Last week we heard that Federal Reserve Chairman, Ben Bernanke is seriously considering the possibility of a new bond-buying program–QE3—which would keep interest rates at current low levels even longer than previously anticipated. These low interest rates have been have been moderately beneficial in stimulating the economy by reducing interest costs on everything from mortgages to credit card debt to the cost of new business equipment. However they have wreaked havoc on the investment plans and interest income for many conservative investors.
This week we just wanted to share an observation. We are constantly reminded that markets act in ways that are counter intuitive. Frequently investors do their homework, make logical investment decisions and then see their investments act in ways that are opposite of what they predicted. Here are some recent examples:
| Posted in Weekly Insight | Posted on 20-08-2012
With Romney’s pick of Paul Ryan as his running mate, you will be hearing a lot more about the “top 1%” and whether or not they pay their fair share of taxes. A question that many people have is, who exactly are these “One Percenters”? A study came out from HNW Inc. that shows that the vast majority of people who are in the top 1 percent (of income) have no idea that they are actually that rich. To be in the top 1 percent you need income of $343,000. However, when surveyed, the average person assumed that you needed to earn $1.67 million to be in the top 1 percent. If you meet president Obama’s definition of wealthy, families earning $250,000 or more, you’re actually in the top 3 percent.
| Posted in Weekly Insight | Posted on 20-08-2012
The headline news of last week was the debacle at Knight Capital. Knight is not exactly a household name but each and every one of our clients as well as the vast majority of investors has done business with Knight in the past. Knight Capital is the single largest market maker for retail transactions. Fidelity, Vanguard, Scott Trade, Schwab and TD Ameritrade all route orders to Knight so this means many of your orders are being bought from or sold to Knight on the other side. Knight helped spearhead online trading in the late 1990’s and I (Robert) have had a close relationship with Knight at many points throughout my career. From personal experience I can tell you that they are the most ethical and reliable market maker I have ever dealt with. This is why it saddened me to see the error that nearly put the firm out of business. Evidentially a new system that was being implemented at the NYSE which was supposed to link up with Knights new software malfunctioned (reportedly due to Knights error) and cost the company over $400 million in just a matter of minutes. It’s important to know that no client or counter party lost a penny. Knight immediately closed out the trades and took the loss. I applaud this swift and decisive risk management decision in a time when commons sense has lacked in this respect.
| Posted in Weekly Insight | Posted on 07-08-2012
Last week global markets started off shaky but ended strong. The US stock market logged its best 3 day rally of the year due to indications that the European Central Bank was going to take further measures to protect the Euro. This once again proves that you can’t try to time markets.
