One of my duties at work is to put together a calendar of various due dates every quarter. Of course, I could manually put the day numbers in, but where’s the fun in that?! The trickiest part in getting Excel to do this automatically is getting the first of the month on the right day. Most people would jump straight to multiple IF() functions, but there is a much more elegant way using the CHOOSE() function. Read more
On April 24, 2014, I posted that I was jumping into the stock market again with both feet. At that time, the S&P 500 stood at 1,883.95. Today it closed at 2,187.02. That’s at 16% rise in the S&P 500, but if I take into account reinvested dividends its about a 21% gain on the mutual fund after about 2-1/2 years. Pretty good, I think. Of course, it didn’t just go straight up. I endured two huge dips, one that actually took the S&P below my initial jumping-in point! These were important learning experiences though. Read more
I’ve been toying with the idea of investing in gold directly or having some exposure to it (and silver) in my investment portfolio. I have hesitated, so far, because I don’t really understand why we value gold so much? It just seems so arbitrary. By itself, it really doesn’t do anything. If the world economies to to hell in an hand basket, why on Earth would this metal be worth anything? The answer, according to this article, is interesting because the reason is that gold is uninteresting, at least chemically.
This is an interesting quick explanation of world economies using cows. It starts off serious, but then degenerates into satire. Still, the first couple slides are dead on.
Ten years ago I would say the US was capitalistic without a doubt. Now days, however, I’m not so sure, as we are drifting towards socialism. Read more
Readers of my blog know I generally feel that supply and demand is driving the stock market and not economic fundamentals. There are only a finite number of stocks available, so if more money gets invested, the market generally goes up. Money comes out, stocks go down. The one thing I didn’t consider is the impact of the baby boomer generation. A recent article pointed this out and I kick myself for not realizing this since I am a baby boomer myself!
The article’s author states: Read more
I wrote my post I’m all in…get ready for the big correction! about six months ago. The S&P 500 Index stood at at 1,883.95 then. Right now, its sitting at 2,031.95, an 8% increase. With a 8% cushion, I feel pretty good that I can survive a 5% drop and even a 10% at this point would be palatable. I already had to endure two sharp downturns, one that took me about 20 points below my starting point–that wasn’t fun. Still, I kept to my guns and felt that there was no fundamental reason for stocks to hold their lows and, sure enough, the markets bounced right back.
This all brings me to the point of this post. I can handle a reasonably large correction because I got in. You can’t do this if you sit on the sidelines waiting. The doom and gloomers are going to be right…someday. They will be gloating with a big I told you so. What they won’t mention is the gains the market had while they spouted off their doomsday predictions. Personally, I want to be sitting on a big gain to weather the storm. Heck, if we can come back from 2008, we can come back from anything!
Interesting article supporting my view that the markets are climbing due to inflow of money. Basically, more dollars chasing a fixed amount of stock shares equals higher prices. Some takeaways:
- “monetary policy is testing its outer limits,” and that advanced economies, including the U.S., need “balance sheet repair and structural reform.” (Me: Our government is too self-serving to do what is needed.)
- near-zero rates are no longer effective in rallying the economy, they have sent investors into equities. (Me: Yup. This is why the markets are at all time highs despite weak economy.)
- “market participants are pricing in hardly any risks … a powerful and pervasive search for yield has gathered” (Me: Investors are being driven to stocks because you can’t get any return on CDs, etc.)
- Currently, monetary easing happens too quickly during busts, and governments need to find ways to make the policy counteract the financial cycle so it does not exacerbate existing problems or add new ones. (Seems unlikely this will happen. Too unpopular.)
None of this is really new or a revelation. For stock market investors, the thing to watch out for is the time when the recent high-return-seeking investors get scared and pull all of their money out of the market. I think they have some stomach for small drops, but if we see a quick steep drop, it will be accelerated as funds are quickly pulled. I know I’ve got my finger on that trigger!
The stock market is kind of like eBay. If there are a whole bunch of people bidding in the same auction, the final price will generally be higher than if there were just a few bidders. By the same token, if more money is invested in stocks, overall prices increases. It’s the law of supply and demand. (For more on this, see my post here)
If you buy into this theory, here is some goods news. According to this article Investors — individuals and institutions alike — are keeping the lowest percentage of their portfolios in stock in over half a century. It goes on to say, “In fact, that doom-and-gloom thinking itself may be part of the “wall of worry” keeping even more cash out of the market. By that reasoning, stocks could be headed a lot higher before this bull market ends.”
I like this state of things. We’ve got a market that’s performing well despite analysts’ pessimism. We continue to get relatively positive news on the employment and economy fronts. This combined with the higher returns on stocks has got to be convincing more folks to invest in stocks, thereby driving up prices even more. Obviously there will be a sell-off at some point, but that’s just something you live with. Long-term, you should be better off.
On a side note, this article says that people in their 50s and 60s are investing too much money in stocks. Obviously, you need to diversify and don’t put all of your eggs in one basket. :-)