Investor Behavior & Psychology

Experts Get the Gold Market Wrong (again)

Two questions: How wrong have experts been about the gold market this year? And how much money has their bad advice cost people? Let’s tackle the first question, by extracting and analyzing some recent headlines: “Gold Miners Fail to Launch” – Forbes, 5/14/14 “Gold Vulnerable to Manipulative Selloff in June” – Max Keiser, 5/30/14 “Why …

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How to Improve Your Investment Performance by Playing Defense

“The best defense is a good offense.” That axiom has been applied in a broad array of fields including politics, sports, and the military. The 1985 Chicago Bears are still regarded as one of the NFL’s best defensive teams ever. Not only did they lead the league in defenses that score, but the Bears defensive …

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Ocean Waves

Bull Market in Borrowing: Corporate Debt Skyrockets to $9.6 Trillion

How healthy are corporate balance sheets? It depends who you ask. One news outlet said that U.S. firms are hoarding a record $1.6 trillion in cash led by Apple, Google, and Microsoft. Shockingly, that same report made no mention of corporate debt levels, which are also at all-time records. During the previous 2009 recession high, …

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Don’t Make These Widespread Mutual Fund Mistakes!

“People should only buy mutual funds with experienced portfolio managers that have good long-term track records.” “Investing in highly rated mutual funds with at least 4 or 5 stars is a sure-fire way to choose the best fund.” “Our firm screens thousands of mutual funds to help our clients find funds and managers that have …

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Gold and Silver Bars

How to Print Money in the Psychotic Gold Market

The gold market is the epitome of human psychosis.* On one hand, there’s the anti-gold camp that have utter disdain for precious metals 24 hours a day, eight days a week. On the other hand, there are the survivalist types, general goldbugs, and anti-Fed clan who live, breath, and eat gold at any price. Together, …

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Boxer Vintage Mecca Card

Don’t Let the ‘Great Yield Slide’ Punch You in the Nose

At the beginning of the year, the yield on 10-Year U.S. Treasuries was just shy of 3% and appeared ready for takeoff into the stratosphere. Alas, the long-awaited period of runaway interest rates had arrived! The something weird happened. U.S. Treasury yields (ChicagoOptions:^TNX)– like a schizophrenic mad scientist straight out of the movies – suddenly …

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Portfolio diversification

Should You Be 100% Invested in Stocks?

Investors should have 100% of their money invested in stocks! That’s what Laurence Fink, the chief executive officer at BlackRock declared in 2012. Since then, the S&P 500 (NYSEARCA:IVV) has broken above record levels and is now 43% higher compared to a -1.4% loss for the total U.S. bond market (NYSEARCA:BND). While Fink’s advice looks smart …

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Gambling Roulette

What Does a Professional Gambler’s Investment Portfolio Look Like?

I’ve always wondered what a professional gambler’s portfolio would look like. Would it be a broadly diversified portfolio of penny stocks with a Kenny Rogers box set and a shot of whiskey to boot? Or perhaps, it would contain none of these worldly possessions. How would a gambler invest his or her winnings? I recently …

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Industry Sectors

3 Industry Sectors Vital to the Stock Market’s Health

Performance divergences, especially in key industry sectors, are either supportive or non-supportive of the broader stock market’s move. Although the S&P 500 (SNP:^GSPC) and Dow Jones Industrial Average (NYSEARCA:DIA) have notched new highs this year, small cap stock ETFs linked to the Russell 2000 (NYSEARCA:IWM) and S&P SmallCap 600 (NYSEARCA:IJR) continue to lag. The fact …

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Falling Bricks

A $725,000 Portfolio on Shaky Ground

Having a six or seven figure sized investment portfolio doesn’t automatically make it smart. Such is the case with a $725,000 investment portfolio that I recently graded. An investment Portfolio Report Card request was made to me by a mid-40s software engineer who described himself as an “aggressive investor.” Software is a pretty aggressive business and …

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2 Times When Diversification Becomes Di-Worsification

Diversifying your investment portfolio: It’s a dull exercise that people repeatedly hear, yet a chore they execute with consistent imprecision. Are there times when diversification can actually become “Di-Worsification”? Variety is the Secret Diversification boils down to spreading your investment risk across multiple asset classes. It works because of something called “covariance,” which basically means …

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Why Do So Many Investors Self-Destruct?

“The investor’s chief problem—and even his worst enemy—is likely to be himself,” once quipped the great Benjamin Graham. The truth of Graham’s observation is seen in the consistent pattern of mutual fund investors to self-destruct. AUDIO: Listen to Ron DeLegge @ The Index Investing Show Over the past 30 years, the typical stock mutual fund investor’s performance has …

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Boxer Vintage Mecca Card

How to Beat the Low Yield Cycle

How would you like an 11% cut to your paycheck? That’s exactly what’s happened to income investors who own long-term Treasuries (ChicagoOptions:^TYX). At the beginning of the year, 30-year U.S. Treasury yields (NYSEARCA:TLT) were above 3.90% but have trended lower. That’s not what income investors who piled into long-term Treasuries were expecting. Their plan was to capture more …

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BBQ Grill 2

Treasury Bonds Sizzle, High Tech Fizzles

What do you get when you add up Twitter, Yelp, and Weibo? Answer: Deflation. That’s the latest joke as former high-flying tech stocks fizzle, while Treasury bonds sizzle. Over the past several weeks we’ve seen a major shift in the market’s psychology away from risky equity bets. And as these high risk/high beta equity segments …

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Ocean Waves

Is Stock Market Volatility Increasing?

Is stock market volatility rising or falling? For most of this year, stock market volatility has actually outperformed the stock market itself. But for whatever reason, it’s an unpopular narrative that’s been and continues to be ignored by the mainstream media. The chart below illustrates the relationship between stocks and volatility in 2014. You’ll notice how the S&P …

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Corporate America’s Late Cycle Behavior

The pace of U.S. merger and acquisition (M&A) activity has erupted. Bankers and lawyers love it because it gives them work. And investors of the targeted companies love it so long as the buyout premium hovers between juicy and ridiculous. What does the velocity of M&A deals tell us about the state of the stock market? During the …

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Baron Rothschild

What Would Baron Rothschild Say about Russian Stocks?

Russia is in deep trouble. Never mind that it’s on the brink of full-blown war with Ukraine. International sanctions were just imposed against 17 companies with close ties to President Vladmir Putin, and even more severe penalties are in the works. A poll of economists by a large media enterprise* found that Russia faces a …

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Financial Geek

Stock Prices Are Cheap! Valuation Geeks Get it Wrong Again

“Stocks are cheap by historical standards” is the latest fiction being promoted by valuation geeks. Is it true? Meb Faber, proprietor of the Cambria Global Value ETF (NYSEARCA:GVAL), and a valuation guru tweeted the 5-year CAPE ratio for the usually frothy technology sector (NYSEARCA:XLK) is just 22 today compared to an elevated 96 at the height …

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