Don't Quit Your Day Job…

Who is your favorite investor? Warren Buffet, Peter Lynch? Do you wish you had their insights? What if you could link your brokerage account to theirs? That exact concept is brought up in an article from the New York Times hosted on Yahoo! Finance: for a fee, your brokerage account can mirror that of an expert investor.

Of note: an interesting report from Cumberland Advisors. An ETF that tracks the KBW Banking Index is up a whopping 145% since March 9. It consists mainly of bigger, national banks. With their ‘bigness’ also comes ‘too big to fail-ness’ and political connections. Smaller, regional banks are a totally different story.

How accurately can the stock market (as modeled by the S&P 500 Index) predict future recessions? If one charts the S&P 500 over the years and marks when recessions begin, is there any indication that the market senses it early? How accurate are the predictions? Can the market be used to prepare for downfalls? In short: somewhat, yes, very, probably not.

What better way to start writing again (Happy October!) then to write about an investing fallacy: over periods of 20 years or longer, many investors automatically assume that stocks are the best investment. Really, it isn’t fair. Stocks have behaved (before this decade anyway) in such a controlled fashion, gaining 10% or so on average every year, that it is only natural for many investors to assume that this trend will continue. Well, as Jason Zweig of the Wall Street Journal makes clear, that isn’t the case.

No way. According to this Wall Street Journal article, individual investors are responsible for $120 billion in currency trades per day. Sure, the total volume of currency trades is somewhere around $4 trillion, but individual participation in Foreign Exchange (or FX, or ForEx) markets has definitely climbed. Let me just say: Caveat Emptor.

Welcome back to the table, emerging markets! As a recent Wall street Journal article points out, emerging markets are back. Emerging markets, defined as rapidly growing economies coming from a smaller base (but notoriously hard to list!), have bounced back from their lows this year. Are emerging markets re-emerging?

Let the good times roll! As I write this article, the S&P 500 is at 1068.22, up 55.91% in absolute terms since the trough on March 9, 2009. Investor and consumer sentiment seems to be climbing according to polls and news headlines. In fact, if you somehow avoided the news since last October 7th, your S&P 500 investments would be even. However, signs abound that we could be in the midst of a “sucker’s” rally- universally defined as unsustainable…

Do psychological barriers matter to you in investing?

The Dow Jones Industrial Average is poised to climb, once again, to the psychologically important level of 10,000. 10,000 has been a memory since last October. As Brett Arends of the Wall Street Journal points out, we first crossed the 10,000 barrier over 10 years ago, and the dollar has lost 23% of its purchasing power in that time. What does Dow 10,000 mean?

From the Wall Street Journal yesterday: the bear market has taken a swipe at college savings rates. In fact, it’s taken more than a swipe; 47% of parents are savings less than before or nothing towards the education of their children. Ouch.

Feeling lucky? The Wall Street Journal recently ran an article suggesting investors take a look at health care stocks. The article makes the argument that an aging population and potential congressional mandates for people to buy health insurance make the health care sector a decent place to look for some growth in the medium to longer term. Politically, it’s impossible to read the tea leaves. However, could the story be on to something?