November 8, 2013 at 2:35 pm
I find it fascinating, all the speculation as to what the Fed will do with tapering. It's hard to imagine, that one report like the jobs number today, will greatly influence the Fed's actions. This whole thing is really pretty simple, until the housing market stabilizes and produces more jobs, I don't think the Fed will end its bond-buying activity. It just doesn't make sense to stop buying the bonds, when the economy clearly is not overheating, and there are literally almost no signs of inflation and the dollar is actually strengthening. Why on earth would the Fed not continue to buy bonds under these conditions? It looks like more of the same to us, which is to say, stay invested until the Fed actually does something different.
November 7, 2013 at 1:37 pm
In a surprising move today, the European Central Bank, lowered borrowing rates. As we have been saying for years now, the problem is not inflation, its DEFLATION. The ECB stated that inflation is not the problem, unemployment is the problem (see deflation). Welcome to the party boys, glad you could make it. For those who constantly warned us of the demise of the dollar, well, perhaps you can hang in there a little longer, well maybe a LOT longer. The dollar is more likely to strengthen in the short to intermediate-term in our view. Our economy, while certainly not blistering, is the strongest around right now, and with the dollar moving up, and inflation non-existent, don't be surprised if our Fed keeps the stimulus in place for longer than you might think. I don't see tapering until at least 2nd quarter 2014, and possibly longer. On top of that, new economic reports suggest the Fed will lower it's target rate of unemployment to 6-6.5%, which gives them even more latitude to keep buying bonds. Bottom line, the market looks like the best game in town for the foreseeable future. Long live the Fed!
October 24, 2013 at 10:47 am
We have our deal, well at least until January. In the meantime, congress has established a committee to come up with yet another budget. Don't hold your breath for sweeping change. According to our insider, Andy Friedman, we will likely see a budget with minor concessions from both sides, and another fight over the debt ceiling. Shocking. Between now and then we're pretty bullish. Interest rates have sunk back down a little bit, the 10yr US Treasury is down to around 2.5%, that should be good for big-ticket purchases. The latest jobs number came in a little soft, which again, supports support. Looks like our friends at the Fed will be busy for a while. The key takeaway, equities continue to look like the place to be.
October 14, 2013 at 12:02 pm
Just when you thought it was safe to go outside...I guess that deal wasn't as done as we thought. Don't worry though, it will get done. Between now and then, expect more of the same. Ups and downs, like a cruise ship surfing through a hurricane, the markets will remain volatile until the ink is dry. The good news, however, is that it looks like clear skies ahead, if we can just make it out of this wretched storm. The economic data is still solid, earnings will be rolling in, a proactive fed and decent valuations provide a nice backdrop for stock growth. Just might be a little bumpy along the way. Maybe we should invest in some Dramamine.
October 12, 2013 at 11:59 am
October 10, 2013 at 1:01 am
With the markets peeling off a few percentage points over the last few days, and no immediate end to the budget or debt ceiling fight in sight, its important to keep the following 5 things in mind:
1. Valuation: How are stocks valued? Are they cheap or are they expensive? (Keeping in mind that cheap stocks can get MUCH cheaper, and expensive stocks can get MUCH dearer).
2. Trend: What is the economy doing in sum? Is it expanding or contracting? What is the market doing — rising, falling or range-bound?
3. Inflation: What is the overall trend in inflation? Are prices rising or falling or stable — and how rapidly?
4. Earnings: Are companies able to grow their top and bottom lines?
5. Credit: What is the cost and availability of credit?
The bottom line, all of the previously mentioned 5 points appear to be favorable. Throw in a Janet Yellen Fed Chair confirmation, it seems to me, once this budget BS gets resolved, the market resumes its upward trend.
October 9, 2013 at 3:08 pm
October 7, 2013 at 12:38 pm
With the futures down triple digits today, things are playing out just as we expected, so far at least...the shutdown, while at the moment nothing more than a nuisance, is not the real problem. The shutdown, is really a distraction from the actual issue, which is the debt ceiling. While nothing is certain, we remain confident that in the end, the national debt will not be defaulted on. If you keep that in mind, the rest of this nonsense shouldn't bother you too much. We still believe that ultimately, this turns out to be a nice little buying opportunity. Waiting in the wings, Janet Yellen, who appears a lock to become the next Federal Reserve Chairperson, reminds me of the lyrics from that famous song by the Who..."meet the new boss, same as the old boss..." The bottom line, a Yellen appointment is likely to produce more economic support from the Fed, low interest rates, and the intent to raise prices on everything from stocks to real estate. So as the media continues to pound the table about how bad the ramifications will be if the debt is defaulted on (and it would be bad), keep in mind that a default is a very unlikely outcome. Kinda like the Lion's actually beating the Packers in Green Bay.
October 2, 2013 at 2:29 pm
Shocking...more volatility. Up down up down. It looks like this is how its going to be for a while. I think this ultimately becomes a buying opportunity, as the markets may shed a little valuation until the budget and debt ceiling issues are settled. If/when the debt ceiling is resolved, the markets would likely recover pretty quickly whatever damage may have been done, and resume it's upward trend. Specifically, you might want to think about increasing equity holdings sometime towards the end of October if you have the capacity to do so. It's something we will be addressing with our clients in the very near future.
On a happy note, the Red Wings open up their season tonight, and it's the first year of competing in the Eastern Conference. No more 10:30pm west coast playoff games!!!
October 1, 2013 at 11:49 am
The government shuts down...and the futures are up over 50 points...hmmm...I guess we know what the market thinks about our elected officials and the job they're doing...
Separately, it's becoming quite clear, the housing market needs to pick up for unemployment to abate. This is why we think the Fed will continue to buy government bonds and mortgage backed securities, probably through the end of the year. Keep an eye on the 10 year treasury, as long as that stays at or below where it is right now, the housing market should show signs of improvement, and not surprisingly, the equity markets should remain pretty strong. Just keep this in mind as we hustle through the next few weeks and have to listen to all the nonsense about the budget and debt ceiling.
Big game Sunday, we will truly find out if we're watching "the same old Lions" as they visit fabled Lambeau Field, where they haven't won since Abe Lincoln was president.
September 30, 2013 at 11:31 am
September 30, 2013 at 11:19 am
This is exactly what I was talking about. While a government shut-down isn't out of the question, and perhaps even a very real possibility, how long do you think it will last? Neither party wants any part of that long-term. In the meantime, the futures are down a hundred plus points. Between now and Oct. 17, volatility is likely to be pretty high. Like flying on an airplane during turbulence, it's annoying and uncomfortable, but it's most likely no big deal.
Separately, mortgage rates have quietly dropped 30 basis points in the last week. The 10 year Treasury has dropped about the same amount. If the rates stay at this level or even drop further, it should help the economy and the housing market. It's the main reason I don't think we see any tapering this year, specifically in the mortgage backed securities market. Maybe in government bonds, but that is looking a little less likely now too.
Are the Lion's and Tigers really in first place at the same time? I think I just saw a pig fly by...
September 27, 2013 at 10:52 am
By the way, let me know if you've seen our commercial on Comcast cable tv, or if you've heard our web promos on WWJ (am 950).
And for your viewing pleasure, check out our latest video:
Sawchuk & Langenstein Wealth Strategies is dedicated to helping their clients plan for, and achieve, a financially successful retirement. Founded in 1997, the firm now serves more than 500 clients and manages more than a quarter of a billion dollars in assets. Terry Sawchuk is Founder and Chairman o...
September 27, 2013 at 10:43 am
Lot's going on in the world of finance these days. While it looks like, at least for now anyways, the impending military strike in Syria isn't so impending, things are heating up here in the U.S. Let's start with the debt ceiling. Our Washington Insider, Andy Friedman, has been consistently saying that there will be no default on the U.S. debt. He's also said that it's very unlikely we will see a government shut-down either. Try to keep that in mind as you watch the nightly news over the next few weeks!
As for the market, it may get a little choppy between now and then. In the big picture, mortgage rates have fallen 30 basis points (three tenths of one percent) in the last week, which is probably good for anyone looking to buy or sell a home. Ben Bernanke's decision not to taper was a surprise to some, and has really helped settle the bond market down. I'm not sold on the idea that Fed tapering (slowly easing out of stimulus support by the Federal Reserve) will begin in 2013. Unless we see a very big improvement in the economic data, there is no justification for tapering.
If we've learned anything over the last 5 years, it can be simply stated in one easy phrase..."don't fight the Fed!".
September 19, 2013 at 11:20 am
As it turns out, I was right and PIMCO was wrong. The combination of Larry Summers pulling his name out of the hat for Fed Chairman, and Ben Bernanke announcing the Fed would not begin to taper this month gave the markets reason to party like a twenty-something baby boomer at Woodstock. Ben Bernanke also discussed unemployment, and stated there is no specific number to which the Fed's actions are tied, basically saying they need to look at the entire economic picture to determine what policy will be. Duh, he really had to say that? Sadly, yes, because there had been so much speculation that the Fed would begin to taper as unemployment got closer to 7%. Now we have better guidance. This recent twist should be good for both stocks and particularly bonds. The party rages on!
September 12, 2013 at 10:37 am
I'm already sick of hearing the word tapering. The guys at PIMCO have recently coined the phrase "tinkering" which I like a lot better. Either way, contrary to my earlier post, it looks like the Fed may start "tinkering" this month. The reason neither the bond market nor the stock market seems too worried looks to be the very modest pace of reducing bond purchases. As long as the Fed continues to telegraph its actions and doesn't make any drastic moves, it appears that markets may be able to hold it together. That's a good sign, lets hope it stays that way!
September 5, 2013 at 1:31 am
We will be hearing more and more about the debt ceiling as it draws ever closer. You will be inundated with end of days rhetoric and possibly even more significant swings in the investment markets. We believe a compromise will be reached. In our view, based upon research produces by historically reliable outlets, the likelihood of a default on the national debt is pretty remote.
The two probable bargaining chips that are likely to be exchanged...the republicans are looking for a change to the way CPI is handled on entitlements. From Andy Friedman, a respected source on this topic:
"The Republicans seek to replace CPI with “chained CPI.” Chained CPI acknowledges that when the price of an item gets too high, people do not simply pay that higher price, they substitute something cheaper. If the price of beef gets too high, people buy more chicken. Chained CPI does not grow as quickly as conventional CPI. Thus, using chained CPI would slow the rate of growth of Social Security payments."
The dems are looking for an end to the "stretch out" IRA for non-spouse beneficiaries. This means anyone other than a spouse who inherits an IRA will have to withdraw the entire IRA balance, and of course pay the tax, within five years of the owners death.
None of this is set in stone, but we think at this point it's the most probable outcome. Stay tuned!
September 3, 2013 at 11:58 am
Sadly, summer is over, oh wait, my kids started school today, woohoo!!
Now that we have that out of the way, in spite of the market looking like it's doing the happy dance today, keep in mind that with each passing day, the debt ceiling debate gets ever closer. While we all agree there is very little chance that the U.S. Government will default on its debt, the negotiations leading up to the resolution may make for some turbulent days for the markets. A likely casualty of the potential compromise could be the closing of certain tax loopholes. Stretch IRA's may go the way of the dinosaur for beneficiaries other than a spouse. Limitations on amounts being accumulated in IRA's for high net worth individuals are also on the table. Particular trusts designed to dodge taxes are also squarely in the cross-hairs of our legislators, maybe even on both sides of the isle.
The bottom line...the negotiations are going to get a lot of air time, and taxes are likely going up. Neither seem to be particularly good for the markets.
August 22, 2013 at 10:44 pm
There's been quite a bit of speculation over "tapering", meaning when the Fed will begin to reduce/eliminate it's bond purchases. Recent commentary has suggested Bernanke and company will begin tapering in September. In our view, that's probably not the case, but certainly not out of the question. With Bernanke's term about to expire, it's hard to imagine he would start a process this early giving his successor no choice in the matter. Rates have increased this week, which could mean that tapering is coming sooner rather than later. Fools make predictions, and I'm not even sure Bernanke knows at this point. What we do know is that the economy is not setting the world on fire, and the economic data continues to be mixed. We will probably just have to suffer through a little bond volatility until the picture clears up a bit. Thankfully, our algorithm is in place and ready to act should the situation deteriorate. In the meantime, equities are holding up pretty well considering what's on the table.
August 19, 2013 at 11:41 am
What a beautiful weekend! Hope all you dream cruisers got your fill of automotive nostalgia and some crazy good people watching! The stock market has been worth paying attention to as well. Seems the markets are not very comfortable with the direction from the Fed at the moment. Uncertainty abound as not only do we not know what policy the Fed may pursue, at this point, we don't even know who the next Fed policy maker is even going to be. Rest assured, we are watching things very closely, and our algorithm is hard at work. We haven't made any changes to our models, but we are paying very close attention to market related events. In the meantime, football is back!!!
August 17, 2013 at 10:15 am
Check our our new commercial...soon to be seen on a television near you:
Vimeo is the home for high-quality videos and the people who love them.
July 31, 2013 at 11:45 am
July 29, 2013 at 11:07 am
It's been a little too long since we've posted here on FB, so when I saw this article today, I thought it would be a great way to get the posts going again. This is another nice commentary from Barry Ritholtz, and it's something most investors fall for...a good story. Think gold, inflation, devaluation of the dollar, housing, tech stocks etc. Every bubble starts out with a story about how "it's different this time" blah blah blah:
> My Sunday Washington Post Business Section column is out. This morning, we look at a cognitive issue that has caused problems for
June 26, 2013 at 12:17 pm
Have you considered long-term care insurance? Perhaps you've looked at it but decided it was too expensive? It's a common approach for insurance sales people to recommend the most expensive coverage, when more reasonable and practical options are available. The risk of needing skilled or custodial care in your later years may be the biggest threat to your spouse's financial security. If your pension gets reduced when you move on to the next life, and you end up spending through a big chunk of savings due to long-term care costs, your spouse could be in trouble financially. There are many long-term care options available, and it can be more affordable than you might think. We can show you a few different options, we can even suggest options if you think you won't qualify for health reasons. Information is power, you can always decide to go it alone, but if you don't at least explore all the options, you could be leaving your family in a potentially bad spot. Just think of the awesome Christmas and birthday gifts your spouse would give you if she knew she didn't have to worry once you're gone.
June 24, 2013 at 10:40 pm
Believe it or not, the market goes down too! Yes, I know it's been a really long time since we've seen any kind of dip, and that's exactly the point. It's fair to say the market may have gotten a little ahead of itself by racing up nearly 20% in less than six months. Don't bother looking for explanations, nobody knows exactly why the market has been falling. There are MANY reasons to explain the dip, at the end of the day, it really doesn't matter why, it's too late to do anything about it, and it will be different next time so there probably isn't much to learn from it. For now, it's like being in an airplane during some gnarly turbulence. Yeah it's uncomfortable to deal with, but it's still a whole lot better than trying to exit the plane. It's impossible to tell how far this latest swoon will go, we are watching things closely. If the algorithm tell us to go to cash, we will, otherwise we ride out the storm. Perhaps a nice glass of scotch will calm the nerves.