Thirty years ago

Thirty years ago this week I was beginning what was then a very novel business model: fee-only, no commissions. I was working at Christopher Weil, Inc, after a few years at E.F. Hutton. The consensus among the veterans was that fee-only could never work. Now it’s the industry standard, and I was present at the beginning. Much to the chagrin of some of my managers, I had moved my clients’ accounts to safer positions because...

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Gone and mostly forgotten.

Ten years ago today, the S&P 500 U.S. stock market index hit its record high before falling about 57% in the Financial Panic of 2008. It recovered in March, 2013. Before the meltdown, there were already major issues in the financial system which were larger and more dramatic than what we are facing today. So is such a meltdown imminent now? If so, I can’t see it. But valuations and debt levels are again high. How...

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60% of a bag full of slow

The stock markets of the world appear to be impervious to every current geopolitical event, including the threat of nuclear terrorism and serial hurricanes, while a growing number of writers are shrieking that the end of the financial world is nigh. (Read the latest apocalyptic broadcast here.) Hmmm. I have my doubts, but there’s a lot of smoke in the air. Conditions being what they are, last week I moved 5% in many clients’ accounts from...

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I think I’ve figured this out.

The more missiles North Korea shoots over Japan without blowing anything up, the more investors think the Federal Reserve is likely to be cautious about raising rates, and thus the more they invest in stock markets. Absurd but there’s a logic to it. As someone said earlier this morning as a joke, perhaps the North Korean dictator has a brokerage account or a hedge fund, and he’s doing his part to boost profits. We are...

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Risk Happens Fast

As last night’s 8.2 magnitude earthquake in Mexico illustrates, risk happens fast. We are now conditioned to three beliefs: things will continue as they are today indefinitely, the Federal Reserve will always save us, and we’ll be able to dodge out of the way. Nine years ago today, that wasn’t the case. One of the largest investment banks, Lehman Brothers, was allowed to go bankrupt and default on its bonds. The stock market fell 25%...

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The stock markets of the world are apparently missile-proof.

Seriously. The North Koreans just shot missiles over Japan and global stock markets shrugged it off. Yet again we learn why we should stay at least partially invested. In the past few decades, central banks have changed the way investors perceive risk. Most people think now that central banks can rescue us from ANYTHING! As Hurricane Harvey (yet another non-event in the stock markets) rips its way through Texas and Louisiana, it’s worth pondering what...

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I’m just going to put this here.

At the moment I’m not making any changes to our portfolios due to this information. As I’ve mentioned before, by classic standards, I’ve been advocating relatively conservative portfolios of mutual funds. And, as I’ve said before, I’ve been mildly wrong for the past three years: the markets have continued to rise despite all our fears. So the balance of proof is now weighted in favor of a continuing bull market, and staying invested anyway is...

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Are Small Stocks Leaving the Party?

The market for small stocks just turned negative for the year. That’s big news, and you aren’t likely to hear it elsewhere because it disrupts the narrative of a rising stock market. Why is it happening? This article provides more data to suggest stock market overvaluation. In this case, it’s the small stock markets, exemplified by the Russell 2000 Index. What’s more, this downturn is a divergence: the performance of the Russell 2000 Index is...

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Good thing we’re diversified.

We haven’t (yet) responded to recent market turbulence by altering our portfolios. We’ve simply been maintaining our current very diversified allocations, which aren’t fully invested in the U.S. stock markets. As I wrote in my last posting, long term holding is a very decent tactic. And right now we’re a little bit allocated towards safety. From this position, it’s OK to ride out short term news. However, this weekend’s blog on “Wolf Street” is interesting....

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The Ten Year Anniversary of the day the world changed.

Ten years ago today, French mega-bank BNP Paribas announced it couldn’t place a value on its US-created collateralized debt obligations, complex toxic “derivative” investments, and thus was suspending client withdrawals from the funds which held them. That was the first indication that the most gigantic financial panic since the Great Depression in 1929 was about to unfold. The world has changed a lot since then. But many of the same structural flaws remain, patched and...

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