Quantitative Investment Group

Friday, August 28, 2020

We’re in the ‘early innings’ of a bull market, and any temporary correction will be just a buying opportunity, Leuthold strategy chief Jim Paulsen says

Jim Paulsen said during a Leuthold Group webinar on Thursday that he believes stocks are in the early innings of a bull market.
The chief investment strategist said investors should be prepared for more than one correction, but they won't be permanent and could be buying opportunities.
Paulsen added that economic indicators are showing signs that an economic rebound is beginning, and this rebound will be good for stocks.

Visit Business Insider's homepage for more stories.

Jim Paulsen said he believes that signs are pointing to an economic expansion and that US stocks are in the “early innings” of a bull market. While he said it will take a few years for the economy to fully recover, he told a Leuthold Group webinar on Thursday, “I am bullish.”

The chief investment strategist also said this doesn't mean there won't be any corrections. “Expect corrections. We're definitely going to get more than one of those and they'll be scary when they occur, ” Paulsen said.

These corrections won't be “end game” for the cycle, though, and Paulsen sees them as buying opportunities.

One signal of this new bull market is what Paulsen calls the “divot repair.” Paulsen said that the pandemic has created the deepest recession the US has ever had, and this large divot in the economy has created a huge upside opportunity for the future of the stock market.

“Stocks react not to levels, they react to change in activity and there's huge possibilities to have positive change in economic activity if only because things are so bad right now,” the strategist said.

bull photo

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Thursday, August 27, 2020

Net Worth Is Misleading, Stick to Monthly Passive Income for FIRE – 50PlusOnFIRE

You will find an endless number of posts on FIRE that include discussions about the central roll of net income in your journey to financial independence and early retirement. But Networth, while not unimportant, pales in comparison to your Monthly Passive Income (MPI) if you truly want financial independence.

Why is passive income more important than net worth?

Passive income surpasses net worth in importance as you approach retirement because it pays the bills and supports your progress toward meaningful financial goals. Net worth provides a theoretical value to your possessions while passive income offers immediately usable money.

Back in the late 90s, Stanley and Danko released their landmark work, The Millionaire Next Door, cementing in the mind of just about everybody who read it the roll of net worth in becoming a millionaire. After all, they used net worth and not income to define a millionaire: someone whose net worth, excluding the value of their primary residence, reaches or exceeds $1M.

Your Net Worth Means Nothing at the Grocery Store

While net worth may serve you well when describing your general sense of wealth accumulation, it does nothing for you on a day-to-day basis. It will help you if you want to apply for a loan but not when checking out at the grocery store. For everyday purchases, you need income, whether passive or active.

The problem with net worth stems from the likelihood that it involves many non-liquid assets. Some of these assets might include property, some art and collectibles, retirement accounts, a business, jewelry, vehicles, boats, furniture, and even business equipment.

You can’t use non-liquid assets to pay your bills or make purchases. Stores don’t accept non-liquid assets as payment in most countries.

I have other reasons for not placing net worth on the…

income photo

Photo by Got Credit

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Learning from Warren Buffett and LTCM

In the late 1990s, the world's largest hedge fund at the time, Long Term Capital Management (LTCM), failed.

The failure sent shockwaves across Wall Street and the rest of the financial world. The hedge fund had been one of the largest players in the global derivatives markets, and when it failed, it dragged its counterparties with it.

Eventually, the Federal Reserve was forced to bail out the fund instead of risking a global financial crisis (though, no federal funds were used - the Fed merely brokered a deal on LTCM's behalf with a consortium of Wall Street Banks). However, before the central bank stepped in, Warren Buffett (Trades, Portfolio) also made a bid for the fund's portfolio of assets.

It later emerged that Buffett made a bid of $250 million for LTCM. On top of the purchase price, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) would have to put $3.75 billion into the fund to meet other obligations. If the deal had succeeded, Buffett would have paid $250 million for $100 billion worth of securities and over $1 trillion worth of derivative contracts.

LTCM had been forced into a corner because it could not meet margin calls on its extensive portfolio of derivatives and other assets. It seems Buffett was betting that if Berkshire bought the assets, LTCM's former counterparties would back down, giving the firm breathing room to unwind the positions. This may have produced enormous profits for Buffett and his investors.

Ultimately, the deal fell apart. As Buffett later described, due to the deal's size and volatility in the underlying portfolio, he gave LTCM a short window to accept the offer. They declined, and the deal fell through.

Smart people and dumb decisions

LTCM became a case study of how even the smartest people can make dumb decisions. The 16 people who managed the business were considered some of the smartest economists...

Photo by bunnicula

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The 7 Best Ways to Invest $1,000 (& Beyond)

“You can have this $1,000, but you got to tell me the best way to invest $1000.”

How would you respond?

Me personally, had you asked me that question or confronted me with the same scenario 5-6 years ago, I would have stuttered and probably just said to save it.

While saving isn’t a bad answer per se, at the end of the day there are better ways to invest $1,000. Whether it is your first time investing $1,000, you just got your tax refund, or you are simply looking to invest $1,000 every month…

Today we will discuss the best options available for investing $1,000!

Real quick, prior to looking at the 7 best ways to invest $1000, keep in mind that you can invest more when you make more (duh).

Here are Money Life Wax our team is huge on helping people figure out ways to create more money either outside of their full time job or with entreprenesuhip.

So in addition to investing $1,000 per month, here is a great read for making an extra $1,000 per month to bookmark for later!

*Remember – every dollar invested today doubles in 10 years on average!*

1. Start Your 401(k)

If you haven’t got one already, a 401(k) retirement plan is one of the best ways to invest $1,000 — especially as you could literally double your money (more on this in a second).

A 401(k) is a retirement savings plan that is sponsored by your employer. One of the benefits is that you can invest a chunk of your paycheck in one each month before any tax has been deducted. In other words, a 401(k) allows you to save for your retirement and enjoy tax breaks at the same…

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Wednesday, August 26, 2020

Bank of America details red flags to watch for when hunting down cheap stocks

Bank of America recommends value stocks over growth names as major indexes breach record highs, but warns that value traps could damage investors' portfolios.
Value traps are stocks that seem inexpensive but are more likely to continue falling than stage a comeback.
Bank of America searched for stocks with relative prices falling faster than their earnings, and found that real estate investment trust, telecom, and multi-utilities stocks screen as value traps.
Investors should pick high-quality names with strong price momentum and fundamentals within the value space, the bank's analysts said.
Visit the Business Insider homepage for more stories.

Bank of America's analysts prefer holding value stocks over more expensive growth names, but see a handful of traps dotting the investing landscape.

Several gauges used by the bank identify the stock market as extraordinarily expensive. For one, the S&P 500 sits at record highs roughly five months after bottoming out on virus fears, despite the pandemic's economic damage still looming.

Stretched valuations across the market's darlings leave the best opportunities in value picks, the team led by Savita Subramanian said in a Tuesday note. However, certain inexpensive stocks pose a major threat to investors and should be avoided at current levels, they added.

The bank screened for companies and sectors that are inexpensive because relative prices are declining faster than their earnings. Though such stocks may seem like appealing buys at first, the analysts warn that their earnings deterioration can continue and leave investors with a rapidly depreciating asset.

Some sectors are fraught with traps specifically due to possible de-rating on pandemic-related risks, the team said, including real estate investment trusts.

from Investment News, Investment Strategies, Investment Opportunities - Feed http://www.quantitativeinvestmentgroup.com/bank-of-america-details-red-flags-to-watch-for-when-hunting-down-cheap-stocks/

Tuesday, August 25, 2020

Advice for investing at record highs, including a 7-part stock-picking model

The stock market is sitting at record highs. So why does it feel like the party's already dispersing?

It could be the recent measured skepticism from firms like Morgan Stanley. While chief US equity strategist Mike Wilson isn't ready to predict another bear market, he did recently say that three conditions in particular could combine to spur a near-term correction.

[caption id="" align="aligncenter" width="400"]Photo by Got Credit [/caption]

JPMorgan has also joined in the lukewarm chorus, with strategist John Normand recently outlining what could trigger a bond-market sell-off that could threaten stocks. The implications of such a shift would bleed into everything from equities to gold — a situation that has Normand urging traders to hedge.

Also within JPMorgan is Eduardo Lecubarri — the firm's global head of small and mid-cap equity strategy — who predicts a rangebound stock market for the next year. But while his market-wide forecast is largely neutral, Lecubarri still sees select investing opportunities. He recently laid out 11 regions and sectors poised to outperform.

The Investing team at Business Insider is closely monitoring these shifting views to help you figure out how to excel in any market environment.

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She thought unemployment benefits were coming. Two months later, eviction loomed

Jennifer Moon has waited more than two months for unemployment benefits — and the delay presented a scary situation.

Absent any income, the 46-year-old, who lives in Cedartown, Georgia, fell behind on bills.

Lenders repossessed her car. She lost water at her home, which she rents, before a friend helped pay the bill.

Most significantly, Moon, a certified nursing assistant, also couldn't pay her rent. She missed two months of payments — $900 total — and next month's rent is due soon.

The landlord threatened eviction if Moon can't pay up by month's end.

More from Personal Finance:

Where states stand on the extra $300 weekly unemployment benefits

What Joe Biden plans to do for student loan borrowers

Don't count on the $300 unemployment boost anytime soon

"I begged and pleaded with them," she said. "[They said] I have exactly 10 days to be vacated."

Making up the shortfall by returning to work is also a risky proposition

. Moon has a lung disease, pulmonary emphysema, which requires her to use oxygen and puts her in a high-risk category for Covid-19.

Moon, a single woman, doesn't have family to fall back on for help, and cares for a 30-year-old son with a disability.

Photo by malias

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