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The Standard and Poors (S&P) Large Cap 500 Index ($SPX) lists the 500 largest “large-cap” stocks (stocks from major companies in various industries). What Is the Price-to-Earnings (P/E) Ratio? The price-to-earnings ratio is the ratio for valuing a company that measures its current share price relative to its earnings per share (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple. Figure 1.  SPX P/E Index (Source:  @CyclesFan ; Courtesy: stockcharts.com) SPX P/E Index On Twitter,  CyclesFan  had commented on the current SPX P/E level: The $SPX price earnings ratio is now at 18.64, a bit higher than it was at the June low. When it gets to ~16 where it was at the 2020 low it will start being attractive. If it drops to below 13, where it was at the 2011 low, it will become very attractive. If you look at Figure 2 , SPX P/E Index actually peaked in 03/2021 and SPX peaked only in 12/2021, which it had given u...

Figure 1.  This jet fuel price index provides the latest price data from the leading energy information provider  Platts . [1] Jet fuel can actually be used in cars, but only in diesel engines. Kerosene jet fuel  (including Jet A and Jet A-1, JP-5, and JP-8) and diesel are actually similar enough to allow for cross-functionality and would provide a similar performance. Although, experts wouldn't recommend running a jet on diesel. Why are jet fuel prices so high? Just as the crude supply shrinks, demand for fuels refined from it is growing. The worldwide return to airline travel has driven up demand for jet-A , but the booming freight and shipping markets are clamoring for diesel fuel . Limited supply means both industries are paying more for fuel. What is considered a distillate? Distillate is a term used to refer both to the atmospheric gasoil cut from atmospheric distillation, and to a range of light products ranging from kerosene to diesel. Generally, the distillat...

Warren Buffett on Economic Moats (Source: 2007 Berkshire Hathaway Shareholder Letter ) Figure 1.   ROIC  and Competitive Advantage (Courtesy:  @mjmauboussin ) A  company's moat  refers to its ability to maintain the  competitive advantages  that are expected to  help it fend off competition and maintain profitability into the future . Moat Investing Moat investing  is based on a simple concept:  Invest in companies  with  sustainable competitive advantages trading at attractive valuations . One of the first steps in implementing this approach is finding companies with a moat.   Earnings must be stable in order to determine valuation. Because valuation is about forecasting the future. When earnings fluctuate, especially when there is  no moat , your  valuation will be less reliable.  This means that companies in the early stage are tougher to value. Figure 2.  Moat Investing   What is the ...

A yield curve inverts when long-term interest rates drop below short-term rates, indicating that investors are moving money away from short-term bonds and into long-term ones. This suggests that the market as a whole is becoming more pessimistic about the economic prospects for the near future . When looking at inverted yield curve, it can be any pair of long-term interest rates and short-term interest rates. In this article, we will look at the inverted yield curve between 30-year and 10-year treasury bond yields . Inverted Yield Curve Precedes the Recession The Fed's ongoing rate hiking will eventually trigger the next recession. Historically, an inverted yield curve - the difference between 10-year and 2-year bond yields - has been one of the single-best leading indicators of an impending downturn . Figure 1. Inverted Yield Curve Precedes the Recession The Slope of the Yield Curve Conceptually, the slope of the yield curve is a rough approximation of the stance of U.S. mo...

One popular macroeconomic analysis metric to compare economic productivity and standards of living between countries is purchasing power parity (PPP). PPP is an economic theory that compares different countries' currencies through a "basket of goods" approach. Purchasing Power Ranking Based on 2021 Data Based on data of  Purchasing power parities (PPP), and  Exchange rates from [1].  The below table ranks the purchasing power of using US dollars to purchase the same basket of goods in different countries.  For example,  In Columbia, you can purchase 2.76 times of the same basket of goods as you do in USA. Country Purchasing Power of USD Georgia 3.37 Zambia 3.23 India 3.19 Turkey 3.18 Madagascar 3.18 Indonesia 3.01 Colombia 2.76 Russia 2.69 North Macedonia 2.67 Cameroon 2.45 Albania 2.41 Romania 2.38 Senegal 2.35 ...

Figure 1. Long-term Elliot Wave analysis posted in 2019  (courtesy:  Elliott Wave Trader ) Elliott  theorized that  public sentiment and mass psychology  move in 5 waves within a  primary trend  and 3 waves within a  counter-trend : [1]   Once a 1-to- 5 wave move in public sentiment has completed, then it is time for the subconscious sentiment of the public to shift in the opposite direction, which is simply the natural cycle within the human psyche, and  not  the operative effect of some form of "news."   Elliott Wave Analysis In [1],  Avi Gilburt  describes  Elliott Wave analysis  succinctly in this way: I have not found any other analysis methodology which  provides an understanding of market context  which exceeds that of Elliott Wave analysis. Moreover, Elliott Wave analysis  does not provide any 100% guarantees . Rather, it  provides us with probabilistic expectations based up...

Economics is not very good at explaining swings in economic activity.  We don't know what causes recessions.  We've never known.   — Eugene Fama In this article, we will not speculate on whether a recession is coming or will it be a mild recession or not.  But, we will focus on gold market development during a period of recession . Mild Recession vs Deep Recession A technical recession normally started when  GDP contracted for two consequent quarters.  However, recessions are officially declared by the National Bureau of Economic Research (NBER), a group of economists whose Business Cycle Dating Committee defines a recession as “ a significant decline in economic activity that is spread across the economy and lasts more than a few months .” In this article, mild recession vs deep recession are differentiated roughly by how long the pain last : Mild Recession Is a short and shallow recession like in 1990-91 or in 2001 Would be a relatively ne...