Volatility Got Crushed In February, The S&P 500 Soared

February was quite the month for markets. Two things, in particular, happened: volatility dropped, and stocks climbed higher. Here are two charts that show the action.

1. Here’s what the $VIX did February. It dropped more than 33%:

2. Here’s what the S&P 500 did in February. It climbed about 6%:

The question is now: was this just a seasonal occurrence for stocks and volatility? Or is this the start of a new trend? Let us know in the comments below.

Here Is What Americans Spent Their "Gas Savings" On

Last quarter, in “This Is What Americans Spent The Most Money On In Q4" we showed that according to the first estimate of Q4 GDP data, the American consumer spent a whopping $20.4 billion in nominal dollars on healthcare, which also resulted in the biggest consumption contribution to GDP in years.

Today, following the first revision of consumer spending, we learn that in the fourth quarter Americans spent even more on healthcare, pushing the total up by $1 billion more, to a whopping $21.4 Bn, or 18% of all spending on goods and services in Q4.

This upward revision on healthcare, of which Obamacare was the primary source of mandatory spending, takes places even as the bulk of the key spending line items were revised lower following the revision.

In any event, the math is clear - the next time anyone asks you what Americans spent their so-called “gas savings” on in Q4, and why retail sales in the end of 2014 (and the start of 2015) were so weak, show them this chart.


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Warren Buffett; Next Berkshire CEO Must Fight Arrogance

Warren Buffett; Next Berkshire CEO Must Fight Arrogance

Warren Buffett, the tycoon executive and CEO of Berkshire Hathaway Inc., said his successor will need to maintain a strategic distance from traps that have ruined organizations before.

The following Berkshire CEO will require “the capacity to battle off the ABCs of business rot, which are self-importance, administration and jadedness,” Buffett, 84, wrote in his yearly letter to Berkshire…

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The Dow Jones Industrial Average: A Spectacular Chart

NOTE: The Dow Jones Industrial Average was not formally created until 1896. On this chart, the line before that time period represents the basket of US stocks that were trading before the DJIA index was created.

The chart above could almost be viewed like a piece of artwork. The historical context of it is simply mesmerizing. It shows the Dow Jones Industrial Average since 1789. 

It is, essentially, one of the most comprehensive visualizations of modern equity markets.

In addition to the chart plotting price, it also highlights noteworthy historical events. Wars, crises, and major political turns are all listed on the chart.

To make this chart larger, click here. And when you scroll down, you’ll find other charts like it ranging from gold to crude oil. Just make sure you let the original poster, Sobata416, know you’re grateful for his excellent find.

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The Great Peaks and Troughs of the S&P 500’s CAPE Ratio

CAPE stands for Cyclically Adjusted Price to Earnings ratio. It’s a metric created by Robert Shiller. The chart above shows this ratio for the S&P 500 since the late 1800s.

Guru Focus has a great 4-step explanation for how CAPE is calculated (just in case you did not know, or need a refresher):

  1. Use the annual earnings of the S&P 500 companies over the past 10 years.
  2. Adjust the past earnings for inflation using CPI; past earnings are adjusted to today’s dollars.
  3. Average the adjusted values for E10.
  4. The Shiller P/E equals the ratio of the price of the S&P 500 index over E10.

While CAPE isn’t a guaranteed indicator of future returns, it is interesting to view over time. It seems to speak tremendously about sentiment and demand surrounding the stock market at any given moment.

Right now, the current CAPE ratio for the S&P 500 stands at about 27.49. This means the S&P 500 is only a few points away from taking out its CAPE ratio highs from 2007. If it manages to climb above these levels, the next highest points are the rise and fall before the Great Depression and Dot Com Bubble.

This will be interesting to watch. And make sure you share your thoughts about this in the comments below: how much higher can the CAPE ratio go? 


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Why You Need a Healthy Dose of Healthcare - http://goo.gl/jZ75Q5

Why You Need a Healthy Dose of Healthcare

In This Issue:Beating the Tech TitanCanada’s Big Banks Survive Their BeatdownSelling the Steak and the Sizzle The Best-Kept Secret in Investing – for Now Twenty-nine years ago, on the South Lawn of the White House, Ronald Reagan signed a piece of paper that ignited the …


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US stock futures are pointing for a mixed open, with investors focused on a Greek bailout and a January existing home sales report. Late last week, Eurozone ministers agreed to extend Greece’s bailout for 4 months as the Euro/USD rate trades at a 12 year low. At 10am, investors will be watching the January existing home sales, expecting a slight decline of 1.6% to an annual rate of 4.95 million homes.

  • Fed Chairman Janet Yellen will be giving her semiannual testimony tomorrow, and Wall Street will be looking for clarity on the interest rate increase. Recent developments in Greece and a climbing dollar might delay the anticipated June increase.
  • Nearly 90% of the S&P 500 has reported their quarterly results, posting a beat rate of 56% on revenue and 74% on EPS.  The beat-rates are about in line with the one-year averages
  • In M&A news, Valent Pharmaceuticals announced over the weekend they will be buying Salix $10.1 billion ($158/ share).  The Nasdaq Biotech Index has been on fire in 2015, advancing by 10.6% outpacing the 2.5% advance on the S&P 500.

Technical Spin:

Since taking out the 4800 resistance, the Nasdaq Composite is on pace to test the monumental 5000 level. We’ll be watching short-term retracements if the index runs out of steam. We anticipate the index will maintain its bullish channel, with 4920 the support to the downside.   

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My Plan for Profiting From the Next Market Crisis

By using one of my favorite strategies, we could easily turn a downward move in U.S. equities into a 60%… 70%… or even 80% gain. View Online | Print Version | Add to Address Book   February 28, 2015 My Plan for Profiting From the Next Market Crisis …


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