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A Darn Good Track Record

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I always have money in the stock market and I always will. I don’t get worked up about big swings in stocks because I also have money in bonds. The bonds tend to go up when stocks fall and vice versa. This balanced approach is best illustrated with my favored Vanguard Wellesley fund. The fund has been down for the year only 6 times since 1971 and so far this year it’s up. But even if Wellesley were to be down this year I would never sell it. The fund has a knack for making money in the year following a down year. That’s a success rate that makes me comfortable in any market. … [Read more...]

Thoughts on the Markets

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Volatility has picked up in financial markets in recent weeks. It is still mostly noise at this point, but the sell-off has done damage to the technical picture of the market. The NYSE Advance/Decline line for stocks is in the tank, key moving average levels, support levels, and trend channels have been breached by various indices.  Foreign stocks have sold off sharply. Commodities are sending a signal of deflation and/or global recession. It seems as the Fed ends quantitative easing, the rose-colored glasses are coming off. Of course, the Fed will try to jawbone markets higher and you … [Read more...]

The Monday Melee: Gasoline Plummets, Germany Sags

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Dollar Power Drives Gasoline Prices Down   What We’re Reading Market Faith in Central Bank Omniscience Being Tested (MoneyBeat) Auto save email attachments in the cloud (lifehacker.com) Eurozone on cusp of triple-dip recession as German exports crumble (The Telegraph) Opinion: U.S. stocks won’t be dragged down by the rest of the world (MarketWatch) Don’t count on a soft landing for stocks (Fortune) Two Fed officials say interest rates to rise in mid-2015 (Fortune) … [Read more...]

Zero Percent Rates Holding Back Economy

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Did you catch the story from last week where former Fed Chairman Ben Bernanke told an audience at a Chicago conference that he recently tried to refinance his mortgage and was denied? After all I’ve written about Dr. B. you didn’t think I was going to let this story slip by did you? It’s too juicy to pass up, but don’t worry, I’ll keep it clean. Bernanke attributed the rejection to mortgage lenders tightening credit conditions too much. That may be true, but I would like to offer an alternative explanation that the academic minded Bernanke (and his former Fed colleagues) may be … [Read more...]

Teach a Grandchild How to Invest: Part II

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As I recommended to you in part I, make sure statements are mailed to your grandchildren so they can stare at the changes in value of their accounts every month. Watching it go down from time to time is preferable. That way they'll build two invaluable skillsets. The first is persistence. When I was a kid, my grandmother would come over every Monday for dinner. “Guess how many clambake tickets I sold this week?” she would ask. This wasn’t just a summer thing for her to raise money for her church. It was a year round personal challenge to see if she could beat last year’s total. And she did … [Read more...]

The World’s Most Dangerous Mutual Fund?

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Fannie Mae and Freddie Mac investors are toast. That is the verdict the market delivered last week after a judge threw out a lawsuit to stop the government from seizing most of their profits. I don’t want to get into the details or merits of the case, but it is important for you to know that the common and preferred shares of Fannie and Freddie took a beating following the ruling. The Fannie Mae preferreds plunged almost 50% on the day of the announcement and they are down more than 60% since September 30th. The ruling on the mortgage giants' shares was notable, but what was most … [Read more...]

Can U.S. Stocks Decouple?

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U.S. stocks are still up YTD, but the iShares MSCI All Country World Index excluding the U.S. is now down over 4% in 2014. Can U.S. stocks continue to diverge from foreign markets? With about half of the revenue of S&P 500 companies coming from foreign economies that may be a tall order. Better buckle up. … [Read more...]

Bond Kings

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My favorite bond funds are not known for their king like managers. And I like it that way. One would think that the world renowned Bill Gross (whose compensation reached $200 million in years past) could make things work at PIMCO. But with interest rates so low, it was getting too hard for him to make a difference. In this interest rate environment, the only way a bond fund manager is going to make a difference is by taking on more risk than his competition. It’s not rocket science. But I have a feeling investors aren't going to be comfortable with these risks, as I explained here. … [Read more...]

The Monday Melee: World War III

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What We’re Reading: Correlation and causation (tylergiven.com) Wanna be rich--get back to work! (theguardian.com) When not to load up on stocks (Fortune) Don't use one of these passwords. 25 commonly used password list 2014 (Visual.ly) Know Which Fish Are Low in Mercury With This Chart (lifehacker.com) The Market Makes a Case for Conservative Investing (WSJ) … [Read more...]

Politics Matter

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Even after the passing of some of the most economically damaging policies the nation has ever seen, there are still some investors who insist that politics and investing don’t mix. These investors somehow believe that economic and financial market performance are independent of policy. Seems hard to believe when you look at the structure of government. In the U.S., the President appoints the Federal Reserve Chairman and few would deny that the Fed plays a major role in interest rate markets and has influence over other asset markets. The Congress has the power of the purse. And one-fifth of … [Read more...]