Since market-cap weighted indexes weight companies according to market capitalization, and respectively the stock price, they often reflect the investors’ enthusiasm over certain sectors. To remove market exuberance from the indexing process, FTSE, together with its partner Research Affiliates, has developed FTSE RAFI Index Series, a range of indices that are based on fundamental metrics of company size including sales, earnings, book value, cash flow, and dividends.
Q: What are the key features of the fundamental indexation™ methodology of the FTSE RAFI Index Series?
A: The concept of fundamental indexation ™ was introduced by Rob Arnott and his team at Research Affiliates, who were looking to create an alternative to market-cap weighted indexes. The idea is that a market-cap weighted index, where stock price is a key variable, reflects a good part of the investor psychology that determines the price, while fundamentally weighted indexes exclude market emotions.
Instead of using market-cap weighting, Rob Arnott used sales, earnings, cash flow, and book value to measure company size. His experiment showed what would happen if each of those weightings replaced market capitalization...[...]
NEW YORK (MarketWatch) -- The old market adage that things that can't last don't, has finally caught up with China. The top-performing investment letter finally has turned decisively bearish on the Middle Kingdom.
Cabot China & Emerging Markets Report, which I'll call CCEMR, is currently the top-performing letter according to the Hulbert Financial Digest, up an astonishing 90.29% over the past 12 months vs. a mere 15.06% (phooey!) for the dividend-reinvested Dow Jones Wilshire 5000. Equally amazing, CCEMR's performance has been sustained. Over the past five years, for example, it's up 27.57% annualized vs. 15.23% annualized for the total-return DJ Wilshire 5000.
But editor Paul Goodwin has (very sensibly) been worrying for some time about the China craze he's been riding. He consciously tried to diversify into Brazil, Russia and China earlier in the year...[...]
No, really -- it is. The yield on the 10 Year was under 4% this morning -- briefly kissing 3.99%.
You may be noticing about now that this lies in stark contrast to our prior discussion of Rates and the Magazine Cover Indicator (for more on the magazine cover indicator, see this).
To the wayback machine: Earlier this year, we noted (with an "Uh-Oh") that Business Week's February 19, 2007 cover story on our "Low, Low, Low, Low-Rate World" might be a contrary indicator that rates were about to tick higher. After that article came out, Fixed income rates went lower for a month, then rallied to a new 12 month high.
Things were looking grim for Messers. Mandel and Henry.
Courtesy of Barry Ritholtz - We have previously mentioned our fondness for the acid tongue of Jeff Matthews (see 2005's Why We Love Jeff Matthews).
With Q3 earnings reporting nearly over, Jeff explained analysts' penchant for the word Upbeat -- translating that as well as numerous other Wall Street Weasel words for the reader.
Jeff:
“Upbeat” = can mean anything from “Wildly optimistic” to “Grinning and bearing it.”
Other coded words and phrases in the tribal language of Wall Street's Finest, with translations provided by NotMakingThisUp, include:
1. “Management was cautiously optimistic” = management has no clue
2. “Earnings were in-line” = the company barely made the number
3. “We are tweaking our estimates” = we will be slashing our numbers next time
The much-dreaded mother of all loaded phrases:
4. “Our thesis is still intact” = sell every share you can, right now
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Market sentiment did an about-turn last week as uncertainty mounted on the back of the credit situation going from bad to worse. The upshot of the deteriorating outlook was a reassessment of risk by market participants as evidenced by a number of measures such as the Volatility Index (VIX) and the CBOE Put/Call Ratio pointing to complacency making way for fear.
But nowhere is it illustrated more vividly than by the continued appreciation of the Japanese yen as investors unwind their carry trades. The carry trade involved borrowing cheaply at low Japanese interest rates and reinvesting in high-yielding assets. The unwinding of the carry trade is putting downward pressure on high-yielding currencies such as the Australian dollar and the British pound and is furthermore leading to the liquidation of stocks across a broad spectrum. The latter phenomenon is clearly shown by the strong inverse relationship between the Japanese Yen Index (blue line) and the Dow Jones World Stock Index (red line) in the following graph:[...]
Nov. 9, 2007 -BHP Billiton, undiscouraged by Rio Tinto’s rejection of an initial takeover bid, has upped the ante as it is now prepared to offer more that $140 billion for the mining company. If accepted, the deal would be the largest of this year (see article from The Money Times). In order to determine if any significant relationships exist between BHP and Rio Tinto that could facilitate negotiations, we created an IntellectSpace Knowledge Map that visually maps the ties through the Executives and Board of Directors at either company. The results suggest that BHP may need more than connections to satisfy Rio Tinto.
(Note: the information contained and presented in Knowledge Maps is public information from the Securities and Exchange Commission of the United States of America).
posted on: September 20, 2007 | about stocks: OIL / USO / DBO
Oil's low close of $50.48 on January 18th, 2007 seems decades away as prices are up 62% since then.
With T. Boone Pickens forecasting $100 oil (thankfully not this year), we looked back at historical price moves for the commodity since 1986.
Bull and bear markets are defined as 20% moves. Notably, the average gain for oil in a bull market is 62.89% (we are up 62.32% right now); the average length of a bull market is 226 days (we are at 245 days right now). See Chart (Complete Story)
