Current market volatility is creating a moment ripe for bad decision making on the part of the average investor. An interesting chart (below) published by BlackRock at the end of 2012, but no less pertinent today, shows that the average investor didn't even keep up with inflation from 1992-2011. Rash decision making is likely at fault. … [Read more...]
Annuity Guarantee “WILL BE REVOKED”
I've been warning investors about variable annuities for a long time. Hartford Insurance has issued a letter to its variable annuity investors warning that the guarantee will be revoked if they don't have 40% in bonds. Apparently Hartford has a contractual right hidden within the pages of the prospectus. Most investors need a doctorate to understand what they're signing up for with variable annuities. In this case, as is most often the case with variable annuities, the investor loses. Hartford is one of many insurers seeking to reduce exposure to what have turned out to be costly guarantees … [Read more...]
Shocking Statistics about American Savings
The New York Fed announced yesterday that household debt levels have fallen to $11.23 trillion, down from a peak of $12.68 trillion in the third quarter of 2008. That’s good news for Americans’ personal balance sheets, but paying off debt isn’t enough to get one through his golden years. Are you saving enough for retirement? [expand title="Click here to read more."] As you can see on the chart below. Savings rates have been very low for a long time. Since 2000, the average monthly savings rate has been 3.5%. For the last two months the rate has been below 2.8%. But the historical average … [Read more...]
Going Broke!
If you feel like you’re spending too much don’t feel so bad. These guys take it to another level. 15 Ways Professional Athletes Go Broke By Tony Manfred | Business Insider – Mon, Mar 11, 2013 9:58 AM EDT Two very different ex-NBA players ran into financial issues in two very different ways recently. Robert Swift — who earned $11 million in three seasons — had his house foreclosed on after prematurely flaming out of the NBA and apparently not doing much else. Allen Iverson — who earned $154 million in salary — found out the hard way what happens when you keep living the good life after the … [Read more...]
Election Year Buzz Turns into Hangover
Surprise, surprise, consumer sentiment in America reached its post-recession high in November, just as politicians were sending Americans to bed each night with dreams of jobs and prosperity on the horizon. Meanwhile, Americans supporting incumbents in 2012 told themselves everything was OK to justify voting for their candidates. That false positive sentiment bled through to surveys as expressed deluded hope. Now that those heady days are over, sentiment is based deeper in the reality that taxes have gone up on 77% of Americans, job growth remains anemic, gas prices remain elevated, and … [Read more...]
Fiscal Cliff Winners and Losers
It’s nice to have options. Before knowing the fiscal cliff outcome and before taking a trip to North Korea, Google Chairman Eric Schmidt sold 153,000 shares of company stock for $108 million, according to a Wall Street Journal review of securities filings. Starbucks Chairman Howard Schultz exercised two million stock options for $107 million. Robert Kauffman, co-founder of hedge fund Fortress Investment Group, sold $180 million in stock back to the firm partly because of concerns about higher tax rates, saying, “It was more that the current certainty, with rates relatively attractive, was a … [Read more...]
The Illegitimate Tax Mandate
Following last week’s election, the President and his allies in congress are claiming the outcome of the election (and exit polls) indicates a mandate to raise taxes on the “rich.” Why? Because the President campaigned on a higher tax message. Actually, he campaigned on raising taxes on millionaires and billionaires, not the “thousand-iares” that will see a higher tax bill if he gets his way. But the more dominant message during President Obama’s campaign was not one of higher taxes, but that he isn’t Mitt Romney. If there is any clear mandate from this election, it is not to be Mitt Romney. … [Read more...]
Investing in a Global Recession
World trade volumes declined for the third month in a row according to the CPB World Trade Monitor Index released today. The index grew only 0.29% on a year over year basis (Chart 1). Every time the index has grown so slowly, the United States was already in recession. The report, put together by the Netherlands Bureau for Economic Policy Analysis, also indicated that world industrial production has also decreased, with the bulk of the decreases coming from the U.S., Japan, and Central and Eastern Europe. Evidence of the trade contraction is showing up on U.S. shores as declines in … [Read more...]
Income Investors Beware: This Asset Class is a Guaranteed Loser
Yesterday, Bloomberg reported that the U.S. Treasury sold $24 billion of 10-year notes at a record low auction yield. The bonds were sold at a yield of 1.85% which is lower than the 1.9% yield on 10-year notes sold in January. What investor would willingly lend the federal government money for ten years at a 1.85% interest rate? Aren’t these folks aware that this is the same federal government that has racked up trillion dollar deficits for three consecutive years and promises at least one more year of the same? On a fundamental basis, long treasury bonds are one of the world’s most … [Read more...]
Fear and Greed: Read the Market like Warren Buffet
If you tune into to CNBC regularly, you’ve likely come across a segment where the commentators are talking about the VIX Index. You may have wondered what the significance of the VIX was and what its implications are for your portfolio. The VIX isn’t like the Dow Jones or the S&P 500—it doesn’t track the movement of stock prices. The VIX is a measure of risk. Some call it the “fear gauge.” According to the Chicago Board of Options Exchange, the organization that publishes the index, the VIX is a “key measure of market expectations of near-term volatility conveyed by S&P 500 stock … [Read more...]
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