A striking divergence has emerged in global financial markets in recent weeks. During July and August as the euro-area sovereign debt crisis intensified and spreads on Spanish, Italian, and even French bonds rose, U.S. stocks plunged (point A on chart). After the European Central Bank restarted their bond buying program in early August to temporarily take the heat off of Italy and Spain, bond spreads fell. Spreads didn’t rise back to their August highs until late September. The move back up in Spanish and Italian spreads in September contributed to another down-leg in U.S. stocks. That … [Read more...]
Archives for November 2011
Vanguard Wellesley Up 7.7%
Your risk tolerance probably isn’t as high as you think. Go back to September of this year or 2008 and be honest with yourself about how you felt. Did you lose sleep worrying about your portfolio? One back-of-the-napkin approach to getting a handle on your risk is to put your age in bonds. If you’re in your early 60s, your portfolio would be like the Vanguard Wellesley fund. It invests 60% in bonds, 40% in equities. The fund is up 7.7% year-to-date and kicks off 3.2% in income. They could call it the sleep-well(esley)-at-night fund. … [Read more...]
Warren Buffett: How to Fix Housing
What We’re Reading 11-11-11
Development Map of Bakken Shale, EIA.gov For Muni Bonds, a 'Super' Headache, Kelly Nolan, The Wall Street Journal Pacific Deal Could Revolutionize Trade, Bloomberg.com Scientists Tweak Bugs to Zap Disease, Gautam Naik, The Wall Street Journal Four Reasons Keynesians Keep Getting It Wrong, Allan H. Meltzer, The Wall Street Journal … [Read more...]
A Simple Recipe for Beating the Market 3 to 1
Over more than eight decades of stock market history, a dividend focused approach has been a winning investment strategy. Consider that if you invested $100 in the stock market in 1927—as measured here by a portfolio of large-capitalization stocks— today your portfolio would be worth $190,000. A tidy sum to be sure, but if you instead invested that same $100 in the highest yielding stocks (top 20%) and rebalanced annually, your portfolio would now be worth $586,000. That’s three times as much. To some, a dividend-focused approach just sounds too boring. The highest yielding stocks are … [Read more...]
Jenkins Says Italian Bonds to`Implode’ Without ECB Backing
A Pathetic Payday
Doing less, with less, is one way to describe retirement on a fixed income today. This sad truth is illustrated by Young Research’s proprietary Payday Indicator, the average of the Dow Jones Industrial Average yield plus the three-month Treasury bill yield. In the history of the series, it has never looked so pathetic. Stocks and bonds compete for investor money. The accommodative Federal Reserve policy hasn’t helped matters. Treasury bill yields are so low that stocks don’t need to offer much yield to attract money. The Dow is certainly not a good value at a 2.59% dividend yield. At the … [Read more...]
Cohan on Corzine, MF Global, Chris Flowers, Oct. 31
Got Jobs?
You want to retire to a state where there are jobs. Not because you might need one someday, though you might. I’m thinking for insurance reasons. States without jobs are states without revenue. And they may be eyeballing your nest egg someday like a ravenous rodent. It’s not a bad idea to have the mindset of a 20-something college grad. They’re moving to where the action is. For retirees, splitting time between two states doesn’t have to be expensive. You should see some of the younger crowd getting by for two weeks on what you might spend going out to lunch with friends. Now it’s … [Read more...]