In 2012 variable annuity cases were the only class of security where arbitration cases increased. Recently, Diany Nygaard, a Kansas City, MO based lawyer said she has been “besieged” by investors claims, as reported in The WSJ. “[Brokers] will stand up in front of a room and sell what they tell people are tax free, high income, you-can’t-lose-your-money investments…That’s the shtick.” Investors in variable annuities are at the mercy of the issuing insurance company. Take a look at the chart below. It’s an ETF of insurance companies. It gives you a snapshot of how they performed when times … [Read more...]
Yesterday’s Winners: Best Buy Edition
We all know the adage, “yesterday’s winner is today’s loser,” or some variation thereof. That’s why it’s no surprise to see Best Buy tanking on the back of a sales report that showed its holiday revenue results coming up short. Investors punished Best Buy shares after the report was released, driving them down over 28.5% at last look. This is probably hard to believe for some because Best Buy was one of the S&P 500’s top performing components in 2013. But those who think back just a little further will remember that Best Buy seemed on the verge of bankruptcy in 2012. The moral of … [Read more...]
Who Will Buy Your Stocks?
Zero Hedge highlighted a striking statistic on its website last Wednesday. A chart with data from Investors Intelligence showed that survey reporting bullish sentiment over 60%, and bearish sentiment in the tank. There are four times as many bulls as bears—a high that goes back almost three decades and covers two of the largest asset bubbles in history. Investors are more euphoric than they were at the height of the dotcom and real estate bubbles. With so many bulls already all-in on the stock market, who are the buyers that are going to drive prices up from today’s already lofty levels? … [Read more...]
The Cold Hard Economy
Whenever bouts of cold or precipitation hit the country it is inevitable that publicly traded companies’ managements will regale quarterly analyst conference calls with the news that weather played a detrimental effect on earnings in the quarter. We think we speak for the entire analyst community when we say “save it.” Fear mongers are already playing up the bout of cold hitting the country this week. Over at CNBC, Steve James writes: The record cold spell that has half the country in the deep freeze could cost the U.S. economy up to $5 billion. That's because millions of Americans … [Read more...]
Calling the Crash of ‘29
If you look at a enough charts it’s not hard to draw historical comparisons to fit your frame of mind. After reading an article comparing this market to 1928-29 I was reminded of Roger Babson, founder of my alma mater Babson College who correctly called the crash of ’29. His “ten commandments” ring true even today. Babson authored more than forty books on economic and social problems, the most widely read being Business Barometers (eight editions) and Business Barometers for Profits, Security, Income (ten editions). Babson also wrote hundreds of magazine articles and newspaper columns. He was … [Read more...]
Setting Your Course for 2014
What I’m about to share with you is something I’d like you to share with or teach to your spouse. In 2008 some of the smartest guys in the room sat and watched as their mutual funds lost close to 50%. Meanwhile boring old Vanguard GNMA made money. That’s all the proof I need to make sure my well balanced portfolio owns Vanguard GNMA. It would be nice to be able to buy just one balanced mutual fund and be done with it. But there are none out there today that fit the bill. Don’t get me wrong, I love the world class Vanguard Wellesley fund. There is no better low cost balanced fund. But without … [Read more...]
100 Years of the Fed and All I Got Was this Lousy Dollar
Monday was the centennial of the Federal Reserve. Established in 1913 as a lender of last resort, the Federal Reserve has taken on more and more responsibilities over time. Today it is expected to stabilize the value of the dollar (which it has failed miserably to do, with exceptionally bad performance noted during the 1970s), promote growth, produce full employment (ostensibly by ignoring the value of the dollar), regulate banks, manage asset bubbles (though the Fed seems better at creating them), and to communicate all of this with a stream of speeches, press conferences and articles … [Read more...]
Your Personal Financial Security Part II
Every Christmas we give our kids their age in cash—a tradition that began with Becky’s parents—making it fun to get older. Hard cold cash is often forgotten when credit cards, gift cards or your iphone complete transactions. But what happens when the lights go out? You still have basic needs, like caffeine. That’s why carrying some cash and storing some cash makes sense to me. It’s a lot easier letting the cashier keep the change for that cup-of-Joe or 5 lbs. of ice than explaining why he should trust you to pay him next Tuesday. "I'll gladly pay you on Tuesday..." … [Read more...]
The Taper Stimulus
After months of guessing and mixed signals from the Fed, the so-called “taper” of the quantitative easing program has finally arrived. The market surged yesterday because the Fed’s taper was taper-lite. The Fed announced that the QE program would only be drawn down by $10 billion a month at each FOMC meeting next year ($5 billion fewer in treasuries and $5 billion fewer in MBS). This means the Fed will still be buying at least $500 billion worth of bonds next year. Then the Fed said that it would keep rates at between 0% and 0.25% until the unemployment rate drops below 6.5%, but it doesn’t … [Read more...]
Americans Still Drowning in Mortgage Debt
The good news is, the Fed’s money printing has generated enough growth in real estate prices that during the third quarter 800,000 homes regained positive equity. That means, the home’s market value grew larger than its mortgage. But that still leaves 6.4 million households underwater. And of those homes whose values are above their mortgage balance, nearly 10 million are what’s known as “under equitied,” better understood as having less than 20% equity value. The housing market is coming back to be sure, but those artificial gains are at risk. You see, the Fed has added trillions in … [Read more...]
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