Statistical Investment facts to ponder
There are many divergent facts that swirl around the investment world. Many of them are useful to spot trends while some are just smoke masking the reality. It is always useful to look at these stats / facts before forming your own decision. As Joe-Friday said, “just-the-facts,-only –the facts.”
----Only 54 percent of American adults own stock market investments in 2014 versus 67 percent in 2000 per a “Gallup” poll.
----401K participation of eligible adults is 80% but this stat masks the fact that many small company and minimum wage service employees simply aren’t eligible.
----The Society of Actuaries currently estimates that the average 65 year old man will live to 86.6 years, up from 84.6 years. The average woman will live to 88.8 years old, up from 86.4 years. Are you ready for more?
----The average US investor realized a 3.69% average, yearly gain for the last 30 years.
Tuesday, February 24, 2015
Thursday, February 12, 2015
“We have gone too long without a 10 percent market correction.”
We’ve all heard these kinds of statements to justify doom & Gloom predictions for 2015. I think it’s all BS. This kind of background noise is always with us and is rarely correct. My fearless prediction for 2015 is that we will enjoy 8 percent return in the overall market for the year based on the S&P-500.
We actually had a 9.83% sell-off at the end of 2014. Note that there is indeed a difference between a pullback / correction and a crash. The generally-accepted ranges are: 5% = dip, 5-10% = pullback, 10-20% = correction and +0% = crash. There's more to it, but the guidelines are pretty universal. So, is it really reasonable to argue that a 9.83% sell-off (0.17% shy of 10%) doesn't qualify as a 10% correction? Yes, I'm aware that the 9.83% bottom was only intraday, but my point remains the same, in that perhaps the purpose of a correction was still served. An attorney might refer to this as a question of "the spirit of the law, versus the letter of the law."
Yes, our Bull-Market is middle aged but historically we’ve experienced many market runs that went beyond a single decade. The 1982-2000 Secular Bull Market (18 years)---The 1966-1982 Secular Bear Market (16 years) and the 1949-1966 Secular Bull Market (17 years). Our Price / Earnings ratio stands at just a wee-bit over the historic mean and the last batch of earnings reports had 71% of the company’s reporting meeting or beating their forecasts.
We’ve all heard these kinds of statements to justify doom & Gloom predictions for 2015. I think it’s all BS. This kind of background noise is always with us and is rarely correct. My fearless prediction for 2015 is that we will enjoy 8 percent return in the overall market for the year based on the S&P-500.
We actually had a 9.83% sell-off at the end of 2014. Note that there is indeed a difference between a pullback / correction and a crash. The generally-accepted ranges are: 5% = dip, 5-10% = pullback, 10-20% = correction and +0% = crash. There's more to it, but the guidelines are pretty universal. So, is it really reasonable to argue that a 9.83% sell-off (0.17% shy of 10%) doesn't qualify as a 10% correction? Yes, I'm aware that the 9.83% bottom was only intraday, but my point remains the same, in that perhaps the purpose of a correction was still served. An attorney might refer to this as a question of "the spirit of the law, versus the letter of the law."
Yes, our Bull-Market is middle aged but historically we’ve experienced many market runs that went beyond a single decade. The 1982-2000 Secular Bull Market (18 years)---The 1966-1982 Secular Bear Market (16 years) and the 1949-1966 Secular Bull Market (17 years). Our Price / Earnings ratio stands at just a wee-bit over the historic mean and the last batch of earnings reports had 71% of the company’s reporting meeting or beating their forecasts.
Friday, February 6, 2015
Advertising Words, Listen with great care.
As always, an investor must be ever alert when an investment is being presented to him. We’re all adults so we are aware of “weasel” words that are less than definitive like may, might, should, could etc. That’s all good but lately advertisers have become ever more creative.
Have you heard the ad selling silver that’s playing constantly on network TV? It says “buying silver is the smart move since right now you can buy silver for less than its all-in-cost of production.”
What they have found is a clever way to say is that Silver is cheap now because it has been a remarkably lousy investment. Let’s review why you can presently buy silver at less than production cost.
“SLV” is an ETF that mirrors the spot price of silver. It’s annualized return for 5-years is minus (1.9%) and it is down (19.5%) for the last year. Silver peaked at $48 an ounce in the first quarter of 2011 and its chart shows a steady downtrend to today’s price of $16 an ounce. “Selling below the price of production”, indeed. I suppose that buying Radio-shack today at $.09 a share as they enter bankruptcy could easily be reworded as an opportunity to buy-low to allow selling high!
As always, an investor must be ever alert when an investment is being presented to him. We’re all adults so we are aware of “weasel” words that are less than definitive like may, might, should, could etc. That’s all good but lately advertisers have become ever more creative.
Have you heard the ad selling silver that’s playing constantly on network TV? It says “buying silver is the smart move since right now you can buy silver for less than its all-in-cost of production.”
What they have found is a clever way to say is that Silver is cheap now because it has been a remarkably lousy investment. Let’s review why you can presently buy silver at less than production cost.
“SLV” is an ETF that mirrors the spot price of silver. It’s annualized return for 5-years is minus (1.9%) and it is down (19.5%) for the last year. Silver peaked at $48 an ounce in the first quarter of 2011 and its chart shows a steady downtrend to today’s price of $16 an ounce. “Selling below the price of production”, indeed. I suppose that buying Radio-shack today at $.09 a share as they enter bankruptcy could easily be reworded as an opportunity to buy-low to allow selling high!
Thursday, February 5, 2015
Whether “Retail” Investments ?
The Retail sector is in a state of flux that will last many years. We’ve recently experienced big investor problems with retail companies as diverse as Circuit City, Sears, Barnes & Noble, J.C. Penney and Radio shack. All retail is changing; Brick and Mortar stores are struggling to compete with internet sales.
Simply put, there are way too many stores and in general the large Malls are rapidly losing ground. Even the Internet sales giant Amazon can see a problem building with Alibaba. The little investor wanting to avoid excess risk in this sector might consider Home-Depot or Lowes but they hover close to their historic high prices. I think that our retail community of companies shrinks by half in the next decade. Of course some retail will prosper but picking the gold out of the dung will not be easy. If you don’t think that retail is changing ask the nearest 20 year old what percentage of their purchases are through the internet.
By the way, As I write this on August 5th 2015 Radio Shack went into bankruptcy. The CNBC coverage of this expected event stated that Radio Shack had 4063 stores and it was questionable if they would attempt to exit bankruptcy; wow, over 4K stores and they may just fold up as Circuit City did. The CNBC coverage then went on to say that Amazon was interested in buying the stores from Radio Shack.
You don’t have to be a Business Major to see where this might be going. Just picture an Amazon showroom for TVs or Refrigerators. The customer would pick out an appliance and pay Amazon. The Fridge would simply ship from the Whirlpool factory and Independent Contractors working for the Amazon store would install it. The item would be in Amazon’s inventory for at most a couple of days to delivery. Think about it, the largest expense of an Appliance store is inventory and Amazon has the money in hand before the goods hit their books as inventory. That would be pricing power.
Ok, so what are the general types of investments with less risk? I like companies that are able to plot their profits because they are part & parcel of modern life. The credit card titans like Visa, Mastercard and American express come to mind. They have pricing power and have kinda a troika of profit. Insurance companies and some banks also qualify due to our very cheap money supply.
I guess that established “service” companies that occupy the upper tier of their industry qualify. If your company has no inventory and essentially takes a commission on a sale then by definition it is a transfer agent incurring cost only when booking a sale. Disclaimer, I currently hold positions in Aflac, P&G, Altria, Merck, AT&T, Bank-America, Visa, Lowes, Pfizer, Brinker International, Wells-Fargo and Walgreens and am well into the money with them all.
The Retail sector is in a state of flux that will last many years. We’ve recently experienced big investor problems with retail companies as diverse as Circuit City, Sears, Barnes & Noble, J.C. Penney and Radio shack. All retail is changing; Brick and Mortar stores are struggling to compete with internet sales.
Simply put, there are way too many stores and in general the large Malls are rapidly losing ground. Even the Internet sales giant Amazon can see a problem building with Alibaba. The little investor wanting to avoid excess risk in this sector might consider Home-Depot or Lowes but they hover close to their historic high prices. I think that our retail community of companies shrinks by half in the next decade. Of course some retail will prosper but picking the gold out of the dung will not be easy. If you don’t think that retail is changing ask the nearest 20 year old what percentage of their purchases are through the internet.
By the way, As I write this on August 5th 2015 Radio Shack went into bankruptcy. The CNBC coverage of this expected event stated that Radio Shack had 4063 stores and it was questionable if they would attempt to exit bankruptcy; wow, over 4K stores and they may just fold up as Circuit City did. The CNBC coverage then went on to say that Amazon was interested in buying the stores from Radio Shack.
You don’t have to be a Business Major to see where this might be going. Just picture an Amazon showroom for TVs or Refrigerators. The customer would pick out an appliance and pay Amazon. The Fridge would simply ship from the Whirlpool factory and Independent Contractors working for the Amazon store would install it. The item would be in Amazon’s inventory for at most a couple of days to delivery. Think about it, the largest expense of an Appliance store is inventory and Amazon has the money in hand before the goods hit their books as inventory. That would be pricing power.
Ok, so what are the general types of investments with less risk? I like companies that are able to plot their profits because they are part & parcel of modern life. The credit card titans like Visa, Mastercard and American express come to mind. They have pricing power and have kinda a troika of profit. Insurance companies and some banks also qualify due to our very cheap money supply.
I guess that established “service” companies that occupy the upper tier of their industry qualify. If your company has no inventory and essentially takes a commission on a sale then by definition it is a transfer agent incurring cost only when booking a sale. Disclaimer, I currently hold positions in Aflac, P&G, Altria, Merck, AT&T, Bank-America, Visa, Lowes, Pfizer, Brinker International, Wells-Fargo and Walgreens and am well into the money with them all.
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