This week I wanted to share some interesting new research from the Journal of Financial Planning on the value of delaying retirement. We have often said that one of the most effective ways to improve your probability of financial success in retirement is to retire later. Now an article in the JFP has quantified the value of additional work. All things considered, delaying retirement by one year increases the probability of retirement success (defined as not running out of money) by approximately 10.6% over a 30 year retirement period. To put this in context, working one additional year had approximately the same impact as earning an additional 1% on your investments each year during retirement or reducing your initial portfolio withdrawal rate by .5%.
Today’s edition of SV Insight focuses on the increasing heat Fed Chairman Ben Bernanke has been taking in recent weeks.
A chorus of big-name investors has taken to the media to vilify the “loose money” policies of Federal Reserve Chairman, Ben Bernake. These investors insist that Bernanke is ruining the country, debasing the currency, creating class warfare and creating a situation which is going to lead to runaway inflation. He is also supposedly responsible for creating a “fake” stock-market rally.
Posted in Market Commentary, Uncategorized, Weekly Insight | Posted on 16-05-2013|
Some of you will recall that on January 24th, Robert named Disney as his stock pick of the year. Robert had an opportunity to talk about the stock this morning on Yahoo Finance (click here to view). This is a timely clip as Disney reports earnings today and the stock is +30% YTD.
On a completely different topic…this month’s issue of Financial Planning magazine had an article on the top issues that financial advisors worry about. One issue that I thought was interesting was “Eroding Confidence”. Here is an excerpt:
Posted in Market Commentary, Weekly Insight | Posted on 08-05-2013|
The S&P 500 has just set a new all-time high, which means that it just passed where it was in March of 2000. Wow! That is sobering. The good news is…the companies in the S&P are earning more than twice what they were earning back in March of 2000, balance sheets are stronger, interest rates are lower and credit is tighter. So, there are lots of differences between now and 2000 or 2007-2008 for that matter. Nevertheless, anytime you hit new highs, investors begin to ask; “is this a bubble”?
Posted in Uncategorized | Posted on 03-05-2013|
Our thoughts and prayers go out to the families directly affected by the Boston bombings last week. We are especially thankful that our own Jennifer and Al Palardy were not hurt as Al finished running the marathon 8 minutes before the first bomb exploded.
In financial news, last week we saw the stock market give back some of the year’s gains. We have been predicting a 3-5% pullback for a couple months but every time the market has a minor decline it comes right back. The surprising thing is not that the market had a down week. We are surprised by how resilient the market has been. For example, 10 years ago, the market would have sold off 5-10% in the wake of a terrorist attack like we witnessed in Boston. However, the market held up quite well.
Posted in Market Commentary, Weekly Insight | Posted on 25-04-2013|
Even to those who have not been big proponents of Gold as an investment, Monday’s $140 per oz drop was surprising. That brought the two day decline to over 13%, a record since gold futures began trading in 1974. Robert was talking about this today on Fox Business.
Posted in Market Commentary, Weekly Insight | Posted on 25-04-2013|
The first quarter started off with a bang as we saw the S&P 500 climb 10%, nearly matching the first quarter rise of 12% that we witnessed just last year. Foreign markets didn’t fare nearly as well. The MSCI Emerging Market Index was down 5.6% in the first quarter and Europe was down 3.61%. This is also reminiscent of the first quarter of 2012 when foreign markets significantly underperformed in the first half of the year, but ended up outperforming in the second half.
Posted in Market Commentary, Uncategorized, Weekly Insight | Posted on 09-04-2013|
We typically cover the stock and bond markets in our weekly newsletter. However, this week we are going to talk about the other big driver of personal wealth, residential real estate.
There’s no doubt that housing is recovering. This news is no surprise to our clients in Las Vegas, Phoenix and Southern California all of whom are seeing and hearing about bidding wars again. I personally know of multiple people who have decided to rent because they cannot find a house to buy. Nationally, existing home sales, which account for the bulk of the market, have topped year-ago levels for 20 months in a row and existing home prices have topped year-ago levels for 12 consecutive months. In addition, the national inventory of homes for sale has dropped to a 4.7 month supply – far below the normal 6 month supply. But unlike past housing recoveries, this one is heavily supported by investors – big and small. They currently account for about a third of home purchases, according to the National Association of Realtors.
Posted in Weekly Insight | Posted on 02-04-2013|
The market continued its winning ways last week. There are plenty of skeptics and also plenty of believers that the rally can and will continue. Meredith Whitney, a famous Wall Street analyst said last week that this is the most bullish she has been on U.S. equities in her entire career. That being said, we think investors will be well served to think “outside the box” in looking at the best opportunities. For example, most investors think of big consumer staples companies (e.g. General Mills) as a safer way to invest in the stock market than buying technology stocks such as Cisco. Historically, that would have been true. However, today, General Mills is trading at 17x earnings and Cisco is trading at 10.5x earnings. Cisco also has $46 billion in cash on its balance sheet, a higher dividend yield than General Mills and a higher expected growth rate. This is just one of many examples of finding value in non-traditional places. We always say that the key to investing is to buy what is on sale.
Posted in Market Commentary, Weekly Insight | Posted on 19-03-2013|
As the stock market hits new highs, we find that many people are worried that this rally won’t last. This is compounded by the many talking heads on financial TV predicting the next crash. This makes for great television and feeds into our natural “recency bias” where we conjure up the fear of the most recent crash. Luckily there is a saying, “the stock market climbs a wall of worry”. Admittedly, the market has moved pretty far pretty fast and a moderate and temporary correction is likely (and would be healthy). However, this is not 2008. The global financial system is not teetering on the brink of collapse. In fact, since the first time the stock market was at these levels, corporate earnings have more than doubled. Since the great recession of 2008, productivity and profits have soared and companies have stock piled $1.4 trillion in cash on their balance sheets. One more piece of information to help you sleep at night; stocks are the cheapest they have been relative to bonds in over 50 years.