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The Best of What They Said and I Read Week Ending 10/28/2018

Short excerpts from articles I found interesting

I may not agree with the author and the following material is not intended as investment advice


Barron’s – October 26, 2018 – S&P 500 Drops 3.9% - Is It Time to Panic? – Ben Levisohn

  • ·“…Last week felt like a disaster for the stock market. It wasn’t. The Dow Jones Industrial Average fell 756.03 points, or 3%, to 24,688.31; the S&P 500 slumped 3.9%, to 2658.69; and the Nasdaq Composite dropped 3.8%, to 7167.21. The S&P 500 briefly dipped into correction territory on Friday, but managed to close above the 10% threshold. The Nasdaq Composite, which has tumbled 12% from its Aug. 29 high, wasn’t so lucky.But take a deep breath. It may not be the end of the world—or at least not the end of the bull market.”
  • “Yes, everywhere you look there are problems. Technology stocks are tanking, and industrials are seeing rising costs and flagging demand, thanks to tariffs. Over a few short weeks, the market has gone from worrying about the U.S. economy overheating to a potential recession just over the horizon…So what caused the selloff? “It’s all of the above,” says Matthew McAleer, director of equity strategies at Cumberland Advisors. “You can circle any one of 15 different things.”
  • “…Today looks a lot more like 2016 than it does 2008. The 2016 growth scare began when China’s yuan tumbled the previous August, raising concerns about waning global growth, only to be followed by the collapse of oil prices and concerns that an energy-led recession would hit the U.S.  But oil prices bottomed, banks weathered the storm, and stocks ultimately found a bottom before rising again.”

U.S. Global Investors Investor Alert– October 26, 2018 – Frank Holmes 

  • ·“…October was at it again this week. After Wednesday’s close, the S&P 500 Index, Dow Jones Industrial Average and small-cap Russell 2000 Index had all erased their gains for 2018, while the tech-heavy NASDAQ Composite dipped into correction territory.  I don’t believe there’s any single cause for the selloff. Investors are simply nervous, thanks to rising interest rates and the upcoming midterm elections, among other things.”
  • “So can we expect additional volatility going forward? In a recent note to investors, Citibank says it estimates that “some more volatility is likely through December” due to the impact of trade disputes on growth, rise in U.S.-Saudi Arabia tensions and Brexit stalemate. Analysts point out, though, that the present slowdown doesn’t necessarily signal the end of the historic bull market. Compared to the start of the previous two bear markets, in 2000 and 2007, only four out of 18 factors are flashing “sell” right now on Citi’s “bear market checklist.” Among those factors are overinflated global equity valuations, a flattening yield curve and high debt levels.  The bull is “tripping, not dying,” Citi says.”

The Wall Street Journal – Steak Dinner and Annuities:  Retirement Product Surges After Fiduciary Rule’s Demise – Ben Eisen and Lisa Beilfuss - October 27, 2019

  • “A retirement investment product associated with steak-dinner sales pitches is flourishing thanks to the death of a regulation once expected to curtail it.  Annuity sales totaled $59.5 billion in the April-to-June period, the highest since late 2015, according to the Limra Secure Retirement Institute.  The annuities resurrection stems from the demise of the Labor Department’s fiduciary rule, an Obama-era proposal that would have required brokers who oversee retirement savings to act in their clients’ best interests.”
  • “Annuities protect customers from losing principal…Customers pay a lump sum to an insurance company, then can effectively get back their money plus a potential return for a set number of years or their lifetime in regular payments. In some cases, buyers can win if they live longer than expected but lose if they don’t. They can also pay hefty penalties if they withdraw money early.”
  • “Lawmakers have panned the product’s high commissions, and Sen. Elizabeth Warren (D., Mass.) has criticized the prizes given to sales agents, like expensive vacations. The estimated average commission received by agents selling certain types of annuities is more than 6%, according to Wink Inc., an industry market-research firm. In those cases, if a customer buys an annuity for $150,000, the agent would make around $9,000 in commission.”

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