Too Early for a Victory Lap, but…

I’d like to review my comments on bonds over the last couple years. The financial media, and retail investors along with their advisors, tend to focus a lot on stocks as stock markets are perceived as “sexier” while the bond markets often receive the cold shoulder.

Honestly, this is largely the reason that bond and credit markets are “smarter” than the stock markets. After all, how many retail investors do you know that open a brokerage account so they can trade bonds? Almost none (I’ve never known a single retail investor to do this actually).

In other words, there’s a lot more retail money “investing” in the stock markets than in the bond markets.

With that being said, let me summarize some comments I’ve made regarding the bond markets over the last couple years and include a chart to see how those comments have stacked up. Continue reading “Too Early for a Victory Lap, but…”

What is a Safe Portfolio Withdrawal Rate To Ensure Your Money Lasts?

One of the more important questions I try to answer via the financial planning process is, “How much can I withdraw from my portfolio each year and not run out of money?” Or the inverse of that, which is, “How much do I need to have saved in order to retire and sustain my current lifestyle without running out of money?”

To answer the question specifically for your unique circumstances we would need to prepare custom financial projections, however, there are some general rules of thumb that can serve as a starting point. Continue reading “What is a Safe Portfolio Withdrawal Rate To Ensure Your Money Lasts?”

Market Update – Only Two Other Times in History

The rally that began around Christmas Eve continued with strength through last week.

It’s been such a strong rally that U.S. large company stocks (as measured by the S&P 500 index) even eclipsed the prior record high from last September…admittedly, an event of which I was skeptical.

Specifically, on September 21st the S&P 500 set a new intra-day high at $2,940.91. However, last Wednesday the S&P 500 touched $2,954.13 before closing down to $2,923.17. As I write this commentary on May 6th, the S&P 500 is trading around $2,910.

Now, unfortunately, the S&P 500 was the only major index to set a new high. U.S. small company stocks (Russell 2000) are still down over 8% from their August 31st record. The global stock market more broadly, including foreign developed and emerging markets (MSCI All Cap World Index), is still down over 6% from it’s all-time high set almost 16 months ago on January 26th, 2018. Yes, the global stock market is still technically in a bear market.

Here is the interesting part, when reviewing one of the most reliable valuations metrics available from John Hussman, we find that the U.S. stock market has experienced current extremes only two other times in history (1) 1929: on the eve of the Great Depression and (2) 2000 – on the eve of the Dot Com Bubble burst. Neither of those events ended well, and I don’t expect the current dislocation to end well either. Continue reading “Market Update – Only Two Other Times in History”

Success and Happiness

Please pardon this brief departure from markets and economics, but it’s too interesting and important not to share!

Recently, a client shared the late Jack Bogle’s book, Enough, with me. (Jack Bogle was the legendary founder of Vanguard). It was recommended I start with the last chapter first, which I did dutifully. In that short chapter, Mr. Bogle shares something quite valuable that’s worth sharing here.

Mr. Bogle begins this chapter by quoting Albert Schweitzer,  “Success is not the key to happiness. Happiness is the key to success.”

Continue reading “Success and Happiness”

Auto Production Figures, Inventories and 0% Financing on New Trucks

Automobile production figures through Q1 were released this morning. I pay close attention to these numbers as contractions in automobile production has tended to lead recessions (see below).

Gray bars indicate recessions. Blue line is monthly production figures. Orange line is annual.

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Per CNBC: “Motor vehicles and parts production dropped 2.5 percent last month after increasing 2.3 percent in February. An inventory overhang in the automobile sector is weighing on production, contributing to factory employment declining in March for the first time since July 2017.” Continue reading “Auto Production Figures, Inventories and 0% Financing on New Trucks”