With the market in a correction and off 10% this quarter, emotions are running high. I want you to take a minute this weekend and get your bearings. Clear your head of the emotions that hinder sound analysis and get yourself on the road to the investment success you deserve. A lesson worth remembering is that, without fail, investors tend to miss out on the market’s biggest gains, getting sucked in when the big money has already been made, and suffering from its biggest losses. I know this from studying money flows, and in part thanks to the 2010 edition of the Investment Company … [Read more...]
Donuts and Coffee to Measure the Economy
Using Starbucks, Dunkin’ Donuts to Track Economy – Phil Izzo, The Wall Street Journal The most recent leading indicators are pointing down, indicating more economic weakness in the months ahead. Be your own economist by going to your local Dunkin' Donuts or Starbucks to track activity. You may be surprised how closely both track the economy. – E.J. Smith … [Read more...]
Muni Debt Trap
You know how hard it is to be retired on a fixed income these days, especially with a risk-free rate (three-month T-bills) at less than one-tenth of one percent and with an historical expansion of government almost assuredly set to increase taxes next year. Caution: You don’t want to be like other investors who are reaching for yield and snapping up municipal bonds. Investors are not paying attention to the inherent risks they are buying. That’s why your smartest income move right now may be to avoid or reduce your exposure to these so-called “high-quality” credits. Little Rhode Island may … [Read more...]
The Crash
The Regional Economist from the Federal Reserve Bank of St. Louis is a must-read for any serious investor. The quarterly review provides business and economic commentary for the states in the eighth Federal Reserve District—which are “central to America’s economy.” I’ve been studying the most recent review and want to discuss with you a table in the cover story, “Economic Hangover: Recovery is Likely to be Prolonged, Painful ,” by Bill Emmons. I’ve customized the table to help illustrate that easy money and out-of-control government spending lead to reduced stock-market returns. The crash was … [Read more...]
The #1 Investment in the World
You may recently have read the outstanding, in-depth article from Sports Illustrated “Sports Genes,” by David Epstein, who points out that “good genes” don’t necessarily equate to athletic success. Take Ethiopian runner Haile Gebrselassie, the world-record holder in the marathon and perhaps the greatest distance runner ever, who, at age five, ran six miles each way to school because that’s how you got to school in Ethiopia. “Every day is running. Every job is running: working in the fields or just getting somewhere. Life is running,” says Gebrselassie. Just as Gebrselassie wasn’t born a … [Read more...]
A Ticking Bomb
On Monday morning while driving to Boston for a meeting, I was listening to the news while waiting for the start of the award-winning Helen Glover Show. Helen came on at 7:00 a.m. sharp, and even though she greeted listeners with the same energy as always, you could immediately sense that something was different this morning. Her opening emotions made listeners sit up and pay attention to what had happened to her over the weekend, which she spent in New York City at the Marriott in Times Square, right across the street from the failed Faisal Shahzad van bomb. We learned how, just like that, a … [Read more...]
The #1 Investment Book
You may be surprised to hear that Moneyball by Michael Lewis is my #1 investment book, given that it’s about baseball, not Wall Street or the stock market. Moneyball is a story about how one of the poorest teams in baseball, the Oakland A’s, and their GM, Billy Beane, built a roster chock full of talent and won 103 games. Beane did it by discovering hidden value through faith in his convictions and obscure stats, like a hitter’s pitches per plate appearance—helpful in tiring out a pitcher and getting on base. He drafted baseball players who were overlooked by other GMs blinded by their … [Read more...]
The Real POP in Investment Returns
Putnam Investments’ full-page colored advertisement in this week’s WSJ was hard to miss—the Putnam marketing team made sure of that. In the ad, they tout their suite of Absolute Return Funds, which seek to do well in any type of market environment, up or down. As is often the case, and certainly is here, if it sounds too good to be true, it is. The funds have outperformed their laughable benchmarks, but have failed every one of mine. It used to be a well-known fact at Proctor & Gamble that the smart people worked in engineering and the really smart ones worked in marketing. I’ve been … [Read more...]
Pop Quiz
You’re right if you guessed that the largest stock fund is an exchange-traded fund (ETF), a fact I always find somewhat surprising when studying the list of the largest stock funds in The WSJ’s monthly fund report. The one at the top of the list is the SPDR S&P 500 ETF (SPY), with $91.11 billion in assets. When I first started working in this industry, back in 1995, Fidelity Magellan was the largest stock fund. It was an actively managed fund, so it was a big deal when it was surpassed by Vanguard’s Index 500, a passive index fund. With the index fund, investors knew what they owned, … [Read more...]
Investment of the Decade
Trust has been kicked to the curb by Washington and Wall Street. Not a smart move, as the former prepares for mid-term elections and the latter feels the effects of investors voting with their feet. Many clients and brokers have fled the big Wall Street firms for independent advisors. Washington and Wall Street may realize too late that trust is a terrible thing to waste. The bailout of Bear Stearns, Lehman's bankruptcy, the controversial merger between Merrill Lynch and Bank of America, and Citigroup's near collapse had little to do with their client brokerage accounts. In fact, brokerage … [Read more...]