by ilene - August 19th, 2014 3:09 am
Instead, I’d come armed with just one chart and force my erstwhile pupil to spend the entire half-minute staring at it.
That chart is below, a gem from Professor Jeremy Siegel (via Vox):
In the above table, originally pulled from Siegel’s epic Stocks for the Long Run (now in its fifth edition), we see that stocks have beaten Treasury bonds and T-Bills (a cash equivalent) in almost 100 percent of all thirty-year periods. Phrased another way, only during less than one percent of all thirty-year periods for more than two centuries did it make sense to stay out of the stock market with a retirement portfolio.
Now of course, there are caveats – the first is, nobody lives for two hundred years. This is true, which is why the gains of the stock market from the entire period are not important ($1 turned into $704,000, in case you were wondering).
The second caveat is that, prior to the 1970′s and the advent of the index fund at Wells Fargo, nobody could have done anything quite so simple as buy the stock market passively. As such, these historical returns would have been unattainable, even if the numbers themselves are reality as represented by the indexes.
But to those caveats, the reasonable person says “So what? Just because I’m not going to live for centuries or because my grandparents could not have owned an index fund, what does that have to do with my own future and the next thirty years?”
Thirty seconds doesn’t offer us a lot of time for nuance and there are certainly other issues that should be brought to the fore in a discussion about portfolio management and risk. But if that were all I had, this chart would be all I’d need to make the most important point a younger investor needs to be armed with, the earlier the better.
Check out the book or gift it to the new investor in your family or office:
by ilene - August 19th, 2014 2:33 am
Courtesy of Mish.
The mirage in Spain pretending to be a recovery, has officially dissipated into wind-blown ashes.
Spain’s trade deficit doubled in the first half as imports soared. Spain is again dependent on foreign financing.
Via translation from Libre Mercado, Spain Again Borrows Abroad to Finance Consumption.
One of the main and genuine green shoots making the Spanish economy begins to show the first worrying signs of weakness. It is the foreign sector, one of the few economic engines of the country in recent years. And not because of the export slowdown , as the significant increase in imports.
Spain recorded a trade deficit of 11.882 billion euros in the first half of the year, almost double a year ago now, when this same gap stood at 5.824 billion.
According to the Economy Ministry report released Monday, exports slowed their growth, after rising just 0.5% yoy. Imports, meanwhile, rose 5.3%.
“Spain is still in debt,” says economist Juan Ramón Rallo. “That 6 million unemployed can only increase imports, not domestic production illustrates our problems,” he warns.
In the same vein, economist Javier Santacruz adds that the most worrying of these data is that we are not competitive (exports stagnate), but “imports soar to finance domestic consumption,” as shown by the increase internaual foreign car purchase (+ 17.6%) and non-durable consumer goods (+ 19.1%).
In fact, overall imports do not even account for energy products, which fell by 4.1%.
Spain has been living on borrowed time for years, accumulating a huge debt to maintain their level of consumption and investment-their standards of living. Between 2002 and 2007, Spain was amassing a growing external deficit, as more and sell less abroad (exports) and bought more (imports), bringing its foreign debt grew.
This imbalance is reflected in a very specific indicator, the current account deficit, which in 2007 reached a record high close to 10% of GDP. That is, the entire country that year said external financing close to 100 billion euros to cover their consumption and investment.
The fact that the trade deficit has risen again after the minimum economic rebound in recent quarters is a sign of weakness, because it demonstrates the strong dependence Spain still external financing to maintain their level of consumption and investment.
Think Spain is going to meet its budget deficit goals for 2014? If so, think again….
by ilene - August 18th, 2014 10:15 pm
?The stock market is presently a roulette wheel with dimes on black and dynamite on red. We continue to have extreme concerns about the extent of potential market losses over the completion of the present market cycle. At the same time, we have very little view with regard to short-term market action. If one reviews market action surrounding major pre-crash peaks such as 1929, 1972, 1987, 2000 and 2007, you’ll observe a sort of “resilience” in the major indices on a day-to-day and week-to-week basis even after market internals had already corroded. In 1987, for example, the break following the August bull market peak was largely recovered over the course of several weeks before failing rapidly in October. In 2000, the market actually experienced a series of 10-12% corrections and recoveries before a final high in September that was followed by a loss of half the market’s value. In 2007, the initial break in mid-summer was fully recovered, with the market registering a fresh nominal high in early October that marked the end of the bull market and the start of a 55% market collapse.
As economic historian J.K. Galbraith wrote about the advance leading up to the 1929 crash, the market’s gains
“had an aspect of great reliability… Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in February and March of 1929 it seemed that the end had come. On various of these occasions the Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But it has long since been forgotten that for many months those who resisted reassurance were similarly, if less permanently, discredited.”
None of this implies that the market will or must collapse in short order. Stocks remain strenuously overvalued, overbought, and overbullish, but those conditions have persisted uncorrected much longer in the present instance than they have historically. That doesn’t encourage us to abandon our concerns, but it does make us less aggressive about investment stances that rely on…
by ilene - August 18th, 2014 10:07 pm
Courtesy of Mish.
Meet hitchBOT, a robot from Port Credit, Ontario.
HitchBOT Help explains Everything you always wanted to know about hitchBOT, but were afraid to ask.
HitchBot successfully hitchhiked from Halifax, Nova Scotia to Victoria, British Columbia, a distance of about 4,000 miles. HitchBOT is now on a return trip.
CNN reports …
The gender-neutral robot was conceived by university researchers David Harris Smith and Frauke Zeller, who view its quest as part performance art, part social experiment.
“People seem to be rather intrigued with hitchBOT, and take very good care (of it),” said Smith, a communications and multimedia professor at McMaster University in Hamilton, Ontario, and Zeller, a communications professor at Ryerson University in Toronto, in a statement e-mailed to CNN.
“We have even seen hitchBOT lying in a camping bed under a blanket, and sitting on a toilet,” they said, “so people certainly have fun with it.”
hitchBOT has a bucket for a torso, blue swimming-pool noodles for arms and legs and a smiling LED panel for a face, protected by a cake saver. It wears yellow gloves on its hands, and wellies — rubber boots — on its feet. Inside is a simple tablet PC and some components from Arduino, the open-source electronics platform. Together, all the parts cost about $1,000.
“We wanted to see what we can build on a shoestring budget … and with tools/components that one can get in any hardware store,” Smith and Zeller said.
Thanks to its computerized innards and speech software, hitchBOT can answer basic questions, make small talk and recite info from Wikipedia. It can also get pretty chatty, not always something you want in a road-trip companion.
“We knew that sometimes … hitchBOT won’t be able to properly understand what people are saying. For these cases, we came up with the solution to let hitchBOT simply chatter away,” its creators said. “We taught hitchBOT to say that sometimes it gets a bit carried away, and that its programmers could only write that many scripts, hoping for people to be patient.”…
by ilene - August 18th, 2014 9:03 pm
Submitted by Tyler Durden.
Over six weeks ago we were the first to bring the investing world's (and SEC's) attention to CYNK technologies – a revenueless, assetless 'social network' shell that rapidly exploded in price and market cap soared to $6 billion. Since then it has come crashing back to 'sanity' levels – i.e. worthless – and now, as WSJ reports, The Securities and Exchange Commission is investigating. Their initial findings show a number of 'repeat offenders' linked to several stocks that suffered suspicious trading – just as we noted here…
Even in the boom-and-bust universe of penny stocks, Cynk was a supernova—soaring 36,000% before the SEC suspended trading, then losing almost all of the gains after the halt was lifted.
Cynk's eye-popping valuation—given it reported no assets and only one employee—briefly made it the talk of Wall Street. But the affair also highlighted a complex web of people who were connected to Cynk and other microcap companies that have soared and sagged.
Peter Messineo, a 53-year-old accountant from Palm Harbor, Fla., is the auditor being scrutinized. He is one of a number of "repeat players" linked to several stocks that suffered suspicious trading who are being looked at by the SEC, as it shifts its tactics in its battle against penny-stock fraud, the people said.
The SEC is looking at whether some lawyers and accountants are liable for helping to enable penny-stock frauds, either by signing off on phony information or simply not asking the right questions, said people close to the agency.
Mr. Messineo, who hasn't been accused of any wrongdoing, said he was just a "bystander" at the Cynk stock blowup and there is no reason he should come under scrutiny. "The SEC should look into whatever they want to, that's their job. But I had no connection to any suspicious trading and I stand by my audits," he said.
The Public Company Accounting Oversight Board, which polices auditors, said its routine 2011 inspection of Mr. Messineo showed "deficiencies" in his audits.
by ilene - August 18th, 2014 7:24 pm
Courtesy of James H. Kustler of Kunstler.com
Of all the awful tensions roiling and coiling in American society, it’s only a little bit surprising that the racial module is blowing off now rather than, say, the stock market. Perhaps it’s a seasonal thing: race riots in the summer; stock market crashes in the fall, revolutions in the spring.
Michael Brown, the 18-year-old shooting victim of a cop-stop in Ferguson, Missouri, was not the best candidate for martyrdom. But it was only after the violent protests to his killing got underway that his convenience store robbery videotape went public – despite attempts by the US Department of Justice to suppress it – and by then it was too late to stop the juggernaut of grievance. Meanwhile, the white condescension machine (The New York Times, The Huffington Post, et. al.) revved into top gear to validate the fears and resentments of the rioters.
The casual observer from Mars might have trouble finding the reality in this welter of bad feeling. A toxicology report should have accompanied the second autopsy report, and shed a little light, but apparently no one has asked for it yet — notably the leading news media. 18-year-old young men are not known for having great judgment or impulse control even when not high.
White America is tortured by black America’s failure to thrive, and all that guilt and anxiety has only gotten worse as a substantial quota of white America loses its own footing in the middle class and plunges into the rough country of joblessness, hopelessness, and government dependency. The usual remedies of even more dependency aren’t working so well for anybody. It’s politically easier for the moment, though. And both the government and the news media are frantically busy manufacturing excuses for everybody’s bad conduct.
This poor nation is faced with the tasks of completely retooling its economy in a way that it can’t bear to imagine, and of also reforming its grotesque social behavior. One might follow the other in a better world, but our prospects for the moment are not so bright. My own camp is inclined to expect an anguished collapse rather than any deliberate reformation. We’ve set ourselves up for it.
by ilene - August 18th, 2014 6:29 pm
Submitted by Tyler Durden.
While most headlines are focused on the devastating drought in California, which by some measures is the worst on record, there is another 'factor' that has exploded to record highs – the heat. As Bloomberg reports, the California heat this year is like nothing ever seen, with records that go back to 1895 and with 70 percent of the state’s pastures rated “very poor to poor,” according to the USDA, things do not appear to be about to get better any time soon.
As Bloomberg reports,
The California heat this year is like nothing ever seen, with records that go back to 1895. The chart below shows average year-to-date temperatures in the state from January through July for each year. The eastern half of the U.S. has had an unusually cool 2014, but it's a lone exception compared to the rest of the planet.
The high temperatures have contributed to one of the worst droughts in California's history. The water reserves in the state’s topsoil and subsoil are nearly depleted, and 70 percent of the state’s pastures are rated “very poor to poor,” according to the USDA. By one measure, which takes into account both rainfall and heat, this is the worst drought ever.
Perhaps more worryingly,
The International Panel on Climate Change, which includes more than 1,300 scientists, forecasts temperatures to rise 2.5 to 10 degrees Fahrenheit over the next century.
That puts California's record heat well within the range of what’s to come, turning this “hot weather” into, simply, “weather.”
by ilene - August 18th, 2014 5:34 pm
Courtesy of SoberLook.com
1. The homebuilder optimism index recovered more than forecast.
2. Lumber futures have risen materially from their lows in June.
|Sep lumber futures contract (barchart.com)|
At this point it is difficult to say whether this construction improvement relates to new home purchases or new rental units. Given the looming rental market shortage in the US (see post), we are certainly going to see more apartments built in the near-term.
And while nobody expects a major boom in construction employment across the country, there is definitely room for improvement.
US construction jobs
by ilene - August 18th, 2014 4:48 pm
Courtesy of The Automatic Earth.
Marjory Collins Gasoline rationing in Mechanicsville, Maryland Jul 1942
When first we practise to deceive!
The upper echelons in and behind various governments have had on their radar far longer than the media that serve them, and I also realize that Washington wants a leading role in that battle, but even then I still don’t really get what is going on these days.
I think perhaps that’s because I tend to give the American political machine too much credit when it comes to intelligence and insight and other qualities its managerial staff doesn’t exactly seem to be drowning in. But still. I get the idea that most of what Washington does is based on what someone I read today calls ‘solution selling’, and what I know as ‘the completion backward principle’.
Both marketing terms mean you create a problem – a.k.a. a market – first, and then sell your products into the hole you just created. Perhaps that comes closest to what I see America doing these days, and if I’m right in that assessment, I can guarantee massive failure. Or maybe I should say massive warfare, which for me would be a failure, but not necessarily for the Pennsylvania Avenue apparatchiks.
The result is that stock markets keep rising, and oil prices keep falling, while the US actively involves itself in various hornets nests directly linked to various energy resources, involvements it doesn’t exactly have a stellar record in over the past 25 years- if not much longer -. Stocks are up only on central bank largesse, and oil is down only because people have faith in US military might. The latter is a big mistake all by itself, but both are for sure hugely risky notions, which tells me when a blow comes many investors will be taken off guard.
But let’s some other people talk. First, Ron Paul, that very rare sound voice:
We have been at war with Iraq for 24 years. Shortly after Iraq’s invasion of Kuwait that year, the propaganda machine began agitating for a US attack on Iraq. We all remember the appearance before Congress of a young Kuwaiti woman claiming that the Iraqis were ripping Kuwaiti babies from incubators. The woman turned
by ilene - August 18th, 2014 3:47 pm
Courtesy of David Stockman via Contra Corner
There is no reason rooted in the real world for today’s frothy stock market rally. In every single region of the planet, the post-crisis, central bank fueled expansion cycle—-tepid as it was in the global aggregate—is faltering badly.
Japan’s economy is only a hair bigger than 5 quarters ago (0.8%) before Abenomics supercharged the BOJ printing presses. Meanwhile, even as real wages in Japan plummet to modern lows, the BOJ’s balance sheet has now reached 55% of its GDP—–a ratio that would have been unimaginable even a decade ago.
Likewise, notwithstanding Mario Draghi’s “whatever it takes” bluster, the only thing that has happened in perpetually recessionary Europe is a short lived stampede of the fast money into peripheral debt. And that was on the tenuous predicate that the debt issued by basket cases like Italy and Spain can only go up because Mario might be buying it sometime down the road. Soon it will be apparent, however, that the Euro area economy benefited not a wit from Mario’s monetary magic, and that the hedge fund punters can dump their rented bonds as fast as they piled on.
And the schizoid policy of the comrades in Beijing needs no elaboration. Stabilizing China’s tottering tower of $25 trillion in debt is far beyond the pay and grade of people who believe with Mao that power comes out of the barrel of a gun, and with Wall Street Keynesian’s that prosperity comes out of the end of a printing press.
And now the usual Wall Street suspects are also busily marking down their US GDP numbers for Q2 and their outlook for the balance of the year. What was supposed to be the year of 3%+ “escape velocity” is heading for the lowest rate of GDP growth—about 1.5% at best—-since the 2009 bottom. And even that depends upon believing that the Commerce Department’s GDP deflator is actually only running at a 1.4% annual rate. There’s not a chance that’s true for households which consume energy, food, health care, transportation and educational services, not iPads.
So with the global expansion cycle faltering, profit ratios at all-time highs and PE multiples in the nose-bleed section of history—nearly 20X reported earnings for the S&P 500—there is only one thing left for the Wall Street robots to do. Namely, vigorously buy the latest dip because the Fed has yet another new sheriff heading for Jackson Hole purportedly bearing dovish tidings. To wit, after…