Gallup recently released data from a survey of over 1,000 U.S. investors where findings reported more than half of polled investors have not ruled out the possibility of moving out of stocks if interest rates rise.
Survey respondents also largely believe the U.S. economy will see rising interest rates in the near future, and the vast majority believes this increase in rates will be modest.
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Following up on a theme we’ve discussed before about certain people having access to trading options that you—the retail investor—do not, we figured we’d talk today about the Securities and Exchange Commission and its approved practice of insider trading among its employees.
You see, at the SEC, insider trading is not only allowed; it’s required.
While there is no doubting the last couple of years have been really great years for the stock market (if you think of it in terms of the growth over the year, rather than growth from many years past), but we’d like to take a moment and think of things a tad longer term.
But keeping with our traditional habit of raining on parades, we wanted to take a moment to point out that not all that glitters is necessarily gold. We’ve talked before about where the Dow Jones Industrial Average would need to be in order to have achieved an 8% per year rate of return since 2000, and figured it was about time that we updated those numbers.
The answer:
Stock Market Corrections are a fact of life in a our economy. There are several theories that seek to explain this phenomenon, and I personally like to think it’s a result of our warped implementation of market economics, but what do I know?
Lately certain members of the press have been buzzing a bit about the stock market and whether or not it’s headed for a decline. Will 2014 be the year to kiss your post 2008 gains good bye?
Hmmmmm?
Earlier this month, Gallup released data it collects concerning stock ownership in the United States. The data show that stock ownership among Americans is at its lowest point since Gallup began tracking the data in 1998 with just 52% of American’s surveyed claiming to either directly or indirectly own stock in a public company.
Historical data from Gallup shows us that American stock ownership peaked around 2007 at 65% reporting direct or indirect ownership in stocks, and this percentage has been on a consistent decline since. Not surprisingly the sharpest declines in ownership took place during throughout 2008, but somewhat counter-intuitively—or at least that’s what some experts would have you believe, the trend continued in the same direction despite what has become a pretty good market rally since the 2008 fallout.
Is this a sign that it’s time to get back in?
First, I guess I should define value investing. The best thing I can really do is to let you know from the beginning that I believe that being a value investor is much more of an investment style than it is an adherence to any one set of strict criteria.
That being said, there are some basics tenets that are universally agreed to in regards to value investing.
We've heard a lot recently about the fiscal cliff and the second dip, so recently I decided to spend a weekend reviewing stock market charts. Some of you might remember this guy from last year. Consider this part two.
Bill Gross of PIMCO, the authority on bonds (or so they say) announced earlier this month that the days of investing in equities for the long run (you know the sales slogan of Merrill Lynch, Morgan Stanley, Edward Jones, and company) is over.
Now, does it surprise us that the head of the the largest bond fund in the world is suggesting stocks are toast insofar as they are a long term investment/savings strategy? Does it surprise you that a blog dedicated (at least in part) to alternative asset classes would be talking about it? Now that we have everyone's self interest out of the way, lets get into what's interesting about Bill Gross' comments in his proclamation.
Let's start with a brief discussion of modern portfolio theory (MPT) just to make sure we're all on the same page. To avoid a less than exciting academic foray into MPT, I'll provide a basic definition.
Basically, the theory is that individual investment (a particular asset i.e. stock or bond) selection should not be chosen on their own merits. What's more important is how each asset's price moves relative to all the other investments in a portfolio. Harry Markowitz was the first to articulate this concept back in 1952.
I've been known to quote stock market returns from a Compound Annual Growth Rate (geometric mean) point of view. This calculation takes into account the effect time has on a rate of return and is wildly more useful than simply looking at average rate of return (usually quoted as the arithmetic mean).
But any good hardcore day trader or even the wannabe home gamers in the investment world should quickly ask a disarming question: “so what?” So the markets have traditionally failed miserably to consistently post a year over year positive return over the course of the past decade. There are still people who make money investing in equities, even your precious insurance companies.
And you know what? They are correct.
