Skip to main content
Home Working together to build your tomorrow

The effect of human emotions in stock market

This might be a good time to talk about stock market bubbles. Not that they matter to the long-term buy-and-hold investor, but as an object of curiosity they are interesting to watch. For 401(k) investors or anyone steadily depositing money on a monthly basis, the overreaction caused by a bursting bubble typically reduces stock prices to values below the intrinsic value of the companies whose real values (based on income statements and balance sheets) they are supposed to reflect.

Online advisory services

The selling of inexpensive, computerized investment advice should be like shooting fish in a barrel if what I see from the financial services industry is any indication of what the major competition looks like these days. A typical account I just reviewed indicated that on a $100,000 account, a major bank’s “wealth advisory service” was charging 1.5 percent per year to spread a client’s assets over about twenty different mutual funds whose average annual expense ratios were three quarters of one percent per year.

China's stock market makes a return

For sheer entertainment value, it’s hard to beat a mutual fund investing in Chinese companies. The last time I wrote about the subject, it was after reading “From Wall Street to the Great Wall” by Burton Malkiel of ‘Random Walk Down Wall Street” fame. This time, I couldn’t resist the new book by Henry Paulson entitled “Dealing With China.” You remember “Hank,” our former Treasury Secretary.

Reminiscing on some good advice from the past

In a recent interview of Bill Gross, the former Pimco bond fund manager, he happened to mention that one of his favorite, most entertaining and inspirational books was "Reminiscences of a Stock Operator," by Edwin Lefevre in 1923. Lefevre, a journalist and novelist, wrote the fictional account of a stock speculator named Larry Livingston, but the story was based on Lefevre's real interviews with famed speculator Jesse Livermore, who had won and lost millions over the years.

Looking beyond the 'wall of worry'

That "wall of worry" on which the stock market rises is getting pretty tall these days. Robert Shiller's column in the New York Times discusses the extent to which there is a lot of uncertainty even though life is good for many people.

The various consumer confidence indices are now as high as they were in 2004, but before we get excited about this good news, note that consumer confidence is not a forward indicator of any consequence. The Institute of Trend Research once pointed out that a rise in the confidence index only meant good news for the sellers of used boats.

The art of predicting future economic events

The good news is that the next recession shouldn't occur until about 2019. We have a good three to four years before we'll be peering into some abyss. The bad news is that the stock market usually, (but not always) is a forward indicator of weakness in the economy. Stock prices are supposed to reflect what investors expect to be future earnings of companies. If signs on the horizon indicate a slowing down of the economy, then it stands to reason that stock prices can be expected to decline before the recession itself reaches full force.

High Yield Bond Funds

High yield bond funds can accomplish a great deal when it comes to generating income from a retirement account. However, to take advantage of what they have to offer, investors need to ramp up their basic understanding of what this particular investment category entails.

Linking big estate taxes, family farm

Just when we think we have driven a stake through the heart of efforts to repeal the “Death Tax,” the House of Representatives, with too much time on their hands, has managed yet another attempt to appease a group of the nation’s wealthiest families. Once again, the Family Business Estate Tax Coalition has rallied its members in an effort to do away totally with the estate tax which, over a decade, is normally estimated to raise roughly one trillion dollars.

Subscribe to