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 …
Real Estate Update: Bargains Harder to Find
Based on my prior experience buying nearly two dozen homes across the country, I’m frequently asked for advice on buying real estate. The attraction to real estate investing is easy to understand. Although real estate can’t be expected appreciate more than the rate of inflation (unless you have the vision to buy in to an area where demand is about to take off, such as Southern California circa 1960), the leverage and tax breaks make it look promising. And the recent downturn, coupled with the ultra-low mortgage rates, have made real estate a hot investment in the past 12 months. …
What Happens To Stocks When Interest Rates Rise?
Wow, it’s been five years already. Five years ago it looked like the entire financial industry was about to collapse. Major financial institutions, global banks, and hedge funds of assorted varieties went bankrupt. Companies like Bear Sterns, Washington Mutual and Lehman Brothers are no longer around. They either went out of business, or were acquired by other firms with assistance from the Federal Reserve. The common thread was excessive leverage, and a lack of understanding of the underlying investments. The resulting economic meltdown caused the biggest recession since the Great Depression, and a 43% decline in the S&P 500 (a …
Surviving the June Swoon
Sometimes the direction of the market can change with just a few words. That was certainly the case on June 19th, when the Federal Reserve Chairman Ben Bernanke mentioned the possible end of QE3 in 2014 and the prospect of reducing the central bank’s monthly bond purchases later this year. Almost immediately, nearly all global asset classes started to sell off. Including the ones that are supposed to be uncorrelated. Choosing uncorrelated asset classes is the cornerstone for a well-diversified portfolio. History shows that over the long term, this helps smoothen investment returns, which are usually quite volatile. But once …
Is it the Right Time to Invest in Real Estate?
Despite expecting a pullback in the market, it was up another 2.3% in April. In fact, the market has gone on to hit a record high last Friday. The S&P500 (a representative index of the US stock market) has seen amazing gains this year, up more than 10%. The stock market has been quite resilient this year. It shook off the recent Boston bombings as well as the sudden drop in gold prices. But this sort of performance is usually followed by a pull back, as the market digests its gains. And because of the time of year, that’s what everyone expects. …