Investing Links of Interest – June 10, 2013

By on June 10, 2013

Pragmatic Capitalism reports that AAII investor allocation survey indicates small investors have their allocation tilted towards stocks at the highest ratio since September 2007.

Excerpt:

Equity allocations nearly hit an six-year high last month, according to the May AAII Asset Allocation survey. Cash allocations, meanwhile, fell to a level not seen since 2010.

Stock and stock fund allocations rose 3.5 percentage points to 65.2%. This was the largest allocation to equities since September 2007. It was also the fourth time in five months that stock and stock fund allocations were above their historical average of 60%.

Source: Pragmatic Capitalism

David Goodboy, reporting at MSN Money, examines three reasons why the bull market could soon be derailed.

Excerpt:

Federal Reserve Chairman Ben Bernanke is stepping down in 2014. His replacement may have a different market view and pull back the reins on the easing measures. If this occurs in an unexpected way, be prepared for the largest stock single market plunge of the century.

Source: MSN Money

Jeff Macke at Yahoo Finance! Breakout looks at the troubling dichotomy surrounding the falling price of lumber and a perceived housing market resurgence.

Excerpt:

That said, some suspicion regarding the economic recovery is justified. Keep copper and lumber on your radar. If housing is really improving, lumber should be able to hold a bid near $300. If that doesn’t happen, it’s going to be time to consider the idea that the entire recovery could be headed up in smoke.

Source: Yahoo! Finance

Rick Ferri writes about the disappointing returns achieved by endowments that strayed from a traditional indexed equity/fixed income asset allocation.

Excerpt:

The numbers speak for themselves. Despite hundreds of millions of dollars spent on consultants, management fees, and incentive fees for alternative investment gains, endowment fund portfolios did not keep up with these simple index fund strategies.

Source: Rick Ferri

USA Today’s Adam Shell reports in a piece titled Sell in May … I mean, June and go away? that June has been the worst performing month for the past 20 years.

Excerpts:

June happens to be the worst-performing month for the Dow the past 20 years, falling 0.8%, on average, and finishing the month higher only 40% of the time, according to Bespoke Investment Group. It also is the second-worst month going back 50 years.

On the bright side: The stock market has risen an average of 0.6% in June when stocks were up 10% for the year at the end of May. That’s where they are now, Bespoke says.

Source: USA Today

The New York Times examines the stock market’s subsequent returns following a peak in the level of margin debt.

Excerpt:

Margin debt in the United States — money borrowed against securities in brokerage accounts — has risen to its highest level ever, at $384 billion, surpassing the previous peak of $381 billion set in July 2007.

margin debt to gdp and subsequent s&p 500 returns

Source: The New York Times

The Wall Street Journal’s Total Return posts a followup to a previous article regarding the notion of investors allocating 100% of their assets to stocks:

Excerpt:

The fact that the topic is being discussed at all was even seen as a risk factor for investors. “Any time you see these ‘I’m 100% stocks’ or ‘All Stocks Anyone?’ posts as well as the ‘Do You Really Need Bonds?’ threads, you know you may be near an inflection point,” wrote a poster called “animule.” “I think Benjamin Graham had famous advice on this – no more than 75% stocks, and no less than 25% stocks. 100% stocks is crazy. No matter what your age.”

Source: The Wall Street Journal

3 Comments

  1. Felix Gillie

    June 12, 2013 at 12:06 pm

    It is apparent to anyone with a brain the stock market is rolling over into a new bear market. The mass of investors are morons and will be left holding the bag on overpriced equities as it always is. Ponzi’s will be exposed en masse as the tide goes out.

  2. Captain Midnight

    June 13, 2013 at 3:56 pm

    Felix, you couldn’t be more wrong. The Fed model shows that stocks are very undervalued. If stocks go down (get cheaper) Bernanke will switch to buying equities instead of bonds. He will be praised as a value conscious investor. It certainly makes more sense than blowing his wad on overpriced bonds!

  3. Justin Herass

    June 14, 2013 at 2:10 pm

    When/if the bond market collapses, won’t the fed have to print itself money to avoid insolvency? They seem to be the main buyer/owner at this point.

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