August 2016

Due Diligence, News August 26, 2016

He Called It

He called 5 market crashes and now has three more dates for you to worry about.  Technical analyst Sandy Jadeja is predicting financial devastation on three dates.  Well, now that I read the article, he doesn’t really say that at all, only that there will be sharp market movements in the future.  He names three dates, but doesn’t really attach any importance to them, only saying to “watch” them.  I hope this sounds fishy to you because this sounds shady as hell to me.  So I did some digging. Who is this guy?  Google Sandy Jadeja and you don’t really find much other than the recent Business Insider articles written about him.  I couldn’t find any education credentials, but I found a video of him speaking with a British accent so he’s probably really smart.  They don’t hand out those accents to just anyone. How does he make these predictions?…

Investing, News August 18, 2016

Fed Minutes

On Wednesday, the Federal Reserve released the minutes from its latest meeting.  The minutes of these meetings are basically a form letter now with the Fed relaying its thoughts on the economy and rates via tweaks in the vocabulary used.  Changing “modestly strong” to “strong” can move markets.  There is a cottage industry of folks who live to parse the Fed minutes.  There are hedge funds using computer algorithms to receive, read, and trade on the Fed minutes faster than it takes you to hit reload on the Federal Reserve’s website.  They are obviously a big deal. Here’s what the Fed minutes mean to you: Nothing. Should you be scrambling to reposition your portfolio ahead of the next Fed meeting?  No.  Should you be scrambling to reposition your portfolio in reaction to a Fed meeting?  No. The great Federal Reserve word hunt is the latest in a long line of…

Due Diligence, Investing August 8, 2016

The Tyranny of the Calendar

We are all beholden to the tyranny of the calendar.  Monthly or quarterly account statements tie a nice bow on a period of time, but can lend false significance to a time period’s returns. If you’ve got a brokerage account or 401(k), you probably got a statement ending on 6/30/2016.  As of the quarter end, the S&P 500 was up 3.99% over the past 12 months and 12.09% annualized over the past 5 years (77.02% cumulative). What if we look at the same performance, but ending a month later on 7/31/2016?  As of the end of July, the S&P 500 was up 5.61% over the previous 12 months and 13.37% over the past 5 years (87.36% cumulative).  What a difference a month can make! If statements were cut on 8/5/2016 we’d see an even bigger leap.  As of Friday, the S&P 500 was up 6.29% over the last 12 months and 15.18% over the past 5 years…

News August 5, 2016

Stripped

It’s been five years since the United States was stripped of its AAA credit rating by Standard and Poors.  Reports of the downgrade were filled with an array of worst case scenarios. There was worry that this would push up borrowing costs.  The 10-year was at 2.33% in 2011.  It is 1.56% today. There was worry that foreign debt buyers would sell US debt en mass.  Instead, we’ve seen a flight to safety as the world continues to snap up US Treasury securities.  At 1.5%-ish, our 10-year is one of the highest yielding government securities as Germany, Japan, and Switzerland flirt with negative rates. The ten year Treasury is a financial standard, often used as the basis for a hypothetical risk-free rate in financial models.  Downgrading the foundation of these models was a very big deal.  However, the S&P 500 is up over 100% since the downgrade, including dividends.  Think about that…

News August 2, 2016

Fire hose

My last post was about uncertainty and volatility and how even in a low vol environment like today, marketers will magnify feelings of uncertainty to sell the product of the month.  Regardless of the statistical fact that volatility is historically low, we as humans seem to be as pessimistic as ever about the future. It is not uncommon to feel reluctance to implement a financial plan due to fears about what’s happening in the world right now.  It is easier to say we’ll wait until the world is less scary before putting money to work.  So when was the world less scary?  30 years ago when the threat of nuclear war was a legitimate concern?  20 years ago when the internet was certain to destroy brick and mortar stores?  10 years ago when the Middle East was in turmoil (ok, turmoil is the only constant in that region)?  There has…