Congress is trying to pass new rules on 401(k)s. There are some good reforms in the current legislation, but one glaring red alert is the increased role of annuities planned for 401(k) accounts in the bill. Annuities can be fee-sucking, performance killing traps enriching the companies that sell them, rather than the customers who buy them. Anne Tergesen reports on some of the drawbacks of annuities: Annuities aren’t often used in 401(k) plans, in part because employers worry that if they pick an insurance company that ends up going bust, the 401(k) participants will sue the … [Read more...]
Archives for July 2018
My Investment Plan: Easy to Understand and Easy to Implement
I couldn’t help but laugh to myself recently when I read an article in a major business publication about banks selling structured notes linked to FAANG stocks. The only thing more complicated than an explanation of the business case for some of these tech stocks is a structured note based on their performance. It’s the opposite of my small-town Vermont axiom “Simple is Sophisticated.” Any investment plan you make should work hard to eschew the use of such exotic investment products (they’re called products because they are sold to consumers). Instead you should focus on an investment plan … [Read more...]
Your Retirement Life: The International Tennis Hall of Fame
There’s a couple of ways to get in to the International Tennis Hall of Fame: Dedicate your life to the sport and realize incredible success or, cross Bellevue Avenue from my office and enter the historic complex by foot. This week, as is tradition following Wimbledon, competitors are in town for the Dell Technologies Hall of Fame Open. It’s a wonderful time to be in Newport for players and fans alike as both mingle about town enjoying what Newport has to offer. If you’re a tennis fan and have questions about your investments, swing by for some coffee before heading across the street for the … [Read more...]
The Most Crowded Trade on Wall Street
This year's most crowded trade on Wall Street is Big Tech. The FAANG stocks, as measured by the NYSE's Fang+ index have climbed by 32% year to date. According to Bank of America, the trade is the most overextended since 2015. Robin Wigglesworth writes in the FT: The New York Stock Exchange’s Fang+ index, which includes a mix of US and Chinese tech companies, has climbed more than 32 per cent this year. However, some investors think the rally in “Big Tech” shares is overdone. Betting on the Faangs in the US and China’s Bats has been identified as the most crowded trade for sixth months … [Read more...]
Confident Manufacturers Hitting on All Cylinders
American manufacturing is growing again, with the favorable winds of tax cuts and regulatory reform at their back, manufacturers are confident and busy. Sarah Chaney and Bob Tita report in The Wall Street Journal: For now, the long U.S. expansion, now in its 10th year and being further fueled by recent business and individual tax cuts, appears to be paying dividends for American plants that churn out cars, appliances and business equipment. “Activity right now is hitting on all cylinders. Demand is up, production is up, [and there’s] really robust hiring overall,” said Chad Moutray, chief … [Read more...]
Pensions are Still Hiding from the Truth
You can never save too much of your own money. As I wrote here on January 22, 2018, the pension funds many Americans are depending on are gambling with their money. For years I've been writing about how badly pension funds have been ignoring reality when it comes to return expectation (read a sample of these posts here, here, and here). Funds have a choice to make when they set their return expectations, they can: Shoot low, and require governments or companies to put more funding aside to fund the pensions, or Shoot high and gamble on having strong enough returns to make up for … [Read more...]
Is China About to Tank the Market for Metals?
There is a growing body of evidence to support the theory that China's economy is slowing down. One of the clearest signs is the recent drop in metals prices. If the Chinese economy spirals down, it could tank the market for metals and other commodities along with it. Neil Hume reports for the FT: Mining stocks were under pressure on Thursday as selling of industrial metals intensified on concerns about demand from China, the world’s biggest consumer of raw materials. Copper fell 2.5 per cent and slipped below $6,000 a tonne for the first time in a year, while zinc was off 3.9 per cent at … [Read more...]
The Problem With Mutual Funds Today
One of the problems facing long-term, patient investors using mutual funds and ETFs is that many of their fellow investors are traders. It’s why we favor individual stocks where you call the shots. Asjylyn Loder reports in The Wall Street Journal on the volatile nature of fund flows, writing: BlackRock said Monday it received $20 billion in net inflows in the second quarter. While the sum is enormous, it was down from more than $100 billion a year ago. BlackRock is the world’s largest asset manager and a bellwether of low-cost index-based investing. BlackRock isn’t alone: For the first six … [Read more...]
Trump’s Pro-Business American Revolution: Part II
One has to search far and wide to find a single positive headline from the mainstream press about the Trump administration. Trade-wars and foreign policy gaffes dominate the papers, but the story that isn’t being covered well is Trump’s pro-business American revolution. After eight years of anti-business regulation and rhetoric, U.S. business finally has a spring back in its step. Small business confidence is at some of the highest levels on record, and CEO confidence, even in the face of some disruptive trade rhetoric, remains strong. The University of Michigan Survey of Consumers shows … [Read more...]
Your Retirement Life: 1972 DeTomaso Pantera, A Coyote in Wolf’s Clothing
Here’s a wonderful story about my friend Marty Quadland and the rebirth of his 1972 DeTomaso Pantera: “A Coyote in Wolf’s Clothing,” featured this month in Hot Rod: Following retirement, Quadland realized a dream of his and moved west to the mountains of Wyoming. In preparation, he downsized considerably, selling his SCCA race cars, several motorcycles, and a late-model exotic, and, for the first time, he considered selling the Pantera. His son intervened, however. “I saw the look on my son’s face when I told him I might sell it,” he recalls. “He thought the Pantera would be his someday. I … [Read more...]