Edward J. Strafaci ~ Academic Blog

Is American Express Company’s (AXP) 25.1% ROE Good Enough When Compared To Its Industry? https://simplywall.st/news/2017/05/30/is-american-express-companys-axp-25-1-roe-good-enough-when-compared-to-its-industry/ While American Express Company’s (  NYSE:AXP  ) 25.1% ROE was above the industry average of 12.6%, the role of leverage must also be considered. Leverage can distort an ROE to a great extent. For instance, assuming interest costs are higher than a company’s earnings. The ROE might look impressive, but in reality the shareholders will take a hit instead achieving a positive return. Peeling the layers of ROE – trisecting a company’s profitability ROE ratio basically calculates the net income as a percentage of total capital committed by shareholders, namely shareholders’ equity.Generally, an ROE of 20% or more is considered highly attractive for any investment consideration. Although, it’s more of an industry-specific ratio as the constituents share similar r...

LEARN TO SELL : I don’t care what you think about it, like it or not LIFE forces you to sell. And, selling is a science and a learned skill. To be good at it you have to maintain a life long dedication to constantly learning and growing and practicing it. So if you’re going to be in business and expect any modicum of success, you will need to learn to sell. Learn the basics if nothing else. NEVER TAKE A NO FROM SOMEONE WHO CAN’T SAY YES ! One of my very first business mentors taught me this. It’s based on the simple fact that you can waste a lot of time dealing with someone, in virtually any phase of business, who can say NO to your proposal but has no authority to say yes. Just ask a few questions and find out where the authority lies and save yourself, days, weeks, months, maybe years in time and frustration. BE PASSIONATE ABOUT WHAT YOU’RE DOING, OR DON’T DO IT!  If you’re an entrepreneur who’s selling an idea, a product or service, or working for someone, selling your boss ...

By including returns relative to risk, as measured by standard deviation an investor can view returns within the context of variability, or risk. Imagine two people traveling 50 miles, both get there within 1 hour. Both average 50 miles an hour. However, one travels at at variance of 40 to 60 mph and the other travels at a variance of 10 to 100 mph. Who do you suppose has more risk?

US banks led by Goldman Sachs and JPMorgan have lowered their expectations for US bond yields this year, as hopes of a surge in the US economy subsides. US Treasury yields have stayed stubbornly subdued, despite the recovery of the US stock market from a bout of turbulence last week, underscoring that bond investors remain far more sceptical of economic growth and inflation than stockpickers. The benchmark 10-year Treasury yield, which moves inversely to price, edged higher to 2.25 per cent on Monday, having fallen 9 basis points from its starting point last week. At the same time, the S&P 500 has been buoyed by announcements of US defence and infrastructure deals over the weekend, after the US administration travelled with senior business leaders to Saudi Arabia. But the shift in mood among investors has done little to assuage concerns about a slip in the timeline for important, promised pro-growth Trump administration policies including fiscal stimulus and tax cuts, with...

I am of the mind that going with Exchange traded funds may be the best alternative for most people. Low commissions , liquidity and effectiveness! A piece on ETF's from the Vanguard website. What is an ETF? The simplest definition of an exchange-traded fund, or ETF, is that it's an investment that's built like a mutual fund but trades like an individual stock. The most common ETFs are designed to track the performance of a  market benchmark , or "index." Enjoy the same built-in benefits of mutual funds Diversification One fund can hold potentially hundreds—sometimes thousands—of individual stocks and bonds, which helps spread out risk. Professional management You don't have to keep track of every single investment your ETF owns. The fund is managed by fund experts who take care of that for you. Get more control with ETFs—at lower costs While ETFs are in many ways the same as mutual funds, there are some features that make them...

6 Questions Bond Investors Should Be Asking Right Now As interest rates rise, finding the right fixed-income strategy is crucial https://www.wsj.com/articles/6-questions-bond-investors-should-be-asking-right-now-1494209700 Where can you get a reasonable return on cash these days? That is one of six questions that savers and bond investors are asking. ILLUSTRATION: DOUG CHAYKA FOR THE WALL STREET JOURNAL Michael A. Pollock May 7, 2017 10:15 p.m. ET The Federal Reserve is raising interest rates, and there are several questions that savers and bond investors would like answered. For example, to be blunt:  Is my savings account going to pay any worthwhile interest at some point?!  (The answer: probably not soon. But there are alternatives.) If this all sounds familiar, it should: Many bond-market strategists had expected bond yields would be a lot higher by this point in the economic recovery, perhaps even making a savings account desirable. But a...

Hot Stocks Can Make You Rich. But They Probably Won’t. https://www.nytimes.com/2017/05/12/your-money/hot-stocks-can-make-you-rich-but-they-probably-wont.html?src=me&_r=0 Individual stocks can be hazardous to your financial health. You may not want to hear that right now, with the stock market regularly hitting new highs. The Standard & Poor’s 500-stock index set another record on Wednesday after reaching a new high on Monday. It set records on two days the previous week, too. Counting dividends, it has returned more than 6 percent this year and more than 15 percent in the last 12 months. What’s more, big bets on hot stocks are generating enormous gains. So far in 2017, for example, two companies in the S.&.P. 500 — the biotechnology company Vertex Pharmaceuticals and the video game developer Activision Blizzard — have each returned more than 50 percent to their fortunate shareholders. No question about it, if you pick a sizzling stock at just the rig...

https://www.forbes.com/sites/hershshefrin/2017/04/26/support-from-unlikely-quarter-for-lowering-the-corporate-tax-rate/#6780a1e2cba3 President Trump is proposing to  reduce the corporate tax rate  to 15 percent from its current 35 percent.  Some will be surprised to learn that not only lowering the corporate rate, but eliminating it altogether, is one of the reforms proposed by economist  Hyman Minsky , whose ideas about the impact of psychological traits on financial instability have gained much attention since the global financial crisis. Shutterstock Minsky recommended eliminating the corporate income tax because it encourages companies to take on excessive debt. He made the forceful argument, which recent events have supported, that excessive leverage makes the economy fragile and vulnerable to instability. In his view, overvalued debt, not overvalued equity, presents the biggest threat to stability. Corporate debt is part of the picture, as is of c...

The Real Reason Investors Can’t Get Enough of Tesla W Rocky Newman Apr 20, 2017 http://fortune.com/2017/04/20/tesla-value-general-motors-elon-musk/   When someone buys a stock at any price, they are betting it will rise in value over time. When someone sells a stock, they’re assuming the price is going to go down at some point. The side with greater numbers usually determines which side wins the day. And currently, there are a lot more buyers for Tesla than sellers. In fact, Tesla surpassed  General Motors   (GM, -1.44%)  last week as the most valuable automaker in the United States, and the two have been neck and neck since. Tesla stock is now trading just a sliver over $300 per share (up from a previous 52-week low of $178), while GM is about $33.70 per share (up from a 52-week low of just over $27). This puts the market capitalization of both companies at about $50 billion.   From the standpoint of making ca...

How Will Hedge Funds Be Affected by NYCERS’ and CalPERS’ Exit? After the 2007-08 financial crisis, many large institutional investors turned to hedge funds for diversified asset management. These hedge funds promised a package that hit home: high equity-like returns without the volatility of the market. Investments skyrocketed. By 2014,  public pensions had increased their hedge fund holdings to 5.2 percent of total assets, compared to just 1 percent a decade earlier.  Hedge funds now manage six times as much as they did at the turn of the century, flaunting a $3 trillion dollar industry that drew as many critics along the way as it did billionaire elites. Though hedge funds have consistently underperformed the S&P 500 since the financial crisis, managers continue to benefit from management fees, making larger institutional investors weary. Source: Bianco Research These investors are finally taking action. CalPERS (California Public Employees’ Ret...