The VIX Is Raising A Red Flag For The Rally

One of the indicators I like to watch in regards to the stock market is the relationship between it and expected volatility as indicated by the VIX Index. Typically, these should move in opposite directions: When stocks rise, volatility should fall and vice versa. When there is a divergence, it can be a signal of an impending reversal.

For example, there have been several significant tops (and bottoms) identified by a divergence between the S&P 500 Index and the VIX Index. At the 2007 stock market top, the VIX showed a key non-confirmation that served as a red flag. Conversely, when stocks broke down to new lows in 2009, the VIX never came close to matching its 2008 highs, a bullish non-confirmation. Since then, we have had several bearish non-confirmations that warned of significant corrections. Today, we have another such bearish non-confirmation.

We can also dial down into a shorter-term view by looking at the 10-day correlation between the S&P 500 Index and the VIX Index. When it rises into positive territory, meaning that stocks and volatility are generally moving in the same direction, it can also serve as an effective short-term sell signal, though it does trigger early at times. Right now, this VIX warning signal is flashing again as it did earlier this year and prior to the corrections in the first and fourth quarter of 2018.

In short, the options market is sending a message that volatility going forward is likely to be greater than the stock market currently implies. And history shows the options market is usually the one who wins this sort of argument.
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8 Self-Empowerment Books to Help You Take Back 2020

Take a break from the everyday unrest of this year to be inspired by the stories of others who have faced adversity and overcame it.

It doesn’t matter who you ask — 2020 has been an exhausting year. Between a global pandemic, political unrest and an unprecedented economic downturn, it’s easy to feel downtrodden.

While there’s no easy way to get out of this funk, it never hurts to listen to the perspectives of others. By reading books focused on self-empowerment and overcoming adversity, you can feel prepared to take on whatever the world has to throw at you in 2020 and beyond. Here are some of the top choices out there right now.

1. Learn, Improve, Master: How to Develop Any Skill and Excel at It by Nick Velasquez

With lots of people having more free time than ever on their hands, many are taking this opportunity to pick up new skills. But doing so is often easier said than done. Learn, Improve, Master doesn’t teach the basics of any one skill; it gives you the tools you need to learn things more quickly and fully in the future. Nick Velasquez’s new book is a valuable investment for anyone looking to continually grow and evolve over time.

2. Grit: The Power of Passion and Perseverance by Angela Duckworth

The title here says it all. In Angela Duckworth’s Grit, the secret to success can be found entirely in one’s own dedication and work ethic. Duckworth looks at standouts everywhere from West Point to the National Spelling Bee and has found one thing in common: sheer determination. If you’re looking to learn how to take your career to the next level through hard work, this book is the one for…

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The 3 Fund Portfolio – A Simple Investment Strategy That Works

The 3 Fund Portfolio is a simple investment portfolio that only contains 3 assets, which are typically equity (stocks) and fixed income (bonds) mutual funds. A three fund portfolio is considered a ‘lazy portfolio’ because it requires very little maintenance. This investment strategy is also simple to implement and is viewed favorably by the investment community which often recommends them as a solid introduction to long term investing.

If you’ve read our guide on asset allocation then you might recognize the phrase 3 Fund Portfolio.

This investment strategy may seem simple, but the underlying principles are solid. It helps you easily create a well-diversified portfolio with low fees (expense ratio).

Let’s jump into what the 3 Fund Portfolio actually is, how it works, and how you can make your own. But first, let’s make sure we are all on the same page.

What’s an investment portfolio anyway? Your portfolio is the collection of assets that you own. If you have all of your investments at Vanguard, then that’s where you’d go to see your portfolio. Yours might even be spread amongst a few different financial institutions.

This is pretty common if you have a 401K from work with one brokerage and your IRA with another one. In that case, you’d want to take a step back and look at your overall investments to see your entire investment portfolio.

Why Investors Love 3 Fund Portfolios

The beauty of the Three Fund Portfolio lies in its simplicity and efficiency. The typical 3 Fund Portfolio contains a U.S. ‘total market’ index fund, an international ‘total market’ index fund, and a bond ‘total market’ index fund.

Investors don’t need to necessarily use mutual funds to construct their portfolio either, as an ETF portfolio offers the same benefits. As a result, the asset classes included in these portfolios are…

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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.

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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.

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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…

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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...

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

Need a Side Hustle? Get a free copy of my Side Hustle Guide here and learn how to start making money on the side using these proven steps!What would you do right now if I handed you $1,000 cash money and said to you:

“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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