Skip to main content

The Best of Times, the Worst of Times

Image
By
Below is a brief article from Weston Wellington of Dimensional Fund Advisors, reviewing the markets over the last year and concurrent headlines from the media. It always helps to keep things in perspective and not get caught up in the financial pornography that is put upon us.

-Kevin Kroskey

---------

For the twelve-month period ending May 31, 2011, equity investors around the world enjoyed the equivalent of blue skies and bright sunshine while the economic news was partly cloudy at best. Among forty-five developed and emerging-country stock markets tracked by MSCI, all but four had double-digit total returns (in US dollar terms), and twenty-six had returns of 30% or more.

If someone had told us a year ago that global markets would stage such a broad-based rally, we would have been inclined to think that trends in employment, housing, and financial distress were about to take a pronounced turn for the better. It seems hard to argue they have done anything of the sort. Somehow, despite gloomy financial page news that keeps repeating itself, equity prices marched substantially higher.

The moral of the story? Investors should be skeptical of their ability to predict future events and even more skeptical of their ability to predict how other investors will react to them.

Last Year's Headlines
This Year's Headlines
"Europe Crisis Deepens as Chaos Grips Greece"
Sebastian Moffett and Alkman Granitsas. Wall Street Journal, May 6, 2010		"Greek Woes Fuel Fresh Fears"
Marcus Walker and Hannah Benjamin. Wall Street Journal, May 10, 2011

"Fearful Investors Are Pulling Out"
Adam Shell. USA Today, May 20, 2010
"Fear Wins: Stocks Resume Long Slide"
Adam Shell. USA Today, June 16, 2011
"Housing Prices Remain Weak"
Sara Murray. Wall Street Journal, May 26, 2010
"Home Market Takes a Tumble"
Nick Timiraos and Dawn Wotapka. Wall Street Journal, May 9, 2011
"Fear Returns—How to Avoid a Double-Dip Recession"
Cover story. Economist, May 29, 2010
"The World Economy—Sticky Patch or Meltdown?"
Cover story. Economist, June 18, 2011

"Spill Tops Valdez Disaster—Deep Trouble: There Was 'Nobody in Charge'"
J. Weisman, G. Chazan and S. Power. Wall Street Journal, May 28, 2010		"Japanese Nuclear Crisis Is Ranked at the Level of Chernobyl"
Mitsuru Obe.Wall Street Journal, April 12, 2011
"Discouraging Job Growth Batters Stocks"
Don Lee. Los Angeles Times, June 5, 2010
"Jobs Data Stoke US Recovery Fears"
Robin Harding, S. Bond and M. Mackenzie. Financial Times, June 4, 2011
"Economic Outlook Darkens"
Jonathan Cheng and Justin Lahart. Wall Street Journal, June 2, 2010
"Stocks Plunge Amid Fears That Global Economy is Slowing"
Christina Hauser. New York Times, June 11, 2011

"Bond Fund Managers See Signs of a Bubble"
Sam Mamudi. Wall Street Journal, June 8, 2010
"Why Are Investors Still Lining Up for Bonds?"
Jeff Sommer. New York Times, May 29, 2011
"Rapid Declines Rattle Even Optimists"
E.S. Browning. Wall Street Journal, June 14, 2010
"Investors Shaken by the Fear Factor"
James Mackintosh. Financial Times, June 18, 2011

Labels:

Popular posts from this blog

Diversification: Disciplinarian of Disciplinarians

By
Disciplined diversification works when you do and even when you don't want it to. Diversification in effect forces you to sell the thing that has been doing so well in your portfolio and to buy the thing that hasn't. While this makes rational sense, it is emotionally difficult to execute. Think back to the tail end of 2008--were you selling bonds and cash to buy stocks? Most likely you weren't unless your advisor or some sort of automatic trigger did it for you. Carl Richards of www.behaviorgap.com provided a good reminder of how diversification works in a recent NY Times blog post. The diversification he discusses here is more so related to equity asset-class diversification but also touches on the three basic building blocks--equities, bonds, and cash. He doesn't discuss alternative asset classes -- an asset class that doesn't fit neatly into the three basic categories -- being used to further diversification, but that's a detailed topic for another day. ...
Read more

What Does $100 Buy You in Your Home State?

By
A new map released by the Tax Foundation shows exactly how far $100 would go in all 50 states. Using recently released data from the Bureau of Economic Analysis, the Tax Foundation was able to show how the varying prices of goods, housing and income taxes in each state can impact consumers’ purchasing power. Southerners and Midwesterners have a serious edge over those along the East and West Coasts. A hundred bucks goes the furthest in Mississippi, where $100 will buy you what would cost $115.74 in another state that's closer to the national average. The next low-price states are Arkansas, Missouri, and Alabama. Ohio comes in at an encouraging $112.11 Meanwhile, $100 would only be worth $84.60 in the District of Columbia, the priciest state, $85.32 in Hawaii and $86.66 in New York. http://finance.yahoo.com/news/how-much--100-is-worth-in-your-state-152310027.html Click the Map Read More
Read more

2013 Key Tax Proposals

By
On February 13, President Obama's Fiscal Year 2013 budget was released. Follow this link to get a full copy of the   2013 Budget . The   Treasury's Green Book   containing general explanations of the Administration's revenue proposals can be found here. Robert Keebler, a leading professional in the area of tax and estate planning, highlighted some of the key proposals potentially affecting taxpayers below: Extend Bush tax cuts for all but the top two brackets. The only change would be to have the 33% and 35% rates go back to their pre-2001 levels of 36% and 39.6%. Taxpayers in the top two marginal brackets would still benefit from reduced rates on the portion of their income taxed in the lower brackets. Raise the long-term capital gains rate to 20% for single taxpayers making more than $200,000 per year, $250,000 for married taxpayers filing jointly and $125,000 for married taxpayers filing separately. Tax rate on qualified dividends would revert to ordinary income t...
Read more