Hotlines

January 2019

January 10, 2019
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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 »

January 3, 2019
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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

December 27, 2018
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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 »

December 20, 2018
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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 »

December 13, 2018
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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 »

December 6, 2018
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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

November 29, 2018
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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 »

November 21, 2018
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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 »

November 15, 2018
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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 »

November 8, 2018
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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 »

November 1, 2018
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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

October 25, 2018
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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 »

October 18, 2018
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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 »

October 11, 2018
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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 »

October 4, 2018
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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

September 27, 2018
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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 »

January 2019

January 10, 2019
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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 »

January 3, 2019
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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

December 27, 2018
mp3

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 »

December 20, 2018
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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 »

December 13, 2018
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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 »

December 6, 2018
mp3

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

November 29, 2018
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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 »

November 21, 2018
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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 »

November 15, 2018
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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 »

November 8, 2018
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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 »

November 1, 2018
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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

October 25, 2018
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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 »

October 18, 2018
mp3

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 »

October 11, 2018
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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 »

October 4, 2018
mp3

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

September 27, 2018
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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 »

September 20, 2018
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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 »

September 13, 2018
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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 »

December 2017

December 28, 2017
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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 »

December 21, 2017
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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 »

December 14, 2017
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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 »

December 7, 2017
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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

November 30, 2017
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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 »

November 22, 2017
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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 »

November 16, 2017
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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 »

November 9, 2017
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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 »

November 2, 2017
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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

October 26, 2017
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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 »

October 19, 2017
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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 »

October 12, 2017
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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 »

October 5, 2017
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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

September 28, 2017
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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 »

September 21, 2017
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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 »

September 14, 2017
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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 »

December 2016

December 30, 2016
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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 »

December 22, 2016
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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 »

December 15, 2016
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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 »

December 8, 2016
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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 »

December 1, 2016
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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

November 23, 2016
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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 »

November 17, 2016
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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 »

November 10, 2016
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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 »

November 3, 2016
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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

October 27, 2016
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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 »

October 20, 2016
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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 »

October 13, 2016
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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 »

October 6, 2016
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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

September 29, 2016
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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 »

September 22, 2016
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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 »

September 15, 2016
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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 »

December 2015

December 31, 2015
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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 »

December 24, 2015
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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 »

December 17, 2015
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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 »

December 10, 2015
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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 »

December 3, 2015
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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

November 25, 2015
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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 »

November 19, 2015
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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 »

November 12, 2015
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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 »

November 5, 2015

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 »

November 2, 2015

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

October 29, 2015
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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 »

October 22, 2015
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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 »

October 15, 2015
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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 »

October 8, 2015
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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 »

October 1, 2015
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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

September 30, 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 »

December 2014

December 31, 2014
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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 »

December 24, 2014
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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 »

December 18, 2014
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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 »

December 11, 2014
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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 »

December 4, 2014
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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

November 26, 2014
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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 »

November 20, 2014
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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 »

November 13, 2014
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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 »

November 6, 2014
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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

October 30, 2014
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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 »

October 23, 2014
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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 »

October 16, 2014
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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 »

October 9, 2014
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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 »

October 2, 2014
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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

September 25, 2014
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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 »

September 18, 2014
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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 »

December 2013

December 26, 2013
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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 »

December 19, 2013
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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 »

December 12, 2013
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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 »

December 5, 2013
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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

November 27, 2013
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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 »

November 21, 2013
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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 »

November 14, 2013
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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 »

November 11, 2013

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 »

November 7, 2013
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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 »

November 1, 2013

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

October 31, 2013
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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 »

October 24, 2013
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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 »

October 17, 2013
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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 »

October 10, 2013
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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 »

October 3, 2013
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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

September 26, 2013
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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 »

December 2012

December 27, 2012
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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 »

December 20, 2012
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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 »

December 13, 2012
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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 »

December 6, 2012
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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

November 29, 2012
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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 »

November 21, 2012
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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 »

November 15, 2012
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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 »

November 8, 2012
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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 »

November 1, 2012
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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

October 25, 2012
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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 »

October 18, 2012
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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 »

October 11, 2012
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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 »

October 4, 2012
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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

September 27, 2012
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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 »

September 20, 2012
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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 »

September 13, 2012
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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 »

December 2011

December 31, 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 »

December 29, 2011
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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 »

December 22, 2011
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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 »

December 15, 2011
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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 »

December 8, 2011
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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 »

December 1, 2011
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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

November 23, 2011
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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 »

November 17, 2011
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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 »

November 10, 2011
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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 »

November 3, 2011
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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

October 27, 2011
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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 »

October 20, 2011
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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 »

October 13, 2011
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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 »

October 6, 2011
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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

September 29, 2011
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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 »

September 22, 2011
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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 »

December 2010

December 30, 2010
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Hotline

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 »

December 23, 2010
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Hotline

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 »

December 16, 2010
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Hotline

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 »

December 9, 2010
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Hotline

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 »

December 2, 2010
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Hotline

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

November 24, 2010
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Hotline

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 »

November 18, 2010
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Hotline

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 »

November 11, 2010
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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 »

November 4, 2010
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Hotline

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

October 28, 2010
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Hotline

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 »

October 21, 2010
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Hotline

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 »

October 14, 2010
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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 »

October 7, 2010
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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

September 30, 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 »

September 23, 2010
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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 »

September 16, 2010
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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 »

December 2009

December 31, 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 »

December 24, 2009
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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 »

December 17, 2009
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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 »

December 10, 2009
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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 »

December 3, 2009
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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

November 25, 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 »

November 19, 2009
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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 »

November 12, 2009
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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 »

November 5, 2009
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Hotline

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

October 29, 2009
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Hotline

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 »

October 22, 2009
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Hotline

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 »

October 15, 2009
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Hotline

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 »

October 8, 2009
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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 »

October 1, 2009

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

September 24, 2009
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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 »

September 17, 2009
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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 »

December 2008

December 31, 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 »

December 30, 2008

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 »

December 24, 2008

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 »

December 18, 2008

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 »

December 11, 2008

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 »

December 4, 2008

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

November 26, 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 »

November 20, 2008

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 »

November 13, 2008

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 The Wall 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 »

November 6, 2008

Hotline – 2008-11-06

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

October 2008

October 30, 2008

Hotline – 2008-10-30

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

October 23, 2008

Hotline – 2008-10-23

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

October 16, 2008

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 »

October 9, 2008

Hotline – 2008-10-09

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

October 2, 2008

Hotline – 2008-10-02

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

September 2008

September 29, 2008

Hotline – 2008-09-29

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

December 2007

December 27, 2007

Hotline – 2007-12-27

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 27.

Read More »

December 20, 2007

Hotline – 2007-12-20

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 20.

Read More »

December 13, 2007

Hotline – 2007-12-13

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 13.

Read More »

December 6, 2007

Hotline – 2007-12-06

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 6.

Read More »

November 2007

November 29, 2007

Hotline – 2007-11-29

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

Read More »

November 21, 2007

Hotline – 2007-11-21

Hello, this is Dan Wiener with the pre-Thanksgiving FFSA Vanguard Hotline update for Wednesday, November 21. Read More »

November 15, 2007

Hotline – 2007-11-15

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

Read More »

November 8, 2007

Hotline – 2007-11-08

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

Read More »

November 1, 2007

Hotline – 2007-11-01

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 1.

Read More »

October 2007

October 25, 2007

Hotline – 2007-10-25

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 25.

Read More »

October 18, 2007

Hotline – 2007-10-18

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 18.

Read More »

October 11, 2007

Hotline – 2007-10-11

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 11.

Read More »

October 4, 2007

Hotline – 2007-10-04

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

September 2007

September 27, 2007

Hotline – 2007-09-27

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 27.

Read More »

September 20, 2007

Hotline – 2007-09-20

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 20.

Read More »

September 13, 2007

Hotline – 2007-09-13

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 13.

Read More »

December 2006

December 28, 2006

Hotline – 2006-12-28

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 28.

Read More »

December 21, 2006

Hotline – 2006-12-21

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

Read More »

December 14, 2006

Hotline – 2006-12-14

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, December 14.

Read More »

December 7, 2006

Hotline – 2006-12-07

Hello, this is Seth Kennedy, sitting in for Dan Wiener, with the FFSA Vanguard Hotline update for Thursday, December 7.

Read More »

November 2006

November 30, 2006

Hotline – 2006-11-30

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 30.

Read More »

November 22, 2006

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.

Read More »

November 16, 2006

Hotline – 2006-11-16

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 16.

Read More »

November 9, 2006

Hotline – 2006-11-09

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

November 2, 2006

Hotline – 2006-11-02

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, November 2.

Read More »

October 2006

October 26, 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.

Read More »

October 19, 2006

Hotline – 2006-10-19

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

Read More »

October 12, 2006

Hotline – 2006-10-12

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

Read More »

October 5, 2006

Hotline – 2006-10-05

Hello, this is Dan Wiener with the FFSA Vanguard Hotline update for Thursday, October 5.

Read More »

September 2006

September 28, 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.

Read More »

September 21, 2006

Hotline – 2006-09-21

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

Read More »

September 14, 2006

Hotline – 2006-09-14

Hello, this is Seth Kennedy sitting in for Dan Wiener with the FFSA Vanguard Hotline update for Thursday, September 14.

Read More »

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Vanguard Funds Correlation
What's This?
Model Portfolio Performance
ModelsDecember2018
Growth-9.2%-6.1%
Conservative Growth-7.2%-3.8%
Income-6.1%-2.6%
Growth Index-9.1%-6.5%
The average
Vanguard investor
-5.5%-4.9%
Past Performance »
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