5 billion in 2013 free cash flow. Nevertheless, GM is only valued at 1.9x’s the market value of Tesla…head scratch.
  • Social Media Silliness: Maybe not quite as wacky as the $19 billion price tag paid for WhatsApp, but the $30 billion value placed on Twitter Inc (TWTR) for a company that burned $30 million of cash in their most recent financial report is silly too. Yelp Inc (YELP) is another multi-billion valued company that is losing money. I love all these services, but great services don’t always make great stocks. Investors from the dot-com era vividly remember what happened to those overvalued stocks once the bubble burst.

Fear and greed are omnipresent, and some of these speculative areas may continue to appreciate in value. However, controlling or ignoring the powerful emotions of fear and greed will help you in achieving your financial goals. As the markets (and Sidoxia’s team) expand, our disciplined investment process should allow us to objectively identify attractive investment opportunities without succumbing to the pitfalls of panic-selling or performance-chasing.

Other Recent Investing Caffeine Articles:

Retirement Epidemic: Poison Now or Later?

NASDAQ and the R&D-Tech Revolution

Stock Market: Shrewd Bet or Stupid Gamble?

www.Sidoxia.com

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing SCM had no direct position in FB, TWTR, YELP, TSLA, BTK, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

March 3, 2014 at 11:34 am Leave a comment


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