Financial Floyd Blogspot

Good Morning, On Monday, the Wall Street Journal published an article about Credit Card Spending Limits being limited. From the article, the following points stood out: 1. Discover and Capital One are tightening lending standards 2. There are currently no signs of problems with people paying their balances 3. Discover has cut back personal loans Credit card limits are a leading indicator of how these companies view the market. If you observe them less willing to extend credit to people (usually starts with the below prime borrowers), then it signals that they are more worried about deterioration within the current economic environment. The article touches upon how consumers have taken on record levels of debt, and these debts will be facing a headwind due to rising interest rates. While this does not signal us falling off a cliff, it does provide more information about how others are viewing this market/economy. If these companies are shedding risk and preparing for a tur...

Good Morning, I ran across an article on CNBC yesterday that summarizes a report done by the Stanford Center of Longevity which highlights how people need to either double or triple their retirement savings a year. While this is a good article that sheds light on the lack of savings, it is hard to quantify based on the article using percentages, so I thought providing an example would be a better frame of reference. Let's say I want to retire by 68 years old and plan on spending $60k a year in retirement for 30 years, based on a conservative investment return of 4% a year, on day 1 of retirement I need about $1.04 Million . Now based on my current age (38), and not having a dollar in my retirement, using the same investment return assumption (4%), I would need to save $18.5k for 30 years. Based on this example the inputs that matter are: Number of years (in retirement and working) Amount needed yearly in retirement Investment return assumption Starting amount Thi...

Good Morning, Over the past couple of days, various news sites have posted about Initial Public Offerings (IPOs), because Uber is supposed to be going public next year. Bloomberg  published an article yesterday about IPOs and the possibility of a bubble. A couple takeaways from this article were: 1. Some of the big tech companies have frothy valuations that are remarkably higher than the average company in the S&P500 2. Tesla which went public in 2010 has failed to make a profit and some of the most recent tech IPOs continue this trend 3. This is similar to the dot.com bubble of the late 90's early 2000's While this article paints a gloomy picture, it does highlight that fundamentals (and more importantly profit) matter. When taken into context of what we have seen domestically since September 20, in a falling market, companies that do not earn money carry a higher risk (i.e., Tesla, Snapchat, Pot Stocks, etc.). Also, the companies coming public now are not like th...

Good Morning, Yesterday marked the 30th Anniversary of Black Monday. On October 19, 1987, the market (Dow Jones Industrial Average) crashed 22.6% in one day. MarketWatch published an article about what happened that day and how dissimilar it is to our current situation. A couple points that I found interesting in the article were: 1. The Fed Funds Rate (starting point for interest rates) was at 7.25% versus 1.125% (at the end of 2017) 2. Inflation (which has been non-existent for us currently) was 3.9% vs. 1.7% 3. The gain since the last Bull Market is similar to today, but the time length from the end of the last Bull Market was 60 months in 87' versus 103 months at the end of 2017 4. From 8/25/1987 to 10/16/1987, the market (DJIA) was down 16%, but for the market was up last quarter and this month the market (S&P500) is down around 5% This article was great with providing a comparison but did not highlight how at this time program trading...

(repost from Tuesday 10/16/2018 Facebook page ) Good Morning, Tomorrow Canada will be the second country to legalize Marijuana, and over the past couple of weeks, these stocks have seen exponential growth. There has been a ton of chatter, but not a lot of useful information around it. This weekend, The New York Times released an article highlighting this law change. This is a lengthy article but some good points are: 1. The country is trying to figure out the parameters around it 2. Analyst expect the industry to reach $5 Billion (6.5 Billion CAD) by 2020 3. Government and Corporate interest will impact the opportunities around it 4. Question marks surround how the illegal market will be absorbed or alienated While these new stocks have a ton of good news pushing them higher, there has been minimal mention of the financial viability of these firms or how governments impact regulation. As a personal investor while it is great to hear all the stories, at the end of the day prof...

(report from 10/12/2018) Good Morning, The stock market has taken a beating all week and based on the attached CNBC article President Trump blames the Federal Reserve. While entertaining, this is a lot deeper than assuming that rising rates caused the collapse. A couple of points worth considering are: 1. 2017 saw synchronized growth, but 2018 has been different as the US has shaken off the February pull back while the rest of the world has stayed lower 2. Volatility has been low despite all the political events which should have increased it 3. IMF downgraded growth for 2019 across a majority of nations The most prominent theme that people have missed is that trade and politics matter. The trade war (which Pence quietly called a Cold War) with China has been primarily ignored within domestic markets, but the reality is starting to set in that companies and consumers will still be impacted. The article mentioned a higher dollar, but what this does is increase the cost of for...

(repost from 10/9/2018) Good Morning,  It looks like the IMF is cutting global growth across the board. According to the projections, it seems that initial projections were "overly optimistic." Based on the article by CNBC the biggest takeaways from the post are: 1. The Trade War concerns between the US and China with looming unknowns around the tariffs 2. Uncertainty around NAFTA and the EU (Brexit) continue to loom 3. Emerging Market countries growth expectations have been downgraded due to trade concerns While it has been a surprisingly good year for the equity markets, the market has been in the red for the past couple of days. The IMF report is not mentioning anything new but brings to light how badly the markets were not considering the uncertainty of political risk in a more connected world than in the past. If anything the news around what could push the market higher has started to dampen. . . . . #financialliteracy #imf #nafta #eu #us #china #cnbc ...

(repost from 10/1/2018) Good Morning, It looks like we have a new NAFTA deal (now called the United States Mexico Canada Agreement) ahead of the October 1st deadline. The CNN article below highlighted a couple of points: 1. Canada will open up its dairy market to the US which is similar to what it has done with the European Union and others 2. The auto manufacturing portion impacts Mexico the most From the initial news and information about the deal, not much has changed, but it does open the door for more changes. Canada kept an essential dispute resolution in the document and received assurances that new tariffs on automobiles won't impact their country. What has not been mentioned is Mexico made a bulk of the concessions on the automobile industry which might end up increasing the cost of cars . #financialliteracy #nafta #usmca #economics #dairy #automibiles #unitedstates #mexico #canada #cnn #tariffs #tradewar #financialfloyd #phillyfinance https://www.cnn.com/20...