Investment advisors are today's snake oil salesmen.
Their product has no value whatsoever.
Their real skill is in getting people to either give them money to invest or to pay these salesmen for investment advice.
Every rigorous review of their results over time show that they underperform the market -- which makes sense because they are typically taking 1% to 1.5% off the top.
My God Sag. You are one pompous windbag.
Repost since the thread page flipped abruptly. Have a good weekend full of football fellas. Gotta go with the 'Tide:
I never once said Flagpole doesn't give solid, if not obvious, advice for the long-term, rudimentory investor, and I accept that he may have "channel checks" in his line of work that enhance his ability to perceive anecdotal economic conditions. But I think it more likely that he "knows enough to be dangerous." His strategy works for him, and that's fine. I'm not arguing with it. But, this is my background, my living, and my general orientation, summed up nicely by one John Hussman, who I quite like:
Portfolio:
"In short, a convex return profile – what we view as the hallmark of an effective risk-managed investment strategy – is the result of repeatedly accepting greater levels of market risk in conditions that have historically been associated with strong return/risk profiles, and repeatedly avoiding market risk in conditions that have historically been associated with poor return/risk profiles."
Macro-strategy:
"The alternate possibility, which is the one that I personally subscribe to, is that the recent downturn was the initial phase of a more prolonged deleveraging cycle; that the advance we've observed in recent months most likely represents mean-reversion – qualitatively and quantitatively similar to the large and often abruptly terminated “clearing rallies” of past post-crash markets; that major credit losses are continuing quietly but are going unreported thanks to changes in accounting rules by the FASB this past spring, which allowed for “substantial discretion” in accounting for loan losses and deterioration in the value of securitized mortgages; that a huge second-wave of mortgage losses can be expected from a reset schedule on Alt-A and Option-ARMs that has just started (following a lull in the reset schedule since March) and will continue into 2010 and 2011; that intrinsic economic activity remains abysmal; that recent GDP growth is an artifact of massive fiscal stimulus that is unlikely to have sustained follow-through; and that recent market valuations are not representative of those observed at the end of most post-war recessions, but are instead similar to those observed at major market peaks prior to the mid-1990's."
http://www.hussmanfunds.com/wmc/wmc091102.htm
I cannot time the market. No one can, which is why Flagpole's "advice" is fine for most. I am more comfortable with a more nuanced approach. That's why I jumped out a bit too late in January 2008 (around Dow 13000, despite warning about the "Great Deleveraging" in 2007), started incrementally adding back in November of 2008, even though I was still bearish (and still am in the macro picture), and started unloading again a few months ago and have accelerated it here recently. But, that's long-term money, not the trading accounts. I think we will "re-test" 1100 on the S&P 500 and probably higher, but my nose is beginning to bleed after the trajectory of this move.
Thank you. Again, cheers.
Unemployment was last over 10 percent in 1983. That's right, over 2 years into the Reagan administration. The max was 10.8 percent in late 1982. Apparently, the American people gave Reagan a LOT MORE time to get that down than the people here are giving Obama. Obama's already helped get us 3.5 percent growth with low inflation and interest rates continuing, and the job losses are below 200,000, from highs of over 600,000 earlier this year. The rate at which job losses are slowing and the rate of GDP suggests that it will still be some time before job growth is adequately positive to start denting the unemployment rate, but it will be well below 10 percent two years into Obama's administration. Incidentally, job growth did not exactly keep pace with population growth during the Bush administration, in contrast to the Clinton administration.
You're right that the recession we associate with the 70s peaked in '81 (with a 20+ misery index) and stayed bad into '83. For those of us who accept supply-side theory, we say that's how long it took for the tax cuts to do their magic.* It is to Reagan's credit that he stayed steady when things didn't improve right away (unlike Carter, who zigged and zagged like crazy), which enabled him to claim credit for the recovery underway by election day '84. Let's also not forget that there were plenty of other factors that allowed us to put the "malaise" in the rear-view mirror: everything from the firing of the striking air traffic controllers to the release of our hostages in Iran to the invasion of Grenada. But perhaps the biggest thing that kept Reagan personally popular while the economy continued to stink was getting shot. I'm pretty sure Obama doesn't want to emulate that. However, if he can similarly position himself to claim credit for a recovery (economically and otherwise), he will likewise win re-election.
*Quick note: just because cutting top tax rates from 70% down to 28% worked wonders does not mean that you can get the same results from cuts now, when rates are much lower. Too many supply-siders assume all cuts are the same. I like tax cuts as much as the next guy, but the premise of the Laffer Curve is that tax cuts "work" only if taxes are too high. And the higher they are, the more benefit you get from the cuts. Too bad politicians can't do math.
Here's some insightful commentary from John Mauldin on the (improving?) payroll figures and devastating tax policy. And whether you agree with his assumptions, it's hard to disagree with his overall conclusion. Personally, I'd prefer something akin to the Austrian approach, though not quite as draconian, but, rest assured, we will implement something that will prove far more destructive over time.
It's already happening. Just look at this healthcare boondoggle that's going to cost a shitload more than initial projections for covering not even a wide swath of the uninsured, all the while forcing people out of satsifactory plans because their employers will elect to pay a punitive tax rather than fund insurance because it will be far cheaper.
http://www.ritholtz.com/blog/2009/11/the-glide-path-option/
On a sidenote, some of my institutional contacts tell me their retail accounts have a full quarter of their accounts still in cash. And that's worrisome, because they're always the last ones to the party, which makes me think this market is not done going higher.
jjjjjjjj wrote:
Unemployment was last over 10 percent in 1983.
real unemployment, including U6 discouraged and under-employed, is 17.5%. Dont kid yourself. The total job destruction from the peak in % terms (Calculated Risk) is -6%, the largest in post WWII records. Hours worked/employee, the lowest, etc
All these numbers indicate a large unemployed cohort that is growing
'highest unemployment rate since 1983'- WHEN RONALD REGAN WAS INTO HIS 3RD YEAR! Gee, I guess he was given his WHOLE FIRST TERM TO 'GET IT TOGETHER'. OBAMA'S BEEN IN OFFICE 10 MONTHS. NICE.
Highest ever unemployment for high school kids. Is that the result of minimum wage increase this summer?
Heath reform will pass soon. Will companies hold off on hiring until they see how this will affect them?
Tax cuts end soon too.
Unemployment extensions raise unemployment tax. It will cost more for each person you hire.
Read somewhere that social security reform is on the agenda for next year. Can't mean cheaper for private sector can it?
Not saying all of these things aren't best for the long run, but none of them are going to "create jobs" this or next year.
Ok, financial, economic, and political experts, here is a MUST READ for everyone on this board that has serious political consequences as well. It is a page from my own playbook that I've been preaching about for quite some time about structural unemployment staying elevated for longer than anyone thinks possible.
We should be doing everything possible to NOT enact policy that will ULTIMATELY thwart nascent growth, but we are currently on a trajectory of doing JUST the opposite. It will have political fallout, and while the market beats to its own drummer and may go higher still as this all takes a prolonged period to play out, play out it will. Currently the tail is wagging the dog in Washington, but that will change.
Who am I?
Sagarin wrote:
Ok, financial, economic, and political experts, here is a MUST READ for everyone on this board that has serious political consequences as well. It is a page from my own playbook that I've been preaching about for quite some time about structural unemployment staying elevated for longer than anyone thinks possible.
We should be doing everything possible to NOT enact policy that will ULTIMATELY thwart nascent growth, but we are currently on a trajectory of doing JUST the opposite. It will have political fallout, and while the market beats to its own drummer and may go higher still as this all takes a prolonged period to play out, play out it will. Currently the tail is wagging the dog in Washington, but that will change.
http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2009/11/13/if-this-is-recovery.aspx
Well I'm no expert on any of those fronts but a little dose of common sense, and the fact that I've seen this movie before, backs you up.
Dust off the old leisure suit, turn down that thermostat and put on 2 or 3 sweaters...that 70's show is just starting.
Words of wisdom to close Mauldin's piece, which is a very noteworthy piece:
"Second, Americans are not used to the concept of 12% unemployment or 10% rates for extended periods. That is going to cause a serious backlash across the political spectrum. Couple that with the discomfort over $1.5-trillion deficits and there could be some serious political changes in the coming years. I think the message will be more anti-incumbent than one party or the other.
Third, the only way out of this morass is to create an environment where small business can thrive. As I've noted for the last several weeks in this letter, government spending does not increase GDP over time. It is a temporary nonproductive stimulus. It takes private investment to create jobs and increase productivity. Over the next few months, I will write more about how to do that."
One thing I'm pretty sure of is that if it were "MUST READ" material, it would be published somewhere other than a guys blog on Investorsinsight.com.
For the record, last time unemployment hit 10% it marked the end of a recession and the beginning of 18 years of massive and unrelenting gains in the stock markets.
Sagarin, I don't fault you for pulling all of your long-term investments out of the market. We had a quite a nice run this year, and it's understandable that you were jittery after what we all went through. I have hedged my long positions much more than I would have in retrospect for that reason. But you've really got to stop dredging up articles from second-rate blogs to convince yourself that you are right. It's a recipe for your own financial ruin.
If you thought there was absolutely no value here, you would refrain from commenting altogether. What you think of these "blogs" is immaterial. They are not commenting on the "market," the fundamentals of which are frequently disconnected from the economy (many of the smartest minds out there are collectively, rightly scratching their heads). I cannot provide you with proprietary information, and though you're generally right about the value of transparent information, I fear you will find ignoring the longer-term theme of these pieces regrettable. For the record, the last time unemployment hit 10%, we were in a vastly different era, fundamentally and structurally speaking. You and many others are reading the playbook of typical post recession recovery trajectories of the last six or seven decades. That will prove your undoing, ultimately. And it is also why we are putting the cart before the Trojan horse.
Even selling into this rally, I still have substantial long-exposure and have long said I expected this end-of-year rally on here, but THAT will be the clarion call, even if I'm early still. The rollover IRAs that I do have SIGNIFICANT control over are up some 42% YTD. Compare that to 22% and change on the S&P, unadjusted for risk of course. I am not telling people to be out of the market (though you would be wise to be paring back if you have gains and haven't done so). I full well KNOW that fiscal, interventionist charades can continue for a very long time, even if you find it compatible with your political leanings. That doesn't mean we're in a new structural bull market.
You must be the only bear on earth whose portfolio has double the returns of the S&P this year. Nice work.
Almost word for word what my wife said. That I'm a secular bear and a scrooge on the coming macroeconomic years has little to do with actively trading a portfolio, including the IRAs using levered ETFs and option writing, even bearish ETFs when picking spots, like today, for example, when Merdith Whitney (who is correct I might add) gave the bears a momentary reprieve. The 401ks, which I have limited flexibility over, have underperformed, since I did and have, in fact, taken some off the table and will continue to do so as we go up. No one has ever claimed to be able to pick an absolute top or bottom, but that doesn't matter.
This thread is about employment, not the market. Did you even bother to look at the spreadsheet embedded in Mauldin's link? I think a lot of his assumptions are generous.
bro, people tooling around on a message board aren't going to click through to an embedded spreadsheet on a posted link. You need to work on summing up your ideas a bit better.
Their loss. Not my job.