The late great investment manager, Sir John Templeton once said "Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria." Euphoria is the final and most dangerous stage of the bull market. This is when the investing public moves all in on stocks. Has the bull market entered euphoria territory? It would seem that way. Investor sentiment has surged since the election. Our chart shows the spread between the percentage of respondents to the Conference Board's consumer confidence survey who think stocks will be higher in twelve months and those who believe … [Read more...]
Should you Invest in Last Year’s Best Performing Mutual Funds?
According to Mark Hulbert of MarketWatch.com, the answer is no. Buying last year’s winners is a not a winning strategy. It is often more true that past winners become future losers. The best thing you can do when examining the 2016 performance rankings is to sit on your hands. That’s because, if you behave like the average investor, you will be sorely tempted to begin following those advisers and strategies with the best 2016 returns. More often than not, that turns out to be a bad idea. This is important advice at any time, but especially now, since in the next few days you will be … [Read more...]
This is What you get Free Each Week with Portfolio Strategy
If you are new to our site or haven’t yet signed up for our free weekly Portfolio Strategy service, below is just a taste of what you missed this year. And these are just my posts. Each week our goal is to bring you our most cogent thoughts on the economic and financial landscape. Our weekly email service helps investors, both novice and expert, cut through the noise and invest their serious money with the savvy and sophistication of a seasoned pro. If you have family or friends who you would like to share our free Portfolio Strategy service with, just click the button with the envelope on … [Read more...]
These are the Most Expensive Housing Markets in the Country
Janet Yellen's 8-year yield heist has done wonders to help home prices recover from their 08-09 crash. But the gains made in home prices haven't been driven by sustainable fundamentals. Home prices have outpaced income gains in many housing markets. MarketWatch reports on some of the least affordable housing markets in the nation. New York County and San Francisco County predictably top the list, according to data from the U.S. Census Bureau comparing median home values against median household income. The median home price in New York County was 11.6 times the median income ($849,000 versus … [Read more...]
Could This Simple Strategy Conquer the Dow 4 Years In a Row?
The "Dogs of the Dow" strategy is on pace to outperform the Dow Jones Industrial Average for the fourth year in a row. To execute the Dogs of the Dow strategy, you buy the 10 highest yielding stocks at the start of the year and hold them for 12 months. The strategy is simple, but not easy as it often means buying the most unloved and out of favor Dow components. Steven Russolillo gives some more detail on the Dogs' 2016 performance in The Wall Street Journal: The dogs approach mimics what was the hottest trade in the first half of the year: chasing yield. Many of the market’s … [Read more...]
Trump is Going to Make 2017 an Interesting Year
Love him or hate him, Trump was undeniably an unconventional candidate for President and he promises to be an unconventional President. Unlike many in Washington, he doesn’t seem concerned with poll testing everything that he says. He speaks….err tweets his mind. Supporters view that as a refreshing change, while critics consider it a cavalier approach to governing. What about markets? Before Trump has even taken office, he’s had a major impact on markets. As you know, stocks have rallied strongly on the prospect of faster growth, lower taxes, and less onerous … [Read more...]
What is the Auto Market Forecasting about the Economy
Despite the positive signal that the Trump rally in the stock market is sending about the state of the U.S. economy, the auto market is adamant that we are in the winter stage of the economic expansion. Pro-growth policies from the incoming administration have the potential to prolong the expansion, but General Motors, Ford, and Chrysler are taking an, "I'll believe it when I see it" approach to growth. The WSJ reports that the Big Three have scheduled down-time at their factories of as much as three weeks in January to clear inventories resulting from cooling demand and shifting consumer … [Read more...]
Financial Strategies of the Super Wealthy
Every wonder how the super wealthy manage their vast fortunes? Here the WSJ reports on some of the financial strategies of the ultra-wealthy ($10 million or more in investable assets). Consolidate Your Accounts To prepare for his portfolio defense, Mr. Lerner created a spreadsheet of all his accounts, assets and liabilities. Putting everything down on one spreadsheet helped him get a clear, organized picture of what he owns and owes, he says. It also reminded him of something he thinks when he gets yet another financial statement in the mail. “I have too many accounts,” he … [Read more...]
Is this the Dawn of the Golden Age for Bank Stocks?
Steve Eisman, one of the few traders who profited from taking a major short position in sub-prime mortgages before the financial collapse thinks we could be entering the golden age for bank stocks. Eisman was profiled by Micheal Lewis in "The Big Short." See the movie and if you have the time, read the book. Marketwatch has the story Eisman, whose story was told in Michael Lewis’s “The Big Short,” wagered correctly that these mortgage securities would eventually rock the financial system to its very core Now, Eisman is espousing a much more bullish position in the banking sector, which … [Read more...]
How to Survive Soaring Interest Rates
For income investors, the threat of soaring interest rates is a nagging risk. If your portfolio is loaded up with the wrong types of bonds, rising rates can devastate your portfolio returns. See here for example. Rising interest rates don't impact all bonds in the same way though. Here at Barron’s, PIMCO (via a paid advertisement) makes the case that a properly positioned bond investor need not fear the threat of increasing interest rates. As one of the world’s largest bond fund managers, PIMCO of course has an ax to grind, but the insights they offer remain relevant. Bond declines … [Read more...]
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