In the grand scheme of things, a small, upward blip in the yield of the U.S. ten-year Treasury bond should be of little concern to equity investors. But sometimes, when the conditions are ripe, even the tiniest spark can cause a conflagration within a speculative stock market. As readers are aware, interest rates have been trading at historically low levels for some time. The onset of the Coronavirus forced our Federal Reserve Bank to pin them even lower. Essentially, it is why the stock market has been having such a great run. Investors have been conditioned to just assume that,…
Insights & Advice
General Interest
SPAC Attack
One of the hottest trends on Wall Street today is special purpose acquisition companies or SPACS. There is hardly a day that goes by without an announcement of a new SPAC, or the acquisition and merger of a private company by one. It works like this. Although they are called “companies,” SPACs have no commercial operations, no sales, profits, or losses. All they have is a pile of cash. They received that money from investors in an initial public offering (IPO) with the promise that they would invest that money down the road into a private company with good prospects….
CAPITAL IDEAS: A bubble in ‘stonks’
COVID-19 vaccination update The good news: COVID-19 cases and hospitalizations have improved recently in the U.S. As of February 15, 2021, 54.6 million doses have been given. An average of 1.64 million doses per day are being administered. The bad news: Infections of the more contagious variant from the U.K. are doubling every 10 days in the U.S. This mutant strain may reverse the positive trends that have occurred since January 9, 2021. More infections would slow the reopening of the economy and be a headwind for job creation. Retail trading: Froth and frenzy Retail investors are bidding up so-called “meme” stocks…
Stocks versus Bitcoin
There was no contest this week. Cryptocurrencies took center stage as the stock market churned, chopped and gave investors a little indigestion. Welcome to the market’s brave new world. It appeared that Bitcoin was the answer to whatever ails you. Higher interest rates, the threat of higher inflation, weaker (or stronger) dollar, no problem, just buy Bitcoin. By the end of this week, the crypto coin had chalked up a 15% gain and was trading above $52,000. Ethereum, Bitcoin’s younger cousin, was also up 10%. None of the financial market’s usual suspects—stocks, bonds, or commodities—could come close to those kinds…
Clubhouse comes of age
The latest entrant into the social media orbit is an audio-only chat app called Clubhouse. The internet company had a $1 billion valuation even before it had a business plan. That is even more surprising, since membership is by invitation only. On January 24, 2021, the company announced its latest $100 million fundraising effort and, for the first time, presented a rough sketch of how it plans to start generating sales. Its founders, Paul Davidson and Rohan Seth, are hoping to offer paid subscriptions, ticketed events, and other schemes to turn the site profitable. You need to know an existing…
CAPITAL IDEAS: Passive investing
According to AAII’s calculations, the Russell 1000 Growth Index posted an average annual gain of 17 percent for the entire decade of the 2010s. That compares to a 10 percent return for the Russell 1000 Value Index. Holding a balanced portfolio throughout that decade would have been prudent. A balanced portfolio would have been more diversified and, theoretically, safer. However, that prudent, safer portfolio would have underperformed its more reckless counterpart. It is a worthwhile exploration to elucidate why this occurred. At least two of the reasons that drove the outperformance of growth relative to value are still applicable today. Those…
Financial froth infects markets
One sure sign that stocks are getting overdone, is the actions of overconfident investors that bid up stocks in a euphoric frenzy, only to dump them at the first sign of trouble. These behavior patterns normally usher in a corrective stage in the stock market, but exactly when that will occur is anyone’s guess. Investopia’s definition of froth “refers to a market condition where an asset’s price begins to increase beyond its intrinsic value.” Wall Street’s “Reefer Madness” event this week is just such an example. Certain stocks in the Cannabis sector saw their share prices double and then triple…
Gambling, the vice we love
The pandemic has altered the behavior patterns of many Americans. It has also forced states to reexamine their thinking in several areas, especially in taxation and spending. One of the biggest winners in this process appears to be gambling. Clearly, with most of the nation’s leisure activities shut down, more and more Americans are looking for something to occupy their time. At the same time, thanks to massive losses in tax revenues, states are scrambling for ways to make ends meet. Sports and other forms of online gambling are an easy answer to shoring up state budgets, while satisfying the…
Tips for the 2021 Tax Season
Preparing for the 2021 Tax Season How a financial advisor can help you manage your taxes this year Reducing your tax burden can help you manage your wealth and free up money to meet your financial goals and build your legacy. But tax rules are complicated, and you may need help understanding all the methods you can use to minimize your tax burden. Your financial advisor is one resource you can tap to help you develop strategies that fit your plan and reduce your tax exposure in 2021. Here are four ways they may be able to help. Tax-deferred accounts…
Master Your Goals
Earlier this week, our CEO Allen Harris, pointed out we all have “woulda-coulda-shoulda” investment opportunities, but how can we minimize that? Ideas. Plans. Goals. We are almost halfway through the first quarter of 2021. Now is the time to think about your “financial fitness”. Where is it now? And where do you want it to be? These questions can seem a little overwhelming if you do not know where to begin. To help identify what your specific goals are, here’s a checklist to get the conversation going. Master-List-Of-Goals-2021
The Business of Space
Space! It holds the promise of riches beyond our wildest dreams—solar systems bursting with precious resources ripe for the taking. Just the idea of such prizes has set off a frenzied rush by global business entrepreneurs to claim stakes in this new frontier. The private sector has increasingly pushed aside governments and their contractors in a frenzied bid to develop commercial space exploration. At the same time, using all their cost-cutting prowess to reduce the cost of putting people and objects into orbit, and that is only the first step. This year, for example, there are three separate missions to…
Choosing the Right Life Insurance Policy
How to compare plans based on your specific needs The basic premise behind life insurance is simple: You pay premiums to an insurance company, which then pays your beneficiaries a certain amount after you die. But not all life insurance policies are the same. In fact, the right policy for one person may be the wrong choice for someone else. Understanding the basics of life insurance and what to look for in a policy can help you find coverage that fits your unique needs. What is life insurance? Life insurance is a powerful tool for many different financial situations. Here…
Loyalty shock: Customer behavior after COVID
Businesses need to understand how customers will behave after the population receives its COVID-19 vaccinations. Even after the memory of the pandemic fades, the effects on consumer behavior may persist. Understanding habit formation, process and technology adoption and behavioral economics can help you be ready for what happens next. History provides lessons in navigating a post-pandemic world. I tracked consumer behavior through and following recent pandemics (SARS in 2002, H1N1 in 2009) and epidemics (H7N9 in 2013) and, after World War II, the oil price shock of the 1970s and the 9/11 terrorist attacks. After the 9/11 terrorist attacks of…
Tax Tips for Charitable Donations
Charitable giving is a great way to support the causes you care about while also getting a tax break. In 2020, Congress passed the Coronavirus Aid Relief and Economic Security (CARES) Act, which incentivized charitable giving by offering new rules for charitable deductions. As we move into the new year, now is the time to make sure you’re making your 2020 deductions properly and planning for your 2021 charitable giving. Here’s what you need to know: 2020 Tax Moves The CARES Act temporarily changed some of the rules around tax deductions for charitable giving in 2020 to encourage people…
We ain’t normal
After watching the catastrophe at the U.S. Capitol building last week, it’s clear to me that we ain’t normal. But that’s not the only way to measure our lack of normalness. According to the CNN Business “Back-to-Normal” index, we ain’t normal. The Back-to-Normal index represents how close the U.S. economy is to returning to its pre-pandemic level. As I write this column, the index tells us that the economy is operating at 75 percent of where it was in early March 2020. The index was hovering around 83 percent for most of October 2020. Since then, it has been trending downward….
Brexit at last
After four years of squabbling, and nine months of last-ditch negotiations, the United Kingdom (UK) and the European Community (EU) have come to a compromise agreement. The deal is much more an economic partnership than a true parting of the ways. The new economic system covers large areas of bilateral trade, including autos, industrial materials, manufacturing, the pharmaceutical sector, as well as professional services. It also allows the UK freedom to set new standards in areas like the environment and labor laws, as long as any changes do not overstep European standards by too much. The idea is to maintain…