Over the summer I read The Big Short, by Michael Lewis. It delves into the inner workings of some of Wall Street's most powerful investment ﬁrms and rating agencies, and uncovers the conﬂicts of interest that were largely responsible for the sub-prime meltdown.
When the markets are scary, we tend to hear a particular question, "What are you doing to protect me?" As a wealth management ﬁrm that promotes the idea of "passive" investing, Abacus runs the risk of being perceived as a ﬁrm that does nothing.
Agliophobia, the fear of pain, is in the air. The pain investors felt in 2008 may have diminished somewhat, but in place of that pain is now a fear of having to feel pain again, that we're not out of the woods yet, and that another 2002 or 2008 could be right around the corner.
As we enter the season of giving and giving thanks, I realize with some regret that I haven't been as charitable this year as in years past. But, I justify, how could I possibly give as I have in the past? My income is off by 50% this year! Surely if there's a time to cut back, to retrench, to be more conservative, this is it.
My Volvo wagon is 12 years old, has soiled carpets (I've got two kids!) and the stitching on the leather seat is coming undone. But, the most irritating thing is the driver's door which creaks like a train braking as it enters Grand Central Station.
If you have been holding your breath since asset values started to decline last year, we suggest you relax and breathe a little. From April through June most of the stock, real estate, and commodity mutual funds we use increased in value by 15% to 35%.
How long does it take to master the piano, golf, carpentry, cooking, chess? Most of us would answer years, if not decades. But the field of investing is very different; instead of producing stellar results the most seasoned investment managers underperform a basic index fund.
As of October 10th, the S&P 500 is down 37% for the calendar year, a decline unmatched since 1931's slide of 43%. And unlike the crashes of 2000-2003 and 1973-1974, diversification into different asset classes has not reduced the carnage. International and small stocks have been hurt even more than the U.S. blue chips.