Fareed Zakaria GPS – CNN 09-13-15

Salient to Investors:

Fareed Zakaria said:

  • China’s economy is nearly 2.5 times that of Japan so even if growth slows substantially, China will continue to have seismic effects on the global economy.
  • Henry Kissinger said Republican candidate China-bashing is dangerous and could create an atmosphere a la Europe before WW I – a war no one wanted but no one knew how to prevent.
  • China’s renminbi has appreciated substantially against the dollar and yen over the past few years so devaluing it due to market forces is wise, which is why the move was praised by the IMF. China’s inconsistent and ineffective policies in the currency and equity markets does not make it evil.
  • Germany has tried as hard as any nation in history to repent for its past, and is now an exemplary liberal democracy and model global citizen. Reuters said West Germany accepted 13 million people from Soviet-ruled Eastern Europe after After WW II.
  • The countries in the Middle East that have taken in refugees are often not the richest: Jordan has taken in over a million, Lebanon a huge number, Turkey 1.5 million, but Saudi Arabia and Egypt have barely taken any.
  • If you put fruits and salads at the start of a buffet, people are more likely to eat good things. If you want people to save money, make the saving the default option.
  • An Australian study found that the longer humanitarian migrants stay in a country, the more likely they are to start businesses than other migrants. Historical refugees include Chopin, Freud, Einstein and Madeleine Albright.

John Sawers at Macro Advisory Partners said:

  • The world is chaotic and dangerous due to the rise of ISIS, change in terrorist tactics to killing in shopping malls – much harder to stop – and cyber attacks, where we have no ability to deal with in a conventional way.
  • The great bulk of migrant refugees are people genuinely fleeing conflict. The bigger problem is our citizens visiting Syria and returning radicalized and terrorist.
  • The intelligence communities in America, Britain, France and elsewhere have been successful in combating terrorism, but one cannot have a 100% record.
  • Iran is transitioning from a revolutionary to a more normal state. Rouhani et al have a different vision for Iran’s security and future than the hard-liners in the Revolutionary Guard and Quds Force. Iranians, especially the young, have little respect for the concept of a revolutionary state, and just want a normal life.
  • Putin understands that any prospect of sanctions being lifted requires him to cooperate with the Ukrainian government, while the West has to understand that Ukraine holds a special place for Russians.
  • China is trying to change to a more market-led economy. The US relationship with China is key for global stability for the rest of this century. A failed China is a much more dangerous China.
  • Obama inherited the entrée from hell, but has been calm, steady and reliable. His initiatives on Iran and Cuba are important in normalizing those countries.

Naguib Sawiris said:

  • The war in Syria will not end in months or even years.
  • The whole world is united in identifying the enemy as ISIS, who are killers and gangsters.

David Halpern at Behavioral Insights Team said:

  • Peer pressure is effective in encouraging people to pay their taxes, especially if you tell them that most people in their area pay on time, and even more effective when you tell them they are one of the few who have yet to pay.
  • Most things that governments do actually concerns behavior.
  • People are much more likely to do something if they plan ahead, think more precisely and concretely, when, where and how they are going to do something. Asking questions in a different way makes people much more effective in their job search.
  • If you want people to save money, make saving the default option – as a result, more than 5 million Brits now save. 
  • Most healthy years lost are due to behavioral factors.
  • Economies bounce up and down because of what we think others are doing, and we are often wrong in those perceptions.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/

or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1509/13/fzgps.01.html

Advice After Stock Market Drop: Take Some Deep Breaths, and Don’t Do a Thing – The New York Times 08-21-15

Salient to Investors:

Stocks are most useful for long-term goals so it does not make sense to change your investment strategy based on a blip (sic) of market activity. There is absolutely nothing abnormal going on in the market. Research shows that long-term portfolio performance suffers badly by missing just a few days of the market’s biggest gains.

The fundamentals of capitalism have not changed, not should your confidence in very long-term ownership of equities. Few investments deliver the kinds of returns that stocks can without their own accompanying anxiety. It would take decades of systemic economic erosion to prove that stocks are not the most accessible route to earn the returns you will need to retire.

Read the full article at http://www.nytimes.com/2015/08/22/your-money/stocks-and-bonds/advice-after-stock-market-drop-take-some-deep-breaths-and-dont-do-a-thing.html

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Fidelity Reviewed Which Investors Did Best And What They Found Was Hilarious – Business Insider 09-04-14

Salient to Investors:

James O’Shaughnessy of O’Shaughnessy Asset Mgmt said:

  • Fidelity found that their best performing accounts were those of people who forgot they had an account with them.
  • The shorter you hold a stock, the more likely you are to lose money.

Barry Ritholtz found that when families fought over inherited assets and did not touch those assets for say 10 or 20 years, those years were the best period of performance.

Richard Bernstein of Richard Bernstein Advisors found:

  • Over the period December 31, 1993 to December 31, 2013 the average mutual fund investor underperformed every investment asset class except Asian emerging market and Japanese equities, and even underperformed cash.
  • The average mutual fund investor would have improved performance by simply buying and holding any asset class other than Asian emerging market or Japanese equities.
  • The underperformance suggests the average mutual fund investor consistently bought assets that were overvalued and sold assets that were undervalued.
  • When chaos occurred, the average mutual fund investor ran away.

Read the full article at  http://www.businessinsider.com/forgetful-investors-performed-best-2014-9

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Yale vs. Penn: Where are stocks headed? – MarketWatch 08-22-14

Salient to Investors:

  • Robert Shiller at Yale said stocks and bonds are highly priced and may be joined by real estate.
  • Jeremy Siegel at Wharton expects the bull market to continue, possibly reaching Dow 18,000 or higher by the end of 2014. Siegel said bull markets climb the wall of worry in a world of uncertainty, and sells when there is no uncertainty.
  • Mitch Tuchman at Rebalance IRA said long-term investors are served by declining markets because steady buying during down cycles is a great way to build wealth over decades – a balanced, low-cost portfolio does not require you to guess correctly the direction of any investment.

Read the full article at http://www.marketwatch.com/story/yale-vs-penn-where-are-stocks-headed-2014-08-22

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Celebrities scammed by Madoff – Bankrate.com 08-15-14

Salient to Investors:

  • Steven Spielberg’s Wunderkinder Foundation lost an undisclosed amount – in 2006, about 70 percent of its interest and dividend income came from the Madoff firm.
  • Kevin Bacon and Kyra Sedgwick lost an undisclosed amount.
  • Elie Wiesel’s Foundation for Humanity lost substantially all of its assets, $15.2 million.
  • Sandy Koufax and other baseball greats lost undisclosed amounts.
  • Eric Roth said he suffered massive losses.
  • Larry King said he got back the money he had invested.
  • Zas Zas lost $10 million.
  • Jeffrey Katzenberg lost undisclosed millions.
  • John Malkovich said he was ruined financially by the scam.
  • Eliot Spitzer’s family real estate firm lost an undisclosed amount.

Read the full article at  http://www.bankrate.com/finance/investing/celebrities-scammed-by-madoff-1.aspx?ic_id=most_shared_default

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Morningstar shocker: Active funds lose heat – MarketWatch 08-14-14

Salient to Investors:

John Rekenthaler at Morningstar said:

  • Over the trailing 12 months, 68% of net sales to mutual funds ended up in passive investing vehicles versus 32% active.
  • Of $134 billion going into active funds, $30 billion is being placed in target-date funds.
  • Low-cost, passive funds keep more of the investor’s money in their pocket.

Read the full article at http://www.marketwatch.com/story/morningstar-shocker-active-funds-lose-heat-2014-08-14

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REMINDER: You Are ‘Shockingly’ Terrible At Investing – Business Insider 08-12-14

Salient to Investors:

Richard Bernstein at Richard Bernstein Advisors found:

  • Over the period from December 31, 1993 to December 31,  2013, the average mutual fund investor underperformed every asset class and category, including cash, except Asian emerging market and Japanese equities.
  • The average investor would have improved performance by simply buying and holding any asset class other than Asian emerging market or Japanese equities.
  • Investors consistently bought overvalued assets and sold undervalued assets.
  • In periods of chaos, investors ran away.

Read the full article at  http://www.businessinsider.com/typical-investor-returns-20-years-2014-8

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Bogle’s legacy: Returns that trounce active investing – MarketWatch 08-07-14

Salient to Investors:

Mitch Tuchman at Rebalance IRA writes:

  • The best strategy for a retirement investor with a 5 to 25 year time horizon in a tax-deferred account uses low-cost index funds allocated across multiple asset classes and re-balanced at least annually.
  • Re-balancing – the discipline to sell assets that have gained to reinvest in assets that have declined – brings is a huge advantage.
  • Burton Malkiel at Princeton says re-balancing a stock/bond split portfolio annually added 1.5% to returns during the past 15 years.
  • Diversify over multiple asset classes, including large-caps, small-caps, developed-foreign and emerging-market stocks, bonds and real estate.
  • John Bogle at Vanguard says over a lifetime of active investing, the active manager gets 80% and the investor gets 20%.

Read the full article at http://www.marketwatch.com/story/bogles-legacy-returns-that-trounce-active-investing-2014-08-07

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Millennials End Up in Stocks for Head Start on Retirement – Bloomberg 08-04-14

Salient to Investors:

  • The Transamerica Center for Retirement Studies said millennials – born from 1979 to 1996 – began saving for retirement at a median age of 22, versus 27 for Generation X and 35 for baby boomers. 71% of millennials offered 401(k) or similar plans contributed a median 8% of their salaries.
  • Sarah Holden at the Investment Company Institute said millennials were nervous about stocks and were less willing to take risk, but 401(k) plans are keeping them in equities. In 2012, 22% of heads of households younger than 35 owning mutual funds said they would only invest in financial instruments with zero or below-average risk even for a below-average return – more than any other age group except 65 and older.
  • Bankrate.com said 39% of adults aged 18 to 29 said cash was their preferred investment for money not needed for at least 10 years, 3 times the percent that picked the stock market.
  • Jean Young at Vanguard said defined contribution retirement plans, especially those with automatic enrollment or options that reduce risk as an employee ages, is keeping millennials invested in equities despite their risk wants.
  • Alicia Munnell at the Center for Retirement Research said the total effect is positive for the economy because in the long-term, more savings means more investment which means more growth.
  • Social Security’s trust funds will be depleted by 2033, after which tax income would be able to pay 75 percent of scheduled benefits through 2088.
  • Pew Research Center said 51% of millennials do not think there will be any money left in the Social Security system by the time they retire, while 39% said SS will only be able to provide benefits at reduced levels.
  • William Emmons at FRB of St. Louis said millennials have a large amount of student-loan debt but are cutting back on other borrowing, like not buying houses or maxing out credit cards.

 

 

 

Read the full article at http://www.bloomberg.com/news/2014-08-04/millennials-end-up-in-stocks-for-head-start-on-retirement-saving.html

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Did you miss this foreign stocks boom? – MarketWatch 07-31-2104

Salient to Investors:

  • Pundits calling for a huge decline in equities are either the absolutely certain types, who have stuck to their prediction for years, and the less media-savvy academics and heads of research at big investment firms who see a decline but after the market goes higher.
  • The last set of economic “reasons” for global markets to implode did not lead to that result.
  • Emerging bonds are back in vogue among big investors. Emerging country stock markets are pushing gains well into the double digits.
  • The US stock market could easily rise for a number of unknowable reasons, including late-arriving investors, Fed pronouncements, and a stronger economy.
  • Owning a diversified portfolio of global index funds benefits from all trends, all the time, regardless of underlying economies or investor sentiment, because a re-balancing strategy would have cashed out gains in up markets for investment in down markets.

Read the full article at http://www.marketwatch.com/story/did-you-miss-this-foreign-stocks-boom-2014-07-31

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