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The "Uncle Drew" Stock Market
Headline stock indexes (S&P 500, Dow, Nasdaq) continue to trade near all-time highs, and sport gaudy 5-year returns. These indexes have averaged more than 15% a year each since this time in 2010. The problem is, some investors think this is a reflection of the entire investment universe. Far from it.
The Fed will Strike Out
It has been said that the most difficult thing to do in sports is to hit a Major League fastball. A small object coming toward you at 95 miles per hour, with the potential to dart down, sideways or toward your skull is certainly a skill that few can master. And many excellent athletes train all their lives, reach the Major Leagues and find out even they can’t do it. And as that sport gets more scientific, strikeout rates are rising at an alarming rate. More complexity is being thrown toward hitters and even the best in the business find it more difficult than their predecessors.
Two Job Markets
We have written in the past about U-6, which in addition to being a very large shrimp (it’s a code that means 6 shrimp to a pound), is one of the government’s measures of unemployment. Specifically, it includes not only the traditional definition of unemployed (which the government calls U-3) but also those who are working but “under-employed." These may be people who are working multiple jobs, taking jobs that are below their level of experience, or those who have been unemployed for a long time. None of these people are included in the “headline” employment figures you hear about o
Stuck in Neutral
We see emphasis on “neutrality” in outlook in several of the indicators we follow at Sungarden, including our Sungarden® Stock Scoring System. From a fundamental and technical standpoint, we see fewer screaming long-term buys than we have in some time, yet we also don’t see too many situations that signal pending disaster.
We're Having "Flation"
We decided to look back at the last four years and get a sense of what is happening with prices. And, like so many investment discussions these days, our conclusions are not uniform. In the case of consumer prices, we are having inflation, disinflation depending on which major component of the CPI you watch. Conclusion: just as the broad stock market can have many underlying sub-trends within it, so too can that be the case for consumer prices. “Flation” – it is everywhere and of all three types in today’s consumer world.
Anatomy of a Down Market
As with all professional investors, we have an opinion about where the market is going, over the next few months and years, and even longer. Such forecasts do not contribute meaningfully to the investment decisions we make at Sungarden. Rather, our investment committee tries to focus on what is right in front of us. Instead of investing for a specific outcome, we gauge the possibilities, evaluate the tradeoff between reward and risk, and plan for anything.
The Super Bowl of Investing
Here is our list of official National Football League penalties — as applied to investors. Don’t get penalized, think your way through today’s environment, or find a money management specialist who can.
A Market Forecast We Can Believe In
When Leuthold makes a major forecast, we pay close attention. And in their January Green Book, they said they see the U.S. stock market beginning a ?topping process? which started last July. They believe that this will ultimately take U.S. stocks down by 25-30% in either 2015 or 2016. Leuthold points to symptoms such as a weak high yield bond market, lagging relative performance of the NYSE Composite Index (which was the focus of our 11/28/14 blog), and very bullish newsletter writers.
Oil Prices... A Metaphor for an Investment Process
Energy is an essential part of the global economy. There are companies that drill for oil or natural gas, those that process and refine it into products and others that transport and sell those products (e.g. gas stations). These businesses are all impacted by the price, supply and demand environment surrounding energy. Lately, they have nearly all been losing investments.
Rounding Third and Heading for Where?
These past few weeks, with the year winding down and investment strategy decisions to think about (always), I spent a lot of time with my research team analyzing historical stock market index data as far back as 1871. First conclusion: I am sick and tired of analyzing historical stock market index data! We did this to see what todays investor might learn from market history.
Sungarden's 2015 Investor Preview
2014 is nearly behind us. And since we tend to not want to do things the way the Wall Street herd does, our 2015 outlook is formatted this way: we list a group of potential scenarios, and then assign our best guess probability that they will happen next year. This is about considering the possibilities, not making outright predictions.
2014 In Review: A Good Year to Avoid Performance Envy
2014 has been an odd year in many ways. Easy money has continued to be the rule for central governments across the world, and this has created false sense of security that is going on six years (following the end of the financial crisis-induced stock market decline that ended in March, 2009). To us, it was a year of waiting: for an end to the suppression of interest rates to aid retirees, for the U.S. Congress to do something productive, and for investors to start taking risk more seriously and stop falling for Wall Street come-ons.
Bulls, Bears and Pigs
So, the global stock markets have your attention. Whether you are focused on declining economic prospects in Europe, Emerging Markets weakness or the recent slide in the U.S. stock market, we are all forced to contemplate something that may now be driving up beside us, not merely in the rear-view mirrora stock bear market.
Revisiting a YouTube Classic
Back in the summer of 2011, a short animated film was built using a website called XtraNormal. The site allows anyone to create a film and chose animated characters and voices. This one particular film sought to educate (with the creators strong opinions included) the audience on the Federal Reserves Quantitative Easing (QE) program, which then was in its middle stages. And boy, did it find an audience, with over 5 million people viewing it!
The "Other" Problem for Bond Investors
For a while now, my firm and I have been devout in alerting our clients and blog subscribers to the issues that will confront them as investors if/when the more than three decades of generally falling U.S. interest rates reverses itself. But what if they dont rise much for a while, and instead stay around where they are?
Where You Finish Could Depend on Where You Start
It helps to be aware of the many possible outcomes and adjust your strategy to sync with the current record price highs in this popular market benchmark. Doing so can help you be more successful, regardless of what the next five years may bring. In this sense, it is not where you finish, its where you start.
The Investing Evolution: How We Got Here
One of the main themes of the Schwab Impact conference was the urgency the industry feels to go beyond traditional asset allocation. I could not agree more with that concept. But as for the execution of it, I see what I have seen so many times beforea good idea to help investors, which the industry then bludgeons to death with complexity, excessive fees and a bunch of me-too products. I will devote much more space in this blog to this in the coming weeks and months.
Point and Go Figure
I will admit that Point and Figure (P&F) charting is not something I have spent years studying. I do know that according to Investopedia and other sources I have read recently, it is gaining followers. P&F charts tend to be longer-term in their view, and they project and name an actual price target for the stock or index you are tracking.
Where Are We? A Psychological View
When markets get temporarily unruly as they have recently, it tends to drive folks like us to go back and prove to ourselves once again that each and every part of our existing portfolios (the stocks and the hedge positions we own) is as valid to us as it was when we bought it. And, with many stocks on our watch list getting closer to being viable additions to the mix as their prices drop, we are essentially scouring our investable universe to see if we can either improve our upside potential, strengthen our defenses, or both. It is a rigorous process, always.
Investing is Like a Baseball Season (Not a Football Season)
Rather than try to out-guess the market's trader element, we prefer to act consistent with what our objectives are for each strategy. Avoiding the big loss is a prime part of that. Tracking bounce days when market activity is getting increasingly concerning to us is not. Boring? Yes. Effective at keeping our clients retired? We think so.
Much Ado About 0.60%
Since 1962, the Dow has had a daily change of at least 0.60% over 45% of the time! (Ycharts.com 2014) There are 251 U.S. market trading days a year. This means that on average, about 113 trading days a year result in the Dow changing by 100 points or more, in current terms. Enough said. So, let's focus on what is really news. When market volatility truly returns, it will be like U.S. Justice Potter Stewart famously said about pornography (paraphrasing): you'll know it when you see it.
The Elephant Leaves the Room
The news was greeted with shock by some, while others wondered what took so long. In perhaps the first of many shoes to drop on the hedge fund industry, the largest U.S. pension fund, Calpers announced it will sell all of its hedge fund investments within 12 months. Media stories on this announcement were quick to cite lagging performance of these funds over the past year, but it appears Calpers was more concerned with the level of fees and lack of transparencythat is, they did not know what the heck was going on inside of many of the funds.
Investors have heard about record highs in the stock market for months now. Headline indices like the S&P 500 and the Dow 30 broke their record highs this summer, and are still quite close to them. But what about the other indices? According to a recent Bloomberg article, About 47% of stocks in the Nasdaq Composite Index are down at least 20% from their peak in the last 12 months while more than 40% have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. Some will refer to this as a two-tiered market. We prefer to call it "bad breadth."
Anarchy in the U.K.
This weeks blog borrows its title from one of the early anthems of the 1970s Punk Rock era. At a time when terrorism dominates the global newswire, another part of the world is erupting in what could become a market-moving chain of events. This is accompanied by an atmosphere that can appropriately be described as vicious (Baby Boomer alternative music buffs from their college days hopefully get the pun there).
Roll Em if Youve Got Em
Investors and their advisors have eased into the perceived comfort of evaluating investment results over standard, fixed time periods, such as year-to-date or the past 1-3-5 years. These are all valid time periods to review, but I dont think they are enough.
This week, the S&P 500 stock index crossed the 2,000 mark for the first time (this figure and other historical returns referred to in this article do not include dividends). Round numbers always get the medias attention, so avid market-watchers already know this. But why? Why, just six years after the financial world seemed to be ending, are we celebrating a milestone that at that point seemed a generation away?
7 Phrases Investment Professionals Should Never Say
Robert Isbitts posted: "As a big Robin Williams fan, this was a tough week. Ironically, before this comedic genius's shocking death on Monday, my team and I planned for this week's blog to be a parody of the work of another comedian taken from us too soon, George Carlin.
Index funds beat active 90% of the time. Really?
My last article suggested six ways in which retired and retiring investors may be lulling themselves into a false sense of comfort. They do this by adhering to ideals that were originally postulated many years ago, and which today still have some merit. But theyve become clichs to a point where their foundation is no longer questioned when it needs to be. They are myths which need to be busted
WIMPY Implications of Massive Government Stimulus
The question we have is how are we going to pay for all of this borrowed money? If you are the government and own the Mint, you can print more money. That pays your debts but devalues your currency, so you replace one problem with another. When you hear that the Fed is "pumping liquidity into the system" there is a good reason - they are the only ones left who can. The consumers financial condition is again fading into treacherous territory.
Red Shoots - Today's Top Investor Concerns (Also Known as the Investors "Dirty Dozen")
A while back, we published a list that we continually update at Sungarden. We call them Red Shoots. They are essentially the opposite of a set of conditions which gave investors hope that not all was lost, in the throes of the financial crisis of 2008. Those reasons for optimism were called Green Shoots, like a patch of short green grass about to show up on the dirt area you will one day call your lawn. Red Shoots are the opposite: they are the reasons for extreme caution when the market and many investors seem to be forgetting that security prices are not a one-way propositi
Adapt or Perish: The Retirement Financial Decision
Investors should pay very careful attention to how retirement investing has changed versus 10 or 20 years ago, get educated about it and then apply it to their specific situation. Financially-speaking, its a case of adapt or perish.
What Are Your Chances?
Todays blog is an excerpt from our whitepaper, The Sungarden Study which addresses the retirement income crisis, standard solutions, and offers a recommended alternative to traditional approaches. To request a copy of the study, please use the Contact Us tab at www.sungardeninvestment.com .
When volatile markets come around, it is not the actual VIX level that is most important. Understanding of the way the rules of engagement for risk management and return strategies change (and they can change a lot), is the key. The difference between fearing volatile markets and capitalizing on them is, in our opinion, a key element to the long-term success of any investment strategy.
In T-Ball as in Life
I cant help but notice a great number of similarities between peoples approach to their investment portfolios and the way baseball games are played. This is true, even at the T-ball level with four and five year olds, not major leaguers, running around.
Thoughts at Age 50
Today, I reach the half-century mark on this earth. I have spent over half of that time working in the investment management business. Over my more than 90,000 hours in the industry of managing money and caring for investors, I have met thousands of people, read a seemingly infinite amount of research and developed more than a few opinions about both investing (in bold) and life.
“Chasing Tails” How to Play Defense Against a “Market Event”
This is about the time in a market cycle (up for stocks, for several years) that it is prudent to talk not about playing defense, but HOW it is being played. That is, proactively and not reactively.
The Best of the Sungarden Blog - On Its First Birthday
This week marks the first anniversary of our blog, which you can find at www.sungardeninvestment.com. To celebrate, we chose from among the more than 50 blog posts of the past year eight which we believe were the most impactful, based on readership and feedback we have received. We invite you to see what you may have missed or take a fresh look at this tour of Sungardens views. The original post date is noted after each title, and you can simply click on a title to go to it.
"Can You Kick It?" ...and Other Irrelevant Questions
This was on my mind recently as CNBC turned 25 years old. That is a significant achievement no matter how you slice it. Since 1989 the biggest business news network around has transformed the way people participate in the markets. Their hosts have become icons, and they have turned some very bright but anonymous portfolio managers and economists into the business world equivalent of rockstars.
How to not get screwed by the bond bubble
To paraphrase an old Sean Connery/Roger Moore movie: bonds?high quality bonds. Bond funds, too. Bond funds, particularly those that invest in US Treasuries and other types of bonds at the low end of the risk spectrum, have been popular investments with individual investors for a long time. Since a lot of those bond buyers are generally risk-averse, many of them likely moved cash out of money market funds to buy the bond funds, so there is likely a strong element of ?reaching for yield? occurring there. That is, they were used to earning 6-7% on their Treasury Bonds not very long ago.
"The 10 Plagues" of Retirement Investing
Last Tuesday marked the end of the Passover holiday, in which Jews around the world celebrate the exodus from Egypt in biblical times (see the classic movie ?The Ten Commandments? for a visual version of the story). One highlight of the ?Seder? dinner conducted on the first two nights of the holiday is for all gathered to recount a part of the story known as ?The 10 Plagues.? Biblical references aside, it got me thinking about 10 plagues that today?s retired and retiring investors must grapple with. Here they are, sans the Matzoh Ball soup.
Financial Television: Five Things You Need to Know
Whether you are new to the retirement investing mindset, you go back to the days of Rukeyser and Kangas, or are somewhere in between, here is my list of things you will often see when watching financial TV ... and how to separate the reality from the hype and sales pitch.
Risk Tolerance: Defining a Misunderstood Term
First, lets be clear: "Risk" is the possibility that you will need money but dont have it, either because your portfolios value plunged, because your investments dont have near-term liquidity, or both. What freaks investors out in the here-and-now, is VOLATILITY. Yet many traditional approaches to building a portfolio dont really take this into account, other than a token survey question or two when the client is first starting to invest.
Do You Think You Can Be Effective in Market Forecasting?
It is important to understand that no one can predict the future with certainty. Investors should take so-called expert forecasts with a grain of salt. Effective portfolio management is not about forecasting the future and then clinging to that forecast. It?s about continuously evaluating information and market conditions and then making adjustments when necessary to pursue the ultimate goal. To paraphrase long time market watcher Steve Leuthold, ?Predictions are for show, our decisions within the portfolio are for dough.?
Are You Being Advised or Sold To?
Independent advisors come in all shapes and sizes the ones who get it treat the client as a teammate, not an opponent, and see their role as being the clients advocate, representative, and interpreter, within an increasingly complex investment world. Shortcuts and overkill by Wall Street ?rms increase the chance of the clients later feeling fooled, and feeling like a fool. Independent ?rms will continue to be the winners in that battle for the clients affections because they are far less likely to allow that to happen.
The Two-Minute Portfolio Manager
Its a short attention span world, and while we often wax poetic about investment topics we feel passionate about, today we will summarize our world markets view in less than the time it takes to heat up the dinner your family ate two hours ago (a scenario most familiar to this writer).
Results 1–50 of 100 found.