Why Citigroup Stock Is Rated a “Hold With Caution” Today

citigroup stock 2

By Rob Otman

Citigroup (NYSE: C) is a $185 billion company today. Investors that bought shares one year ago are sitting on a 60.32% total return. That’s above the S&P 500’s return of 18.09%.

Citigroup stock is beating the market, but does that make it a good buy today? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

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✗ Earnings-per-Share (EPS) Growth: Citigroup reported a recent EPS growth rate of 22.52%. That’s below the banking industry average of 189.86%. That’s not a good sign. We like to see companies that have higher earnings growth.

✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the banking industry is 26.73. And Citigroup’s ratio comes in at 12.72. It’s trading at a better value than many of its competitors.

✓ Debt-to-Equity: The debt-to-equity ratio for Citigroup stock is 232.92%. That’s below the banking industry average of 322.18%. The company is less leveraged.

✗ Free Cash Flow per Share Growth: Citigroup’s FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

✗ Profit Margins: The profit margin of Citigroup comes in at 18.86% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Citigroup’s profit margin is below the banking average of 26.24%. So that’s a negative indicator for investors.

✗ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Citigroup is 6.75%, and that’s below its industry average ROE of 13.99%.

Citigroup stock passes two of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Hold With Caution.

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you’re interested in finding Strong Buy stocks yourself, check out Fundamental Analysis Pro. It’s a free five-part mini-course that will teach you how to grade stocks like a Wall Street veteran. Click here to learn more. …read more

Source:: Investment You

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Has the Fed Lost Control of Interest Rates?

fed rate treasury yields 1

By Kristin Orman

Last month, the Federal Reserve raised its benchmark interest rate for the second time this year. It was the fourth quarter-point bump since interest rates were slashed to near zero in response to the Great Recession. Today, the federal funds rate stands at 1% to 1.25%.

The move reflected the central bank’s confidence in the U.S. economy. And higher interest rates should be good for savers. But after years of earning nothing in their savings accounts, the interest rates they receive on deposits have barely budged.

And in one case, savers are actually getting a lower rate of return.

As today’s chart shows, the yield on the 10-year Treasury actually dropped after the last month’s hike. And it fell after the Fed raised rates the last three times, too. The yield on the 10-year Treasury is actually less than it was six months ago.

Below, I’ll show you why the 10-year Treasury rate is falling. And, more importantly, I’ll tell you how to make money in spite of it.
Let the 10-Year Be Your Guide
The 10-year Treasury note is a loan investors make to the U.S. government. Since investors agree to lock up their money for a decade, the yield on the 10-year Treasury reflects a medium- to long-term view of the world’s economy.

The yield is the rate you get for investing in the note. It’s viewed as a guide for other nonadjustable interest rates.

The note is backed by the U.S. economy. And the 10-year Treasury is the most popular debt instrument in the world. That’s because the U.S. risk of default is very small relative to other countries’ sovereign debt.

The U.S. Treasury Department sells 10-year Treasury notes through an auction. The market decides the price. When demand for the world’s safest debt instrument is high, investors bid up the price and yields fall. Investors are willing to pay up to protect the safety of their principle.

Conversely, when demand is low, the price falls and yields rise. Treasury yields always move in the opposite direction of prices.

Investors from across the globe buy Treasurys. Therefore, 10-year Treasury yields tell us what investors think about many of the world’s economies… not just that of the U.S.

While the Fed’s move in June signaled a strengthening U.S. economy, the action in the 10-year Treasury demonstrated that the market isn’t so sure about the rest of the world’s economies.

The market doesn’t believe interest rates are going anywhere fast. And even though inflation is just starting to tick up, traditional “safe” investments are struggling to keep pace with it. So in spite of the Fed’s tightening, investors are searching for protection against inflation.

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An Inflation Hedge That Grows in Any Environment
Dividend-paying stocks are a hedge against inflation. And that hedge still works well in today’s low interest rate environment.

When times are good and inflation is rising, more dollars are needed to buy a good or service. Since companies generally raise their prices faster than they raise their costs, they should be able to pay out more in dividends.

On the other hand, companies …read more

Source:: Investment You

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Weekend Show – Sat 1 Jul, 2017

By Cory Recapping The First Half Of 2017 – Gold, Markets, and Politics

Download audio file (0701-KER-Full-Weekend-Show.mp3)

First a very happy Canada Day to all of our Canadian listeners and an early happy Independence Day for everyone in the US.

As we turn the corner into July it is a great time to look back on the first half of this year. On this weekend’s show we review the markets, gold, and investments in general all with a look ahead to what the trends are for the rest of the year.

We always love to hear your thoughts on the show so please reach out to me at Fleck[at]kereport.com.

Segment 1: Rick Rule kicks off the show by recapping the metals complex in terms of gold and precious metals stocks in H1 2017.
Segment 2: I continue my conversation with Rick Rule discussing the GDXJ rebalancing and previewing the upcoming Sprott Natural Resource Symposium taking place in Vancouver on July 25 – 28th. It is one of the best resource investing conferences I attend each year so I hope to see you there!

Click here to visit the conference website and consider signing up if you are in Vancouver over July 25 – 28th.

Segment 3: John Kaiser recaps his recent trip to the Midas Gold property and provides an overview of the sentiment towards precious metals stocks.
Segment 4: I wrap up the first hour with Chris Temple and his overview of the first half of 2017 in terms of the investing climate in a broad sense combined with how politics is playing its roll.
Segment 5: New Guest Martha Boneta Senior Vice President of Citizens for the Republic discusses property rights.

Segment 6: Martha Boneta continues her discussion of property rights in the United States.

Segment 7: Big Al and James Farley provide alternatives to the two versions of the ACA.

Segment 8: We wrap up our discussion on the medical situation with James Farley.

Download audio file (0701-1-1.mp3)

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…read more

Source:: The Korelin Economics Report

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Gold is Weak in Real Terms

By Jordan Roy-Byrne CMT, MFTA

Intermarket analysis is a rather new field in technical analysis but one of my favorites because it is critical in understanding Gold. Asset classes like stocks and bonds are enormous and aren’t as influenced by as many factors as Gold. Trends in stocks, interest rates, commodities and currencies impact Gold in one way or another. We have written many articles over the years analyzing Gold with respect to its outlook and standing in real terms. Gold, when in a true bull market outperforms against all currencies and the global equity market. Unfortunately that is not the case at present. In real terms, Gold is weak, getting weaker and it could be a reflection of the metal’s worsening fundamentals.

In the first chart we plot Gold along with Gold against foreign currencies (FC) and Gold against stocks (inverse). While Gold (in nominal terms) has yet to break its 2017 uptrend, Gold/FC has and the Gold/Stocks ratio remains on the cusp of a major breakdown. Gold/FC has broken down from a mini head and shoulders top, lost its 200-day moving average and closed at a 6-month low. Meanwhile, the Stocks/Gold ratio is on the cusp of a breakout to a 2-year high. In short, Gold against both currencies and equities is weak and likely to get weaker.

Gold’s weakness in real terms could be a reflection of its worsening fundamentals. As we’ve drilled into the head of readers, Gold is strongly inversely correlated to the trend in real interest rates. Negative and declining real interest rates push Gold higher while Gold struggles amid rising real interest rates.

Below we plot Gold along with the real 5-year yield (calculated from the TIPS market) and the real fed funds rate (using the 2-year yield as proxy). Inflation, which was rising until recently, is now declining. Interest rates declined since December 2016 but may have put in an important bottom in recent weeks. The result is an increase in real interest rates. Unfortunately, I see a good chance real rates continue to trend higher over the next several months.

Until recently Gold had been holding up due to a weak US Dollar but Gold has become so weak in real terms that even that support is fading. This past week the US Dollar index plunged 1.6% but Gold lost 1.1% and gold stocks (GDX) lost 2.9%. The equity market declined four out of five days but even that failed to help precious metals catch a bid.

As you are probably well aware, the precious metals sector is approaching a breaking point and Gold’s weakness in real terms is another troubling sign. Moreover, Gold’s fundamentals are also warning of a break to the downside. While traders may have an opportunity on the short side, gold bugs and bulls should de-risk portfolios, handle their emotions and wait for the next true low risk buy opportunity. For professional guidance in navigating this sector consider learning about our premium service and …read more

Source:: The Daily Gold

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China factory surprise lifts copper price to 3-month high

By analyst

Copper price ends first half at 3-month high

By Frik Els

Copper futures trading on the Comex market in New York rose for the eighth straight day on Friday on renewed optimism about growth in top consumer China and a weaker dollar.

Copper for delivery in September jumped to a high of 2.7185 a pound (just shy of $6,000 a tonne) in afternoon trade, up 5% for the month and nearly 8% during H1 2017.

Source: Capital Economics

Chinese manufacturing data comfortably beat expectations in June with Beijing official manufacturing PMI rising to 51.7 from 51.2 (a reading above 50 indicates improving operating conditions) against predictions of a decline for the month.

Business conditions were boosted by a pick-up in both exports and domestic demand which rose to a four-month high. Concerns about deflation and downward pressure on commodity prices also eased with the underlying price components of the gauge reaching levels last seen in December.

The official non-manufacturing PMI also improved, rising from 54.5 to 54.9, with the breakdown pointing to improved conditions in both construction and services.

The entire base metals complex enjoyed a good week with zinc up 1.8% to the highest level since March at $1.25 a pound ($2,756 a tonne). Lead gained 2.7% to $1.03 ($2,275 a tonne) while nickel prices surged 3.5% to $4.23 a pound ($9,342 a tonne).

The post China factory surprise lifts copper price to 3-month high appeared first on MINING.com.

…read more

Source:: Infomine

The post China factory surprise lifts copper price to 3-month high appeared first on Junior Mining Analyst.

Work is for Idiots

By MN Gordon

Disproportionate Rewards

The International Monetary Fund reported an unpleasant outlook for the U.S. economy on Wednesday. The IMF, as part of its annual review, believes the U.S. economic model isn’t working as well as it could to generate shared income growth.

Supping with the IMF (we recommend trying to avoid invitations to structurally adjusted suppers if possible. Their air of finality is reportedly unbearable). [PT]

On the same day, in an unrelated interview on PBS Newshour , billionaire investor Warren Buffett offered a similar outlook:

“The real problem, in my view, is — this has been — the prosperity has been unbelievable for the extremely rich people.

“If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion. They now have $2.4 trillion, [a multiple of] 25 for one. This has been a prosperity that’s been disproportionately rewarding to the people on top.”

No doubt, U.S. wealth has become exceedingly concentrated into a very small number of hands over the last 40 years. At the same time the middle class has been hollowed out into a shell of its former self. Wages have stagnated. Well-paying jobs that could support a family on a single income have disappeared.

On the other hand, asset prices, like stocks and real estate, have gone sky high. These increases in asset price have served to magnify wealth at the upper end of the wealth spectrum while pricing out everyone else, particularly millennials with entry level incomes and massive student loan debt.

Certainly, asset prices will crash again like in 2000-02 and 2007-09. But this won’t do anything to balance out middle class incomes. What to do about it? Both the IMF and Buffett offer several recommendations…

The homely sage is known for frequently complaining that he “doesn’t pay enough in taxes”. But nothing would be easier than to cut the IRS a check voluntarily. We’re sure they would gladly take his money. Funny enough, after realizing that he couldn’t take the loot with him to the grave, Buffett decided not to trust the State with his moolah after all – instead he gave it away to a private foundation. That is exactly how it should be. Zthroughout history many of America’s self-made rich – including the much bemoaned “robber barons” of the Gilded Age – were well-known for their generous philanthropy. Throwing money into the insatiable maw of the State so that politicians can waste it would be utterly insane, which is why Buffett has presumably avoided doing so to the best of his legal possibilities for his entire life (we have little doubt he and his company employ an army of accountants and tax consultants to make sure of that). So when he publicly complains that he doesn’t pay enough in taxes, he probably means to say that you don’t pay enough. [PT]

Photo credit: AP Images

Insider Claims to the Pie

The clever fellows at the IMF identified with careful detail and delicate precision how to go …read more

Source:: Acting Man

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The Coming Carmageddon

By David Stockman

This post The Coming Carmageddon appeared first on Daily Reckoning.

Ben Bernanke’s successors at the Fed and other global central banks still don’t get it.

Falsified debt prices do not promote macroeconomic stability. They lead to reckless credit expansion cycles that eventually collapse due to borrower defaults. We’re now seeing that play out in the auto sector, especially since anyone who can fog a rearview mirror has been eligible for a car loan or lease.

If that reminds you of the sub-prime housing disaster, you’d be right.

That, in turn, will make the looming collapse even worse, due to the sudden drastic shrinkage of credit in response to escalating lender losses.

How did we get here?

Let’s start by looking at the Fed. Its reckless monetary reflation cycle in response to the Great Recession caused auto credit, sales and production to spring back violently after early 2010.

Accordingly, that reflation has powerfully impacted the growth rate of total U.S. domestic output. And it’s had a massively distorting effect.

Auto production has seen a 15% gain over its prior peak, and a 130% gain from the early 2010 bottom. But overall industrial production is actually no higher today than it was in the fall of 2007. Real production in most sectors of the U.S. economy has actually shrunk considerably.

That means if you subtract the auto sector, there has been zero growth in the aggregate industrial economy for a full decade.

So the auto industry has actually distorted the effects of monetary central planning.

But the real point here is that the financial asset boom-and-bust cycle caused by monetary central planning is making the main street business cycle more unstable, not less. And it means the next auto cycle bust is certain to be a doozy.

It also means the weak expansion of real sales and GDP over the past seven years has been artificially supported by a rapid but unsustainable snapback in the auto sector. But that is now over.

And what I call Carmegeddon will soon be now metastasizing rapidly.

Consider that credit analysis in the auto sector is now being overwhelming driven by the collateral value of the vehicle — not the creditworthiness of the borrower.

Accordingly, when car prices fall sharply, losses from loan defaults will soar. During the last cycle, used car prices peaked in early 2006 and then fell nearly 25% through the 2009 bottom. Total auto credit cratered during the same period.

And today, after plateauing for more than two years, used car prices have now begun a steep descent. During April, for example, prices of most classes of used vehicles plunged sharply. The J.D. Power index was down 13%. Needless to say, the drop in used car prices is now accelerating.

But it still has a long way to go due to the rising tide of used cars from maturing leases and loans that are hitting the markets.

Looking back to the last credit cycle, the crash of new cars sales after 2007 resulted in a drastic shrinkage of leased vehicles. Accordingly, volumes of pre-owned vehicles …read more

Source:: Daily Reckoning feed

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Exclusive KE Report Commentary – Fri 30 Jun, 2017

By Cory An Introduction To A Bullion Dealer We Trust

This is an introduction to the Hard Assets Alliance (HAA). We rarely feature bullion dealers on the show but we do get a number of questions of dealers we trust. The COO of the Hard Assets Alliance Ed D’Agostino joins me today to explain what makes the HAA standout from other bullion dealers.

Click here to visit the HAA website and consider registering an account.

Download audio file (2017_06_30-Hard-Assets-Alliance-Ed-DAgostino.mp3)

…read more

Source:: The Korelin Economics Report

The post Exclusive KE Report Commentary – Fri 30 Jun, 2017 appeared first on Junior Mining Analyst.

Is Fastenal Stock Undervalued or Overvalued Today?

fastenal stock fastenal earnings 2

By Rob Otman

Fastenal (Nasdaq: FAST) is a $13 billion company today. Investors that bought shares one year ago are sitting on a 0.72% total return. That’s below the S&P 500’s return of 19.3%.

Fastenal stock is underperforming the market. It’s beaten down… so is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

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✗ Earnings-per-Share (EPS) Growth: Fastenal reported a recent EPS growth rate of 4.55%. That’s below the trading companies industry average of 80.07%. That’s not a good sign. We like to see companies that have higher earnings growth.

✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the trading companies industry is 28.59. And Fastenal’s ratio comes in at 24.39. It’s trading at a better value than many of its competitors.

✓ Debt-to-Equity: The debt-to-equity ratio for Fastenal stock is 18.42%. That’s below the trading companies industry average of 121.88%. The company is less leveraged.

✓ Free Cash Flow per Share Growth: Fastenal’s FCF has been higher than that of its competitors over the last year. That’s good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

✓ Profit Margins: The profit margin of Fastenal comes in at 12.81% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Fastenal’s profit margin is above the trading companies average of -43.57%. So that’s a positive indicator for investors.

✓ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Fastenal is 26.68%, and that’s above its industry average ROE of 10.64%.

Fastenal stock passes five of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Strong Buy.

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you’re interested in finding Strong Buy stocks yourself, check out Fundamental Analysis Pro. It’s a free five-part mini-course that will teach you how to grade stocks like a Wall Street veteran. Click here to learn more. …read more

Source:: Investment You

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