In this article, The Economist highlights the underappreciated strength and dynamism of today’s global jobs market.
Kari Firestone and Jill Carey Hall of Bank of America Merrill Lynch discuss the markets on CNBC’s “Closing Bell.”
As the Massachusetts gaming commission began hearings last week to decide if the Wynn Co will retain its license to operate the first major urban casino on the East Coast, Kari appropriately walks through many sectors that have dramatically changed since she began her investment career.
In many spheres, such as politics, media and entertainment, women have made considerable progress in reaching executive leadership positions, achieving higher pay, and building new enterprises. But this ascent hasn’t been achieved everywhere. In my own industry, investing, progress has been painfully slow.
This article was originally posted by CNBC.com
Kari Firestone’s newest article discusses why the incentives for companies and research organizations may not be aligned with customers’ desire for lower drug prices. Additionally, the legal complexity of the Medicare system leaves the government with no negotiating power, further inflating prescription drug prices.
Written by Kari Firestone
On the anniversary of the Crash low on March 6, 2009, at 666 for the S&P 500, I want to commemorate that day both for the reverberating trauma it caused, but, more importantly, for what came after. Honestly, I feel enormous luck and gratitude that our company, Aureus, hung in there, didn’t sell at the bottom, remained an active equity manager these last ten years, and has prospered since. I remember that day, and so many like it, from that sense of hope when I woke at 5:15 each morning, through the increasing dread as the futures pointed down, and further down, through the meteor-like falling of so many trading sessions, without pause, for many months. During days such as March 6th, I tried tricks like turning my screens to other views, walking around the block, praying that everything would have jumped up 5% by the time I returned, and coming back to find those same screens entirely covered with bright red numbers.
However, that day marked the low, and we have had the most amazing ten year stretch ever since. From the low of 666, the S&P has risen 320%; $100 invested at the end of that day would be worth $437 today. Put another way, the ten year compound rate of return on the S&P 500 has been 15.9%, which is one of the highest return rates over a ten year period that this index has ever attained in my working life, other than looking back from August 2000, right before the dot-com bubble burst and the market tumbled over 45%.
That, however, was a very different and much less comfortable market. The Nasdaq had already collapsed 20% from the internet bubble, I owned many of those dot-com stocks, and that index was swan diving into the tank. Although the S&P held up longer, it felt precarious that spring and summer of 2000, at over 24 times earnings.
What has been amazing over the past ten years is that the average American, with a small amount of savings, or a 401k plan, has been able to participate in this gain. While Venture Capital, Private Equity and Real Estate are often considered “sexier” and more “interesting” investments by wealthy individuals and endowments, the US market has offered outstanding returns with a very low cost of entry, daily liquidity and high levels of transparency, unavailable in those other assets.
What happens now? This market sells for 16 times earnings, which is roughly the long term average over the past twenty five years. There is a lot to watch over the next few months. The market could move on to better or worse earnings, the China trade deal, Brexit terms, and huge IPO launches will all play a part. Up or down.
Today, I am just grateful to have participated in the past decade of the stock market and I sure love looking at the ten year returns. Let’s toast to the next ten!
In this article, The Economist highlights the evolving form of the conglomerate as traditional industrial conglomerates break up, tech firms are bulking up.
This article was written for CNBC.com.
Having more than one decision-maker can only work if the participants can handle the fights and come away scuffed-up but, basically, uninjured. Who has ever made much money buying a stock when everyone agreed that it was fantastic idea?
2018 – Year in Review
The financial markets last year were a mirror image of their performance in 2017. Two years ago, optimism reigned, as both economic and political forces seemed positive. In 2017, all the world’s stock markets rose, led by emerging markets, which were up 37%, while US markets rose 22% amidst historically low volatility. The reverse was true in 2018, when cash had the best returns and very few asset classes had positive returns. The S&P 500’s streak of consecutive years of positive returns dating back to 2008 came to an end in 2018. After three strong quarters, the fourth reversed, sharply falling 13.5%, resulting in a decline of 4.4% for the full year. Volatility, unusually quiet in 2017, returned early in 2018 and continues today. International equities, after leading the way in 2017, were much worse than the US in 2018; down 14% for the year.
The market worried about slowing earnings growth, trade wars, Federal Reserve policies, rising interest rates, possible yield curve inversion, falling oil prices, and early talk of a US recession. On the positive side, economic news was generally positive, the US economy grew at 3%, unemployment fell below 4%, and corporate earnings increased 20% year over year – helped by tax reform. After falling almost 20% from their peak, the price to earnings ratio of the S&P 500 index fell from 18.4x at the start of the year to only 14.7x at year end.
Intermediate US bonds returned 0.9% while interest rates finished the year at higher levels. The largest increase in interest rates occurred at the short-end of the yield curve, where yields gradually rose 1% in 2018. Longer maturity 10-year Treasuries started the year at 2.4%, moved to 3.2% in October, before finishing the year at 2.7%. High-yield bonds fell -2.3% as investors became less comfortable holding risker debt instruments.
Recently, the yield curve inverted with 2-year to 5-year maturities yielding less than 1-year maturities. An “official” yield curve inversion is when the 10-year yield falls below the 2-year yield, which did not happen in 2018. Inversions generally occurs when concerns arise around future economic growth and the market begins pricing in expectations for Fed rate cuts in the future. However, we caution that while the yield curve does reliably invert ahead of recessions, not every inversion is followed by a recession.
This article was written by Karen Firestone and appears in the most recent issue of Barron’s.
A few years ago, I was invited to appear on CNBC as a commentator for shows like Squawk Box and Half Time Report. Then, in 2018, I began to sense a shift. Producers began to actively recruit women for shows in which the experts are often 100% male. Some asked me if I knew other women who are experienced investors or market strategists. They began to invite me more frequently and on more shows, which is only partially explained, I suspect, by my TV talents.
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