What I Read (And Why) A list of the best financial writers

Originally published February 6, 2016 on Fool.com
by Morgan Housel

We are in the golden age of financial information.

There is more high-quality financial writing today than ever before, written by a more diverse group of writers than has ever existed.

But there is far too much to read. The volume of financial information could drop by 99% and you still couldn’t read a fraction of what’s out there.

Everyone needs a filter, which requires having a curated list of go-to writers.

Here’s a list of people I go out of my way to read (I know I’m forgetting many — sorry).

Ben Carlson (A Wealth of Common Sense)

  • Who he is: Portfolio manager at an endowment fund
  • What he writes: Investing observations that seem like common sense until you realize you had never thought about investing that way before reading his article.
  • Why you should read him: He bats pretty close to a thousand in terms of quality. Every article is worth reading.

Sam Lee (Morningstar)…

Read the rest of Morgan’s go to reading over at Fool.com

All third party materials are the responsibility of their respective authors, creators, and/or owners. First Allied is not responsible for third party materials, and the information reflects the opinion of its authors, creators, and/or owners at the time of its issuance, which opinions and information are subject to change at any time without notice and without obligation of notification.

Went to cash? Here’s the next mistake you’ll make

Originally Published on Yahoo! Finance
by Eric Rosenbaum

How about that 550-point intraday dive last week in the Dow! Did that finally get you to sell?

Or was it one of the many headlines about the trillions of dollars that have been wiped out of the stock market in the worst start for the Dow in history — since 1897! And worst start for the S&P 500 since the Great Depression began in 1929.

Oh, c’mon, that was “so last Wednesday.”

Surely, when all the major indices ripped higher on Friday, and stocks registered their first positive week of the year, and that diving-Dow had two straight days with triple-digit gains, you had plowed right back into the stock market and banked all those big gains.

Right?

It seemed like the panic and the paranoia were over — until the Dow dropped by another 200 points on Monday.

Vanguard Group CEO Bill McNabb said on Monday that investors should expect the volatility to last longer — and expect less from stocks for up to a decade.

And so far in January, investors have yanked near-$7 billion from U.S. stock funds, according to Thomson Reuters Lipper data. Investors have also put more than $3 billion into money market funds — the market’s under-the-mattress cash equivalent. But the more alarming data comes from last month, when investors pulled $48 billion from stock funds. That is eerily similar to 2008, as the financial crash hardened: Investors took $49 billion out of stock funds in Sept. 2008 and $55 billion out of stock funds in October 2008.

Kudos to investors for the great timing. Except for the fact that from 2008 to 2012, the S&P 500 generated a cumulative return of 8.6 percent.

Here’s the problem…

Read the rest on Yahoo! Finance

My Top 10 Expected Surprises For 2016

Originally published Jan 5, 2016 on Real Clear Markets
by Byron Wien

Here we are with the 31st edition of The Ten Surprises. As loyal readers know by now, my definition of a Surprise is an event I believe is probable, with a better than 50% chance of happening during the year, but which the average professional investor would only assign a one-in-three likelihood of taking place. Over the years I generally have five or six of the Surprises pretty much on target (they have multiple components), but I don’t develop the list to get a high score. My objective is to present concepts that I believe could have an impact on the financial markets but are generally unanticipated by most investors. I would describe my 2015 edition as below average after a good year in 2014. I had a number of Surprises partially “right,” but I missed several important events, including the terrorist attacks in Paris and California, the delay in the increase in short-term interest rates by the Federal Reserve and the weak performance of the U.S. equity markets.

My first Surprise last year expected the Federal Reserve to raise rates early in the year rather than in December, so I got this one clearly wrong. My reasoning was that the Fed had kept rates near zero throughout the recovery and was anxious to move to a more normal policy position. For that to happen, the governors had to feel that the United States economy had developed enough natural momentum on its own to continue growing with less monetary accommodation. Because I believed back then that the economy was headed toward a 3% real growth rate by the end of 2015, I thought the Fed would have the confidence to act early. As events developed, the economy was weaker than I anticipated and the Fed delayed increasing rates until the end of the year (even though the economic data were mixed at the time of their decision).

The second Surprise was my expectation that cyber terrorism would become a serious problem during the year. Foreign computer-savvy operatives are clearly using techniques to invade the networks of both corporations and government agencies. While this problem has existed in a minor way in the past, it has escalated significantly in 2015. So far, however, the cyber security efforts at financial institutions seem to be working, given that no major bank has been forced to suspend service to its depositors. Nonetheless, the risk is self-evident and further efforts by cyber rogues are likely to create major problems in the future.

The third Surprise was that the Standard & Poor’s would rise 15% in 2015. At the beginning of the year, most forecasts by analysts and strategists were for a 10% increase. The surprise would be a market that either did better than that or was down for the year. Since I was optimistic that the U.S. economy would continue to grow during 2016, I opted for the positive view. As it turned out, the combination of a strong dollar and declining oil company profits caused S&P 500 earnings to decline. As a reflection of this, the index saw a decline of less than 1%, a far cry from my estimate. Concern about the Federal Reserve raising short-term interest rates hung a cloud over the market all year.

The controversial decision by Mario Draghi to increase monetary expansion at the European Central Bank was my fourth Surprise, and that turned out to be right. He recognized that without a vigorous program of monetary stimulus, Europe was in danger of moving back into recession. He had said earlier that he would “do whatever it takes” to prevent another recession and he made good on that promise in 2015. As a result, the euro weakened against the dollar, helping European exports and diminishing overseas earnings of American companies. The Surprise further suggested that Europe would suffer a recession anyway and that Germany would be particularly hard hit because exports to China and other trading partners would decline. Happily, Europe had a better year than that with the economy growing at more than 1%. Europe, like the United States, would have had better results with more fiscal spending, but the various parliaments were not supportive of that policy. Politically, there was a shift to the right, as I expected.

I focused on Japan in my fifth Surprise. I thought Shinzo Abe’s combination of fiscal and monetary stimulus would enable the economy to achieve modest growth. The second and third quarters were in recession, although the fourth quarter is now expected to show real growth of 3%. I thought the Nikkei would be flat in yen and down in dollars. As it turned out, it was up in both yen and in dollars, so I was correct on the currency depreciation, but the market did better than I thought it would.

So here are the Surprises of 2016. I will discuss them in detail in my February essay.

1. Riding on the coattails of Hillary Clinton, the winner of the presidential race against Ted Cruz, the Democrats gain control of the Senate in November. The extreme positions of the Republican presidential candidate on key issues are cited as factors contributing to this outcome. Turnout is below expectations for both political parties.

2. The United States equity market has a down year. Stocks suffer from weak earnings, margin pressure (higher wages and no pricing power) and a price-earnings ratio contraction. Investors keeping large cash balances because of global instability is another reason for the disappointing performance.

3. After the December rate increase, the Federal Reserve raises short-term interest rates by 25 basis points only once during 2016 in spite of having indicated on December 16 that they would do more. A weak economy, poor corporate performance and struggling emerging markets are behind the cautious policy. Reversing course and actually reducing rates is actively considered later in the year. Real gross domestic product in the U.S. is below 2% for 2016.

4. The weak American economy and the soft equity market cause overseas investors to reduce their holdings of American stocks. An uncertain policy agenda as a result of a heated presidential campaign further confuses the outlook. The dollar declines to 1.20 against the euro.

5. China barely avoids a hard landing and its soft economy fails to produce enough new jobs to satisfy its young people. Chinese banks get in trouble because of non-performing loans. Debt to GDP is now 250%. Growth drops below 5% even though retail and auto sales are good and industrial production is up. The yuan is adjusted to seven against the dollar to stimulate exports.

Read the rest of the article on Real Clear Markets

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Families Go to Battle in Probate Court, Only to Leave Without Anything

by Steve Jansen

In October 2007, Willie Jo Mills of Houston suffered a stroke that paralyzed the right side of her body. A widow with two daughters and a son, the 80-year-old woman was prescribed a variety of pain medications, but doctors couldn’t find the right cocktail.

Six months later, Mills’s son Larry filed an application with the Harris County Probate Court to become his mom’s legal guardian. Mills’s youngest daughter, Sherry Johnston, who wasn’t getting along with Larry, contested her brother’s guardianship request. With the case at a standstill, Judge Christine Riddle Butts, one of the newest of Harris County’s four elected probate judges, selected the third-party guardians David R. Dexel, a Houston-based attorney, and Ginger Lott, a certified guardian in Texas, as Mills’s legal caretakers.

Johnston says that’s when the family’s five-year horror began…

Read the rest here on HoustonPress.com

Kathleen Elkins: 11 Short Books to Read If You Want to Get Rich

Business Insider Contributor: Kathleen ElkinsYou don’t have to be a money expert to get rich, but it can help to read up on investing and achieving wealth.

Good news: There are several concise books loaded with valuable information about accumulating wealth that you could start and finish in an afternoon.

We can’t guarantee a book will make you rich, but if you’ve always wanted to learn how to properly manage your money and never made the time, start with this list of brilliant personal finance books all under 160 pages.

Read the rest on Business Insider

Perspective on Interest Rates: Numbers Not Anecdotes

For the Past Two Years, Predicted Rate Increases Have Not Materialized.

The problem with the thinking behind this incorrect commentary is what is termed the normalization of deviance. We typically experience this when our car brakes gradually lose effectiveness but we constantly adjust and never realize the deviance until the brakes are adjusted. The Challenger disaster of 1986 is another famous example of this rationalization.

More recently, the rise in adjustable rate mortgage delinquencies, both prime and subprime, was evident by late 2006, see my presentation “Supervisory Challenges at the Mid-cycle of the Economic Expansion Nov. 6, 2006. Note also that this presentation was made long prior to the failure of Bear Stearns in March 2008 and almost two years before Lehman. Overlooking the deviance of mortgage delinquencies then, interest rates over the past two years, and more recently, the rise in inflation on a year-over–year basis, has caused decision makers to ignore trends at their own, their shareholders’ and voters’ peril…

Continue Reading on Real Clear Markets

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14 Thoughts That Changed How I Think About Investing

A smart sentence can teach you more than some books. Here are 14 that totally changed how I think about investing.

“In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for wrestling, chess, and investing: Beginners should focus on avoiding mistakes, experts on making great moves.” — Erik Falkenstein

Most investors assume they’re average and attempt to become above average. In reality, they’re far below average (or the market’s average return) and should put all their effort into working their way to par…

Continue reading this article on The Motley Fool

**PLEASE NOTE:  the information above being provided is strictly as a courtesy.  When you link to any of the sites provided here, you are leaving this site.  We make no representation as to the completeness or accuracy of information provided at these web sites.  Nor is the company liable for any direct or indirect technical or systems issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this webs site.  When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

11 Financial Books Every Young Person Should Read

Those of you who are seeking investing enlightenment are not going to find much of it on the web.

I suggest you log off, power down your computer, and read some books. Take your time. The months you spend perusing this list will be well spent.

I’d recommend reading at least the first four books listed before even thinking of getting your hands dirty with real investing.

1. “A Random Walk Down Wall Street by Burton Malkiel

An excellent investment primer. It explains the basics of stocks, bonds, and mutual funds, and will reinforce the efficient market concept.

2. “Common Sense on Mutual Fundsby John Bogle…

Continue reading this article at Business Insider

**PLEASE NOTE:  the information above being provided is strictly as a courtesy.  When you link to any of the sites provided here, you are leaving this site.  We make no representation as to the completeness or accuracy of information provided at these web sites.  Nor is the company liable for any direct or indirect technical or systems issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this webs site.  When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

An Update on My Reading

AdvisorOne: 15 Best Investing Quotes of All Time

Whether markets are roaring ahead or stumbling off a cliff, good, solid advice is always needed to restrain the euphoria or soothe the panic attack. AdvisorOne collected some great, and well-traveled, investing quotes from the well-known and the lesser-known…

The Motley Fool: 25 Important Things to Remember As an Investor

1. The intrinsic value of the stock market as a whole increases by about 1% every six weeks. That’s what you’ll get over the long term. Everything else is noise.

2. Several academic studies have shown that those who trade the most earn the lowest returns. Remember Pascal’s wisdom: “All man’s miseries derive from not being able to sit in a quiet room alone.”…

The Motley Fool: 50 Unfortunate Truths About Investing

Sorry, but … 

1. Saying “I’ll be greedy when others are fearful” is much easier than actually doing it.

2. The gulf between a great company and a great investment can be extraordinary.

3. Markets go through at least one big pullback every year, and one massive one every decade. Get used to it. It’s just what they do.

An Update on Mike’s Reading

The Motley Fool: Investing Essentials to Last You a Lifetime

The best time to start saving for retirement is as soon as possible. So if you’ve secured your emergency savings account, thumbed through your employer’s benefits package, and know you’re interested in stocks, where do you go from there?

MarketWatch: 8 Strategies to Protect Your Investments

I don’t know about you, but I’m a little bit nervous. The Standard & Poor’s 500 is trading close to a four-year high and the only good reason for that, it would seem, is this: Stocks like to climb a wall of worry.

My guess, however, is that if you’re like me, you might want to a little downside protection right about now. After all, it seems more likely the market will fall rather than rise significantly from current levels. So what are some good ways to protect your portfolio, and gains if you have any?

CBS News: John Bogle’s 10 Rules of Investing

The Clash of the Cultures: Investment vs. Speculation” is investing pioneer John C. Bogle’s tenth and last book. It is an enjoyable read that ends with 10 lessons for investors that, while simple, are deeply valuable to the general public. I even developed my own scorecard to keep track of how the clash that Bogle, founder of mutual fund giant The Vanguard Group, alludes to is developing over time…

Bogle also offer prescriptions for how to address such opposing forces. The bad news — don’t hold your breath waiting for the financial system to get fixed. The good news is that you can immediately begin following his lessons to at least lessen the chances of losing your hard-money amid this surge in speculation

MarketWatch: Here’s What Keeps Me Awake at Night

September 12, 2012. This is the date that may ultimately decide the fate of the euro zone.

It has nothing to do with Greece, Spain, Italy or any of the other problem children of Europe. No, it is Europe’s stern school mistress Germany that holds the fate of the currency zone in the balance.

On Sept. 12, the eight justices of Germany’s constitutional court will meet to decide the legality of the euro zone’s rescue fund or, more accurately, the legality of Germany’s participation in the bailout fund under the German constitution.

Seeking Alpha: 4 Strategies for Betting on Interest Rate Moves

While interest rates are low, the yield curve looks very, very normal. The longer a bond’s maturity, the more a bondholder will receive in interest. How should you position your bond investments in this environment?