We may not be happy with the slow and choppy recovery from the 2008 financial crisis, but I think we would all agree that we can thank our lucky stars that we aren’t suffering like the Greeks. The definition of an economic depression isn’t precise, but I think we can all agree that Greece is mired in a horrible depression: the economy is almost 30 percent smaller on an inflation… Read More
For the most part, the returns associated with foreign stocks and bonds have two components: the return of the stock or bond and, secondly, the return of the foreign currency. Over the past eight months, the impact of the exchange rate has been unusually high. For example, a German investor that owns an index fund in the DAX is up 24.04 percent so far this year through yesterday. For… Read More
ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: At Least We Aren’t Europe Bond of The Day – When Does 2% ≠ 2%? More Problems… Read More
I’m a big fan of Jack Bogle and Vanguard, so I was interested to see that Vanguard has made some fairly substantial changes to their Target Date Funds (TDFs). A TDF is a mutual fund that is designed for working people who know roughly when they will retire. For example, if I want to retire at 67 when my Social Security payments begin, I would buy a 2040 TDF. As… Read More
After years of stalling, the European Central Bank (ECB) finally launched a meaningful quantitative easing (QE), or bond-buying program. ECB President Mario Draghi announced that the ECU will buy €60 billion, which at today’s rate is roughly equivalent to $69 billion dollars. The program will begin in March and is expected to last through at least September 2016, which means that the ECB is expected to spend close to €1… Read More
The good news is that the S&P 500 is up almost 14 percent this year through yesterday. The bad news is that no other equity asset class is doing nearly as well. Most clients that I’ve been talking to understand why we diversify, but a few of them have said something along these lines: ‘Dave, I hear what you’re saying and you’re probably right, but shouldn’t we do something different?… Read More
With a lot of focus being put on the coming end to the Federal Reserve’s quantitative easing campaign, this article will delve into some of the other factors impacting interest rates in the US. The Federal Open Market Committee (FOMC) has maintained a steady course ever since Chairman Bernanke first hinted at the end of quantitative easing in the spring of 2013. The “Taper” which is scheduled to complete this… Read More
ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: What if You Called The Market Perfectly? The Impact of Fed Tightening Why Aren’t Interest Rates Higher?
Last week, when the S&P 500 closed over the 2,000 mark for the first time, I wrote that the US large cap stocks are on the expensive side, especially if you use one of my preferred metrics, the Shiller PE ratio (a refresher on the Shiller PE ratio can be found here). Over the weekend, I received an email alert from a research firm that I respected and it ranked… Read More
Legendary investor Peter Lynch once said that if you spend 13 minutes per year on economics, you’ve wasted 10 minutes. Although I spend more than three minutes per year looking at economic data, I do tend to look a lot less than others in the industry. Many years ago, I saw a study that showed that the connection between gross domestic product (GDP) and stock market returns were lowly correlated,… Read More
