SmartStops Comment: Modern Portfolio Theory – continues to have holes poked in it. Here’s a post by Hedgeable reiterating the importance of missing the worst times in the market.
From their post: If you merely miss out on 75% of market losses during the two largest crashes of the past 25 years- the dot-com crash and the financial crisis crash- you will have $1 MILLION MORE IN THE AVERAGE IRA ACCOUNT!!!
BaseBall fans will like the rest of the post too. Read Entire Post
SmartStops comment: Interesting perspective posted on by Doug Kass (TheStreet.coM) as to signals he’s watching.
SmartStops Mantra: ALWAYS STAY PROTECTED !
From the article: Since early August I have highlighted numerous technical divergences (in the weakness of the Russell Index (IWM) , new highs, the cumulative advance/decline lines, etc.), the schmeissing of the high-yield market (often seen as a precursor to stock vulnerability) coupled with growing evidence of weakening global economic growth (posing a threat to consensus corporate profit forecasts) and other factors (including valuation, sentiment and geopolitics) suggesting that a downward trend and (potential) bear market might be in the early state of developing.
History also shows that rising volatility in foreign exchange markets may be consistent with bear markets. (A good analysis by Nautilus Research can be found here.)
Economic weakness in Europe has been a worrisome factor that I have steadily highlighted.
Read entire article at:
SmartStops Comment: WisdomTree suggests its time to consider a strategy of hedging with ETFs to mitigate risk as the Fed begins to taper. That can be one approach to ensuring that a market correction will minimally affect your portfolio. But determining when to hedge especially with the costs incurred, becomes the main question. That’s where SmartStops can help – by providing an objective analysis for when risk levels are increasing in the market.
This excerpt from a white paper of WisdomTree:
Over the last nine months, the Federal Reserve (Fed) has gradually reduced the pace of its asset purchases in
conjunction with improving strength in the U.S. economy. With tapering on pace to conclude October 29, we believe that investors should now look beyond 2014 and start to focus on when, not if, the Federal Reserve will begin to tighten monetary policy. In our view, the way that investors have prepared their portfolios for tapering could be inadequate for the likely market reaction to increases in short-term rates. In the remainder of this discussion, we intend to focus on the following topics:
+ Preparing your portfolio for tightening is different than tapering
+ Traditional approaches to rising rates may not adequately insulate portfolios from losses going forward
+ Duration4-hedged and negative duration exchange traded funds (ETFs) may provide investors with
more comprehensive and intuitive tools to mitigate interest rate risk
For the entire white paper, click here.
SmartStops Comment: We couldn’t agree more with this author.
From Seeking Alpha, Contrarian Profits
The bulls are back out in force, as the hiccups from a few weeks ago seem a distant memory. Indexes have resumed breaking records on a regular basis, and all seems right with the world.
Great – trust me, few things make me happier than a happy market. I like making money as much as the next guy.
But I’m also a little more suspicious than the next guy. And right now, that suspicion is warranted.
… Today, the average price-to-earnings ratio of an S&P 500 stock is a hair below 19. The long-term average is right around 15. We’re solidly sitting in overbought territory. Stocks are expensive right now.
“We’re between the bottom of the seventh and the top of the eighth,” Marks said in a Bloomberg Television interview last week. “It’s time for the seventh-inning stretch. You have to have plenty of defense on the field today.”
SmartStops Comment: Defense is the best Offense!
- Market Risk?
- Interest Rate Risk?
- Liquidity Risk?
- Volatility Risk?
- Credit Risk?
A new article by Paula Vasan titled “Talking About Risk? Advisors, Industry Must Do Better“, takes the industry to task claiming investment risks are not well understood by advisors and not being well explained to clients.
Be aware when your risk is on the rise with SmartStops.net Equity Risk Alerts.
The past year has been a dramatic time for electronics retailer Best Buy (BBY). After nearly tripling its stock price, peaking at $45 a share in November 2013, the company’s stock plummeted almost 30 percent after releasing its fourth quarter earnings report. The store had weak sales during what should have been a strong holiday season and fell far short of its goals.
Over the past decade, Best Buy and similar retailers have faced difficulties competing with websites like Amazon.com (AMZN). The theory is that consumers use brick-and-mortar stores like showrooms. After finding the products they like, customers then take their business online. Read More…