The trend in February was again one of posting a wide range of results and a shifting pattern of winners and losers on a monthly basis. This isn’t a shock, but more of it is probably coming, meaning that a new set of challenges await for managing asset allocation relative to the trend for much of the past 12 months.
NO ONE LISTENED, BUT EVERYONE SHOULD READ IT
Harry Markopolos spent nearly a decade telling the Securities and Exchange Commission that Bernie Madoff’s returns were too good to be true. The SEC more or less ignored Markopolos, a securities analyst and forensic accountant. The greatest Ponzi scheme in history, as a result, rolled on for years, ultimately stealing billions of dollars from investors, large and small, before it all came crashing down in 2008.
Markopolos has written a first-rate memoir of his lonely one-man investigation into Madoff’s $65 billion fraud: No One Would Listen: A True Financial Thriller
MORE TROUBLES WITH BUBBLES
There’s been quite a bit of talk about a bond bubble recently. “Are bonds in a bubble?” inquires The Wall Street Journal. SmartMoney doesn’t even ask but instead declares in a headline: “The New Bond Bubble.” Meanwhile, a prominent forex trader warns today in Asia Times that “a nasty popping of the bond-market bubble lies in wait for investors.”
THE TROUBLE WITH DEFINING BUBBLES
What’s the difference between a bubble vs. a legitimate rise in prices? Fundamentals, or so the story goes.
IS THIS REALLY JUST AN EXPENSIVE GAME OF MUSICAL CHAIRS?
The fiscal debacle in Greece is at least partly connected to minimizing (hiding?) deficits. In 2000 and 2000, Greece borrowed billions via currency swaps. But the fix was only temporary and the red ink has come back to haunt the country. (Gee, where have we heard this one before?)
CAN WE BELIEVE THE RISING TREND IN DURABLE GOODS ORDERS?
The labor market may be facing new challenges, but new orders for durable goods rose again last month. This leading indicator of future economic activity increased 3.0% in January, the Census Bureau reports this morning. That’s good news, of course, although we’re in no mood to celebrate, given the apparent reversal of fortunes in jobless claims, as we discussed in our previous post.
ANOTHER WARNING SIGN IN JOBLESS CLAIMS
Last week’s rise in new filings for jobless claims adds another data point to the case for thinking that the downtrend has hit a wall in this critical measure of the labor market’s trend.
IS THE ECONOMY HEADED FOR A SLOWDOWN?
Yesterday’s sharp downturn in the Conference Board’s consumer confidence index for February has rattled investors, but the shift in sentiment isn’t surprising. With the labor market still weak, it’s only reasonable to expect that there’ll be a price to pay in Joe Sixpack’s outlook.
WHAT’S THE CRITICAL FACTOR IN PORTFOLIO RETURN?
If you could only make one decision in your investment strategy, what would it be? Would you concentrate on picking the best securities? The best ETFs or mutual funds? Would you focus exclusively on trying to time your asset allocation/rebalancing choices? Or maybe you’d spend a lot of time deciding if Asian stocks would beat European equities in the foreseeable future. Or how about managing the risk, however defined, like a hawk? In any case, the question is simply this: Which variable in the money game is likely to have the most influence on the end result of performance?
CAN INVESTMENT MISTAKES BE RATIONAL DECISIONS?
There’s a furious debate these days over the efficient market hypothesis and whether recent events support or spurn its implications. Among the criticisms: investors are irrational, meaning that they’re prone to chase trends mindlessly. In turn, this leads to speculative manias and crushing selloffs.