1.Volatility of Equities
40% Lower When Bond Yields Below 3%
Barrons…That’s
key, since continued low rates provide the ideal environment for equity
investors, writes James Paulsen, chief investment strategist at the Leuthold
Group, in a client note: “At least for the last 93 years, the opportunity to
invest in stocks when the 10-year Treasury yield is below 3% has proved to be a
‘gift’.” (The benchmark note ended the week at 1.82%, down 0.02 of a percentage
point.)
Adding
equities to a portfolio when yields are under 3% sharply boosts returns without
significantly increasing overall risk, Paulsen finds, based on the record from
1926 to 2019. The volatility of an all-equities portfolio is 40% lower when
bond yields are below 3%, he further found, while future 12-month returns were
negative only 18% of the time. When bond yields rise to 3% to 4%, however,
the risk-reward trade-off for adding stocks is much less attractive, he says.
We Have a Trade Deal and Brexit
Clarity. That’s Good News for Stocks.
4.How SALT Has
Iced Home Prices in High Tax States
Wed,
Dec 11, 2019
In the past couple of days, we’ve released
a few more sections of our 2020 Outlook Report including those
on Washington, Commodities, and Housing. In addition to gauging the
overall health of the economy and potential for future economic growth, in
the Housing section, we also discussed home
price trends using the gold standard for housing prices: the Case-Shiller Home
price indices. Below is a complimentary excerpt from the Housing section of our 2020 Outlook Report. To view the
entire section and gain access to all of the other sections (plus the rest of
our research offering), join Bespoke Premium with this 2020 special offer.
The Case-Shiller indices saw home price growth slow sharply in 2018 from the
6% to 7% YoY range all the way down to the 2% range, but in 2019 home price
appreciation began to pick back up. One significant cause of the
fluctuations in home prices over the past couple of years has been the
implications of tax policy.
Prior to the passage of the Tax Cuts & Jobs Act (TCJA) at the end of
2017, relatively high and low tax metro areas had no consistent home price
trends relative to each other. The Trump tax bill capped SALT (state and
local taxes) deductions, however, which hurts higher-tax metro areas like DC,
LA, New York, and Chicago more than lower-tax metro areas like Denver, Las
Vegas, Charlotte, and Dallas. This has resulted in home prices rising more in
low-tax jurisdictions versus high-tax jurisdictions in each month since early
2018 as shown in the chart below. This trend is not likely to last forever,
especially as the effects have already waned in 2019 compared to 2018, but the
TCJA has certainly been a big penalty for homeowners in high tax metros, and
the data proves that out.
5.Percentage
of Investment Grade Corporate Rated Single A or Higher at an All-Time Low.
Jeffrey Gundlach on the Corporate Bond Market:
The percentage of the investment grade
corporate bond market that’s rated single A or higher is at an all-time low. It used to
be two-thirds of the corporate bond market was rated single A or higher, 25 years ago. Now it is 35% of
that market. So, the rating is actually worse. So, the yield spread should be
higher than average. Not at near a low level.
So, that is a very bad
sign.
Is the glass half full or half empty? Whether you’re an optimist
or a pessimist, your tendency could be hindering your ability to achieve career
success and attain a rich life.
If it is, Mark Ford explains how you can move forward.
Boldness
in taking on new business opportunities is considered a virtue by many… and
timidity a vice.
I’m not
so sure.
When I am
bold, I often gamely invest my time and money into projects that are foolish,
unnecessary, and/or unlikely to succeed. When I am feeling timid, I shy away
from good and likely opportunities.
Emotional
tendencies matter. If you know your basic nature, you’ll be able to make better
business and investment decisions by taking contravening measures against your
dominant mood.
But how
do you figure out such a thing?
Determining
Your Basic Nature
Are you
fundamentally an optimist or a pessimist? Answering the following questions
should help you find out.
When offered investment or business opportunities, are you
instantly and positively excited?
Do you often take on projects that you regret later on?
Do you enjoy meeting new people, seeing new sights and going on
adventures?
When talking about a new business or investment with friends or
colleagues, do you tend to exaggerate the benefits and profit potential?
Do you often take on social obligations you later regret?
If you
answered yes to three or more of the questions above, I would call you
generally optimistic. You may even be overly optimistic.
Now
answer these five questions.
Do you feel that, generally speaking, you have more challenges
and obligations than you can properly handle?
In social situations, do you find yourself often thinking about
business obligations or problems? Do you have difficulty staying in the “here
and now”?
Would you rate your boss and colleagues negatively?
Do you often feel anxious or even sad about going on business
trips or attending business functions?
Do you fantasize about retiring or quitting your job and getting
another one?
If you
answered yes to three or more of these last five questions, you might have
pessimistic tendencies. If you answered yes to all five, you are probably
overly pessimistic.
Admittedly,
this is not a scientific test. But optimism and pessimism aren’t really
scientific terms.
And as I
said above, emotional tendencies matter when it comes to business decisions. To
push back against your dominant mood, here is what I recommend doing…
Optimists,
Curb Your Enthusiasm
Understand
that there is a part of your brain that is not operating efficiently. That is
the part that, in other people, causes doubt and fear.
Be happy
that you have a frame of mind that gives you the feeling that you can
accomplish just about anything, but promise yourself that you’ll run all your
important impulses through an outside filter.
Don’t
sign any contracts or agree to any business deals without running them by a
trusted lawyer and accountant first. Tell your advisors that their job is to
spot the problems and to be tough on you when you try to dismiss them with
quick rhetoric. (That’s what you’ll want to do when they toss a pail of cold
water on your fire.)
Don’t buy
anything expensive on the spot. Don’t hire anyone on the spot. Don’t fire
anyone on the spot. Don’t take a job on the spot.
Don’t
send out “reactive” emails on the spot. Wait 24 hours, and then either delete
or modify the email. If, in reading the email 24 hours later, you get angry
again and want to send it out unchanged, hold off for another 24 hours. Don’t
send out that first email under any circumstances. You will regret it.
Don’t
ever say anything in an email about anyone unless you wouldn’t mind them
reading it… because they surely will. The same rule applies to anything written
in letters or spoken on the phone or in person.
Pessimists,
Fill Your Glass a Bit More
Accept
the fact that you have some deficiency in your brain chemistry. Recognize that
your instinctive tendency to see the dark side can sometimes limit your success
by dampening your enthusiasm or the enthusiasm of others.
Be happy
that you have a natural ability to detect the potential problems in every
situation. Use that talent to assess the risks and problems inherent in any
major venture you undertake.
Make it a
habit to always say something positive before you say whatever it is that’s on
your mind.
After you
get through writing your daily task list, spend five or 10 minutes visualizing
every task. Imagine yourself happily achieving the objective. Even if you find
the job odious and the person you are doing it with repugnant, find some way to
imagine actually enjoying the experience.
This may
seem like advice that borders on the silly – it certainly did to me when I
first tried it – but you’ll be amazed at how well it works.
Practice
smiling in the mirror. Do this as often as you can stomach it. And then do it
some more. Again, this advice may seem ludicrous… but it will work.
When
talking on the phone, smile. The person on the other end is cueing off the
energy from your voice. If you want him to respond enthusiastically to your
ideas, you need to breathe that enthusiasm into the tone of your voice.
Every
time you see someone for the first time, greet him or her with a firm
handshake, a smile and a confident “eye lock.”
Recognize
What Mood You Are In
You may find
that your mood swings between optimism and pessimism. If you are like me, that
swing can be very large.
After
going through a rather deep depression some time ago, I began to chart my
mental state in terms of how I felt, what I thought about and what sort of
functionality I had.
At the
bottom of the scale, I felt suicidal, had repetitively negative thoughts, and
could not get out of bed or even carry on a conversation. At the top of the
scale, I was euphoric. I loved everyone and everything I encountered.
By
logging my moods, I discovered that when I was below a 6, I made bad decisions.
I shied away from every challenge or opportunity, including many that could do
me nothing but good.
When I
was above an 8, I often made bad decisions in the other direction. I would take
on almost any new project or invest in any new business opportunity.
Nowadays,
I follow a rule that keeps me in good stead. I never make business or
investment decisions unless I’m in the 6 to 8 range.
You don’t
have to use my system to get the same effect. Simply recognize that if you have
significant mood swings, you should defer decisions when you are feeling
especially good or bad.
In other
words, say yes to new opportunities only when you are not being swayed by your
emotions. Whether optimistic, pessimistic or something in between, recognize
that whatever your goals are, you’ll have a better chance of achieving them if
you approach them with a level mood.
Advisor
Perspectives welcomes guest contributions. The views presented here do
not necessarily represent those of Advisor Perspectives
Clickhereto watch a video and learn more about
Evidence Based Advisor Marketing.
If your ego
is too loud, it stops you from reaching your goals and having a happier, more fulfilling
life.
That’s the
message from Scott Barry Kaufman, a psychologist at Columbia University, in an
insightful article published
in Scientific American.
The problem
Kaufman
defines your ego as, “that aspect of the self that has the incessant need to
see itself in a positive light.” He claims that, “the more the ego is quieted,
the higher the likelihood of actually reaching one’s goals.”
His views
are shared by Mark R. Leary, the author of The Curse of Self. Leary
observed that “egoism” can “profoundly affect people’s lives, interfering with
their success, polluting their relationships with other people, and undermining
their happiness.”
Kaufman and
Leary advocate self-awareness and reflection. Both are essential for reaching
your goals. Problems arise when our egos are so “noisy” they actually impede
the goals we are trying to achieve. Kaufman puts it this way: “A noisy ego
spends so much time defending the self as if it were a real thing, and then
doing whatever it takes to assert itself, that it often inhibits the very goals
it is most striving for.”
The
solution
Instead of
adopting a defensive posture in an effort to prove you are “right,” and being
concerned about self-enhancement, Kaufman suggests you quiet your egos, which
will foster a sense of well-being, health, self-esteem and other benefits.
Having a
quiet ego means being less concerned about getting across your point of view
and more concerned with identifying with the experience of others. Instead of
dominating a conversation, show your interest in what others are saying. Not
only is your behavior a form of kindness, it will be perceived by the other
person as being compassionate.
Those with
quiet egos have a “detached awareness,” which permits them to see both sides of
an issue. They are open to reexamining their thoughts, positions and beliefs.
They have
an “inclusive identity.” They are cooperative and compassionate toward
others, rather than focusing on themselves.
Marketing Services For
Evidence-Based Advisors…and a New Book!
We offer consulting services on how to convert
more prospects into clients through Solin Consulting, a division of Solin
Strategic, LLC. Our evidence-based persuasion strategies have
significantly increased conversion rates for our coaching clients. I’m
available to speak at events. I also provide individualized coaching using
videoconferencing.
We offer a full range of digital marketing
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Based Advisor Marketing, LLC . These services include: web and
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I’m working on a new self-help book for the
general public. It’s called:
Why it’s
important
Success as
an advisor is largely dependent on your ability to make an emotional connection
with prospects and clients. A “noisy” ego leaves little room for focusing on
others. Your bandwidth is absorbed by a preoccupation with yourself – how you
are being perceived, your views on the issues, your background and expertise.
The list goes on…and on.
When you
quiet your ego, you appreciate it’s not about you. It’s about your ability to
focus intensely on your prospect, client, loved ones and colleagues.
On a macro
level, Kaufman observes, “I don’t think it’s an overstatement to say that the
cultivation of these skills in our society would lead to greater mental health,
useful reality-based information, as well as peace and unity among humans.”
Get Dan’s
investing insights by signing up for his free, weekly newsletterhere.
1.Trading in
U.S. Stocks Has Increased 177% Over the Last 15 Years.
Phil Mackintosh-Nasdaq–Nasdaq Says Fears ETFs Are
Eating Stock Liquidity Are Unfounded – Trading in U.S. stocks has increased 177%
over the last 15 years, Phil Mackintosh, the exchange’s chief economist,
wrote in a note last week.
U.S. markets hosted about $164
billion additional stock trades every day last year versus 2004; by contrast, average daily
ETF trading has increased $93 billion over the same time frame, albeit from a
smaller base.
These
are the 20 best-performing stocks of the past decade, and some of them will
surprise you–Some lesser-known companies have special advantages in their
industries PHILIPVAN DOORN
