Down goes the Dow

Joe,

I have never argued against a buy and hold investment plan. Let me as you this question, do you believe an investor should buy and hold bonds? Bonds have done much better than stocks this year.

Igy

Do you seriously think I believe you are telling your clients, "The market is overvalued and about to crash, but you should stand pat with your stocks?" Your position regarding the stock market argues against a buy and hold strategy.

Joe,

You unfortunately have a simplistic view of the markets and what I do.

Do you believe you buy and hold bonds?

Igy

I think Joe Beets is right. You're not a buy and hold guy. That's ok.

Smarter,

But I want to know if Joe buys and holds bonds?

I think he is afraid to answer the question.

Igy

smarter,

Here is a teachable moment. If I am truly a buy and hold investor, I would buy 10 Year Treasury Bonds knowing my return is only 1.5% a year. But would Joe Beets buy and hold stocks today if he knew he would have that same annualized return of 1.5% a year. Consider this, the ten year annualized return of the S&P 500 from 3/2000 thru 3/2010 is probably very close to that 1.5%. The next peak was 10/2007, what will be the ten year return? How about the current market?

Igy

To the fellow asking about bonds... Bonds are guaranteed by the borrower. Stocks are speculative. Apples and oranges.

Nu,

Partially true, there have been dozens of energy producers that have defaulted on their bonds the last two years. In default the holders have a claim on assets, which in many cases will be less than 50 cents on the dollar. Furthermore, there are thousands of issuers that have bonds trading in the speculative category.

Igy

Not "partially true". It's completely true. I said they were guaranteed, which they are. A guarantee does not preclude default. Sheesh.

U.S. stocks futures climbed on Wednesday, setting the Dow industrials on track for a seventh straight day in record territory as Microsoft rallied premarket after better-than-expected earnings.

Futures for the Dow Jones Industrial Average rose 62 points, or 0.3%, to 18,539, after the index closed at an all-time high Tuesday for a sixth session in a row.

Futures for the S&P 500 index gained 6.55 points on Wednesday, or 0.3%, to 2,165.25, while those for the Nasdaq-100 index added 14.75 points, or 0.3%, to 4,621.25.

Earnings season: Both the S&P 500 and Nasdaq Composite Index closed lower on Tuesday as the broader market retreated after disappointing quarterly results from Netflix Inc.(NFLX). The online-streaming service sank 13% for its worst percentage drop in a single day since October 2014.

On a more upbeat note in the earnings season, shares of Microsoft Corp.(MSFT) jumped 4.3% ahead of the bell after the software giant's earnings released late Tuesday beat analyst forecasts. The company also said its cloud and productivity businesses posted revenue growth, even as overall sales fell.

The financial sector continues to impress. In notable earnings on Wednesday, Morgan Stanley (MS) reported earnings and revenue that beat Wall Street's expectations, sending shares up 3.2% premarket. The report comes after Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co (JPM) and Citigroup Inc.(C) also all beat on earnings for the second quarter.

What are you trying to teach me there?

Nu,

Nice try but wrong. Learn yourself up.

Many bonds are not backed by assets and are not guaranteed. Very similar to credit card debt, as opposed to a home equity line. These types of bonds are called debentures. Here is a definition:

"A debenture is a type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond to secure capital."

Igy

smarter,

Buy and hold is a theoretical concept. That concept's validity faces few critics at a market top. If assets are overvalued, as they are now, the concept should be challenged, but it won't. The industry of selling stocks, would lose customers. Furthermore, many of the pundits who profess buy and hold on stocks, at the same time, say sell bonds because they are in a bubble and have historically low yields. The same metrics that show an overvaluation in bonds, can be used to discount cash flows in stocks. Doing so shows stocks overvalued as well.

Igy

Ghost of Igloi wrote:

Consider this, the ten year annualized return of the S&P 500 from 3/2000 thru 3/2010 is probably very close to that 1.5%. The next peak was 10/2007, what will be the ten year return?

The return for the first period is closer to double what you guessed. For the second period it is approximately 9%. Neither figure includes dividends which would obviously increase the return.

Bond: A written and signed promise to pay a certain sum of money on a certain date, or on fulfillment of a specified condition. Syn.: guarantee

businessdictionary.com

Facts,

You better refigure Mr. Facts checked. The S&P 500 peaked at 1,553 in March 2000, ten years later the peak in March 2010 was 1,180. As far as the later period goes, we will not know until 10/2017.

Igy

Facts,

Learn yourself up, a debenture is a promise and not a guarantee, it is unsecured. Believe what you want though, but invest according to the definition I have provided.

Igy

1. The discussion was about annualized return.

2. 'Bond' and 'guarantee' are synonyms.

Facts,

Use your brain for once:

1. If the index falls from 1,553 to 1,180, the annualized return without dividends is -2.4%. Current dividend yield on the S&P 500 slightly over 2%. It was actually worse than what I expected.

2. If the bond is not secured by assets, there is no guarantee, you are subordinate to everyone with the exception of equity owners.

So your facts are upside down. Give up, you are already in the whole.

Igy