Heroin is a highly addictive drug. It is an opioid like morphine, codeine, and methadone. One of the reasons heroin is so addictive is that our brains have receptors for opiates that our body naturally produces—the endorphins produced during or after exercise for example. When an addict starts using heroin daily, his brain stops producing natural opiates because it is getting all the opiates it needs and more from the heroin. If the heroin addict continues using for years and years, he slowly trains his own body to cease all natural dopamine production. A dependency is created where the … [Read more...]
Archives for October 2014
Market Collapse: Last Mango in Paris
“If the phone doesn’t ring it’s me” -- Jimmy Buffett Are we having fun yet? Since peaking at 17,279.74 on September 19, the Dow Jones Industrial Average Index has lost 6.6% of its value. If you haven’t been investing very long, this is what it’s supposed to feel like. During bull markets it’s easy to say “I’m a contrarian” or “I’m in it for the long-term.” It’s harder to actually do. I manage investments for successful Americans like you— the real people—for a living. You may be surprised to hear this, but my phone hasn’t been ringing a lot over the last couple of weeks. I’ve spent many … [Read more...]
Luxury Goods Indicator Ringing the Alarm Bells
Young Research’s Luxury Goods Index is a modified market-cap weighted index of some of the world’s most prestigious luxury brands. You would recognize many of the names in the index. The components include Tiffany’s, Louis Vuitton, Hermes, Bulgari, and Southeby’s among others. No single stock accounts for more than 20% of the index. Our luxury goods index provides a real-time snapshot of the health of the high-end consumer. Why should you care about the health of the high-end consumer? The high-end consumer has become vital to both U.S. and global economic growth. In 2012, the top 5% of … [Read more...]
A Darn Good Track Record
I always have money in the stock market and I always will. I don’t get worked up about big swings in stocks because I also have money in bonds. The bonds tend to go up when stocks fall and vice versa. This balanced approach is best illustrated with my favored Vanguard Wellesley fund. The fund has been down for the year only 6 times since 1971 and so far this year it’s up. But even if Wellesley were to be down this year I would never sell it. The fund has a knack for making money in the year following a down year. That’s a success rate that makes me comfortable in any market. … [Read more...]
Thoughts on the Markets
Volatility has picked up in financial markets in recent weeks. It is still mostly noise at this point, but the sell-off has done damage to the technical picture of the market. The NYSE Advance/Decline line for stocks is in the tank, key moving average levels, support levels, and trend channels have been breached by various indices. Foreign stocks have sold off sharply. Commodities are sending a signal of deflation and/or global recession. It seems as the Fed ends quantitative easing, the rose-colored glasses are coming off. Of course, the Fed will try to jawbone markets higher and you … [Read more...]
The Monday Melee: Gasoline Plummets, Germany Sags
Dollar Power Drives Gasoline Prices Down What We’re Reading Market Faith in Central Bank Omniscience Being Tested (MoneyBeat) Auto save email attachments in the cloud (lifehacker.com) Eurozone on cusp of triple-dip recession as German exports crumble (The Telegraph) Opinion: U.S. stocks won’t be dragged down by the rest of the world (MarketWatch) Don’t count on a soft landing for stocks (Fortune) Two Fed officials say interest rates to rise in mid-2015 (Fortune) … [Read more...]
Zero Percent Rates Holding Back Economy
Did you catch the story from last week where former Fed Chairman Ben Bernanke told an audience at a Chicago conference that he recently tried to refinance his mortgage and was denied? After all I’ve written about Dr. B. you didn’t think I was going to let this story slip by did you? It’s too juicy to pass up, but don’t worry, I’ll keep it clean. Bernanke attributed the rejection to mortgage lenders tightening credit conditions too much. That may be true, but I would like to offer an alternative explanation that the academic minded Bernanke (and his former Fed colleagues) may be … [Read more...]
Teach a Grandchild How to Invest: Part II
As I recommended to you in part I, make sure statements are mailed to your grandchildren so they can stare at the changes in value of their accounts every month. Watching it go down from time to time is preferable. That way they'll build two invaluable skillsets. The first is persistence. When I was a kid, my grandmother would come over every Monday for dinner. “Guess how many clambake tickets I sold this week?” she would ask. This wasn’t just a summer thing for her to raise money for her church. It was a year round personal challenge to see if she could beat last year’s total. And she did … [Read more...]
The World’s Most Dangerous Mutual Fund?
Fannie Mae and Freddie Mac investors are toast. That is the verdict the market delivered last week after a judge threw out a lawsuit to stop the government from seizing most of their profits. I don’t want to get into the details or merits of the case, but it is important for you to know that the common and preferred shares of Fannie and Freddie took a beating following the ruling. The Fannie Mae preferreds plunged almost 50% on the day of the announcement and they are down more than 60% since September 30th. The ruling on the mortgage giants' shares was notable, but what was most … [Read more...]
Can U.S. Stocks Decouple?
U.S. stocks are still up YTD, but the iShares MSCI All Country World Index excluding the U.S. is now down over 4% in 2014. Can U.S. stocks continue to diverge from foreign markets? With about half of the revenue of S&P 500 companies coming from foreign economies that may be a tall order. Better buckle up. … [Read more...]