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You Have Two Jobs to Do in Record Breaking Markets

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The S&P 500 500 index closed at a record high yesterday, and could do so again today. Back in June of 2004 I was telling readers about how to position their portfolios when stock prices rise well above trend. I told them then that they had two jobs in preparing for such lofty stock prices. I wrote: So what is your plan during periods when stock prices rise well above trend? You have two jobs. First, be sure your exposure to equities does not exceed what, for you, is a conservative and appropriate level. Second, place more emphasis than normal on dividends. Look to maximize yield. And by … [Read more...]

Bigger Funds Are not always Better Funds

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In the low rate environment that has followed the financial crisis, big institutional investors have looked to alternative investments like private equity to generate returns large enough to fund promised payouts. The problem is, that once a fund gets big enough, the number of options it has for meaningful investment becomes limited. Dick Young explained this phenomenon in his popular post on the Crisis at Vanguard. Now, after plaguing the largest mutual funds for years, the problem of getting too big is hitting private equity funds. Miriam Gottfried reports at The Wall Street Journal: The … [Read more...]

American Gun Owners Are Afraid of 2020: Gun Stocks are Rising

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Nearly all the Democrats running have expressed their desire to impose draconian gun control measures on Americans. As the threats to Americans' gun rights in 2020 become clearer, many Americans are taking my advice to get their guns and their training now. The number of background checks rose in May compared to the year before, meaning more Americans were out attempting to buy firearms. Americans' firearms buying habits are an indicator of their perception of political risk that I use as a part of my monthly RAGE Gauge computation. Another group paying attention to firearms purchases … [Read more...]

Can You Bank on the Fed?

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There’s a saying in finance that you shouldn’t fight the Fed. What that means generally, is that if the Fed is encouraging riskier or less risky behavior with its policies, you should go along. But what happens when the Fed is giving mixed policy signals? The Fed increased rates as recently as December 20, and was discussing further hikes even later. Now, in June markets see the Federal Open Market Committee signaling two possible rate cuts in 2019. That’s a neck snapping change of course. Such turnabouts aren’t new for the Fed though. Back in April 1995 I wrote: In recent testimony to … [Read more...]

The Rise of Robo-Real Estate?

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Real estate firms Opendoor, Offerpad, and Zillow are developing services that purchase homes, improve them slightly, and then flip them to new buyers using apps to do most of the sales work. In my series Dead or Alive? The Future of Long-Term Investing, I questioned the benefits of using robo-advisors in place of real, warm-blooded, human beings. As I wrote then, what happens in a crisis; "We’ll see how well they do when markets crater and the phone lines light up like a Christmas tree. It’s happened twice already this century, and that’s when it matters most." The question is now, are … [Read more...]

Would You Hire an Advisor to Buy Your Next Car?

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Raise your hand if you enjoy the car buying experience? Anybody? The consumer car buying experience is widely regarded as one of the worst there is. The Internet has made things a little bit easier, as you can now do some basic research so you don’t have to walk blindly into the dealership, but the dealer still has the upper hand. If you try to negotiate a price on your trade-in for example, the dealer will budge less on the new car you are trying to buy. If you are leasing, the dealer may give you a good price on the new car and your trade, but he’ll jack up the lease … [Read more...]

Has the Fed Lost Control of Short-term Interest Rates?

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Phil Gramm and Thomas R. Saving make the case in The Wall Street Journal that the Fed Funds rate is no longer in the driver's seat of the monetary policy car, and that instead the rate the Fed pays on excess reserves has become much more important. With that rate guided by movements in Treasury markets, the authors wonder if the Fed has lost control of short-term interest rates altogether. They write: The rate the Fed pays on reserves has eclipsed the fed-funds rate as its key monetary tool, with a much more direct influence over the money supply. If the interest rate on reserves is set … [Read more...]

United Technologies Flees Connecticut’s Poor Management for Massachusetts

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The Wall Street Journal's editorial board explains the Connecticut strategy succinctly when it writes "Thus we have Connecticut’s business model: Raise costs for everyone and then leverage taxpayers to provide discounts for a politically favored few." By raising taxes on all corporations and individuals, Connecticut makes owning a small business very difficult. If a major corporation can lobby for better tax treatment, small businesses are even less capable of competing. Small businesses are the powerhouses of the American economy, putting them at a disadvantage to big corporate interests … [Read more...]

Is Never Ending Stimulus the New Normal?

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Many astute market observers maintain the central banks are never going to be able to stop printing money and stimulating. The Fed finished its wind-down of QE in September, but quickly shifted back to a dovish stance in January. The ECB ended its bond buying program in December, but today assured markets more stimulus is on the way. Those market observers predicting never ending stimulus are looking more and more correct. The BOJ, BOE, and Fed all meet this week. Expect more of the same. Paul Gordon and Piotr Skolimowski report for Bloomberg: European Central Bank policy … [Read more...]

June RAGE Gauge: Gold Shines as Investors Seek Safe Haven

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My latest RAGE Gauge reading is in, and while perceived risk is down from last month, it’s still not pretty. What caught my attention is the noticeable bump in gold as investors seek safe haven investments. Remember though, while the yellow metal is an important component of a diversified portfolio, its lack of income or dividend payments make it an expensive asset for too much of your retirement money. Originally posted on Your Survival Guy.  … [Read more...]