Today was a historic day for the Dow Jones Index – and a harrowing day for investors. The blue chip stock index fell 1,089 points, the biggest intraday move in the history the index, before recovering to a loss of only 588. Over the past three months, the S&P 500 has dropped about 7.5%. There hasn’t really been any safe haven as global markets have dropped as well. Except for bonds, every other asset class is down for the year to some extent. The biggest losers have been Emerging Markets and Commodities, down 19% and 22% year-to-date. Today’s action was …
Will The Federal Reserve Start Raising Interest Rates?
2015 has been a roller coaster ride so far. The stock market was down in January, up in February, and is now trending back down again in March. Long term bond prices (US 20-year treasuries) were up 10% in January, and then drifted back down again. And then there was today, Friday March 6th 2015, where the entire investment landscape was awash in a sea of red. It’s unusual to see all asset classes decline at the same time. Usually, at least stocks and bonds move in opposite directions. But today everything was down – US and International stocks and …
There’s Always Something To Worry About
2014 is almost over. And fear has dominated the news headlines for most of the year. We had a war between Russia and the Ukraine, bombings in the Middle East, Ebola reaching the US, a military coup in Thailand, ISIS, fears of European recession, an actual recession in Japan, civil unrest in Ferguson, and Black Friday retail sales that were widely reported as being a bust (the implication being that the US consumer is broke). We also dealt with the announcement that the Federal Reserve will end Quantitative Easing this year, which led to widespread fear that interest rates would …
Economic Review: What’s Next For The Stock Market?
Last week, the US stock market closed at an all-time high. And I’ve received multiple queries asking if this is a true reflection of the economy and what is the best course of action to take right now. Has there been a meaningful economic recovery at all? Every time I turn on the radio or TV I hear polarizing views on this topic. Either the economy just hasn’t recovered and we’re in a stock-market (or real estate) bubble on the verge of collapse, or the economy is chugging along like everything is peaches and cream. Of course, reality lies somewhere …
Is It A Good Time To Buy Real Estate?
As I write it this, the national housing market seems to be recovering slowly, although it is showing signs of slowing down again. But certain markets seem to be going crazy. Southern California, where I live, is one of them and the real estate market is on fire right now. I’m currently in the market for a house myself, and I’ve also received several queries from clients asking if it’s a good time to buy real estate. My misgivings about the real estate market in Southern California have been building over the past year, during which time home prices (and …
The Truth Behind Hidden 401(k) Plan Fees
Five years, Bloomberg ran a special about the hidden fees in nearly all 401(k) plans. Most participants thinks that there no fees in these plans. Over half of HR managers also think the same thing. [embedplusvideo height=”315″ width=”420″ editlink=”http://bit.ly/1bGatKb” standard=”http://www.youtube.com/v/08UPQ3JaRek?fs=1&vq=hd720″ vars=”ytid=08UPQ3JaRek&width=420&height=315&start=&stop=&rs=w&hd=1&autoplay=0&react=1&chapters=¬es=” id=”ep4323″ /] [embedplusvideo height=”315″ width=”420″ editlink=”http://bit.ly/1bGaL3D” standard=”http://www.youtube.com/v/94eDjL4ciVE?fs=1&vq=hd720″ vars=”ytid=94eDjL4ciVE&width=420&height=315&start=&stop=&rs=w&hd=1&autoplay=0&react=1&chapters=¬es=” id=”ep5870″ /] [embedplusvideo height=”315″ width=”420″ editlink=”http://bit.ly/1bGaPk9″ standard=”http://www.youtube.com/v/x1NPUf2Q-sw?fs=1&vq=hd720″ vars=”ytid=x1NPUf2Q-sw&width=420&height=315&start=&stop=&rs=w&hd=1&autoplay=0&react=1&chapters=¬es=” id=”ep9283″ /] Since then, things have gotten slightly better, but not by much. Congress has since mandated that all plans disclose the fees charged to the participants in 401(k) plans, it’s still notoriously hard to figure out. One way the average user …
Hedge Funds Underperform for 5th Year In A Row
According to Bloomberg, Hedge Funds underperformed the S&P 500 for the fifth year in a row. On average, they delivered 7.4% vs. nearly 30% for the S&P. This isn’t surprising. Several years ago, legendary investor Warren Buffet bet $1 million that the S&P 500 index would bet Hedge Funds over a ten year period. At that time, the index was deep in the hole, having been down about 38% in 2008. Hedge Funds were slightly ahead, being only 24% down that year. (To see the arguments on both sides of the actual bet , click here). But since then, the …
World Stocks Are Oversold
The US stock markets have been on a tear this year, with the S&P 500 up about 30%. However, world stocks have lagged in performance, and are currently over-sold. Over-sold is a somewhat ill-defined term, and in this context means the price of a stock is selling at less than 1 standard deviation below it’s 50 day moving average. Stocks that are oversold are more likely to undergo mean reversion, and the prices will increase. Here’s an interesting chart from Bespoke Investments.
Where Are The Values Today?
As I mentioned in my last post, interest rates are likely to stay low for quite a while. Investors are starved for yield, and have been bidding up the prices of dividend-paying stocks. Boring stocks of electric companies and consumer staples (companies that make toothpaste, soap and cereals) usually have limited growth opportunities. Instead of reinvesting their earnings, they tend to pay it out to investors in the form of dividends. As a result, these stocks have slightly higher dividends, and trade at a slight discount to the market (based on their Price/Earnings ratios). Investors in these sectors are exchanging …
If You’re A Saver, You’re Selfish
The US stock market returns has certainly had a banner year, so far. We’ve certainly had a lot to worry about such as the fiscal-cliff tug-of war, various European government and political scares, capital flight from emerging markets, tapering of the Federal Reserve bond-buying program, and the US Government shutdown. And yet the market has maintained its solid march upwards, hitting new highs last week. But while the stock market has been climbing higher, people looking for income to live on are stuck. Right now, it’s the toughest environment for generating income in over 100 years. According to data from …