(Photo credit to: MarketPlayground.com)
There’s much to discuss and even more to look back on! With everyone getting back onto a normal schedule, the main focus has switched to end of quarter earnings reports. Investors alike are all curious to see what companies have prevailed while others may have not done so well. Additionally we’ll look into what we know about the FOMC decision for tomorrow, look at what happened to the NASDAQ today, and end it all with a funny story about one lucky Bitcoin owner. So let’s get started and get you up to speed on what you need to know!
Stock Market News: Biggest Earners & Who Is Setup To Earn Even More
As usual, Apple was in headlines reporting solid earnings for this quarter. Tim Cook also announced that Apple will be rolling out a new product category in 2014, which has Apple fans worldwide hopeful for either an “iWatch” or “iTelevision.” Hmmm come to think of it I should probably trademark those names now before they do! They were also adamant to clear up any discrepancies, in addition to explaining their reasoning behind their actions following Ichan’s request. For those of you that don’t remember, Ichan proposed that Apple borrow $150 billion to buy back $150 billion worth of stock. His reasoning was that it would immediately boost Apple’s share price. Though Ichan has been an influencer in Apple’s share price before, this time he did not find the same success. Cook did not go into detail on what they plan to do with the situation, but said that borrowing $150 billion (to avoid all of the fees and taxes to pull their cash out from overseas) would just be a terrible idea in general.
Upon the closing bell, reports showed that retail sales actually performed worse than economists were originally hoping. On the upside, the housing marketing continues to strengthen. It seems that the economic data for the past few weeks have been poor to say the least. Even the data comparing real performance versus expected performance have been slowly getting dangerously closer and closer to the negative area. Still, we’re a group of “cup half full” type of personalities and saw that LinkedIn’s earnings (reported after the closing bell) were better than expected to say the least.
(Photo credit to: BusinessInsider.com)
A market that has been performing very well recently has been the S&P 500 Buyback Index. What’s even more interesting is the fact that it’s all because of the shares outstanding in the market, not because of the specific earnings. When companies generate enough to buy back their stock, it reduces the amount of shares outstanding, which affects the ratio of earnings in a positive manner. It’s outperforming the S&P 500, increasing by 250% since December 31, 1999 while the latter only increase by 20%.
This index is specifically for the 100 companies in the S&P with the highest buyback ratio. The sector within the index that performed the best is the financial sector. Adding three other sectors (telecom, consumer discretionary, and basic materials) have all experienced double digit percentage increases of share buybacks. As we all continue to look into the various ways to really earn the most we can or diversify our portfolio, some thought and consideration should definitely be given to the S&P 500 Buyback Index.
In the last bit of Stock Market News, the Nasdaq ran into some complications today. It seems that certain computer glitches were delaying trades to actually be processed. BusinessInsider.com actually ran a post merely to update investors on the progress. According to the last update, the glitch that halted trades from 11:53 am in 4,500 (out of the 5,100 indexes) was finally resolved 62 minutes later.
Anything in Stock Market News About a Burst?
In a great objective article, Alexei Bayer recently posted an article on ThinkAdvisor.com titled “Beware the Obama Stock Market Bubble.” Now, do not automatically assume we’re taking one side or another. We’re not, we’re merely providing commentary on a very interesting point Bayer brought up. He cited two different campaigns, different presidents, and economic situations that have followed the same pattern since the 1980’s. According to Bayer’s article, the Fed and presidents have tried to juice up the Stock Market in order to re-inflate the economies.
He points at that a pattern seems to be emerging with Presidents that are serving two terms, who come into the office either in the midst of an economic crisis or as it’s ending. Their duty is then to provide plans for economic recovery. The first instance happened with President Reagan (1980-88) and then with President Bush (2002-08). What concerns Bayer is that Obama seems to be following this same plan to the tee, which (if history is indeed cyclical) will then burst as he leaves office or shortly before. At that point, it’s then his successor’s problem.
Use the link above to learn more about Bayer’s opinion.
News on the FOMC Decision
Unlike what many analysts had initially predicted, one individual actually knew that the FOMC would not be tapering the policy any time soon. His name? Bank of America Merrill Lynch’s own, Michael Hanson. He saw through September’s minutes and understood that minimal (if any) progress would be made at that point. As he’s nailed it so far, we look to see what he predicts for tomorrow. He tells many of his clients and readers to basically not believe many of the speculations that have been coming to light so far. He’s said that many rumors, like increasing the pace of purchases, revision to the Fed’s forward guidance, or even adding an “inflation floor” seems highly unlikely.
Also, in his preview for tomorrow, he writes about what they will be focusing on as the minutes are released. Key points to focus on will be the cyclical vs. structural rates of high unemployment and low participation and expected amount of time for inflation to remain below target. The last point to really look into will be whether or not they also weigh out the costs and benefits of continuing QE for many more quarters.
Bernanke’s supposed “framework” for tapering has appeared to have lost any validity. Hanson hopes to expect some insight on this as well, possibly through an in-depth discussion of the economic factors to justify the taper, and most importantly the ways they will improve/strengthen their communications around asset purchases and the exit strategy. Don’t be too hopeful though, as resolutions to these situations are not likely to come into fruition at October’s meeting.
How Jealous Are You Of This Guy?
Even though the Stock Market world seems to be as murky as ever, we’re going to wrap this up on a lighter note. Now, usually when you see Bitcoin in headlines it’s usually accompanied by some sort of negative situation. Most recently was the shutdown of the online illegal drug store The Silk Road. The ongoing investigation concluded shortly after the owner/operator decided to do an anonymous interview. When that happened, the encrypted currency prices plummeted. This of course, is not too out of the ordinary for Bitcoin prices, as its one of the most volatile markets out there.
(Photo credit to: TheVerge.com)
So when I was skimming through the headlines and came across this one, I was pleasantly surprised to hear Bitcoin was associated with someone else’s good fortune. Here’s what happened. While Kristoffer Koch was working on his encryption thesis, he came across the currency and decided to invest 150 kroner ($26.60) in exchange for 5,000 Bitcoins in 2009. Not thinking much of his mere thirty dollar purchase, this Norwegian resident completely forgot about it. FOUR YEARS PASS. Koch begins to see Bitcoin headlines circulating through the media and remembers his purchase. He went to check and see what his $30 was worth and got the surprise of his life. At today’s current rates, Koch’s 5,000 Bitcoins have now generated a whopping $886,000!
Needless to say, Koch cashed one-fifth of his investment, and bought an apartment in Toyen, the wealthier area of Norway’s capital. Can you imagine what that first moment realization must have felt like?! I don’t know if I’d need to run to the bathroom or lay down before passing out. Now, Koch knows to keep a closer watch and can still enjoy the capital his remaining 4,000 Bitcoins will earn him!
I’m happy to see things finally turning around for the peer-to-peer currency. Hopefully we continue to see more good news than bad, though a classic line from the press is that there IS no such thing as bad press.
For more info on Bitcoin’s latest developments, check out the full article.
Still, we will keep you posted on the latest developments for the remaining days and will also make sure you know everything you need to about the FOMC’s latest decision. Be sure to check back to stay up to date and aware!
What do you think about Bitcoin? Is it worth the investment?
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