stock market

Did Mortgage Rates Hit 12-Year High?

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Did Mortgage Rates Hit 12-Year High? 1

The press loves a good scare story, and mortgage rates hitting a 12-year high is just the ticket. Mortgage rates did hit a 12-year high, and I suppose for those who are newer to the world of finance that probably seems like a big deal, but the reality is a little different. The 30-year fixed mortgage averaged 5.11% last week. That isn’t remotely a historically high mortgage interest rate. In fact, it wasn’t that long ago that a 5% mortgage was a great rate. It still is. But, these haven’t been normal times. The U.S. economy seems to lag on differently than it once did. The inflation we see today is the only real inflation we have seen in decades. Every time the American economy looked it like might get going back to “normal” something happened to smack it back down turning what used to be crazy, historically low interest rates into normal interest rates to the newest generation hitting financial literacy. This 10-year chart of the Federal Funds rate shows that we haven’t seen a Fed Funds rate above 2.5% in the last decade. In fact, just when we got close to something that might be considered normal or …

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Stock Market Trading Sideways

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nothing to see here

Update: It’s been 15 days of breathless up and down headlines from the financial media since I first wrote this article, and the stock market is STILL trading sideways. Take a look at three months of the Dow. The stock market often trades “sideways” as it consolidates after moves up or down. This is very common after big run-ups or drops, as well as when the economy is sort of waiting to see what happens. Of course, the stock market doesn’t literally trade sideways with the S&P 500 chart moving to the right as some sort of straight line. Instead, the market goes up and down, sometimes daily, sometimes over a period of a few days, all with the eventually outcome of having not moved up or down much at all. However, that doesn’t make for a clickable headline for financial reporters and financial news sites. So instead, we see things like this from Marketwatch. U.S. stocks fell Tuesday, with the Nasdaq Composite leading the way down after the previous session’s technology sector gains, as investors kept a close eye on plans for more sanctions on Russia and remarks by Federal Reserve policy makers. Nasdaq leads stocks lower as investors …

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Russia Invades Ukraine

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Russia Invades Ukraine 2

Thinking about your investments as war starts is kind of cold and calculating, but also perfectly natural. What should I do when Russia invades Ukraine? First, remember, investors do not like uncertainty. Nothing is more uncertain than the course of war. Expect a market downturn with every new development that isn’t the war ending. Second, remember that the markets tend to overreact to initial news because everyone is both reacting, and trying to predict how others will react. Third, remember if you have a well-diversified portfolio, this sort of thing should not affect your investing strategy. Markets go up and markets go down. As far as your long-term investments are concerned it doesn’t matter whether the markets went down because of war, or just a cyclical phase of the market cycle. Do not panic. Do not sell unless you were already planning it. Fourth, if you are actively investing for the long-term in your 401k, IRA, 529 plan, or whatever else, KEEP GOING. This is exactly how dollar cost averaging works for you. Your investments when the markets are down become your buying at the bottom in the future. Do not miss the opportunity. Dollar cost averaging does the work …

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Market Correction… Barely

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Market Correction... Barely 3

So, the S&P 500 closed low enough on Tuesday to make it 10% lower than its closing high on January 3rd marking, officially at least, a correction in the stock market. If you aren’t seeing a lot of fuss, that’s because it really isn’t that big of a deal. Back on January 3rd, you couldn’t swing a dead cat without hitting someone who thought the market was overvalued, that it had run up too high for too long. So, when the market began a slow sideways, sloping down, trend over a two-month period, nobody really worried about it. It’s as if those prices on January 3rd weren’t real and the market was getting back to reality. Even now, there are plenty of people out there saying that the market is still too high. They might be right, and frankly another two-month long drop down another 10 percent probably won’t be much of a fuss either. After all, while this correction is a market down 10 percent from its peak, it’s a market that is zero percent down from last October, and zero percent down since last July, and still very much up from before that. In other words, unless you …

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Is Ark Innovation a Scam?

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ark innovation

Sometimes, a fast rise comes with expectations that are difficult to live up to. Sometimes the person rising fast doesn’t really help matters. Cathie Wood came into the “mainstream” of financial news with a prediction of a huge rise for Tesla. She was “right,” at least over that sample period, and then some guy anointed her best stock picker of 2020. That will attract some eyeballs. But, just like Abby Joseph Cohen rose to fame by always being more optimistic than the next stock market analyst who said, “Are we really sure all of these no-earnings, no-profit, internet stocks should be pulling everything this high?” while the market rose and rose during the internet bubble, being right isn’t always so much being right, as being the last one to ignore the iceberg. Cohen told investors to “buy the dip” as the internet bubble popped, and the market crashed. I hope everyone who thought she was amazing just didn’t listen to her that time… Wood’s problem is that when you become famous for catching unicorn, people only think you’re amazing while you still have one. Since finding another one is almost impossible, there is a tendency to hold on too long, …

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Blaming the Fed

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Blaming the Fed 4

Selective amnesia and analysts dying to be “right” is contributing to a flood of inaccurate articles seeking to blame the Fed. I saw this in my Twitter feed this morning and I just couldn’t let it go by. It’s filled with the kind of half-truths and misinformation that builds an analyst’s career, unfortunately, but that doesn’t make it true. Here we go. According to this tweet, The Fed spent 12 years creating an “everything bubble,” a term so bizarre that it requires quotes. Oh, and the Fed didn’t spend 12 years creating this so-called everything bubble. Oh, and before we start pointing fingers, until THIS YEAR neither this analyst, nor almost any other was asking for the Fed to tighten monetary policy because the economy was teetering on a cliff and every bit of the stimulus was required to prevent the Great Recession II, or worse. Yep. For exactly, ONE MONTH, inflation has been a bit crazy. Too bad the graph they posted as “evidence” is so far zoomed out that you can’t see what really happened. Maybe they couldn’t find one that showed more recent events. Oh, wait! Here’s one. The crazy, reckless Fed that has been pumping up …

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Market Monday 1-24-2022

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negative interest rates

Hey, Boys and Girls, here comes an interesting week for investors. The following article is for informational purposes only and is not investment advice. This is not a recommendation to buy or sell securities. As always, the best investment strategy for long-term investing is building a well-diversified portfolio based upon your time frame and risk tolerance and then leaving it alone except for annual or semi-annual rebalancing. But… Short-Term Investing January 2022 The week of January 24, 2022 looks fun. And by fun, I mean interesting. The Fed meets on Wednesday. Everyone expects it to raise interest rates to help tame inflation, while also reducing its bond buying to do the same thing. If that weren’t enough, a bunch of big companies are set to report their earnings this week including Apple, Microsoft, and McDonalds. At least we don’t have to worry about options expiring, that was last week. As I write this, the S&P 500 hit the 10% down mark necessary to call the move from January 3 to now a correction. Remember a correction is a 10% reduction, although most people will require the market to close beneath that level to call it a recession. A 20% reduction …

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Jeremy Grantham Calls Stock Market Crash…

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Jeremy Grantham Calls Stock Market Crash... 5

Jeremy Grantham crash call I don’t mean to pick on Jeremy Grantham, I just seem to see his stuff come across more than others. Maybe that is because he is so influential, or maybe he just generates headlines that financial journalists love like calling crashes and calling things super bubbles. What is he saying this time? Jeremy Grantham Calls Bubble Popping and Stock Market Crash Again… So, Grantham is back with another stock market crash call, or he is still calling a stock market crash that already started, or he is really super serious about it this time, depending upon how you want to spin it. Grantham spins it like this: “I wasn’t quite as certain about this bubble a year ago as I had been about the tech bubble of 2000, or as I had been in Japan, or as I had been in the housing bubble of 2007.” Bloomberg That’s weird. I don’t remember any “I’m not as sure,” talk the last time Grantham called a bubble popping stock market crash. I wrote about Grantham accuracy right here in March of 2019 when he was already calling a crash (oops). I wrote about him again in January of …

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Dogs of the Dow 2022

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Dogs of the Dow 2022 6

. I first heard of the Dogs of the Dow strategy back when Motley Fool was just becoming famous, largely based on the out-sized success of their investment in AOL as the Internet Bubble continued to swell. (Whew! There’s a lot of investing history, and investing lessons in that one sentence.) The Foolish Four was a supposed improvement on the Dogs of the Dow strategy. I never invested that way, and it turns out to have been a good move. As the year rolls over to 2022, there come the obligatory articles about which stocks are the 2022 Dogs of the Dow, and whether the Dogs of the Dow is a good investment strategy. So, I thought we’d take a quick look. What Is the Dogs of the Dow Strategy? The Dogs of the Dow is an investment strategy where an investor invests in the 10 stocks in the Dow Jones Industrial Average that have the highest dividend yield as of 12/31 on the first trading day of the year in equal amounts and then holds the stocks for the full year before repeating the process. The idea (which used to be true, but is less so these days) is …

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Is There Really a Santa Claus Rally?

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Santa Claus Rally Picture

There are so many investing maxims that it’s hard to know why anyone needs to do any research into stocks and bonds at all. I mean, how hard can it be to invest? Why do people put so much effort into it? At any time of year, there is a tried-and-true maxim to tell you where to invest your money right now. Stock Market Sayings *To the tune of Here Comes Santa Clause* Here comes platitudes, here comes platitudes… *End song* The most famous Wall Street market saying is: Sell in May, then go away. It rhymes! It must be true. The idea is that historically the market sort-of, kind-of, under-performs during the summer months. Of course, there are plenty of years where this isn’t true, especially now that Manhattan bankers don’t head for the country and stay there all summer long. There’s also a Super Bowl Stock Market Indicator which says that if the team from the AFC Division wins the Superbowl, then the market will have a down year. Conversely, if the NFC Division team wins, then the market will have an up year. My personal favorite is the Hemline Theory, or the Skirt Length Theory which suggests …

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