By 2 Cents on July 21st, 2011 | Category: Investing |  The conventional view serves to protect us from the painful job of thinking.
~J.K. Galbraith
A recent article in the Globe and Mail delivered the following advice to investors: Don’t Let a Fear of Bonds Infect Your Healthy Portfolio. The implications are clear:
1. Concerns about ultra-low interest rates eventually turning higher are overblown.
2. If you succumb to the paranoid people who think interest rates can actually rise above 0% – 3%, your portfolio will be unhealthy, damaged, infected. (The image with the article showed people in protective masks.)
3. And my personal favourite: Long term investors need not concern themselves with shorter term market movements because markets always rise over the long term – whenever that is.
So there you go. “Stop worrying so much about bonds.” All you have to do is put your desired allocation in bond mutual funds or [...]
Read on and enjoy … Yes, You Can Live Without Bonds
By 2 Cents on July 15th, 2011 | Category: Investing |  Prosperity is a great teacher; adversity is a greater.
~William Hazlitt
If you believe the opening quote, we are in for some great lessons – at least according to Felix Zulauf of Zulauf Asset Management in Switzerland. The transcript of a recent interview with him was published by McAlvany Weekly Commentary. It is optimistically entitled Marching Full Speed into Calamity.
It’s rare to find such great detail in a single interview, especially if you’re accustomed to consuming your market commentary via television, where guests are rarely allowed to finish a sentence let alone expand on their thoughts. This far-ranging discussion covers Zulauf’s views on everything from stocks, bonds, and gold to sovereign debt and the fate of the European Union.
His views are not too far from my own, and he even uses a similar weather analogy. (See 5 Year Market Outlook: Felix Zulauf
By 2 Cents on June 21st, 2011 | Category: Investing |  Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime. Teach a man to create an artificial shortage of fish and he will eat steak.
~Jay Leno
Today’s quote illustrates why it’s so hard to invest in markets. There are so many variables, and some of them may not even be apparent to us. You could become the best fisherman on the planet and still lose money if someone successfully manipulates the market for your catch.
A little more than a year ago, I wrote a two-part piece answering 8 questions posed by Kevin at Out of Your Rut. He was interested in finding out where his readers thought the stock market was headed. I gave some pretty detailed answers to his questions and, while I think I got a lot of [...]
Read on and enjoy … What’s Next for the Markets?
By 2 Cents on April 6th, 2011 | Category: Investing |  Most of us can read the writing on the wall; we just assume it’s addressed to someone else.
~Ivern Ball
Market and economic commentary over the past few months has contained numerous references to walls. Setting aside the irony of the fact that the seat of American capitalism rests on Wall Street, we’ve also heard about the wall of water that washed over Japan and subsequently complicated the global macroeconomic picture. Add that to the Wall of Worry.
There are 3 kinds of walls mentioned in a lot of market discussions these days. Each one seems to take its turn in the spotlight and ironically, bulls and bears alike seem to be able to use all 3 walls to build their case. The one left standing may determine your investment success over the medium to long term. In the short-term, of course, anything can happen.
I’m talking about [...]
Read on and enjoy … Investing: 3 Walls to Watch
By 2 Cents on March 16th, 2011 | Category: Investing |  The following is Part Two of a two-part guest post from Rob Bennett. The first part (How to Use Valuation-Informed Indexing – Part One) was published on Monday.
(Schedule Note: I will be taking Friday off, so there won’t be a new post until Monday.)
The valuation metric (P/E10 — the price of an index over the average of its last 10 years of earnings) used in The Stock-Return Predictor to identify the most likely long-term return is research-tested. It has worked well for the entire 140 years of U.S. stock-return history available to us. For example, research by Wade Pfau, Associate Professor of Economics at the National Graduate Institute for Policy Studies in Tokyo, Japan, reports that Valuation-Informed Indexing beat Buy-and-Hold in 102 of the 110 rolling 30-year [...]
Read on and enjoy … How to Use Valuation-Informed Indexing — Part Two
By 2 Cents on March 14th, 2011 | Category: Investing |  The following is Part One of a two-part guest post from Rob Bennett. I asked Rob a couple of questions in a comment the other day and he was kind enough to answer them in the form of these two articles. My thanks to him for taking the time to do this. I found this information to be very informative and I hope you will too. Part Two will appear on Wednesday, March 16, 2011.
I advocate Valuation-Informed Indexing. This investing strategy is the alternative to Buy-and-Hold.
Buy-and-Hold is rooted in the research of University of Chicago Economics Professor Eugene Fama and assumes that overvaluation is a logical impossibility; thus, it posits that investors need not change their stock allocations in response to price changes. Valuation-Informed Indexing is rooted in the research of Yale University Economics Professor Robert Shiller and assumes that valuations affect long-term returns; thus, it [...]
Read on and enjoy … How to Use Valuation-Informed Indexing — Part One
By 2 Cents on March 9th, 2011 | Category: Investing |  Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish.
~John Quincy Adams
Inflation has been in the headlines a lot lately. Many point to food price spikes as a key factor in the eruption of bloody protests in the Middle East and North Africa. Instability in these regions has only added to inflation concerns as it has caused the price of oil to surpass the psychologically important $100 per barrel mark.
I recently wrote about where Canadians should invest if inflation rises and I included Real Return Bonds (RRBs) as an option. These are inflation-protected bonds issued by the Canadian government. They are analogous to the Treasury Inflation Protected Securities (TIPS) issued by the U.S. Treasury.
If you follow the financial markets at all, you likely noticed that bond prices have taken quite a [...]
Read on and enjoy … Inflation Protection: Are Real Return Bonds or TIPS the Answer?
By 2 Cents on March 7th, 2011 | Category: Investing |  At high tide the fish eat ants; at low tide the ants eat fish.
~Thai Proverb
Stocks, bonds and cash are the three asset classes that most people consider to be the foundation of an investment portfolio, with stocks representing the most risky choice and cash, the least. Where do GICs fit into the mix? Some consider GICs (the Canadian version of U.S. CDs) to be part of your cash allocation. Others argue that many GICs don’t qualify as cash because you can’t always get instant access to your money. Some GICs are cashable, but you have to forfeit some or all of your interest earnings to get your money out.
In many ways, GICs are very similar to bonds. You invest your money for a fixed amount of time. You collect interest periodically throughout that period of time, and receive your [...]
Read on and enjoy … Are GICs a Good Substitute for Bonds?
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