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Hotlines

December 2021

A Year for The Books

We’re coming up on year-end and it’s been one hell of a year. 2021 should go down in the record books as one of the weirdest years in about two decades. I was looking back at a wealth of data and well, not since the tech bubble and the bursting and recession that followed have there been so many broad dislocations and anomalies. Read More »

Select Advice Select Carefully

It’s been a trying year for diversified investors. Bonds have not made money, and foreign markets have lagged U.S. markets—once again. But on top of that, the S&P’s return masks a huge gulf between the gains of a few stocks at the very peak of the index, and everything else. The six largest stocks in the S&P represent more than 25% of the index by weight and have generated 37% of the index’s return this year. Add in NVIDIA, the 7th largest stock in the index which has more than doubled this year, and those seven companies are responsible for nearly half of the index’s return. Read More »

Bifurcation Diversification

The stock market’s bifurcation hasn’t let up. What do I mean by that? Well, whether you are looking at a broad index like the S&P 500 or say the NASDAQ Composite, returns are being driven by a handful of mega-companies while in the category of “everything else” performance is all over the map. Read More »

Vanguard Goes In On China

Free Hook Up Hotlines For Free

With a new variant of COVID emerging—OMICRON—volatility has returned to the market. Since Thanksgiving, we’ve had five consecutive trading days of the S&P 500 index rising or falling by 1% or more—that’s the first time that has happened in over a year. Unfortunately, three of the five days have been to the downside. But keep things in perspective, as of Wednesday the S&P was only 4.1% below the high it hit on November 18th. And that’s before adding in today’s positive return. Read More »

November 2021

Don’t Be a Turkey – Stay Diversified

Please login to view this content.

Vanguard Estimates Capital Gains for Their Funds and ETFs

On Monday night, Vanguard released estimates of what its funds and ETFs will distribute for capital gains in the month of December. If you are listening to the recording of this, you can find the full list of funds in the web version of this Hotline. Read More »

Inflationary Hyperbole

Inflation is all over the news these days (when Elon Musk isn’t) as the headline consumer price index posted a 6.2% year-over-year rate in October—the highest one-year inflation number since November 1990, 31 years ago. So, the common wisdom is that inflation is here, it’s pervasive, it’s going to persist and we’re in trouble. Read More »

Small Stocks Complete Rebound

The Fed has been buying at least $120 billion of Treasury and mortgage-backed bonds each month since the pandemic struck. However, the central bank will only purchase around $105 billion in November. Read More »

October 2021

Hertz Puts Tesla In the Driver’s Seat

Possibly the most interesting event this week—a week full of news-making events—was the deal the recently-emerged-from-bankruptcy rental car agency Hertz made with electric-vehicle (EV) superstar Tesla. Read More »

Vanguard Private Equity Coming to A Portfolio Near You

Blink and you would’ve missed it. The S&P 500 index recorded its 54th all-time high of the year back on September 2nd. But just a month later, on October 4th, the S&P was 5.2% below that high—technically in a pullback. Read More »

Inflation Is “In the House”

Inflation popped higher again in September and, yes, it’s in the house—housing prices that is. Maybe the single largest component of the Consumer Price Index, or CPI, is something called OER, or owners’ equivalent rent. Read More »

Foreign Flight

October came out of the gate… well… down and up and down and up. After just four trading days, though, 500 Index (VFIAX) has notched a 1.3% gain, and the S&P 500 index is just 3.8% below the all-time high it hit in early September. Read More »

September 2021

No. Diversification Isn’t Broken

The economy is growing, but at a slower pace than it was earlier this year as we emerged from the pandemic recession. Moody’s and the Atlanta Fed now estimate that the economy grew at a bit better than 3% annual pace in the quarter that ends tonight. Read More »

Fed In Focus As Evergrande Runs Aground

Is an interest-rate hike from the Federal Reserve now baked in for some time in, say, late 2022? How about the beginning of tapering in late 2021? Read More »

Don’t Fear A Shutdown

The U.S. economy is still digging out of the hole it fell in when Covid first came to our shores—fewer people are employed today and GDP is smaller than it would be had the economy not shutdown last spring. Inflation has cooled (slightly) in the last couple of months but is still running hotter than usual as supply chains continue to come back online. And the high-frequency data that Dan and I follow—data on eating out, flying and miles driven—has ticked lower as concerns about the delta variant have risen. Read More »

Defense Is Also Important

After the three-day weekend and reports of the economy slowing down again, in part catalyzed by Friday’s unimpressive jobs report, stocks began to pull back from last week’s record highs. As of Wednesday’s close, the S&P 500 is only off 0.5% from its September 2 record and the Dow is 1.7% off of its August high. Read More »

Looking Ahead To Q4

As I write this the S&P 500 index is headed for its 54th all-time high for 2021. Add in dividends and the S&P 500 has already hit 408 highs since the end of the Great Financial Crisis and 70 since the 2020 Covid bear market. If we hit a high today that’ll add to those numbers. Read More »

August 2021

Active Management Works

I’m keeping an eye on earnings and would be particularly concerned if they begin falling. Remember, earnings (along with interest rates) drive stock returns. I know that earnings won’t grow as fast they did over the past year, but they should continue to grow. If they don’t, that would be a concern for the market. Read More »

With Inflation, Stocks Still Win

Most of the S&P 500 companies have reported earnings now and gains have been exceptional. Jeff and I have often said that, along with interest rates, it’s earnings that drive stock prices. Read More »

Real-Time Economic Slowing

Since the pandemic struck, Dan and I have been keeping an eye on a host of high-frequency data points—like the number of people eating out or flying. Unlike most official pieces of economic data, which are released with a big-time lag, these newer data sets are often updated on a daily or weekly basis. Read More »

Delta Days of Summer

Maybe we should call these the Delta Days of Summer rather than the dog days. On the East Coast, the temperatures have been temperate, while the heat is coming from growing concerns that the Delta variant of the coronavirus is throwing a wrench into the works driving the global economy’s continued upward trajectory. Read More »

July 2021

The New GDP Expansion

Just last week the National Bureau of Economic Research (NBER)—the official arbiter of recessions and expansions—declared that the COVID recession only lasted two months—March and April of last year. Read More »

Correction: No Correction

Wow, that was a quick turnaround. After peaking a bit more than a week ago U.S. stock markets were treading water until, over the weekend, it dawned on folks that the Delta variant of the coronavirus was making its way around the country and having an impact primarily on folks who haven’t been vaccinated. That was enough, I guess, and “boom!” Read More »

Persistence

One thing to keep in mind is this: You probably will hear many of the talking heads on TV saying that we are moving into a period where we’ll see “persistently higher inflation,” and that’s a quote. The trouble is they aren’t willing to stick their necks out and say exactly what they mean by that. Read More »

When An Improvement Isn’t

With stocks dropping from record highs today you might think there’s change afoot in the markets. And in some cases, you might be right. How to explain a 10-year Treasury yield of 1.3% is beyond me. It’s as if investors have decided, almost overnight, that inflation isn’t a concern and that the economy is going to grow slowly, rather than quickly in the months ahead. Read More »

Few Fireworks

With the year’s second quarter in the history and record books, one of the characteristics that stands out to both Jeff and me is how calm the markets have been this year. While there’s been some underlying volatility among certain stocks and occasionally certain sectors, overall, the stock market has been placid. Read More »

June 2021

Everything and Nothing Changed

It seems that while I was welcoming baby Rowan into my family over the past six weeks, everything changed and nothing changed. Clearly, life as I know it has changed—and decidedly for the better! But allow me to turn my eye to the economy, markets and Vanguard. Read More »

The Talking About Talking About Hotline

Federal Reserve Chairman Jay Powell says policymakers are now talking about talking about cutting back on asset purchases and raising the fed funds rate—he even went so far as to say the Fed’s recently ended two-day meeting was, in his words, “The talking about talking about meeting,” a reference to prior meetings where he’d said they weren’t even talking about talking about cutting purchases or raising rates. Read More »

Piquing Inflation Interest

Last week, it was meme stocks. Or was it SPACs? Or bitcoin? I can’t remember anymore because there is so much noise in the markets and the economy. Read More »

Data Whiplash

Inflation is still a hot topic even as it appears to be cooling—at least according to the bond market. Read More »

May 2021

May Showers, Or Flowers?

Well, we’re just a day away from the month’s end, and what a month it’s been. Inflation numbers for April suggest we’re heading for a brave new world of rising prices. But the bond market is saying something different… Read More »

Taper Tantrum or Whimper?

The Federal Reserve’s latest minutes, released on Wednesday afternoon, stirred the markets for a moment. Read More »

Traders Inflate the News

Inflation was on investors’ minds and lips Wednesday when, at 8:30 in the morning, the Department of Labor reported that April’s headline inflation rate had soared to 4.2% from March’s 2.6% rate. Read More »

Stay in May

With the arrival of spring, you are likely to hear the old chestnut that investors should “Sell in May and go away.” Ignore this nonsense. Read More »

April 2021

PRIMECAP versus Buffett

The U.S. economy is in recovery mode. The government’s first estimate indicates the economy grew at a 6.4% annualized pace in the first quarter. The personal consumption component of GDP, the biggest part of the economy, grew at a 10.7% annualized rate. And remember that this activity was during the early stages of the vaccine rollout. Read More »

Mr. Market Goes to Washington

Inflation remains a hot topic, as do inoculations and infrastructure. Jeff and I have talked a lot about inflation and inoculations; let’s get into infrastructure a bit. Read More »

Inflation Talk, Bond Market Walk

The economy is off to the races. Or, at least that is the picture painted by this morning’s economic data releases. Read More »

The Memes They Are a Changin’

It’s early days in the second quarter, but so far it’s as if someone reversed the script, or changed the memes, from the first three months of the year. Read More »

March 2021

Value Factor In The Lead

Tuesday was the one-year anniversary of the pandemic bear market bottom. Care to guess what the best performing fund in Vanguard’s stable was during the past year? Read More »

High Frequency Changes

While Jeff and I are not recommending changes to our Model Portfolios, there are plenty of changes afoot—most particularly in the estimates we’re seeing on first-quarter economic growth. And that’s important because of the expectations that are embedded in stock prices. Read More »

Market Static—Separating Signal From Noise

Is the stock market broken? With the rise, fall and rise of “meme stocks” like GameStop, the rapid rotation from growth to value stocks and the meteoric rise in bitcoin’s price, it certainly seems that if the market isn’t broken, it’s a least behaving differently today than in the past. Read More »

Value Up, Health Care Down

For all the noise around the stock market’s machinations this year it might be surprising to learn that as of Wednesday night the S&P 500 index is up just 1.7% for the year or that the NASDAQ Composite is only up 0.8%. Read More »

December 2021

A Year for The Books

We’re coming up on year-end and it’s been one hell of a year. 2021 should go down in the record books as one of the weirdest years in about two decades. I was looking back at a wealth of data and well, not since the tech bubble and the bursting and recession that followed have there been so many broad dislocations and anomalies. Read More »

Select Advice Select Carefully

It’s been a trying year for diversified investors. Bonds have not made money, and foreign markets have lagged U.S. markets—once again. But on top of that, the S&P’s return masks a huge gulf between the gains of a few stocks at the very peak of the index, and everything else. The six largest stocks in the S&P represent more than 25% of the index by weight and have generated 37% of the index’s return this year. Add in NVIDIA, the 7th largest stock in the index which has more than doubled this year, and those seven companies are responsible for nearly half of the index’s return. Read More »

Bifurcation Diversification

The stock market’s bifurcation hasn’t let up. What do I mean by that? Well, whether you are looking at a broad index like the S&P 500 or say the NASDAQ Composite, returns are being driven by a handful of mega-companies while in the category of “everything else” performance is all over the map. Read More »

Vanguard Goes In On China

With a new variant of COVID emerging—OMICRON—volatility has returned to the market. Since Thanksgiving, we’ve had five consecutive trading days of the S&P 500 index rising or falling by 1% or more—that’s the first time that has happened in over a year. Unfortunately, three of the five days have been to the downside. But keep things in perspective, as of Wednesday the S&P was only 4.1% below the high it hit on November 18th. And that’s before adding in today’s positive return. Read More »

November 2021

Don’t Be a Turkey – Stay Diversified

Please login to view this content.

Vanguard Estimates Capital Gains for Their Funds and ETFs

On Monday night, Vanguard released estimates of what its funds and ETFs will distribute for capital gains in the month of December. If you are listening to the recording of this, you can find the full list of funds in the web version of this Hotline. Read More »

Inflationary Hyperbole

Inflation is all over the news these days (when Elon Musk isn’t) as the headline consumer price index posted a 6.2% year-over-year rate in October—the highest one-year inflation number since November 1990, 31 years ago. So, the common wisdom is that inflation is here, it’s pervasive, it’s going to persist and we’re in trouble. Read More »

Small Stocks Complete Rebound

The Fed has been buying at least $120 billion of Treasury and mortgage-backed bonds each month since the pandemic struck. However, the central bank will only purchase around $105 billion in November. Read More »

October 2021

Hertz Puts Tesla In the Driver’s Seat

Possibly the most interesting event this week—a week full of news-making events—was the deal the recently-emerged-from-bankruptcy rental car agency Hertz made with electric-vehicle (EV) superstar Tesla. Read More »

Vanguard Private Equity Coming to A Portfolio Near You

Blink and you would’ve missed it. The S&P 500 index recorded its 54th all-time high of the year back on September 2nd. But just a month later, on October 4th, the S&P was 5.2% below that high—technically in a pullback. Read More »

Inflation Is “In the House”

Inflation popped higher again in September and, yes, it’s in the house—housing prices that is. Maybe the single largest component of the Consumer Price Index, or CPI, is something called OER, or owners’ equivalent rent. Read More »

Foreign Flight

October came out of the gate… well… down and up and down and up. After just four trading days, though, 500 Index (VFIAX) has notched a 1.3% gain, and the S&P 500 index is just 3.8% below the all-time high it hit in early September. Read More »

September 2021

No. Diversification Isn’t Broken

The economy is growing, but at a slower pace than it was earlier this year as we emerged from the pandemic recession. Moody’s and the Atlanta Fed now estimate that the economy grew at a bit better than 3% annual pace in the quarter that ends tonight. Read More »

Fed In Focus As Evergrande Runs Aground

Is an interest-rate hike from the Federal Reserve now baked in for some time in, say, late 2022? How about the beginning of tapering in late 2021? Read More »

Don’t Fear A Shutdown

The U.S. economy is still digging out of the hole it fell in when Covid first came to our shores—fewer people are employed today and GDP is smaller than it would be had the economy not shutdown last spring. Inflation has cooled (slightly) in the last couple of months but is still running hotter than usual as supply chains continue to come back online. And the high-frequency data that Dan and I follow—data on eating out, flying and miles driven—has ticked lower as concerns about the delta variant have risen. Read More »

Defense Is Also Important

After the three-day weekend and reports of the economy slowing down again, in part catalyzed by Friday’s unimpressive jobs report, stocks began to pull back from last week’s record highs. As of Wednesday’s close, the S&P 500 is only off 0.5% from its September 2 record and the Dow is 1.7% off of its August high. Read More »

Looking Ahead To Q4

As I write this the S&P 500 index is headed for its 54th all-time high for 2021. Add in dividends and the S&P 500 has already hit 408 highs since the end of the Great Financial Crisis and 70 since the 2020 Covid bear market. If we hit a high today that’ll add to those numbers. Read More »

August 2021

Active Management Works

I’m keeping an eye on earnings and would be particularly concerned if they begin falling. Remember, earnings (along with interest rates) drive stock returns. I know that earnings won’t grow as fast they did over the past year, but they should continue to grow. If they don’t, that would be a concern for the market. Read More »

With Inflation, Stocks Still Win

Most of the S&P 500 companies have reported earnings now and gains have been exceptional. Jeff and I have often said that, along with interest rates, it’s earnings that drive stock prices. Read More »

Real-Time Economic Slowing

Since the pandemic struck, Dan and I have been keeping an eye on a host of high-frequency data points—like the number of people eating out or flying. Unlike most official pieces of economic data, which are released with a big-time lag, these newer data sets are often updated on a daily or weekly basis. Read More »

Delta Days of Summer

Maybe we should call these the Delta Days of Summer rather than the dog days. On the East Coast, the temperatures have been temperate, while the heat is coming from growing concerns that the Delta variant of the coronavirus is throwing a wrench into the works driving the global economy’s continued upward trajectory. Read More »

July 2021

The New GDP Expansion

Just last week the National Bureau of Economic Research (NBER)—the official arbiter of recessions and expansions—declared that the COVID recession only lasted two months—March and April of last year. Read More »

Correction: No Correction

Wow, that was a quick turnaround. After peaking a bit more than a week ago U.S. stock markets were treading water until, over the weekend, it dawned on folks that the Delta variant of the coronavirus was making its way around the country and having an impact primarily on folks who haven’t been vaccinated. That was enough, I guess, and “boom!” Read More »

Persistence

One thing to keep in mind is this: You probably will hear many of the talking heads on TV saying that we are moving into a period where we’ll see “persistently higher inflation,” and that’s a quote. The trouble is they aren’t willing to stick their necks out and say exactly what they mean by that. Read More »

When An Improvement Isn’t

With stocks dropping from record highs today you might think there’s change afoot in the markets. And in some cases, you might be right. How to explain a 10-year Treasury yield of 1.3% is beyond me. It’s as if investors have decided, almost overnight, that inflation isn’t a concern and that the economy is going to grow slowly, rather than quickly in the months ahead. Read More »

Few Fireworks

With the year’s second quarter in the history and record books, one of the characteristics that stands out to both Jeff and me is how calm the markets have been this year. While there’s been some underlying volatility among certain stocks and occasionally certain sectors, overall, the stock market has been placid. Read More »

June 2021

Everything and Nothing Changed

It seems that while I was welcoming baby Rowan into my family over the past six weeks, everything changed and nothing changed. Clearly, life as I know it has changed—and decidedly for the better! But allow me to turn my eye to the economy, markets and Vanguard. Read More »

The Talking About Talking About Hotline

Federal Reserve Chairman Jay Powell says policymakers are now talking about talking about cutting back on asset purchases and raising the fed funds rate—he even went so far as to say the Fed’s recently ended two-day meeting was, in his words, “The talking about talking about meeting,” a reference to prior meetings where he’d said they weren’t even talking about talking about cutting purchases or raising rates. Read More »

Piquing Inflation Interest

Last week, it was meme stocks. Or was it SPACs? Or bitcoin? I can’t remember anymore because there is so much noise in the markets and the economy. Read More »

Data Whiplash

Inflation is still a hot topic even as it appears to be cooling—at least according to the bond market. Read More »

May 2021

May Showers, Or Flowers?

Well, we’re just a day away from the month’s end, and what a month it’s been. Inflation numbers for April suggest we’re heading for a brave new world of rising prices. But the bond market is saying something different… Read More »

Taper Tantrum or Whimper?

The Federal Reserve’s latest minutes, released on Wednesday afternoon, stirred the markets for a moment. Read More »

Traders Inflate the News

Inflation was on investors’ minds and lips Wednesday when, at 8:30 in the morning, the Department of Labor reported that April’s headline inflation rate had soared to 4.2% from March’s 2.6% rate. Read More »

Stay in May

With the arrival of spring, you are likely to hear the old chestnut that investors should “Sell in May and go away.” Ignore this nonsense. Read More »

April 2021

PRIMECAP versus Buffett

The U.S. economy is in recovery mode. The government’s first estimate indicates the economy grew at a 6.4% annualized pace in the first quarter. The personal consumption component of GDP, the biggest part of the economy, grew at a 10.7% annualized rate. And remember that this activity was during the early stages of the vaccine rollout. Read More »

Mr. Market Goes to Washington

Inflation remains a hot topic, as do inoculations and infrastructure. Jeff and I have talked a lot about inflation and inoculations; let’s get into infrastructure a bit. Read More »

Inflation Talk, Bond Market Walk

The economy is off to the races. Or, at least that is the picture painted by this morning’s economic data releases. Read More »

The Memes They Are a Changin’

It’s early days in the second quarter, but so far it’s as if someone reversed the script, or changed the memes, from the first three months of the year. Read More »

March 2021

Value Factor In The Lead

Tuesday was the one-year anniversary of the pandemic bear market bottom. Care to guess what the best performing fund in Vanguard’s stable was during the past year? Read More »

High Frequency Changes

While Jeff and I are not recommending changes to our Model Portfolios, there are plenty of changes afoot—most particularly in the estimates we’re seeing on first-quarter economic growth. And that’s important because of the expectations that are embedded in stock prices. Read More »

Market Static—Separating Signal From Noise

Is the stock market broken? With the rise, fall and rise of “meme stocks” like GameStop, the rapid rotation from growth to value stocks and the meteoric rise in bitcoin’s price, it certainly seems that if the market isn’t broken, it’s a least behaving differently today than in the past. Read More »

Value Up, Health Care Down

For all the noise around the stock market’s machinations this year it might be surprising to learn that as of Wednesday night the S&P 500 index is up just 1.7% for the year or that the NASDAQ Composite is only up 0.8%. Read More »

February 2021

A Performance Perspective

So far, it’s the year of the meme stock. Just when I thought GameStop was in the rearview mirror, it’s back in the headlines as its price doubled in the final 90 minutes of trading yesterday. Its up another 80% or so today. Other reddit-favorites of day traders, like AMC, also jumped in price. Read More »

Watch the Numbers

After multiple all-time highs the stock market is taking a breather today. Read More »

Beware Transitory Inflation Warnings

If you’ve been following the economic news of late, consumer price inflation just clocked in at 1.4%—that’s a 1.4% increase over the last 12 months—a pretty darned low rate in my book. So why are so many investors, traders and the media sounding the alarm about rising inflation? Read More »

The Economy Is Not The Market

The Congressional Budget Office says the U.S. economy will be back to its pre-pandemic levels by the end of the second quarter, just 4.5 months from now. That’s all well and good and sounds terrific, but it misses the point. Read More »

January 2021

Stop the GameStop

We’ve got some changes recommended for our Model Portfolios. Grab a pen and some paper, and I’ll give them to you in a moment. Read More »

Vanguard Plans Active Bond ETF

Yesterday, Joe Biden was sworn in as our 46th President, and the markets didn’t crater. Read More »

A Billion Here, A Billion There

Prospects for economic recovery took a big hit today, or at least a big hit to optimism. Economists and analysts were expecting maybe a small rise in unemployment claims for the past week but instead got a whopper. Claims jumped to the highest level since August. Read More »

When Stimulus Equals Growth

You might have thought an insurrection—a violent uprising against a government or authority—at the U.S. Capital would have sent the markets into a tailspin. Luckily, our democracy is resilient. Read More »

December 2020

Time To Give

What an incredible year. A global pandemic, an incredibly ferocious bear market followed by an equally ferocious bull rebound, some 100 record closes for the Dow, the S&P 500 and the NASDAQ combined, ultra-low borrowing rates, a surging housing market, the almost instantaneous shift to a work-from-home economy and surge in online commerce, a crypto currency on a moonshot… The list goes on and on. Read More »

Let’s Make a Deal

The week’s been fairly quiet after all the noise about Tesla being added to the S&P 500 index. Read More »

A Healthier Health Care Option

As Jeff and I have both told you in recent Hotlines as well as in the December issue of the newsletter, we’re selling Health Care (VGHCX) today, trading it for Health Care ETF (VHT). Read More »

Is the S&P 500 an Active Fund?

The stock market’s daily gyrations are now seemingly tied to one or both of two things: Vaccine effectiveness, availability and distribution. And fiscal stimulus effectiveness, availability and distribution. Read More »

The HMS Vanguard II Sails On

When does a 28.3% one-month return NOT qualify for the record books? Read More »

November 2020

Giving Thanks in Unexpected Places

This holiday season is shaping up to look and feel very different than those of years past as we face yet another wave of Covid-19 infections. Read More »

Management Factors In

The housing market continues to boom, the jobs market is looking a little worse for wear and could suffer as unemployment benefits run out and no further fiscal support is moved forward, and leading indicators suggest we’re definitely out of the recession but certainly not in robust growth mode. Read More »

A Year in a Week, Or a Day

It’s often said that traders and “the markets” don’t like uncertainty. Well, the past two weeks have seen at least some of that uncertainty answered. Read More »

Relief and Belief

The election is history, but we still don’t have a confirmed president. That will come, but for now the stock market has rallied on relief and belief. Read More »

October 2020

ETF Expenses Hit Bottom

We’re just days away from the election, and while the pundits are having a field day with the voter numbers and polls showing one thing or the other, Dan and I have been focused on a different number today—the first estimate for 3rd quarter economic growth. Read More »

Stocks Yield to Bonds

If the stock markets feel as though they’ve stagnated of late, it may be because we’re seeing fewer days when stocks close more than 1% higher or lower than the prior day compared to September. In fact, we’re running at about half of last month’s rate. Read More »

More Bifurcation

Bifurcation is the buzzword of the moment whether you’re talking about the economy, the markets or, now, inflation. Technically, it’s the division of something into two parts or branches. To Dan and me, it’s the good and the bad, the up and the down, the positive and the negative that has come to characterize 2020. Read More »

October Surprises

We’ll never, ever know what drives stock prices from one day to the next. Over the long haul, yes, it’s earnings and interest rates. But short-term, well, the past week might give a perfect example. Read More »

Recovery is Debatable

The economy is still trying to gather momentum, Covid-19 deaths have passed the 200,000 mark in the U.S. alone, and Washington is still arguing about further stimulus to help the typical American family through the recession that may or may not be over for some, but certainly not for all. Read More »

September 2020

V-Shaped Markets

Jeff and I have some changes recommended for our Model Portfolios. Grab a pen and paper and I’ll give them to you in a moment. Read More »

Reverse Engines

The last will be first and the first will be last—at least over the short term. Through Wednesday night, stocks are down for the month and sectors that have outperformed are now underperforming, and vice-versa. Read More »

Getting the Numbers Right

Well, for a few days there we were reminded that trees don’t grow to the sky. Between Thursday and Tuesday, Total Stock Market Index (VTSAX) fell 7.1%. Most of the decline was led by the stocks that had carried the market up in prior weeks—big tech companies. Read More »

Sir Isaac Newton’s Apple

On its face, today’s report on the number of people filing for unemployment for the first time looks like a win, with the number dropping from over one million to 881,000—still high but headed in the right direction. Read More »

August 2020

Manager and Money Market Musical Chairs

Over a million people filed for unemployment for the first time last week, suggesting once again that the jobs situation is not good. Read More »

Doubting Retail’s Rebound

Stock investors are either denying or looking way past the economic damage wrought by the coronavirus, having pushed the S&P 500 index to its first new high since February. Read More »

Smart Money Sells Gold

The biggest of the big tech stocks—really, growth stocks since even S&P doesn’t think of Amazon as a tech stock—are driving market returns this year. Read More »

Searching for Short Yields

The jobs picture brightened slightly last week as 1.19 million people filed for unemployment for the first time. That’s the lowest level since March and is certainly a step in the right direction—though it is still roughly double the worst numbers we saw in the Great Recession of 2008 to 2009. Read More »

July 2020

No Value in U.S. Value—As We Said

The economy is front-and-center this morning with reports that economic activity cratered during the second quarter and layoffs increased for the second week in a row. Read More »

Bad… And Maybe Getting Worse

With Covid-19 cases and, regrettably, now deaths on the rise in much of the U.S., our economic recovery is at risk of stalling out. Read More »

More “Take Your Pick”

The “take your pick” economic news continues to confound investors while medical news appears to be driving stocks. Read More »

Never a Dull Moment

On the pandemic and economic front, there isn’t much new to say. Cases of COVID-19 are on the rise in the South and Southwest, forcing many early-to-open states to reverse course and rethink their policies to varying degrees. Read More »

Data Gives “V” Some Verisimilitude

You can view the economic bounce off of the recession’s bottom as evidence of a “V-shaped” recovery or, as I see it, an initial rebound that tapers rather quickly. Read More »

June 2020

Economic and Market Tipping Points

We may be at a tipping point when it comes to the economy and the markets. Read More »

Economy Half-Full or Half-Empty?

In this recession, the economy took the elevator down, as we sheltered-in-place to slow the spread of COVID-19. Read More »

Rally Rationale

Well, it’s official, we are in a recession. This past week, the National Bureau of Economic Research (NBER) told us what we already knew, that the economy peaked in February. Read More »

Why?

The question that people keep asking me is, “Why?” Why is the stock market rising so fast and furiously? Read More »

May 2020

Unintended Consequences

Jeff and I have changes recommended for two of our Model Portfolios. Grab a pen and paper, and I’ll give them to you in a moment. Read More »

Bad… But Getting Better

If I had to sum up the current economic situation in a sentence, I’d say, “It’s bad… but getting better.” Read More »

Shifting Sentiment and Stocks

For the year through Wednesday, the U.S. stock market’s best-known gauge, the Dow Industrials, has dropped 18.5%, and the S&P 500 index is down 12.7%. Read More »

The Market is Not the Economy, and Vice Versa

To say that we are living in unprecedented times would be a vast understatement. Over the past seven weeks, almost 33.5 million people have filed for unemployment benefits for the first time—a stunning number. Read More »

April 2020

Data Dependence

The economic data reflecting the impact of the coronavirus pandemic on the U.S. economy is starting to roll in, but it’s early and it’s incomplete. Read More »

I’ll Pay You to Take My Oil

You can file this under the list of historic market events we’ve experienced over the past two months or so: The price of oil went negative for the first time in history. Yes, you read that correctly. Read More »

The Shape of Things to Come

We’re only just beginning to get real numbers on how the coronavirus pandemic has impacted our economy and, well, the numbers are ugly. Read More »

Bonds for the Long Run?

Good news everyone… We are in a new bull market! Or at least that’s what some headlines are saying. Read More »

Predictably Uncertain

To say that the current pandemic has thrown us into uncharted territory would be a vast understatement. Read More »

March 2020

Stocks Rise as Ugly Data Arrives

3.28 million. That’s the number of people who filed for unemployment insurance for the first time last week. Three-point-two-eight million is four times the previous record for a single week’s unemployment filings going all the way back to 1967. Read More »

Getting By with a Little Help

For better or worse, we are living history. A pandemic has spread across the globe and, to combat it, entire cities and countries are hunkering down. Read More »

Keep Your Eyes on the Horizon

We are living through extraordinary times. As the coronavirus pandemic sweeps the globe, economic activity is slowing down or, at a minimum, changing dramatically, and most investment markets are dropping precipitously. Read More »

Pandemic Pandemonium

It’s been the second of two very unsettling weeks, both from a world health perspective and an investment perspective. Read More »

Special Update

Over the weekend, a dispute between Saudi Arabia and Russia over oil prices sent the crude market into a tailspin, adding cheap fuel to the fire that is the coronavirus scare of 2020. Read More »

Yields Plumb New Lows

Okay. So, the questions that I guess are on everyone’s minds are: How bad the coronavirus will be, when we’ll see it spread more widely across the U.S., whether it will spark a recession, how the stock market will respond, etcetera, etcetera. Read More »

February 2020

A Coronavirus Cure-All

How quickly things change. Last week, I talked about the stock market’s most recent record high—the 13th high of the year despite the growing spread of the coronavirus across two dozen countries. Well, that was then. Read More »

The Day the Yields Died

Markets have been remarkably resilient to the coronavirus. Read More »

Viral Narratives

U.S. stock markets continue to set records, and now Europe is joining in. Yesterday, both the German stock market and the European STOXX 600 index set record highs. Read More »

Last Week’s Worries Transitory

The headline worries of a week ago are apparently less worrisome this week. President Trump was acquitted. The U.K. formally split with Europe, but it will be 11 more months before anything really changes. And the coronavirus, while still a very real humanitarian concern, appears less of an economic concern. Read More »

January 2020

Markets Go Viral

The weight of uncertainty surrounding the Chinese coronavirus and both its spread and virility has put a damper on traders’ enthusiasm. Read More »

The More Things Change, The More They Stay The Same

Stock markets have sold off slightly from the record highs hit earlier this month and, of course, why am I not surprised? Here at home, we have impeachment hearings and a phase-one China trade deal that didn’t do anything but provide a backdrop for some positive press. Read More »

Trade Deal And Trump Trial

The House sent the articles of impeachment of President Trump to the Senate today, which means we’ll be witnessing just the third presidential impeachment trial in our country’s history—starting next week. Read More »

Investors Shrug Off Threat of War

Well, that was… far less dramatic than I expected. A week ago, the U.S. assassinated a leading Iranian general—ratcheting up tensions in the Middle East. Read More »

Vanguard Follows, Doesn’t Lead on this Fee Cut

The stock market is soaring today, and Jeff just quipped to me that “As goes the prior decade, so goes the first trading day of the new decade.” That’s what passes for investment humor around our offices. Read More »

December 2019

Fee Wars for Hearts and Minds

What a decade it’s been. Read More »

Barrow, Hanley Fired

A major change at Vanguard rumbled through several of its funds, but that tumult was nothing compared to history in the making in our nation’s capital. Read More »

Let’s Make A Deal?

We’re going to hit a bunch of deadlines in the next few days but, that said, investors have gotten bullish again and the S&P 500 index flirted with, and then surpassed the high hit on the last day of November—closing up just shy of 0.9%. Read More »

“I’ll Trade Ya!”

Global trade was back in the headlines this week as the President and his Commerce Secretary went public about progress over “phase one” of a trade deal with China as well as whether they could, in fact, wait until after next year’s election before really buckling down on the hard stuff. Read More »

November 2019

Records Without Rancor

Despite the fact that there wasn’t a whole lot of new news this week, stock markets continued to climb. Yes, the impeachment process continues to dominate headlines and airtime. Meanwhile, the U.S. and China inch toward agreeing to “phase one” of a larger trade deal. Read More »

Brexit What? Tariffs Who?

Brexit what? Tariffs who? Investors and traders have been focused on the impeachment proceedings in Washington while domestic markets have continued to hit new highs. Though they’ve backed off over the past few days, both the Dow and the S&P 500 hit all-time highs on Monday, and the NASDAQ Composite hit a high on Tuesday. Read More »

Don’t Be Defined As Growth or Value

Between impeachment hearings, the on-again, off-again nature of a potential trade deal with China and Brexit negotiations dragging on and on, there are plenty of unknowns facing investors. Read More »

Trade Treaties, Fee Cuts, Service Problems And Record Highs

The S&P 500 Index closed at a new high on Monday and looks poised to do so again today. At some point, the next new high will be the “last” new high before a bear market. Who knows? Maybe today is the top before a bear market—or simply a stepping stone to further gains. Read More »

October 2019

Strong Data and Few Scares

Over the past week, nothing of consequence happened in the markets or the economy, the global trade war was declared over and, oh yes, the U.K. exited the EU and is now considering declaring Boris Johnson king.

Just kidding—that’s my trick for the day. Read More »

Plenty More to Come on Brexit and Trade

Well, it sounds like Brexit will be with us for a few more months—at least. This week, Parliament endorsed Prime Minister Boris Johnson’s deal to leave the EU in principle. It was a win for Johnson, but then lawmakers immediately voted against fast-tracking the 110-page bill. Read More »

Deal or No Deal?

Deal or no deal? Over the weekend, it seemed U.S. and Chinese negotiators had reached a trade deal, but that was quickly questioned. Read More »

To Your Good Health

Last Friday’s jobs report was a mixed bag, but ultimately generated optimistic sentiment among traders who bid stocks up 1.4% for the day. Unemployment fell to 3.5%, which is the lowest since the 1960s. Read More »

Slow Down and Slowdown

The media is making lots of noise about how this is the stock market’s “worst start” to a quarter in about 10 years. Well, with two trading days under our belts that’s quite the statistic. Not! Read More »

September 2019

The Trend Trumps Impeachment

Impeachment is the buzzword of the week. Whether or not the president is impeached is hugely significant for our country’s governance and the political environment we find ourselves in. Read More »

Uncertain About Uncertainty

Vanguard Chief Economist Joe Davis seems to be backing down on his calls for massive interest rate cuts by the Federal Reserve—though it’s all couched in somewhat obtuse language. Read More »

Growth Still Has Value

We’ve seen a nice little rally in the stock markets lately. As I record this, both the Dow and S&P 500 indexes are fractions away from the all-time highs they set in mid- and late-July, respectively. Read More »

Recession-Calling Super Power Overrated

Once again, stocks are rallying today on hopes that China and the U.S. can reach a trade truce. The two countries expect to hold talks in October, with preliminary meetings between the folks who actually get things done later this month. Read More »

August 2019

Recession Obsession

The following question comes up more frequently these days: How do you “recession proof” your portfolio? Read More »

Fee Wars III

Both headlines and markets have given investors whiplash this month. Are we nearing a trade deal with China or are we suddenly imposing more tariffs? Is the economy growing just fine or do we need tax and interest rate cuts? Do efforts to goose the economy work or are they simply adding to our already-massive national debt? Is the yield curve inverted or not? Is Europe in recession? Read More »

A Not So Good, Very Bad Week—For Vanguard

On Monday, we were in a trade war with China, and stocks dropped like a stone. On Tuesday, the trade war was off—or at least delayed until 10 days before Christmas to give consumers some relief, so stocks rallied back. And Wednesday, well, give me a second. Read More »

Defeat Volatility By Extending Your Time Horizon

If you don’t like the weather in New England, just wait a few minutes. Mark Twain may or may not have actually said that. But that same sentiment could certainly have been applied to the stock markets yesterday. The reason for all this volatility circles around trade tensions with China and fears that the global economy is slipping into a recession. Read More »

From Malvern to DC—Changes Abound

After a deflating end to July, August opened with a bang with a big first-day rally turning into a big drop after the President surprised traders and policymakers with a decision to impose yet another 10% tariff on Chinese imports. We also got a slew of big changes out of Vanguard HQ. Read More »

July 2019

Vanguard Hoovers Dollars While Timing the Market

Vanguard continues to eat the financial world’s lunch—hoovering up assets left and right. According to Bloomberg, of the $39.1 billion that investors have poured into tax-exempt bond funds this year, $12.7 billion, or nearly a third, has gone into Vanguard funds. Read More »

A Zero-Yield 10-Year Treasury

One of Wellington Management’s best small-cap growth investors has been tapped for an international stock fund, according to a press release and SEC filing Vanguard posted this morning. Read More »

Fed Policy Expectations Are Driving Stocks

Sometimes good is bad. Last Friday’s jobs report was good—better than expected with 224,000 new jobs being created even as the unemployment rate was ticking up a tenth of one percent to 3.7%. Read More »

Holiday Ho-Hum

The photo-ops from both the G-20 meeting and the Korean demilitarized zones were the news over the weekend—oh yes, and there was agreement that the U.S. and China would try to move ahead on trade talks again, while the U.S. and North Korea would try to move ahead on nuclear talks again. Read More »

June 2019

Trade Tweets to Tell a Tale

All eyes (and ears) are on Japan and the G-20 meeting where it won’t be what happens at the meeting per se, but what happens on the sidelines between the presidents of the U.S. and China when they come together to try and hammer out a trade agreement. Read More »

The Fed Loses Patience

Vanguard’s Global Chief Economist Joe Davis got it wrong (as Dan said he would), as the Federal Reserve held steady on interest rates—again, as Dan said it would. Read More »

I’ll Take That Bet

It won’t be closure by any means, but in the next two weeks, we’ll get a lot more information on two of the biggest concerns Wall Street has right now—interest rates and China. Read More »

It’s All About … Mexico (and a little China and Brexit)

Trade, trade, trade. First it was the issues around Brexit and trade within and outside of the E.U., then it was China and a ratcheting up of tariffs on a slew of goods, and now it’s Mexico. That’s not to say that either Brexit or China are solved—far from it. Read More »

May 2019

No Time For Timing

Given the recent market declines and some naysayers’ rumblings, I expect to hear a lot about 50-day and 200-day moving averages in the days and weeks to come. One market timing gospel is that when the S&P 500 index drops below both the average of its last 50 closing prices as well as its last 200 days worth of closes, it’s time to sell. When it gets back above both, it’s time to buy. Read More »

Red Flag Waving

Two weeks ago, I told you it was all about China. Last week, Jeff said it was still all about China. Well, nothing has changed. Yes, worries about Brexit (the British exit from the E.U.) are now giving way to fears of the consequences of a Mexit (Prime Minister Theresa May’s expected exit from office). Read More »

It’s Still All About China

Last week, Dan said that it was “all about China” and, well, it still is. News, or even rumors concerning the state of negotiations over what are still trade tariffs, but which could escalate into a full-blown trade war are what’s driving the stock market up and down. Read More »

It’s All About China

Forget the purported earnings recession, which appears to have been ameliorated for the moment. Read More »

Vanguard Helps Index Investors Avoid Taxes

We very well could be in the middle of something called an “earnings recession,” but that isn’t a reason to panic. Read More »

April 2019

Post-It Here. All Indexes Are Not Alike

I’ve got changes recommended for one of our Model Portfolios. Grab a pen and paper and I’ll give them to you in a moment. Read More »

Unicorns and New Heights

If you count dividends, which you should, the bear market we suffered through in the fourth quarter last year ended last Friday. 500 Index (VFINX) gained 24.4%, including dividends, over the 75 trading days from Christmas Eve through last week to reach a new all-time high. Read More »

The European Union’s Ghoulish Humor

Is it a cruel signal or just happenstance that the European Union has now given the United Kingdom until October 31 to get its Brexit act together? Read More »

Two Down and Another New One to Come

Last month, it was Convertible Securities that was shuttered. Tomorrow, it’s Morgan Growth (VMRGX) merging into U.S. Growth (VWUSX) and going away for good. Today, Vanguard said it has a new fund in the works—Commodity Strategy. Read More »

March 2019

You Say Inversion, They Say Recession. Let’s Call the Whole Thing Off.

The amount of ink being spilled and air time being wasted on talk of a “yield curve inversion” and “recession” is out of control. And see, I’m about to do it too. But I’m doing it to try to add some perspective to the mess and the madness. Read More »

Fee Wars and Fraud

First, from the annals of irrelevance: According to yesterday’s Wall Street Journal, the S&P has averaged a 0.02% gain on “Fed decision days” versus the average 0.03% daily gain for the index over the last five years. What happened after they printed that story? The Dow dropped 0.55% and the S&P fell 0.29%. So much for the averages. Read More »

The Stock Market Is Up and Down

Both Dan and I are out of the office tomorrow, so I’m bringing you this week’s Hotline a day early. Read More »

10 Year Returns Go Parabolic

Just as Vanguard jumped on the “factor” train with its low-cost factor ETFs a year ago, it’s now going whole-hog into the ESG marketplace. Read More »

February 2019

Say Goodbye, VanguardAdvantage

It’s been a headline-filled week with something for everyone—though little of it has had a direct impact on investors, other than President Trump’s announcement he would delay increasing tariffs on China after substantive trade discussions. Read More »

Vanguard Pushes Strategy

Consider some of the major worries of the fourth quarter: a U.S. and China trade war, Brexit and the lack of a plan for how to accomplish what a majority in the U.K. now wish wasn’t going to happen, recession risks in Europe and what turned into a record-long U.S. government shutdown. Only one of those—the U.S. government shutdown—has been resolved. Read More »

It’s Valentine’s Day. Eyes on your Dates.

It’s Valentine’s Day and while you’ve probably been focused on just who you’ll be delivering chocolates to tonight, I’ve been focused on some other dates of consequence. Read More »

Time to Reassess Allocations and Risk

For most investors, I’m hoping the fourth-quarter decline was a non-event. Your long-term savings and investment plan should be built to accommodate the inevitable but temporary market dips that are part and parcel of being an investor. Read More »

January 2019

Strong Opening

The government is open for business, earnings reports are coming in a bit better than the drastically-lowered expectations that followed 2018’s fourth-quarter tumult, and the Federal Reserve is now on hold, as economic weakening both here and abroad (and hopefully not political pressure) has led the Fed governors to decide that enough is enough for the time being. Read More »

Investing is not Baseball

The government’s partial shutdown continues and now the White House’s chief economist Kevin Hassett says that there could be zero economic growth in the first quarter unless something changes. That would be terrible, but worse is the fact that hundreds of thousands of government workers are, tomorrow, about to miss out on their second paycheck of the year. That begins to hurt, big-time. Read More »

A Visionary Passes

I begin today’s Hotline on a somber note, as Vanguard’s founder and former chairman, Jack Bogle, passed away yesterday from cancer. Bogle will rightly be remembered as the father of the index fund and the leading proponent of and force behind low-cost investing. He made investing accessible and saved us millions of dollars in the process. Read More »

Stocks Are Down…Over the Past Year

The year is young, but so far, it’s also been profitable. As you know, both Jeff and I thought the selling at the end of 2018 was overdone, as there really was no reason for the panic that some investors apparently succumbed to. The economy was still growing, interest rates were still low, unemployment was still scraping lows we haven’t seen in years. Plus, for all the yammering, a trade war had still not ensued—and still might never, since it doesn’t behoove either party, the U.S. or China, to engage in their mutual self-destruction. Read More »

Will Vanguard Turn the Technology Corner in 2019?

Since we are only two trading days into the year, I’ll point you toward the Outlook in the latest issue of the newsletter—which should’ve hit your email inbox last night—for comments on the market and economy. I’ve got plenty of Vanguard-related events to update you on today instead, including continuing technology problems and another fund that’s closing for good. Dan and I keep telling you to watch what you read on Vanguard’s website—and that’s for good reason, as you’ll see. Read More »

December 2018

Volatility and Opportunity

What a roller-coaster ride into the end of the year it has been. Yesterday the stock market surged and today it did loop-the-loops. The Dow Jones Industrial Average made a 3.8%, 871-point turn from low to high and ended the day 1.1% higher. Traders are confused. It’s tough to figure out just what Treasury Secretary Mnuchin was trying to accomplish with his Sunday tweet and subsequent statement that he’d confirmed with the CEO’s of the country’s six largest banks that they all had adequate liquidity for lending. The notion that banks were somehow not in strong financial shape was not an issue going into the weekend but became a big one on Monday when markets reopened, and dropped almost 3%. The 6% or so gains over the two days since then just accentuate the confusion that reigns on Wall Street. Read More »

Manager Musical Chairs—2018 Edition

Let’s start with the Federal Reserve, which executed a quote-unquote “dovish rate hike” on Wednesday. What does that mean in English? It means policymakers raised the fed funds rate on Wednesday by 0.25% to a target range of 2.25% to 2.50% while also saying that there will be fewer interest rate hikes in the upcoming year than previously anticipated. Another way to look at it is Chairman Jay Powell and colleagues have enough confidence in the economy to hike interest rates today, but will need to see more growth in 2019 before committing to further action. Read More »

Holiday Shopping for Bargains at the (Stock) Market

Before discussing the markets this week, let me quickly remind you that capital gains distribution season has arrived. Vanguard funds started paying out distributions on Wednesday. Some ETFs are paying out gains and income tonight, but we’ll see more funds distribute next week. Just this week, Vanguard updated some numbers on expected capital gain distributions as well as income distributions. We did some calculations and found that a few funds saw their estimates go up and a few went down, but those with the biggest distributions remain the same. Read More »

Inversion Immersion

Traders are having their time in the sun, taking the stock market down on a host of worries that, they must have concluded, are going to be the death knell to this bull market. Their obsession this week is yield curve inversion. An inverted yield curve? Well, maybe. Because there’s an inversion in a short segment of the yield curve, between 3-year and 5-year bonds, all of a sudden the worrywarts are headed for the hills. Read More »

November 2018

Consumers Set Online Sales On Fire

According to Adobe Analytics, which tracks sales at 80 of the top 100 online vendors, including Wal-Mart and Amazon, online sales were on fire this past holiday weekend. Online sales increased 28% on Thanksgiving Day compared to 2017 and were up 24% on Black Friday. Cyber Monday was another big day, with sales jumping 19% to $7.8 billion. Amazon didn’t report dollar amounts, but said that Monday’s activity was its biggest shopping day ever and that customers ordered more than 180 million items during the five-day period from Thanksgiving through Monday. While online sales were up, it is estimated that brick-and-mortar foot traffic fell 1% on Thanksgiving and Black Friday compared to a year ago. Read More »

Market Reset

First off, Jeff got it exactly right in the story he wrote on page 14 of the October newsletter. Monday, Vanguard announced that it is getting rid of the higher minimum on its lower-cost Admiral index funds. Effective Monday, the Investor shares of Vanguard’s index funds are closed to new investors, and the minimums on the Admiral shares have been dropped from $10,000 to $3,000. Remember, this is for index funds only. Read More »

Points Versus Percentages

Consumer prices increased 0.3% in October—the highest monthly rate since January—leading to a 2.5% headline inflation number for the last 12 months. A bounce in energy prices was a factor, and of course with oil now headed south, it should be a factor going the other way in November. At core, taking away the energy and food price components, inflation is running about where it has been, at 2.2%. I think this gives the Fed policymakers plenty of cover for another 25-basis-point interest rate increase at the conclusion of their December 19 meeting. Read More »

Gridlock is Good

It may be true that politics don’t drive the investment markets over the long haul, but boy, they sure seem to have had an impact over the short-term this year. Look at it from a risk-on, risk-off perspective. Through the end of September, the top sectors, using Vanguard’s ETFs as a proxy, were the technology, health care and consumer discretionary groups of stocks. Then October arrived with the rising rhetoric around a very contested and contentious mid-term election. Read More »

A Market and Vanguard Website Refresh

Let’s get a couple of Vanguard housekeeping items out of the way. First, maybe Vanguard is finally hearing the message about their ongoing technical issues, but their most recent response has people pretty upset. Vanguard.com is going offline this coming weekend—Vanguard is saying it may be the entire weekend, or maybe only through 4 pm on Sunday, but of course it could be shorter than that, or not. Why the shutdown? They aren’t saying, and even if they were, it would probably be along the lines of, “We’re making substantial improvements to the site.” As for details, forget it. They’ve offered none. Read More »

October 2018

Below-Average Retrenchment

Okay, it’s been a couple of tough weeks in the stock market, with the Dow Industrials falling more than 8% below their October 3 all-time high and the S&P 500 index falling more than 9% below its late September high. Are you worried, nervous, trying to stifle your flight instincts? Get over it. Read More »

Don't Fret Rising Volatility

Given the stock and bond markets’ moves over the past couple of weeks, I wanted to hit on two broad topics in today’s Hotline: volatility and bonds. Let’s start with volatility because, well, it’s back. Last week, the Dow was down 832 points and then 546 over two days. It then saw a 548-point up day this week. With the Dow in the 25000 to 26000 range, it should come as no surprise that we see triple-digit changes on a regular basis. Read More »

A Network Connectivity Issue

Weighing whether yesterday’s market drop is a bigger story than Vanguard’s failure to allow investors to trade, I’d say the Vanguard story is. On a day when the Dow and the S&P 500 index both dropped more than 3%, Vanguard’s website failed. “A network connectivity issue” was the stated reason, according to a tweet Vanguard repeatedly sent out in response to clients who themselves tweeted about their inability to log in or trade. One suggested workaround was to ignore your bookmarks, type in Vanguard’s URL, log in, and then go to their “CDs & Bonds” portion of the website. If that makes sense to you, you’re better versed in this stuff than I am. When I finally logged in and tried to make a trade just to see if things were working, the system froze. Answer to my question: No, the system was not working. Read More »

Don't Believe Peak Earnings Hype

With the Dow having hit two all-time highs over the past two days, the bull is still running despite the fact that stocks stumbled today—the Dow is off a little over 1% as I record this—and who knows, maybe this is the beginning of the next bear market. I doubt it, but it is possible. Remember that any time the market hits a high, it only has two ways to go the following day: either to a new high, or down. The crux of the matter is that we can’t know whether this is a pause that refreshes or the last gasps of the bull. We will find out with time. Read More »

September 2018

Higher Tariffs, Rates and Profits

With Monday’s imposition of a 10% tariff on another $200 billion of Chinese goods, the U.S. has now imposed tariffs on a total of $300 billion of U.S. imports, which is a bit more than 10% of all imports into the country. I should note that the 10% Chinese tariff will rise to 25% in January. Trade-policy makers may have kept the initial rate low to ease the way for consumers, who will begin to feel the impact on their wallets more than they did during the first round of China tariffs, which tended to focus on goods used earlier on in the production cycle, not direct-to-consumer goods. Read More »

All That Glitters Ain't

It isn’t a trade war, but the skirmishes are becoming more intense as the Trump Administration is now going to impose a 10% tariff on another $200 billion in Chinese goods and will ratchet that up to 25% on January 1. If this is a negotiating ploy, it’s a pretty aggressive one. It’s not clear how the Chinese will match the latest round of tariffs, but so far Wall Street doesn’t seem overly concerned. In fact, both the Dow and S&P 500 hit records today, marking the 205th and 207th records for each, respectively, since this bull market began nine-and-a-half years ago. Read More »

Make Mine a Double

Two days from now, Saturday, will mark the 10-year anniversary of what many refer to as the catalyst for the bear market that accompanied the Great Recession—the bankruptcy of Lehman Bros. That bankruptcy filing and the resulting problems in the money market arena, the banking and hedge fund arenas, and finally the mortgage debt arena set off a cascading trail of woes that led to the Federal Reserve’s and the government’s historic quantitative easing and bailout programs. Ultimately it also led to the stock market’s enormous declines that ended on March 9, 2009. Read More »

Don't Bet On Stock Market Carnage

For years, Dan and I have run the numbers and reported to you that it’s not October—famous for the October 19, 1987, Black Monday meltdown and other seminal market downturns—that is the worst month of the year, on average, for stock investors. It’s actually September. And the media has caught on. But recent headlines have been ridiculous, which I guess I should have expected because the stock market is near an all-time high. My favorite headline this past week was that investors were due for “carnage” in the stock market, which is how an analyst at Ned Davis Research put it and Barron’s reported it. Really? Carnage? Read More »

August 2018

Income on the Rise

Friday’s speech by Fed chairman Jay Powell pretty much cements another fed funds rate hike in September. And the bets are pretty strong that there’ll be yet another in December, putting the rate at 2.50% before year-end. If the Fed follows that script, expect the cries of an inverted yield curve to ratchet higher as the year draws to a close. Even if we do see the yield curve invert—meaning short-term bond yields are higher than those on longer maturity bonds—that doesn’t spell immediate economic doom. Read More »

Bull-Market Record Bull

You’d have to have spent the last week under the proverbial rock (or at the beach without a link to the outside world) to have missed the avalanche of stories about the bull market hitting a record length yesterday, as well as the stories about how it actually hasn’t hit a record. Yes, the press has made this into a story that everyone can get behind. I’m in the “it’s not a record” camp, because the 1990 to 2000 bull market that many say was the longest bull market until this one actually started in 1987. Read More »

Taking 40% Odds

Debt is in the news this week. No, not debt like bonds, but household debt. If you only saw the headlines showing that consumer debt had risen to an all-time high in the second quarter, about $13.3 trillion, you might have thought the U.S. economy was in trouble and it would only be a matter of time before consumers would begin defaulting and the economy would come crashing down. Read More »

A Bias Against Home Bias

I always say that dividends matter, and that’s particularly true this week as the season for reporting second-quarter earnings and possible dividend increases winds down. But it’s also true because twice this week the S&P 500 hit an all-time high—no, not the index, but the total return index. Let me put it another way—if you own 500 Index (VFINX) and reinvest dividends, your account value hit all-time highs this week. Why? Dividends matter, and when you count dividends, we’re at record levels. Plus, high-quality mid-cap and small-cap stocks like those found in the S&P 400 and S&P 600 indexes hit highs this week even if you don’t count dividends. Read More »

Zero Bound

We’ve got changes recommended for three of our Model Portfolios. But first, let’s talk about GDP and the size of the U.S. economy. Dan and I expected the second quarter would be the first to see the U.S. economy cross the $20 trillion mark. Well, lots of revisions to the data put nominal GDP at the end of June at $20.40 trillion, but it also put Q1 GDP at $20.04 trillion–so the first quarter was actually the first $20 trillion mark for the U.S. economy. Read More »

July 2018

Dividends Matter

The stock market hit a record high yesterday. No, not the S&P 500 index, nor the Dow Jones Industrial Average index, at least on a price basis. But it hit a high nonetheless. Remember that I always say that dividends matter. Well, the S&P 500 index, on a total return basis, hit an all-time high Wednesday night, its 12th of the year, even though the index itself remains 0.9% below its high. Read More »

Investing Through the Wash Cycle

For all the issues faced by investors around the globe, growth could be strong this year and next, according to the International Monetary Fund, which is predicting that the global economy will grow 3.9% in both 2018 and 2019. Yes, as they put it, growth will be unevenly distributed, with some countries growing much faster than others. But in my mind, that’s a given. Read More »

Name That Tariff

Here’s a quiz of sorts. What do ceramic roof tiles, frozen okra, ATMs, manure spreaders and inflatable boats have in common? The answer may not surprise you if you’ve been keeping track of the current trade-war news. Read More »

Fee-Free Fireworks

Is Vanguard promoting trading, or investing, with its initiative, announced on Monday, to broaden the scope of its transaction-free ETF trading platform and include products from Schwab, iShares, State Street and others? Read More »

June 2018

Do No Harm?

Let’s start in Malvern this week. Vanguard announced yesterday it plans to introduce two new ETFs with environmental-social-governance, or ESG, objectives. (ESG is the industry’s new moniker for SRI, or socially responsible investing.) ESG U.S. Stock ETF will track U.S. stocks that meet FTSE’s ESG criteria, while ESG International Stock ETF will track non-U.S. stocks. Their expense ratios, at just 0.12% and 0.15%, will be compelling. But will that be enough? Read More »

Tariff Tiff to Trade War?

Trade skirmishes may be giving way to a full-on trade war if cooler heads don’t soon prevail. Upping the ante on China, the Trump Administration is now talking about tariffs on $450 billion worth of goods versus just $50 billion. One estimate I saw said that we could be looking at a 10% increase overall in consumer prices on the foreign goods we buy or on those that are made with foreign components. How’s that for inflation? So far, of course, it’s mainly bloviating, but it’s getting increasingly worrisome. The problem, of course, is that you can’t really invest around political talk—you just have to hope that those cooler heads I mentioned come through. Read More »

Europe Plays Catch-Up

As has become the norm, this week was another filled with high-profile events on the world stage. Any goodwill generated at the G7 meeting didn’t last the weekend, as President Trump and Canada’s Justin Trudeau exchanged barbs. President Trump then met with North Korean leader Kim Jong-un in Singapore. In a turnabout, while Trump didn’t sign an agreement with his G7 partners, he did sign one with North Korea. Read More »

Shots Fired in Trade Skirmish

Is this what the start of a trade war looks like, or should we call this a trade skirmish? On Friday, the U.S. imposed tariffs on steel and aluminum imported from some of our closest allies—Canada, Mexico and the European Union. These countries had been granted relief to allow time for negotiations, but President Trump’s hourglass ran out. Not surprisingly, our allies are not taking the tariffs sitting down. Read More »

May 2018

A Month of Reversals

Despite the fact that stock markets closed today’s trading with a loss, May still came in positive, as the S&P 500 index gained 2.2% for the month, putting it up 1.2% for the year. On the other hand, the Dow Jones Industrials gained just 1.0% this month and are down 1.2% for 2018. This mixed message about the year’s stock market returns is a kind of metaphor for the month. Read More »

Rising Rates Haven't Killed the Bull Market

I didn’t realize you could put a war on “hold,” but that what’s going on in the multi-billion-dollar U.S.-China trade war spat. While the numbers that are currently being bandied about–from $150 billion to $200 billion–sound big, the optics are even bigger. Plus, remember the ban on selling electronic parts to China’s ZTE because the company was selling goods to rogue nations like North Korea? Well, not only aren’t they going to be held accountable for skirting trade sanctions, but now the Trump Administration is looking to help put them back in business—all in the name of negotiating a better trade deal with the Chinese. Read More »

More Uncertainty, Less Volatility

Small stocks have set records the past couple of days, with the Russell 2000 index and the S&P SmallCap 600 index both hitting all-time highs last night. One theory is that with a slowdown overseas and lingering concerns over trade tariffs, the better bet is on companies that generate most, if not all, of their business domestically. Smaller companies, rather than global behemoths, fit that bill. SmallCap Index (NAESX) is up 4.4% for the year through Wednesday, while 500 Index (VFINX) is up only 2.5%. Read More »

Warren Buffett's Windsor Fund

Geopolitics are dominating the headlines this week. President Trump has pulled the U.S. out of the Iran deal and plans to reinstate economic sanctions. Meanwhile, a meeting between Trump and North Korea’s Kim Jong-un has been scheduled for June 12 in Singapore. Rising oil prices reflect the increased uncertainty in the Middle East, but otherwise the market response has been muted this week, and the “fear gauge” that has been at the center of Wall Street’s attentions when it comes to volatility has been falling steadily. Read More »

Almost as Flat as a Pancake

So, U.S. stocks eked out a gain in April, when you count dividends, and in the first few days of May, they’ve been down. Volatility rose, but is now coming back down as well—though you wouldn’t know it looking at the way the Dow bounced around today, at one point down 394 points and at another up over 70 before ending with a 5-point gain. Read More »

April 2018

Stocks at an 8% Discount

Dan and I often talk about the stock market being driven by earnings and interest rates. Is that what’s driving stock prices now? Let’s take a look. I’ll start with interest rates, because the financial media has been obsessed with rates this week. Why? Well, after a slow approach, the yield on the 10-year Treasury crossed the 3% mark for the first time since the end of 2013. Higher interest rates make bonds more competitive for investor dollars and, well, a yield with a “3” in front of it is more attractive than one with a “2” in front of it. Read More »

After a Calm, Freshening Breezes

With the U.S. and allies launching an air strike in Syria over the weekend, many were expecting another bumpy week in the stock markets. Fortunately, stock market volatility took a bit of a breather this past week (though it’s popped up a bit today) as Wall Street began focusing, importantly, on earnings reports. The bottom line is that bottom lines are doing very nicely thank you, which helps make valuations look a bit more reasonable. Read More »

Short-Term Wins Part of Long-Term Excellence

As trade war fears diminished, the markets generally gained ground this week. Still, traders had a range of prickly situations to contend with. Determining how any of those events play out and what their subsequent market impact will be is no easy task. Weeks like this—actually, years like this—make me glad to be an investor, not a trader. While I don’t completely ignore the world around me, as a long-term investor I don’t have to respond to every headline or react to every twist in the market. Read More »

Normal Markets, Abnormal Concern

Has the latest market turmoil got you in a tizzy? It shouldn’t. If you’ve been investing with me since 1991, or even since 2000 or 2008 when we went through two tremendous bear markets, then you know that “time in the markets, not market timing” is the key to making money over the long haul. Being aware of the risks in the markets and in your portfolio doesn’t mean you should try to trade around them. You shouldn’t. Just build a portfolio that matches your tolerance for volatility and can help you achieve your objectives. Then stick to it. Read More »

March 2018

Can Tit-for-Tat be a Win-Win?

The market’s “Tariff Tantrum” over the $50 billion to $60 billion levy on Chinese imports that was announced on March 22, one week ago, was pretty routine, but traders took the announcement and ran with it. Meanwhile I’m going to assume that investors, who tend to have a timeframe that extends beyond five nanoseconds, took the announcement in stride. Read More »

Trade Uncertainty

At the Federal Reserve’s first meeting under Jerome Powell’s watch, the committee (not surprisingly) decided to raise the fed funds rate 25 basis points to a range of 1.50% to 1.75%. This was the Fed’s sixth interest rate hike since the end of 2015. While one meeting doesn’t make a trend, it appears that the Powell-led Fed is following the course set out by the previous Fed chair, Janet Yellen. Read More »

No March Madness

>The Fed wants inflation at 2.5%, as measured by the CPI, or 2.0%, if you’re looking at the PCE (which happens to be their preferred bogey). Well, this week we got CPI data showing inflation running around 2.3% for February and core inflation at 1.9%. All of this despite the January increase in incomes that sparked worries that inflation would begin to run rampant. What happened? Well, for one, auto sales have remained sluggish, as the post-hurricane buying hangover hasn’t fully dissipated. One month’s jump in incomes is not going to spark inflation. Read More »

Tariff Travails

Well, tariff talk continued this week, and traders and investors reacted by pushing stocks around with no clear direction in sight. Plus, all the latest uncertainty was punctuated by economic adviser Gary Cohn resigning from his post at the White House. President Trump signed an order imposing tariffs on steel and aluminum imports today, but excluded Mexico and Canada while leaving the door open for other exemptions. Read More »

Diversification Still Rules

Stock traders love to jump on the news and hit the “sell” button before making an educated assessment of what’s really important in the scheme of things, and today it seems that steel and aluminum tariffs are the bogeymen sending the stock market into the tank. The president apparently is setting us up for a trade war, but I’ll bet that cooler heads will calm down the excitable POTUS once he sees the problems he’s creating. Meantime, the bond market that everyone was so worried about yesterday has jumped today, with prices up and the 10-year Treasury’s yield dropping from 2.87% yesterday to a recent 2.81%. Read More »

February 2018

Above Average, Not Abnormal

It’s not guaranteed, but with less than a week to go, it looks like 500 Index‘s(VFINX) 15-month streak of monthly gains is coming to an end. Through Wednesday, the index fund is down 4.2% for February. Big deal. All streaks come to an end. And while I’m not cheering while prices fall, I recognize that downside volatility creates the opportunity for active managers to pick up shares at more attractive prices. Read More »

'Pop' Goes Volatility

The volatility and downdrafts of early February are lingering in the performance tables this month, with only one Vanguard fund, Short-Term Tax-Exempt (VWSTX), the money-market-like short term muni fund, posting a positive return for the month through Wednesday, up a fractional 0.1%. Otherwise, it’s red on the month-to-date list, with Energy ETF (VDE) and Real Estate Index (VGSIX) posting the worst returns, down 8.4% and 6.7%, respectively. Read More »

Show Me the Inflation

What a day! A 1033-point drop for the Dow, or 4.2%, and 101 points for the S&P 500, which drops it 3.8%. These are the kinds of numbers I’ve warned would scare some investors out of the market. But don’t let it scare you. Yes, it’s officially a “correction,” with the Dow now 10.4% below its January 26 high and the S&P 500 index 10.2% below its high of the same day. The fact that we got here quickly is, in my book, terrific. It quickly takes some excess out of the market and gives our managers an opportunity to pick up some relative bargains. This doesn’t scare me one iota, because the economy and corporate earnings are in fine shape. Read More »

Special Hotline: February 6, 2018

If you’re like me, you’ve been bombarded with headlines that the Dow, which fell harder than the S&P 500 Monday afternoon, is in a “freefall.” Geez! I have to admit I was smiling most of Monday as the Dow lost more than 1,175 points. Let me explain why. Read More »

Politics a Pebble On Health Care's Road

Stocks are off to a fast start in 2018 despite recent pullbacks: The Dow crossed two “milestones”—25000 and 26000—in January. These highs become less impressive as markets go higher (the last move represented only a 4% gain), but a milestone is a milestone. The S&P 500 index hit its 202nd record high since the March 9, 2009, bottom, and 500 Index‘s (VFINX) 5.7% January gain was its best start to a year since 1997. Stocks’ two-day stumble near the end of the month, which included the S&P 500 index’s first one-day decline of 1% or more since last August, only amounted to a decline of 2% or so. If you are a trader, that might be a big move. For investors, that is just a blip on a long course. Read More »

January 2018

Fundamentals, Not Headlines

We’ve picked up right where we left off last year, with investors and traders focusing on fundamentals and paying little attention to headlines. The three-day government shutdown, which ended on Monday, was a non-event in the market. The S&P 500 index hit a record high on Friday as the shutdown deadline approached, and made another new high on Monday as lawmakers agreed to a three-week extension. And yes, that means we’ll be talking about a government shutdown again in a couple of weeks. Read More »

Are Bonds Our Best Bet?

Vanguard’s chairman-but-no-longer-CEO, Bill McNabb, says the market is getting close to irrational, if it isn’t there already, and that bonds are going to outperform stocks over the next 10 years. Or, as he told Bloomberg News, “We’re looking at a situation where a balanced portfolio, a 60-40 stock-bond, might outperform an overall equity portfolio over 10 years.” I wouldn’t call that comforting. Read More »

Inflation Down, Markets Up

While stocks continue to hit highs, it’s the bond market that’s had tongues wagging lately, as worries about China cutting back its purchases of Treasurys as well as worries about inflation jumping higher have hit long-bond prices, pushing the yield on the 10-year Treasury to 2.60% during yesterday’s trading. And of course, higher bond yields could eventually make bonds look more attractive than stocks to some investors, and that’s a worry for stock investors. Well, this morning’s report on producer prices suggests that inflation may have cooled a bit in December (we’ll get a better read when the headline consumer price index is released tomorrow). Treasurys rallied while their yields fell. So much for the inflation bugbear. Read More »

Picking Up Where Last Year Left Off

Before closing the books on 2017, let’s review the verdict of the market. There were only three funds in Vanguard’s stable that declined in 2017, so I’ll get them out of the way: Telecom Services ETF (VOX) fell 5.5%. The index fund only contains 25 stocks, of which two, Verizon and AT&T, make up 45% of the index. Verizon stock rose about 4% last year, and AT&T’s stock fell about 4%, so the ETF’s performance was really due to a bunch of smaller, more volatile stocks like Sprint, which fell 30% over the year. Market Neutral (VMNFX) was off 4.9%, which is a big miss off of its objective, which is to at least match the return of cash, if not to do better. And Energy ETF (VDS) slipped 2.5% as oil companies suffered the effects of low oil prices early in the year, and despite strong gains at year-end, they weren’t able to overcome earlier losses. Read More »

December 2017

When Yields Go Wild

It’s been one heck of a great year for all of us. With the economy strong and interest rates low, our portfolios have been singing. In fact, the Dow Industrials hit their 71st record of the year this afternoon. I have a couple of cautionary tales as we head into the New Year. The first is a repeat: Be very careful about tracking all your transactions on Vanguard.com to make sure that everything is where you expect it to be. Read More »

Holiday Greetings, Distributions and Profits

Yes, the tax bill passed. And while we are waiting for President Trump to officially sign it into law—which is only a matter of when, not if—investors are scrambling to do whatever they can to pre-pay taxes and make charitable contributions before the turn of the year. You’ll have to check with your accountant for advice on your particular situation. I can’t imagine how busy CPAs are at this time of year, given that they’ve got one week to make decisions for clients and then have them act on them. But if you’re wondering, yes, it’s time to act, before the 2017 tax year is history. Read More »

Technology Trials, Tribulations and Blockchain

In this, the final month of a momentous year, bonds are outperforming stocks for the first time since August. While short-term bond yields have risen a few basis points, long-term yields have fallen about the same amount. Extended Duration Treasury ETF (EDV) is up 3.1% for the month and Long-Term Treasury (VUSTX) has gained 1.9%. But bond-substitute Utilities ETF (VPU) is off 2.3% and is the worst performer so far this month. Read More »

What's a Dow Point Worth?

Last week’s headlines were almost breathless: “Dow smashes through 24,000” was just one I saw on Thursday. The media loves to hype 1000-point milestones—they are big, round numbers and make for a nice headline. It took the Dow just 43 days to smash through the 24000 mark. A gain of 4.3%, which is what it took to go from 23000 to 24000, translates into a 43.5% annual pace. Sounds impressive, but that was only the fourth-fastest milepost gain of the 23 passed since the Dow hit 1000 on November 14, 1972. In fact, the fastest crossing of a 1000-point milestone took place over 63 days in 1999 as the Dow crossed from 10000 to 11000 at a 73.7% annualized pace. Read More »

November 2017

A Calendar Year of Gains

As November ends, the S&P 500 index has registered 13 straight months of gains, and if we see even a point or two of profit in December, then 2017 will mark the first calendar year of straight gains since the S&P’s inception in the 1950s. To say it’s been a remarkable year would be an understatement, particularly when you consider that volatility has been almost irrationally low. Using the VIX as our volatility gauge, 2017 is shaping up to be the least volatile year in the almost 30 years that indicator has been available. The last time stock markets appeared this calm was 1995. Read More »

This Market's No Turkey

Whether it was housing, the job market or manufacturing, the U.S. economy is firing on more cylinders today than it has in quite some time, and the Conference Board’s Leading Economic Indicators Index (LEI) for October jumped way past expectations. The 1.2% gain in October was the largest jump in almost four years. More importantly, the one-year gain in the index was the best in almost two and a half years. Read More »

Proxies and Taxes and Gains, Oh My!

Federal Reserve governors may be wedded to the notion that they must continue hiking interest rates, and they most likely are planning to do so at their December meeting. But inflation data isn’t giving policymakers much justification. Inflation fell from a 2.23% annual rate in September to a 2.05% rate in October, while core inflation barely ticked higher. Yes, the shorter-term numbers, when annualized, suggest higher inflation, particularly in the producer price measure, which could be the front end of the inflation train. But it isn’t here yet, and producer inflation has flashed higher before, and then settled back. If anything, the Fed governors will point to the tight labor market for rationalization. They certainly can’t point to still well-contained inflation without torturing the numbers at least a little bit. Read More »

Padding Out the Bond ETF Lineup

The new Total Corporate Bond ETF, Vanguard’s first ETF-of-ETFs, launched this week under the ticker symbol VTC. As Jeff and I noted when Vanguard first proposed the ETF, while we think performance will be strong, risks will also be higher than risks at more diversified funds like Total Bond Market Index (VBMFX) or Core Bond (VCORX). And it’s not necessarily a better mid-maturity alternative than the existing Intermediate-Term Corporate ETF (VCIT), which itself is a component of this new “Total” option. Padding out the portfolio of bond ETFs doesn’t make a whole lot of sense, but I’m sure it’ll still gather assets. Read More »

Washington Week

Well, it’s official. And no, I’m not talking about the recent Mueller investigation revelations. Jay Powell will replace Janet Yellen as the head of the Federal Reserve in February. Powell has been a Fed governor since 2011 and has in the past said that the Fed’s patience has been beneficial. So, I’d expect a Powell-led Fed to look similar to a Yellen-led Fed: data dependent, transparent and deliberate—though unlike most, if not all, of the Fed chiefs before him, Powell is not an economist, he’s a Wall Street guy. Read More »

October 2017

Stars Are For Gazing, Not Grazing

Last Friday, on the day after Black Monday’s October 19 anniversary, I didn’t even have to open the paper to get a good example of what I think is the mindset, or the thought-leadership, that can cause investors to be irrationally panicky. On the front page of The Wall Street Journal, a “What’s News” highlight read, “The Dow closed up 5.44 points at a record 23163.04 after plunging earlier in the session.” Read More »

Happy 30th Anniversary

Today marks the 30th anniversary of a day that many investors, including yours truly, will never forget: Black Monday, October 19, 1987, when the Dow Jones Industrial Average dropped 508 points in a single day. At the time, that 508-point decline took the market down 22.6%. Today, that same point drop would only register as a 2.2% decline. And yet, I would wager that a 500-point drop in the Dow would still rattle investors today. Given the fact that the Dow crested 23000 yesterday (and actually tacked on another 5 points today), what would it take to experience another October 19? How about a 5,236-point decline. Could it happen in one day? Almost certainly, though it’s highly unlikely. Read More »

Investing Well and Investing for Good

Despite all the political and geopolitical noise in the media this year, the stock markets have been remarkably calm. I want to share just two quick stats. First, 500 Index (VFINX) has gained ground every month this year (and is on course to extend that streak through October). Second, there have only been nine days when the S&P 500 index moved more than 1% in either direction. If this persists through the end of the year, 2017 will go down as the calmest year for domestic stocks since 1965. Read More »

Records Keep Falling

Friday’s report on inflation, consumer incomes and spending did little to augur for a rate hike, yet the market didn’t discount the data that much. The odds of the Federal Reserve pushing interest rates up another 25 basis points in December remain about where they were when Janet Yellen gave her last press conference. I’ll just say I was a little surprised. Read More »

September 2017

The Tax Debate Begins

The final report on how our economy fared during the second quarter came out this morning, and from an initial read of 2.6% GDP growth, the final tally showed growth of 3.1%, the best annualized number since the first quarter of 2015. Consumers consumed, and that’s what helped propel the gains. As I’ve said many times, our low-inflation, high-employment environment is tailor-made for a consumer-driven economy. Read More »

Inflation and Aggregation

The Fed seems to be sticking to a plan for another rate hike in December and possibly three more rate hikes in 2018. Yes, they’ll meet on Halloween for a two-day confab before the December meeting, but they probably won’t raise rates since there’s no plan for a press conference afterward and Chair Janet Yellen has been very clear that she does not want to surprise anyone with a Fed move, as well as saying she’ll let the data drive the decision-making. Read More »

Stocks Rally, Bonds Still Calm

Oil shares have staged a comeback as refiners come back online in Texas and demand rebounds. Energy ETF (VDE) and Energy (VGENX) are up 5.2% and 4.1% respectively for the month, while the rise in yields has hurt bonds. Extended Duration Treasury ETF (EDV) is off 1.8% for the month, second only to Telecom ETF (VOX), down 3.4%, in the loss column. The pessimism created by the nuclear-bomb-rattling North Koreans and a couple of dramatic hurricanes has dissipated and been replaced by optimism again, with the Dow, the S&P 500 and the NASDAQ hitting new highs once again. Brazil, also shedding some of the pessimism around its political scandals, has also been hitting records, and that’s helped push Emerging Markets Stock Index (VEIEX) to a 25.7% gain for the year, more than double the 12.4% return for Total Stock Market Index (VTSMX) and several percentage points higher than Total International Stock Index’s (VGTSX) 21.1% gain. Still, you can’t beat International Growth (VWIGX) and its 37.0% return this year, the best of any Vanguard fund or ETF. Read More »

Don't Fear September

The world remains unsettled, but markets are unrattled. The U.S. won’t default on its debt this month, but Congress has only kicked the can down the road to December, when renegotiations and, no doubt, plenty of arguing will ensue. North Korea’s test of a hydrogen bomb is unnerving. And still Total World Stock Index (VGSTX) is just 0.4% below the high it hit only a week ago, on September 1. In other words, stock investors are stomaching a high level of geopolitical risk right now. That’s not to say everyone has been complacent. The yield on the 10-year Treasury has fallen from 2.12% at the end of August to 2.06% today as many investors continue to seek the safety of Treasury bonds. Read More »

August 2017

Natural Disaster, Not Market Disaster

We don’t have month-end prices just yet, obviously, since they aren’t normally available until about 6 pm. But with today’s trading still to be calculated into the mix, the top funds for August include Extended Duration Treasury ETF (EDV) up 4.5%, Long-Term Treasury (VUSTX) up 2.9%, and Precious Metals & Mining (VGPMX) up 2.7% as investors sought safe havens. As Dan said last week, falling yields and rising bond prices tell us that bond investors are not worried about the U.S. Treasury defaulting. If a default was in the offing, you’d expect bond yields to rise, not fall. That’s definitely not happening. Read More »

Breaking the Debt Ceiling

Well, the biggest issue the markets face right now is the confusion over the potential for a default on U.S. Treasury debt—rather than a government shutdown, which would almost certainly be disruptive, but short-lived. To give you a sense of how worried investors really are about a default, take a look at bond yields. The 10-year U.S. Treasury yield has been trading below 2.2% the past couple of days—about on par with where it stood at the end of last week. If bond market participants thought there was truly the potential for a default, prices would be falling and yields would be rising. They aren’t. Total Bond Market Index (VBMFX) was up 2.7% for the year through the end of July, and is now up 3.4%, having risen about 0.6% this month. Long-Term Treasury (VUSTX) was up 5.1% for the year at the end of July and is now up 7.9%. Those are not default indicators. Read More »

Global Consumer: Alive and Spending

According to FactSet, U.S. companies with more than 50% of their earnings coming from outside our borders saw higher growth rates in the second quarter than those companies with a home focus. The combination of a dollar tailwind (the dollar fell, making earnings in foreign currencies worth more when converted to the greenback) and faster economic growth in places like the E.U. contributed to an earnings growth rate that averaged 14.0% for foreign-business heavy companies versus 8.5% for companies focused domestically. Read More »

Discipline Trumps Fire and Fury

“They will be met with fire and fury, like the world has never seen.” Over-the-top rhetoric is the norm when it comes to North Korea, but when President Trump talks of unleashing “fire and fury” on Pyongyang, that’s a real-time geopolitical risk. Investors responded, and markets took a drop (not a bad one mind you, but a drop nonetheless) after Trump made the remarks.

I certainly hope it doesn’t come to missiles, fire and fury, but, taking a cool and dispassionate look at history from an investor’s perspective, geopolitical events tend to have short-lived impacts on the markets. Read More »

When 708 Equals 1,101 at 22,000

It wasn’t the biggest gain ever, by a long shot, but the Dow closed above 22,000 for the first time yesterday, at 22016.24. It’s been only 107 trading days since the Dow first closed over 21000, on March 1—but then again, it only took a gain of 4.8% to reach this milestone. The Dow index has now hit 32 highs this year and 154 since recovering from the financial crisis bear market—just one high short of the highs hit by the S&P 500 index. Read More »

July 2017

1,000% Gains (in Expenses)

It might be hard to believe, but after Total Bond Market Index (VBMFX) posted a negative 12-month return last month, well, it looks like it will happen again this month. Why am I mentioning this, even though bonds and bond funds are mostly up this month? Because it is pretty darned rare for the bond market to show consecutive 12-month declines. Again, I know that’s hard to believe, but it’s true. In fact, since inception there have only been 20 times that the fund has shown consecutive months of negative 12-month returns. Read More »

Changing of the Guard

Let’s start with the big, but also not so big, news out of Malvern. Vanguard announced a changing of the guard last week: Tim Buckley will become President and CEO as well as a Vanguard board member, with current CEO Bill McNabb retaining his chairmanship. Greg Davis steps into the Chief Investment Officer shoes. And John Hollyer will take over Davis’ role as Global Fixed Income chief. While the press spilled lots of ink over this, what you need to know is that nothing really changes at Vanguard. All of these executives are long-standing Vanguard employees. Only Davis, however, has any experience managing real money. Buckley, like McNabb, Brennan and Bogle before him, has never been a hands-on portfolio manager. Read More »

Vanguard Gets Into the Dating Game

The Dow hit yet another all-time high yesterday, and markets are up again today. Why? Well, in part, the job market remains strong, and given last Friday’s report, it may actually be getting stronger. Yes, the headline unemployment rate ticked up a tenth of one percent, to 4.4%, but that was due to more people entering the workforce to look for gainful employment. That’s the kind of increase in unemployment numbers that you like to see. Read More »

The Bull Market Is Young

With the second half underway, there’s no reason stocks can’t build on the gains earned in the first half of the year. That said, market gains in the next six months are not going to be as easy to come by. The blush is off the political rose, and the Fed is now in tightening, rather than loosening mode. But I’ll be more interested in earnings than in policy gains. So, while we might still see some form of tax cut or overhaul coming from Washington, what’s most important is whether the global economy continues to generate demand for goods and services that both U.S. and foreign companies can provide. Read More »

June 2017

Disconnected Investors

We’ve talked about this before, but the disconnect between the bond and stock markets seems to reflect different investor outlooks. Bond investors, seeing a lack of inflation and maybe some trouble ahead for the pricey stock markets, have kept buying bonds (with the help of a lot of money gushing in from overseas). Meantime, stock investors, bullish about the economy, earnings and the lack of competition from interest rates, have bid stocks up. Read More »

Where's Dividend-Gro?

The “sell in May” crowd must be wishing they’d never heard of that market myth, because stocks have continued to set records this month. The Dow Industrials are up almost 2% this month, and the S&P 500 is up 1%. Small-caps have rebounded with a better than 2% gain this month. Foreign markets have been mixed with a slight negative cast to returns, overall, but nothing to be concerned about. And healthcare stocks have been particularly strong in June, despite the wrangling over healthcare that is taking place in D.C. Read More »

The Fed's Slow Dance

Retail sales slipped in May, as did inflation, which is now running under 2% again. That didn’t deter the Fed, though. Policymakers raised interest rates at the end of yesterday’s two-day meeting, and the fed funds rate now stands at 1.25%. While the Fed says they remain on track for another interest rate hike sometime later this year, Vanguard is now predicting, along with the consensus, that there are no further rate hikes in store for 2017. And Vanguard floats the possibility of no hikes in 2018 either, as Janet Yellen & Co. make plans to begin normalizing the Fed’s balance sheet by allowing maturing bonds to run off rather than reinvesting in more bonds. Read More »

FANG Fantasies

It’s been a fairly noisy week when it comes to politics, but a quiet week from an economic point of view. I’ll focus on the latter rather than the former. The labor market remains strong, and job openings data reflects the fact that workers have gained a bit of power in terms of being able to leave one job and find another if they so desire. It’s good when the economy provides ample opportunities for job changes, and this apparently is what’s happening. While some manufacturing and service economy data suggests a bit of a slowing from prior months, the fact is that we are still well into expansion mode. Read More »

A Healthy Consumer

U.S. consumers are in good shape with incomes on the rise, plentiful jobs and low inflation. To put some numbers behind that statement: The ADP employment report showed a gain of 253,000 jobs in May. We’ll see how the official numbers look tomorrow, but a tight labor market is leading to higher incomes, which are up 1.8% over the past year after inflation. That’s four months in a row of rising incomes. Spending, too, is up 2.6% after inflation. Yes, this means that savings are down. The savings rate at 5.3% is lower than the 10-year average of 5.6%. But that’s to be expected. Read More »

May 2017

Earnings Eruption

Nearly all the companies in the S&P 500 have reported earnings for the first quarter, and it looks as if the last three months were the strongest in almost six years—since the third quarter of 2011—resulting in earnings growing 13.6% compared to a year ago. That’s significant, given that economic growth was particularly paltry during the period, with GDP up just 1.9% over the past year. We’ll be getting another look at the GDP number tomorrow, but don’t expect a big improvement over the original forecast of 0.7% annualized growth in Q1. Estimates are that they’ll come in at, oh, 0.9%. Read More »

Don't Get Rattled

As Dan and I have been saying for a while now, the Trump Rally, which we think should be called the Rumor Rally, seems to be falling apart a bit as Washington is embroiled in controversies that are putting plans for major tax and health care reform on hold. That doesn’t mean, though, that all the market’s gains since Election Day will evaporate. The fact is that the economic news remains perfectly sound. Read More »

When 60/40 Becomes 80/20

Markets are up, volatility is down, France isn’t going to Frexit, jobs are plentiful, and corporate earnings have surprised even the sell-side analysts’ often rosy projections to the upside. What’s not to like? Well, I don’t want to be a “Debbie Downer,” but when everything looks this good, you have to begin worrying about what’s around the corner, even if you can’t see it. Read More »

Calm Markets in Uncertain Times

The S&P 500 Total Return index hit its 16th high of the year on Tuesday, and has now hit 201 highs since the market bottom on March 9, 2009. You’ve heard Dan and me say this before, but this means that investors have had 201 reasons, since the market bottom, to “sell at the high” and get out. The S&P 500 index, by contrast, has hit 139 highs, the latest on March 1, and is only 0.3% away from that high as of Wednesday night’s close. And it’s not just the S&P hitting highs—on Tuesday, no fewer than 40 of Vanguard’s stock and balanced funds hit all-time highs. Read More »

April 2017

Headline Juggling Act

We’ve got changes recommended for three of our Model Portfolios in this Hotline. Grab a pen and paper and I’ll give them to you in a moment. But first, let’s recap the week, because all of a sudden there are a lot of balls in the air. First, the economy continues to show strength. For instance, existing home sales in March were stronger than February. New home sales were also strong, up 5.8% over February’s numbers. Year-over-year new home sales are at the highest level since October. The lack of adequate supply, and now mortgage rates under 4%, must be making demand even stronger—a good sign, but something I’m sure is making builders anxious, since they will want to strike while the iron is still hot. Read More »

Bulls and Bonds

Tax Day has come and gone, and I hope that you were able to get your filings done on time, or took extensions to make sure your data was clean and clear. Given the disturbing round of emails I’ve recently received concerning mistakes in Vanguard’s reports, I’m sure you were extra diligent. Read More »

Peeved with SPIVA

The employment numbers released last Friday were strong but show signs of a slowing in the pace of job gains, as unemployment fell to 4.5%. Jobless claims reported this morning remain near 40-year lows. And the Fed, or more specifically Janet Yellen, believes the economy is in fine shape. In fact, she used a car metaphor in a speech, saying that while the Fed had had its foot on the gas for a long period, now it was simply allowing the economy to coast. I’d add that she probably should have also said that their interest rate increases have not been akin to tapping on the brakes—yet. I’d say we have a ways to go before the Fed actually tries to slow things down. Read More »

Keep a Watchful Eye

To quickly recap the economic news of the week: Construction spending was solid in February. Both the manufacturing and non-manufacturing sectors lost some of their momentum but are still indicating that the economy continues to expand. Auto sales were weak in March but probably couldn’t have maintained the torrid pace of sales from the fourth quarter, so this was neither bad nor good news, taken at its face. In sum, the economy is growing, but could be firing on more cylinders, which would lead to faster growth. None of this is new news. Read More »

March 2017

Changing Course

With Thursday in the books, we have one more trading day to go in the month and the first quarter, and from where I sit it’s been a pretty remarkable quarter. Why? Because many trends that have been driving the markets over the past year to year-and-a-half, have reversed pretty dramatically—simply with the turn of the calendar. Read More »

Explorer's Manager Diet

Well, on Tuesday it finally happened—the S&P 500 index declined by more than 1% for the first time in 109 trading days—the first time since October 11. Tuesday’s decline was led by financials, with Financials ETF (VFH) off a full 3.0%. Remember, financial stocks have been one of the big gainers since the election on the promise of greater economic activity and loosened regulations. With all the machinations in Washington, it appears Wall Street gave up on them, at least for the moment. Read More »

Yellen: 'GDP Is a Pretty Noisy Indicator'

Last Friday’s jobs numbers were surprising, and strong. Unemployment dropped from 4.8% to 4.7%, while the U-6 rate, which is the broadest measure of unemployment, dropped 2-tenths from 9.4% to 9.2%. The gap between the two is currently at 4.5 percentage points, lower than the long-term 4.7-point average and matching the December 2016 reading for the lowest gap since August 2008. The lowest I’ve seen is a 2.9 percentage point gap between a headline rate of 3.9% and a U-6 rate of 6.8% in October 2000. That was more than 16 years ago, and it didn’t last long. Read More »

Prepare for a 3,000-Point Decline

Here’s a number to write down: 3,003. As Jeff has told us many times, the average intra-year drawdown the stock market has experienced over the last 30 years is 14.3%. That translates into a 3,003-point decline from the Dow’s top. Are you mentally and financially prepared for a 3,000-point decline in the Dow? Read More »

Falling Prices Happen—What's Your Plan?

Tuesday’s GDP report had something for everyone, with better consumer spending but worse numbers on business investment and home building. And inventory “build” was less than originally thought. In the end, virtually nothing changed, with Q4 still coming in at a 1.9% growth rate. That’s a far cry from the 3% to 4% promises being made in Washington these days. The personal income data for January showed incomes rising at the best year-over-year rate since December 2015. Great news. But when you adjust for inflation, income growth remains pretty paltry. And the same goes for consumer spending—great numbers on their face, but when inflation is factored in, not so much. In fact, savings rates have gone up a bit. So, both good and not so good news out of the income report. Read More »

February 2017

Firing on Many Cylinders

U.S. markets remain in rally mode, but questions are now popping up about just how far they can go and how long this rally can last. In the meantime, Federal Reserve policymakers are making noises that suggest the next interest-rate hike is coming in March. Stock prices are high. I was reading an analysis from the folks at FactSet who report that the forward price-earnings multiple on the S&P 500 index (this is the price of the S&P compared to earnings expectations for the next 12 months) is now higher than its 5-year, 10-year, 15-year and 20-year averages. That takes us back to 1997, of course, which was the beginning of the end of the tech bubble. Read More »

Resilient Rally

Last Thursday’s big jump in the markets was said to be due, at least in part, to a Trump statement that he would make good on a campaign promise to lower taxes. Again, this is part of the Rumor Rally that Dan and I have been talking about for some time now. Investors are buying on the rumor of things to come—tax reform and reduced regulation, in particular—but neither the actual news nor the action is here yet, and when that “news” finally hits we’ll have to see if the promise is matched, or if it provokes some selling. Read More »

Rolling with the Returns

Last Friday’s jobs report had something for everyone in it. The good side was the increase in the U.S. workforce by about 76,000 and job creation on the order of 227,000. The flipside is that the headline unemployment rate and the U-6 rate of total unemployment, which includes people in part-time jobs looking for full-time work, both rose. Still, the gap between the headline rate of 4.8% and the U-6 of 9.4% remains below the long-term average for the measure. Read More »

Fed Stands Still

Earnings and interest rates drive stock prices. If rates rise too high and start competing with stocks for investors’ money…well, then we have an issue. That is not the case right now. The Fed stood pat. Remember when I mentioned that it seemed as though everyone had forgotten about the Fed, given how little chatter there was in the media? Well, the lack of a strong statement about the economy and a “holding pattern” on interest rates means that the media and the markets had it right. Read More »

January 2017

Rumor Rally

The “Rumor Rally” carries on. Why do I call it the “Rumor Rally” and not the “Trump Rally”? Well, as Jeff alluded to last week, this post-election rally has been marked mainly by the rumor of what the new administration would do. So far that’s still the case. Some executive actions have been signed, yes, but there’s no Cabinet, the Congress hasn’t done anything and I think there’s more to be known before we can be assured that the economy and markets will benefit from the policies of the administration. Read More »

Trading Rumors for Reality

Buy on the rumor, sell on the news. The post-election rally has been driven by investors buying on rumors—rumors about better trade deals, lower taxes, the return of jobs lost to foreign countries and the like. Since Election Day, the Dow index has gained 8.6%, while the S&P 500 is up 6.6%. And small stocks have soared on the expectation that companies that rely less on exports will benefit when the trade barriers go up. That’s the rumor. Now, where’s the news? And will the news bring a sell-off? I think it’s highly likely. It won’t be permanent, of course (since, ultimately, stocks move on earnings and interest rates), but don’t expect the first 100 days of Donald Trump’s administration to be bullish for Wall Street. Read More »

Health Care On the Hot Seat

Well, it was another quiet week on the economic front. In terms of data, the highlight was soaring optimism among small businesses. Business owners are the most optimistic they’ve been since December 2004! This report perfectly captures the sentiment that a Trump administration will be pro-business–cutting corporate taxes and slashing regulations. Whether those planned policies become reality has yet to be seen, but people are, well, optimistic. Read More »

New Year, Same Computer Bugs

The economy posted some pretty nice growth in the third quarter, according to the updated estimates from the BEA. GDP apparently rose at a 3.2% rate, better than the first estimate of 2.9%, and if it holds into the final report, it will make Q3 the best quarter in two years. Profit growth was also strong, even after taxes, with a 7.6% gain in the quarter and the first year-over-year profit gain since the first quarter of 2015. Read More »

December 2016

Expectations for a Healthy New Year

I want to take a quick look back at 2016 today (and will have much more for you in the January newsletter) and also give you my thoughts about the 2017 Hot Hands fund. But before that, I came across an odd piece of data this week. The Conference Board’s consumer confidence reading for December jumped to a level that we haven’t seen since August 2001. Nothing odd in that. But pundits were exclaiming about confidence having reached a 15-year high, about matching its August 2001 levels. Read More »

A Joyful End to a Mixed Year

The economy remains strong. Despite it being a pre-holiday week the news wires have been very busy with economic data releases ahead of the three-day weekend, and the news has been pretty darned good. The big Kahuna, the final report on third quarter GDP saw another boost from the initial and second estimates to 3.5% growth, which is nothing to sneeze at and is the best rate of growth in two years. We’ve definitely revved up since early 2016, though the fourth quarter may not be as strong as the third was. I’ll leave that to the economists to argue about. Read More »

Fed Hikes Rates as Expected

Here come the distributions. A few funds have already paid out this week, but the flood is about to be unleashed. Based on updated information from Vanguard that includes dividends, not just capital gains, some funds you didn’t hear about in the last round of estimates are poised to make some pretty good payouts in the coming days. Read More »

A Healthy Reponse To The Trump Rally

It has been a relatively light week in terms of economic data. The standout was the ISM non-manufacturing index, which came in above expectations at 57.2. In plain English, that means the service side of the economy, which represents just under 90% of U.S. economic activity, is on very solid footing. Looking ahead to next week, I’d be shocked if the Fed doesn’t raise interest rates at the end of its two-day meeting, but we’ll cross that bridge on Wednesday. Read More »

Total Bond's Third-Worst Month

The economy posted some pretty nice growth in the third quarter, according to the updated estimates from the BEA. GDP apparently rose at a 3.2% rate, better than the first estimate of 2.9%, and if it holds into the final report, it will make Q3 the best quarter in two years. Profit growth was also strong, even after taxes, with a 7.6% gain in the quarter and the first year-over-year profit gain since the first quarter of 2015. Read More »

November 2016

Acorns Are for Nuts

The markets have so far been rallying on the outcome of the election, or at least on the fact that the election is over, thank goodness. You’ve heard this before, but how the Trump presidency will affect the markets and the economy remains to be seen, as we are a long way from knowing what policies will be pursued, and how. But Donald Trump is inheriting a fairly strong economy, not the purportedly weak one that he campaigned on (or against). Read More »

Winners and Losers

Well, it’s been a week of speculation as the transition to a Trump presidency gets underway. There are plenty of unanswered questions at this point: Who will fill the Cabinet and the other soon-to-be-vacated seats in Washington? Will the Affordable Care Act be repealed, or will some elements, such as the requirements around pre-existing conditions or the ability for children under the age of 26 to remain on parental plans, survive? If infrastructure spending is to increase, will it be directed by an infrastructure bank? Apparently, taxes are going lower, but what exactly does that look like—corporate or individual? And what about the repatriation of overseas profits? Other questions abound about foreign policy, trade and immigration. Read More »

A Healthy Response to an Election Surprise

The pollsters, the political pundits and yours truly might have gotten the election wrong, but at least I didn’t tell you to sell before the crash, because, well, as Jeff and I have been telling you, politics doesn’t drive the markets—earnings and interest rates do. No matter who I thought was going to win, you know very well that I wasn’t about to make moves in our Model Portfolios that would jeopardize your wealth, or mine. I told you to sit tight and watch. Good for all of us. Read More »

Polls Watching

Let’s first get the obvious out of the way. By the time you and I get together again next week, we’ll have an answer as to who won Tuesday’s election. That being said, this election is setting itself up to be one that will not be settled on Tuesday, unfortunately. Divisiveness and mistrust have been growing over the campaign season, and I suppose that Tuesday’s results will only be the catalyst for more divisiveness no matter who wins. A contested election remains a possibility—however quixotic. Read More »

October 2016

Cruel Math Could Yield Cruel Numbers

The election is just 12 days away. The polls show the race has tightened a bit since the third and final debate. The closer the vote is, the greater the chance for confusion and uncertainty around the process and outcome. Tensions are clearly running high. As if that wasn’t enough for an investor to worry about, three-year stock market returns have fallen solidly into the single digits for the first time since September 2011. Without a 2.6% or better gain in the S&P 500 between now and month-end, investors will see long-standing double-digit returns return to earth with a thud. 500 Index’s 11.0% three-year annual return at last month’s end could fall to less than 9.0% at the rate things are going. Read More »

Save This Week … And Every Other

Last night was the third and final debate between presidential-hopefuls Trump and Clinton, and we’re now going to be subjected to the final push towards the election on November 8. Expect the political rhetoric and headlines to remain frenzied, but no matter who wins we know that businesses will continue making things and providing services, people will still have jobs, and commerce will continue. So let’s turn down the debate noise and static, and turn to the economy and the Fed. Retail sales numbers for September reversed a two-month slowing, posting the third strongest month of the year. And it wasn’t all autos. Retail sales were up 2.7% over year-ago numbers, while auto sales were up 2.5%. The consumer is kicking in. Read More »

To Your Continued Health

I want to talk about the jobs numbers, which are terrific, but first let me address the weakness we’re seeing in the health care sector. Over the past few days, health care stocks have been whacked. Is this because it appears that the Donald Trump campaign is imploding and Hillary Clinton looks bound for 1600 Pennsylvania Avenue, where she’ll lead a charge on the health sector? Maybe so. But if this is what’s driving the selloff in health care stocks, I think Wall Street has it backwards. Read More »

Buy Health Care, Don't Sell It

The economy is moving ahead slowly, election jitters are starting to take hold on Wall Street (though that uncertainty will be over on November 8), and tomorrow’s jobs report should cement a Fed rate hike in December. On the economy, the ISM manufacturing survey showed a slight improvement for September, but it’s nothing robust, and after a slide in August, we’re almost back to levels seen in July. That’s not cause for excitement. Read More »

September 2016

Generally Good Health

On its third and final estimate of how fast the economy grew in the second quarter, the Bureau of Economic Analysis reported today that the economy grew at a 1.4% pace from April to June—slightly faster than originally thought. That’s good, but not great, which further confirms something Dan and I have talked about for years now—the U.S. economy is in a slow-growth, not no-growth environment. Read More »

Taking Tax-Exempt Munis to the Bank

It’s the Fed, the Fed, the Fed this week, but before we get to that, you might have seen a story posted around the web and in papers this week about data that shows only 9.5% of actively managed large-cap funds beat the S&P 500 index over the five years ending in August. Well, without getting into the specifics of how some fund managers don’t use the S&P as their benchmark (and investors in those funds are thankful for NOT losing more than 50% of their value during the last bear market), I did want to mention that over the same five-year period, all three of the PRIMECAP-run funds, as well as Health Care, well-outperformed 500 Index. Read More »

Income Boost

The only real piece of economic data of any consequence this week was something we can all cheer: the average American saw their income rise in a big way last year. The median household income, which is the level of income where half of households make more and half earn less, rose 5.2% in 2015—the largest annual increase since the Census Bureau started tracking this data in 1967. If we see anything like that this year, median household income will reach a record level. Dan and I have talked at length about how U.S. households are in the best financial shape they’ve been in decades. Well, I think we can all appreciate how rising incomes only serve to strengthen the position of U.S. consumers. Read More »

Getting High—Or Close to It

Just yesterday, we saw new records set for the NASDAQ Composite as well as the S&P small- and mid-cap indexes, and close-but-no-cigar moves by the Dow and the S&P 500, which came within fractions of the highs set in mid-August. Almost 40 Vanguard funds hit all-time highs on Wednesday, and another 15 or so are within 1% of their all-time highs. Read More »

The Consumer Is King

July data on incomes and consumption both surprised to the upside. And savings rates remain strong, which is also surprising. This means households remain in great financial shape. As July is the first month of the third quarter, this is good news—the consumer is well employed, is saving and is spending at the same time. The consumer is king. With all this relatively strong economic news, Moody’s has raised its estimate of 3rd- quarter GDP growth to 3.4%. If it indeed comes in that strong, it will mark growth at three times the rate of the second quarter. Read More »

August 2016

Two Losers? One's a Winner!

Tomorrow will bring the second estimate of second-quarter GDP growth, and given the relatively calm markets we’ve seen lately, it wouldn’t surprise me at all to see a few fireworks if the numbers come in substantially different from the 1.2% annualized growth that the early, or “flash”, estimate came up with in late July. Revisions often take the number up—so we’ll see if that holds true tomorrow. Read More »

Even New Highs Fall Short Of Expectations

Monday was a day of new index highs. Here in the U.S. indexes reached record levels across the market cap spectrum—the Dow, Nasdaq, S&P 500, S&P MidCap 400 and S&P SmallCap 600 indexes all hit records on Monday. Our southern neighbor, Mexico, also hit new highs. Plus, we saw a new index high in Russia for the first time since 2007.

Yes, valuations are on the high side, but that’s when you consider them in a vacuum. The fact is that with interest rates as low as they are, and what appears to be the end of a slowdown in economic and earnings growth rates, those valuations may look a bit less bloated in a few months’ time. We’ll have to see, but remember also that we aren’t buying the market—our individual fund managers are looking for the best values in the market rather than buying ALL the market as the indexes do. The economy remains in growth mode, however slow, and the consumer is in great shape. Stock prices may simply be anticipating a bit of a pickup later in the year. Read More »

Record Serenity

I wouldn’t call it a blowout, but last Friday’s jobs report certainly surprised economists almost as much as the prior Friday’s GDP report–except to the upside. Not only was job creation strong in July, but revisions to June’s numbers also showed marked strength. The headline unemployment rate remains at 4.9%, and the broader U-6 rate ticked up slightly to 9.7%. Job creation was distributed across virtually all kinds of businesses, and reaction on Wall Street was strong. Dan and I think this augurs for a rate hike in September. Read More »

The Impermanence of a Down Market

The economic data continues to point to a slow-growth, not no-growth U.S. economy. But let’s talk about the stock market for a moment. Headline writers were having a lot of fun pointing out that the Dow fell for seven days in a row between July 25 and Tuesday, but then, of course, the streak was broken. What you weren’t hearing, of course, was that over the course of those seven down days, the Dow fell just 257 points for a total of 1.4%. You see, that’s just not worrisome enough to get the media types’ blood flowing. Read More »

July 2016

Vanguard Closes Door on Dividend Growth

Let’s start with a big piece of Vanguard news: This morning, without any prior warning, Vanguard closed Dividend Growth to all new investors. If you already own the fund, and I hope you’ve followed our advice to do so, you can continue to add money to it without restriction. If you don’t own the fund, well, the best substitute in Vanguard’s stable is Dividend Appreciation Index. The index fund is available in Investor, Admiral and ETF shares.

With just over $30 billion in assets, Dividend Growth is the fourth largest actively managed stock fund at Vanguard (behind Health Care, PRIMECAP and Windsor II), so it was probably only a matter of time before Vanguard closed the fund. Read More »

Bearish Sentiment, Bullish Markets

The Dow has now hit new highs seven days in a row, while the S&P 500 index has hit six new highs over the last eight trading days. But more important to you and me, Dividend Growth is at an all-time high, as is PRIMECAP Core, plus about a dozen other equity funds. Other large holdings of ours, like Capital Opportunity and Health Care, are 5.1% and 3.3% below their all-time highs. Don’t read anything into this, but of interest to me is the fact that Health Care last hit a high exactly one year ago, on July 20, 2015, and Capital Opportunity, which as you know has a large stake in the health industry, last hit a high on March 20, 2015. Expect a rebound? I would think so. Read More »

Don't Fret Over New Highs

The story du jour is something Dan and I have been talking about for a while: the disconnect between stocks and bonds with both markets at peaks. Both the S&P 500 and Dow indexes hit all-time highs on Tuesday and Wednesday and are poised to do so again today. Meanwhile, the yield on the 10-year Treasury bond hit a 240-year low last week, and remember that when yields go down, prices go up, so prices on bonds are sky-high. The issue here is the unique influence of central bank buying and ultra-low yields, plus a world almost completely devoid of inflation. That’s what’s causing the disconnect with history. Those factors will change, but when that will happen is anyone’s guess. Read More »

Jobs and Earnings Up Next

Just a few days into July, and what’s working in the markets this month is what’s worked in the markets for the year to date. Precious Metals & Mining has tacked on another 9.4% through Wednesday as global fears have translated into gold envy. The fund is up 94.1%—yes, that’s right, 94.1%—for the year. Long-term Treasury funds are also adding to gains as prices keep rising and yields keep falling to record lows. Extended-Duration Treasury ETF is up 4.1% so far this month, giving it a year-to-date return of 28.5%. And, in a bit of a rebound driven by biotech, Health Care is up 1.3%, which doesn’t sound like much but is well ahead of Total Stock Market‘s 0.04% gain for the past few days. Health Care is still off 2.7% for the year, though. Otherwise, it’s been a kind of fractional month so far for most funds, with foreign funds dropping the most. Not surprisingly, European Index has fallen 3.2%, in part due to overseas declines, but also because of continuing strength in the U.S. dollar. Read More »

June 2016

What Brexit?

As negative as the initial market reaction to last week’s Brexit vote was, the market rebound has been swift. In fact, through Wednesday night, London’s FTSE 100 index is up 2.1% for the month and actually 0.3% higher than where it stood prior to the U.K. surprise. This isn’t to say all is clear—there are still signs of stress in the system. For instance, the British pound is still down around 10% from where it was before the vote. Or, consider that the yield on the 10-year Treasury bond at 1.48% is down meaningfully from the 1.83% yield it had at the end of May. Read More »

What Brexit?

As negative as the initial market reaction to last week’s Brexit vote was, the market rebound has been swift. In fact, through Wednesday night, London’s FTSE 100 index is up 2.1% for the month and actually 0.3% higher than where it stood prior to the U.K. surprise. This isn’t to say all is clear—there are still signs of stress in the system. For instance, the British pound is still down around 10% from where it was before the vote. Or, consider that the yield on the 10-year Treasury bond at 1.48% is down meaningfully from the 1.83% yield it had at the end of May. Read More »

Special Hotline: Brexit Surprise

One uncertainty has been replaced with another. The question of whether the U.K. would indeed vote to exit the E.U. was always a toss-up—5 hours after the polls closed, the betting pools had Remain winning, and UK Independence Party leader Nigel Farage, who spearheaded the Leave group, said he expected Remain to win. So there was no way to know what would happen, and a 52% vote to exit showed as much. Read More »

Heading for the Brexit?

Except for those watching the sit-in at the Capitol, all eyes are on the U.K., whose citizens are voting on a referendum to either stay or leave the E.U. The final tally won’t be in until late this evening, so we’ll see the impact on markets on Friday. A vote to leave will certainly be disruptive. So why haven’t Dan and I recommended changes to our Model Portfolios? Remember, our philosophy of investing in balanced and diversified portfolios doesn’t rely upon correctly predicting the outcome of any one vote or event. Our Model Portfolios have weathered booms and busts and surprises over the past 25 years; they will make it through this, as well. Also, with polls showing the vote will be very close, betting on a particular outcome would be like market timing, something we simply don’t believe in.

Bogle on Gold: 'No, No, No, No, No'

As expected, the Fed did nothing on the interest rate front, leaving the fed funds rate where it has been since their December hike. The possibility of even two rate hikes in the latter half of this year is diminishing. Six Fed governors think there’ll be only one increase this year, rather than two. At the Fed’s last meeting, only one governor thought there’d be just one hike in 2016. And expectations for the future are lower. The Fed expects it will raise rates even slower in 2017 and 2018 than had been thought earlier this year. We remain in a slow-growth, not no-growth economy, and with headwinds and uncertainty coming from Europe and Asia, the Fed’s reticence is not surprising. Read More »

Fed Postponement, Market Records

With the countdown to next week’s Tuesday/Wednesday Fed meeting in full swing, the punditry has now solidly done a “180” and has gotten behind the new paradigm that the Fed will be holding off on a rate hike because, in part, the labor report from last week was so dismal. Every word uttered by Chair Yellen is now grist for the mill, which is running overtime. So, when Yellen holds her press conference following a “standing pat” decision, expect the punditry to be out in full force, parsing every word and inflection. Read More »

Stocks at Highs

Consumer spending jumped in April—plus, maybe more importantly, the numbers for previous months were revised higher. You may have noted that Jeff and I have been saying for some time that consumers have the wherewithal to spend more; they just haven’t done so. Well, maybe now we’re seeing some signs of a loosening of purse strings. Auto sales have slowed, but at the same time, there’s been a bit of a pickup in manufacturing. So, I’d say that the economic signals are confusing, at best. Jobs are strong, and incomes are rising a bit. GDP was better in Q1 than originally thought, and it looks like Q2 will be an improvement, as it has been in each of the past two years. But Europe remains a mess. And China? Well, China’s hard to crack. Read More »

May 2016

Buying Pessimism

Tuesday’s knockout new-home sales numbers were certainly a welcome sign of economic strength, but the stock market, which rose 1.4% that day, had already started climbing before the report, as Wall Street seems to be in one of its periodic “risk-on” modes after last week’s “risk-off” worry about the Fed and the possibility of a higher fed funds rate. Maybe cooler heads have figured out that a Fed rate hike signals economic strength, not weakness. Read More »

Fed Up With Fed Fortune-Telling

Though they aren’t meeting for almost another four weeks, the action in the stock and bond markets of late has been all about the Federal Reserve. Will they or won’t they? My goodness, how many times have we been through this? Inflation (or as I like to say, the almost total lack thereof) sparked the questions and the downside moves. Reports on April inflation showed that the PPI came in flat for the month while the CPI is showing a bit more inflation but nothing extraordinary. Read More »

Treading Water

Since we last spoke, I’d say that the most noteworthy economic data I’ve seen was last Friday’s employment report. The unemployment rate held at 5.0%—what’s generally considered “full employment.” Job creation did slow in April, but what Dan and I have often said about the overall economy also applies here: Slowing jobs growth is not no jobs growth. Since October 2010, the U.S. economy has created 13.5 million new jobs over 67 consecutive months of gains. That’s an impressive stretch of job creation by any measure. Read More »

Slow Growth in the Driver's Seat

First, the headline that’s the talk of the town: Donald Trump will be the Republican nominee for President, while Hillary Clinton and Bernie Sanders continue to duke it out on the Democratic side. Jeff and I will have more to say on elections and investing in the months ahead, but keep in mind that mixing politics and portfolios is rarely a recipe for strong long-term profits. While it becomes increasingly difficult as the election heats up and the decibel level climbs, my advice is to tune out the pundits as much as you can. We will continue to do our best to keep you focused on the longterm, and also on the evidence that neither political party has a lock on economic or market success. Read More »

April 2016

Selling Selected Value

I’ve got changes recommended for two of our Model Portfolios, which I detail in this week’s Hotline. Despite today’s decline, a relative calm seems to have settled over Wall Street of late. Volatility is down, stocks are up, and high yield is back in favor. Since quarter-end, the VIX, a gauge of investor anxiety, has fallen, and its year-to-date average is below its long-term average—if it sticks, this will be the fifth year in a row of below-average volatility. Earlier today, the Dow and S&P 500 indexes were trading within 1.5% and 1.7% of their all-time highs, respectively. Add in dividends, and the Dow has hit five all-time highs this month. 500 Index hit an all-time high last week. It’s down just 0.3% from that high as of Wednesday night. And High-Yield Corporate is up 2.2% this month, putting it up 4.5% on the year. Compare that to Total Bond Market Index‘s 0.1% gain for April and its 3.2% rise on the year. Read More »

A Roof Over Our Heads

After a well-remarked upon start to the year the stock market has, as it is wont to do, defied the pundits. Yes, it’s all calm again on the volatility front. Well, let’s call it average. Over the past quarter century, the VIX, or the fear gauge, has averaged 19.83, with years that ran as high as 32.69 (2008) and as low as 12.42 (1995). Since 2011 the VIX has run below its long-term average. And earlier this year, emotions, and the VIX, were running high, averaging in the low-to-mid 20s, on par with 2010 and 2011. But through Wednesday night, the VIX average so far this year is running below its long-run average, at 19.75 and heading lower. Read More »

Volatility—What Volatility?

After a well-remarked upon start to the year the stock market has, as it is wont to do, defied the pundits. Yes, it’s all calm again on the volatility front. Well, let’s call it average. Over the past quarter century, the VIX, or the fear gauge, has averaged 19.83, with years that ran as high as 32.69 (2008) and as low as 12.42 (1995). Since 2011 the VIX has run below its long-term average. And earlier this year, emotions, and the VIX, were running high, averaging in the low-to-mid 20s, on par with 2010 and 2011. But through Wednesday night, the VIX average so far this year is running below its long-run average, at 19.75 and heading lower. Read More »

Inversion Reversion

Obviously, last Friday’s employment report was the report of the week. It showed unemployment ticking up slightly to 5.0% from 4.9%, but that’s based on more people actually getting off the couch and looking for work. That’s a positive, not a negative.
Through all the election noise and the markets’ rocky start to the year, and despite all the complaints about lack of wage growth for the middle class, consumer confidence has held steady. With housing growing and borrowing costs and inflation low, consumers are in better financial shape than they have been in a long time. This confidence is reflected in people returning to the workforce. Read More »

March 2016

Money Yields Clear the Mat

Allow me to start with a quote from financial journalist Morgan Housel: “If we could go back seven years and tell everyone that the Dow is near 18,000, unemployment is 4.9% and gas is $1.90 a gallon, they would think we won the lottery and were drowning in prosperity. Instead, we’re complaining about market volatility.”
Well, I don’t know if people are complaining about volatility this minute, given that fact that the fear gauge is near its lowest level in at least six or seven months, but the pundits certainly can find one thing or another to complain about. But think about Housel’s observations for a moment. We’re in really good shape, and yet investors are worried. Why? Well, this nicely captures how economic and market crises have long-lasting impacts on our psychology and behavior. The credit crisis (and the bursting of the tech bubble before it) has primed investors to worry that every market pullback and correction is the precursor to a financial and market crash. Though the economy and the markets have come a very long way from where they were seven years ago, our view today is still tainted by our experiences many yesterdays ago. Read More »

Nowhere Markets

If it feels like the stock market is a nowhere man’s market and hasn’t generated a return, or a point of view, over the last year—well, you’re right. Since March 24, 2015, the total return for 500 Index has been a negative 0.6%. When you look at all the one-year returns for 500 Index going back to the 1980s, when my data on daily prices begins, you’ll find that one-year returns within a range of -5% to 5% aren’t all that common. In fact, one-year returns are in the plus-or-minus 5% range only 11% of the time. So our nowhere market is a bit out of the ordinary. Read More »

What Can You Control?

It was a report-heavy week, so let’s run through the major items we saw. First, at the Fed., Janet Yellen & Co. are dialing back their estimates of where the fed funds rate will sit by year-end, with the median estimate of the 17 members of the Fed coming to just 0.875%, which implies only two increases of 25 basis points each between now and the end of 2016. In other words, with two hikes from today’s 0.50% rate we’d be at 1.00%—or actually 0.75% to 1.00%—by year-end. Read More »

A Contrarian Year (So far)

The ECB cut rates today and expanded its stimulus and liquidity programs to boost Euro economies. Initially that put our markets on course for a rise, but later in the day other catalysts drove prices lower. What’s rising this year? Gold. Oil. Precious Metals & Mining is up 28.6% for the year through Wednesday as gold has shot from $1,060 at 2015’s end to $1,247, up about 17.6%. Energy is up 3.8% which may not sound like a lot unless you compare it to say, 500 Index, down 2.2% for the year. Oil, which fell in the early weeks of 2016, has risen from $37.10 per barrel at year’s end to $38.26, pushing Energy up 8.1% so far in the first few trading days of March, more than twice the market’s rise. Read More »

Focusing on Fundamentals

On Monday, the last trading day of February, oil prices jumped 3.5%, a huge leap like the ones that in the past few weeks have led to rising stock prices. Yet the stock market fell. What happened to the correlation between oil and stocks that Wall Street was so sure about just a week or so ago? Was it because it was a Leap Day? I don’t think so. Read More »

February 2016

Focus on the Field

Well, on Tuesday, the stock market’s six-day rally, which saw Total Stock Market gain 6.7%, came to a halt. On Wednesday, stocks looked to be on the same downward course as Tuesday, but staged a rally, and the S&P 500 index finished the day up 0.44%. What should investors make of the market’s daily swings and intra-day reversals? Read More »

Oil, the Pope, and Russia

What a week. It’s one thing when the Pope and Donald Trump get into a war of words. But you have to admit that watching Russia, the Saudis and Venezuela come together and agree NOT to increase oil production above already-astoundingly elevated levels is true theater. It’s a bit like closing the barn door months after the horse, the cows and all the sheep have left. Ridiculous–and, of course, untenable, since Iran isn’t about to agree to anything like this. Read More »

Wall Street's Recession Is Not an Economic Recession

Stocks have definitely been bumping, while bonds have been jumping. But Dan and I are in total agreement: This is a Wall Street recession, not an economic one. Wall Street goes through these periodic selloffs. As one manager has said to us, it’s like flying and hitting an air pocket. The ride gets really bumpy, but then you get through it and the ride calms down and you end up at your destination—maybe a little worse for the wear, but safe and sound. Read More »

Looking for Correlation Where There Is None

Well, Jeff and I keep getting emails from Vanguard investors who say their account consolidations were totally messed up by Vanguard, and yes, some of them are considering leaving Vanguard entirely. Keep an eye on distributions. They’re coming up again in March. Be very, very careful before you file taxes. Read More »

January 2016

Oil Is Not the Stock Market

Okay. First, the accepted Wall Street analysis seems to be that the stock market is moving in lockstep with the price of oil. Oil goes down (which, the equation would suggest, means China is slowing, which means global growth is in trouble) and, hence, stocks go down, too. Then, oil goes back up, because, well, maybe China isn’t slowing that much, and stocks go up, too. So, how do you explain that on Wednesday, oil went up and stocks went down? Read More »

The End of Calm, Not the End of Days

Monday, which was the holiday here, was a non-event, but you might have noticed that on Tuesday, before markets opened, China reported that its economy grew at a 6.8% annualized rate in Q4 and that overall the Chinese economy grew 6.9% for all of 2015. Remarkably, the facts weren’t half as bad as investor expectations, or something else was at play, because China’s Shanghai market bounded 3.2% higher on the news. U.S. markets, which opened much later on Tuesday, bounced around, initially soaring, then falling, and ending the day almost flat. The Dow added 28 points, and the S&P 500 index added one point. Big deal, but at least it was a bit of green in what has turned into a sea of red this month. Read More »

Faulty January Barometer

It’s been a tough start to the year for investors, as markets here and abroad have entered correction territory: The Dow, S&P 500 and NASDAQ all reached that “down 10%” mark yesterday. Small stocks have had it worse, with the Russell 2000 index falling into a bear market—by definition a 20% decline—on Wednesday.

Plus, you’ve probably seen the headlines that U.S. stocks are off to their “worst start ever.” While I’ve already seen a few, you can expect to see even more articles and stories warning that as January goes, so goes the rest of the year. This so-called “January Barometer” gets trotted out every time the year starts with a decline. (You almost never read about it when January is in an uptrend.) But you shouldn’t pay it much heed. Let me explain, and then we can talk a bit about what’s been going on these past eight trading days. Read More »

2016 Opens With a Bang, and Another

The year opened with not one, but two bangs. The first was when a measure of China’s manufacturing sector slipped in December as factories continued to battle overcapacity and weak demand. The manufacturing purchasing managers’ index fell to 48.2 in December. This was the 10th straight month of a below-50 reading for the index. Readings above 50 indicate expansion, and under 50, well, first you’re at stasis, and then you start moving into contraction. We already knew that China was in a slowdown, with more capacity than demand called for, but this latest reading may have been the bamboo shoot that broke the panda’s back. Read More »

Special Hotline: Hot Hands 2016

This is Jeff DeMaso with the 2016 Hot Hands fund announcement. The full analysis of this momentum strategy will be in the February issue, but as a preview, the Hot Hands strategy has generated a 13.2% annualized return since Dan first wrote about it in 1995, versus 8.1% for 500 Index and 8.2% for Total Stock Market. Read More »

December 2015

Out With the Old, In With What?

Well, the year isn’t exactly ending with a bang, is it? That Santa Claus rally that some were talking about failed to stick, and while the markets aren’t yet closed, it looks like we’re going to end the year with Dow and S&P indexes in the red, though dividends could make their total returns positive for the year. We’ll have to see how the day settles out. And it’s really tough to know what the new year will bring, though I’d posit that it won’t look a lot different from where we’re leaving the old year—volatility, uncertainty and the potential for gains if you’re willing to stick your neck out just a bit. Read More »

Active to the Core

First, I have a warning. Vanguard is asking clients to consolidate their brokerage and mutual fund accounts into one, and for those who agree to do so, I’m getting reports that dividend distributions are being messed up big-time. If you wanted distributions to go to cash, well, sometimes they’re being reinvested instead. You want them reinvested? Well you may find cash in your money market instead. One investor tells me he was “missing” $36,000 he expected to find in his money market account. Read More »

Yield, Don't Stop

I probably don’t have to tell you that Fed chief Janet Yellen said yesterday that policy makers had decided to raise the fed funds rate by 25 basis points, or 0.25%. This was the most well-telegraphed rate hike in many, many moons, and the market barely flinched—the bond market that is. There was some action among short-term bonds—the yield on the 2-year Treasury went over 1.00% for the first time in, well, almost forever it seems. And Vanguard’s taxable money funds, which have already been producing higher yields as the short-rate market began expecting the move, also saw yields rise. Read More »

Vanguard Gets Active–In ETFs

Falling oil and gas prices have been driving down stock prices, as investors have responded with a knee-jerk assumption that it is solely global demand, or the lack thereof, that is driving down oil’s price. Worrying about demand for oil reflecting falling demand for global goods and services ignores the flip side of this low-price scenario: More fuel for spending.

The East Coast is heading into Christmas with warmer-than-normal temperatures and lower-than-normal heating costs. If that isn’t a recipe, by itself, for more spending, then what is? While the energy majors hunker down, and smaller exploration and production companies suffer from prices that are too low to make their wells economical, the rest of the economy is fine and should benefit from a consumer who has more money in his and her pockets as well as a job market that is reaching full employment and getting to the point where wages will have to start rising. Read More »

A Low-to-No-Return Year

Porter Stansberry’s and Ron Paul’s nightmare scenario was put into play on Monday when the IMF conferred “reserve currency status” on China’s currency, the renminbi, or yuan. The change won’t go into effect until late next year, but so far the world is still spinning and the dollar hasn’t been crushed into oblivion. Read More »

November 2015

Heading into the Final Stretch

November doesn’t end until Monday night, but we’ve got less than 12 hours of trading left before the markets open for the final month of 2015. It’s been a volatile (though not that volatile) year which in the end hasn’t left us up or down much from where we started. However, you and I have had some good successes. All in all, I’d say we have plenty to be thankful for this Thanksgiving eve. Read More »

Resilience In The Face of Tragedy

Sadly this week’s comments have to start with Paris, where a coordinated terrorist attack led to the worst loss of civilian life in France since World War II. It’s tragic. My thoughts and prayers are with those impacted by the event. ISIS grows by sowing fear and death, but I believe that these tragedies and challenges only bring us closer and more resolved that fear must not trump freedom. Setting aside the human toll, I had expected that the chaos of Friday night’s events would have spilled over into the markets. But, demonstrating that resilience I just spoke of, on Monday stocks in France only fell fractionally, the Stoxx Europe 600 index (which is akin to our S&P 500 index) gained 0.3% and the S&P 500 index rallied 1.5%. Read More »

Wall Street is Fed Up With the Fed

Responding to my comments about his latest prediction that stocks will return 4% going forward, Jack Bogle says that his predictions in the press—whether on TV or radio or in print—aren’t really predictions so much as “casual” comments and that his only “official numbers” are those he puts into papers like the one he’s just now publishing in the Journal of Portfolio Management. In other words, investors should focus only on predictions he makes in papers that very few people will read, while any comments in media that is consumed by millions should be taken only as “casual” observations. Read More »

Jack Bogle and His Magic 8-Ball

Well, I was going to tell you all about the various signs across the U.S. that suggest the economy is pulling out of its third-quarter funk and revving up—signs that include the best pace of auto and light truck sales since this recovery began, strength in the housing industry, and a strong service sector reading. But the real story this week is the unremitting and uncritical press around Vanguard founder Jack Bogle’s latest prediction for stock market returns. Read More »

Special Hotline: October Hot Hands 2015

Jeff and I will have a full report on the October Hot Hands momentum strategy (which is different from the calendar-year Hot Hands strategy) in next month’s newsletter issue. But for those who are following this trading plan, the official October Hot Hands fund for the period from the end of October 2015 through October 31, 2016, is U.S. Growth. Read More »

October 2015

A Strong Week for Central Bankers

Rate cutting is in the news here and abroad. Last week, global rate cuts, or the promise of them, drove markets sharply higher. First it was the ECB’s Mario Draghi, who suggested on Thursday that further stimulus might be on tap as early as December. Then on Friday it was China tacitly acknowledging that its economy needs more stimulus and cutting both lending rates and bank reserve requirements in an effort to get more money into the hands of businesses and people, where it might spur some spending. Read More »

Vanguard Tears Up Money Market Investors' IOU

This week was light on data, but the housing market went three-for-four. Homebuilder confidence for the month of October was stronger than expected, as present sales and expectations for future sales increased. Housing starts jumped 6.5%, largely on the back of a spike in multi-family units. Permits, which point to future construction projects, slipped in September, but allowing for some noise in the data, the overall trend of housing starts and permits shows steady incremental increases. And, finally, existing home sales, which make up 90% or so of the market, bounced back from a weak August, and are up 8.8% over the past year. The trend of the housing market continues to be positive. Read More »

Health, Financials and Your Financial Health

Earnings reporting season is upon us, but I have to say that (a) it’s still very early, and (b) the big banks, which have been releasing their numbers, aren’t giving us much to go on in terms of the broader economy and corporate profits. Financials ETF is off 4.4% for the year through Wednesday, underperforming Total Stock Market Index, and has underperformed so far in October as well, though it gained ground today on the backs of some of these better-than-expected reports. Read More »

Putting Theory Into Practice Could Lead To Losses

It was a very quiet week in terms of getting new reads on the state of the U.S. economy. The ISM service sector survey came in weaker than expected for September, though overall the service sector remains quite strong. It appears that companies are working through inventories and, hence, aren’t as busy making stuff as they have been in the past. This could augur a weaker third quarter read on GDP than was anticipated. One weird divergence was a strengthening in the employment component of the index, but this may simply signal what we’ve already learned about the employment numbers—which is that they are subject to revision and that revision usually takes them higher, rather than lower. Read More »

Here's to Your Health

September was lousy for stocks, but only half as bad as August, and the third quarter was one of the worst calendar quarters since 2011. Does that mean the sky’s falling? Hardly. Jeff and I have been saying for many months now that a 10% to 15% correction was in the cards—we didn’t say (or know) when, but simply figured that having gone for so long without one, we’d have to prepare emotionally, if nothing else, for the inevitability of a market downdraft. Well, we’ve had one with the Dow and S&P indexes falling at one point to just shy of 15% but ending the quarter off 11.1% and 9.9%, respectively, from their all-time highs. Read More »

September 2015

Special Hotline: Trading Message From Dan Wiener

In January, Jeff and I told you about a contrarian trading strategy for aggressive investors. The signal for that strategy has been triggered as of last night’s close, and represents an opportune moment to buy. Read More »

Bond Funds Are Plenty Liquid

What do most investors do when markets are at their worst? Absolutely nothing. Yet an article posted Monday night on The Wall Street Journal‘s website has raised hackles among bond fund managers and investors—and in particular, Vanguard investors. Read More »

Fedmageddon, or Why Are the Markets So Dumb, Daddy?

At a meeting this morning, I polled the participants on whether they thought the Fed would raise interest rates today. A minority thought they would, but the majority (including me) said they would stand pat, though it’s really been a toss-up as far as I’m concerned, with employment data pointing very assuredly towards a hike, and inflation data and a slow-growth global economy pointing the other way. Read More »

Is China's Slowdown Good for the U.S.?

Japan’s almost 8% rise on Wednesday and China’s continuing stock market recovery (the Shanghai market is now off just 38.1% from its recent peak versus 43.3% off the high at its recent low) have spurred a bit of recovery across the globe after last month’s sell-off. It’s funny to think that the Chinese market now seems to be setting the tone for global markets in general, but then again, Japan did the same thing in the ’80s. And look where that got them. Read More »

A BRIC to the Head

Remember the BRICs—Brazil, Russia, India and China, the four countries that were supposed to lead the emerging markets to dominance in the global marketplace? Well, that doesn’t seem to have worked out all that well recently. And now it appears that China is throwing a considerable brick to the head of U.S. investors, who unwittingly seem to be taking their lumps despite a strong economy here at home and only tangential connections to the turmoil around the Chinese stock market and currency. Read More »

August 2015

Storm Before the Calm

It’s been quite the week since last Thursday’s Hotline. I’m going to assume that you’ve kept your cool, like any smart investor would, and tuned out the noise (and yes, it is noise) that accompanied heightened worries over China and the various machinations there that might or might not have an impact on our own economy and markets. Read More »

The 3.5% Solution: Buying Fear

It was a rollercoaster day in the markets—but also one of opportunity. The Dow opened the day 1,000 points lower than its Friday closing price. By midday, stocks had rallied to nearly recover that entire decline, only to roll over in the afternoon. In the end, the S&P 500 index was down just shy of 4% and is now technically in a correction, having fallen 11.2% below the all-time high hit on May 21. Read More »

The Fed's Quandary

Are you nervous? Anxious? Watching the stock market as it goes for a loss for “three days in a row” (as they like to say on the cable financial news networks) and wondering where the bottom is? Stop. Think. Take a breath, please. The stock market, whether the Dow or the S&P 500 or even one of the mid-cap or small-cap indexes, has been on a long tear, hitting all-time highs as recently as late July for the NASDAQ Composite and late May for the Dow and S&P 500. Read More »

China's Moving Yardstick

No matter how you spin it, China’s got some problems. Dan and I have talked about the issues surrounding their ham-handed attempts to keep stocks rising on the mainland, but the latest out of China suggests there are even bigger problems besetting the world’s second-largest economy. Read More »

Puerto Rico: 'It's the Thought That Counts!'

On Monday, a Puerto Rican agency defaulted on bonds for the first time. The agency paid just $628,000 of the $58 million that was due. At that point, why bother paying anything at all? Puerto Rico and its creditors will negotiate what to do about the island’s $72 billion in debt, and the headlines will continue to roll in, but this wasn’t a surprise for most investors. Puerto Rico’s woes have been well-telegraphed, bond prices have already been cut, and the debt issues of Puerto Rico shouldn’t spill over to other states and municipalities. Read More »

July 2015

Maybe It Wasn't So Cold After All

Surprise! The U.S. economy actually grew a fraction in the first quarter of 2015, rather than contracting. This, according to new and revised figures from the Bureau of Economic Analysis, which says that we actually saw 0.6% annualized growth in Q1 rather than the prior data showing a 0.2% decline. Unfortunately, what the BEA gives, it also takes away: The initial estimate on Q2 growth was just 2.3%, which disappointed the consensus that was expecting at least 2.5% or so. Have no fear, though. I looked back at the years since the Great Recession and, based on revised numbers, the final number has come in higher than the initial estimate in six of the last seven Q2 GDP reports. That’s a far sight better than any other quarter. Read More »

Sunny Summer Returns

Here’s a news flash for you: Prime Money Market has been holding onto a 0.03% yield (that’s 3 whole basis points) for a bit more than a week, which is incredible. Either Vanguard has found a way to make money out of thin air, or they are still slashing costs to the bone. Whatever it is, that 0.03% yield is up from the 0.02% they had been paying since early June. Good work, Vanguard! Read More »

A Nice Place To Visit, But …

The juggernaut that is the biotech, pharma, hospital and medical device industry just keeps piling up the mergers, the acquisitions and the profits for you and me. Health Care has gained 17.9% for the year through Wednesday compared to the 3.4% return for 500 Index. That’s a whopper of a gain, but it’s nothing new, really. Read More »

China Syndrome?

Technology took its toll on Wednesday. First, United Airlines halted all of its flights because of technological problems with flight routing software. Then the New York Stock Exchange (NYSE) halted trading because of some kind of glitch. The NYSE said it had seen a problem prior to the market’s 9:30 open and fixed that, but apparently there was more trouble to come. And The Wall Street Journal‘s website, which of course is heavily used during the business day, also went down, giving users a big error message when trying to access wsj.com. Read More »

Neither a Borrower Nor a Lender Be

It’s been a troubling week for the little guys in Greece and China—not to mention some investors here in the U.S.—and it isn’t over yet. First off, with Greece’s prime minister saying, “Let’s put it to a vote!” but also trying to get the members of the European community to agree to yet another set of reforms that didn’t go far enough, the German Bundestag said, “No. That’s okay. We’ll wait to see what the Greek people decide before we consider lending you any more money.” Read More »

June 2015

Old Stories Aren't Moving the Needle

The housing market has found its footing and is bouncing back from a snow-filled winter. Existing home sales data showed a big recovery in May, with national sales up 5.1% and up more than 9% over the past year. Prices are recovering as well, and the median home price of $228,700 was the highest since June 2007, near the peak of the housing market. New home sales, which are just 1/10th the size of existing home sales, also had a good month in May and are up almost 20% over the prior year. Supply of new homes is low, suggesting that construction activity may pick up to meet the demand. Read More »

Fed Holds, Europe To Summit

After a two-day meeting that fed more speculation than a Donald Trump presidential bid, the Fed did not raise interest rates; but they did upgrade their assessments of some things such as labor, housing and consumer spending, while downgrading their view of GDP growth in 2015 to between 1.8% and 2.0% from about 2.5%. Read More »

Getting an 'A' for Effort

Germany’s stock market dropped into a correction on Monday, having fallen 10.6% from the high it hit on April 10. As of today’s close, after a couple of up days, it’s down 8.4% below that high. But don’t feel too sorry for the Germans, as their market is still up 15.6% for the year. European Index is up just 8.9% for the year through last night’s close, in part because of the dollar’s strength, which reduces returns from foreign markets for U.S. investors. Read More »

All Is Well, Unless You Read The Headlines

The Greek debt drama continues to unfold in the headlines as Greece and its creditors, mainly the European Central Bank (ECB) and the International Monetary Fund (IMF), can’t strike a deal. Today Greece said it would defer a payment to the IMF due tomorrow. “Defer” sounds like a polite way to say “default” to my ears, but Greece says it will bundle all of its payments due to the IMF into one lump sum at the end of June. So the dreaded d-word—default—is avoided for another day, and the headlines will continue to roll in and roil investors. Read More »

May 2015

Divide, Then Conquer

We’ve just got one more day to go before May is over, and oops, that Sell in May strategy really seemed to work this time, didn’t it? I know, I know, there are five more months to go before the Sell in May idea is fully borne out to be a dim bulb or a bright light, but at least this first month seems to have yielded a short-circuit. Read More »

Placing a Value on Stock Picking

Tuesday’s report of a huge jump in housing starts (up 20% in April) was a nice kick in the prospects for a rebound from the winter’s cold-edged consolidation. Not only were condos and apartments (those multi-family starts) strong, but so were single-family homes, which are where you really get a lot of economic bang for the buck driving material and labor spending. New building permits also were robust, which casts a pretty strong light on the potential for more good news on housing in the months to come. Read More »

Vanguard Delays Muni ETF Yet Again

Friday was the day that Vanguard was slated to launch its new municipal bond index fund and ETF, Tax-Exempt Bond Index. That is, it was the day they’d postponed the original launch to. Well, now they’ve postponed the launch again. Read More »

Domo Arigatou, Vanguard Roboto

Federal Reserve Chair Janet Yellen’s comments rocked the ship on Wednesday when she said that stock valuations were “quite high” and that long maturity bonds could be hurt if interest rates rise. Thanks for the news flash! Six years into a bull market, we would expect valuations to be high, and the warning bell of rising rates has been ringing for years now. Yellen also said that she sees signs of investors reaching for yield. Wasn’t that the point of holding interest rates at zero for so long? Read More »

April 2015

Sell in May—No Way!

All eyes were on yesterday’s GDP report—more so than on the Fed’s meeting notes, which essentially left open the possibility that a rate hike is not completely baked into June’s cake. The GDP report was a funny one, because while it showed just 0.2% annualized growth in the first quarter, the year-over-year growth in the economy actually sped up to 3.0%. This was an increase from the year-over-year growth number of 2.4% recorded in Q4 2014, and occurred because in 2014’s first quarter (remember the Polar Vortex?) the economy actually contracted at a 2.1% rate. Read More »

NASDAQ's New Watermark

How does the stock market feel to you so far this year? I doubt many would say “average,” but that’s just what we’ve seen so far. Through Wednesday night, 500 Index was up 2.9%, which puts it on pace to deliver about 9% on the year—pretty average to me. While returns on the year have been average, the NASDAQ index just did something it hasn’t done since the tech bubble peaked 15 years ago—close at a record high. Read More »

Many Strong Markets

A few earnings reports and some economic data, both here and abroad, have made for what I’d consider a fairly calm week in the markets. Sure, there’ve been ups and downs, but it’s mainly been ups, with the Russell 2000 index of small stocks hitting yet another record high on Wednesday and the European STOXX 600 index hitting a high on Monday, driven by a 22% gain in Germany’s market. The NASDAQ Composite, solidly over 5000 now, is within reach of finally breaking through the high it hit more than 15 years ago on Mar. 10, 2000, and other domestic indexes are close to records as well. Read More »

Trader Beware

Monday’s report on the ISM Service Sector index didn’t provide much of a contrast to the growing number of observations of a first-quarter economic slowdown. Yes, the service economy is still expanding, but it’s not doing so quickly, and in some respects it’s barely moving forward. Only the employment gauge improved, but not by much. In fact, jobs are where the strength is. Read More »

The Economy Will Spring Ahead

While the first quarter ended on something of a sour note, you and I are doing just fine. Our active managers are making mincemeat of their index counterparts, and in combination are producing gains for us as U.S. markets hover between gains and losses. What’s going on? Well, I’d say that it’s uncertainty. Uncertainty about the economy mainly, but also about just how robust a recovery we can expect from the E.U. and uncertainty about exactly what will drive the Fed to begin raising interest rates. Read More »

March 2015

Soft Patch

The Dow Industrials slid into negative territory for the year on Wednesday, largely on the heels of somewhat weak economic reports and concerns that a strong dollar will hurt earnings. Before turning to those economic reports, keep in mind that though the Dow may be down on the year, it is only 3% or so from the high it hit in early March—nothing to panic about. Read More »

Wall Street's Impatience

Well, all eyes were on the Fed statement coming out of its two-day meeting, and there was something for everyone in there, with the removal of the word “patient” signaling that we could see a rate increase at the June Fed meeting as well as lowered forecasts for growth and inflation signaling that maybe, just maybe, a rate increase could come later in the year, rather than sooner. What Janet Yellen said was that the removal of the “patient” word “doesn’t mean we are going to be impatient.” The breathlessness around this statement, the parsing of the wording and the predictions of yes or no on a rate increase make for great TV, if you’re into that sort of thing, but it’s nigh on useless for real investors who, rather than trying to make a market-timing call on yes or no for bonds or stocks, are more interested in the impact on individual companies and their business here and abroad. Read More »

Six Years From the Fall

Monday, March 9, marked the six-year anniversary of the U.S. stock market bottom following the credit crisis. Since the bottom, 500 Index has returned an outstanding 240%, or 22.6% a year. However, if we instead measure from the prior market top, about seven and a half years ago, in October 2007, 500 Index is only up 52%, or 5.8% a year. So, are we in a raging bull market or a ho-hum growth phase? It all depends on your perspective. It’s fairly safe to say that the next six years won’t see returns as strong as the last six were, but just because the last six were strong doesn’t mean we are poised for a crash. Read More »

Remembering JDS Uniphase

We’ve seen a bit of excitement here in New York City, and I’m not talking about the plane that just skidded off the runway at La Guardia in today’s snowstorm. Many market indices have set new records, and the NASDAQ Composite finally crossed 5000 again on Monday—which means absolutely nothing, except that it’s a BRN, or big-round-number. Forget all the posturing around big round numbers and commentaries on how the NASDAQ is in a bubble. It’s not. The NASDAQ is made up of companies that—unlike in 2000, during the heyday of stocks like JDS Uniphase—pay dividends, and are selling at robust, but hardly astronomical multiples of earnings. And note that I said they have earnings, which many of the highflyers of the dot-com age did not. Read More »

February 2015

Greece Lightning

Any way you slice it, Greece’s newly elected government danced and danced and made it look like dropping out of the EU was going to be a “strategic career move.” But in the end, well, they’ve basically got nothing more than they started with, no matter how they spin it. Greece and the EU have only agreed to a four-month extension, so there will be more chapters to this drama. Looking ahead, perhaps the most relevant line from Grease was delivered by Scorpions member Leo: “The rules are…there ain’t no rules.” Read More »

Markets on a High

While we had a day off on Monday for the Presidents’ Day holiday, Japan reported that it emerged from recession, though hardly with all its afterburners aglow. GDP rose at a 2.2% annualized rate in the fourth quarter, which was okay, but still well below economists’ expectations. Of course, the economists got it wrong (not surprisingly), but the markets seemed happy enough, pushing the Nikkei index up 0.5%. Read More »

Bonds Change Course

Are rates going up or not? Investors keep flipping their focus when it comes to the Fed and the timing of a future rate hike. Does continuing low inflation means the Fed will be on hold for longer? Or does the steadily improving jobs market mean the Fed will be forced to raise rates sooner? Read More »

Foreign Fillips

January’s auto sales were a huge jump from sales a year ago (during the Polar Vortex) and suggest that the consumer is far from dead—in fact, we all seem to be spending our extra money on big-ticket items. The U.S. Big Three had a huge month, and when cars and trucks are selling, that means jobs, jobs, jobs. It takes jobs to make these trucks and it takes jobs to earn enough money to buy these trucks. In fact, this morning’s unemployment claims numbers continue to show an economy that is producing jobs for almost everyone who wants one. Last week, one Federal Reserve governor said that he thinks our unemployment rate, currently at 5.6%, will drop below 5% before the year is out. Read More »

January 2015

Two Sides to Every Storm Front

There were seemingly two sides to every story this week. On the heels of quantitative easing in Europe, Greece voted for an anti-austerity party. New home sales surged in December, but durable goods orders were weak. Caterpillar’s and Microsoft’s earnings disappointed, while Apple had a record-breaking three months to close out calendar year 2014. And though winter storm Juno was a bust in New York, it dropped two feet of snow on Boston. Read More »

Europe Kicks Stimulus into Higher Gear

Those who said that the Fed’s three quantitative easing programs would spur massive inflation are probably back in their bunkers about now, given the impact falling oil prices have had on inflation. At year-end, the CPI, or “headline” inflation number, was so low, at 0.7%, that the deflation word was being uttered from time to time. But since we all know that energy costs are a big part of that equation, let’s look at core CPI, which is running at 1.6%, about the level it’s been at for two years or so (excluding a couple of minor spikes, including a 2.0% reading in mid-2014). Inflation just isn’t an issue right now, which, of course, is one reason we’ve seen Treasury yields looking for new recent lows. Read More »

Swiss Miss

Friday’s labor report was strong. As the year ended, unemployment fell to 5.6%, and total job creation at 2.952 million jobs for 2014 was the best since 1999. While there was no headway made on the U-6 number, as people continued to leave the workforce, the gap, at 5.6 percentage points, remains the lowest since October 2008, which was just before the recession’s real job destruction took hold. Read More »

Back At the Muni Bond Table

Well, the year has gotten off to a bumpy start. Monday’s 331 point Dow drop was attributed to oil greasing the skids. Oil’s price dropped below $50 per barrel at one point on Monday. But then it actually fell further and closed below $50 at $47.93 on Tuesday as the Dow fell another 130 points. On Wednesday, oil remained under $50 at $48.77, yet the market had a huge up day, rising 213 points. And today stocks are up another 1.8% or so. But what’s all the concern surrounding oil, and why are markets apparently moving to the oil beat? Read More »

Hot Hands 2015

Hot Hands is a momentum-based strategy using research I have conducted over the years—one that has left the market in the dust over the long haul. The full analysis of the strategy will be in the February issue, but as a preview, the Hot Hands strategy has generated a 14.9% annualized return since I first wrote about it in 1995, versus 9.8% for 500 Index and 9.9% for Total Stock Market. Read on for the 2015 Hot Hands fund. Read More »

December 2014

A Gainful 2014

Wow. What a year. The final numbers are still coming in and settling, but in broad strokes, natural gas fell, gold fell, oil plummeted, bonds soared, and stocks, despite a last-day drop, ended on very solid ground. Read More »

The Dow's Holiday Gift

It may be a holiday-shortened week, but that doesn’t mean it has lacked for headlines. The latest milestone on the Dow, 18000, was a holiday gift that took just 173 days to achieve, with the Dow having pushed through 17000 in early July. Remember that these milestones, as headline-grabbing as they are, become easier and easier to achieve as the numbers get larger and larger. To get to 19000, we need just a 5.4% gain from yesterday’s close, and 20000 is only an 11.0% gain from here. Read More »

To Cuba (and Russia and North Korea) With Love

It was steady as she goes in Washington. All eyes and ears were on yesterday’s Fed statement and press conference, and Janet Yellen didn’t disappoint. First off, with the Wall Street Journal having floated a trial balloon a week or so ago about whether the Fed would drop the “considerable time” language when referring to the timing of its first rate hike, it was fascinating to see how the Fed massaged that one. It introduced the word “patient,” as in, “the Committee judges that it can be patient in beginning to normalize” interest rates. Then it went on to say that this was consistent with previous statements that it would continue to hold the fed funds rate at 0% to 0.25% for a “considerable time.” Read More »

Oil Greases a Slippery Market

After a very bullish year, December is off to a rocky start, with 500 Index down 1.9% through Wednesday. Tuesday saw the first 200-plus point swing in the Dow since October, when we saw those kinds of swings on almost half of the trading days during the month. And in Wednesday’s trading, the Dow slid 268 points, or 1.5%. Read More »

Zero Down, No Financing, No Profits

Now, I don’t want you jumping for the keyboard and logging into vanguard.com to trade into this one, but Vanguard has lowered the minimum on its Market Neutral fund to $0. Yes, that’s right, $0. But there’s a catch: That’s only for investors working with financial advisers, because, as Vanguard puts it, “given the distinctive characteristics of the fund … [it’s] not appropriate for retail investors broadly.” Hence the $250,000 minimum remains in place for those retail investors. Read More »

November 2014

NASDAQ Returns

Ending a run of three straight days of record closes, the Dow and the S&P 500 took tiny drops on Tuesday. While all eyes have been on these benchmarks, you may have missed the fact that as of Tuesday’s close the NASDAQ index, which climbed as other indexes fell yesterday, only needs to gain 6.1% to fully return to the level it reach nearly 15 years ago on March 10, 2000 during the tech bubble. Does that mean we are near a similar peak today? I wouldn’t say so. Fifteen years is a long, long time to wait for recovery and points to just how out-of-whack valuations were as technology stocks soared. Read More »

Record Highs and Retail Swagger

The stock market is humming—at home, anyway. The Dow Jones Industrial Average has hit 27 new highs this year, including today’s. The S&P 500 index has hit even more highs this year, rising to records 44 times. And many of those new highs have come over the past couple of weeks. Yes, the biggest U.S. companies are struttin’ their stuff, whereas the smaller fare have tumbled a bit from the highs set during the first quarter. That’s why you’re seeing funds like Dividend Appreciation Index, up 2.2% this month, and High-Dividend Yield Index, up 2.1%, leading the charge in November. Read More »

Diluting Alibaba

Last Friday’s employment situation report outshined what has been a quiet week for economic reports so far. To recap, the unemployment rate dropped to 5.8% in October, its lowest level since July 2008, while new job creation surpassed 200,000 for the ninth month in a row. The lesser-known but equally important U-6 rate of total unemployment among the entire U.S. workforce declined by more than the headline unemployment rate. The job market continues to heal, and more workers depositing paychecks should mean a strong holiday shopping season. Read More »

Land of the Rising Stock Market

Japan surprised the markets on Friday with greater stimulus for both its economy and the stock market. The central Bank of Japan said it would increase its annual asset purchase program from 60-70 trillion yen to 80 trilling yen, and it is going to triple the rate at which it buys stocks and property funds where in the past it was mainly a bond-focused purchase program. Read More »

October 2014

Not a New Normal, Just Normal

We have one more day to go before the end of October, and after all the handwringing about the stock market’s volatility and losses this month, it turns out that, well, volatility is still somewhere around what I’d call normal (below average, actually) and those losses have essentially been wiped out. Remember, I said that this was not a “new normal” but rather a “regular, run of the mill, old fashioned normal stock market.” Now, what were you so worried about? Read More »

China's Inevitably Slowing Growth

The recent shootings at Canada’s parliament are tragic and prove that disruptions can come from anywhere, at any time. As long-term investors we have to expect there will be more disasters in our lifetimes, and as Dan and I explored in last month’s issue, history suggests that long-term investors should actually view these events as opportunities—not cause for panic or kneejerk reactions. Read More »

Volatility in Context

Well, Dan was pretty much spot-on in last week’s Hotline when he warned of more volatility and losses to come. As Dan mentioned, in order to see a correction of 10%, we’d have to see the Dow drop to 15,550. The Dow closed today at 16,117 so we aren’t quite in official correction territory yet, at least according to the Dow. Read More »

Back To Normal

To a certain extent, we’re seeing investors taking gains in the funds and stocks that have done the best up to this point. October is turning out to match the old wives’ tale prediction as being the worst month of the year for stocks, which isn’t true historically, but in 2014 may, in fact, come true. This is not a “new normal” but rather a regular, run of the mill, old-fashioned, normal stock market. The Dow points look massive–down 273 points on Tuesday, up 275 points on Wednesday, and then down another 335 points today–but we’re talking 1.6% to 2.1% moves, which aren’t really that massive. Read More »

Ascending the Throne

All hail Joshua Barrickman, the new “Bond King.” Joshua who? Barrickman heads Vanguard’s bond indexing group and is the named portfolio manager on Total Bond Market. While we are still waiting for official numbers from Vanguard, I think it safe to say that Total Bond Market is now the largest bond fund in the world. Read More »

September 2014

Disperse Returns

When Alibaba, the Chinese e-commerce giant, went public last Friday, it was priced at $68.00 and opened at $92.70 for an immediate 36.3% gain. It closed the day at $93.89, up 38.1% from the IPO price. At its current level, around $90, Alibaba would be a top-20 holding in 500 Index, but as a Chinese company I wouldn’t expect to see it in the indexes or index funds any time soon. Read More »

Voting to Stay or Go

Voters in Scotland today are deciding whether to seek independence from the United Kingdom. The polls are too close to call, and results won’t come in until tomorrow, but even if Scotland votes to separate, given its small size, I wouldn’t expect this to disrupt the global economy. Whichever way the vote breaks, as Dan and I discussed in last month’s issue, trying to trade around geopolitical events can be hazardous to your returns. Read More »

Open Sesame

Today is a solemn one for many Americans, and I include myself in taking a moment to remember where I was and what I saw on Sept. 11, 2001. With one child in her third day of high school just blocks from the World Trade Center and another who disobeyed his teachers’ orders to stay put and instead ran home wanting to know where his sister was, we were just one family amongst millions across the country and around the world feeling the impact and the shockwaves of the terrorist attack on our soil. Read More »

Green Across the Board

The incomes and spending report on Friday was kind of a non-event. But the report on inflation, as captured by the Fed’s favorite metric, the PCE (or personal consumption expenditures) measure, showed that while inflation is running around 1.6% year-over-year, the recent three-month trend shows inflation at a 2.2% annualized rate. That may sound like we’re moving into rate-hike territory, but actually that’s down from the pace of the prior two months. The core PCE is running at a 1.7% annualized rate over the past three months, so inflation’s not here yet. Read More »

August 2014

Vanguard Goes for Brokerage

It hasn’t been a particularly busy week from an economic signpost point of view, but it has been a record week as the S&P 500 index has hit a couple of consecutive records before falling back a bit today. The biggest news was probably today’s second-quarter GDP revision. After first-quarter GDP was revised from a 2.9% contraction to a 2.1% contraction, second-quarter GDP has now been revised up from 4.0% to 4.2%. The economy definitely rebounded after the winter chill, and it appears more growth is on the way. Read More »

What Correction?

When the markets closed today, the S&P 500 index had set yet another record high, while the Dow index remains just 0.9% below its mid-July peak. We never got close to a “correction” over the past few weeks, though you wouldn’t have known that from some of the hand-wringing that went on the minute the stock market fell from its July all-time high. Of course, you weren’t worried, were you, thanks to several of my recent Hotlines. Read More »

Tailwinds at Home, Headwinds Abroad

This week, we continue to see a divergence between the data at home and the reports from overseas. In the U.S., the reports have, for the most part, been positive. The employment situation continues to improve. The JOLTS report (Job Openings and Labor Turnover Survey) saw job openings rise to 4.671 million in June—the highest level since February 2001. Also within in this report we saw the “quits” rate tick higher. It is still below pre-crisis levels, but it is moving in the right direction. Remember, people don’t quit their jobs unless they are confident they can find another one or have already found something “better.” Read More »

Just Another Summer Swoon

Last Thursday’s 317-point drop in the Dow got blood boiling, but that was about it. Greater volatility followed on Friday, but after dropping as much as 126 points, the index rebounded and bounced around, then closed the day down just 70 points. The decline and this week’s continuing ups and downs in the stock market have been blamed on a Portuguese bank, tensions in Ukraine, conflict in the Middle East and/or an outbreak of Ebola in Africa. It could be any of those, or maybe it’s the return to recession in Italy—or none of the above. Read More »

July 2014

The 3.4% Correction

Today’s 317-point decline in the Dow, a 1.9% fall, coupled with a 2.0% drop in the S&P 500 index coming on the final day of July, probably woke up a few Wall Street traders lying around their Hamptons beach houses. But really, it’s nothing. Exactly why stocks dropped today—whether it was worries about Argentina’s default, a risk that the Fed could raise rates sooner than anticipated (because, yes, the economy is picking up), or declines overseas—doesn’t really matter. Stocks dropped. Big deal. Read More »

Large Is Beautiful

In the category of “what goes up must come down,” it’s been a see-saw month in the stock markets at home, as large-cap indexes like the Dow and S&P have risen and small- and mid-caps have fallen—though some large-, mid- and small-cap indexes have hit record highs this month. The Dow and S&P indexes are up 3.1% and 7.5% for the year through Wednesday, and the S&P mid- and small-cap indexes are up 5.3% and 0.1%. Read More »

More of the Same

In short, this week delivered more of the same from last week: We saw economic reports indicating that GDP growth picked up in the second quarter, we got word again that the Fed is on the track we thought they were, and more unsettling geopolitical headlines hit the wire. Through it all, markets edged higher, with the Dow closing at a new high yesterday. Read More »

Can the Dow Drop a Thousand or Two?

Are you ready for a 1,700-point drop in the Dow? You should be, because that’s what it’ll take to get that 10% “correction” that is just waiting for us down the road. Is it going to happen tomorrow? I doubt it. But when I see commentary like the one I got Tuesday night from, I feel it’s my duty to put some numbers in perspective. Read More »

Stock Market Fireworks

We’re still in a slow-growth, not no-growth economy. Some indicators suggest a pickup, while others are more hazy. For instance, Monday’s numbers on pending home sales were very strong, but they don’t completely match with mortgage statistics suggesting that some of the housing activity may be coming from all-cash, non-resident buyers. Read More »

June 2014

Man the Lifeboats: GDP is Sinking!

That GDP revision, a change of a full 3 percentage points from first estimate to final, does appear, at least on the surface, pretty outrageous, but in fact we saw the same thing happen in Q1 2011 when the first estimate of 1.7% growth turned into a 1.3% contraction. And in Q4 2008, admittedly a rough time for the economy, the final GDP report was 4.5% lower than the initial report. In Q1 2008, we saw a 3.3% revision. So, rather than focus on what was, let’s focus on what is—and what we have is a recovering and expanding economy. Read More »

Another Chef, Please!

Inflation’s been in the news over the past week, primarily because, well, there’s been a split in the data on consumer inflation and producer inflation. Producer inflation, or inflation at the front-end of the production cycle, declined for the second time in four months in May, though it is still running at about a 2.0% year-over-year rate, while consumer inflation ran up 0.4% this past month and is running at a 2.1% rate Read More »

Slow But Steady

Last month I mentioned that Jeff and I would get back to you on the underperformance year-to-date for International Growth. Through Wednesday’s close the fund has gained just 2.4% for the year versus Total International Stock‘s 5.1% gain. Now, a short period is really nothing to worry about, but I wanted to know (and apparently some of you did as well) whether we could pin the fund’s lagging performance on anything in particular—for instance, Virginie Maisonneuve’s leaving the fund, and Schroder late last year.

Calm Settles Over Markets

Trading volume is down, interest rates are low, stocks are at all-time highs, and the “complaint,” if you could call it that, is that investors have become complacent. Well, are they complacent, or are investors simply figuring out that all that frenetic activity produces nothing more than a lot of noise without much signal? This morning’s Wall Street Journal says that “investors see little reason to make big changes to their portfolios,” to which I breathe a sigh of relief and say, “Hallelujah!” Read More »

May 2014

Context Required

Last Friday’s new-home sales numbers for April were a nice step in the right direction after a terrible winter, but the frost damage hasn’t been fully recovered yet. Sales popped in April, and March’s horrific numbers were modified higher, which made the month look less bad, but not good. But we’ve still seen four months in a row of year-over-year declines and actually saw a small drop in the median new-home price compared to April 2013. Coming on the heels of a better existing-home sales number, the data is, as I said, a step in the right direction, but a baby step at best. Read More »

Correction Averted

Wow, after watching the Dow drop by 100 points or more over three days during the past week, and small stocks nearing an official correction, I was waiting for the doomsayers to jump out of their bomb shelters and safe rooms and proclaim, once again, that the end is nigh. In fact, despite all the supposedly big drops in the indexes, the Dow only got down to a 2% loss from the latest high hit on May 13, and with Wednesday’s 159-point jump, well, the pessimists ran back to their caves. Read More »

Slightly Better Than a Coin Toss

U.S. stocks hit three new highs in as many days this past week before taking a step back on Wednesday and Thursday. At times like these, you should be highly skeptical of pundits trying to call the exact market top—it’s an impossible task. In fact, the more you can tune out the day-to-day market moves, the better. Out of the 1,307 trading days since the stock market bottomed on March 9, 2009, 500 Index only notched a positive return on 736 days, or 56% of the time. So on any given day it has been only slightly better than a coin toss whether stocks were up or down. However, through Wednesday, 500 Index has gained 209.7% since the bottom. For those investors who have been able to stay in the markets through the day-to-day noise, there have been some nice gains to be had. Read More »

Bad Habits

While the markets dawdle and the economy appears to be gaining back some momentum, a couple of disturbing retirement-related trends seem to be rearing their ugly heads, from investors buying at the highs in their retirement accounts to people tapping their retirement accounts, like 401(k)s, to spend the money. Read More »

A Spring in Spring's Step

Housing numbers continue to confuse, and the latest figures on pending home sales suggest that if the housing market remains in recovery, it’s happening in a place where the data doesn’t reflect it—namely, in multi-family housing. Think apartments and condos, which aren’t counted in the sales figures. Read More »

April 2014

Building Blahs

Economic numbers gave Wall Street plenty to ponder this past week. Existing home sales were flat in March, but prices are creeping higher as inventories remain relatively tight. Given that sales have actually been slowing since July, a couple of flat months like February and March are okay in my book. And this opens the door to a surge in the coming months, particularly when you consider the reports that mortgage lenders have eased their restrictions a bit as refinancing activity has slowed, giving them an incentive to start moving paper and collecting fees from new borrowers. Read More »

End of Days? Not!

The seemingly endless fascination with an end-of-days scenario for the bull market just can’t seem to get traction—though it’s not for lack of trying. The false prophets of Wall Street foresee a terrible time ahead, with stocks falling at least 10%, inflation (or deflation—take your pick) coming down upon the consumer from on high, and a “rigged” market yielding famine and destruction upon all who attempt to profit from it. Read More »

500 … and One?

Friday’s payroll report was one of those something-for-everyone reports with greater job creation but a stagnant unemployment number and a slight uptick in the U-6 overall unemployment figure. In short, the private sector continues to create new jobs, but not at the pace we saw in the fourth quarter of 2013, and there’s been absolutely no job creation in the public sector. Also, the quality of new jobs remains low, as it’s lower-paying industries that are doing the most job building. Read More »

High Frequency Fallout

I expect you’ll hear a lot more about HFT in the weeks ahead given that the SEC has announced it’s got some investigations ongoing in the area, and of course Michael Lewis is “talking his book” heavily in the media. But then the conversation will die down and we can go back to thinking about the economy. Read More »

March 2014

Candy Crushed

How sweet it is: Just when you thought the IPO market, which has been on fire, was about to go atomic, the debut of Candy Crush Saga game-maker King Digital Entertainment literally got crushed with a 15% decline in its first day of trading. Does a failed IPO, the worst of the year, make me happy? Not necessarily, but it does suggest that traders and investors aren’t suffering a complete sugar high when it comes to stock prices. Read More »

Has Spring Sprung?

It’s the first day of Spring and I, for one, am hopeful that with warmer weather comes a spring in the step of the consumer, who has been notably absent as the polar vortex has wreaked havoc with our national pastime: shopping. But you have to wait and watch rather than try to guess, or use the Magic 8-Ball to know if, indeed consumers will come out in force in Q2. Read More »

Off the Bench, But Not in the Game

Last Friday’s jobs numbers had something for everyone, it seemed. The naysayers certainly could look at the increase in the unemployment rate and snicker. But the more realistic economic observers, including myself, saw greater job creation than had been expected and signs that those who’d stopped looking for work had come back off the sidelines and started the process once again. (The naysayers would, of course, claim that those better-than-expected numbers were better because expectations had been lowered, but then that’s how people support their arguments, isn’t it?) Read More »

Putin On a Show

Last Friday’s report showing that Q4 GDP growth was closer to 2.4% rather than the original estimate of 3.2% growth didn’t surprise Wall Street, which continued to bid stocks higher through month-end, with the S&P 500 hitting yet another record high. Of course, the biggest news this week was Vladimir Putin and Russia entering the Ukraine’s Crimean peninsula. What’s remarkable is how well the stock market held up in the face of the Russian advance, with the market down less than 1% on Monday and then rebounding past the prior level on Tuesday when the S&P 500 index hit a new record. (It jumped further today.) Read More »

February 2014

A Fabulously Flawed Five

Welcome to the biggest, most bullish market you’ve seen in five years. What am I talking about? Well, when February’s trading ends at 4:00 pm Eastern tomorrow, those five-year return numbers for all manner of equity mutual funds are going to soar! Why? The last down month of the famous 2008–2009 market break was Feb. 2009, and as it falls out of the five-year calculation, well, you’re going to see some pretty tasty-looking returns being reported. I’ll have all of Vanguard’s five-year returns in the newsletter, which we’ll be finishing over the weekend, but I just want to warn you that there’s a lot less in the five-year numbers than meets the eye. Forewarned is forearmed. Read More »

Snow in the Data

There is no way around it: The housing data this week was weak, though it looks like there is some snow in the data. The home builders’ Housing Market Index fell a record 10 points, from 56 a month ago to 46. The weakness was widespread with traffic, current sales and future sales down. Housing starts also were well below consensus and last month’s read. Read More »

Smoke Signals

January was a typical risk-off month, with bonds outperforming stocks and stocks, well, taking a loss for only the fourth month in 20. The $19 billion flow of money out of stock mutual funds and ETFs and more than $10 billion flow into taxable bond investments alone smacked of market-timing, bad portfolio management and maybe a bit of tax-selling, but it also smacked of “risk off.” Read More »

Counting the Days

The ISM manufacturing report came in well below expectations at 51.3, which is a sharp drop from December’s 56.5 read. Keep in mind that this report still signals growth and may have been negatively impacted by the severe weather of the polar vortex. Still, this disappointing report coupled with last week’s weak durable goods report has the manufacturing sector on shakier ground than a month ago, and bears watching. Read More »

January 2014

Early Bumps Amidst the Taper

As expected, the Fed is cutting their stimulus bond-buying by another $10 billion in February to $65 billion and, aside from changes to a few words here and there, issued an unremarkable statement at the end of their two-day meeting on Wednesday. One thing is certain. I told you that volatility would pick up (that it almost had to pick up from the low, low levels of the last year) and it has, with a vengeance. Not that it’s anything to worry about, but it’s something to get used to. Look at the VIX, or fear gauge (in the chart below), which jumped over 7% on Thursday and then jumped another 29.8% on Friday (it was down 2.6% on Monday, down 9.3% on Tuesday and then back up 10.8% on Wednesday). Read More »

Hello, Here's My Wallet

Well, the trio of Managed Payout funds has gone from plural to singular, as all have been merged into one. The first iteration of this experiment has failed, so it now moves into Phase 2. We’ll see how that goes, but I would not rush to be a buyer of the newly reconstituted Managed Payout. Read More »

Quietly Protecting Investors

You have to respect a team that will close a fund that is in high demand and forego the extra revenue that comes with more assets in order to protect a strategy and do right by shareholders. The team at PRIMECAP Management deserves that respect. Announced through a SEC filing, the PRIMECAP Management team is closing PRIMECAP Odyssey Aggressive Growth (ticker: POAGX) to most new investors on January 20, 2014. Read More »

Merging Away

Vanguard has finally set a date to end an adoption that never quite worked out. On Friday, Feb. 21, Growth Equity will be merged into U.S. Growth, and by that Monday no one should be the wiser. Growth Equity will simply cease to exist, and its horror-show track record will disappear with it. Read More »

A Lackluster Start

The year opened with a thud—the Dow dropping 0.8%, or 135 points, and the S&P 500 index dropping 0.9%. But that doesn’t mean that 2014 is dead on arrival. As Dan and I discuss in the Outlook in the year-end issue, we expect to see stocks make gains in the year ahead, though we think those gains will be a little harder to come by than in 2013. Read More »

Ringing in 2014

Happy New Year. Managed Payout fund investors probably got a bit of a surprise on Monday when their funds issued yet another series of distributions, ranging from $0.87 to $1.46, and prices dropped from 3.8% to 9.1%. While a good portion of each was a distribution of capital gains, as much as 60% of Managed Payout DistributionFocus’s distribution was characterized as a return of capital. These funds continue to disappoint, and I absolutely would not be a buyer. And, of course, the three will be merging into one shortly. Read More »

December 2013

A Lump of Coal

First off, let me remind you that we are deep into distribution season and the wild changes in NAV that you are seeing are due to distributions and nothing else. No, Health Care didn’t lose 6.7% of its value on Tuesday, and Explorer did not drop 9.8% in value. PRIMECAP did not lose 5.2%, either. All of these NAV moves, and more, are distributions. If you are reinvesting, you received more shares for your dividends and capital gains, and if you’re taking distributions in cash, well, that cash is now sitting in your money market, waiting to be redeployed. Read More »

Quantitative Tapering

First off, let me remind you that we are deep into distribution season and the wild changes in NAV that you are seeing are due to distributions and nothing else. No, Health Care didn’t lose 6.7% of its value on Tuesday, and Explorer did not drop 9.8% in value. PRIMECAP did not lose 5.2%, either. All of these NAV moves, and more, are distributions. If you are reinvesting, you received more shares for your dividends and capital gains, and if you’re taking distributions in cash, well, that cash is now sitting in your money market, waiting to be redeployed. Read More »

Lowering the Bar

Like a touch-up rather than a restyling, the markets have been getting little haircuts this past week. The Dow hasn’t hit a high since the second-to-last trading day of November, while the S&P 500 index did indeed hit a high on Monday before trimming back a bit. Dan and I have said for some time now that a 10% correction would be healthy. It might flush out some of the “traders” who shouldn’t be in the market in the first place, and would hopefully revalue some of the stocks that may have become a bit too “rich” in this very calm bull market. But with stocks only 2% or so off their highs, it is far too soon to call this a correction. Read More »

Mixed Signals

I am not foolish enough to believe for a second that whatever I say or write is going to move the markets. But I am kind of amused to see the market dropping in early December. As I said in my November 27 Hotline, and repeated in the lede of the December issue of the newsletter, I think a 10% correction in the stock market is warranted, and would be a cleansing that would benefit all of us who are long-term investors, rather than traders. Read More »

November 2013

It's 2006 All Over Again

The personal income report on Friday showed good continued strong growth in incomes after several months of weaker numbers. On a year-over-year basis, incomes are up 3.7%, which is higher than inflation—always a good sign. Spending, on the other hand, ticked down as the savings rate went up. The savings rate is now about the average for the last decade, but it remains well below the average rate going back to the late 1950s. I wouldn’t be too surprised by that as—quite honestly—saving money at 0.01% is really not a very attractive option these days. Yes, I do keep money in a Vanguard money fund for emergencies, and I remind myself all the time that it’s for emergencies, not for investments, and hence even at 0.01%, at least it’s there when I need it. Read More »

A Dow Point Today

Retail sales were stronger in October than expected, even without a 'lift' from the introduction of the new iPhone. Car sales zoomed ahead, as did sales of many of the items you might purchase if you were moving into a new home, like furniture, electronics and appliances. Existing home sales, on the other hand, seem to be slowing. Growth has been negative over the past couple of months. But, tempering that is higher prices and fairly tight inventory. Sales are at a high level, and just staying at that level, particularly when we consider that prices are rising, can power the economy higher. We won’t see new home sales data, which comes from the Census Bureau rather than the National Association of Realtors, until early December. Read More »

Predicting A Money Market's Five-Year Loss

The personal income report on Friday showed good continued strong growth in incomes after several months of weaker numbers. On a year-over-year basis, incomes are up 3.7%, which is higher than inflation—always a good sign. Spending, on the other hand, ticked down as the savings rate went up. The savings rate is now about the average for the last decade, but it remains well below the average rate going back to the late 1950s. I wouldn’t be too surprised by that as—quite honestly—saving money at 0.01% is really not a very attractive option these days. Yes, I do keep money in a Vanguard money fund for emergencies, and I remind myself all the time that it’s for emergencies, not for investments, and hence even at 0.01%, at least it’s there when I need it. Read More »

October Hot Hands Update

I can tell you that we’ve never seen a Hot Hands race come down to hundredths of a percent or a penny difference in price, but the facts are the facts: With Vanguard updating month-end net-asset values—something they do every month and which I’ve told you about in months past—there’s been a change in the October Hot Hands selection. Read More »

Markets Are All A-Twitter

For some market participants, Twitter’s IPO was the highlight of the week. Last night Twitter raised $1.8 billion in its initial offering, selling 70 million shares at $26 a share, for an $18.1 billion valuation. Today the stock opened at $45.10 a share and has been trading around that level, valuing the company at about $30 billion. For a company that is not yet profitable, this brings back shades of 2000 and the tech bubble in terms of stock valuations. But in this case, it’s Twitter rather than the sector as a whole which sports what looks like a very high valuation. The broader tech sector still appears relatively (and that’s relatively) cheap. Read More »

October Hot Hands

We will be reviewing the October Hot Hands strategy in full in the December issue when we have finalized all the numbers, but for those who are trading on this strategy, here is the final word on which fund to trade into. Read More »

October 2013

Hot Hands in Tech Winter

It’s the last week of October, and with the government open and operating again, key economic data for September is finally rolling in. Overall, the picture hasn’t change that much—we remain in an economy that is growing, albeit slowly. The Federal Reserve seems to agree. Having met for two days this week, they plan to stay the course: They will continue purchasing $85 billion of bonds each month and will keep the fed funds target rate pegged near zero. The Fed also reaffirmed their target levels of 6.5% unemployment and 2.0% inflation—though they’d accept inflation up to 2.5%. Tapering seems to be off the table right now, and its start will likely be the responsibility of Chairman Ben Bernanke’s successor in 2014. Read More »

Watch Those Numbers

The government is open again, and economic data is beginning to flow. That said, the shutdown delayed some numbers, delayed capturing some other numbers, and generally will continue to have an impact on all the numbers we see over the next few weeks, from what I’ve been told. In particular, inflation data, because of the way it is collected and processed, could give a wrong impression about the state of inflation in the economy for the next six months. Why? Because some of the data for the inflation numbers, in particular rent numbers, are only collected every six months. And other data will be affected, for a while at least, due to sampling error in the October data due to the shutdown. It’s a mess, particularly given the fact that inflation is one of the two benchmarks the Fed says it is using to determine when to begin tapering of its $85 billion per month bond purchases. From the analysis I’ve seen, it’s important to keep an eye on 12-month numbers and not get carried away with monthly numbers, which could be all over the map. Read More »

Taking Default Off the Table—For Now

Default will be avoided, at least for a few months. Policymakers in Washington agreed to a last-minute deal Wednesday night to end the 16-day government shutdown and raise the U.S. debt limit. As the unsettling practice of governing by crisis becomes all too common in Washington, you can’t blame the analysts at Fitch Ratings for giving the U.S. government’s AAA-rating a negative outlook—it’s literally the least they could do. Remember, it was in the aftermath of the debt ceiling debate in 2011 when S&P downgraded U.S. debt from AAA to AA+. Read More »

Mr. Washington Goes to Market

On Wednesday, October 9, President Obama nominated Janet Yellen to succeed Ben Bernanke as Fed chair, which would make her, upon confirmation, the first woman Federal Reserve chair in its 100-year history. Yellen will, of course, not take her seat until January when Ben Bernanke’s term expires, so there’s still plenty of time for the Fed to cogitate over tapering, or not. But given where the government is right now, with its shutdown and arguments over short-term debt ceiling hikes contingent on savings in the budget process, we would be surprised to see tapering begin in 2013 at all. Tapering will, in our opinion, be in Janet Yellen’s court. Read More »

Shutdown: Day Three and Counting

Friday’s personal income report showed some pretty robust growth in incomes, a welcome showing in a continuing slow-growth economy. Consumption also rose after a weak July. Year over year, incomes have risen faster than spending, and you can see this reflected in the savings rate, which, at 4.6%, is right on the average for the past decade after having dipped in January. Monday played out about as expected. The Senate and the House couldn’t come together and agree to keep the government open, preferring to play games with the country, though it appears there may be some cracks opening in the opposition as of this afternoon. The government shut down some operations and furloughed 800,000 workers. Meantime, the S&P 400, the S&P 600 and the Russell 2000 indexes all hit record highs on October 1, the first day of the shutdown. Read More »

September 2013

Stocks Down a Little, Bonds Up Big

It’s been quite a week with the stock averages moving lower and bond prices moving higher. The Dow, for instance, fell for five consecutive days and, while that made for headline fodder, it didn’t mean very much, as the losses, in total, were small and came from an all-time high that was set just a week ago on Wednesday the 18th. With today’s small, 55-point gain, the Dow is just 2.2% off that high. Through Wednesday, foreign funds are leading the charge for the month, with gains ranging from 7.4% for International Explorer to 9.3% for Emerging Markets Stock Index. Industrials and small growth stocks are also at the fore. Read More »

The Token Taper

I can’t really figure out exactly why 'the market' was so certain the Fed was going to begin to trim its quantitative easing program, given the state of both inflation (nonexistent) and unemployment (still too high). You can be sure that the talking heads are going to have all kinds of criticisms and comments about the lack of a taper and the lack of confirmation of their own biases, but no one is going to do a mea culpa. They’re simply going to find fault with Ben Bernanke’s thought process. Read More »

Will They or Won't They?

Will they or won’t they? You might be wondering if I mean, 'Will they or won’t they bomb Syria?' or 'Will they or won’t they force a government shutdown over the debt ceiling?' But on Wall Street right now, the “will they or won’t they” refers to the Federal Reserve, which begins a two-day meeting on Tuesday and will make an announcement Wednesday afternoon that’ll have all eyes and ears tuned in. I still think the Fed will put off tapering until later this year, but if I’m wrong, then the taper they engage in will be incremental—maybe a $5 billion or $10 billion taper off of the current $85 billion in stimulus currently being provided. As I’ve said before, while there’s some disagreement about whether this quantitative easing is helping, it’s pretty clear that, at least in the short term, it isn’t hurting. Read More »

The Headlines Are Coming

It’s not flashy, but the slow-growth economic story remains on track. The ISM Manufacturing index showed strong growth for the second straight month, as it came in above expectations at 55.7. Today, the ISM Services index was also higher than predicted at 58.6, which is the highest level since December 2005. Remember, readings above 50 indicate growth. otor vehicle sales were up 1.9% in August to a 16.1 million annual rate—the highest since November 2007. Notably light trucks, like pickups, which often point to strength or weakness in small businesses and construction, led the gains. Read More »

August 2013

Taper On, Taper Off

Remember “risk on, risk off”? Well, according to my “bond guy,” we’re now in a “taper on, taper off” environment. As the economic data enhances the prospect for tapering, stocks and bonds fall, while data that suggests the Fed will hold off on cutting back on its $85 billion per month bond-buying program sparks a short-term bond and stock rally. Last Thursday, the 10-year Treasury’s yield jumped as high as 2.92%. Yet, three trading days later, it was as low as 2.71%. For those who don’t follow the daily twitches in the bond market, that’s a mighty big range to be trading in over the course of just a few days. I’ve shown you a chart of the 10-year Treasury’s yield many times over the past several months, and if you look again you can see that we seemed to push outside what I thought would be the new trading range for bond yields, but have since come back in to between, say, 2.5% and 2.8%. Read More »

A Nasdaq Lunch (And Siesta)

3,631.17. That’s the number the Nasdaq was stopped at for over three hours today as trading was halted due to software malfunctions. Though the Nasdaq was down, traders did not panic. U.S. stocks, measured by the S&P 500 and Dow indexes, held on to gains throughout the afternoon. And when trading resumed on the Nasdaq at 3:25 p.m., stock prices initially rallied and then sold off a little, with the Nasdaq finishing the day at 3,638.71, or up 1.1%. Read More »

Brightening Outlook, Darkening Markets

The jobs picture continues to brighten, slowly. The spending picture also looks fine. And inflation is nowhere to be found. Yet investors remain cautious, taking the stock market down off of its early August highs and pushing bond prices lower and yields higher. Why? Well, Thursday’s early sell-off in both the bond and stock markets was on fears that, yes, the economy might be doing so well that we could shortly come to see the beginning of the end of the Fed’s QE3 stimulus program. However, you don’t need to look very hard to find a wide range of opinions over whether the economy is running faster or slower than the numbers indicate—or, even more important, whether the Fed will indeed announce it is starting to taper at its mid-September meeting, or whether it’ll be several more months at least before the bond market really has to get antsy about the reality of tapering, rather than the mere expectations of tapering. Read More »

Bonds Holding Ground

Friday’s personal income and consumption report was another slow-growth reading, and the accompanying report on inflation, using the Fed’s favored gauge, showed nothing going on on the inflation front. The personal consumption expenditures index is up just 1.3%, and the core reading, which excludes food and energy, is up 1.2%. Read More »

Taper On Hold

August opened with a bang. The Dow, the S&P 500, the S&P 400, the S&P 600 and the Russell 2000 all hit all-time highs today as traders and investors apparently digested all the news that has come out this week and decided that yes, the economy is improving, but no, it doesn’t look like the Fed’s going to taper just yet. That being said, the 10-year Treasury has been bouncing all over the place this week and is now at a yield of 2.72%, which is the highest we’ve seen in this cycle and which also means its price has declined by about 6.5% so far this year. Read More »

July 2013

High Returns, Low Volatility

Remember when the market’s volatility spiked in June? The VIX (or fear index) popped to 20.49 on June 20 as the Dow was dumping 550 points over a two-day sell-off. Well, as I record this, the VIX is below 13.20. If you’re worried about volatility, your biggest worry should be volatility in the volatility index, suggesting traders have a schizoid personality. It’s kind of like the old risk-on, risk-off debate we were having about a year ago or more. Well, no one’s talking risk right now, with returns as high as they are in the stock market, but I think we may head into a more risky and more volatile environment as we head into September and the inevitable showdown within Congress over the debt ceiling and spending limits. Read More »

Berkanke Makes It Simple for Congress

Testifying before Congress this week, Fed Chairman Ben Bernanke keeps finding new and different ways to convince people that tapering is not a foregone conclusion, and there aren’t any imminent changes to the fed funds rate. Bernanke continues to try and clear up the confusion that seemed to stem from the post-Fed meeting press conference that spurred the 10-year Treasury yield to spike over 2.7%. His message may be getting through, finally, as the stock market has hit new highs and bond yields have dropped closer to 2.5%, touching 2.46% during yesterday’s trading. Read More »

Home, Home on the Trading Range

For all the worries over the bond market (much of which I think is vastly overdone and overwrought), the stock market has been pushing toward new highs. Over the past week, small-cap stocks have been on a tear to new highs, with both the Russell 2000 and S&P SmallCap 600 taking the lead. Many Vanguard funds are also sitting at all-time highs. On the index side, of course, funds like SmallCap Growth Index and SmallCap Index are at records as of Wednesday night’s close. But active managers from small to large are also doing well for their shareholders. Read More »

Why We Still Don't Own Treasurys

We’ve spent a lot of time covering the bond markets and fixed-income funds over the last several months. (For Dan’s update on Vanguard’s tax-exempt funds, check out the July issue of the newsletter.) Here’s another piece of the story: For the first time in seven years, bond market indexers have lost money over a 12-month period. Total Bond Market Index was down 2.54% for the first half of 2013, but the end of June also marked a 0.95% decline from a year ago. The 45% allocation to plain-vanilla Treasurys, as Dan has warned it could, caused returns to suffer. Read More »

June 2013

The Taper Trauma

There are changes recommended for the Growth and Growth Index Model Portfolios. Grab a notepad and a pencil, and I’ll give them to you in a moment. Last week, Jeff and I expressed surprise at the negative take that the Street and individual investors seemed to have after Fed Chairman Ben Bernanke spoke. The market’s reaction was so strong I thought maybe I’d misheard what he said. Read More »

If, If, If …

If the Fed’s estimates about where the economy is headed are correct, and if its estimates about the pace at which the economy is growing are correct, and if unemployment drops substantially, and if inflation begins to tick up … then, the Fed’s chairman, Ben Bernanke, says, the Fed will begin to taper or slow its purchases of bonds, and if things continue on that path they could (not will, but could) end their bond purchases sometime next year. Those are huge “ifs.” Read More »

Bond Funds Absorb Stock Market Shocks

The Friday payrolls report had something for everyone, it seems. The rise in the unemployment rate back to March’s 7.6% from 7.5% in April was either an indicator of faltering job creation or increased job seeking. The revisions to the prior two months sent the three-month average down substantially. But the bottom line is that in the face of continued job destruction on the government side of the ledger, private businesses are continuing to add workers—slowly yes, but surely. Since the job market turned around a little over three years ago, more than 6.3 million new jobs have been created. This morning we also saw jobless claims decline, which points to continued slow improvement in the employment picture. Read More »

Coping With Rising Market Volatility

The markets have been volatile, as you’ve probably seen, with the Dow dropping 2.4% off of its high through Thursday. I wouldn’t call this anything major. But take a look overseas. You’ve probably heard there’s been some volatility in Japan. Well, as investors have begun to ask the first questions about the viability of Abenomics in a country where the population is aging rapidly, the government is subsidizing power prices, and corporate and investor culture remains locked in decades-old strictures that are hard to break, stock prices have begun to drop. Just 11 trading days ago, the Nikkei was up 50.3% for the year. As of this morning’s close in Tokyo (remember, they are 13 hours ahead of us), the Nikkei is up just 24.1% for the year, having lost more than half its gains. That’s what I call volatility. Read More »

May 2013

Hotline

Stocks hit highs and then gave up some gains. And economic signposts continue to point towards a slow growth, not no growth economic expansion. But maybe not in Japan. Last week investors began to question whether more money will really lead to sustainable growth in Japan, and stocks headed the other way—quickly. Last Wednesday night, Japanese stocks fell 7% in a single trading day. And after declining another 5% last night, Japanese stocks are down about 13% in the past week. Read More »

Hotline

If you’ve been watching the news, you know that a pullback in Chinese manufacturing suggesting contraction rather than expansion caused a minor tsunami amongst Pac Rim stock markets overnight. While China’s market fell just 1.2%, Japan, which relies on major exports to China, saw its market fall 7.3%. Hong Kong was down over 2.5%, and as European markets opened they also fell, mainly in sympathy or in reaction rather than due to any overwhelming fundamental reason for concern. Of course, the way news travels around the world these days, investors tend to shoot first and ask questions later–if they ask questions at all. Many European bourses were down between 2% and 3% on the day. And I wouldn’t lose a lot of sleep over the Japanese market’s decline. The Nikkei was up 50.3% for the year before the little tumble this morning. Read More »

Hotline

Two different measures of inflation released this week both point to an inflation situation that remains stable. The Producer Price Index (PPI) reported headline inflation of 0.7% and core inflation (which excludes energy and food) of 1.7%. The Consumer Price Index (CPI) numbers were very similar, showing headline inflation at 1.1% and core inflation at 1.7%. As long as inflation remains low and below its 2.0% to 2.5% comfort level, we can expect the Fed to continue its easy money policy and focus on stimulating growth to bring down the unemployment rate. With jobless claims coming in higher than expected this week, it looks like the Fed still has some work to do on the employment front. Read More »

Hotline

The stock markets continue to serve up all-time highs as our slow-growth, not no-growth economy slugs it out with the naysayers who constantly find plenty of reasons to be negative. The fact is that companies continue to find markets for their goods and services; they continue to cut costs where they can to run as lean and mean as possible; borrowing costs remain extremely low; and the consumer is loosening the purse strings a bit. The current earnings season hasn’t been anything to write home about because, frankly, there’ve been no big blow outs or blow-ups. It’s business as usual. Read More »

Hotline

The stock markets continue to serve up all-time highs as our slow-growth, not no-growth economy slugs it out with the naysayers who constantly find plenty of reasons to be negative. The fact is that companies continue to find markets for their goods and services; they continue to cut costs where they can to run as lean and mean as possible; borrowing costs remain extremely low; and the consumer is loosening the purse strings a bit. The current earnings season hasn’t been anything to write home about because, frankly, there’ve been no big blow outs or blow-ups. It’s business as usual. Read More »

Hotline

Friday’s GDP report of 2.5% growth for Q1 didn’t meet expectations, but it’s a far sight better than 0.4%, the meager rate at which the economy expanded in Q4. This week saw a range of economic reports. Not to be dismissive, but to my eye not a whole lot changed. Manufacturing slowed a bit, but consumers showed improvement, with increased levels of incomes and spending. Motor vehicle sales were strong, and housing prices continue to recover. Inflation remains in check. The employment situation continues to slowly mend; jobless claims came in at the lowest level in five years, though we will get the official read on employment tomorrow. Read More »

April 2013

Hotline

Vanguard’s tax-exempt money fund yields are jumping, having risen from 0.01% for all funds on April 11 to, in some cases, 0.08% for funds like Tax-Exempt Money Market, NY Tax-Exempt Money Market and Ohio Tax-Exempt Money Market. The last time we saw a spike like this was in October, when we saw yields get as high as 0.08% before quickly doing an about-face. From those highs, yields went back to the 1 basis-point level in a bit less than two months. I can’t think of any reason this won’t happen again, as there is no good, fundamental reason for yields to be rising at the moment. Read More »

Hotline

The big news out of Vanguard this week is that, as of Wednesday, most of Vanguard’s transitions of index funds from MSCI indexes to CRSP and FTSE benchmarks are complete. Congratulations to them. What’s left to finish is Total Stock Market, Total International, Tax-Managed International and Emerging Markets Index. As we said when the changes were first announced, investors shouldn’t feel a thing and, as far as we can tell, they didn’t. The transitions have gone smoothly from the shareholders’ perspective. Read More »

Hotline

While the unemployment numbers released Friday were disappointing, showing that job creation over the past three months was the slowest it’s been since October, the continued disconnect between a falling unemployment number—now down to 7.6% from 8.2% a year ago—and the shrinking labor force has the skeptics and the bears growling mightily. Read More »

Hotline

Last Friday was the Good Friday holiday. Nonetheless we saw consumer sentiment and personal income reports released to a closed stock market. On consumer confidence, the University of Michigan numbers, showing a 1.3% rise in confidence from the prior month, once again seemed to disagree with the Conference Board numbers, which showed March numbers dropping 12.2%. Read More »

March 2013

Hotline

Think back one quarter to the end of 2012. The economy was slowing. Earnings growth was coming off of its peak. And with stocks returning better than 16% for the year, and better than 11% compounded over the prior three years, it seemed almost ludicrous that 2013 could yield even more profits. Read More »

Hotline

Remember that over the past couple months I’ve been saying that the manufacturing side of our economy appeared to be picking up some strength after flagging towards the end of 2012? Well, Friday’s industrial production report was better than expected and appears to confirm the notion that inventories are being rebuilt, and yes, people are buying. Auto production helped, and we already know that car and truck sales have been strong. So, that’s a confirmation of that trend. Only the mining business seemed to contract a bit during February—but it’s been doing so for several months now. It didn’t change the broad trend in these positive economic numbers, though. Read More »

Hotline

The Friday jobs report was better than expected and a welcome capper to a week of records set by the Dow index. While government jobs continue to be cut—and may be cut much further given the impact of sequestration—overall job creation has been strong. The unemployment rate, at 7.7%, doesn’t tell us much, since there are many workers who’ve given up looking for jobs and hence aren’t counted in the numbers, plus there’s the demographic of older workers who’ve simply moved into retirement—albeit maybe a bit earlier than they’d expected. But, be that as it may, the 236,000 new jobs in the month of February, added to almost 340,000 in the prior two months, is a good number. And today’s jobless claims numbers came in at 332,000 and, when smoothed over the last four weeks, is the lowest we’ve seen since early 2008 and is certainly a post-recession low. Read More »

Hotline

Unless you’ve been traveling by dogsled in the outer reaches of the Antarctic where cellphone coverage and Wi-Fi simply doesn’t reach, you know that the stock market, as measured by the Dow, hit a new all-time closing high on Tuesday, did so again yesterday and hit a third “record” today. Of course, if you have been reading my postings at adviseronline.com or maybe heard my take on the record on National Public Radio on Tuesday, you also probably know that this “record” has less to do with actual “highs” and more to do with headlines. On a total return basis, the Dow has hit 18 records this year, after hitting 31 records in 2012. Read More »

February 2013

Hotline

Monday’s market action, which seemed to be following the Italian elections with great interest, saw the Dow drop over 216 points, which in and of itself isn’t that big a deal, measuring just 1.6% or so. But it was the first time this year that the index moved intraday in a better-than-2% swing, something we only saw happen four times last year but an average of 42 times in the prior four years—2008 through 2011. We haven’t seen a lot of volatility in the markets for quite some time, and this might be a one-off; however, the fact that investors were so skittish over the Italian vote means anxiety is definitely high. The VIX, better known to some as the “fear gauge,” rose a whopping 34.0% on the day from very, very low levels. Read More »

Hotline

Merger mania continues unabated and, to my way of thinking, tells us that values still exist in the marketplace and that cash is finding a home in what should result in more efficient, higher-growth-rate combinations. To recap, last Thursday saw a spate of deals announced, and since then we’ve had more. We’re talking about more than $150 billion in deals so far this year. Read More »

Hotline

It was a relatively quiet week on the news front, and markets reflected that with 500 Index up only 0.8% and Total Bond Market down a fraction, -0.2%. What news we did get continued to show signs of a slow-growth environment. Friday’s international trade report showed the U.S. trade balance in December narrowed sharply to a deficit of $38.5 billion from a deficit of $48.6 billion in November. Exports increased 2.1% and imports declined 2.7%. The U.S. continues to reemerge as a major energy producer and we are seeing manufacturing return to our shores. These long-term trends could continue to chip away at the U.S. trade deficit. Read More »

Hotline

It’s been an up-and-down week, with investors ending pretty much where they started. Friday’s employment report, despite showing that unemployment rose from 7.8% to 7.9%, was well received. In part, this was due to upward revisions to December data. Additionally, investors expect the Fed to remain accommodative as long as unemployment remains above the 6.5% threshold. The market also got a boost from the ISM manufacturing report, which surprised to the upside, showing stronger growth than expected. Read More »

January 2013

Hotline

After a massive run-up this month, the markets are pulling back a bit on fundamentals, rather than pure, unadulterated optimism. What kinds of fundamentals? Well, how about GDP? Much as Q3 GDP benefitted from a surge in defense spending, the retreat in spending in Q4 hurt GDP growth and added to woes along with Hurricane Sandy and the debate over the fiscal cliff. Analysts attributed uncertainty on the part of businesses and consumers to the mix and the 0.1% annualized rate of decline in GDP was unexpected but maybe not so surprising after all. And there may be a bit of accounting acrobatics going on here, as the Defense Department was looking for ways to get ahead of sequestration and the Treasury was also looking for ways to forestall banging its head on the debt ceiling. Read More »

Hotline

Our slow-growth, not no-growth economy continues to march ahead. Today, the Labor Department reported that last week saw the lowest level of jobless claims in five years—in fact, since the exact same week in January, 2008. That’s a significant repair in the labor markets. Tuesday’s report on existing home sales capped the year, with a small decline from November, but a 12.8% rise for all of 2012. The median price of a home was up 11.5% over the course of the year. Again, that’s another sign of the economy’s continued recovery. Read More »

Hotline

This morning’s weekly jobless claims report was a bit of a surprise, posting the lowest number of new claims since Feb. 2008, right before the great financial debacle really began to pick up steam and just as the recession was setting in. After that low, unemployment claims crested at almost twice the current rate. Jobs are steadily, if not swiftly, being added as the economy continues on its slow-growth, not no-growth trajectory. Read More »

Hotline

China reported that exports rose more than expected in December, which is a good thing given that this means markets around the world are generating increasing demand. This harbinger of improving economic activity, along with higher oil prices, gives some hope that 2013 could see further mending of frayed economic activity. Read More »

Hotline

We’re past the cliff, but the ceiling (the debt ceiling, that is) looks shaky and may be getting ready to fall in on us. We have two months before sequestered spending cuts take effect. (That’s the delay that was agreed upon in the bill passed on Tuesday.) If you think the posturing and arguing were bad during the debt ceiling debacle of August 2011 and the cliff talks we just went through, well, you haven’t seen anything yet. Read More »

Hot Hands 2013

The numbers are in for 2012. As promised, I have the 2013 Hot Hands fund so you can place your trades before the markets close. And the winner is… Read More »

December 2012

Hotline

As slow as it may have seemed in the news department, given the fact that Congress went home for the holidays, there’s actually been a fair bit of news on the economy this past week. Read More »

Hotline

Fiscal cliff discussions have revved up a bit, and the trial balloons that are being floated ever more frequently are mainly a means of gauging how both the public and the legislators will react as the year-end deadline and desires to get home for the holidays draw ever closer. You can see the markets moving on every whisper out of House Speaker Boehner’s or the White House’s mouth. It’s time for a deal. Read More »

Hotline

Distribution season is here. It starts in earnest on Monday, Dec. 17, when funds like Capital Opportunity, MidCap Growth and others go ex-dividend. MidCap Growth, by the way, is slated to have the largest distribution among all Vanguard’s funds, with 5.7% of NAV scheduled to be paid out, based on the latest numbers from Vanguard. Global ex-U.S. Real Estate, which will pay out 4.2%, goes ex two days later. So, watch your distributions and, if you haven’t done so yet, consider taking them in cash and redeploying across your portfolio if you’re investing in a taxable account. By the way, as of Wednesday night’s close, Capital Opportunity is at a record high. Read More »

Hotline

We continue to see plenty of reports on the state of the economy that both suggest optimism and pessimism, but I would caution that everything we are hearing right now should probably not be taken too, too seriously, as the Hurricane Sandy impact remains substantial–skewing the numbers in ways we won’t understand for at least several more months, if ever. Read More »

November 2012

Hotline

It feels as though volatility is up, even if it’s not showing up in the VIX or other market gauges that the media likes to track. And it’s not showing up in the actual numbers in terms of how the market indexes are moving—particularly when you look and compare to the past few years. Yet, the fact that the market has taken some swoops up and down recently, and that the uncertainty around the fiscal cliff remains so… well… uncertain, is making investors nervous. But they really should look at the numbers. The markets are up and stocks have come well off their November lows. Read More »

Hotline

The data on existing home sales continues to point to a broad recovery, up 2.1% in October and up 10.9% over October a year ago. Prices are up more than 11% above where they were a year ago. Plus, the inventory of homes on the market, at 5.4 months of supply, is the lowest since mid-2006. And Tuesday’s data on housing starts was well above even the most optimistic of projections. Housing is on the comeback trail, period! Read More »

Estimated Capital Gains As % of Fund Price

Investors are focused on the fiscal cliff, as well they should be… but remember that if the two sides in this political cat-fight don’t come together, then on January 1 the Democrats will get what they want, tax hikes, and the Republicans will get what they want, spending cuts. The issue is that the Democrats don’t exactly want the specific tax hikes that the new year will bring, and the Republicans don’t exactly want the spending cuts that are slated to go into effect either. So it behooves both sides to put their heads together, to stop their whining, and get on with helping to manage our country rather than managing their re-election campaigns. Read More »

Hotline

One down and another to go. The election is history–and I don’t know about you, but I’m just glad it’s over. Sure, the stock market took a shellacking yesterday, with the Dow and S&P indexes both falling almost exactly the same 2.4% while the NASDAQ fell 2.5%. But post-election sell-offs are pretty meaningless. The stock market typically doesn’t like Democratic wins, but more importantly this was probably a case of buying on the rumor and selling on the news. The market dropped 5.0% after President Obama’s 2008 victory and it’s been rising ever since. It fell 4.5% after FDR’s first election and it fell 3.8% after Truman was elected. No big deal. Read More »

Hotline

I’m sure you’ve seen the unsettling pictures of Sandy’s aftermath and, before turning a “cold” analytic eye to the story, I want to acknowledge the personal impact of the storm—lives have been lost, homes have been destroyed. It is tragic and all of us at The Independent Adviser for Vanguard Investors hope that the suffering ends quickly and lives return to normal as soon as possible. But as we begin to move forward, talk turns to other impacts. And of course, the naysayers are out in force claiming that lost productivity, lost tourism and the fact that, at least in New York, folks can’t get to their jobs will mean a big hit to the economy. I don’t buy it and neither should you. Sure, there’ll be a short-term disruption to trade and commerce, which will no doubt lead to lots of “I told you so” moments for a few days or even weeks. And numbers released by government and private agencies will note weird blips—both down and up—in supplies and demand. Read More »

October 2012

Hotline

Earnings season is far from over, but the news has been less than rosy—and with the press focusing particularly on companies that have missed estimates or are downgrading future prospects, the mood on Wall Street has turned a bit to the negative. Meanwhile, today’s durable goods report suggests that businesses are slowing down orders and purchases until some clarity around the election and the fiscal cliff comes through. Big business has also found a voice in over 80 CEOs who sent a letter to Congress telling them to get off their electioneering duffs and do something about the budget—and no, they didn’t just say that cutting was in order, they also suggested higher taxes are a necessary evil to close our yawning budget deficit and shrink our debt. Read More »

Hotline

Tomorrow, Friday, marks the 25th anniversary of the 10/19/87 market crash better known as Black Monday. For those who can’t remember, the Dow had hit an all-time high that year on August 25. As is typical after hitting a high, the market consolidated a bit and bounced around, dropping as much as 8.4% before recovering more than half of that loss. But, after a relatively raucous three days when the Dow shed 10.4% and then-Treasury Secretary James Baker expressed some concerns over the weekend about the market’s fall, Monday saw markets tumble around the globe starting in the Far East and ending with our market dropping 508 points or 22.6%. Read More »

Hotline

Last week’s unemployment report, which showed that the unemployment rate fell from 8.1% to 7.8% in September, was followed up today by a big improvement and a surprise in the weekly jobless claims numbers, which fell to their lowest level in over four-and-a-half years. The four-week average is the lowest it’s been since February—a sign of improvement, not economic lethargy. Read More »

Hotline

The big news this week out of Malvern was an announcement that Vanguard is dropping index-provider MSCI’s benchmarks from 22 index funds and ETFs. The changes, which impact signature funds including Total Stock Market and Emerging Markets Index, will take place over several months and are not expected to be completed until well into next year. For the six international index funds affected, Vanguard is dropping MSCI in favor of FTSE. The notable difference here is that MSCI classifies South Korea as an emerging market while FTSE considers it to be a developed country. As South Korea is the largest country in Emerging Markets Index at 15% or so of the portfolio, the difference is not insignificant. Read More »

September 2012

Hotline

Far from being a terrible month and with just two trading days to go, Sept. 2012 is looking like one of the most meek months in over a decade. And I’m not talking about the fact that markets are up rather than down. I’m talking volatility. There’ve been 898 trading days since the market bottomed in Mar. 2009. Over the month of September, eight of the 17 trading days we’ve had so far have ranked in the bottom decile, meaning the bottom 10% of all those days, in terms of intra-day volatility. And four are within the 5% of least volatile days of the entire period. Now, I know that today the market has rallied on the news Spain might actually be getting its deficit-ridden act together and, hence, it’s been a bit more volatile today, but rather than a month to fear, September 2012 has been a month to cheer. Read More »

Hotline

Compared to last week, this was a light week for news. After the market’s initial reaction to QE3, where stocks and commodities jumped up and bonds sold off, the markets were relatively subdued as investors digested the reality of further Fed support. On the concern side of the ledger, the employment environment continues to be challenged. Initial jobless claims came in above consensus at 382,000. But rather than focus on the specific number, note that initial claims have been coming in all year in the 350,000 to 400,000 range. This is a better range than 2011 and 2010 but still points to a slow-to-improve employment picture. Read More »

Hotline

Yesterday was a big day on many continents. In Europe, a few clouds of uncertainty were cleared up. A German court ruled that a significant portion of the euro-zone rescue plan was constitutional and Germany can participate in it, removing a potentially huge impediment that added to investor uncertainty. Also, in the Netherlands, pro-euro parties were re-elected and maintain their majority, dispelling concerns that anti-euro parties would rise to the top. Dan and I are not convinced that the solution to too much debt is to buy more bonds, but the markets have given this news a vote of confidence: Outside of commodity-oriented funds like Precious Metals & Mining, which is up 7.3% this month, European Index is leading the way in September, up 5.0% through Wednesday. Read More »

Hotline

While there’s plenty of economic and political news out this week, the biggest news for you and me is the impending retirement of HealthCare‘s Ed Owens. Ed announced he’ll be leaving the fund and Wellington Management at the end of the year. I could go on and on about Ed’s achievements. He basically did everything Vanguard said was impossible: He was an active manager who beat the index; he was an active manager who beat his sector’s index; he was an active manager of a sector fund (and you know how dangerous those can be); he was an active manager of a sector fund that actually was less risky than the stock market overall; and, finally, he killed the index on a performance basis. Ed Owens is a legend and leaves with a tremendous track record (though he’s got four more months, and I guess anything can happen, but I wouldn’t bet on anything out of the ordinary sullying his long list of hits). Read More »

August 2012

Hotline

While it seems as if someone hit the pause button on the markets, we did get some positive news this past week. The first revision to second-quarter GDP shows that the economy grew a bit faster than originally thought—but don’t confuse faster with fast. A 1.7% annualized growth rate is not going to produce lots of jobs. Of interest is the fact that consumer consumption was a major driver of the upward revision, while government spending cuts were a major drag on economic growth. In contrast to a shrinking public sector, corporate after-tax profits in the second quarter were up 13.3% over the past year. Read More »

Hotline

It’s been a pretty light week all around over the past several days. The stock market’s been moving in a fairly narrow range, and there’ve been few economic indicators to get really worked up over. Housing is giving mixed reports, with the existing-homes data a bit under expectations and new-homes data a bit better. The Fed looks closer to going with a QE3, or third attempt to goose the economy with low, low interest rates, as if they weren’t low already. (Though, this morning, one Fed Governor interviewed on TV suggested another stimulus is far from guaranteed, and the market sold off a bit on those comments.) Unemployment claims suggest the pickup in job creation may have been short-lived, but it’s really too soon to tell. Read More »

Hotline

The economic news this past week had a positive tilt, indicating the slow-growth rather than no-growth story remains on track. The big item was a nice positive surprise out of retail sales. After weak readings the past several months, retail sales rose 0.8% in July, well above consensus expectations. This continues the trend we’ve witnessed the past three years of weak retail sales in the April to June timeframe followed by a rebound as we approach fall. We’ll be watching back-to-school sales to see if this trend continues. Read More »

Hotline

Risk off. Risk on. The markets seem to be defying the common wisdom, and risk is definitely on this month, as the tried-and-true “safe” stocks are taking a back seat once again to their more aggressive sibs. Utilities, telecoms, consumer staples and health care stocks are all lagging. Small-caps are leading big-caps, but more importantly mid-caps, the area I like the most, are in charge again. Read More »

Hotline

The big news out of Malvern today is that AllianceBernstein has been fired from portfolio management positions on Global Equity, International Value and Windsor. AllianceBernstein oversaw roughly $5 billion for Vanguard, but a combination of poor performance, a series of manager changes and continuing questions about the firm’s stability likely contributed to the decision. Turning to the economy, the Fed was in the news again, indicating that they see economic growth slowing and will maintain a highly accommodative policy. But markets were disappointed that additional stimulus was not hinted at more strongly. Read More »

July 2012

Hotline

I’d hate to be a market-timer in this market (or any other, for that matter). The way the market’s been moving this month has been nothing short of the ride I used to take when I took my pogo stick out on the sidewalk in the 1960s. Read More »

Hotline

Last Friday, in spite of a lousy consumer confidence report, the markets rallied on other real fundamentals rather than 'opinion.' In a vacuum, people may focus on consumer confidence numbers, but they take a back seat when there is real data to be considered. This past week has provided plenty of positive data to consider. Read More »

Hotline

I know what you’re thinking: The economy is in a funk, Europe’s a mess, the political infighting has reached epic and I’d say ridiculous proportions, and the Dow has dropped on six of the last seven trading days. Sounds dire, doesn’t it? Yet, at yesterday’s close, the Dow was within about two points of where it was the day before the EU said it would work to put together a financial overseer to watch the banks, rather than let each country do it on their own. Read More »

Hotline

One week ago, the Supreme Court let stand the Obama Affordable Care Act, and health stocks, while up roughly 2% since the announcement, have lagged the broad market. Investors seem to have expected this ruling from the Court or are continuing to assess its full impact. Read More »

June 2012

Hotline

Obviously, one of the biggest news items this week is this morning’s Supreme Court decision on the Affordable Care Act, which has overshadowed much of the other news we’ve seen suggesting an economy that has slowed, but is far from broken, and a euro situation that is, for all intents and purposes, broken and simply being kicked down the road until someone either picks it up and glues it back together, or it falls apart completely. Read More »

Hotline

A glorious bit of bullishness in the stock markets came to a bit of an end today as the Dow Jones Industrial Average took back 251 points of the more than 700-point gain it’s generated over the preceding dozen trading days. Does that mean the market’s about to roll over? Hardly. As you may have noticed, volatility has been rising a bit as sentiment swings from hopeful to helpless in Europe, China marks a slowdown, and flashpoints continue to erupt across Africa, the Middle East and portions of Southeast Asia. Read More »

Hotline

Whether the Dow is dropping 140 points or rising 160, it’s been a volatile week in the stock market as all eyes continue to follow the drama that is the euro zone. Greece is in trouble, and this weekend’s elections may not solve anything, but they will probably replace one level of uncertainty with another. Read More »

Hotline

The markets have been topsy-turvy since last Friday’s unsettling jobs report. Unemployment ticked up from 8.1% to 8.2%, which, on the face of it, would have been acceptable given the re-entry of thousands of uncounted unemployed back into the job-seeking market. But the fact that there were only 69,000 new jobs created, which was less than half the consensus estimate and less than we need to just keep things on an even keel, was disheartening. And revisions (downward revisions) to the March and April data didn’t help. Read More »

May 2012

Hotline

Whether it was Japan’s tsunami, the Arab Spring, China’s attempts to slow its own economy or our own financial crisis, investors are rapidly coming to grips with the notion that short-term market gains and pullbacks are often driven by situations taking place far from home. Yesterday it was Greece. Today it’s Spain (and Greece). Read More »

Hotline

You may think the big news this week has been the fallout from the Facebook IPO debacle, or the gamesmanship around the Greek bailout, or lack thereof. But in my book, the big news is that Vanguard has stripped the back-end loads off of virtually all of its funds. Announced yesterday, Vanguard has removed the onerous back-end trading fees on most of its foreign equity funds; the one-year, 2% loads on the sector funds; and the 1% back-end loads on closed funds like the PRIMECAP-run funds and High-Yield Corporate, as well as other funds like Selected Value. Only World ex-U.S. SmallCap and Global ex-U.S. Real Estate retain back-end loads or fees. Read More »

Hotline

The week’s wrenching drop in the stock market has been driven by Greece, but this is anything but an Olympian decline. In essence, the Greek government has failed in its attempts to use austerity to try and solve its budget issues. The Greek populace, at least those who vote, isn’t willing to live with austerity, and so it’s really only a matter of time before the country must opt out of the euro and start reissuing drachmas. Read More »

Hotline

Like a light switch that can be flicked with ease, risk, which was on just a week ago, is now off. The 10-year Treasury yield fell to 1.84% yesterday, though it’s rising today as stocks are rebounding against bonds. The Dow, which hit a high on May 1, fell 444.26 points over 6 days, which may, on the face of it, sound like a lot, but is actually just a 3.3% decline from that post-crisis high. Read More »

Hotline

Economic data over the past week has been decidedly mixed. Friday’s GDP report on Q1 disappointed with just 2.2% growth versus 3.0% growth in Q4. Yet, what continues to be missed in this discussion of growth rates is the fact that there is growth! Once again GDP, on an inflation-adjusted basis, is at an all-time high of $13.5 trillion ($15.5 trillion nominal). Would we like to see faster growth? Definitely. But compared to the U.K.’s double-dip, or negative growth rates in other euro countries, this looks pretty good to us. Read More »

April 2012

Hotline

It’s been a busy week, as earnings season has begun to roll open. We’ve also gotten a host of economic data points thrown at us, including some consumer confidence numbers (which I am not a big fan of), inflation numbers, retail sales and saving and spending numbers, and more. This morning’s leading economic indicators showed, on the face of it, a slowing, but dig deeper and you find that the consumer confidence and stock market components were the biggest drags—so maybe, just maybe, the numbers are a bit skewed. Read More »

Hotline

It’s been a busy week, as earnings season has begun to roll open. We’ve also gotten a host of economic data points thrown at us, including some consumer confidence numbers (which I am not a big fan of), inflation numbers, retail sales and saving and spending numbers, and more. This morning’s leading economic indicators showed, on the face of it, a slowing, but dig deeper and you find that the consumer confidence and stock market components were the biggest drags—so maybe, just maybe, the numbers are a bit skewed. Read More »

Hotline

Last Friday’s unemployment report and renewed concerns over Europe combined to take markets off their multi-year highs on Monday and Tuesday. The bond market was a big winner, with the yield on the 10-year Treasury falling below 2.00%. The Dow shed 344 points over those two days and was off 550 points over five. Then came the rebound. And despite an unemployment claims report this morning that caused a bit of consternation for those expecting continued strong reductions in new claims, the market took off with the Dow closing up 181 points, or more than 200 points for the last two days. Read More »

Hotline

Last Friday’s report on spending had a kind of push-me/pull-you feel to it. On the one hand, consumers spent like drunken sailors despite a tiny increase in their incomes. This is good for the economy and may reflect a combination of pent-up demand and a sense that things are getting better, finally. But on the other hand the household savings rate dropped dramatically, to 3.7%, which is the average rate over the past decade. All that saving that folks were doing in the early part of the recovery seems to have been a lesson not fully learned. Read More »

March 2012

Hotline

Friday’s figures on new home sales were disappointing on the one hand, and encouraging on the other. The absolute pace of sales in Feb. 2012 declined for the second month in a row, although the December figures were revised upwards. Optimists see the three-month average, which tends to soften the month-to-month figures a bit, as having done better than just a few months ago, so they’re happy. But the situation remains very tentative, as whether you look at the month-to-month or the three-month average, the fact is that the numbers continue to scrape the bottom of the curve. Read More »

Hotline

Inflation continues to rise, though primarily on the back of higher gasoline prices. Otherwise, there’s not much in the way of worrisome inflation in the economy just yet. The year-over-year inflation number of 2.9% is below the spike to 3.9% we saw in September, which was more of a mathematical anomaly coming off of very low inflation in 2010 rather than something more sinister. Read More »

Hotline

As the Dow Jones Industrial Average pushes to new post-crisis highs, Vanguard’s equity funds are pushing towards all-time highs, particularly when you look at them through a total return lens. Through Wednesday night’s close, Morgan Growth is just 0.1% away from an all-time total return high (which might also be called the reinvesting shareholder’s high), as are Health Care and Dividend Growth. Total Stock Market is just 0.3% below its all-time total return high along with Equity Income and Dividend Appreciation Index. 500 Index, a proxy for the S&P 500, is 2.1% away from a new high. Overall, about 30 funds are within 5% of their all-time total return highs. Read More »

Hotline

While the media had a field day with Tuesday’s 200-plus point decline in the Dow Industrials, with screaming headlines about the 'biggest drop' of the year and all manner of doom-and-gloom-sounding adjectives, what seemed lost in Tuesday’s and Wednesday’s clamor was the fact that the Dow had risen more than 22% in just five months and the S&P 500 index had risen 25%! Market gains like that are abnormal and, at some point, beg for correction. Read More »

Hotline

A 70% haircut is not a default, and so as Greek bondholders take it on the chin in the coming weeks, those who made bets on a default will not be able to collect on the insurance they purchased…yet! The International Swaps and Derivatives Association, while ruling that the bond swap was not a default, also said that the Greek situation was “still evolving,” which leaves the door open for these credit-default swaps to actually make some good money. Read More »

February 2012

Hotline

From the leading indicators, which continue to rise, to inflation, which may be slowing, last Friday’s economic news was all positive for investors. Of course, that meant that coming into Monday, all eyes remained on Greece. With something of a fix agreed on for Greece (and I say 'something' because frankly, I think the economy there is completely broken and will only be more so in a couple of years’ time), we can start worrying now about Iran and the timing of a military strike on its nuclear facilities. The question on the strike is simply 'when,' and not 'if,' Israel takes the offensive. In the meantime, the 'if' will be whether the U.S. provides any kind of support for such an extreme but probably necessary move. Read More »

Hotline

Well, what could have been a one- or two-act play is turning into a modern-day version of Homer’s Odyssey. The Greek bailout and austerity plan is sailing towards some kind of completion, but with its own whirlpools and siren-songs and battles along the way as we head towards a showdown on March 20, when Greece must either pay off its bonds or default—a prospect no one is really looking forward to. I’m not sure that a Greek bailout is in anyone’s interests at this point—they might be better off going it alone and letting the eurozone sail on its own winds. Read More »

Hotline

The stock market rally that is ricocheting around the globe seems to have some good momentum behind it. And, more than anything, the fact that foreign markets are ahead of our domestic ones with, for example, Germany up 14.4%, Hong Kong up 14.0% and Brazil up 16.0%, is a big turnaround from just a few months ago. Read More »

Hotline

Markets have been pretty bullish so far this year with foreign markets outpacing our own, a big turnaround that Dan discusses in the February newsletter. It may not be that the trend continues, but at the moment it isn’t hurting us to have some assets overseas. Through this afternoon’s close, the U.S. market, measured by the S&P 500, has returned 5.4% for the year. China, Germany and Brazil all have notched double-digit gains, up between 12.5% and 13.8%. Read More »

January 2012

Hotline

You’d think that Wall Street was in Missouri, not New York, as this quarter’s earnings season has been turning into a “show me” season. Companies with great results and great futures are seeing their stocks bid up or at least staying flat after earnings announcements—Apple and McDonald’s come to mind as Apple, a market darling, showed Wall Street it could manage to grow without founder Steve Jobs, and shareholders were rewarded. Mickey D also posted a big gain in earnings, but shares fell anyway as the company said it was facing some currency pressures from overseas. Read More »

Hotline

All eyes remain on Europe, but I’m not talking about the cruise-ship disaster in Italy (more on that in a moment). I’m talking about last Friday, when after markets closed, S&P cut the triple-A rating on France and Austria one notch to AA-plus. At the same time, they affirmed Germany’s triple-A rating. But they also lowered ratings on Spain (two notches to A), Italy (two notches to BBB+) and Portugal (two notches to BB). Read More »

Hotline

Last Friday’s jobs report was a short-lived optimistic view overshadowed, of course, by continued worries about the euro zone. That being said, today’s better-than-expected bond rally in Europe, and in particular Italy, took some of the sting out of continued concerns of recession, in part due to a recognized slowdown in Germany’s fourth quarter. In fact, with the Italian bond yield dropping well below 7%, Italian stocks were up over 2% for the day. Read More »

Hotline

Looking back at 2011, all or virtually all of our funds and fund managers generated great relative performance. For instance, Dividend Growth, managed by Wellington’s Don Kilbride, returned 9.4% in 2011, outpacing a gain of 2.0% for 500 Index. Read More »

December 2011

Hot Hands 2012

As promised, with the final numbers for 2011 in, I’ve got the 2012 Hot Hands fund so you can place your trades first thing on Tuesday. And the winner is… Read More »

Hotline

I hope you all had a great holiday weekend after the trades I recommended last week. If you haven’t done those trades, you still have time to take losses in your small-cap foreign funds like International Explorer and World ex-U.S. SmallCap ETF, and move that money into Emerging Markets Index (either the fund or the ETF) as well as boost exposure to large-cap dividend payers. Of course, if you’re investing through an IRA or other tax-deferred account, the tax losses are meaningless, but the trade is still a good one. Read More »

Hotline

The final numbers on Q3 GDP showed growth was slower than originally estimated in the prior quarter, but with Q4 almost over and signs that economic activity picked up over the past few months, investors looked past the data and focused more on another positive jobs report showing new claims for unemployment falling yet again in the week past. Read More »

Hotline

Retail sales numbers for November disappointed those who were expecting more, but while the headlines were focused on the relatively paltry increase for the month, the lowest since June, sales in both September and October were revised higher. So, the slowdown was not as bad as you might have thought if you’d only looked at the large print. Read More »

Hotline

Today’s unemployment claims numbers were strong, and followed on Friday’s job stats showing that the unemployment rate fell from 9.0% to 8.6%, the lowest since March 2009. Not only that, but prior months’ numbers were revised up. Read More »

Hotline

The continuing drag of the euro, sovereign-debt crisis is driving markets down, and up, as Wednesday’s almost 500-point Dow rally showed. After shedding over 700 Dow points during the month, the final three days of November rallied back with more than 800 and while the S&P 500 index was off 0.5% for the month the Dow gained 0.8%. The Dow is up for the year, though still about 6% below its April peak, but other major market indexes are off anywhere from 1.0% to 2.5% or so with one month to go before the books are closed on this year. Read More »

November 2011

Hotline

I believe I said I didn’t think the Gang of 12 Congress-people would come up with a $1.2 trillion solution and, lo-and-behold, they didn’t. I wasn’t surprised by their inability to agree, but I was surprised that the stock market reacted so violently, with the Dow falling 2.1% on Monday. The outcome had been all but pre-ordained. In fact, in failing to agree on ways to cut the budget, they succeeded in finding a way to cut the budget—to the tune of $1.2 trillion. Again, pre-ordained. As I mentioned in a Bloomberg TV segment last night, the process is completely broken. Read More »

Hotline

In an eventful year, we now have less than 30 trading days left before 2011 is in the history books. And, while Europe remains the weak kitten in the global litter, here in the U.S., economic indicators are looking up. Retail sales improved last month, surprising those who thought the September surge would be followed by a big slowdown. The consumer continues to spend. And inflation remains a non-event, though the data could begin to show a slight increase in year-over-year inflation over the next few months purely because of the math—don’t worry, we don’t think inflation is about to rear its ugly head anytime soon. Read More »

Hotline

Ciao, Silvio. Like the chanting of 'Italy, Italy, Italy' at a World Cup game, it’s been all Italy, all the time this week. You might ask what the heck happened yesterday that put the markets into a tailspin given that we’ve been talking and worrying about Italy for nigh on two years. Read More »

Hotline

Monday was a humdinger, and all week the markets have been reacting. The big news, of course, was Greece’s Prime Minister, George Papandreou, announcing that he would hold a referendum on the eurozone bailout. To say that he threw the biggest monkey wrench into his own machinery would be a vast understatement. Luckily, the Germans and the French basically told him that any more dilly-dallying would essentially mean the country would be booted from the eurozone and would have to go back to issuing drachmas, which of course it wouldn’t be able to do because the country would be bankrupt. So, after three-and-a-half days of turmoil, Papandreou has backed down, and the markets, not surprisingly, took off on that news plus a cut in interest rates by the European Central Bank from 1.50% to 1.25%, which leaves plenty of ammo available for further cuts if necessary to keep the eurozone on its feet. Read More »

October 2011

Hotline

If anyone doubted that the stock markets around the globe have been moving almost solely on the ins-and-outs of the negotiations over Greece’s debt and the recapitalization plans for the euro banks, I hope today’s market moves have quelled those thoughts. A 50% haircut on Greek bonds and 'happy talk' about repairs for the rest of the eurozone got markets moving around the globe today. Japan’s Nikkei ended with a 2.0% gain, and Hong Kong moved up more than 3.2%. London’s FTSE was up 2.9%, German’s DAX gained more than 5.3%, and in France the CAC 40 was up almost 6.3%. Read More »

Hotline

Don’t ever say that Vanguard lets the moss grow under its feet. Reaching out to the young investor, January will see the launch of the Target Retirement 2060 portfolio. At the same time, Vanguard will merge Target Retirement 2005 (which has been closed to new investors) into Target Retirement Income. There’s nothing new under this sun other than the fact that this is the first Target fund to have finally landed after it’s been on a glide path toward the Target Retirement Income portfolio, so it’s a natural evolution of the funds. Read More »

Hotline

Friday’s employment report didn’t give us a change in the headline rate of unemployment, which remains at 9.1%, but jobs were added—and more than anticipated—helped along by the return of striking Verizon workers, yes, but also with other industries providing a boost beyond what had been expected. On top of that, August’s “zero” was revised up to 57,000 new jobs. We aren’t creating enough new jobs to help the unemployment rate, but at least we aren’t in retreat. The private sector has added jobs in every month since Feb. 2010. The government has cut jobs in all but five of those 19 months, and we’ve been netting new jobs for 12 months now. The trend is moving in the right direction, but oh so slowly. Read More »

Hotline

Market volatility continues apace. Not only have we been buffeted by one triple-digit Dow day after the next, but those triple-digit closings have masked much wider moves from low to high, and high to low. Tuesday’s 153-point Dow gain came after a 4.0% swing from high to low and back. That move ranked, along with Sept. 22’s, as one of the most volatile days since August, when the debt-ceiling debate and S&P downgrade were roiling markets. Read More »

September 2011

Hotline

Whether it’s the numbers on rail and boat shipments, tax revenues, durable goods orders and shipments, or auto sales, there’s plenty in the U.S. economy that points to continued growth, albeit slower growth than we’d like, of course. Today’s update on Q2 GDP was an improvement as well. I’ve seen some estimates that third quarter GDP is going to come in with better than 2% growth. Read More »

Hotline

At the end of its two-day confab on Wednesday, the Fed said that—as expected—it would shift $400 billion of its enormous bond holdings from short-term to longer-term Treasurys in the hopes of knocking rates down further and stimulating the economy in what some are calling QE3, or 'Quantitative Easing III.' Read More »

Hotline

Happy Anniversary Lehman Brothers. Three years ago, today, Lehman filed for bankruptcy protection. The Dow fell 4.4% that day, to 10917.51, not far from where we are today. The S&P 500 fell even more; 4.6% on the day. Volatility spiked, and the VIX went over 30. Read More »

Hotline

Last Friday’s labor report was just plain lousy. While the Verizon strike had a small impact on the numbers, there were no new jobs created that would be worth speaking about. The job-creation machine is simply not engaged. This sets a perfect (or some might say, an imperfect) backdrop for the President’s speech tonight, though, with all the gridlock in Congress, it will take a minor miracle to get anything accomplished even if a good idea or two pokes through the rhetoric. This leaves the Congressional Gang of 12 to make policy for the next month or more. Read More »

Hotline

After all the fireworks in the beginning of the month, August ended with a bit of a whimper on the one hand, but a bang on the other. I loved the headlines that spewed forth just minutes after the markets closed last night. 'U.S. stocks rise to close turbulent month' followed by 'Major indexes drop for fourth straight month,' as well as, 'Stocks gain, end worst month since ‘flash crash’.' Oh, and 'S&P posts best eight-day gain since 2009.' Wow! I just didn’t have that eight-day record in my head, did you? Read More »

August 2011

Hotline

Volatility reigns. But now it’s not only in the stock market, but also in the gold market. Gold, which recently crested to a high of $1,888.70, fell $104.20, or 5.6%, on Wednesday (though it rebounded $15 today after an initial fall). Precious Metals & Mining, down 6.3% for the year through Tuesday (it buys miners primarily, not the metals) lost another 1.5% yesterday and is now off 7.7% for the year. So, for those who’ve wondered why I don’t recommend buying the fund, here’s just another indication of why I think it’s too risky to play with, and certainly too risky to invest in. Trade it? Maybe. Invest in it? Hardly. Read More »

Hotline

As many of you probably already know, the stock market took another big hit today. The Dow index dropped 420 points, or 3.7%. The S&P 500 index dropped 4.5%. And smaller and mid-cap stocks fell over 5% in what could be described as a flight to safety, though the safety was not in larger stocks but in bonds—the 10-year Treasury was in such demand at one point today that its yield fell below 2%. Read More »

Hotline

The volatility we’ve seen in the markets over the past week has been exceptional. Looking back at more than a decade’s worth of data on swings in the Dow, the moves on Monday and Tuesday rank within the top 50 most erratic or volatile days we’ve seen. They, of course, don’t compare with the swings we saw in 2008 during the height of the financial crisis, and the current situation is nothing close—this is not a financial crisis, but a crisis of confidence in our political leadership, in the state of our economic health, and the broader economic health of many countries around the globe. That said, consumer health has improved dramatically since the mortgage crisis days, corporate health is astounding given the amount of cash on balance sheets and growth in profits, and once investors focus on this, the stock market’s health will improve. This is not a replay of 2008 except in the minds of investors who, once again, are shooting first, and asking questions later, if at all. Read More »

Hotline

Hello, this is Seth Kennedy filling in for Dan Wiener with a special FFSA Vanguard Hotline update for Monday, August 8. With the fallout from the ratings downgrades shivering the markets today, Dan asked me to pass along the following message. Read More »

Hotline

I’m recording this Hotline before the trading day’s end because I know some of you are anxious. Today’s stock sell-off is certainly going to be reflected in even weaker returns for the equity holdings in our portfolios when their prices are updated later tonight. That’s a given. But what’s stoking the fear—and this is definitely fear—that is causing such a disruption? Well, here are several parts that make a piece of the whole. Read More »

July 2011

Hotline

I’m not normally a bettin’ man, but while the Congress keeps arguing, I’m going to put money (figuratively anyway) on the fact that there will be (1) a hike to the debt ceiling by next Tuesday’s Aug. 2 deadline, and (2) a credit downgrade to AA from AAA on U.S. Treasury bonds. Whether there will be anything accomplished in tackling the budget deficit is still up for grabs. Read More »

Hotline

The debt ceiling talks have become so convoluted that the President has been forced to have secret meetings. Now it’s the Gang of Six’s turn to come up with a solution by Friday. Meanwhile gold has moved over $1,600 per ounce as fears ratchet up. What happens when a deal is struck? Watch out below. Read More »

Hotline

Last Thursday’s ADP employment report certainly wasn’t confirmed by Friday’s broader report from the Bureau of Labor Statistics. And numbers for May were revised lower as well. Some analysts think that the wrangling over the debt ceiling, and the uncertainty surrounding how the Democrats and Republicans will resolve their differences, have businesses on hold when it comes to adding workers. The fog is going to have to clear, and yet the only good news we can muster out of this is that something is going to have to happen soon, as the August 2 deadline is approaching. Read More »

Hotline

All eyes on are on tomorrow’s jobs numbers after ADP issued an optimistic-sounding report on the state of private sector hiring, surprising investors and helping push stock prices higher from the opening bell. Read More »

June 2011

Hotline

Friday’s GDP report showing 1st-quarter GDP growth of 1.9%, compared to 3.1% in the final quarter of 2010, was a slight improvement over initial estimates, but nothing to set the world on fire. Read More »

Hotline

First, the big picture. While chairman Ben Bernanke sounded his own version of a Greek tragedy in yesterday’s press conference following a two-day Federal Reserve meeting, knocking down growth expectations for the economy, and hiring expectations for workers, FedEx was sounding a bugle, and several aircraft manufacturers’ prospects were flying high. Read More »

Hotline

Consumer spending dropped last month as it did in May 2010, and June 2010. But the drop of 0.2% was a far cry from the 0.7% and 0.3% declines last year. Growth in the preceding six months has been only slightly below growth in the six months prior to last year’s two-month decline. But remember that it was only January when retail sales recovered to their pre-recession highs. We’re in a new ball game of expansion, rather than recovery. Read More »

Hotline

Jobs are on my mind, and there’s been an interesting disconnect between two employment reports that both came out last Friday. The government’s employment report and the employment component of the ISM service economy index for May seemed at odds. Read More »

Hotline

Friday’s report on consumer spending continued to show slow, steady growth. Plus, while the savings rate had to be revised down due to revisions to incomes and spending, the fact remains that American consumers continue to save at levels that are well beyond those seen over the last decade. The average savings rate between 1997 and 2007, before consumers pulled in their horns, was just 3.0%. Since the end of 2007, the savings rate has averaged 5.2%, a big jump. While this isn’t our parents’ savings rate—they saved a lot more in the ’50s and ’60s—it’s an improvement worth noting. Read More »

May 2011

Hotline

Greece and its fellow PIGS are back in the news, scaring investors as the sovereign debt crisis threatens to rear its porcine head again. While the ECB says it’s got things covered, the IMF is obviously in turmoil as it looks to find and confirm a new leader. Given what I’ve read and seen of the French finance minister Christine Lagarde, she may be the perfect person to fill the position left vacant by the disgraced Dominique Strauss-Kahn. But I had to laugh this morning when I saw in TheWall Street Journal that one of the big knocks against Lagarde is that she is not a trained economist! Wow. To my way of thinking that’s something I’d put in the 'plus' column, particularly given how well all these highly trained economists in the U.S. and Europe have handled things over the last five years. Keep that in mind as you watch this story unfold. Read More »

Hotline

Commodities remain in the headlines, yet, if a recent Bloomberg poll of investors, traders and analysts is to be believed, then more cash is going to be heading for money markets than to commodities in the next six months. (It should be said that all of the 1,300 or so respondents are relative professionals since they subscribe to Bloomberg terminals, which are not cheap.) And 40% of those pros think oil prices will fall over the next six months as well. Gasoline futures are already down, so surprisingly, as we head for the start of the summer driving season, prices at the pump may come down just in time for the three-day Memorial Day weekend. Read More »

Hotline

Microsoft’s purchase of Skype may signal signs of a certain frothiness in the technology arena, where money is beginning to flow a lot more freely these days—reminiscent, at least a bit, of the dot-com bubble era. While valuations are still mostly lower for public companies, they’ve gone sky-high for private companies like Skype, Groupon, Facebook, Twitter and so on—not a particularly fortuitous sign unless you are a shareholder of one of these rocketships. Read More »

Hotline

While April ended with another solid gain, up for the eighth month in a row, Capital Opportunity got whacked on that final day as one of its biggest holdings, Research In Motion, the BlackBerry maker, got hit hard, falling over 14% on the day. Ouch! The fund lagged the stock market by almost 1% on the day. That said, the fund is still hanging tough, lagging the market by less than 2 percentage points for the year. Read More »

April 2011

Hotline

The stock market juggernaut keeps rolling right along. Small caps remain front-and-center with the Russell 2000, S&P 600 and the S&P MidCap 400 all hitting record highs (not recent highs, but record highs) yesterday after Fed Chairman Bernanke gave his first-ever press conference. Read More »

Hotline

S&P, which made quite a name for itself rating collateralized debt obligations, or CDOs, made up of nasty mortgages it considered triple-A, must have wanted some additional press this week when it announced it was lowering the U.S. credit outlook to negative from stable, but keeping its rating at triple-A. S&P says they might have to lower U.S. credit by a notch from triple-A to double-A if something isn’t done about the budget deficit. S&P, by the way, gave a 1-in-3 chance of the U.S. seeing a downgrade. That got the markets pretty worked up with long bonds falling, short-term bonds rising, and stocks diving. But it didn’t seem to move the needle in Washington very much at all. Read More »

Hotline

Alcoa kicked off earnings season on Monday with an expected rebound to profitability, though rising commodity prices are definitely having an impact on margins in the aluminum business. China, emerging markets and the aerospace and auto industries are leading demand, and Alcoa’s expectation is for growing demand in the quarters ahead. Read More »

Hotline

Friday’s unemployment/employment report was better than expected with 230,000 new private-sector job gains—about matching the estimates from ADP and blowing through most economists’ predictions. The unemployment rate fell to 8.8%, the lowest it’s been in two years. More importantly, there were more people seeking jobs than in months past, so the decline in the unemployment rate is actually better than it appears given the larger pool of those looking for work. Read More »

March 2011

Hotline

Last Friday’s GDP report confirmed that the fourth quarter of 2010 saw the nation’s economic output hit a record, adjusting for inflation, surpassing the peak last seen in the fourth quarter of 2007. In other words, the economy is now bigger than it’s ever been. The final revision to the BEA’s numbers saw economic growth rising to 3.1% for the quarter for year-over-year growth of 2.8%. Read More »

Hotline

In Japan, Nissan said on Monday that it would be restarting production at its plants this week, but at the same time the supply chain issues I mentioned before have begun to crop up. Nissan says it can’t get all the parts it needs so starting up plants isn’t the same as keeping them running. And a small but critical air-flow component made by Hitachi for car-makers around the world is in short supply, which could bring production lines to a standstill as well. Read More »

Hotline

By now you’ve seen the heart-wrenching images of the aftermath of the earthquake and tsunami that has devastated the northeastern region of Japan. And, if you’re like me, you’re closely following the ongoing story of the dire conditions at the Fukushima nuclear power plant, which has suffered a number of explosions and partial meltdowns. While the scale of the human and environmental aftereffects of the quake are still being strongly felt around the world, it’s important keep a few things in mind as you watch the Japanese stock market taking hit after hit after hit. Read More »

Special Hotline

The building nuclear disaster scenario in Japan has obviously spooked the markets, and the Nikkei, already down 9.4% for the month through last night, fell another 10.6% today. Hong Kong fell 2.9%. Europe fell, as did the U.S. markets. So did oil. So did gold. Read More »

Hotline

It’s been a fairly quiet week in terms of economic indicators. But it’s been a busy week with continuing turmoil in the Middle East and Northern Africa, downgrades that have spurred renewed fears of financial risk in the smaller countries of Europe, higher oil prices and even a surprising economic report out of China that showed a trade deficit rather than surplus that, while a dramatic turn of events, was probably an anomaly created by the timing of the lunar new year and the fact that oil prices were moving up along with China’s thirst. Read More »

Hotline

Oil markets have been extremely reactive to the goings-on in the Middle East, and even pronouncements from the U.S. on the state of our oil reserves. And of course, stock markets have followed suit. Until two weeks ago, the Dow had seen just three triple-digit days all year. Yet over the past couple of weeks, we’ve had four, or an average of one every other day. Today’s 191-point Dow rally was a case in point. The violence in Libya remains, the U.S. has ratcheted up its rhetoric, and yet oil, which settled over $100 per barrel yesterday, dropped a fraction today. Read More »

February 2011

Hotline

After what seemed a relatively peaceful (particularly in hindsight) putsch in Egypt, violence has been surging across the Middle East and northern Africa as the death toll among protesters is rising in both Bahrain and Libya where despot leaders are trying to hold on to their thrones. What worries investors is that the desire for some form of democracy could spread to Saudi Arabia where a government friendlier to the U.S. is currently in control. Read More »

Hotline

The takeover of the New York Stock Exchange by the Deutsche Bourse is being touted as a merger, but it’s not, it’s a takeover. Still, there are lots of regulatory hurdles that will have to be overcome for this to be a sure thing. And frankly, I’m not sure how this harms us other than the fact that the U.S. loses one of its primary symbols of financial and market strength. In fact, greater global volume could mean even tighter spreads and lower costs of investing for all of us—but I wonder if it also won’t mean that there’s a bigger chance for some type of financial calamity like a Flash Crash, or worse, that we can’t foresee at the moment because, well, these things are not foreseeable. In any case, if there was ever a symbol of how our markets and economies have become globally entwined, this is a good one. Read More »

Hotline

The U.S. unemployment rate may have fallen to 9.0% in January, but more people dropped out of the work force, or the looking-for-work force, and only 36,000 new jobs were added. The data can and almost certainly will change, but it appears that horrible weather was one reason there weren’t more people going to work (remember that construction is hoped to be a big piece of the recovery in jobs, and you can’t build homes in rain, sleet, snow and ice), and maybe we’ll get better numbers for February. Read More »

Hotline

With today’s 20-point gain, the Dow is up 4.2% this year, its 12th high in 23 days of trading. The S&P 500 is up 3.9%, and the Russell 2000 is up 1.9%. Clearly, the large-caps are finally having their day, for the moment. Read More »

January 2011

Hotline

While the economic news is improving, the federal deficit news is not. I’m going to let the Congress deal with projections of ever-larger budget deficits, grossed up in large measure by the continuation of the tax cuts that many thought were ending, and you and I can talk a bit about non-policy topics. Read More »

Hotline

On the economic front, last Friday saw reports suggesting consumer inflation picking up just enough to put fears of deflation aside for good, as well as signs that industrial production is continuing to gain ground. In addition, retail sales remained strong, showing consumers increasingly willing to open their pocketbooks and spend, despite tailing off a bit in December from prior strong months. The bottom line here is that consumer spending is up more than 7% over year-ago levels, which is quite robust, representing a huge snapback from the recession, while also reminiscent of spending growth in 2005 and 2006. Read More »

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On the eve of their expected introduction, Vanguard filed papers with the SEC this morning withdrawing its application to introduce three municipal bond index funds and ETFs. Vanguard tells me that it wouldn’t be prudent to launch the funds into the teeth of the current volatility in the muni bond market. Read More »

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Reading the economic tea leaves, we closed out the year on a high note last Thursday when the Chicago ISM came in at its best level since the late 1980s, signaling once again what we already knew—that manufacturing, which was driving this recovery in the early months, continued to do so. Read More »

December 2010

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While New York City is mopping up and plowing up after a winter snowstorm, news about the holiday shopping period is painting a picture of a very, very GREEN Christmas. Stores were busy, and it turns out that online retail sales jumped about 15% this holiday season. Yup, computer shopping is the new normal. All of this means good things for folks like UPS and FedEx. UPS is a big holding at Dividend Growth, and FedEx is a top-5 holding at Capital Opportunity. Read More »

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The tax bill passed the Congress, taking that bit of uncertainty off the table as the year winds down, and the final look at Q3 GDP showed the economy growing at a slightly faster rate, 2.6%, rather than the early estimate of 2.0% or the more recent one of 2.5%. All good numbers, setting us up for more gains in the current quarter and well into 2011. Read More »

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The Dow closed higher again today, at its highest since September 2008, before Lehman blew up, of course. It’s now up almost 76% from the March 2009 low and while the recent pace of gains is cause for some anxiety, we aren’t in nosebleed territory and corporate earnings are once again coming in with solid gains and estimates of more to come as the year winds down. Read More »

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Last Friday’s employment report was a big disappointment, with just 39,000 new jobs created rather than the 138,000 or so that had been expected, though revisions to September and October did add 38,000 jobs that hadn’t been counted in the earlier estimates. Read More »

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It may have been Black Friday for retailers last week (the chain store sales numbers for November were impressive), but it was 'Blechh Friday' for Wall Street as worries over Europe took precedence in a trade-shortened, post-Thanksgiving session. That said, 'blechh' turned into 'boffo' with the turn of the month as markets rallied yesterday on both a terrific jobs preview coming via ADP, and some good manufacturing data on the ISM, which marked the 16th month in a row that manufacturing has been in expansion territory. Read More »

November 2010

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It’s a holiday-shortened week, but not a news-shortened one. First, there’s the mess in Ireland with bailouts galore. Ireland finally admitted what many around the world seemed to know—that they need an EU bailout for their banks. The hope is that by bailing out Ireland, like Greece, the rest of the EU won’t fall victim to the same sovereign debt issues that befell these countries’ banks. Unlike Greece, Ireland’s economy is actually on the mend with exporters making money and industrial output up in the double digits for the year. However, so far, the backlash is being felt in other so-called PIIGs, like Portugal. Read More »

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It’s been a pretty topsy-turvy week with worries about China overheating, and Ireland going cold, sending shivers down Wall Street, not to mention a few foreign bourses as well. Read More »

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Friday’s employment report had plenty to cheer. First, revisions to numbers from August and September were positives. Second, job creation picked up, although the overall unemployment number, at 9.6%, remained at the same level it’s been at since August. Read More »

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The election didn’t surprise, so much as confirm. The Fed’s $600 billion, 8-month purchase plan caused some hiccups in the market on Wednesday but ultimately was seen as a net positive. The Dow, down over 91 points after the Fed’s announcement, ended the day up more than 26 points to a fresh high for the year, and a high since the market’s bottom on Mar. 9, 2009. Of course, today’s rally is putting yesterday’s close to shame. Read More »

October 2010

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QE2 is sailing through Wall Street, tossing stocks in its wake as traders seem, to my mind anyway, to be focused almost exclusively on what the Fed will announce next Wednesday while almost ignoring the surprisingly strong earnings reports we’re seeing at home, or the strong economic news coming out of European powerhouses like Germany, where unemployment has fallen to the lowest level in 18 years in part because the government rightly subsidized salaries during the economic downturn, and England, where 0.8% economic growth in Q3 surprised to the upside given expectations of growth at about half that rate. Read More »

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Retail sales continue to surprise to the upside, and revised numbers for prior months also were better than originally reported. The weakness remains in the auto sector and gasoline sales. Take those two out of the equation, and retail sales are actually higher than their pre-recession peaks. Read More »

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Friday’s unemployment report, following on last Thursday night’s earnings kickoff from Alcoa, was the catalyst for the Dow’s ascent above 11000 again, the first time it’s been there since May, just a few days after BP’s Deepwater Horizon drilling rig sank to the bottom of the sea. This time though, in a fair bit of turnabout, 33 Chilean miners have been lifted from the depths to near global relief. Read More »

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In the continuing battle over operating expenses and fund minimums, Vanguard has fired another shot across the bow of its competitors—only this time it’s not about ETFs (directly anyway) but about regular old open-end funds—Admirals in particular. Read More »

September 2010

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The third quarter ended with a bang as the S&P 500 index gained 8.8% this month and 10.7% over the three months. It was the best September in over seven decades. Mid-sized companies were even stronger with the S&P MidCap 400 up 11.1% for the month and 12.7% for the quarter. It’s up 10.4% for the year compared to the 500’s 2.3% gain. While the S&P 500 index still needs another 37 % gain to get back to its October 2007 high, the S&P MidCap could hit its high with less than a 16% rise. I’ve always liked having a good allocation to this under-followed segment of the market. Read More »

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The Great Recession—all 18 months of it—officially ended more than a year ago, in June 2009 according to the National Bureau of Economic Research (NBER), which is the official arbiter of such things. At 18 months, this was the second-longest recession (though not by much) since the Depression that lasted 43 months from August 1929 to March 1933. Both the November 1973 to March 1975 and July 1980 to November 1982 recessions came close, at 16 months apiece. Read More »

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Retail sales in August were better than had been expected as back-to-school buying picked up a bit, yielding the largest monthly sales gain since March. The “no growth” economy is, as I’ve been saying for some time now, in reality a “slow growth” economy with a wary but not dead consumer. Read More »

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Last Friday’s employment report was not only better than expected, despite an increase in the headline unemployment rate to 9.6% from 9.5%, but revisions to prior month’s numbers show fewer jobs lost over the past three months and more private-sector jobs created than originally reported. That’s a good sign. Read More »

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I probably don’t have to tell you that the ISM Manufacturing survey released yesterday morning surprised economists with a gain in August after three months of declines, and of course the stock market went wild on the news with the Dow pushing up almost 255 points, or 2.5%, after the horrible performance we saw in August. Today’s follow-through, with a more modest gain of almost 51 points, possibly reflects some reassessment of the state of the economy, given that there’s been some recent evidence of a bit more spending and a bit more confidence on the part of consumers. Read More »

August 2010

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With earnings season essentially over and traders taking last-minute summer holidays, it’s no surprise that negative sentiment and pessimistic economic updates, combined with low trading volumes, have been taking the market down over the past couple of weeks. Today’s market decline was more of the same, with pundits claiming investors were becoming more skittish and pessimistic. How do they know that? Because prices are falling? The day-to-day read on what ails the market, or what makes it perky, is irrelevant, but it garners headlines. Read More »

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Last week we talked about the low levels of interest rates and the fact that IBM had sold some three-year notes at just 1.0% yields. Well, corporate balance sheets continue to benefit: Johnson & Johnson set a record last week when it sold $1.1 billion in 10-year and 30-year bonds at the lowest yields on record for high-quality corporate debt. The 10-years sold at a yield of 2.95%, which was just 43 basis points above the yield on 10-year Treasurys. The 30-years had yields of 4.5%, or just 68 basis points over Treasurys. This continues the trend set by IBM as well as McDonald’s, Wal-Mart and other blue chips. We’re particularly happy when companies that we own (J&J and IBM are the second and third largest holdings at Dividend Growth) can put such cheap debt on their books. Read More »

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Big news at Vanguard: AXA Rosenberg is out, and Vanguard’s quant group is in big-time, taking over all of the assets it didn’t already run at both U.S. Value and Market Neutral. The 12% of assets at Explorer run by AXA are being doled out to existing managers. AXA has been under a cloud for a long while now after having failed to report on a computer glitch in its quantitative systems, and many institutions have been dumping the company. Just the other day, Barrow Hanley picked up some assets previously run by AXA. Now, Vanguard’s cutting the firm loose. It’ll be interesting to see if Vanguard goes out of house to find additional managers for U.S. Value and Market Neutral or not. At Explorer, the reduction of even one manager is a change for the good. It should go without saying that AXA’s departure from the three funds will also impact the funds of funds that use them, including STAR, the Managed Payout funds and Diversified Equity. Read More »

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Remember the old line 'Sell in May and go away'? Apparently that’s what mutual fund investors did in a big way, taking almost $27 billion out of stock and balanced funds and adding $15 billion to bond funds, meaning there was a net outflow from mutual funds of almost $12 billion in May, the first month of negative flows since March 2009, at the bottom of the bear market. Read More »

July 2010

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Wednesday’s durable goods news was not good as orders declined 1.0% in June. Later in the day the Fed’s beige book survey concluded that the economic expansion has 'stalled' in some parts of the country but that overall we’re still in slow-growth mode. Read More »

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President Obama signed a landmark financial reform bill into law yesterday, and now the real fun begins. First, everyone in Washington will have to read it. And of course the big push now moves to the regulatory side where the actual rules that will be developed based on the bill’s broad mandates will have to be written and then enforced. This is where the banks, insurers and others with big lobbying budgets will have their greatest impact, and where regulators will have to stand up to the conflicting demands of private interests. Read More »

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While the profits of gloom have been talking up their dooms—most recently the Dow 1000 prediction that was hyped by the New York Times—the markets have had a different idea and risk has come back into the trading scheme of things with stocks heading higher. The Dow is up 6.0% so far this month through Thursday. Read More »

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Yesterday’s explosive rally on positive news out of State Street, and possibly a sense that maybe the selling of the market has been overdone, was followed up by another rally today. And yet, investors have been pulling back. In June, Vanguard, which is still seeing positive inflows, had its worst inflow month since October 2008. Money is still being pulled out of money markets and being put primarily into ETFs. But the inflows are at much reduced levels. Read More »

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Treasury yields are pricing in another recession as the 10-year fell below 3% and ended the first half of the year at 2.95%, about where it sits after today’s trading session as well. The rub is, however, that earnings are going up. Earnings don’t typically go up during recessions. If investors would simply hang on for a few weeks until the second-quarter announcements begin to be made, they’ll see that all the handwringing is uncalled for. Read More »

June 2010

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Uncertainty is the watchword on Wall Street these days. Whether it’s the tremors in Europe, questions about China’s real motives and plans for a revaluing of the yuan, the BP oil disaster, the housing market, our military quagmire in Afghanistan, or interest rates, there are enough unknowns that it seems everyone is on tenterhooks. Read More »

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Uncertainty is the watchword on Wall Street these days. Whether it’s the tremors in Europe, questions about China’s real motives and plans for a revaluing of the yuan, the BP oil disaster, the housing market, our military quagmire in Afghanistan, or interest rates, there are enough unknowns that it seems everyone is on tenterhooks. Read More »

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It turns out that Fridays aren’t always good days in the economic indicator calendar. Two weeks ago it was a lousy employment report that upset the market applecart. This past Friday a decline in May retail sales set the stage as consumers reined in the increase in spending they’d been showing since September 2009. May’s decline was the first, after seven months of rising spending. That being said, retail sales are still up dramatically from a year ago, and the May numbers indicate a slowdown in spending—not the end-of-spend. Still, it doesn’t look as though consumers are going to lead the recovery, that’s for sure. But, they are still out there. Read More »

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Last Friday’s employment report was just the kind of negative news that gave traders an opportunity to sell, sell, sell before the weekend. Gains in employment in non-governmental jobs were much smaller than expected. Out of a total of 431,000 jobs gained in May, private payrolls accounted for just 41,000, or less than 10% of those jobs, many of which are temporary jobs associated with the Census. The Dow Jones Industrial Average and its ilk tumbled right from the start. Read More »

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Personal income gains continued in April for the sixth straight month, and yet savings are going up as well. While it’s good that folks are saving money, it doesn’t help economic growth if they don’t spend it. And we’re seeing that in the retail sales decline in April and the relatively moderate rise in May after seeing big gains from December through March. We’ll have to see whether the next batch of numbers suggest more belt tightening, or if rising incomes finally allow some to begin spending again. Read More »

May 2010

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Pessimism is running rampant on Wall Street despite today’s rally. Just think about the list: The euro and the European Union, budget deficits, rising borrowing costs and lower liquidity in some markets, uncertainty over the sustainability of earnings growth and questions about top-line demand, the oil disaster in the Gulf of Mexico, saber-rattling in the Koreas, and of course the ongoing worries over terrorism here and abroad. It’s enough to send you to your bomb shelter with a few bars of gold and lots of bottled water. Or, if you work on Wall Street, to the Hamptons for the long weekend. Read More »

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Today’s economic hiccups, with jobless claims numbers up and leading indicators down are part and parcel of a halting, slow, and non-uniform economic recovery. While the markets have become much more volatile of late, even with all of the ups and downs, the S&P 500 is just 12.0% below its recent 2010 high of 1217.28. Read More »

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The 290,000 new jobs created in April are a whole lot more than the 190,000 economists had been expecting. But, with greater certainty of an economic recovery, more workers returned to the job search and hence, the headline unemployment rate jumped from 9.7% in March to 9.9% in April. It’ll take more parsing of the data to understand where the jobs are and whether they are where the unemployed are, but the trend is, surely, a positive. Read More »

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What started as a down and up and down day in the U.S. markets turned into a rout this afternoon and then a recovery of sorts as the Dow, at one point, fell almost 1,000 points before rebounding just as sharply ending the day with a not-insignificant loss of 3.2% or 347 points. (There are rumors, still unconfirmed, that a trade error was responsible for the enormous downward spike around 2:40 pm this afternoon.) That said, it could have been a whole lot worse. No doubt you’re going to hear lots of repeats of the old saw that investors should “Sell in May and go away.” Sure, right now that sounds great. But should the Europeans get their collective acts under control this might instead be the period when buying, rather than selling was in order. Read More »

April 2010

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Caterpillar opened the week with stronger earnings and prospects for more as the year advances. CAT is something of a global bellwether since it sells its heavy machinery around the world and, of course, when sales grow that means customers have more projects at hand–a good measure of expansion. Another bellwether is UPS, where profits jumped 33% amid higher volumes, particularly overseas, mimicking the report of a week or so ago from FedEx.

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Forget the volcano, or the car companies paying back their loans, or Apple blowing out its earnings numbers even before the iPad is factored into the equation. The big story concerns what Rolling Stone writer Matt Taibbi referred to as 'that great vampire squid wrapped around the face of humanity,' Goldman Sachs, which is now firmly in the SEC’s crosshairs. After looking at the back-and-forth between Goldman and the SEC, and some of the interviews and articles that have been written, plus the comments of one of Dan’s friends who’s a regulator on Wall Street, it’s his belief that the net result will be a settlement, not a trial, between the SEC and the firm that once said it was doing 'God’s work.' Read More »

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The Dow’s move over 11000 had people cheering on Monday, but so what? It’s just a number in my book and actually doesn’t reflect how far the market’s really come back because it doesn’t factor in dividends. Through Wednesday night’s close the Dow index is up 69.9%. But factor in dividends, and the Dow’s up 75.3%. Meanwhile some of the funds in our portfolios are up even more. Read More »

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Last Friday’s jobs report was a positive, even if the headline number of 162,000 new jobs was tempered by the fact that many are temporary, Census-taking positions. Updated numbers for prior months show that there was net job creation in three of the last five months–nothing to sneeze at when this has become an all-so-important foundation for the economic and market recovery we’ve been witnessing. Of course, as those who stopped looking for work begin to go back into “search mode,” the overall unemployment number, which has been sitting at 9.7%, could rise once again, and that will certainly throw some cold water on those who think it’s all clear for growth going forward. Read More »

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It may be April Fool’s Day for some, but there was nothing foolish about the stock market’s returns in the first quarter of the year. The S&P 500 index gained 4.9% in the January to March period, while small- and mid-cap stocks continued to race ahead, with the S&P 600 SmallCap Index up 8.3% and the S&P 400 MidCap Index up 8.7%. Overseas, we saw some solid gains in Japan, where markets were up 5.2%, and Mexico, where markets hit an all-time high this week while delivering a 3.6% return over the quarter. Of course Europe was a weak man, and European Index showed it, down 1.4% for the first three months. It wasn’t that markets didn’t move higher, per se, with London rising 4.9% and Germany up 3.3%. But the currency tailwind that U.S. investors got when the euro was ascendant last year turned into a headwind this year, turning gains in foreign bourses into losses for dollar-denominated investors. Worse than a falling euro, possibly, and obviously a factor in all of this, is the fact that the EU has had to turn to the IMF, which generally works with developing, not developed countries, to forge a bailout package for Greece. Read More »

March 2010

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The health care reform bill passed on Sunday 3/21/10 and signed into law on Tuesday 3/23/10 is the biggest change in the way we deal with health care in this country in 40 years. Uncertainty about the state and shape of reform has, however, only been reduced, not eliminated. The bill’s required changes begin now, but extend out five years, to 2014. Read More »

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It’s inflation week, or at least it feels that way with reports on both the consumer and producer price indexes dominating the news, along with stories about investors pouring money into bond funds and inflation-protected bond funds. The fact is that inflation remains a non-event. The February measure of Producer Price inflation was characterized by a decline due to falling gasoline prices. While that’s going to reverse in March, the core rate, or underlying inflation in the system remains minimal. Consumer prices were also flat in February. Read More »

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Last Friday’s unemployment report was much better than expected and a bit of a shocker, frankly, given all the doom and gloom that had preceded it, including worries that February’s storms would cause the rate to rise. Instead, it remained steady at 9.7%. Not good, but certainly not worse. Read More »

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There’s lots of cash still sitting on the sidelines; both investor cash sitting in bank accounts, money markets and what-have-you, plus cash on corporate balance sheets and while investors continue to pour money mainly into bond funds corporate America is ramping up its acquisitiveness. Merger Monday remains a significant force for early-week gains. And we’ve had a mildly roller-coaster week since then. With tonight’s close most major U.S. indexes are in the black for the year with the S&P 500 index up 0.7% and the Dow squeaking in with a 0.2% gain. Small- and mid-cap stocks are running ahead for the year with the S&P MidCap 400 index up 4.5%. Read More »

February 2010

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For all the ups and downs, there’s little obvious trend in the market as we hem and haw from greed to panic over everything from Greece’s, and Europe’s problems, to signs of life in the technology and housing markets (again, something that can change day-to-day with whatever indicator is current). For that matter, the worries over interest rate policy are also having a big impact on prices as Fed chief Bernanke’s testimony yesterday made clear, with markets moving on his every word. Read More »

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China told its banks for the second time that they need to boost reserves, a sign they are clamping down even harder on their runaway economic growth, worrying Wall Street that slowed Chinese demand will put a crimp in our exports. Unfortunately, the Chinese stock markets then went on a weeklong holiday for the new Year of the Tiger. Meanwhile, it turns out the Chinese have been trimming their Treasury holdings, leaving Japan once again the largest foreign owner of our debt. The two Asian nations remain our biggest creditors no matter who’s in the lead. Read More »

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Portugal, Ireland, Italy, Greece and Spain—the PIIGS of Europe as they’ve been dubbed—are giving the markets fits. The betting is that at least one, most likely Greece, will need help to keep from defaulting on its bonds. Germany’s determination to keep Greece whole got the markets jumping on Tuesday, but by Wednesday other matters reared their bearish heads as snow shut down Washington again and worries grew that the weather would hamper economic recovery, or at least delay it. In fact, the notion that Germany can single-handedly pull Greece from its funk is a hard one to fathom given that there’s little meat on its proposal’s bones just yet. The details are supposed to be hammered out on Monday. We’ll see. Read More »

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The economic news continues to vacillate from good (Cisco’s great sales and earnings report, and projections) to not so good (today’s employment numbers), and the markets are becoming more volatile as a result. The lousy jobless claims numbers this morning took the markets down in a hurry, and weakness in Europe isn’t helping matters either. A robust rebound still remains a cautious wish rather than a foregone conclusion. Read More »

January 2010

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While unemployment remains front and center across the country, there’s one person who, just moments away from a pink slip, has gotten a reprieve: The Federal Reserve’s Ben Bernanke, whose term expires at the end of January, appears to have dodged the unemployment bullet. As the top Republican of the Senate Appropriations Committee said, the markets don’t need more uncertainty piled on them. Read More »

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Earnings season is revving up, and while Alcoa, which always starts it off, didn’t impress, last Thursday night’s Intel report, which kicked off the technology segment of the show, showed strong bottom- and top-line growth (one of the best quarters in the company’s history and its highest-ever profit margins). And this past Tuesday, IBM confirmed that technology remains a good business as it posted a better-than-expected boost to profits and promised more in the coming year. Read More »

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Last Friday’s employment report had something for everyone in it. There was the specter of job gains, as shown in the adjusted numbers for November indicating a total of 4,000 new jobs having been created during the month, but of course the return to losses (85,000) in December. But with some people giving up on looking for work, the unemployment rate remained at 10%. Temporary employment continues to grow, which means companies remain cautious and are willing to fill their needs with temps rather than full-timers. Read More »

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The decade got off to a bang on Monday with the Dow Jones Industrial Average leaping more than 155 points on the first trading day of the year. There’s been much noise made about all of those old wives’ tales having to do with January’s performance setting the direction for the year, but the bottom line is that the data’s only as good as its average performance, and we’re not making a bet on the market just because the Dow was up, or down, in the first month, or first week of trading. Read More »

December 2009

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Christmas brought a bit more cheer to bricks-and-mortar retailers than had been expected, though the tough weather on the weekend before the holiday made it a nail-biter right to the bitter end. Overall sales, including those on the Internet, which were up nicely with the bad weather as some shoppers stayed home, were up 3.6% compared to a dismal 2008, when sales fell 3.4%. Read More »

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This week we got word that GDP for Q3 was revised lower, to a 2.2% annualized rate of growth. The turn from recession to expansion remains on track, but it’s just not as robust as originally forecast. Remember, Q3 started out with an estimate of 3.5% growth. Read More »

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While hotter-than-expected producer inflation was an initial negative for the stock market on Tuesday, a report that industrial production expanded for the fifth month in a row in November was a balm on the economy’s nerves (or maybe the market’s) and marks continued improvement from the depths of our collective despair one year ago. Today’s leading indicators report continued on that theme as the index was up, yet again, for the eighth month in a row. That said, this is going to be one slow recovery, something the Fed’s Ben Bernanke made clear in recent testimony. Remember, though, that a slow recovery is NOT no recovery. Read More »

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It feels like months ago, but last Friday’s payroll report sent the markets rocketing and rocking. Not only did the unemployment rate decline from 10.2% to 10.0%, but the Labor Department recalculated some prior months (as they always do once their data collection is complete) and found fewer jobs lost over September and October than originally thought. Even better, the “average workweek” figures showed that businesses were extending hours, which eventually leads to hiring since you can’t extend indefinitely. Read More »

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Markets were certainly rattled last week during the Thanksgiving holiday. While Americans ate turkey and cranberry sauce, Dubai, which is considered a city-state, said its real estate and ports conglomerate, Dubai World, would restructure and that there would be a six-month standstill on debt payments, raising the specter of a default. Though U.S. bank exposure was fairly small, U.K. banks were reportedly on the hook for about $50 billion, and that led to a huge sell-off in European markets on Thanksgiving Thursday while our markets were closed. To say that the announcement also rattled Middle-East markets on the whole would be an understatement. While the Dow Jones Industrial Average opened on a trade-shortened Friday to a more than 233-point (or 2.2%) decline, cooler heads prevailed, and the Dow ended the day down a mere 1.5%. This week, the pressure seems to be coming off as Dubai says it is arranging for a restructuring. Read More »

November 2009

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Monday’s report that October existing-home sales rose 10.1% was not entirely unexpected given the stimulus the first-time homebuyer credit has been generating, and today’s report that new-home sales were up in October was also a positive, but given the regional differences in the housing market—only the South saw new-home sales grow, and the Midwest saw sales decline by 20%—it’s far too early to call the housing market recovered. Read More »

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Vanguard launched its seven new bond index funds and ETFs today after delaying their proposed early November launch date. There are seven ETFs, seven Signal class shares and seven institutional shares. With bond markets surging and investor interest more than a little keen for bonds, this particular introduction appears perfectly timed to mark the market’s mood. Read More »

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Friday’s revelation of a 10.2% unemployment rate for October should have been a huge downer for the markets, particularly after the optimism-fueled 204-point rally on the prior day. Yet, the Dow gained 17 points on the day and then on Monday despite the fact that the House passed health reform legislation on Saturday, which so many pundits see as a negative, prices exploded upwards as the G-20 basically confirmed that stimulus would continue to rule the global markets for some time to come. Read More »

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Volatility has accelerated in the markets, as has fear, surpassing greed for the moment. The VIX, better known as the “fear index”, zoomed up 24.0% on Friday. From the recent low on October 22 (20.69), when the Dow closed at its 2009 high of 10081, the VIX has risen 22.9%. Trading also indicates greater emotion in the markets, which translates into volatility. Over the last nine trading days, the Dow’s daily high-to-low range has been run at 2.1% or higher on five of those days. We haven’t seen a period like this since the GM bankruptcy days of the early summer. (Today, by the way, a 204-point gain in the Dow took the index over 10000 once again, pointing to the continued battle between fear and greed about one year after the financial crisis hit full tilt.) Read More »

October 2009

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Despite all the ghoulish predictions coming into October, the month, with just one more trading day to go, has definitely been a mixed bag of tricks and treats. Of course, the ups and downs of the past week have certainly scared some investors, and consumer sentiment indicators suggest there’s still a lot of gloom out there—but I’d remind you that a straight-up market gain like the one we’ve seen since the bottom on March 9 is just not sustainable. A pullback of 5%, 10% or even 15% would still leave us with great gains from the lows and would entice a new dose of cash into the markets from those who “missed out” the last time. Either way, the 10000 Dow is proving to be a hurdle we can’t seem to stay over, for the moment. Read More »

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It’s earnings time, and this week the news has been coming out fast and furious.

Google reported that the online advertising business is coming back with strength, and showed profits in line with that thinking. Both IBM and Citigroup were able to show some profits as well, though not of the sort shown by Intel or JP Morgan Chase, for example. And Southwest Air’s earnings announcement included their belief that the airline industry’s bumpiest days are behind them. Apple and Caterpillar were two of the big names that came through with better-than-hoped-for earnings. Financials and tech are up strong. The new Windows 7 upgrade cycle could help the techs, though both Intel and Texas Instruments, despite counting out a big Windows 7 sell, still think things are on the upswing. Read More »

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Yesterday’s Dow close above 10000 is the first time since October 3, 2008, that we’ve seen a five-digit close for the stock market benchmark. But before you look for too many historical precedents, be glad that today, October 15, didn’t mimic what happened exactly one year ago, when the Dow plunged 733 points, or 7.9%, throwing even more panic into the markets than had been there before. Read More »

Hotline

The stock market’s recent advance can be laid at the feet of the beginning of earnings reporting season and surprisingly better-than-expected results (at least on the profit front) from the first company out of the gate: Alcoa reported last night that while third-quarter sales fell 33% compared with a year ago, earnings were a different story, surprising on the upside, versus the loss that Wall Street had been expecting and reversing three straight quarters of losses. Now the back story and front story. Alcoa controlled costs well, but their overall business really sank. However, their executives say that they see key markets, other than aircraft, are stabilizing, prices are up, and this should mean that the worst is behind them. Read More »

Hotline

Friday’s report that durable goods orders shrank in August, coming after the prior day’s report that existing home sales had also retreated that month, was not what a continuing stock market rally was looking for as assurance that recovery is at hand. And today’s ISM Manufacturing report was definitely a downer, with the index slipping, rather than growing as had been expected, once again showing how rocky the recovery will be. Read More »

September 2009

Hotline

Leading economic indicators are signaling a fairly strong rebound off the bottom of this recession, having already moved back up from their bottom in March to about where they were when the economy officially entered recession in December 2007. Read More »

Hotline

The Wall Street Journal‘s survey of economists finds most in agreement that the worst of the economic crisis is over and that while unemployment hasn’t yet peaked, the economy will begin adding jobs during the next 12 months. Maybe just as important, two-thirds of the economists surveyed believe the U.S. government, and hence taxpayers, will make a profit on the TARP money that was shoveled out to banks, car-makers and AIG in the middle of the crisis. Read More »

Hotline

The pace of continuing job losses fell in August, which was a kind of pyrrhic victory given the fact that prior month’s job losses were revised higher and the unemployment rate came in with a jump from 9.4% to 9.7%. What isn’t reflected in the numbers are the people who’ve given up looking for work, which means the true unemployment numbers are even worse than they appear. Read More »

Hotline

As I expected, or maybe just hoped for, when we spoke last week, the ISM Manufacturing index for August came in solidly in expansion territory, which is just what this economy ordered. But also, as expected, the service economy index, which did improve a bit, does not yet reflect expansion as jobs are just not being created fast enough to really give a boost to economic growth, or spending. Read More »

August 2009

Hotline

The durable goods report for July continues to show manufacturing is rebounding with the largest monthly increase in the index in two years. Aircraft and the Cash for Clunkers program helped. Read More »

Hotline

Treasury Secretary Geithner thinks the banks are healing, running with less leverage and holding more of a cushion on their balance sheets.

Germany, France and, yes, Japan appear to have moved from recession to expansion, leading the way for us to follow. Next Thursday we’ll get another update on second-quarter GDP in the U.S., and expectations are that the numbers won’t be as good as they first appeared, with maybe a 1.5% decline in GDP in Q2 versus the previously reported decline of 1.0%. Read More »

Hotline

Obviously, Friday’s report that the unemployment rate actually fell 0.1% was good news on its face and was cause for a rally, but the bottom line is that there are still lots of folks who have given up on looking for jobs, and so the numerator in the equation came down. Read More »

Hotline

Monday’s report that July manufacturing activity rose more than expected and almost broke into 'expansionary' territory from 'recessionary' levels was another sign, coming on the heels of Friday’s report that GDP fell by just 1.0% in Q2, that we may be headed for positive GDP growth in the current quarter. We’ve seen an almost 49% bounce higher from the December 2008 depths of the manufacturing crisis in the country, a level that was lower than any time since May 1980. Read More »

July 2009

Hotline

Today is the 100th trading day since the stock market hit its closing low on March 9. In those 100 days, the Dow has jumped over 2,600 points, or 39.8%. Volatility remains high this year—on the face of it, 2009 is looking a lot like 2002 in terms of the market’s jumpiness. But volatility cuts in two directions, and right now it’s cutting in the direction of 'up.' Read More »

Hotline

Today’s report that existing home sales were creeping back, up 3.6% in June for the third monthly increase, might have been foreshadowed in part by this week’s earnings report from, of all companies, Sweden’s Electrolux, one of the world’s largest appliance makers after Westinghouse. The Swedes said they thought they were seeing the bottom in the U.S. economy, and of course, if appliance sales are beginning to turn around, then you might expect homes sales would be as well. Read More »

Hotline

Given its size and scope, the Friday emergence of GM from bankruptcy had to set some kind of a record. Promising to pay back the U.S. taxpayer is a fine thing, but whether the U.S. consumer is going to be willing to buy enough GM cars to allow them to make good on the promise is something else. We wouldn’t bet on it. Read More »

Hotline

Calls for increased fiscal stimulus, despite the fact that only about 10% of the allotted money has yet been spent, are increasing as worries about the sustainability of what is perceived as an early attempt at a rebound are increasing. Read More »

Hotline

As bad as the first quarter was, the second quarter was good—very good. But now we have to pause to see if expectations, which drove markets higher from early March through the end of June, are accurate, overblown, or maybe even still too pessimistic. Read More »

June 2009

Hotline

From all appearances, I think we’re going to continue to bump along in a fairly narrow range for a while until we have further evidence that both economic indicators and profit indicators are showing solid expansion. The situation of slowing declines is not going to help push the stock market much higher by itself. We’re in something of a stair-step pattern, where the market has moved ahead and now investors are saying, “Show me,” before they are willing to commit to even higher prices. Read More »

Hotline

As I suggested last week, inflation readings remain muted. The PPI came in with a 0.2% increase, which is nothing, and the CPI was up just 0.1%. And you can guess what drove almost all this increase: fuel prices. Oil at $71 is a fair bit higher than the $45 it was at when 2008 turned into 2009. Read More »

Hotline

Friday’s 9.4% unemployment rate never looked so good—job losses in May fell to 345,000 amid expectations they would be in the 525,000 range, and numbers for the months of March and April were revised lower as well. Read More »

Hotline

GM filed for bankruptcy and was dumped from the Dow, along with Citigroup, which is an ignominious sign for the global banker. Not only that, but Citi was replaced by its former division, Travelers Insurance, and Cisco, the networking company, took GM’s place. So, instead of the rubber-meets-the-road, we now have the Internet Superhighway represented in the Dow, and there are now no auto companies in the venerable index—another sign of the times. Read More »

May 2009

Hotline

In this holiday-shortened week Tuesday saw a big jump in consumer confidence on Main Street–courtesy of the Conference Board–which fueled a rally on Wall Street. But while the jump in confidence was impressive, it still leaves confidence well below the levels seen at the beginning of this decade (in fact, down 62% from the high of May 2000). And as I’ve often said over the past many years, while consumer confidence is one of those indicators that’s easy to understand, and changes in confidence are also easy to digest, the fact is that consumer confidence is a pretty lousy economic indicator. Yes, it accurately gauges how consumers feel, but it doesn’t necessarily translate into how the economy moves. In fact, it’s backward looking; rising after some good news or market movement improves sentiment, and falling after bad news or sentiment has already occurred. Read More »

Hotline

With earnings season pretty much past, the markets are looking at various economic signs for any glimmers of hope, or doom. In sum, most indicators suggest that the rate of decline, or contraction, is itself declining, which is a good thing. Industrial production in April fell just 0.5%, which was a whole lot better than the declines ranging as high as 4.0% that we’ve seen in prior months. New unemployment claims, though still very, very high, aren’t coming in as high as they were—again, declining declines. And the Conference Board’s index of leading economic indicators turned up for the first time in a year. Read More »

Hotline

As Dan predicted last week, the unemployment numbers came in at 8.9% on Friday, May 8, but the underlying trend of job losses has begun to dissipate. This is still a far cry from job gains—but as has been said many times in the past, you have to stop losing before you can start winning. Read More »

Hotline

For all the stress that has supposedly built up in the markets around the bank stress tests, investors seem to be taking things in stride, and pushing up the banks to boot. Vanguard’s Financials ETF, while still down 2.6% for the year to date, is up 12.2% this month (after just 4 trading days through Wednesday), though it fell a minor 2.9% today and was up 14.6% in March and 19.2% in April. Read More »

April 2009

Hotline

'Worse than expected.' That’s what we heard when the Bureau of Economic Analysis released its 'advance' estimate of how much first-quarter GDP had contracted. The 6.14% annualized rate of decline was not as bad as the 6.34% decline in the fourth quarter, but it was still lousy and marked the worst six-month decline since 1958. But consumer spending was up in the first quarter at a 2.2% rate rather than falling at a 4% rate as it did in each of the last two quarters. So, as only a forward-looking discounting mechanism like the market can do, Wall Street took this as a sign the worst may be past, and the S&P 500 index gained 2.2% on the day while smaller stocks, which often lead out of a recession, were up 3.9%. Read More »

Hotline

The big banks have pretty much all reported in now, and surprise of surprises (not!), they came up with billions in profits in the first quarter. The problems remain, however, that their balance sheets are still messy works-in-progress, and it’s only by dint of the Fed’s super-low borrowing rates that they can generate a nice bit of income from borrowing low and lending high—when lending at all. Investors apparently got religion on Monday when they decided the banks’ earnings weren’t all they were cracked up to be and took stocks down almost 4%, with the Financials ETF falling 10.5%. Since then, it’s been a bit of a rough slog, particularly with revelations this morning that Bank of America CEO Ken Lewis says he was told by former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to stay mum about problems with its Merrill Lynch purchase, lest the whole financial house of cards collapse. Read More »

Hotline

The past month and week have shown signs of increasing stability, if not downright improvement in our economy. The phrase 'the worst is over' seems to be appearing with greater and greater frequency (a quick Google search finds almost 1,200 hits in the news for the past day versus about 725 over the past month). From rising exports in February (the first time in 7 months), or slightly less pessimism on the part of corporate CEOs in a Conference Board survey, or the continued decline in the TED-spread and improved liquidity in the commercial paper markets, all are small steps in the right direction. And the beige book was less red this past month as the pace of economic decline is declining. Read More »

Hotline

Alcoa started earnings season off on about the foot I thought they would—a misstep, as aluminum demand faltered.

But Pulte Homes buying Centex in a $1.3 billion deal is an encouraging sign: Why would you want to buy or expand your home-building business if you thought you could wait a while and buy it, or expand it later at lower prices? This, along with the resurgence in buying and refinancing, could be marking a bottom, however prolonged, in the housing market. Read More »

Hotline

All the world’s got its eyes on the G-20 meeting in London, yet Wall Street reacted to events closer to home today: A change in FASB (Financial Accounting Standards Board) rules on 'mark-to-market' accounting will give big financial institutions a lot more leeway in terms of how they manage their balance sheets. This will allow companies to use their judgment to value assets where markets aren’t pricing consistently, or at all. This 'fair value' accounting is something companies have been hoping to get for a long time, particularly since the credit markets seized up last fall, as it will allow them to appear healthier by accounting standards. The critics say it’s not accurate, but companies, and apparently the rule-setters, think it’s perfectly accountable. Read More »

March 2009

Hotline

Improved numbers on durable goods, where orders rose in February dashing economists’ expectations for a continued slide, as well as housing, where sales are rising as prices are falling (the return of supply and demand–something we’ve been saying for some time now would be necessary to stabilize the market), are pushing stocks higher this week. The markets got an additional boost today as the final GDP number came in for the fourth quarter of 2008 showing less of a slowdown than expected. And the rally isn’t limited to the U.S. Foreign markets, particularly emerging markets, where higher oil prices often can push markets that hinge on major oil producers, are moving up dramatically. Emerging Markets Index is up 19.5% this month. And Precious Metals & Mining is up 22% as gold prices have again moved from the low $900 level to the current $940 or so. Read More »

Hotline

The Fed’s announcement that it is stepping up its 'qualitative easing,' which is another way of saying they’re going to spend money to lower interest rates further, set the markets on fire yesterday before cooler heads prevailed. Stocks soared, sank, and then took off one more time before the closing bell. Bottom line: The Fed will spend at least $300 billion buying in Treasury bonds (their prices got a big lift on the news, and yields fell big-time), and they are also going to buy about $750 billion in mortgage-backed bonds plus more debt of companies like Freddie Mac and Fannie Mae. Read More »

Hotline

Is it the proverbial dead-cat bounce (a bull rally in a bear market), or are investors finally picking their heads out of the sand and looking forward? I don’t know, but I do know that in three days, the Dow Industrials have risen 9.5% above the bear-market closing low hit on Monday, and 10.8% above the intraday low hit last Friday. Read More »

Hotline

Last week’s report that the economy fell at a 6.2% annualized rate in the fourth quarter sets us up for the possibility of a 5% or greater decline for the first quarter as well. Many economists are suggesting these will be the two worst of this recession and that things should begin to look up, or at least not look as far down as they have, in quarters to come. Read More »

February 2009

Hotline

Nationalization fears have had Wall Street in a tizzy this past week as Citigroup saw its stock price fall below $2 and Bank of America came under fire as investors worried that with the government taking over, their equity would be wiped out. J.P. Morgan Chase slashed its dividend saying it would save tons of money in the process, preserve capital and, presumably, keep it from falling into the same category as Citi and B of A—i.e., in need of government resuscitation. Read More »

Hotline

What we’re seeing in the markets now is nothing more than a severe crisis of confidence. Yes, there’s a financial and credit crisis, of sorts, and a car-maker crisis and a housing crisis and what-have-you. But really, it’s a crisis of confidence that we can see our way out of this morass. Read More »

Hotline

As you’re probably aware, Friday’s unemployment report was as bad as expected, with the unemployment rate jumping to 7.6% as almost 600,000 jobs were lost in January, marking more than 3 million jobs lost since the recession began 13 months ago. Despite the job problems, the news from Washington that President Obama was pushing hard to get some kind of stimulus package moving through Congress lifted spirits on Wall Street, and the Dow rose 2.7%, marking the end of a good week (finally). It may be as Dan said last week, that virtually any stimulus package—good, bad or indifferent—will still make a difference in the national psyche. Read More »

Hotline

There’s an old saying that we should be careful what we wish for. For the past decade, or more, economists have decried the fact that consumers weren’t saving any money, but were loading on debt. Their wish: That consumers would become savers, in part to make sure retirees wouldn’t bankrupt all our social service safety nets. Well, economists finally got what they wished for. The savings rate rose to 3.6% in December, from 2.8% in November, and there are some economists who now think it could hit double digits by year-end 2009. The issue, of course, is that higher savings means lower consuming, and in a consumer-based economy, lower consumption and lower spending means trouble for the prospect of growing out of the current recession. (I should note, however, that Visa says credit card customers are using their cards more, so maybe someone’s adding to their debt.) Read More »

January 2009

Hotline

The unemployment numbers and new home sales numbers continue to show an economy in crisis. Not unexpected, but certainly not pleasant either. The Fed, which met this week, can’t lower rates any more, so they’re going to have to fight with other swords–which could mean buying in Treasurys to lower yields further, or possibly to come up with a solution to the bad assets sitting on many banks balance sheets. Read More »

Hotline

Well, we have a new President and a new Congress, and hopefully we’ll have a new economic policy that will begin to put the worst of the credit and economic crisis behind us—although we certainly aren’t investing with a belief in magic bullets or Pollyanna visions of a quick recovery. Still, there’s a new sheriff in town, and we’re hoping he can clean up some of the mess. Read More »

Hotline

Unemployment is at 7.2% according to the report last Friday. And the pessimists see it rising to more than 10%. But UBS has done an analysis that suggests that GDP would have to decline 6% or more to see unemployment rise into the double digits. Given the fact that businesses kept their employment rolls down while boosting productivity, there’s some hope that we won’t see double-digit unemployment, though of course the absolute jobs lost will be greater than, say, during the last recession, considering the enormous number of new jobs that have been created over the last decade or so. Read More »

Hotline

Auto sales in December were off 30%, marking 2008 as a horrific year for the auto industry (like we didn’t know it already). And today’s report on retail sales confirmed what many of us were fearful of, that the holiday shopping season was a bust. Of course, we think most of this was built into stock prices already. Read More »

December 2008

Hotline

Thank goodness the year is over. As one analyst said to me yesterday, 'On Friday you can start the year off with a 0.0% year-to-date return.' Sounds good to me. But I’ll still be working to recover what we lost in this tumultuous year. Though the official numbers aren’t in yet, the Dow index appears to have had its third-worst year ever, by a fraction, beaten only by the declines of 1931 (-52.7%) and 1907 (-37.7%). The Dow dropped 33.84%, which is a few basis points worse than the 33.77% decline of 1930. I say, good riddance. Read More »

Hotline – 2008-12-30

Hello, this is Dan Wiener with a special FFSA Vanguard Hotline trading update for Tuesday, December 30. I’ll have a full Hotline for you tomorrow afternoon to end out the year, but I wanted to get these trades to you prior to year-end. Read More »

Hotline – 2008-12-24

If you think the Fed’s rate cut to a range of 0.0% to 0.25% is low, how about the Bank of Japan, which cut its benchmark interest rate to just 0.1% from the previous 0.3%?! Like the U.S. and other foreign countries, Japan is feeling the effects of the global slump and is planning additional measures to pump liquidity into the markets. Read More »

Hotline – 2008-12-18

The recent revelations of a $50 billion Ponzi scheme at Bernard Madoff Securities will have repercussions far and wide across Wall Street, Main Street and obviously within the offices of regulators who were clearly asleep at the switch. I have two close friends who lost money with Madoff. One gave him $2.4 million just a few weeks before the scam came unraveled. The other thought she had $4 million with the man. What a disaster for both. The Madoff scandal also points up, I think, some of the benefits of working through a large, well-known company like Vanguard. Read More »

Hotline – 2008-12-11

Obviously, Friday’s report on unemployment, with 533,000 fewer jobs, an unemployment rate at 6.7%, and a large number of new unemployment claims this morning has sent shivers down most observers’ spines. And as Detroit’s Big-3 came hat-in-hand (and in hybrids at that) one more time to Washington, the pols waffled on just what, and how much, to do. There’s a bailout bill wheeling its way through the Congress now, and we’ll see if it’s got traction. Read More »

Hotline – 2008-12-04

It took them a year to figure it out, but the National Bureau for Economic Research (or NBER), the official arbiter of such things, has officially dated the start of the current recession to December 2007, which means, of course, that we’re already one year into the recession of 2008 and certainly will be in it as we move into 2009. Read More »

November 2008

Hotline – 2008-11-26

As we approach the Thanksgiving holiday and the traditional shortened trading day on Friday, the last day of the month, the financial markets remain roiled, and the economy clearly is headed for massive upheaval as unemployment rises and economic activity declines. Personal income, as we learned this morning, actually increased at a greater-than-expected rate this month, but folks are saving, rather than spending. And with durable goods orders taking another step down, it’s clear we have to be prepared to work through more lousy economic reports before we see our way clear. If you haven’t done so already, buckle your seat belt and hang on, as the road will remain bumpy. Read More »

Hotline – 2008-11-20

November started off okay, but it sure has come apart since Election Day. In fact, with today’s decline, November is now worse than October was, with most major domestic indexes down over 20% this month. The Dow is down 19.0% this month through today, the S&P 500 index is down 22.3%, and the NASDAQ Composite has fallen 23.5%. Foreign markets have actually held up somewhat better in November with losses of around 10% to 15% among major indices. Read More »

Hotline – 2008-11-13

Anyone who attempts to explain how and why the Dow swung through more than 910 points, or 11.0%, from low to high today, is making it up. Was it TheWall Street Journal survey of economists predicting earnings would begin to grow again by the middle of next year? Was it the fascinating end to the testimony of five billionaires on Capitol Hill that sent bullish juices flowing? Or was it a press conference by the President? No one can say definitively, but all will try. Me, I’ll take it for what it gave us, which is a rebound from some pretty dismal numbers for the month. Read More »

Hotline – 2008-11-06

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 6. Read More »

October 2008

Hotline – 2008-10-30

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 30. Read More »

Hotline – 2008-10-23

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 23. Read More »

Hotline – 2008-10-16

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 16. Read More »

Hotline – 2008-10-09

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 9. Read More »

Hotline – 2008-10-02

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 2. Read More »

September 2008

Hotline – 2008-09-29

Hello, this is Dan Wiener with a Special FFSA Vanguard Hotline update for Monday, September 29. Read More »

Hotline – 2008-09-25

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 25. Read More »

Hotline – 2008-09-18

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 18.

Hotline – 2008-09-15

Hello, this is Dan Wiener with a SpecialFFSA Vanguard Hotline update for Monday, September 15. Read More »

Hotline – 2008-09-11

Hello, this is Dan Wiener with the FFSA Vangusard Hotline update for Thursday, September 11th. Read More »

Hotline – 2008-09-04

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 4. Read More »

August 2008

Hotline – 2008-08-28

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 28. Read More »

Hotline – 2008-08-21

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 21.

Hotline – 2008-08-14

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 14. Read More »

Hotline – 2008-08-07

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 7th. Read More »

July 2008

Hotline – 2008-07-31

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 31. Read More »

Hotline – 2008-07-24

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 24. Read More »

Hotline – 2008-07-17

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 17th.

Hotline – 2008-07-10

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 10.

Hotline – 2008-07-03

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 3.

June 2008

Hotline – 2008-06-26

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 26.

Hotline – 2008-06-19

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 19.

Hotline – 2008-06-12

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 12.

Hotline – 2008-06-05

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 5. Read More »

May 2008

Hotline – 2008-05-29

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 29.

Hotline – 2008-05-22

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 22.

Hotline – 2008-05-15

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 15.

Hotline – 2008-05-08

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 8.

Hotline – 2008-05-01

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 1.

April 2008

Hotline – 2008-04-24

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 24.

Hotline – 2008-04-17

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 17. Read More »

Hotline – 2008-04-10

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 10.

Hotline – 2008-04-03

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 3. Read More »

March 2008

Hotline – 2008-03-27

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 27. Read More »

Hotline – 2008-03-20

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 20. Read More »

Hotline – 2008-03-13

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 13. Read More »

Hotline – 2008-03-06

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 6. Read More »

February 2008

Hotline – 2008-02-28

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 28. Read More »

Hotline – 2008-02-21

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 21.

Hotline – 2008-02-14

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 14.

Hotline – 2008-02-07

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 7. Read More »

January 2008

Hotline – 2008-01-31

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 31, the final day of an extremely tumultuous month. Read More »

Hotline – 2008-01-24

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 24. Read More »

Hotline – 2008-01-17

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 17.

Hotline – 2008-01-10

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 10.

Hotline – 2008-01-03

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 3.

December 2007

Hotline – 2007-12-27

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 27.

Hotline – 2007-12-20

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 20.

Hotline – 2007-12-13

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 13.

Hotline – 2007-12-06

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 6.

November 2007

Hotline – 2007-11-29

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 29.

Hotline – 2007-11-21

Hello, this is Dan Wiener with the pre-Thanksgiving FFSA Vanguard Hotline update for Wednesday, November 21. Read More »

Hotline – 2007-11-15

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 15.

Hotline – 2007-11-08

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 8.

Hotline – 2007-11-01

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 1.

October 2007

Hotline – 2007-10-25

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 25.

Hotline – 2007-10-18

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 18.

Hotline – 2007-10-11

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 11.

Hotline – 2007-10-04

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 4th. Read More »

September 2007

Hotline – 2007-09-27

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 27.

Hotline – 2007-09-20

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 20.

Hotline – 2007-09-13

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 13.

Hotline – 2007-09-06

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 6.

August 2007

Hotline – 2007-08-30

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 30.

Hotline – 2007-08-23

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 23.

Hotline – 2007-08-16

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 16. I’m recording the Hotline early today because I’m sure that with the recent market tumult, you’re eager to hear how I think you should be playing it.

Hotline – 2007-08-09

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 9.

Hotline – 2007-08-07

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 7th. Read More »

Hotline – 2007-08-02

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 2.

July 2007

Hotline – 2007-07-26

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 26.

Hotline – 2007-07-19

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 19.

Hotline – 2007-07-12

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 12.

Hotline – 2007-07-05

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 5.

June 2007

Hotline – 2007-06-28

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 28.

Hotline – 2007-06-21

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 21.

Hotline – 2007-06-14

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 14.

Hotline – 2007-06-07

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 7.

May 2007

Hotline – 2007-05-31

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 31.

Hotline – 2007-05-24

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 24.

Hotline – 2007-05-17

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 17.

Hotline – 2007-05-10

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 10.

Hotline – 2007-05-03

Hello, this is Seth Kennedy sitting in for Dan Wiener, who’s on the road, with the FFSA Vanguard Hotline update for Thursday, May 3.

April 2007

Hotline – 2007-04-26

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 26.

Hotline – 2007-04-19

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 19.

Hotline – 2007-04-12

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 12.

Hotline – 2007-04-05

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 5.

March 2007

Hotline – 2007-03-29

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 29.

Hotline – 2007-03-22

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 22.

Hotline – 2007-03-15

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 15.

Hotline – 2007-03-08

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 8.

Hotline – 2007-03-01

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 1.

February 2007

Hotline – 2007-02-22

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 22.

Hotline – 2007-02-15

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 15.

Hotline – 2007-02-08

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 8.

Hotline – 2007-02-01

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 1.

January 2007

Hotline – 2007-01-25

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 25.

Hotline – 2007-01-18

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 18.

Hotline – 2007-01-11

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 11.

Hotline – 2007-01-04

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 4. Happy New Year.

December 2006

Hotline – 2006-12-28

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 28.

Hotline – 2006-12-21

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for December 21.

Hotline – 2006-12-14

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 14.

Hotline – 2006-12-07

Hello, this is Seth Kennedy, sitting in for Dan Wiener, with the FFSA Vanguard Hotline update for Thursday, December 7.

November 2006

Hotline – 2006-11-30

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 30.

Hotline – 2006-11-22

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Wednesday, November 22, a pre-Thanksgiving Hotline for those who’ll be too busy eating, enjoying family, and hopefully giving thanks tomorrow.

Hotline – 2006-11-16

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 16.

Hotline – 2006-11-09

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 9. Read More »

Hotline – 2006-11-02

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 2.

October 2006

Hotline – 2006-10-26

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 26.

Hotline – 2006-10-19

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 19.

Hotline – 2006-10-12

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 12.

Hotline – 2006-10-05

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 5.

September 2006

Hotline – 2006-09-28

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 28, investors’ penultimate day of the quarter.

Hotline – 2006-09-21

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 21.

Hotline – 2006-09-14

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 14.

Hotline – 2006-09-07

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 7.

August 2006

Hotline – 2006-08-31

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for August 31.

Hotline – 2006-08-24

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 24.

Hotline – 2006-08-17

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 17.

Hotline – 2006-08-10

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 10.

Hotline – 2006-08-03

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, August 3.

July 2006

Hotline – 2006-07-27

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for July 27.

Hotline – 2006-07-20

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 20.

Hotline – 2006-07-13

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, July 13.

Hotline – 2006-07-06

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for July 6.

June 2006

Hotline – 2006-06-29

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 29.

Hotline – 2006-06-22

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for June 22.

Hotline – 2006-06-15

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for June 15.

Hotline – 2006-06-08

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for June 8.

Hotline – 2006-06-01

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, June 1.

May 2006

Hotline – 2006-05-25

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday May 25.

Hotline – 2006-05-18

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for May 18.

Hotline – 2006-05-11

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, May 11.

Hotline – 2006-05-04

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for May 4.

April 2006

Hotline – 2006-04-27

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for April 27.

Hotline – 2006-04-20

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 20.

Hotline – 2006-04-13

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 13.

Hotline – 2006-04-06

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, April 6.

March 2006

Hotline – 2006-03-30

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 30th.

Hotline – 2006-03-23

Hello, this is Seth Kennedy filling in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 23.

Hotline – 2006-03-16

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 16.

Hotline – 2006-03-09

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 9.

Hotline – 2006-03-02

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, March 2.

February 2006

Hotline – 2006-02-23

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 23.

Hotline – 2006-02-16

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 16.

Hotline – 2006-02-09

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 9. Read More »

Hotline – 2006-02-02

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, February 2.

January 2006

Hotline – 2006-01-26

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 26.

Hotline – 2006-01-19

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 19.

Hotline – 2006-01-12

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 12.

Hotline – 2006-01-05

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, January 5.

• Correlation Tool

  You don't want to own too many funds that are similar, but how do you tell? A high correlation between funds may mean that your portfolio of funds is not as diverse as you might want it to be. While other tools may compare funds only to the S&P 500 (or 500 Index fund), you can use this tool to determine how closely the performance of one Vanguard stock fund tracks that of any other Vanguard stock fund. Compare all the funds that you own. To diversify, look for funds that have low correlation with one another.

Model Portfolio Performance

Past Performance »