Assuming the Republicans keep control of the House of Representatives after the election then they may be able to participate in the joint creation of gridlock because of an inability to get along with Clinton and thus they will avoid tax increases next year. This could prevent a tax increase that would trigger a recession. It may be tempting for investors to conclude that there won’t be any changes and thus stocks won’t crash. But since stocks are overpriced (and need to drop 45% from their top to reach fair value) and the economy is at a 1.9% GDP this quarter (estimated) and has been logged in at 1.3% annual GDP growth for the first half of the year then
It has been said that 2015 was the hardest year to make money in 78 years. Stocks had a total return of 1.38% for the SP because of dividends, but a slight negative return if one counts only the price. The best assets in 2015 were investment grade bonds. Of this class the best sub-class were Municipal bonds. These bonds are often reported in the press on their yields before adjusting for tax. If the yield was adjusted for the tax-free benefit then the investment grade Muni index total return of 3.19% would have been roughly a taxable equivalent of 4.8%, assuming a taxpayer is in the 33% combined state and federal marginal tax bracket and that the bonds were
Today there was a lot of bearish news. After the stock market had been going up with minimal dips for six month it finalled dipped with the SP decling 2%, Nkkei down 1.8%, Shanghai down 2.6%.
The 4 Percent Rule -- What is the Right Amount to Withdraw from Your Retirement fund each year?With stagnant incomes and roller-coaster investment returns over the past decade, individualson the brink of retirement might wonder what became of all those “rules of thumb” affecting howthey handle their nest egg once they walk away from their jobs.They’re still there. But the question of how well they work comes down to the individual.Chief among them is the “Four Percent Drawdown Rule” first revealed by CERTIFIEDFINANCIAL PLANNER™ professional William Bengen in the October 1994 issue of theFinancial Planning Association’s Journal of Financial Planning. Bengen wrote that retirees whotook out no more than 4.2 percent of their mostly stock-based portfolio in the initial year
Risk-aware investing means to judge an investment by its risk adjusted rate of return. This means using Sharpe ratio or Information ratio to see how much reward did you obtain in return for the risk you took. The goal is to spot investments that had a high performance but were so risky that they really did not make enough profit to offset or to justify taking the risk. Using this technique means an investor may make less than another investor who takes on excessive risk however an investor who uses risk-aware techniques may be able to reduce the probability of serious losses. However, nothing about investments is guaranteed and past performance is not indicative of the future.
According to an article in MSN.com January 3, 2011 the average stock ownership lasts 22 seconds due to computerized trading. That’s right: 22 seconds, not 22 days or 22 weeks!
Should investors seek professional independent investment advice for a fee during a bear market or should they try to “save” money by not using an advisor and simply putting all their funds into an insured CD?
Albert Edwards of the French bank Société Générale was quoted in The Guardian article of 1-3-2011. He is a good example of independent investment advice. He said “…China is basing a growth model on the most unstable part of GDP. Something has to give – and probably sooner than most people assume. … In reality, China is a much more potentially volatile economy than people think. The Chinese situation is the one that could come out of nowhere because people are not considering it…. China has produced such strong growth for such a long time that investors assume the process will last indefinitely’…. “There is too much confidence in the lack of volatility.” End quotes.
In today’s Wall Street Journal an editorial said that China’s lending exceeded quota by 40%. “Local governments and banks have set up off-balance sheet vehicles to conceal loans and keep the spending boom going.”
The real economy in many ways has recovered since the Lehman crash of September, 2008. So does this mean today’s stock prices with SP500 at 1256 are justified and that the bear case is wrong?