Sunday, September 21, 2014

Diversification At Its Best - SPDR S&P 500 Trust ETF (NYSEARCA:SPY) | Seeking Alpha

Diversification At Its Best - SPDR S&P 500 Trust ETF (NYSEARCA:SPY) | Seeking Alpha



This is an outstanding article about the value of holding bonds through TLT while also being in the stock market through the S&P 500 (SPY). Since 1992, holding 100% of either TLT or SPY resulted in almost the same return with less volatility in TLT.  Wynn Capital believes that stocks have a greater possibility of decline than bonds even though some people say the bond bull run is over.  In other words, as interest rates rise, the capital gain loss in TLT will probably be minimal compared to a greater possible loss in stocks.



The author presented data that showed an 80/20 SPY/TLT allocation resulted in an annual gain of 9.8%, which was more gain than SPY alone with a lot less volatility.  The portfolio was balanced each January.  For example, using 2013-2014, the higher gain SPY was reduced from 2013 while TLT was increased in 2014, and this re-balancing was spot-on for this year since TLT is up significantly.  Each year one asset is bought at a discount while the other asset is sold at a premium.



Next, the author ran the numbers on a 60/40 SPY/TLT allocation, and the annual gain was still 9.8% while the volatility was reduced to almost as much as TLT alone!  Then, the author did a 40/60 SPY/TLT ratio to cap things off, and the annual gain was only slightly lower at 9.5% while the maximum draw-down dropped all the way to 16% which was lower than TLT alone.  So, this article shows the great importance of always holding a significant portion of bonds through TLT.


Thursday, September 18, 2014

September 2014 Philly Fed Business Outlook Index Declines But Still Shows Strong Growth

September 2014 Philly Fed Business Outlook Index Declines But Still Shows Strong Growth



Here is a very important article about the Philly Fed business outlook along with other economic statistics.  The Philly Fed number for September was +22.5 which shows a strong economy.  The article also included statistics from other regions of the country along with a Federal Reserve chart called NAICS, Industrial Production: Manufacturing.



The NAICS chart in particular illustrated that we are nowhere near a recession.  This is why I remain bullish on the stock market while other uncertainties exist such as being overbought.  We may indeed have shallow corrections, but I doubt we would enter a bear market while the economy is doing well.

 

Wednesday, September 17, 2014

Analyzing Tesla's Demand And How It Will Drive The Stock - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha

Analyzing Tesla's Demand And How It Will Drive The Stock - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha



This is a bullish article about Tesla.  The author gave many facts to back up his position.  I am bullish on Tesla, too.  I especially liked the author's bullish target of $366.  This is basically in line with other analysts who have price targets ranging from $320 to $400.


Why You Should Shift From Profits To Protection | Seeking Alpha

Why You Should Shift From Profits To Protection | Seeking Alpha



Here is an interesting and controversial bearish article.  Both the author and the people who made comments were worth listening to.  I agree with the author that the real estate market is shaky.  However, I agree with some of the people who commented that the Baltic Dry index is actually pointing up.  So, I believe we should be buying the dips on quality stocks.

In addition, the author's table on 10% pullbacks was very informative. Since the economy is doing okay, and pullbacks should be less than 10% statistically, we should not be afraid to stay with stocks.  I think the worst decline this year was only 6% back around the first part of February.




Is A Big Move In Stocks Coming Soon? | Seeking Alpha

Is A Big Move In Stocks Coming Soon? | Seeking Alpha



Chris Ciovacco has written an amazing article about how to make sense of stock market moves.  We should not be guessing about the stock market direction.  As Chris has often said, we need to keep an open mind.



The author used a great example of looking at the 50-day line of various charts to see if the trend is flat or something else.  Usually stocks will go either up or down after an indecisive period.  We also need to consider the fundamentals for the probability of where stocks will go next.



Chris used the Dow and the NYSE Composite ($NYA) to illustrate the danger that could be lurking since they are both flat.  We are making new highs once in a while due to strong stocks in major indexes.  How long can the large caps carry everyone else, though?  On the flip side, the economy is doing well, and the Federal Reserve is still on our side.  So, I am slightly bullish on stocks, and the best place to be is with the large caps until conditions change.

 

Millennials: Bonds Aren't Just For Old People | Seeking Alpha

Millennials: Bonds Aren't Just For Old People | Seeking Alpha



This is a very good article explaining how bonds should be a part of each investor's portfolio.  If a reasonable allocation of bonds is chosen, the result will not be much different from a person who is successful with stocks only.  The balanced investor will also be able to sleep better at night, and he will not have to worry as much when bear markets come around.  A properly allocated portfolio will keep a person interested in the stock market.  This will also keep people from sitting on the sidelines in cash for years because they are afraid of stocks.  They will actually be making money from their investments instead of losing it by being in cash.




Is A Stealth Liquidation In Stocks Underway? | Seeking Alpha

Is A Stealth Liquidation In Stocks Underway? | Seeking Alpha



Eric Parnell has written an outstanding article on why we need to be cautious in the stock market.  While it is true that large caps seem to be making new highs quite often, Eric believes that trouble is brewing under the surface.  For example, different asset classes are going down along with weak stock sectors.  Government bonds (TLT) usually are bought when stocks go down.  However, Eric pointed out that it looks like we have a liquidation scenario where investors are hoarding cash instead.  So, we need to be cautious about the stock market.  I own mostly large cap stocks and dividend stocks myself, but I am constantly monitoring charts and fundamentals in case I need to exit stocks.