Stock Trading

A generation of Economists and students of Macroeconomics were taught that the Quantity Theory of Money described the relationship between money and prices in the economy. The primary equation for the Quantity Theory of money is:Where:is the total amount of money in circulation on average in an economy during the period, say a year.is the transactions velocity of money, that is the average frequency across all transactions with which a unit of money is spent. Velocity is derived from the Money Multiplier which arises from a fractional reserve banking system. When a bank lends money to a business from deposits its customers make, that money can be paid as salaries, re-deposited, and lent out again, and so on. So a given unit of money can change hands and take part in many more transactions than if all banks had to keep 100% of their deposits on hand.

Gregory Mankiw, a professor of economics at Harvard, wrote an editorial piece on May 18th, 2013 in The New York Times that included a list of the "what we know" rules that all investors should follow. Among other things, Mankiw argued for international diversification.In a section titled "Smart Investors Think Globally", Mankiw argues that owning international stocks is an indispensable part of stock investing: One widely documented failure of diversification is what economists call home bias. People tend to invest disproportionately in their home country. Most economists take a more global perspective. The United States represents a bit under half of the world's stock portfolio. Because Europe, Japan, and the emerging markets do not move in lockstep with the United States, it makes sense to invest abroad as well. I see no reason to regard a focus on American domiciled stocks as a "widely documented failure of

By Rob Gowen, CFA New York University professor Aswath Damodaran has been teaching corporate finance and valuation for decades. His message is simple: when valuing a publicly traded stock, the ubiquitous discounted cash flow model is a trustworthy framework. However, he admonishes financial analysts to challenge conventional wisdom and biases (i.e., no shortcuts) that create internal inconsistencies and questionable results.At the 2013 CFA Institute Annual Conference in Singapore, the legendary Stern School of Business academic delivered his message in a talk entitled, "Valuation in the Face of Uncertainty." Damodaran confessed that he's been doing this talk for so long that he has to find new ways to repackage his message. In fact, he delivered a similar talk in late 2012 at the CFA Institute Equity Research and Valuation Conference that my colleague Dave Larrabee, CFA, nicely summarized on our Enterprising Investor blog.The core of

Improved weather opened up a window for farmers to plant the 2013 crop, resulting in a 43% increase in week to week corn acres planted. Farmers in the Corn Belt will see increased moisture at the beginning of this week, favoring developed crops but slowing down planting the remainder of the crop.As of May 19, 2013 71% of the U.S. corn crop has been planted. This was a huge jump in acres planted and only 8% behind the five year average of 79%. Corn that has emerged was at 19%, down 27% from the five year average.Soybeans planted were at 24%, well behind the five year average of 42%. Last year at this time 32% of soybeans had emerged, but only 3% have emerged as of May 19, 2013.Winter wheat conditions were 41% of the crop in poor or very poor condition compared to only 14% at

It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny, the average for Regular increased seven cents and Premium four cents. This is the third week of price gains after nine weeks of declines, which followed eleven weeks of price rises. Since their interim high in late February, Regular is down 11 cents and Premium 16 cents.According to GasBuddy.com, eight states are averaging above $4.00 per gallon, up from four last week. Six states are in the 3.90-4.00 range, up from two last week.In March, Business Insider featured a chart illustrating the gasoline price trend over the course of a year. (click to enlarge) However, if we dig into EIA the data, we find that over the past 20 years, the weekly high for the average retail price of all gasoline formulations occurred in

While it seems that earnings season just finished, or at least is winding down, we are more than halfway through calendar Q2 already. We're less than a week from Memorial Day, and June is almost upon us. While the summer months generally see lower trading volumes, there will be plenty of excitement ahead. Before you know it, we'll be back into earnings season, and the fun will begin again. Today, as we get past the halfway point of the quarter, here are five names with something to prove this quarter. Google (GOOG): Google has to prove that its monster rally over the past couple months is worth it for investors. Shares of the technology giant are up about $250 over the past six months, and are looking to take a crack at $1,000. With all of the analysts jumping on the Google train, one must wonder if Google is about

Global fast food giant McDonald's (MCD) once again posted weaker earnings numbers. Recent performance was highlighted by: Year-to-date March global comparable store sales numbers -1%, Flat Q1 2013 operating income Earnings Per Share (EPS) up 3% constant currency The US, Europe and "AMEA" (Asia Pacific, Middle East and Africa) all showed negative comparable store sales numbers for the quarter as well. However, McDonald's gained share in many of its most important markets. For the last few years McDonald's has been a growth powerhouse, with earnings growth often in the double digits. But it looks like this may have changed within the last eighteen months or so. A flat-to-declining Informal Eating Out (IEO) market has lowered all boats: fast food restaurants have seen pressure on the top line and McDonald's is not immune. Hence the consistent pressure on comparable sales numbers.While management has set forth a plan and

Paul Krugman wants to know why there are no deficit celebrations. He says: For three years and more Beltway politics has been all about the deficit. Urgent action was needed to avert crisis. A Grand Bargain absolutely had to be reached. Fix the Debt, now now now! So where are the celebrations now that the debt issue looks, if not solved, at least greatly mitigated? And it's not just recovering revenues: health costs, the biggest driver of long-run spending, have slowed dramatically. He's right that the "Grand Bargain" debates were disingenuous. And they were disingenuous on both sides. It's absurd to argue that the US government has somehow "run out of money" or is at risk of suffering some sort of Grecian default. It's not happening because the USA is a rather unique monetary system in an environment that makes alternative forms of default (like a high inflation) extremely

Based in Tel Aviv, Israel, Alcobra Pharmaceuticals (ADHD) scheduled a $25 million IPO with a market capitalization of $133 million at a price range mid-point of $11, for Wednesday, May 22, 2013.Five other new IPOs are scheduled for IPOs for this week. The full IPO calendar is here. F-1A filed May 2, 2013 Manager, Joint Managers: Aegis CapitalCo Managers: Sunrise Securities SUMMARY ADHD is a biopharmaceutical company with a lead product targeted towards Attention Deficit Hyperactivity Disorder, or ADHD. ADHD has completed a Phase 2 study, but TEVA backed out of a collaboration agreement in November 2011 by not making a payment.VALUATION Valuation Ratios IPO Mrkt Price / Price / Price / Price / % offered annualizing March qtr Cap (MM) Sales Earnings BkValue TangibleBV in IPO Alcobra Pharmaceuticals (ADHD) $113 n/a -27.6 5.1 5.0 22% Glossary ADHD has no revenue, 5

Economic principles tell us much about the effects of supply and demand on prices of goods and services. Simple economics shows us that if the supply of a particular good or service remains constant while demand for that good increases, the price for the good will also increase. Likewise, if demand falls, so does price. But what is the end result when demand and supply rise in tandem? That answer is not so simple. It depends on which is rising faster and by how much. If they rise at exactly the same rate, prices should remain constant. However, there is one particular sector that currently stands to benefit from the simultaneous rising supply and rising demand of natural gas. Companies involved in natural gas gathering, pipeline supply, and transport will benefit from the increasing supply of natural gas in the short term and will continue to benefit in the long