In this morning’s Wall Street Journal, Steven Russolillo and Kaitlyn Kiernan offer two perspectives on the low levels of volatility being telegraphed by the VIX Index. Some investors interpret the benign numbers as evidence that worries about gridlock in Washington and the slowing global economy are overblown. But others worry that the low readings are a sign of complacency, and that the potential for further declines in response to unexpected bad news isn't reflected in stock prices, even after the Dow Jones Industrial Average's decline of 4.4% since Oct. 5. You can put us in the category … [Read more...]
A Sure Bet Gone Wrong
Fenway Sports Group is the parent company that holds John Henry’s ownership interests in the Boston Red Sox and the Liverpool Football Club. Last week, his money management firm, John W. Henry & Co., announced that it is closing. In its worst-performing programs, it has lost as much as 21% YTD and 32% over the past year. You can never afford to lose money, but it’s even more important not to lose it when you’re in retirement. What if you don’t own a baseball team or a soccer team to help you get through the tough times? I am sure there are a lot of people who used to be wealthy who … [Read more...]
It’s the Spending Stupid!
As congressional leaders and the White House begin to negotiate on the fiscal cliff we are hearing a lot about raising taxes on the “rich.” The debate has morphed from whether or not to tax the rich to how to tax the rich. Apparently, a majority of Americans bought into the President’s dubious campaign pitch about taxing millionaires and billionaires to solve the budget crisis. And based on the media’s coverage of the fiscal cliff—they did too. That’s a shame, because America doesn’t have a revenue problem. It has a spending problem. You don’t have to be a budget wonk to recognize that it … [Read more...]
Markets in the Age of Big Government
The economic data released post-election have not promised an easy return to office for President Obama. Jobless claims numbers (Chart 1) released today showed a spike in layoffs. True, some of these were Sandy related, but bigger losses came from Pennsylvania and Ohio where auto and manufacturing workers were laid off in large numbers. So much for that GM bailout. Trouble has also been showing up in the equity markets. Since the president was reelected, $650 billion dollars of wealth has disappeared from the value of S&P 500 companies (Chart 2). That’s in only six trading days. And … [Read more...]
Dr. Copper’s Diagnosis
The red metal is often called Dr. Copper, because it has a Ph.D. in economics. Copper seemingly knows before anyone else that the economy is headed into a recession. If that’s true, copper isn’t signaling a rosy forecast today. Take a look at our chart of the price of copper. Futures for the 1-month contract have been declining since a peak in February of 2011. The price has oscillated, but its peaks keep getting lower. Investors have been content to put a bottom on the price near $3.30/lb., but now prices are edging down once again. A drop below $3.30 could signal a coming recession. … [Read more...]
Time to Buy Gold?
It’s the question most frequently asked by customers over the last week: Is now a good time to buy gold? My answer is that I like gold. Who doesn’t? But I don’t buy it hoping it goes up. I buy it and hope it goes down, because most of the stuff I own in my portfolio goes up when gold goes down, as should be the case in yours. But if you have invested in gold over the last 10 years, you’ve beaten the pants off the Dow Jones Industrial Average total return. Look at the chart below for a comparison. The chart shows you what $100 invested in the Dow or gold on December 31, 1999, would be worth … [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...]
Fairy Tales in the Fantasyland of Washington D.C.
Chuck Schumer, the liberal democratic senator from New York is out with some post-election blather on the fiscal cliff. Schumer and his liberal allies have yet to figure out that higher tax rates don’t generate more revenue. Here is what he said during an address at the Christian Science Monitor Breakfast yesterday. From the Daily Caller: “It’s a lovely thing but it’s a fairy tale…it is the Rumpelstiltskin tax fairy tale that if you cut taxes you increase revenues.” Mr. Schumer’s beliefs are grounded in a fantasy land where higher rates don’t encourage tax avoidance. But the truth is, … [Read more...]
RIP Economic Freedom
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years.” ― Alexis de Tocqueville In a nutshell, the above quote from Tocqueville explains the outcome of yesterday’s election. … [Read more...]
Annuity Blimp Losing Air
When you get your insurance bill, you may not think insurers struggle to make money, but indeed some do. MetLife Inc. reported a third-quarter loss of about $1 billion compared to a gain of almost $3.5 billion last year. Of the loss, $1.6 billion was a goodwill impairment from its U.S. retail annuity business, where variable annuity sales dropped by 46%, or $4.6 billion. MetLife is the biggest U.S. life insurer by assets. You might remember it from the Snoopy blimps. But don’t get caught by the marketing blitz. Variable annuities have a tough road ahead. It may not be long before annuity … [Read more...]
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