Welcome to hump day, following an ugly inta-day reversal yesterday. Future look soft, as we seem to be taking directions from Europe. Oh, and our morning train reads:
• What’s Behind the Drop in Oil Prices? Simple Economics (NYT)
• Job Openings Rise Near 14-Year High In November (Real Time Economics) see also Three Signs Pointing to Bigger Raises in 2015 (Upshot)
• The Most (Not) Hated Bull Market (Meb Faber)
• Private Equity’s Soaring Valuations, Rampant Deal-Making (CIO)
• Euro Slumps to 9-Year Low Against Dollar on ECB Easing Expectations (WSJ) see also Yield on Five-Year Japanese Government Bond Falls to Zero (WSJ)
Re: Rethinking retirement guidelines
It is only very recent history that has allowed for the luxury of retirement. That the burden has been shifted back on the individual in an era of stagnant wages and increased longevity could be a portent that this luxury was a fleeting one in human history. Oh yes, I forgot, soon we’ll all be free as robots take away the unpleasantness of labor. Perhaps they will be more disciplined in their retirement savings.
I think an over-looked feature of the Target Date funds for many retirement savers is that they provide the discipline to end up with a relatively conservative investment mix in that age 60-70 window when people are leaving the work force, making Social Security decisions, beginning to collect pensions etc.
From a planning standpoint, that relative conservatism reduces the likelihood of a massive 2008 shock where suddenly 50% of their assets disappear right when they are looking to buy annuities, set up a TIPs ladder, downsize, relocate etc. At one of the massive transition points in their lives, a conservative asset mix can provide a pre-retiree or just retired person some breathing room to make decisions. At that point in time, a major re-allocation of assets is likely to occur and the Target Date allocation will become much less important.
Once the re-allocation of assets has occurred and guaranteed income streams are set up, then the remaining assets can be put into stocks etc. to provide that long-term growth to offset the often poor inflation adjustments that pensions etc. offer. For some people, the conservative mix that most Target Dates provide post-retirement may also be desirable, so that group wouldn’t have to do anything.
Bonds have no income stream in a ZIRP environment. Unless you can live off money stuffed in your investments, there is no alternative to equities. From all of us pensioners, “Thanks FED”.
well even without the fed’s intervention, rates would still be low.. as there really isnt much interest in loans at higher rates. business is barely investing in the US, or else where, as demand is so week. and raise consumers rates and they stop buying, leading to even less demand
Nerves Rattled in U.S. Equities as S&P 500 Volatility Turns Ugly
http://www.bloomberg.com/news/2015-01-13/nerves-rattled-in-u-s-equities-as-s-p-500-volatility-turns-ugly.html
“‘As an investor, what I’m thinking right now is don’t panic'”
You’ve got be kidding me. Stocks are down 3% from all-time highs after a 200% diagonal-up rally in five years. What the hell could these people possibly be complaining about? I mean I certainly agree that the “market” going down – not diagonal up as is it’s new “nature” – is a rare and puzzling event these days, but are there any adults left in the room? Have any of these people actually looked at the nosebleed valuation measures of this “market”, or were they too busy constantly buying the dip?
Also, although I realize nothing can ever have bearish implications again, those of us with memories longer than that of a highly intelligent goldfish (or a wall street monetary crack addict) still pay attention to the copper price as a barometer of the global economy. And to my eyes, copper is down over 15% in about a month. This is not to mention shipping indices which have absolutely collapsed in recent months. Thankfully Dr. Copper is now simply “high school diploma copper”, and we can safely ignore what’s happening there (and everywhere else in the commodity complex, for that matter).
China is sick. China is the only significant manufacturer. That’s why commodities are down. The USA lives by eating it’s seed corn, i.e. selling off it’s companies, land and buildings. Of course, modern economists say we can get rich selling our services to each other, i.e. taking in our neighbors wash.
I was wondering about the recent volatility, so I looked at the average daily ranges of the S&P over the past 10 years (high-low)/close averaged over the last 10 trading days. The last 10 days, excluding today which will be a hummer, ranked 67th out of 251. The top 10 were:
10/3/2008 0.082877147 1
10/17/2008 0.059651304 2
11/14/2008 0.056687624 3
12/1/2008 0.047624528 4
10/31/2008 0.047165691 5
7/29/2011 0.041618739 6
2/27/2009 0.038536002 7
9/19/2008 0.038214443 8
1/14/2009 0.036765189 9
9/5/2008 0.034357088 10
On Crude:
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRNTUS2&f=W
US net imports are somewhat down. More production, new production techniques, etc. The change is a small % of the world demand.
I wonder how cheap the royals need to go to keep China from looking to Russia, in many ways Russia is a better “security” prospect than relying on US puppets.
A Teenager’s View on Social Media (Medium) An Old Fogey’s Analysis of a Teenager’s View on Social Media (Medium)
STARTUPTOPIA: Capital Ventured (The Awl) Middleman Removed (The Awl) must read the keywords
Benedict Evans: Mobile Is Eating the World (Andreessen Horowitz) There is no point in drawing a distinction between the future of technology and the future of mobile. They are the same. In other words, technology is now outgrowing the tech industry.
The internet of things. Way back in the last century, 1999, Jim Clark at NetScape had programmers writing software so he could control a yacht on the Internet, The New New Thing, one of Michael Lewis’ finest
Jeff Gundlach is looking the part of both sage and guru lately.
Is he incredibly smart, incredibly lucky or both?
Critique of “Bewitched by Mandarins of Central Banking”
The very sharp John Plender makes what is now the standard …argument that central banks are doing bad things with quantitative easing and need to reverse it and raise interest rates. …
That Plender’s argument is incoherent is, I think, demonstrated by the fact that markets do not respond as he thinks they should–he saw the end of large-scale US QE coming at the start of 2013, and confidently predicted a fall in US Treasury bond prices that simply has not happened.
The way I see it is this: The root problem is an inability of financial intermediaries to stand behind or to credibly assess risks ….
NB: In a world desperate for reliable collateral the price of reliable collateral goes up.
“The root problem is an inability of financial intermediaries to stand behind or to credibly assess risks ”
The US House is about to repeal the Dodd-Franks protections. Only the republican controlled Senate can stop them. Hang on to your hat as we prepare for Bailout Nation Part II (or is it III).
If and when it happens again, we sure as hell better do the right thing this time and nationalize them. Wipe the equity holders out, give the corporate bond holders a huge haircut, fire all the corrupt executives, and then eventually break up what’s left into multiple smaller, private banks. It’s what would have happened the first time if we weren’t living in a completely corrupt system.
Of course, we’ll have QE4 and QE5 and QE6… and QEN before that’s allowed to happen.
As S.&P. Prepares to Settle, Worth Remembering the Killing of the Franken Amendment
This is a good time to mention the Franken Amendment to the Dodd-Frank bill which would have eliminated the incentive for the rating agencies to exaggerate the quality of MBS by taking the hiring decision away from the banks.
…the amendment was killed and the pre-crisis system was preserved intact.
And, as economic theory would predict, there is evidence that the rating agencies are again lowering their standards to gain business.
NB: People are, quite rationally, reluctant to buy and hold private debt in the absence of guarantees they can trust and these days both guarantee and trust are in short supply.
this also impacts what the rates are that bond holder want. and it impacts how much interest there is on the part of companies to add debt
brits in the US give US health ‘care’ as review
http://www.theguardian.com/money/2015/jan/12/us-healthcare-system-leaves-brits-baffled-enraged
pain in the but?
not sure that wages will go up, after all, lots of companies can offshore those ‘new’ jobs any where in the world, and will. plus even if they want to hire in the US, there is still a deep bench off unemployed workers to go through first
that big employer collusion scandal has been settled.
http://www.reuters.com/article/2015/01/14/us-apple-google-settlement-idUSKBN0KN02Z20150114
seems that employers arent suppose to not poach from each other
course its really hard to catch them doing it isnt it?
As a pro-science moderate who loves space exploration…
With Ted Cruz in charge of NASA I say shut it down. SHUT NASA DOWN NOW!
Seriously. Shut it thing down, defund, end it. NOW! I don’t give a damn if it hurts him, his supporters in Texas, their families or America’s place in space. SHUT NASA DOWN NOW!
No funding for his free-market deals with private space companies. SHUT DOWN NASA NOW.
just what will create wage growth? one US region has %4 unemployment . and little wage growth
http://www.businessinsider.com/kocherlakota-thinks-4-unemployment-to-see-wage-growth-2015-1?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+TheMoneyGame+%28The+Money+Game%29