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'Speculative Frenzy': Tech Stocks Haven't Done This Since the Dot-Com Bubble

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One measure of U.S. technology stocks has just surpassed its dot-com bubble high, raising concerns for one widely followed strategist about unsustainable levels in U.S. stocks.

By: Evelyn Cheng
CNBC News, May 22, 2017

One measure of U.S. technology stocks has just surpassed its dot-com bubble high, raising concerns for one widely followed strategist about unsustainable levels in U.S. stocks.

The MSCI USA Growth Index, whose top three holdings are Apple, Amazon.com and Facebook, has outperformed the MSCI World Value Index so much that the ratio of their performance topped this month a high last seen during the tech bubble in 2000, Bank of America Merrill Lynch's chief investment strategist, Michael Hartnett, said in a note Monday.

10 Big Tax Mistakes That Can Lead to an Audit

The chart below demonstrates a sharp decline in the number of audits since 2010. The IRS audits only 0.5% of all returns as of 2017. That being said, that is still nearly 1 million taxpayers that may face the dreaded audit this coming tax year With that in mind, here is a list of red flags that may draw the attention of the IRS to examining your tax return.

CONSUMER CREDIT: 3,500 B.C. TO TODAY

Consumer credit is an integral part of modern life and might seem like a relatively new invention. However, historical evidence shows that it has actually been around for more than 5,000 years! This informative infographic takes us on a journey through the history of consumer credit from antiquity through to modern times.

history of consumer credit 01

First Quarter 2018 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: Sailing With the Tides.  After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING

First Quarter 2019 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: Gerard O'Reilly on Understanding Investment Performance.  After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING

Fourth 2019 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: Tuning out the noise.  After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING

Fourth Quarter 2017 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: What Should Investors Make of Bitcoin Mania? After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING

How Evidence-Based Indexing Works

The strategy uses common sense, data, and financial science to boost performance.

In the hallowed halls of academia, noted professors at the top business schools are teaching entire semesters on the benefits of investment strategies using passive indexes instead actively managed mutual funds or picking stocks.

As of 2017, more than $4.5 trillion has flowed into passive index funds and exchange-traded funds. What is passive investing, why are trillions of dollars flowing to this strategy, and more importantly is there a better way to invest?

To fully understand passive investing, it is helpful to understand active investing. Here investment managers (or investors doing it on their own) try to outperform the overall stock market or a specific part of the market using strategies such as fundamental and technical stock picking or market timing.

Indexing Fuss Unwarranted

Passive investing has been ridiculed by Wall Street for decades. The following list is just a small sample of the criticisms I’ve collected over the years:

  • Sanford C. Bernstein & Co. strategist Inigo Fraser-Jenkins called it worse than Marxism.
  • David Smith, fund manager at Hargreaves Lansdown, called passive investors parasites on the financial system.
  • Tim O’Neill, global co-head of Goldman Sachs’ investment management division, warned investors that if passive investing gets too big, the market won't function.

The common theme is that indexing (and passive investing in general) has become such a force that the market’s price discovery function is no longer working properly. Goldman Sachs’ O’Neill has even called passive investing a “potential bubble machine.”

Given the number of questions I get from investors about this issue, one would think that passive investing is now dominating markets. Let’s see if there’s any truth to such beliefs, and whether there’s anything to worry about.

Is Your Investing Strategy Really a Strategy?

SPECULATION, RISK, AND A LONG-TERM PLAN FOR BUYING AND SELLING SECURITIES

Many people are hesitant to invest heavily in the stock market because they consider it similar to gambling or taking too much of a risk with their hard-earned money. With volatility on the rise in our current climate, more investors are pausing to consider the risk they are taking with their investments and whether they should be so bold.

The idea of losing more than they can afford to in advance of their retirement weighs heavier on them than the possibility of capitalizing on the money they invest. Sadly, this type of behavioral bias--fear and herd mentality--can do more harm than good.

Key Questions for the Long-Term Investor

Focusing on what you can control can lead to a better investment experience.

Whether you’ve been investing for decades or are just getting started, at some point on your investment journey you’ll likely ask yourself some of the questions below. Trying to answer these questions may be intimidating, but know that you’re not alone. Your financial advisor is here to help. While this is not intended to be an exhaustive list it will hopefully shed light on a few key principles, using data and reasoning, that may help improve investors’ odds of investment success in the long run.

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1. What sort of competition do I face as an investor?

The market is an effective information-processing machine. Millions of market participants buy and sell securities every day and the real-time information they bring helps set prices.  This means competition is stiff and trying to outguess market prices is difficult for anyone, even professional money managers (see question 2 for more on this). 

This is good news for investors though. Rather than basing an investment strategy on trying to find securities that are priced “incorrectly,” investors can instead rely on the information in market prices to help build their portfolios (see question 5 for more on this). 

Mind Over Model

speculation
Checking the weather? Guess what—you’re using a model. While models can be useful for gaining insights that can help us make good decisions, they are inherently incomplete simplifications of reality.

In investing, factor models have been a frequent topic of discussion. Often marketed as smart beta strategies, these products are based on underlying models with limitations that many investors may not be aware of.

To help shed light on this concept, let’s start by examining an everyday example of a model: a weather forecast. Using data on current and past weather conditions, a meteorologist makes a number of assumptions and attempts to approximate what the weather will be in the future. This model may help you decide if you should bring an umbrella when you leave the house in the morning. However, as anyone who has been caught without an umbrella in an unexpected rain shower knows, reality often behaves differently than a model predicts it will.

Recent Market Volatility

speculation
After a period of relative calm in the markets, in recent days the increase in volatility in the stock market has resulted in renewed anxiety for many investors.

From February 1–5, the US market (as measured by the Russell 3000 Index) fell almost 6%, resulting in many investors wondering what the future holds and if they should make changes to their portfolios.1 While it may be difficult to remain calm during a substantial market decline, it is important to remember that volatility is a normal part of investing. Additionally, for long-term investors, reacting emotionally to volatile markets may be more detrimental to portfolio performance than the drawdown itself.

Second Quarter 2017 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: Getting What You Don't Pay For. After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING

Second Quarter 2019 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: The Uncommon Average.  After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING

The Future of Artificial Intelligence, According to Pop Culture

Storytellers of all kinds have long been fascinated by the possibilities artificial intelligence offers humanity.  Movies and books have given us a window into possible realities both good and bad resulting from the rise of the machines.
 

Today’s infographic from BBC Future provides an entertaining take on these scenarios, organized by potential likelihood.

Third 2019 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: Timing Isn't Everything.  After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING

Third Quarter 2017 - Quarterly Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a commentary article: There are Now More Indexes Than Stocks. After the article you can look for a market summary, then the returns of stock and bond asset classes in the US and international markets.

CONTINUE READING