What I’m Selling (and will be Buying) in the Market Turmoil
The market is in turmoil, and it seems like everyone I talk to wants my take on what's happening this week. So here's my take: I really don't know if the various bailouts and decisions not to bail out made by Paulson et al will turn out to be good decisions or not. I do know that the mess we're in is due to hard decisions which have been put off for years at the highest levels, and I do know that the American taxpayer is going to be feeling the pain for a generation, if not...
Green Energy Investing For Beginners, Part III: Before You Invest
Tom Konrad, CFA Before you consider green stock market investments, invest in yourself. A reader of my article on asset allocation for green energy investors brought up an important point: we may have green opportunities in our own lives, such as improving the energy efficiency of our homes, which will return much safer and higher returns than green stocks, especially when the market as a whole is as overvalued as I currently believe it is. Homeowners typically have a large number of high-return energy efficiency investments they can make. Since energy efficiency reduces energy use, it both produces returns...
An Elephant Hunter Explains Inflection Point Investing
John Petersen In "An Elephant Hunter Explains Market Dynamics" I discussed the two basic types of public companies; earnings-driven companies that are “bought” in top-tier weighing machine markets and event-driven companies that are “sold” in lower-tier voting machine markets. Today I'll get a bit more granular and show how "sold" companies usually fall into one of two discrete sub-classes that have a major impact on their stock market valuations. As a starting point, I'll ignore the China-based companies that are listed in the US because their quirky metrics would only confuse the analysis. Then I'll break...
Opportunity Hiding in Plain Sight
Information asymmetry, climate investing and the active management edge.
By Garvin Jabusch
The theory of efficient markets says all stock prices are perpetually accurate, because investors always have complete and up-to-date information about their holdings.
But as any casual observer knows, information and topical awareness are not evenly distributed, even among professional analysts. Reality is always far more complicated than equity markets can quickly assimilate, meaning information asymmetry is a constant. While usually considered a type of market failure, information asymmetry is frequently used as a “source of competitive advantage.” The person with the most information is best equipped to make the best...
Why I Sold My Utility Stocks
In times like these of financial uncertainty, regulated utilities have traditionally been considered a safe haven. But that is changing. The Dow Jones Utilities Average was down 30% in 2008, vs. a 34% drop in the Dow Industrials. Not much of a safe haven. In a recent interview, utilities analyst Daniel Scotto noted, that the utility industry offers "a lot less security" than it used to. His reasoning is based mainly on the fact that the regulated portion of utility company's business is smaller than it has been in previous recessions, making them vulnerable to lower growth (or even...
Should I Sell My Mutual Fund To Go Solar?
by Tom Konrad Ph.D., CFA An enthusiastic solar volunteer recently asked me: “What can I invest in to prepare for the next financial crisis?” The situation made the question deeply ironic. The woman asking me was trying to help people invest in solar systems through Solarize, a nonprofit, community-sponsored group buying and discount program. Our town of Marbletown, New York and the neighboring towns of Rochester and Olive have just launched Solarize Rondout Valley, a campaign open to residential and commercial building owners in Ulster County. Solarize campaigns are designed to make it easier and cheaper...
Twelve Green Investment Themes From Putin’s War on Ukraine
By Tom Konrad, Ph.D., CFA
Horrific, Tragic, Unprovoked, Heartbreaking. There is no lack of adjectives to describe Putin’s war on Ukraine. And while there probably can’t be too much coverage of the tragedies and war crimes, many others can write those far better than I.
As an economic and stock market commentator, the adjective I will focus on is world-changing. There is no doubt that the first land war in Europe since World War II, piled on top of a global pandemic, is already reshaping the economy in dramatic ways.
Some of those changes, like Europe switching away from Russian gas and...
An Elephant Hunter Explains Market Dynamics
John Petersen Friday afternoon was a strange time for Axion Power International (AXPW.OB). After trading 200,000 shares early in the day, Axion filed $28 million mixed shelf registration with the SEC at about one o'clock and the fly on the wall reported the filing within minutes. It seems that some stockholders were spooked by the news and assumed that Axion would sell stock right away instead of waiting for the fall deal season. Their knee-jerk selling shoved another 1.1 million shares into the market in three hours and made Friday the second heaviest trading day in Axion's history....
Green Energy Investing For Beginners, Part II: How Much To Invest
Tom Konrad, CFA In Green Energy Investing for Beginners, Part I, gave information to guide the choice of green investment vehicles (mutual funds, ETFs, or stocks.) This article is intended to help investors decide how much of their money to put into those vehicles. An informed decision of how much to invest in green energy is at least as important as how you make the investment. The choice between green Exhange Traded Funds (ETFs) and green Mutual funds rests on a difference of about one percent per year, caused by differences in fees. Yet in the first three quarters...
How to Buy Losers: Tricking Yourself with Cash-Covered Puts
It's that time of year again. I've started studying for the third (and final) CFA® exam, and my readers are "treated" to my theories of the market and trading. No stock picks today; put your thinking caps on! CAPM: Nice Theory, Too Bad About the Market In Level II of the exam, we studied efficient-market theories, such as CAPM and APT. I actually like an elegant theory (I spent nearly decade of my life studying mathematics), but as a market practitioner, I know the market doesn't work that way. I learned this lesson the hard way. Early in my...
Green Energy Investing For Beginners: How Many Stocks Should You Own?
Tom Konrad, CFA In stock portfolios, deciding how many stocks to own involves weighing a trade off. A smaller portfolio can be built (and sold) with fewer commissions, and also requires less time to research. On the other hand, a portfolio with fewer stocks will gain fewer benefits of diversification, and likely be both more volatile and harder to sell in a crisis. These trade offs are also affected by the size of the portfolio, and the market capitalization and liquidity of the companies in the portfolio. Diversification is widely accepted as a nearly costless way to reduce...
Green Energy Investing for Beginners: A Small Investor’s Perspective
This is a guest post by Brad Wright, who felt that my "Beginners" series was a too high level to really live up to the name. He's probably right about that, so here is his effort to bring it down to basics for the small Canadian investor. The links and section headers are mine. Tom Konrad. Motivation The goal of this article is to assist with your future investments by explaining investment options, how they work and potential alternatives that may be of interest to you. The take away I’m looking for is with a little research you can...
The Problem With Proxy Ballots
Vote With Money Instead by Garvin Jabusch Many people assume that engagement with public companies through proxy voting and resolution filing is the best if not only way to see positive environmental, social, and governance outcomes from your investments. For me, this approach misses a fundamental point of market-based solutions: you make in investments in the most compelling ideas that reflect what you think is likely to grow, where you think the economy is headed, and yes, outcomes you support. That means using investments to favor firms that are already making innovative sustainable contributions to the global economy...
Preparing for Catastrophe: Is your global warming portfolio ready for rising sea levels?
A Worse-Case Scenario I believe that a large part of global warming denial is fear: fear that if we acknowledge that global warming is happening, we will be morally obligated to do something about it, and that the problem is too large for us to do anything effective. I also believe that denying the problem is certain to render us all ineffective in dealing with it. But getting over our global warming denial is not the only obstacle in our way to dealing with it. Global warming is already happening, and future temperature rises are already inevitable given the...
Correction, or Bear Market?
by Tom Konrad, Ph.D., CFA
On February 21st, I was helping an investment advisor I consult with pick stocks for a new client's portfolio. He lamented that there were not enough stocks at good valuations. This is one of the hardest parts of being an investment advisor: a client expects the advisor to build a portfolio of stocks which should do well, but sometimes, especially in late stage bull markets, most stocks are overvalued. I reminded him, "The Constitution does not guarantee anyone the right to good stock picks." He agreed, but he still had to tell his client that...
Free Talk: A Permaculture Portfolio
For readers in the Hudson Valley, I will be giving a free talk next Monday night. I will speak about applying permaculture design principles to your investment strategy. While I developed my own strategy over the last two decades without any reference to these design principles, now that I'm familiar with them, I realize that I have been thinking along these lines for a long time. The design principles are remarkably robust and intuitive.
I used to think Permaculture was just about redesigning our food systems, but it's much much more than that.
The talk is sponsored by the Rondout Valley...
