Friday, September 18, 2009
Dow Breakpoint
The DOW closed this week above another breakpoint: 9,800. Just for sake of history, the first time the DJIA (a.k.a. "The DOW") closed above 9,800 was March 1999 (in fact, it started shy of 9,700 and it closed at 10,006.78 that month) and I believe it closed below 9,800 most recently on October 6, 2008, so depending on your definition of "recovery," the recovery of the aforementioned Lehman Brothers bankruptcy only took one year (the financial definition of "recovery" is technically when we set a new high, but I think that's a misnomer because it assumes that the market is never over-inflated, and everybody knows that is possible).
Monday, September 14, 2009
CNNFN: Events That Broke Wall Street
The events that broke Wall Street: A shocking series of events that forever changed the financial markets
http://money.cnn.com/galleries/2008/news/0809/gallery.week_that_broke_wall_street/
A year ago, the collapse of Lehman Brothers set off a series of stunning events from which Wall Street is still recovering.
Seemingly every day for about month, a different legendary financial company teetered on collapse. Stocks recorded some of their most dramatic drops in history, including the Dow's epic 778-point drop on Sept. 29 -- the biggest ever single-day slide. And lawmakers worked overtime in an effort to stem off a failure of the financial system.
The solution: a series of unprecedented and expensive bailouts to save systemically significant institutions from failing and to loosen the tight grip on credit.
Today is the one-year anniversary of the biggest event to shake Wall Street to its core in the most recent market downturn: the bankruptcy of the Lehman Brothers. The DOW tumbled as far down as 6500 in March 2009 before it has made a steady recovery (although most analysts feel as though the "recovery" has been backtracking lost ground because the investors in large over-reacted to the news). Regardless, this 33-date timeline from the above link is interesting from a historical perspective (granted, it's no fall of ENRON but somewhat interesting nonetheless).
http://money.cnn.com/galleries/2008/news/0809/gallery.week_that_broke_wall_street/
A year ago, the collapse of Lehman Brothers set off a series of stunning events from which Wall Street is still recovering.
Seemingly every day for about month, a different legendary financial company teetered on collapse. Stocks recorded some of their most dramatic drops in history, including the Dow's epic 778-point drop on Sept. 29 -- the biggest ever single-day slide. And lawmakers worked overtime in an effort to stem off a failure of the financial system.
The solution: a series of unprecedented and expensive bailouts to save systemically significant institutions from failing and to loosen the tight grip on credit.
Today is the one-year anniversary of the biggest event to shake Wall Street to its core in the most recent market downturn: the bankruptcy of the Lehman Brothers. The DOW tumbled as far down as 6500 in March 2009 before it has made a steady recovery (although most analysts feel as though the "recovery" has been backtracking lost ground because the investors in large over-reacted to the news). Regardless, this 33-date timeline from the above link is interesting from a historical perspective (granted, it's no fall of ENRON but somewhat interesting nonetheless).
Thursday, August 27, 2009
CNNFN: Market Watch
Tomorrow will be a very interesting day in the market considering it is going to follow this round of headlines:
- Friday rally lands Dow industrials, S&P, Nasdaq at 2009 highs; oil also ends at '09 high (8/21/09) Hardly a news-worthy story at that time, but it kept the wheels in motion for more interesting headlines.
- Dow industrials' winning streak hits seven as U.S. equity indexes eke out gains (8/26/09) And that verb was on the money! The DOW closed up by a mere 4.23 points, i.e. .04%. "Eked out" indeed.
- U.S. stocks close higher; 8-session Dow winning streak is longest in 28 months (8/27/09) The past longest "winning streak" was in April 2007, and the markets peaked that October. Obviously, there is no way the markets will peak within the next year or two, but at the same time, these are promising signs.
Saturday, August 15, 2009
The Full Motley: 3Q 2009
This week was when I was slated to re-evaluate my allocations, which I somewhat missed but that's not too upsetting because July 2009 was the best single month of the DOW since 2002, so I was probably best off to just let things sit as they were.
But aside from the market boom, Vanguard.com had some restructuring since my last personalized update, so now I can track the progress of my account much easier. Keep in mind that the most important focus of an active portfolio is the asset allocation, so it matters less whether the current balance in the portfolio is $10,000, $100,000, or $1,000,000, than how the 100% is split.
Here are my current allocation:
Vanguard Total Stock Market Index Fund (fund 85) = 44.5%
Vanguard Explorer Fund Investor Shares (fund 24) = 23%
Vanguard Total International Stock Index Fund (fund 113) = 14%
Vanguard High-Yield Corporate Fund (fund 29) = 10.5%
Vanguard Total Bond Market Index Fund (fund 84) = 5.5%
Vanguard GNMA Fund Investor Shares (fund 36) = 2.5%
So, the first step is to compare these real numbers to my current and target allocations:
Fund # - Real / Current / Target
Fund 29 - 10% / 0% / 5%
Fund 84+36 - 5% / 55% / 10%
Fund 24 - 23% / 15% / 25%
Fund 113 - 14% / 5% / 10%
Fund 85 - 45% / 25% / 50%
At this point, I could simply flip 5% from Fund 29 to Fund 84 and another 5% from Fund 113 to Fund 85, and then set my current allocations to my target allocations. This was the goal that I had prepared back in February, and it would make future re-evaluations very simple because any change will reflect the performance of the holdings (unless there is a change in my target allocation).
Alternatively, I could continue to direct a higher percent to Fund 84 and Fund 85 than I have going to Fund 29 and Fund 113, respectively, which is what I am doing now.
I don't think we are going to see a big gain until 4Q ("fourth quarter," i.e. Oct-Dec) in the stock market again, so I believe whatever money I add there may be nullified in the next few months, so I would just as soon keep new money going in than I would be to rearrange my existing amounts. Plus, I have a curiosity to find out how long it will take for me to build up 10% in Fund 84 without dumping new money to it.
But aside from the market boom, Vanguard.com had some restructuring since my last personalized update, so now I can track the progress of my account much easier. Keep in mind that the most important focus of an active portfolio is the asset allocation, so it matters less whether the current balance in the portfolio is $10,000, $100,000, or $1,000,000, than how the 100% is split.
Here are my current allocation:
Vanguard Total Stock Market Index Fund (fund 85) = 44.5%
Vanguard Explorer Fund Investor Shares (fund 24) = 23%
Vanguard Total International Stock Index Fund (fund 113) = 14%
Vanguard High-Yield Corporate Fund (fund 29) = 10.5%
Vanguard Total Bond Market Index Fund (fund 84) = 5.5%
Vanguard GNMA Fund Investor Shares (fund 36) = 2.5%
So, the first step is to compare these real numbers to my current and target allocations:
Fund # - Real / Current / Target
Fund 29 - 10% / 0% / 5%
Fund 84+36 - 5% / 55% / 10%
Fund 24 - 23% / 15% / 25%
Fund 113 - 14% / 5% / 10%
Fund 85 - 45% / 25% / 50%
At this point, I could simply flip 5% from Fund 29 to Fund 84 and another 5% from Fund 113 to Fund 85, and then set my current allocations to my target allocations. This was the goal that I had prepared back in February, and it would make future re-evaluations very simple because any change will reflect the performance of the holdings (unless there is a change in my target allocation).
Alternatively, I could continue to direct a higher percent to Fund 84 and Fund 85 than I have going to Fund 29 and Fund 113, respectively, which is what I am doing now.
I don't think we are going to see a big gain until 4Q ("fourth quarter," i.e. Oct-Dec) in the stock market again, so I believe whatever money I add there may be nullified in the next few months, so I would just as soon keep new money going in than I would be to rearrange my existing amounts. Plus, I have a curiosity to find out how long it will take for me to build up 10% in Fund 84 without dumping new money to it.
Wednesday, August 5, 2009
Record Highs
Here's the power of investing & timing, by the way: I happened to check my portfolio tonight and, knowing the market was up BIG, I was expecting BIG things! But I was more than pleasantly surprised when I saw that my month-end balance for July 2009 was higher than my portfolio had ever been.
That means in September 2007 when the market was at its current peak, and when the DOW was sitting around 14,000, I had less money than my portfolio is worth right now, when the market is impressively within the 9,000's, but still another 2-3 years from full recovery.
Granted, we are not talking about a huge starting balance of $1,000,000, but we're not talking about a balance of ::shakes head:: $3, either.
As soon as the market tumbled, you might have heard how a lot of people were putting money into falling stocks at a discount, and this is the reason. Once the market reached its low, which I believe it was when the DOW was at 6,500, I increased my paycheck deductions by another 2-3%, so not only was more money going in, but it was buying more at a lower price per share, and when the market recovered, the worth of each share increased.
The easy way to determine when I should buy and when I should hold off was -- well, luck played a big part, especially in not buying when the market was too high, and when the market went below my existing average cost basis (i.e. the average price of each share I have purchased), I knew that I would be getting a bigger discount than I had up until that point, so I made the most of the opportunity.
There are two schools of thought for the market recovery at this point: one, "easy & steady" and the other, "rough & rocky." Personally, I am expecting the former but I have stated a couple times that I would not be surprised to see the market retreat this month or next month, maybe even back down to 8,500 or lower, but October through December should see another strong rally like we saw recently.
Probably not as strong as the month of July 2009, though. That was the best single month in the market since 2002.
New for 2011 Note: the $3 joke was in reference to an old reader who had asked how much he could earn off $3 invested for 7 hours. Not much, if you didn't know already.
That means in September 2007 when the market was at its current peak, and when the DOW was sitting around 14,000, I had less money than my portfolio is worth right now, when the market is impressively within the 9,000's, but still another 2-3 years from full recovery.
Granted, we are not talking about a huge starting balance of $1,000,000, but we're not talking about a balance of ::shakes head:: $3, either.
As soon as the market tumbled, you might have heard how a lot of people were putting money into falling stocks at a discount, and this is the reason. Once the market reached its low, which I believe it was when the DOW was at 6,500, I increased my paycheck deductions by another 2-3%, so not only was more money going in, but it was buying more at a lower price per share, and when the market recovered, the worth of each share increased.
The easy way to determine when I should buy and when I should hold off was -- well, luck played a big part, especially in not buying when the market was too high, and when the market went below my existing average cost basis (i.e. the average price of each share I have purchased), I knew that I would be getting a bigger discount than I had up until that point, so I made the most of the opportunity.
There are two schools of thought for the market recovery at this point: one, "easy & steady" and the other, "rough & rocky." Personally, I am expecting the former but I have stated a couple times that I would not be surprised to see the market retreat this month or next month, maybe even back down to 8,500 or lower, but October through December should see another strong rally like we saw recently.
Probably not as strong as the month of July 2009, though. That was the best single month in the market since 2002.
New for 2011 Note: the $3 joke was in reference to an old reader who had asked how much he could earn off $3 invested for 7 hours. Not much, if you didn't know already.
Sunday, July 26, 2009
Surprise, Surprise!
Wasn't this week a nice surprise? The DOW closed above 9,000 again! Well, I'm not sure if "surprise" is the right word, but there were enough cynics to say that the collapse of the American dollar is forthcoming and a whole lot of other bunk that made this week almost like a moment of truth for them, in that their "sky is falling" heresy is a vast over-reaction. In fact, my friend at work was spouting off those claims as early as Monday, and he had to shut up by Thursday's impressive close.
Cynicism definitely weighs more, which is how the markets fall faster than they rebound, but this road to recovery has gone amazingly smooth (albeit the real test will be that 11,000-14,000 range). If you've taken notes & memorized everything I've said (or if you just read my May 8th entry), then my expectations might be a bit too conservative, which is fine by me! I like being wrong when the end result is better than expected, especially when I have a large hedge against my expectations.
The real lesson to be learned is that the "all-in, all-out" approach is best saved for Vegas with the rest of the craps. Proper investing is a (at times, delicate) balancing act with calculated exposure to all parts of the stock and bond markets. While my expectations are that the DOW will be above 10,000 by the end of this year, I am not going to direct all of my new money into the Total Stock Market Index fund for a variety of reasons, including the fact that I believed bonds would experience above-average growth this year (highly unlikely given the market recovery, but not altogether impossible), the International Markets are recovering as strongly as (at times, stronger than) the domestic markets, and there is nothing moving this portion of our recovery along aside from the disproportionate freefall from the end of last year into this year.
My day to rebalance my 401(k) investments is August 11th, assuming I find it necessary next month to redistribute my assets, but I have not checked in a little while (geez, where have I been? My rock-and-roll vampire lifestyle shouldn't disable me from staying up on these things) so I need to take a serious look at them this weekend or next weekend, and start honing in on what my options are. Most likely, though, I will be making no (or limited) changes. Most likely, I will rebalance my existing money and leave my incoming allocations alone.
Cynicism definitely weighs more, which is how the markets fall faster than they rebound, but this road to recovery has gone amazingly smooth (albeit the real test will be that 11,000-14,000 range). If you've taken notes & memorized everything I've said (or if you just read my May 8th entry), then my expectations might be a bit too conservative, which is fine by me! I like being wrong when the end result is better than expected, especially when I have a large hedge against my expectations.
The real lesson to be learned is that the "all-in, all-out" approach is best saved for Vegas with the rest of the craps. Proper investing is a (at times, delicate) balancing act with calculated exposure to all parts of the stock and bond markets. While my expectations are that the DOW will be above 10,000 by the end of this year, I am not going to direct all of my new money into the Total Stock Market Index fund for a variety of reasons, including the fact that I believed bonds would experience above-average growth this year (highly unlikely given the market recovery, but not altogether impossible), the International Markets are recovering as strongly as (at times, stronger than) the domestic markets, and there is nothing moving this portion of our recovery along aside from the disproportionate freefall from the end of last year into this year.
My day to rebalance my 401(k) investments is August 11th, assuming I find it necessary next month to redistribute my assets, but I have not checked in a little while (geez, where have I been? My rock-and-roll vampire lifestyle shouldn't disable me from staying up on these things) so I need to take a serious look at them this weekend or next weekend, and start honing in on what my options are. Most likely, though, I will be making no (or limited) changes. Most likely, I will rebalance my existing money and leave my incoming allocations alone.
Friday, July 3, 2009
Breaking News!
I couldn't help thinking of Mo Ansari when I got on CNN.Money.com right before the market closed to see the most unique "Breaking News!" that I've witnessed in my career: "The market will remain open until 4:15PM!"
The market had been facing downward since the opening, brought on of course by the jobs report, which was exactly what Mo Ansari said to expect, but keeping the market open the day before an observed holiday for 15 minutes was too bizarre. We found out that it was due to "connectivity" issues, as in the freakin' New York Stock Exchange had computer problems!! This is a first in my career, and I am going to start searching the financial websites to find out if it had happened before.
I had the presence of mind to set up an exchange into the Total Stock Market fund for the remainder of the money that I had planned a while ago (see 6/15 entry), thinking it might be the closest to 8,000 we're going to see again, but the market had already passed 4PM (its regular close) and the website did not provide me a guaranteed trade date. Why? Because Vanguard hates day-traders, which is what I was doing. If you want to make an exchange, make the exchange. If you want the lowest possible price, then go somewhere else because they're not going to help you! While it served me no good, I had to respect it. It protects long-term investors (including me) as a whole.
Then, it turned out that we stayed late to change the trade date on every transaction submitted between 4 and 4:15PM (with a nice little OT for the next payday) so I guess I should have gone ahead and dumped the money into it during that 15-minute grace. If nothing else, it would have made for a good story! But we'll see what happens Monday. If the unemployment reports scared the market down 2.5% today, then I don't know what is going to give investors the confidence to buy on Monday (or at least throughout the whole week).
The market had been facing downward since the opening, brought on of course by the jobs report, which was exactly what Mo Ansari said to expect, but keeping the market open the day before an observed holiday for 15 minutes was too bizarre. We found out that it was due to "connectivity" issues, as in the freakin' New York Stock Exchange had computer problems!! This is a first in my career, and I am going to start searching the financial websites to find out if it had happened before.
I had the presence of mind to set up an exchange into the Total Stock Market fund for the remainder of the money that I had planned a while ago (see 6/15 entry), thinking it might be the closest to 8,000 we're going to see again, but the market had already passed 4PM (its regular close) and the website did not provide me a guaranteed trade date. Why? Because Vanguard hates day-traders, which is what I was doing. If you want to make an exchange, make the exchange. If you want the lowest possible price, then go somewhere else because they're not going to help you! While it served me no good, I had to respect it. It protects long-term investors (including me) as a whole.
Then, it turned out that we stayed late to change the trade date on every transaction submitted between 4 and 4:15PM (with a nice little OT for the next payday) so I guess I should have gone ahead and dumped the money into it during that 15-minute grace. If nothing else, it would have made for a good story! But we'll see what happens Monday. If the unemployment reports scared the market down 2.5% today, then I don't know what is going to give investors the confidence to buy on Monday (or at least throughout the whole week).
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