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The Best of What They Said and I Read week ending 8/6/2017

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 – August 5, 2017 – Dow Rises 1.2% to Top 22,000, So What? –– by Ben Levisohn

  • “Let’s stop for a moment to celebrate the Dow’s latest milestones—breaking 22,000 for the first time, and hitting new highs for eight days in a row—and then quickly move on.  Yes, the Dow Jones Industrial Average gained 262.50 points, or 1.2%, to 22,092.81 last week, while the Standard & Poor’s 500 index rose 0.2% to 2476.83. The Nasdaq Composite fell 0.4% to 6351.56.  But as much as we’d like to think of the Dow as a reflection of market strength, it’s really just a concentrated portfolio of 30 stocks weighted in a wacky way: by price.”
  •  “That means one stock, especially a high-priced stock, can have an outsized impact on the benchmark’s level. Last week Apple and 3M did the heavy lifting. The week before, Boeing carried the benchmark higher. For a more accurate reading on the market, look to the S&P 500. Due to its size and market-capitalization weighting, no single stock can make it move on its own—and the S&P 500 simply isn’t moving. It has now gone 12 days without a move of 0.3% in either direction, the longest such streak on record. So despite the fanfare that greeted Dow 22,000, the market is reflecting a high degree of equilibrium that nothing has been able to upset.

Kiplinger's Personal Finance Adviser - August, 2017 - Social Security Boosts Security

  •     “…The Social Security Administration is adding an extra layer of protection to online accounts. Anyone signing in to an online account, or signing up for the first time, must provide either a cell-phone number or an e-mail address to receive a unique, one-time code by text or e-mail. Set up your account now, even if you’re years away from retirement. Once you have an account, there’s no way identity thieves can create a fraudulent one in your name and use it to apply for benefits. Create your account at www.ssa.gov/myaccount. You’ll need to enter some personal details, answer questions to confirm your identity and come up with a complex password.”

U.S. Global Investors – August 4, 2017 – Storm Advisory – What You Need to Know - by Frank Holmes

  • “…There’s a historical risk in the Fed reducing its balance sheet, though. The central bank has embarked on this reduction six times in the past—in 1921-1922, 1928-1930, 1937, 1941, 1948-1950 and 2000—and all but one episode ended in recession.  That’s according to research firm MKM Partners, whose chief economist, Mike Darda, urged attendees of a Fidelity event in May to hope for the best but prepare for the worst.  “My opinion is that business cycles don’t just end accidentally,” Darda said. “They are killed by the Fed. If the Fed tightens enough to induce a recession, that’s the end of the business cycle.”
  • “…According to Brian Reynolds of Canaccord/Genuity in a piece of research entitled "The Credit-Led Equity Bull Market Is More Likely To Intensify Than Collapse,'' the stock market boom has another three to five years to run due to stimulus from states and municipalities. Reynolds suggests that the credit boom will persist because most major U.S. states, and a number of cities, have either raised or are thinking of raising taxes in order to shrink their pension underfunding. These states and municipalities need to earn 7.5 percent annual returns just to keep up, "and they do not want the perceived risks of stocks. Thus, they invest in aggressive credit and credit-related funds, which provides fuel for companies to buy back their stocks and increase shareholder value.'' These investors aren't focused on the macro environment or temporary sell-offs, writes Reynolds, but on "meeting their bogies.''
  • “He then proceeds to list 25 different state or local pension funds and their announced $3.5 billion in commitments gathered over the past few weeks. It's an impressive list: Texas Teachers, Colorado Public Employees, New Jersey, Connecticut, Pennsylvania, Rhode Island, Tennessee and so on. He continues, "if history is a guide, assuming this money is put to work at 5x leverage (compared to the 10x-50x leverage of the last two credit cycles), this nearly $3.5 billion in commitments will return to the stock market in the form of more than $17 billion in buybacks.''



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