I don't care for USA Today's title "Stocks poised for powerful rally?"; you can find just as many articles saying that the recent rally won't last. I do like the chart from the article, it's a good history of the gains have happened in the stock market after past recessions.
Saturday, May 23, 2009
Post-recession rallies
I don't care for USA Today's title "Stocks poised for powerful rally?"; you can find just as many articles saying that the recent rally won't last. I do like the chart from the article, it's a good history of the gains have happened in the stock market after past recessions.
Monday, May 18, 2009
When will the economy be improved?
When will the economy be improved? It's sort of like baseball!
First, credit markets must improve more and yield spreads need to tighten. Currently corporate bond yields compared to treasury yields are the highest since 1932. With rates this high, it's more difficult for companies to make a profit. Another measure is high-yield bond spreads. Currently high-yield bonds trade at 17% above treasuries. Even in the Great Depression, the spreads were not that large.
Second, equity markets need to improve. Stock markets have had much higher than average volatility in the recent past. A bullish indicator is when volatility (VIX) is 20-30. It has been above 30 consistently since September 2008. Last week it was 33.1. In addition, price earnings ratios normally dip into single digits (the current P/E is about 13 to 16 right now) before a bull market takes off. Keep in mind, P/E can decrease because earnings increase or because prices drop.
Third the economy begins to improve. So unemployment decreases instead of increases and the economy grows instead of shrinks.
Feel free to add comments.
First, credit markets must improve more and yield spreads need to tighten. Currently corporate bond yields compared to treasury yields are the highest since 1932. With rates this high, it's more difficult for companies to make a profit. Another measure is high-yield bond spreads. Currently high-yield bonds trade at 17% above treasuries. Even in the Great Depression, the spreads were not that large.
Second, equity markets need to improve. Stock markets have had much higher than average volatility in the recent past. A bullish indicator is when volatility (VIX) is 20-30. It has been above 30 consistently since September 2008. Last week it was 33.1. In addition, price earnings ratios normally dip into single digits (the current P/E is about 13 to 16 right now) before a bull market takes off. Keep in mind, P/E can decrease because earnings increase or because prices drop.
Third the economy begins to improve. So unemployment decreases instead of increases and the economy grows instead of shrinks.
Feel free to add comments.
Friday, May 15, 2009
You Know you are Living in 2009 When ....
1. You accidentally enter your password on the microwave.
2 You haven't played solitaire with real cards in years.
3. You have a list of 15 phone numbers to reach your family of 4.
4. You e-mail the person who works at the desk next to you.
5. Your reason for not staying in touch with friends and family is that they don't have e-mail addresses.
6. You pull up in your own driveway and use your mobile phone to see if anyone is home to help you carry in the shopping.
7 Every commercial on television has a web site at the bottom of the screen.
8. Leaving the house without your mobile, which you didn't have the first 20 or 30 (or 60) years of your life, is now a cause for panic and you turn around to go and get it.
10. You get up in the morning and go on line before getting your coffee.
11. You start tilting your head sideways to smile. : )
12 You're reading this and nodding and laughing.
13. Even worse, you know exactly to whom you are going to forward this list.
14. You are too busy to notice there was no #9 on this list.
15. You actually scrolled back up to check that there wasn't a #9 on this list AND NOW YOU ARE LAUGHING at yourself.
Go on, forward this to your friends. You know you want to.
http://richfp.blogspot.com/
Personally, I am Getting a Life (I hope).
Thanks to Naima for communicating this list to me.
2 You haven't played solitaire with real cards in years.
3. You have a list of 15 phone numbers to reach your family of 4.
4. You e-mail the person who works at the desk next to you.
5. Your reason for not staying in touch with friends and family is that they don't have e-mail addresses.
6. You pull up in your own driveway and use your mobile phone to see if anyone is home to help you carry in the shopping.
7 Every commercial on television has a web site at the bottom of the screen.
8. Leaving the house without your mobile, which you didn't have the first 20 or 30 (or 60) years of your life, is now a cause for panic and you turn around to go and get it.
10. You get up in the morning and go on line before getting your coffee.
11. You start tilting your head sideways to smile. : )
12 You're reading this and nodding and laughing.
13. Even worse, you know exactly to whom you are going to forward this list.
14. You are too busy to notice there was no #9 on this list.
15. You actually scrolled back up to check that there wasn't a #9 on this list AND NOW YOU ARE LAUGHING at yourself.
Go on, forward this to your friends. You know you want to.
http://richfp.blogspot.com/
Personally, I am Getting a Life (I hope).
Thanks to Naima for communicating this list to me.
Now's a Good Time to Reasses Your Finances
Our friends at Bedrock Capital (in Mountain View) are good folks and very similar to ICM - fee only, independent, a small boutique firm.
Their Q2-09 newsletter was interesting this month and worth a read.
http://tinyurl.com/q83hrv
Let me know (via comments), what you think of it.
Their Q2-09 newsletter was interesting this month and worth a read.
http://tinyurl.com/q83hrv
Let me know (via comments), what you think of it.
Wednesday, May 13, 2009
Is Buy and Hold Dead?
You can see this idea expressed in many, many articles these days.
Market Timing: getting in and out of the stock market in order to enhance returns by sidestepping downturns. Depending on the quality of the timing, can produce much higher or much lower than market returns
Buy and Hold: staying in the stock market through thick and thin. Produces market returns less expenses.
Market timing is a very attractive concept but the articles I've seen were disappointing since they had no practical suggestions for when to exit or reenter the stock market. There's a reason for that, it's impossible to do on a consistent basis. In my 37 years of stock market experience, I have not yet found anyone who could consistently time the stock market. Many have tried, all the ones I know of have eventually failed to beat buy and hold returns.
The bottom line for me is that, to borrow a phrase, buy and hold is a terrible form of investing, it's just better than all the others.
There's a lot to say about this important topic. What's your opinion?
More later.
Market Timing: getting in and out of the stock market in order to enhance returns by sidestepping downturns. Depending on the quality of the timing, can produce much higher or much lower than market returns
Buy and Hold: staying in the stock market through thick and thin. Produces market returns less expenses.
Market timing is a very attractive concept but the articles I've seen were disappointing since they had no practical suggestions for when to exit or reenter the stock market. There's a reason for that, it's impossible to do on a consistent basis. In my 37 years of stock market experience, I have not yet found anyone who could consistently time the stock market. Many have tried, all the ones I know of have eventually failed to beat buy and hold returns.
The bottom line for me is that, to borrow a phrase, buy and hold is a terrible form of investing, it's just better than all the others.
There's a lot to say about this important topic. What's your opinion?
More later.
Banding day for peregrine falcons
I don't know if any of you watch any of the peregrine falcon cameras (Google for peregrine cam) but yesterday was banding day in San Francisco. Here's one of the stills from the experience. No, she's not amused by this giant mammal that has invaded to nesting area (on a top floor balcony on the PG&E building).
There are three chicks and they will fledge in about 2 weeks. There is a whole group of volunteers trained to help out if any of the fledglings don't make their first flight to a safe place.
When returns are poor...
Our investment commentary for May 2009 is full of wisdom. Take a look and let me know what you think of it.
http://tinyurl.com/qz3kdw
http://tinyurl.com/qz3kdw
Monday, May 11, 2009
Thursday, May 7, 2009
Build America Bonds
Perhaps you have heard about the Build America Bonds and have wondered if they would work as an investment for you?
Generally they would not, at least not yet. The first reason is that there is no active seconday market (meaning once you buy, selling would be a real issue). The second reason is that these bonds are generally long i.e., the maturity is 20 to 30 years. This is too long for the typical individual investor (10 years is about the maximum you should do).
The good news about these bonds is that they compete with other taxable bonds, corporate bonds in other words, but generally have far less default risk than corporate bonds. So good interest rates with lower default risk.
If a viable secondary market materializes and if shorter maturities are sold, then perhaps Build American Bonds would become attractive for individual investors.
Generally they would not, at least not yet. The first reason is that there is no active seconday market (meaning once you buy, selling would be a real issue). The second reason is that these bonds are generally long i.e., the maturity is 20 to 30 years. This is too long for the typical individual investor (10 years is about the maximum you should do).
The good news about these bonds is that they compete with other taxable bonds, corporate bonds in other words, but generally have far less default risk than corporate bonds. So good interest rates with lower default risk.
If a viable secondary market materializes and if shorter maturities are sold, then perhaps Build American Bonds would become attractive for individual investors.
Tuesday, May 5, 2009
Refinance Now
Now is a great time to refinance. We are paying down our mortgage by about 200k to fit into the high balance conforming category. We are getting a 5.0%, fixed-30, no points loan vs. our current 6% loan. The monthly payment is about $2,000 lower.
Myths of Market Underperformance
My latest MoneyMinute, "Myths of Market Underperformance": http://tinyurl.com/clvkhz, discusses the ways the media misunderstands or distorts long-term returns from the stock market.
Bear Market Discussion
Of all the discussion about the bear market, this is the best. Takes about 30 mins. http://www.dfaus.com/share/whatshou/
Subscribe to:
Posts (Atom)
