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Fixed Income
2020 is shaping up to be a strange year.  This Coronavirus has a region in China, far larger in population than New York city, on a complete lock-down.  There are zombie cruise ships patrolling the waters in a state of full quarantine, with no countries wanting to take the risk of allowing them in to...
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Over the weekend, I was reading Barron’s, and there were numerous articles about obtaining enough income in retirement.  The recommendations vary from buying dividend stocks, annuities, and/or bonds.  All of these strategies offer various challenges and risks.   Buying dividend stocks offers income and the potential for capital appreciation.  The problem is that many of these...
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To piggyback on our last article discussing the illogical 60/40 portfolio in today’s interest rate environment, I thought I’d pass on this article on how interest rates impact bonds.  Many people don’t realize the immense risks that rising interest rates pose to bonds.  In the inflationary 1970’s, bonds were called “certificates of confiscation” due to...
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Historically, it has made reasonable sense for retirees to have a sizable allocation to bonds.  A minimum of 40% was certainly not uncommon.  The logic behind this was that retirees regularly draw from their accounts and are less comfortable with the enhanced volatility that stocks can at times provide.  The supposedly steady income from the...
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This morning I read a good article in the WSJ, posted below.  The article discussed that, as a whole, stocks and bonds are pricey by historical measures.  Highly valued stocks and bonds have very likely pulled future returns forward, meaning many investors have less of an opportunity for big gains in the future. “U.S. stocks...
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Over the last week, value stocks have poised very impressive gains, while many of the momentum names have really struggled.  This is obviously very good for our deep value investment portfolios.  I want to emphasize, we should never get too excited or upset by short-term performance metrics.  With that said, value stocks are as cheap...
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Most financial advice starts with an asset allocation model.  These asset allocation models typically use information from the past, typically the last 30-40 years or so, and then project that into the future.  The big flaw in the process is that they don’t factor in changes in starting conditions and valuations.  For instance, on January...
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Believe it or not, there are now over $13 trillion worth of bonds that are trading at negative interest rates.  Money-losing unicorn stocks are able to IPO at valuations worth tens of billions of dollars.  Interest rates have plummeted with the 10-year Treasury bond now circling around 2%.  Lingering in the background of this environment,...
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We’ve written about sequence risk on many occasions in the past.  While most investment projections are based on average returns, the reality is that returns don’t happen that way.  There is a sequence to them, and for those recently retired, or close to retirement, sequence risk is an extremely important consideration. Losses taken early in...
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In a recent interview on CNBC, Warren Buffett mentioned that if interest rates were to stay below 3% on the 10-year, stocks are incredibly cheap.  I talked about the same thing in the recent podcast with Tobias Carlisle.  The reason that this is so, is because interest rates have an almost gravitational impact on stocks....
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