NewsLetter - February 2017
THERE’S NO WAY
…I could not lead with this story. I’m so proud that I’m bursting at the seams, and have to share it far and wide. On March 8, Deena, my partner, wife, best friend, and besherta, will be honored with the Alexandra Armstrong Award that “celebrates pioneers in the field of financial planning. It recognizes women who have had long careers as advisers, a track record of leadership in the profession and/or at charitable organizations, and a demonstrated commitment to service as a role model or mentor to other women. It also acknowledges women who have earned the admiration and respect of their peers.”
As my regular readers know, I love quoting gurus. Here’s an item from Fortune.com:
DOW COULD HAVE ITS WORST DAY IN HISTORY, BY FAR
If Donald Trump wins the election, kiss your 401(k) goodbye.
That’s the prediction of the world’s largest hedge fund.
Bridgewater Associates sent out a note to its clients predicting that the Dow Jones Industrial Average could plunge nearly 2,000 points in one day if Trump is elected president. That would be the biggest one-day slump in stock market history by more than double, besting the 777-point plunge that happened on October 29, 2008, at the height of the panic surrounding the financial crisis. The drop would translate into a 10.4% dive, and immediately send the stock market into correction territory.
With about $150 billion under management and 1,700 employees, Bridgewater is one of the world’s largest macro hedge funds.
DON’T CONFUSE CERTAINTY WITH SAFETY
POPULAR LONG-DATED BOND ETF SUFFERS WORST WEEKLY LOSS EVER
Nov. 11, from Seeking Alpha:
“The bond market was closed today for Veteran's Day, but the iShares 20+ Year Treasury Bond ETF was open for business and it fell another 0.6%, bringing its loss this week to 7.4% — the largest weekly decline since inception in 2002.”
SAME SONG, SECOND VERSE
From recent headlines….
- Deutsche Bank to Pay $7.2B for Misleading Investors
- SEC Fines Morgan Stanley $13M for Overcharging Clients. About 149,000 clients paid excess fees, the regulator says.
CHECK IT OUT
A bunch of short articles based on material from Hello Harold:
- American Association of Individual Investors
CONSUMER FEDERATION OF AMERICA
REPORT: REVIEW OF 25 MAJOR BROKERAGE FIRMS AND INSURANCE COMPANIES FIND ALL POSING AS FIDUCIARIES, MISLEADING CONSUMERS
Twenty-five top U.S. brokerage firms and insurance companies present their employees as trusted financial advisors putting client interests first even as their lobbyists argue in court that they are nothing more than commission-driven salespeople, according to a major new report from the Consumer Federation of America (CFA) and Americans for Financial Reform (AFR). The report also dissects how brokerage firms and insurance companies are systematically misleading unwary consumers.
MORE GURUS — MARKET TIMING STRIKES AGAIN
Four Days Before the Election
Three Days Before the Election The Day After the Election
The Day After the Election
The End of the Week After the Election
— Breaking News: Dow rose 5.4% for the week, ending at a new record. Retailers, construction firms, and banks had the biggest gains. http://cnnmon.ie/bkgnews
COOL TIP & GOOD ADVICE
FOR MY FOOTBALL READERS
From my friend Peter:
- “The man who complains about the way the ball bounces is likely to be the one who dropped it.” – Lou Holtz / Arkansas – Notre Dame
- “When you win, nothing hurts.” – Joe Namath / Alabama
- “A school without football is in danger of deteriorating into a medieval study hall.” – Frank Leahy / Notre Dame
- “In Alabama, an atheist is someone who doesn’t believe in Bear Bryant.” – Wally Butts / Georgia
- “I could have been a Rhodes Scholar except for my grades.” – Duffy Daugherty / Michigan State
- “Always remember Goliath was a 40- point favorite over David.” – Shug Jordan / Auburn
- “If lessons are learned in defeat, our team is getting a great education.” – Murray Warmath / Minnesota “We didn’t tackle well today, but we made up for it by not blocking.” – John McKay / USC
- “I’ve found that prayers work best when you have big players.” – Knute Rockne / Notre Dame
- Ohio State‘s Urban Meyer on one of his players: “He doesn’t know the meaning of the word fear. In fact, I just saw his grades and he doesn’t know the meaning of a lot of words.”
- “Gentlemen, it is better to have died a small boy than to fumble the football.” – John Heisman
- What does the average Alabama player get on his SATs? Drool.
- How many Michigan State freshmen football players does it take to change a light bulb? None. That’s a sophomore course.
- Two Texas A&M football players were walking in the woods. One of them said, “Look, a dead bird.” The other looked up in the sky and asked, “Where?”
From my #1 Son. I believe he had me in mind.
As I was lying around, pondering the problems of the world,
- I realized that at my age I don’t really give a rodent’s posterior any more.
- If walking were good for your health, the postman would be immortal.
- A whale swims all day, only eats fish, only drinks water, but is still fat.
- A rabbit runs and hops and only lives 15 years, while a tortoise doesn’t run and does mostly nothing, yet it lives for 150 years.
- And you tell me to exercise??? I don’t think so.
- Just grant me the senility to forget the people I never liked, the good fortune to remember the ones I do, and the eyesight to tell the difference.
TOO GOOD TO BE TRUE…
It seems some people never learn.
From the Wall Street Journal, “A ‘Ponzi-esque’ Scheme that Came Undone”
“…federal prosecutors filed a criminal indictment alleging that Mr. Nordlicht [Platinum Partners] and others operated perhaps the largest fraud since Bernard L. Madoff’s Ponzi scheme. Authorities estimated that $1 billion from more than 600 Platinum investors may have been swindled…. ‘Platinum Partners held no more value than a tarnished piece of cheap metal,’ Mr. Capers [Brooklyn U.S. Attorney] said.
“Platinum’s collapse caps a stunning fall for a hedge fund that once boasted of one of the most superlative track records in the hedge-fund world. Its main fund reported no down years and virtually no down months.” [my emphasis]
WISE WORDS FROM ONE OF MY FINANCIAL IDOLS
If you’ve not read Charles Ellis’s Winning the Loser’s Game, make a note to get a copy. He has now just published The Index Revolution. His latest is a major wakeup call for those investors who are still trying to beat the professionals (and, on average, don’t). Among other observations, he reminds his readers “the future ain’t what it used to be”*:
- Trading volume on the New York Stock Exchange increased from three million to five billion shares daily over the past 50 years.
- The dollar value of trading in derivatives rose from zero to more than the value of the cash market.
- There are almost one million investors actively trying to find pricing errors – 50 years ago there were 5,000.
- Trading by individuals has been overwhelmed by institutional and high-speed machine trading now representing 98 percent of all trading.
- The 50 most active professionals (half of them hedge funds) do 50 percent of all NYSE-listed stock trading.
Revolution — (https://www.amazon.com/Index-Revolution-Investors-Should-Joinebook/dp/B01LIE5HUE/ref=pd_sim_351_4?_encoding=UTF8&pd_rd_i=B01LIE5HUE&pd_r d_r=SN2NSF377JJQ8JAAJECR&pd_rd_w=sN7h9&pd_rd_wg=U2xUb&psc=1&refRID=SN2 NSF377JJQ8JAAJECR)
*From Wealth Management.
SPEAKING OF EYESIGHT… HINDSIGHT IS 20/20
Ever hear “past returns are no indication of future returns?” It’s good advice. It’s always interesting to look at market returns in hindsight and the last few years are no exception. Here are a few examples:
FINALLY, EVEN MORE TO BE PROUD ABOUT
Hope you enjoyed,
Evensky & Katz / Foldes Financial Wealth Management