WHAT'S AHEAD FOR THE STOCK MARKET IN 2018
My opinion and synopsis of what Bob Brinker said about the stock market in the June 2018 issue of Marketimer:
The all-time closing high for the S&P 500 Index is 2872.87. The closing low for 2018 was on February 8th at 2581.
The big question right now is, will the S&P 500 Index 10.16% correction in February be the low for this "mid-term election year" selling pressure. Brinker is "attuned" to the possibility that it will not be, and is prepared to post a "Special Subscriber Message" at bobbrinker.com if he should "identify" a new buying-opportunity.
Of course, all of Brinker's buying opportunities are for those who do not follow his advice to remain fully invested and dollar-cost-average new money, or for those who may come into some new money they want to get into the stock market.
There is a very low probability of a recession beginning this year, so that likely means that any further market declines will not exceed beyond 20% that would be considered a bear market.
History shows that after the mid-term election year correction activity ends, market action is highly favorable, therefore Marketimer model portfolios are remaining fully invested. Going back to 1962, the S&P 500 has rallied at least 27% after the correction ends.
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78 comments:
John from SF said:
It's Father's Day so it could be a Brinker Holiday with the "young sprouts".
Brinker took off on Father's Day. Maybe he's doing something today with Junior or maybe he just stayed home to watch the finish of the U.S. Open Golf Tournament.
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Moneytalk is only broadcast one day a week - on Sunday.
Brinker never announces when he is not live on the air.
Brinker never announces when Moneytalk consists of old monologues and old calls - spliced together.
Why not? All other radio talk show hosts respect their audience by announcing when shows are reruns.
November 26: Re-Runs
December 10: Re-Runs
November 26: Re-Runs
December 10: Re-Runs
December 24: Re-Runs
December 31: Re-Runs
2018:
January 14: Re-Runs
February 11: Re-Runs
March 11: Re-Runs
April 8: Re-Runs
May 13: Re-Runs
May 27: Re-Runs
June 17: Re-Runs
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John and Jim...HAPPY FATHER'S DAY TO YOU AND TO ALL!!!
Yes, I would completely expect Brinker to take Father's Day off to be with his son and two daughters.
As you know, my problem with him taking time off is the deceptiveness of not announcing it before, after or during the program.
I heard a network ad even slip up and give out the phone number. Usually, they catch it before the last four numbers go out.
Watching Lefty chase his puts around & hit them in before the ball stops rolling. Thats hilarious. Im going to try that but I will probably stumble & fall face first or twist an ankle. Anything to shave strokes I guess. When there's $ on the line you gotta dig deep.
Wow, when you cut and paste as desired, you end up with one bootlicker following another -- they're out in full-force today. How many duped listeners think this is all live and spontaneous?
Helped spread the bogus word on Bogleheads today
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=251945&newpost=3977560&view=unread#unread
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Good post on Bogleheads, Housedoc. Let us know if they start calling you crazy for posting the truth. :)
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Bluce….after the caller and Brinker talking about the caller's "large" I decided I would give myself a break. That call was hard enough to listen to the first time round. :)
Honey: Did you catch the caller (don't remember the name or hour, maybe the second?) who thanked Bob for keeping him "in the stock market" during 2009?
LOL, can't make this stuff up!
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Bluce...No I didn't hear that. I listened to about the first half hour and decided that listening to the same ring-kissing callers a second time might not be what I wanted to do with my afternoon.
Did you catch what Brinker replied to that hilarity?
Honeybee,
I was going to inquire "large what?", however I think I probably should not.
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J. Wales....You asked that I repost this here. Be sure that you refresh the blog after 1pm on Sundays so that you will be sending comments to the new Summary Comments.
Here is your post:
J Wales said...
I don't market timming will work based largely on history & what ever else BB uses. The Fed with QE & now QT have made this a unique time in history for the finacial system as we've come to know it. BB is no spring chicken. Im not either but there's just too many firsts going on. Federal debt is mushrooming to epic levels. I know there's money being thrown around like confetti on different federal projects. Craft people making $100k+. House prices are getting too high in my opinion. Someone shoot holes in my brash statements. I need some counter balance to keep me in line.
June 17, 2018 at 2:29 PM
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Natasha, here is your reply to J. Wales:
natasha said...
natasha here
Hi J. Wales,
I have no counter to your arguments. I am risk averse so I am always always concerned. I have little in the way of monthly income from ss and retirement benefits, so I don's have much of a room to be taking risk with my savings.
That said, may I suggest you repost your comment of June 17 on the actual June 17 broadcast comments after Honeybee kindly posts the bob brinker summary. I am interested in what responses you might get, and doubt that many people will be reading more on this comment suggestion.
Best to you,
Natasha
June 17, 2018 at 3:15
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Mad as hell....Yeah, I wondered too. LOL!
Honey: I believe Blinker totally ignored the comment about being "in the market" in 2009.
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Bluce...remaining silent when lies are being stated as facts is usually the way Brinker reacts.
He has done that myriads of times when callers says that he/she subscribes to both of his investment letters.
For a Father's Day, the radio show was quite entertaining (kudos to the radio production splicer and dicer, owe you a big fatty).
Bluce and Honey and others nailed the highlights better than the re-roofers next door perched upon my neighbor's domicile.
Just guessing that the best hour to change the wife's oil in the driveway with the AM radio next to the drain pan was it.
Was the 2nd hour, and can recall ALL of those calls from previous shows. In fact, have heard them many times on other RE-RUN shows. Must be the "golden oldies" from tax-free Nevada.
Here we go, Y'all! Reason for all the re-runs is to avoid sales taxes. When purchasing the product "On Demand", the seller can claim the product is only 50% new production for retail taxes. The other 50% is complimentary, no revenue taken, so no tax liability.
Distinctly remember the "5 large" caller who worked in the same "ecosystem" as the host's "FANG" sector, which he defined as Facebook, Amazon, Netflix and Google."
Host waived his 4% one-stock rule when the swingin' tech worker explained he was getting beautiful stock purchase options at his gig, and they would probably get more prettier.
Then the Host asked, "How old are you?" And tricky tech wiz replied, "Let's say I'm 20 years until RMD." Upon which the host mumbled, "OK then." And the rest of us oil drainers did the math and concluded, "OK, you are 50, why so opaque?"
Then the real comedy kicked in when Host concluded that, "Well, if your industry tanks and you lose it all (his company stock, 2 large of 5 large net worth) then you have 3 large to carry on with. I'd be inclined to go for it." Call it a convoluted philosophy from the Host, driven by the greed factor.
No bull, flashbacks not withstanding, can remember doing the same thing when I heard this call originally, under the wife's chassis in the driveway.
Instead of BB having repeats (but not telling his audience), why not he gave a substitute host fill-in like in the past.
Maybe I miss the reason(s) why BB refuse to have a substitute host. Could it be he wants the substitute host not get paid?
Sad to see this out of BB in his ladder part of his career, soon to come to an end? Or will he be doing this the next 25-50 years (lol).
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Joe Tong....Those are all questions that I have wondered about since the old days when Bob Brinker had fill-in hosts.
We didn't always enjoy them, but at least we appreciated that Brinker's Moneytalk was honest with us.
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Johnny Sims....I enjoyed your comments.
I think you are saying that Moneytalk has deteriorated down to the point of broadcasting reruns of reruns. :)
Honeybee, thank you for the summary of the newsletter. I agree with your critique of his 'timing' suggestions. There needs to be some 'sell' signals so that there would be cash available for the 'buy' signals. However, most of the experts he brings on the show, and the authors he recommends like John Boogle, etc. are opposed to this type of timing.
One begins to question the whole premise of his show. Also, I agree with all the comments on the reruns. It is your blog I check once a week now, I no longer listen to the show, unless it is by chance.
Johnny Sims, good comments.
Joe Tong: I don't know if payment to a substitute host is the reason there aren't any. In my Suspicious Mind (one of my Elvis favorites: "Suspicious Minds") I think the reason could be that Bob doesn't want a host giving out advice that might be in conflict with his outlook.
That would prompt calls to him later, asking about the disparity, which could always be screened out unless the caller pops out with "can I ask one more question?"
... and another thing: In the past, "large" was not shorthand for one million. My recollection from watching Mob movies was that "large" meant one thousand. Maybe inflation is responsible for its "upgrade."
Attn: Honeybee's Fake Post Dept.
FAKE POST:
Anonymous Mad as HELL! said...
Gabe,
Welcome back my brother!
June 18, 2018 at 6:47 AM
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Mad as Hell....Clearly this blog and all the posters live rent free 24/7 in someone's feeble brain.
Honeybee,
Well, he or she certainly exhibits cunning and manipulativeness, one set (out of 20) markers that can point to psychopathy.
I hope he/she gets the help needed. If money is a problem they might be eligible for low-cost or free diagnosis and treatment if they self-admit to a clinic or hospital.
That would make a lot more sense and would certainly be more productive than jerkin' people around on this blog.
What in the world are you people talking about?
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The person who sits at the computer in his mommy's basement and pretends to be regular posters here.
You are safe because you have a Google account and that photo. :)
Ha, okay. ☺
However, Mad as HELL does NOT have an account. I will ask my old friend, Lt. Columbo, to run some checks on him.
I was reading of Buffet portfolio of 90:10 and thought how nice to have a ETF balanced fund with the same setup. The 10% is in short term treasuries. Know that ETFs have very low costs to trade given they can achieve lowest rates with fewer trades than all of us working on our own. Also, as far as I know the ETFs are constantly rebalancing. So, can you imagine a better setup? They have algorithms that minimize cost, but will make many trades during a day of rebalancing given the stock market change. Rebalancing is basically an autopilot way to buy low and sell high. I like the idea of putting short term stable money to work. I'm guessing in theory this would make a difference in returns. I do think letting short term or money sit for any length of time is a loser proposition. The market can stay irrational longer than you can stay solvent.
Also, I was reading a few articles on the hidden costs of trading and mutual funds. Jack Bogel has it right and offers the best way to cheat the system. Rigged game. Also, history tells us a lot of what to expect, but nothing to count on. In this regard it is always different this time. IOWs you can read of history, but know that you can't help but make history as it is the hidden path we do not know. Were all making bets and the success of which YTBD.
Know that many choices to be made in attempts to minimise volatility and improve returns. Do you utilize sectors, foreign, EM, mid or low term bonds, treasuries, corp debt, value, momentum, large corp. Do, you adjust your bond ratio and utilize 10% foreign. How to know the best fixed income mix of investments or what is a good value? Do you pay much for a financial advisor to make these decisions? Does this dude have a track record of many decades? So, given we have major shortcomes to this business of investment my choice is winding down to Wellington. Reviewing many choices and one must fit you risk tolerance to best comfortable long term (hold) investment.
Trees said, "So, given we have major shortcomes to this business of investment my choice is winding down to Wellington."
Wellington is a good choice for a balanced fund. Set it and forget it. It is closed to new investors since 2013, so I hope you already have a stake in it.
People in their 20s pretty much believe the stock market goes up double digits every year. A by product of Bernankes rescue the system at all costs. Too big to fail policy. Seems like the bill will come due. But I am from an older generation. It just seems like some serious hocus pocus going on. I'm a student of the great depression just like Bernanke. My degree is less prestigous but like Bernanke I learn as I go. I have it in my head you never get something for nothing. The house prices are cranked up but the lack of inventory is not good. No doubt the govt will jump in & we will get a everyone should be able to own a house policy again. Just seems like the system is being managed in way that puts in the next crisis. I'm all out of bailout cash myself. That well is dry.
Does anyone think the media is being used to promote the lie that Trumps so called trade war with China will be the cause of the next recession/bear market?
Trees: I have the Bslsnced Index Fund in my personal account and the Wellesley Fund in my Retirement Account. Both are doing well.
Gabe
Very exciting times. One of the Belgium Warmbloods just birthed a colt!
Gabe
The DOW wipes out 2018 gains.
Tired of winning,
Ben Gibson
Acronyms seem to be in vogue here these days. So,..... FWIW, IMHO,.. Brian Wesbury’s current take on what bonds are are telling us is very insightful.
Pavlov’s Cat
The bond duration on any of the vanguard balanced funds is pretty long. The tax managed balanced fund is the shortest.
Let me say this about that. It was a dark and stormy night...
However, I still don't understand Brinker's fuzzy math.
He constantly states, over and over, "A balanced portfolio of $1 million should generate about $40,000 per year, about 4 percent. And most, if not all, will be forthcoming from stock and bond dividends, interest, and at times capital gains distributions."
So help me pencil this baloney out. Let's agree to some assumptions (or call me out if you notice a hanging curve ball.)
The balanced portfolio would contain $500,000 in stocks (or equities) and $500,000 in bonds (or fixed income) and may utilize mutual funds for each portion.
So if the highest-yielding recommend stock fund on his list is Vanguard Equity Income Fund, it will generate 2.6% of the current price annually, assuming we bought in on May 31 with the $500k.
My H-P 32S RPN Scientific calculator, circa mid-1990's, says that 2.6% of $500k is $13,000 annually.
Proceeding to the bond side, we can use his recommended income portfolio yielding 3.3% according to him last month, which equates to 3.3% of $500k equaling $16,500.
Do you see where I'm going? Added together at $29,500 the results seem a little shy of the vaunted $40,000.
Am I missing something or just nit-picking? Should I just shut up and color? Any ideas?
Man, this discrepancy really torques my grind, worse than a bad front tire during the long drive to Vegas.
Thank you for listening.
Hey Ben you need to be invested in things other than the Dow. Can't expect Trump to bail you out all the time. I'm actually having a good year buying low and selling high.
Ben said:
The DOW wipes out 2018 gains.
Tired of winning
Ben, unless you are heavily invested in DOW component stocks (or a DOW-based ETF) I wouldn't worry too much about it.
Honestly, other than "memorabilia" I'm really not sure why the DOW continues to exist. It hasn't been an "industrial" index for many years. It is no longer an "average". And frankly, it's usefulness as a market indicator perished decades ago.
Coincidentally, we learn today that one of the few remaining DOW "industrial" components (GE) will be dropped on June 26 and replaced by Walgreens Boots Alliance (WBA).
JC
Seems like there's too many bearish articles on marketwatch for a big decline. They always have stories on guys I never heard of. Of course I'm not a 1%er with friends in high places. My friends the few left are in low places.
J Wales: Take a look at these two Vanguard funds, Short term investment grade bond fund, (VFSUX) and Ultra short term bond fund (VUSFX)
VFSUX: duration 2.58, 30 day SEC yield 3.10%
VUSFX: duration 0.98 and 30 day SEC yield of 2.42%.
So Rexx is one of those people that buy low and sell high.
Got it Rexx. You should start an investment consultant firm.
Ben
Royce: I think Bob (and most others) assume that the 4% is an average safe withdrawal over the long term. In years when stocks are up 10-20% or more then your portfolio will be higher even after taking out the 4%, and that gain will cushion the downside when the market tanks. And the bonds will help with that, as they often (not always) go up when stocks dive.
If you look at a 50% total stock, 50% total bond portfolio over several decades, it should return 5-6% annualized.
However in recent years, some knowledgeable people have suggested that 4% might be a bit optimistic going forward from here. Maybe figure 3% as being safe for the next decade or two.
Not sure if those "experts" have a crystal ball or not, so take it FWIW. But you can't go wrong erring to the conservative side.
Jerrod: You are right about the Dow. It doesn't mean a whole lot in modern times except to the newsreaders on TV. The vast majority of them don't even know what "The Dow" is, or what an index is, lol.
Bluce,
Indeed, and we can add additional screw-ups such as:
- Reporting the prior day figure as "todays" DOW.
- Reporting the DOW is up 200 when it is actually down 200 (and vice versa).
- Reporting the "current" DOW when all financial markets are closed for a Holiday.
And bear in mind that all of these are major market Los Angeles stations, one of which is a 50,000 watt blowtorch.
Some of these folks must be Summa Cum Laude Graduates from The Blinker School of Broadcasting!
JC
For me, the 4% rule is merely a guideline. Personally, I believe the investor can go somewhat higher like 5% or lower like 3%. depending upon how the market performs and inflation that year. I cannot recall whether I had ever withdrew any funds from my portfolio with respect to yearly withdrawal but have sold portions of stocks and mutual funds over the years for special projects and entertainment. Suffice to say my pension income and social security is all that I require.........I may be the person that Bob refers to regarding the richest person in the cemetery!
Gabe
BB is very rate risk adverse which seems to make sense I guess. The 10 & 30 year treasury rates aren't going up but the long term & to a lesser extent intermediate term Vanguard bond funds are pretty red for the year. And the bonds are really dragging down the balanced funds. I guess long term the balanced funds will do ok but I do hesitate buying a balanced fund because of the 6-8 year duration on the bond portfolio.
Maybe I miss the reason(s) why BB refuse to have a substitute host. Could it be he wants the substitute host not get paid?
It may have something to do with the fact that once years ago (I think Bill Flanagan was the fill in host) a caller simply described what Brinker did in regard to the QQQ. only he just referred to him as an advisor and not Bob Brinker. and then asked Flanagan his opinion of what the advisor did. Naturally Flanagn dissed the advisor, not knowing it was in fact Brinker that was the reference.
Da Brink also had many unflattering things to say about his fill-in hosts under his various identities.
This ourney down memory lane brought to you by tfb, the rabbit who cares.
Seems like there's too many bearish articles on marketwatch for a big decline.
The liberals in the media are simply trying to talk the economy down like they did with Bush-the liberal-I and Bush-the liberal-II. It is part of the lib playbook.
If we look at YTD U.S. Stock Market performance based on Wall Street's more commonly used measure, the S&P 500 Index, we see the U.S. Stock Market is up +3.5% so far this year:
S&P 500 Index close on December 29, 2017 = 2673 vs June 20, 2018 = 2767 or +3.5% YTD. And we should note that it has been plagued by the apparently traditional "mid-term election year correction" pull back.
Something similar happened during this same first "mid term election year correction" period for the previous administration:
S&P 500 Index close on December 31, 2009 = 1115 vs June 21, 2010 = 1113 or -0.15%
However, for those of us who prefer to assess the effectiveness of economic stewardship with regard to U.S. Stock Market performance using the passage of significant economic legislation as the starting point rather than the date on a calendar or any other random starting point, the results are more dramatically different between this time and last time as measured by the S&P 500 Index:
December 23, 2017 (the passage of The Tax Cuts and Jobs Act) = 2680.
Six months later, June 20, 2018 = 2767 or +3.25%
February 19, 2009 (the passage of The American Recovery and Reinvestment Act) = 779.
Six months later, August 20, 2009 = 1007 or +29.3%
While one might argue that this time around the significant legislation was "unlucky" enough to have been passed right before we entered one of those apparently traditional "mid term election correction" periods, one might also argue that last time around was even more "unlucky", having been passed in the midst of one of the worst economic downturns, jobs losses, housing and stock market crashes of all time that could have quite easily continued to trend downward for years afterward. But didn't.
Frankj- It's closed to other than Vanguard brokerage.
Running the portfolio tests, Wellesley about equal to 60/40, but with less volatility. Wellington is just a tad higher volatility of 60/40, but almost matches straight S&P index funds. The managed fund does have .1% larger load so that will change the math. Also, the VTI looks to do better than the old S&P over long haul. Most think this is due to the diversification of adding small and mid cap stocks. This should be right. It funny when charting the growth rates how much time S&P sits below Wellesley over time, but will catch up on long bull market. The current historical long bull market has really propelled the growth rates of the big cap stocks. In my opinion, using this outlier data (long bull market) is not of much help when deciding what fund to chose. Most investors fail to meet the averages as they are tempted to chase returns.
Things to think about. Does one follow Brinker to average into VTI given there is still some energy left in the bull? Or buy less costly value stocks for the long haul. I'm thinking some of both. Good to keep some in VTI, Wellesley, and Wellington. The Fidelity Contra fund did good, but is into lots of high flying stocks. To risky for me at this stage of life. Funny the highly rated Dodge and Cox and Contra funds within our IRAs were down to 6% level of growth for years, but pulled all of their averages up to look impressive during this bull cycle. Looking simply at the 1-10yr growth rates look impressive. I remember the older years and frustrating low rates. Don't want to experience that again. Also, on the upswing the VTI looks as good after taking out the loads.
I read the average/most investors should use a financial consultant. They pay .5% to 1% of there portfolio. The advice goes to the point, while investing should be simple you need the expert to calm your nerves, keep you from mistakes, helping with insurance choices, planing you withdrawals, tax avoidance,annuity choice, and estate planning. Really? So, why the heck should we worry of .1% extra load for Wellington as compared to VTI when paying ten times that for hand holding? I'm guessing that Wellington is 10x more competent and that they will act as compared to myself or a neighbor financial advisor.
All this talk of 4% scarry withdrawal rate. What if, worst case scenario dramma Your financial advisor would rather you keep all your money in the market as you never can tell. That way you never worry. Of course one financial guy selling annuities claimed that the end result of not vacationing and enjoying the money is the all to common early retired children that do go out and RV, sail, and travel. Youth currently have a belief they will retire at fifty. They also have a low savings rate what gives?
Finally, I know much doom and gloom of bust out their. Know their is also a lot of political hype and propaganda. More than ever the opinions are flavored by politics. Lot of partisons talking of crash for political opportunity. Really, hoping the U.S. fails for your side? Undermining the future of country for same? I read a piece back a few that claimed our financial future was strong. If you wanted something to fear read this. His link was to partison site that was truly scary within their beliefs and if ever the country leaned that way...you know the Venezuela way of thinking. So, we can discount lots of advice and gradually learn the trusted offerings.
The common conceptions of market timing such as interest rates vs stock market, short vs long t bills, or dividends vs bonds. While their is correlation most often it's not a direct path or causation. History gives parallels, opposites, and correlations. Each time it's different. Better to stay in the market. Over time a safe bet with the caveat of 5-10 year needs within a safe investments.
The Fed rules all things with our financial system it seems like. Or are they just another reactionary govt agency? Maybe we will see a longer than expected up trend. Another 5 or 10 years of growth. Who knows. Buffet seems to be the most accurate forcaster. Just stay in but have cash when the opportunities present.
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They are saying that we now have more jobs than available workers.
And this from the Wall Street Journal:
Job Layoff Gauge Falls Heading into the Summer Months
Unemployment benefit applications fall for four straight weeks
By Sharon Nunn
Updated June 21, 2018 10:14 a.m. ET
WASHINGTON—The number of Americans filing applications for new unemployment benefits fell for the fourth straight week in mid-June, signaling continued strength in the labor market heading into the summer.
Gawd,
I have always felt that Fed policy has more to do with stock market performance than legislation from our politicians. In 2009 the market had gone through a 57% decline on the S&P so how much lower could it go? We would have had to have another Great Depression for it to go lower. Just a few months before the 2009 legislation you mention the Fed started the QE program and that action probably deserves the most credit for the turnaround in the stock market at that time. Here in 2018 we in the latter stages of the economic cycle where the easy money has been made so we must expect only a slow grind higher from here. We also have the Fed now involved in a QT policy which acts as a headwind for the market. So the bottom line is that I think the Fed's QE and QT policies have had a much greater influence on the market than the two pieces of legislation you mention.
Gawd what you said about +29.3 gain going into Aug 2009 made no sense. We'd already had a 40-60% Bear market occur in 07 and 08. Fiscal stimulus and Fed lowering interest rates was beginning and next cyclical bull started on March 09. Lightweight Obama was along for the ride just by luck.
I remember a favorite thing for BB to say was the markets like gridlock. So the less DC does the better. So I guess that hasn't changed. It seems a bit simplistic since but it could be just something he heard & it's a good sound bite for radio.
Note to "Ben Gibson" about your comments that I see no reason to publish.
I go by facts, and do not have TDS.
Back to the basics: The idea that a group of pointy-head academics can possibly know what the price of money should be (interest rates) is ridiculous. This is central planning, an idea that has failed massively everywhere it's been tried.
It is believed in by people who do not trust markets to set prices (via supply and demand) so prices must be manipulated by intellectuals who "know better" than the free market does.
The excuse for every massive failure of socialist ideas is that "they didn't do it right." Wrong answer. The right answer is that central planning never works in the long run, no matter who is in control. Free people making self-interested decisions set prices automatically. Bureaucrats cannot do this -- as history shows. They always end up distorting prices, with disruptions and/or shortages in supply as a result.
I remember reading a story about the Soviet Union "back in the day." Bureaucrats in Moscow fixed the price of tractor tires which were sold thousands of miles away. There were no feedback mechanisms for pricing sent by the normal supply and demand, so they (of course) had no way of determining the true value of the tractor tires. Central planning at its best.
And we know what happened to the Soviet Union. And I'm not even mentioning the tens of millions of citizens murdered by their own government.
Schwab Alert!
I had placed 3 Good Til Cancelled limit orders at Schwab. Let's pretend the limit was 110 on each of the three orders. I check my open orders twice per day.
AMAZINGLY, today the limit on my 3 orders was LOWERED. I have the fraud department working on it. They show the original limit was the LOWERED one. IT WAS NOT. The fraud department has locked my account, at my request. The ORDER numbers ARE CONSISTENT.
Well Pals, check you Schwab open orders right away.
Jim, I would not argue that Fed policy has nothing to do with stock market performance except that I believe it generally contributes more in terms of temporary pops or dips rather than longer term trends. After all, Fed policy is almost always an effort to tweak and/or repair an ongoing economic trend far more influenced by current legislation and the stated goals of current legislators. It follows and responds much more than it leads.
I would say the Fed understands its limitations in this regard better than anyone. All during the post-2008 recovery, the Fed was practically begging legislators to introduce more and better fiscal stimulus, explaining that if we wanted a faster economic recovery (and the usual accompanying greater stock market gains), we could not rely so heavily on monetary stimulus. We needed more fiscal stimulation and they knew it. Once you've gone to and maintained a near zero Fed Funds rate, you've got nothing left in your arsenal. To be sure, we got a recovery. But the Fed was always making the point that it would have been a much better and faster one without the constant obstruction against providing more fiscal stimulus in Congress.
Meanwhile, I don't know what economic Law of Gravity prevents a stock market free-fall of 57% from heading to 65%, 75% or 85% as it did during the Crash of the Great Depression while we waited for free market Capitalists to reach out and catch a falling knife rather than hold out for a better bargain tomorrow. And even at the point of "no lower left to go", what are those free market Capitalists investing in while half or more of the country has seen their jobs and incomes eviscerated? There is virtually no historical data showing free market Capitalists willing to do that in large enough numbers to matter without the government intervening first to invite them back in with fiscal stimulus legislation, making the waters safer and warmer to jump back in.
Rexx, the +29.3% gain in the stock market as measured by the S&P 500 Index was since the passage of the American Recovery and Re-investment Act, which was signed and passed in late February 2009, just 2-3 weeks before that March '09 cyclical bull began. It wasn't a +29.3% gain to an "all time high" by August '09 or anything like that. It was the gain six months later just since the passage of that legislation demonstrating to free market Capitalists that the then current legislators were indeed going to introduce and pass stimulus legislation to keep the falling knife from falling much further and a floor will likely be established very soon, so go ahead and start investing and reaching out for gains.
Vanguard Prime.....2%! Yay!
Gabe
The Left loves Keynesian 1930's economics. The theory awards federal government control and spending. The "free" money awarded to empower politics. The theory has been discredited, but the Great Recession revived the narrative. Obama was a Great Depression student, probably because of the massive gains in politics that lasted decades.
Government spending is inefficient. It is slow to produce results. Increased liquidity is good for a reviving an economy as well as lower tax burdens, and lower regulations. Government can spend money on the margins such as a slight uptick in infrastructure improvements and R&D matching funds. Probably a good time to offer no cost technical training. It would be an excellent time to experiment with over haul of federal governments such challenging all preconceived notions of program benefits. Reconstruct private sector devices to accomplish same goals at a fraction of the cost. Challenge legal system to modernise and curtail the odious cost of economic lost from the caustic overhead of legal liability. Much work to do if the country takes the opportunity to think out of the bigger government solutions box.
Gabe how's the horse calf doing?
I am in the Bluce camp on his central planning post. The central banking system seems unamerican. Kind of surprised the US of all countries ended up with the financial system we have. We had a long cold war against the Soviets who as he said used centralized control & lack of at least an attempt at free markets. But when it comes to our choice of finacial systems we are accepting of central control. Is it an apples & oranges comparison or is there a dichotomy going on?
Gabe, I'm almost there on the MMF rate:
Fidelity Money Market Premium Class @1.94%
In addition, I get 500 Free Trades over the next 2 years.
Vanguard has good funds and ETFs, but (for my purposes) Fidelity has a better offering.
And again (for my purposes) Fidelity's web site, tools, webinars, Active Trader Pro Platform, and superior Customer Service are best of breed.
I also have accounts at Schwab and they are a very close second in my opinion. Their SSE (Street Smart Edge) platform is fantastic! Great Customer Service there too! My free-trade agreement with Schwab expires in about one month. However, I plan to re-up!
Gabe, Good Investing!
JC
JC: You are doing very well. Stick with your plan.
Holly: The Barn is doing well. My son is now fully in charge of the operations. He is taking the business to a new level by starting a horse breeding operation. I will be pushing 80 years old and so the move.
Thanks for asking.
Gabe
4% rule- listening to a podcast they mentioned a study of retiree spending. Retirees have the habit of lowering spending 1%/year starting at 65. Also, retirees tend to hang onto Roth accounts to long. They are not utilizing the advantages of Roth as planned. So, to my thinking the Roth is overrated? The 4% rule was established with data going through Great Depression. Look at the depth and breath of recessions since then. They are getting shorter duration. Modern financial thinking is way improved as compared to 30's. Meaning the U.S. has a better handle on what to do modern day. This does infer that historical data on financial markets just not very worthwhile to decision making. For example the common thinking of higher interest rates competing with dividends and the ensuing drop in stock market. That insight was gained during a historical period of public increasing market investments. In other words probably a false causation. That isn't to say that investors will act on that common knowledge and impact markets, just the impact in that event will be short lived.
The investor group think and irrational/emotional behavior is reason number one the market is impossible to time. Realise you can be a good market timmer, but if you get if wrong one time, the damage can wipe out all your good calls advantage.
Day trading and individual stock trades for short term is riddled with hazard. The modern market place is run by professionals with full time experienced staff trained in this discipline. The computer tools and data are above any diy abilities. It's expert going against expert. The index funds do have built in advantages for eliminating investor mistakes and keeping costs down. Those two factors weigh heavy in favor of individuals.
The investing advisor occupation is quickly changing. Traditional jobs dying. The modern investor just has much better knowledge and information as compared of bygone days. The modern sophisticated investor is looking for overarching input in overall plan such as tax avoidance, checkups, 2rd opinions, budgets, and spending plan.
I'm still of the opinion that income investments best handled by balanced fund. The Brinker common thinking of ultra short bond investment protection is over hyped. A conservative balanced fund will strategise the balances of yield and safety. This zone of investment may not be as good for index investing.
Trees, your comment that "this zone of investment may not be as good for index investing" got me curious about a comparison between the Vanguard Wellington (Admiral) shares and Vanguard's Balanced Index fund. The Wellington is a managed fund, closed to new investors unless they already have a Vanguard account as you pointed out.
The big difference between these two funds is the size: Wellington has $103.6 billion in assets and the Balanced has $37.7 billion.
Wellington has 18.5% of these assets in its top ten holdings. Balanced has 10% of its assets in the top ten.
Wellington holds 100 different stocks and 930 bonds. Balanced holds 3472 stocks and 9776 bonds.
You'll have to scrape together $50,000 to buy into the Wellington Admiral fund (VWENX) which has an expense ratio of 0.17%. You'll only need $10K for a seat at the table of the Balanced fund which has an expense ratio of 0.07%.
The Wellington fund will go to 65% equities, while the Balanced fund tries to stay at 60%.
Wellington paid $4.75 per share in dividends and cap gains in 2017. Balanced paid only $0.68 per share, so if you're going to own Wellington it is better to own it in a tax sheltered account unless you are in a very low tax bracket.
Now, similarities:
Both are rated 5 star Gold by Morningstar.
Yield: 2.69% for Wellington, 2.28% for Balanced. (similar enough for me).
Duration of the bond side: 6.5 vs 6.1. (close enough for my thinking).
Performance, 1 Yr, 3 Yr, 5 Yr: Wellington 7.59% 7.53 and 9.20.
Performance, 1 Yr, 3 Yr, 5 Yr: Balanced 8.99% 7.37 9.19.
Down market performance: In the period from Nov 30 2007 to March 6, 2009 Wellington turned $10,000 into $6567 and Balanced turned that same amount into $6628.
To me, this is one of the more interesting differences between the managed Wellington fund and the Balanced index fund. I really like the Wellington fund and we own it in our family but the evidence seems to be that despite the active management it could not mitigate the downdraft any better than a plain vanilla balanced fund.
I hope you and others looking at a balanced approach find this worthwhile.
Is this a simplistic or wrong observation? That in order to maintain the financial system as we know it the central financial govt had to reward risk takers to the point of subsidizing risk. It seems like the central control of the financial system failed dur to fraud that wasn't percieved as distructive ast least not to them. Are we entering a new phase where risk will be evaluated differently again? Will the Bernanke response to the crisis have any downside consequences yet to be experienced? Or is the system repaired & will next down turn be muted & managed with relative ease?
Thank you frankj
J Wales-
Some problems of government messing with the financial risk and natural supply vs demand.
1. Finance companies now want to big to be allowed to fail status. Also, these businesses now understand that government has their back when making risky bets. Also, they have learned that wealth is maintained by picking up the tab for influential class in DC politics.
2. The FDIC, Social Security, and any other government program will be busted in truly hard economic calamity. Meaning these programs instill to much artificial confidence in citizens who then act in less prudent ways to safeguard themselves. The stock market is addicted to federal manipulation. If things go bad, beyond government capability they will become much worse than simply letting the short term correction take place in natural operation.
frankj- yes, thanks, that was a nice write up. I was thinking of VBIAX as well, but when working with longer history of 60/40 portfolio returns and drawdowns, it was no go for me and I am a believer in the power of indexing and low costs. Yes, the Wellington should be in a tax preferred account.
Looking at the CAGR for VBINX vs VWELX was an eye opener. Yes, the ten year return as you described. Pull the time out to the start up of VBINX was more convincing for Wellington.
1993 to current
VBINX $10k grows to $71,685 8.06% CAGR .66 sharpe
VWELX $10k grows to $98,206 9.40% CAGR .77 sharpe
So the Wellington more growth at lower violitily. The fund did not perform up to standards during the '08. My opinion, the Wellington is a defensive fund. The fund does better, as compared, during the periods of recession and large corrections. It is amazing to see how much time S&P sits under the growth charting. Only in long bull runs does the S&P really shine and eventually overrun.
I'm less convinced that bond index funds match up in the way stock ones have proven. There is more sway in the management choices of the active fund. Some leaning on stock or bond percentages. Even a small percentage of foreign. The fund can change duration, change the makeup such as junk, LT, Corp, and treasuries. This is all the stuff I know little of and even more clueless in what to do. I wouldn't trust Brinker advice and have read from second source bloggers that the fund has or is part of the Vanguard investment analysis team. Most investors will just purchase the BND type fund as a catch all. There may be an inherent advantage to balanced funds per the auto pilot rebalancing and especially if they can increase percentages of one side if it makes sense.
Because the fund has more stability (historicallY) the safe withdrawal rate is high. So all in all a good fit for retirees. Sure, the future could and will be a different time. Given that the only way to rate these financial choices is by history. The fund has a lot of that.
Another 10 cent comment. I like the stability of Wellesley, actually historically above the 60/40 portfolio while enjoying just about the same growth. Problem is currently the steady interest rate increase will provide a mild headwind. You can see the lower growth during these periods from graphs. Eventually, the increase interest will level out the performance, since funds all pick up on interest returns. So, I have safe money in this fund and just expect lower returns, yet still a safer bet than 60/40 portfolio. Their bond side will do better than my ability to pick bonds. So, going Wellington more heavily makes more sense for growth. Problem is high P/E and long bull in the general marketplace. Wellington has a lower P/E due to it's value tilt. Wellington stock side is large cap value. They like dividends. So, this is the area to be in for defense as compared to general market.
I have read the large investment brokers "smart money" have increase investment in active funds, for what that info is worth? The bottom line of my info sources, claim active has value for investors, but less in modern day time as investors are much smarter and everyone enjoys timely good info, analysis, and computer power. Just keep the active fund fees in check and one should benefit. Almost all factors have vanished. The small cap value for example have long disappeared. Meaning stocks and bonds are truly valued per risk, future returns. This is another reason indexing is so very hard to beat. Some believe that because of human nature there will always be a small advantage to value and momentum.
Also, diversify into some EM and foreign is increasingly attractive. The trading costs and risks are higher. W & W have two new funds in this arena that many investors watching.
U.S. Inflation Hits 6-Year High in May
U.S. inflation posted its highest annual growth rate in six years last month as lower unemployment and faster output of goods and services reduce slack in the economy.
The personal-consumption expenditures price index, a broad measure that serves as the Federal Reserve's preferred inflation yardstick, rose 2.3% in May from a year earlier, its biggest annual rise since March 2012, the Commerce Department said Friday. The year-over-year increase in April was 2%.
In another important milestone for policy makers, the so-called core PCE index, which excludes volatile food and energy prices, hit 2% for the first time since April 2012. The Fed watches core PCE inflation closely as an indicator of longer-run inflation trends.
It was the first time since early 2017 that the overall PCE index surpassed the Fed's 2% target, underscoring most policy makers' belief that the chronically low inflation of recent years is a thing of the past and that higher interest rates will be needed to keep prices in check from rising too much.
At their most recent meeting earlier this month, Fed officials moved their median estimate for the necessary number of interest-rate increases in 2018 to four from three.
Source: Dow Jones Newswires
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