The Fiscal Standoff and Smart Beta Strategies
Posted on October 10, 2013 | Investor Update
Mr. Market has so far kept a stiff upper lip in the face of the current fiscal policy debacle. The S&P 500 has only fallen modestly over the past few weeks, and prior to today’s bounce. The benchmark 10-year Treasury note’s yield remains notably below its early September highs. The relative calm displayed in the U.S. markets is occurring even as the federal debt ceiling may be hit seven days from now.
It is always difficult to draw a precise conclusion of what Mr. Market is telling us, and there have been some signs of shaky knees. The VIX, a measure of volatility, recently jumped to levels not seen since last June. Domestic equity mutual funds collectively incurred an estimated $4.1 billion in outflows last week, according to the Investment Company Institute. The last time estimated outflows were anywhere near this range was at the start of last May.
Investing Lessons from BlackBerry
Posted on September 26, 2013 | Investor Update
A funny thing happened this week. As I was about to tape my “Sell of the Week” for Chuck Jaffe’s Your Money Life podcast on Monday afternoon, trading in BlackBerry Ltd. (BBRY) was halted. Since neither Chuck nor I knew what was going on right at that minute, we postponed taping. As we now know, an acquisition offer was made for the Canadian smartphone maker.
I bring this up because BlackBerry is a great case study for investors. The company realized revenue growth of 33.1% and net income growth of 38.8% in fiscal 2011. (The company’s fiscal years run from March through February.) Last week, BlackBerry warned that fiscal second-quarter revenues would be down by approximately 45% from a year prior. The company also anticipated recognizing a net operating loss of nearly $1 billion, primarily reflecting a massive writedown of inventory.
It’s The Simple Things That Matter
Posted on September 19, 2013 | Investor Update
I have a suggestion that will significantly impact your wealth: Focus on the simple things.
It’s easy to get caught up in the pursuit of beating the market. Forecasts about what the market is going to do, tactical asset allocation strategies to help you avoid down markets and advanced methodologies for stock selection all sound appealing, but there are actions you can take that will have a far greater impact on your long-term wealth and what you pass on to your heirs (or preferred charity).
If it sounds a bit odd, remember that the investment industry doesn’t make much money off of the simple things. Getting you to trade more often, switch brokerage firms, sign up for seminars, buy the latest fund incarnation and the like make the industry’s cash register ring. Your success is very much dependent on your ability to hit the mute button and not be distracted by whatever the investment industry can conjure up.
The Dow’s Changes Make Sense
Posted on September 12, 2013 | Investor Update
It’s not often a change is made to the Dow Jones industrial average, and it’s even rarer to see three out of the 30 components replaced. This is what makes Tuesday’s announcement interesting. Goldman Sachs (GS), Visa (V) and Nike (NKE) will replace Bank of America (BAC), Hewlett-Packard (HPQ) and Alcoa (AA) after the close of trading on September 20, 2013. This is the first time three stocks have been replaced in the average since April 2004.
It’s September; Set Your Expectations Accordingly
Posted on September 5, 2013 | Investor Update
We have now entered what is statistically the worse month of the year for the stock market: September. The S&P 500 has lost 1.12%, on average, in Septembers dating back to 1928, according to Merrill Lynch Wealth Management. September has also been the worst month of the year for the Nasdaq and the Russell 1000 since 1971 and 1979, respectively, according to Jeffrey Hirsch of the Stock Trader’s Almanac. In a recent post, Hirsch observed in post-election years going back to 1953 that “September is the third or fourth worst month depending on index.” He calculates average post-election year September losses of 0.9% for the Dow Jones industrial average, the S&P 500 and the NASDAQ. The Russell 2000 has lost 1.6% on average in post-election Septembers.
Emerging Markets Are Out of Sync
Posted on August 29, 2013 | Investor Update
Correlations have not only declined among U.S. stocks, but they have also declined between U.S. stocks and their emerging market counterparts. While U.S. stocks have held onto most of their 2013 gains, emerging markets have struggled, with a funk emanating from some of them.
Good News for Stock Pickers
Posted on August 22, 2013 | Investor Update
The decline in correlations has become a trending topic among stock market strategists. The monthly returns of individual U.S. stocks are diverging from the Russell 1,000 index. Depending on who you ask, this is either a positive occurrence for stock pickers or a sign that fund managers are becoming complacent.
It’s Tougher to Find Bargains
Posted on August 15, 2013 | Investor Update
“The market is no longer cheap.” This is how we started our August AAII Dividend Investing newsletter. The S&P 500’s approximate 18% rise in price this year so far has boosted portfolio values, but made life difficult for value investors.
Cash Is Costly Over the Long Term
Posted on August 8, 2013 | Investor Update
Many Americans believe “cash investments are the best way to invest money not needed for more than 10 years,” according to a new survey by Bankrate.com. More than one in four Americans (26%) favor cash as the best long-term investment, choosing it over real estate (23%), gold or other precious metals (16%), stocks (14%) and bonds (8%).
Bond ETF Redemptions Encounter Liquidity Issues
Posted on August 1, 2013 | Investor Update
As if investors needed another eerie-sounding headline, the issue of bond liquidity has popped up. Recent articles in Reuters and Barron’s pointed to issues involving the exchange of bonds and ETF creation units. Though this may sound a like a technical concept, it’s one worth understanding.