Although there are still a good solid two and half months left this year, the big stories in my mind are set: the horrible performance of US small cap stocks (overseas small stocks are mildly worse than overseas large) and the meaningful drop in US Treasury bond yields. Back in May, I wrote that the Treasury bond market was a bit of a mystery because yields were falling, which is… Read More
At this point, the S&P 500 is still positive for the year, unlike all of the other (smaller) US asset classes or developed markets overseas, which are all down. Emerging markets and REITs are also up this year, but emerging markets are recovering from a loss of -3.86 percent last year and REITs are benefitting from the surprise drop in interest rates. When we think about asset class results, like… Read More
A little before my time, comedian George Carlin did a bit called ‘seven dirty words’ that were unsuitable for television. Although the words are fairly commonplace now, I’m glad that the networks and basic cable keep them off of the air until my kids are in bed. Finance has a few dirty words as well, but unlike Carlin’s list, I can use them here to describe how we mostly, but… Read More
When I drove out for lunch yesterday, the selloff caused me to switch from my regular setting on the dial, St. Louis Public Radio, in favor of CNBC via satellite radio. What a mistake! I wish that I had stayed with the calm, reassuring (though non-market) related discussion on public radio because by the time I got back from lunch, the CNBC anchors has scared the dickens out of me…. Read More
Unlike most central banks, the Federal Reserve has what is known as a dual mandate: to foster full employment and stable prices. Generally speaking, doves are thought to focus more on full employment at the expense of inflation and, theoretically, hawks are more willing to accept higher unemployment for the sake of stable prices. Of course, in reality, everyone is in the middle somewhere, since no one wants high unemployment… Read More
Last week, I wrote that REITs and TIPs are relatively pedestrian ‘alternatives’ because they are so commonly used. TIPS, which stands for Treasury Inflation Protected Security, are issued by the government – how could they be alternative? What could be more mainstream than a bond issued by the government? Back in August, I did a write up on REITs and they really are different from traditional stocks and bonds, and… Read More
I visit Morningstar’s home page almost every day. I love their data and like about one-third of their qualitative written commentaries. Despite being a daily visitor, I noticed for the first time yesterday a ‘Chart of the Week’ and decided to check it out. Since I was unable to get a copy of the image, I strongly urge you to click here to check out the chart yourself. Essentially, the… Read More
Last year, Fidelity Investments did a study called the College Savings Indicator to measure how families deal with college costs. They found that 26 percent of parents will pay for all college costs, four percent will not pay for any college costs and the remaining 70 percent plan on paying a portion of college costs. In short, college is still a high priority. On average, these families expect to pay… Read More
Every investment strategy requires patience. Let’s say, for example, that you believe, as we do, that small cap stocks tend to outperform large cap stocks over time. You’ve got the empirical data going back to 1926 that clearly shows, with statistical significance, that small stocks outperform large ones. Small stocks are more volatile than large stocks, but that fits elegantly with the theory that to earn a higher return, you… Read More
Back in February, I wrote that the stock market was overvalued and cited metrics like the Shiller PE ratio and Tobin’s Q that show the market is high relative to history. At the time, I concluded by saying that timing the market is notoriously difficult, so pick your stock/bond allocation and stick with it through thick and thin. (Click here for the article) A few people called or emailed back… Read More
