Coronavirus Infects Stock Market: Part LI “You know what’s crazy,” a client told me yesterday, “is that investors spend more time buying a grill than picking a financial planner.” Friends of his are in deep financial trouble. The virus has made it even worse, and the losses are taking a toll on their health. Another client, who’s in my business, brings bond deals to market. He said every deal is oversubscribed with demand through the roof. We talked about how the retail investor has no chance to get in on these deals. When it comes to your bonds, you don’t want to be a retail buyer like … [Read more...]
Archives for May 2020
Is There a Bubble in Growth Stocks?
Growth stocks are beating value stocks by the widest margin since the dotcom bubble. The top 5 S&P 500 stocks (all growth-oriented technology companies) now account for over 20% of the index—the highest weighting for the Top 5 in the S&P 500 in at least the last three decades. What’s more, for the first time in a decade, a net 20% of fund managers are expecting growth stocks to outperform value stocks. Sounds like a good time to lean into value especially those value stocks that pay and increase their dividends regularly. The Wall Street Journal's Akane Otani reports: Growth … [Read more...]
Robo-Advisors: When You Have a Lot More to Lose than Money
Coronavirus Infects Stock Market: Part L With casinos slowly reopening (sorry, most buffets are still closed), it looks like gamblers found a home with Nasdaq. While the world, as we know, has basically come to an end, the tech-laden Nasdaq is up a couple percent year-to-date. Welcome to Planet Hollywood. One is reminded of the dot.com bust especially when Shopify), a Canadian tech company, trades at a larger market cap than Royal Bank of Canada. Pop quiz: One was founded in 2004, the other in the 1800s. Recently, I was asked about robo-advisors: You set-up an account with a low … [Read more...]
Gamblers Descend on the Stock Market
If the stock market feels more like a casino to you than a place to invest for retirement these days, the FT has some insight to offer. With all major sports on hiatus and many casinos closed, gamblers are opening stock trading accounts. Net new client accounts have soared at online brokerage firms by almost 800,000 in March and April. Some are even using stimulus money or money they would typically gamble with to bet on stocks. Gamblers who cannot bet on professional sport because fixtures have been scrapped are flocking instead to the US stock market, creating a new class of customer for … [Read more...]
Walmart Sales Soar as Americans Stock Up
As shutdown orders have closed other retailers without grocery stores attached, Walmart has been the only place open to many would-be shoppers. Walmart's sales have surged during the coronavirus shutdown. Sarah Nassauer writes in The Wall Street Journal: Walmart Inc. WMT +0.54% is reaping the rewards of being one of few retailers positioned to successfully navigate a global pandemic, reporting a surge in quarterly sales as consumers turned to its giant stores to stock up on food and household goods. The country’s largest retailer said U.S. comparable sales, those from stores and digital … [Read more...]
Update! May 2020: Why Vanguard is Too Big for YOU
Coronavirus Infects Stock Market: Part XLIX A new client of mine is consolidating his eight-figure fortune with Fidelity. What’s shocking is how easily he decided to leave Vanguard. “Why?” I asked him. “E.J., I haven’t heard from anyone at Vanguard in over a year,” he said. “They’re letting a quarter of a hundred million dollars walk out the door,” I thought to myself. “The front door.” That is shocking. “I’ve read your father-in-law Dick Young for over 30-years,” he said. “I miss him.” “Welcome home,” I said. When the late Vanguard founder Jack Bogle released Bogle on … [Read more...]
These Numbers are Staggering
Many Americans have wondered why the stock market has bounced so much in the face of an unemployment rate exceeding 20% and economic growth that may fall at the fastest rate on record in the current quarter. Fiscal stimulus is one reason, but as has often been the case over the last decade a Federal Reserve that views its primary job as supporting asset markets is likely a larger cause. Below we present the annualized weekly increase in the Fed’s debt monetization program as a percent of total stock market value. The numbers are truly staggering. In the early weeks of the COVID … [Read more...]
Coronavirus is Amazon’s Cleanup Crew
After Amazon set about decimating retail competitors across America, coronavirus has come along and helped it finish the job. Suzanne Kapner and Sarah Nassauer report in The Wall Street Journal: Amazon. AMZN 0.68% com hurt many retailers. Coronavirus will finish some of them off. Even as malls and stores begin to reopen, the Covid-19 pandemic has taken a toll on an industry already battered by the shift to online shopping. More than two million retail jobs disappeared in April as many stores closed. The damage will be clear Friday when the U.S. government reports what is expected to be one … [Read more...]
You Can’t Time the Market: When Hubris Fails
Coronavirus Infects Stock Market: Part XLVIII You can’t time the market. Don’t even try, because you just might end up being wrong. Consider commercial real estate, for example. Anyone want to buy a high rise in Manhattan? Let’s hop in our time machine and look back to 2018 when the stock market was having a rough year. The DJIA ended the year down close to six percent. Big bad pensions wanted nothing to do with stocks. They wanted the “safety,” the “reliability of,” wait for it—commercial real estate. Let’s roll the footage (WSJ article Nov. 2018): U.S. public pension funds are … [Read more...]
Is the S&P 500 Still Relevant?
Did you know the 5 biggest stocks in the S&P 500 accounting for 22% of the index offer investors an average dividend yield of 0.44%? Only two of the five even pay a dividend. S&P puts them in different buckets, but all five are technology businesses. To meet the SEC’s diversification definition, a fund cannot hold more than 5% of its assets in any one issuer. The two largest stocks in the S&P 500 now account for more than 5% of the index. The index doesn’t even qualify as a diversified fund according to the SEC’s definition. Does that sound like a benchmark anybody in or … [Read more...]