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Buy, Sell or Hold: The Smart Money is Selling Amazon.com
I love the super deals that I get from Amazon.com (NASDAQ: AMZN). They always seem to beat the brick-and-mortar stores and I get two day-delivery for free.
It's no wonder to me that the online retail giant has ranked at the top of Foresee's E-Retailer Consumer Satisfaction index for eight straight years.
What I do have doubts about is Amazon's share price. It continues to make new highs while the company's core business is slowing and its new "growth" businesses aren't all they are cracked up to be.
With a P/E that has now reached astronomical levels, here's why the only money I'll be giving to Amazon will be what I spend on its merchandise.
Why Top Hedge Funds Can't Outperform the Market
Hedge funds are known as the "smart money" on Wall Street, and in the past, that distinction was justified.
For years, hedge funds successfully managed risk and made well-placed bets, leaving their investors with a return they were happy to pay for.
But recently, hedge funds have underperformed the market, earning a return of just 7.32% in 2012, according to research firm eVestment, compared with last year's S&P 500 return of 13.41%.
Was 2012 just an outlier, or are hedge funds really inferior to a market-based index?
One investing legend thinks it's the latter and has even gambled $1 million on it.
Here's the Surprising Winner of the Currency Wars
It's war by other means. With the Bank of Japan now buying government bonds and targeting an inflation rate of 2%, a global race to the bottom is on again.
Along with the Fed's commitment to "quantitative easing" and the ECB's promise to buy dodgy Mediterranean economies' bonds, Japan's latest move has sparked new fears of a currency war.
Like any other war, this one won't end well, either.
In fact, this same scenario played out in the 1930s, and the chances of another nasty outcome are quite high.
However, the mathematical reality is that the world's major currencies can't all be catastrophically weak against each other. It's impossible.
But the winner may surprise you. Because as this skirmish unfolds, it is the U.S. Dollar that will likely maintain its value against desperate contenders like the yen, the euro and the pound.
At the moment, those are the currencies that look distinctly unlikely to hold their own against the greater realities.
Here's why, starting with the yen.
What Everyone Absolutely Needs to Know About Money
I got my start studying economics at UCLA. That started me on a career that's lasted for more than 30 years, trading equities, bonds, commodities, currencies, derivatives, and real estate. It continues to be a great, rewarding career and it's afforded me a wonderful lifestyle.
No one is born with a mastery of these fields. It takes careful study and years of experience before one gets a real grasp of economics, money, and the markets.
But you have a great head start.
We live in the Information Age. There are hundreds of financial and business news outlets. Discount brokerages have opened up everywhere, putting the power directly in the traders' hands. The Internet offers a huge body of knowledge and opinion on investing, markets, and money.
All of this – and more – is available to each of us. But I've been wondering why there aren't more successful investors or traders. Then, in an "Ah-ha!" moment the other day, I realized why: No one teaches you how to "fish" the markets!
You know the old saying… Feed a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.
That's just what I'm going to do. Starting today, and continuing on, I'm going to use our Insights & Indictments space to give vital insights on mastering the markets.
You'll have the benefit of more than 30 years of experience and success in the palm of your hand. You will be the master of your own destiny.
Your first lesson starts with money. Here's what everyone absolutely needs to know about it.
Is the Obama Stock Market Rally the Real Deal?
At first glance, there can be no doubt that U.S. President Barack Obama has been good for the stock market.
The Standard & Poor's 500 Index has rallied by nearly 700 points – just shy of 86% – since the president's first Inauguration on Jan. 20, 2009.
This is the best stock market performance for a presidential first term since World War II, even beating the 79.2% rally during President Bill Clinton's first term in the White House, from January 1993 to January 1997.
In fact, the only time stocks rallied more during a presidential first term was during Franklin Roosevelt's first term from March 4, 1933, to Jan. 20, 1937, when the Dow Jones Industrial Average rose 245% off of Depression-era lows.
In a very broad sense, the condition of the stock market at the start of President Obama's first term in 2009 can be compared to the stock market in 1933. In both cases, stock prices had collapsed and were trading at generational lows when both presidents took office. In both cases, share prices rallied substantially off of the bottom as economic conditions improved.
But all this really proves is that the first leg of any rally is usually the strongest and most profitable.
As the S&P 500 is at a five-year high and is zeroing in on the 1,500 level for the third time in its history, one has to wonder if the Obama Rally is sustainable or are we just reverting to the mean?
IPO Calendar 2013: Two Real Estate Winners Come to Market
With the stock market reaching five-year highs, the IPO market in 2013 is expected to be more robust than last year.
In fact, strong IPO performance at the end of 2012 has given hope that the IPOs of 2013 will take off after hitting the market.
"To me, it feels like a meaningful shift in the market," said Tom Murphy, a partner and head of the securities-capital and markets group at law firm McDermott Will & Emery. "With those companies [that had great IPOs], all in very different industries, getting out at the top of their ranges, and above, is a really strong signal."
If you want to be an IPO investor with hopes of getting the hot deals, it pays to keep your eye on the new issue calendar and watch for small deals that make sense as long-term investments.
In the next two weeks there are two deals scheduled that may be of interest to you.
Let's take a look.
The Apple Sell-Off is Just Beginning
I've made the case several times that Apple Inc. (Nasdaq: AAPL) was over-cooked, most recently last fall when the company was flirting with $700 a share.
Each time I did I was taken to the woodshed by the legions of Apple fans who couldn't reconcile their passion with their profits.
iHere we go again…
Following earnings that "beat" and revenue that fell short, the company dropped $48 billion, or roughly 10%, in afterhours trading on Wednesday. And still more on Thursday in early trading.
I think this is just the beginning of a protracted sell- off and my argument really isn't that fancy. In fact, it comes down to two very simple points:
Stock Market Today Battles the Apple Effect
The stock market today was proof that one bad apple doesn't spoil the whole bunch.
The Dow was up 55 points by 3:15, the S&P 500 up 1 – but the Nasdaq did slump 20 points, dragged down by Apple Inc. (Nasdaq: AAPL).
Thursday's advance came on the heels of the Dow's 67-point rise Wednesday which was stoked by a vote in the House of Representatives to suspend the U.S. debt ceiling through May 19.
Also propelling gains Wednesday were strong results from tech heavyweights Google INc. (Nasdaq: GOOG), which beat estimates and spiked $38.63 points higher, and International Business Machines Corp. (NYSE: IBM), which rallied 4.4% after posting better-than-expected numbers.
To date, some 75% of the 134 companies in the S&P 500 Index that have reported results have handily beat expectations.
"People are just trying to digest all the earnings reports from the various companies. As long as the economy seems to get better the stock market will do well," Giri Cherukuri, portfolio manager who helps manage $3 billion at Oakbrook Investments LLC in Lisle, Illinois, told Bloomberg.
Why the Japanese Yen Has Triggered Global Concern
The Japanese government was criticized for deliberately weakening the Japanese yen by German Chancellor Angela Merkel during a question-and-answer session following a speech at the World Economic Forum in Davos, Switzerland.
"I can't say I'm completely free of worry when I look at Japan right now," Merkel said, according to Bloomberg News.
Michael Meister, a senior member of Merkel's Christian Democratic Union who will be meeting with Japanese officials next month, said in a telephone interview with Bloomberg, "What can Japan's competitors do? Either we're all smart and do nothing, or we follow suit and create a spiral that hurts us all."
"The Japanese economy's real problems are structural and beg structural remedies, not tampering with the exchange rate," Meister continued.
Merkel and Meister are not the only German critics of Japanese Prime Minister Shinzo Abe's program to revive the Japanese economy through weakening the yen.
Germany's Finance Minister Wolfgang Schaeuble raised concerns about excess Japanese liquidity flooding the global capital markets while Bundesbank President Jens Weidmann warned of politicizing the Japanese yen.
Meanwhile, South Korean Finance Minister Bahk Jae Wan said South Korean exporters, which compete directly with Japanese companies in many industries, including cars, electronics and engineering, might be "at risk."
Deng Yuhan, writing for China's Xinhua News, said, "The easing of Japan's monetary policy entails the weakening of its currency, a side effect – if not the purposeful design – that can translate into an artificial and unfair price advantage for Japanese exports."
Deng continued, "It is a safe bet that others would respond with driving their own currencies down, thus igniting a downward race among the world's most heavily traded media of exchange – known in a more dreadful way as currency wars."