Last week Vanguard founder Jack Bogle spoke out about the dangers of index funds, something he helped pioneer. Take a look back at this piece I posted on October 12, 2017 for more depth on the issue. Let the good times roll? Great lyrics from the Cars but it’s a song I can’t get out of my head thinking about the money piling up by the truckload at Vanguard’s back door. We’re talking nearly $300 billion in the first nine months of this year alone. All of that money unloaded and stacked up with the rest of the $4.7 trillion at the firm. That’s a lot of confidence in one company. And maybe … [Read more...]
Archives for December 2018
Is There Anything Better than This at Christmas?
As Christmas approaches is there anything better than an ice-cold oyster and a sip of Prosecco? For me, it’s the combo that reminds me of Summer while Newport is frozen. It’s the counterbalance that makes it fun and it’s the Prosecco that keeps more money in my pocket for compounding. Understanding both concepts, counterbalance and compounding, are key for us all as I explain here: Yesterday’s trashing in the stock market offers us a chance to review the arithmetic of losses and the value in a counterbalanced strategy. Technology shares as represented by the Nasdaq composite index lost … [Read more...]
Heavy Duty Truck Orders Slowdown
After months of record breaking growth, heavy duty truck orders have slowed down in November. The freight market is slowing down in tandem. Erica Phillips reports for The Wall Street Journal: Orders for heavy-duty trucks declined in November for the first time this year, falling to the lowest level in 14 months and providing a fresh sign the North American trucking market is cooling down. Trucking companies last month ordered 27,900 new Class 8 trucks, the heavy-duty rigs used on regional and long-haul routes, according to a preliminary estimate from industry data provider ACT Research. … [Read more...]
Are You Investing in the Armored Truck of Financial Markets?
Are your investments characterized by the flash and speed of a supercar, or the reliability and protection of a Brinks truck? There’s nothing wrong with a super powered automobile made to take on curves at maximum speed, but the power that makes those machines exciting, is also what breaks their parts. All that torque can be hard on an automobile. Meanwhile, the massive diesel engines and reinforced steel protective bodies of armored trucks make sure its cargo reaches the destination. Back in 1990 I called Treasuries “the armored Brinks truck of financial markets.” I was responding to … [Read more...]
Vanguard GNMA Up, Nasdaq Drops 3.8%
Yesterday’s trashing in the stock market offers us a chance to review the arithmetic of losses and the value in a counterbalanced strategy. Technology shares as represented by the Nasdaq composite index lost 3.8% on the day. Let’s say, for example you began the day with $10,000 in Nasdaq. By late afternoon, when the market closed, it was worth $9,620 or down 3.8%. You now need (not a good word in investing) a gain of 4% to get back to even. Now, imagine a string of ten days like yesterday, or a 38% decline. A 61% gain is needed just to get back to even, or where you began with … [Read more...]
Are Catastrophe Bonds Worth the Risk?
Investors who purchased catastrophe bonds from PG&E now have the fate of their investments lying in the hands of investigators searching for the cause of the Camp Fire in California. If PG&E is found to be at fault for the fire, those investors are likely to lose everything. Markets will surely have to reevaluate the risk posed by such catastrophe bonds, and adjust yields demanded accordingly. Nicole Friedman reports on the bonds in The Wall Street Journal, writing: Those who follow the catastrophe-bond market are already anticipating the worst. The PG&E wildfire bond was quoted … [Read more...]
American Factories Booming
America's factories surprised economists with a stronger than expected reading on the Institute for Supply Management's manufacturing index. Economists had expected a reading of 57.9, but were pleasantly surprised with a strong reading of 59.3. Harriet Torry reports for The Wall Street Journal: Readings above 50 indicate activity is expanding across the manufacturing sector, while numbers below 50 signal contraction. November’s reading exceeded the 57.9 economists surveyed by The Wall Street Journal had expected. The report was compiled before this weekend’s announcement of a trade truce … [Read more...]
Kroger to Reach New Customers with Walgreens Partnership
In the race to reach new customers, mega-grocer Kroger has signed a partnership with Walgreens to embed mini grocery stores in the pharmacy chain's locations. Heather Haddon reports at The Wall Street Journal: Kroger and Walgreens executives wouldn’t say how the companies would share sales revenue or provide financial details of the deal. Kroger and Walgreens will supply and operate the Kroger-branded sections together, officials said. Kroger won’t sell store-brand items that compete with Walgreens’s private-label products, but it will take over its supply for branded goods, the companies … [Read more...]
House Prices are Also Prices
Inflation measures used to guide Fed policy should include housing prices. At The Financial Times, Alliance Bernstein Chief Economist Joseph Carson explains: The American economy has experienced many booms and busts in its history but, in the past two decades, the problems have been particularly acute in the asset markets. Both the 1990s dotcom equity bubble and the 2000s housing bubble saw large, persistent increases in asset prices. And each time, the economic tipping point came from sharp falls in asset prices and the abrupt changes in balance sheets on spending and investment … [Read more...]
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