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The "Great Recession" - Ten Years Later


I thought you might be interested in some thoughts about the investment climate around the time of the "great recession". You may find them disturbing, or enlightening, depending on where you think we are today. But two things are fairly certain... not a whole lot has changed, and a look to the past often provides insight about the present.
  • Without too much of a stretch, it could be documented that the stock market "Crash of '87" was caused by investor focus on company fundamentals, as the best companies on earth led the market on a reckless course to a sudden and painful reversal of fortune for most investors.
  • It would be a "piece of cake" to prove that the "irrational exuberance" of the ".com bubble", ten years or so later, was caused by blind faith worship of technical analysis, as the "no value at all sector" flourished while profitable, high quality, dividend payers significantly underperformed NASDAQ's much more speculative issues.
  • More recently, blame for "The Great Recession" could well have been laid at the feet of big government, misguided regulators, and Modern Portfolio Theory zealots instead of heaped upon Wall Street banking institutions, complicit as they were in shaping the disaster. There was plenty of guilt to pass around.
In an April, 2010 post in Jotwell: Trusts and Estates: "Time to Rethink Prudent Investor Laws?", Jeffrey Cooper paraphrases a similarly titled article by Stewart Sterk.
  • Sterk, in my opinion, supports the assertion that Modern Portfolio Theory (MPT) and its computer creation "The Efficient Capital Market Hypothesis" were directly, without reasonable doubt, the cause of the recent global financial crisis.
By removing the "prudence" from the Prudent Man Rule, the federal government had allowed hypothesis and theory to replace profits and regular recurring interest payments. Effectively, probabilities, standard deviations, and correlation coefficients replaced fundamental value analytics, real profit numbers, and income generation capabilities, as determinants of investment acceptability in trusteed portfolios.
The Uniform Prudent Investor Act (UPIA), which reflects an MPT and "total return" approach to the exercise of fiduciary investment discretion, was adopted by most states by May 2004. The act stated that:
  • No category or type of investment is inherently imprudent. Thus, junior lien loans, limited partnerships, derivatives, futures, options, commodities, and similar investment vehicles, were acceptable.
At the same time, Congress was: encouraging lenders to make mortgages available to absolutely everyone; allowing federal mortgage providers to package products for Wall Street; preventing the SEC from regulating a burgeoning derivatives industry; and making all regulators stay clear of any involvement with a growing interest in "credit default swap" gambling.
It's not difficult to surmise just how involved Wall Street lobbyists were in making the once "sacred ground" of trusteed investment and pension plans a trillion dollar market place for every conceivable manner of "Masters of the Universe" creation/speculation. My assessment is that we remain in an "artificial portfolio" bubble as this is being written.
Not even Dodd Frank contained a solution to the problems that fostered the recession/ correction (at least not effectively). Both pension and defined contribution plan (401k) trustees are still expected to focus on portfolio market value growth instead of growing the income that plan participants will need at retirement... conservative, income based, portfolios would be fined mercilessly by feckless regulators for "poor performance".
  • The most popular "retirement income fund" on the planet (Vanguard's VTINX) generates less than 2% in spending money, check it out... while hundreds of other securities, safely yielding much more, are unacceptable to the regulators.
Without a meaningful correction for over ten years, it seems likely that millions of investors are about to become victims of a "How Could This Be Happening, Again" debacle.
Blinded By The Math
MPT doesn't just ignore all fundamental analytics while playing Frankenstein with the technical variety, it also pays no attention to the reality of market, interest rate, and economic cycles. It has produced an investment environment that has taken diversification to new heights of lunacy by including every possible speculation in the formula, while ignoring fundamental quality and income generation.
The only significant "risk", it postulates, is "market risk"... in reality just the always clear and present danger of all securities and markets. The MPT mixologists' concoction:
  • combine all market price numbers of all securities irrespective of quality rankings, income, or even profitability numbers
  • determine how these numbers varied against one another during various past market scenarios... regardless of cyclical cause
  • measure the dispersion of the results as they relate to the average and latest iterations of the actual numbers (what!)
  • measure the probability of each possible result, assign a "standard deviation" market value change risk measurement to each possible result, and finish by correlating the various risk assessments.
Add a shot of single malt, and a pinch of Old Bay, bring to a boil, shake a stick over it and SHAZAAM... we know the combined market, liquidity, concentration, credit, inflation, financial, and economic risk of every marketable security.
MPT portfolio construction assures that everything owned is negative directionally correlated to nearly everything else, without ever owning an individual stock or bond, or considering the amount of income produced by the portfolio. Thus creating, eh, producing, a passively managed... well, I haven't quite determined what such a portfolio would be.
The "oxymoronic" passive management (let the formulas and standard deviations steer your retirement bound ship) of "Modern Portfolio Theory" may initially have a sexy ring to it... until you try to figure out exactly what it does to the data it fuels itself on.
Aren't we bringing way too much science to a relatively simple system of exchanging dollars for ownership interests in business enterprises... an age old means for taking measured financial risk in the search for increased personal wealth.
MPT has spewed forth thousands of derivative products that have changed the equity playing field...
  • Should an uptick in a "triple-short-the-S & P 500" ETF be considered a positive or a negative?
  • Should individual issue numbers be adjusted for the number of derivative entities that hold them, short or long?
  • Does share price have anything at all to do with fundamental value or is it just the impact of derivative parlor game activity?
S & P p/e ratios are roughly 50% higher than they were five years ago; a sampling of high-dividend-paying ETFs sports an average p/e more than twice that of the S & P... and none of your advisors (myself excluded) seems concerned with the anemic level of income being produced by your retirement-bound portfolios.
Déjà Vu all over again?
Modern Portfolio Theory would have us believe that the future is, indeed, predictable within a reasonable degree of error. Theorists, research economists, other academics, and Wall Street marketing departments have always gone there --- and they've always been wrong.
Any claim to precision; any attempt to time the market; any hope of being at the right place at the right time, most of the time, is just not a reality of investing. And there's the rub for both forms of analysis, and for "the emperor's new clothes" risk assessment techniques and "active asset allocation" processes so popular in MPT.
So long as we live in a world where there are tsunamis and Madoffs; politicians and terrorists; big corporate egos and far more dangerous big government; and imperfect intelligence (both human and artificial) there will be no hope of certainty.
Get over it, reality is pretty cool once you've learned to deal with it.
My articles always describe aspects of an investment process I have been using since the 1970's, as described in my book, "The Brainwashing of the American Investor". All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.


Article Source: http://EzineArticles.com/9957905

Harnessing Stock Market Volatility


If you were to Google "stock market volatility", you would find a wide range of observations, conversations, reports, analyses, recipes, critiques, predictions, alarms, and causal confusion. Books have been written; indices and measuring tools have been created; rationales and conclusions have been proffered. Yet, the volatility remains.
Statisticians, economists, regulators, politicians, and Wall Street gurus have addressed the volatility issue in one manner or another. In fact, each day's gyrations are explained, reported upon, recorded for later expert analysis, and head scratched about.
The only question I continue to have about all this comical hubbub is why don't y'all just relax and enjoy it? If you own only high quality income generating securities, diversify properly, and adopt a disciplined profit-taking routine, you can make stock market volatility your very best friend (VBF).
Decades ago, a nameless statistics professor brought me out of a semi-comatose state with an observation about statisticians, politicians, and economists. "In the real world", he said, "there are liars, damn liars, and any member of the groups just mentioned". An economist or a politician, armed with a battery of statistics, is an ominous force indeed.
Well, now, all economists and statisticians have high powered computers and the ability to analyze volatility with the same degree of certainty (or is it arrogance) that they have developed with regard to individual-stock risk analysis, economic and geographical sector correlation dynamics, and future prediction in general.
  • But the volatility (and the uncertainty it either causes or results from, depending upon the expert you listen to) persists.
Modern computers are so powerful, in fact, that economists and statisticians can now calculate the investment prospects of just about anything. So rich in statistics are these masters of probabilities, alphas, betas, correlation coefficients, and standard deviations, that the financial world itself has become, mundane, boring, and easy to deal with. Yeah, sure it has.
Since they can predict the future with such a high degree of probability, and hedge against any uncertainty with yet another high degree of probability, why then is the financial world in such a chronic state of upheaval? And why-o-why does the volatility, and the uncertainty, continue?
I expect that you are expecting an opinion (yet another opinion) on why the volatility is as pronounced as it seems to be compared with years past. Frankly, Scarlett, I can't really make myself give a damn. The uncertainty that we are asked to believe is caused by volatility just simply is not. Uncertainty is the regulation playing field of the investment game... and of life, actually.
The more you invest in higher risk securities, the more you speculate on future directional change, the more you ignore growing income, and focus only on market value, the more uncertain your investment environment becomes. So risk, speculation, poor diversification, low income generation, and up only market value expectations combine to exacerbate uncertainty, but nothing can eliminate it... only that is certain.
Volatility, on the other hand is simply a force of nature, one that needs to be embraced and dealt with constructively if one is to succeed as an investor.
But this machine driven, hyper-volatility that we have been experiencing recently, has been magnified by the darkest forces of the "dismal science" and the changes that it has encouraged in the way financial professionals view the makeup of the modern investment portfolio.
On the bright side, enhanced market volatility actually enhances the power of the equity and income security trading disciplines and strategies within the Market Cycle Investment Management ( MCIM ) methodology... an approach to market reality that embraces market turbulence, and harnesses market volatility for results that leave most professionals either speechless or in denial.
  • MCIM focuses on the highest quality equity securities and well diversified income security portfolios, creating a lower than normal risk environment where price fluctuations can be dealt with productively, without panic. Higher prices generate profit taking transactions; lower prices invite additional investment. The underlying quality, diversification, and income generation create a more tolerable "uncertainty quotient" than other methodologies.
But, with no statistical data necessary (or available) to support the following opinion, consider this simplistic rationale for the hyper-volatility of today's stock market.
Volatility is a function of supply and demand for the common stock of a finite number of dirty, evil, greedy, polluting, congress corrupting, job creating, product and service providing, innovation and wealth developing, foundation supporting, gift giving, tax-collecting corporations.
Those of us who trade common stocks in general, Investment Grade Value Stocks in particular, owe a debt of gratitude to the real volatility creators: the hundreds of thousands of derivative products that bring an entirely speculative kind of indirect supply and demand to the securities markets.
Generally speaking, the fundamental, emotional, political, economic, global, environmental, and psychological forces that impact stock market prices have not changed significantly, if at all.
Short term market movements are just as unpredictable as they have ever been. They continue to cause the uncertainty you need to deal with, by using proven risk minimization techniques like asset allocation, diversification, and profit taking.
The key change agents, the new kids on the block, are the derivative betting mechanisms (Index ETFs, for example) and their impact on the finite number of shares available for trading. Every day on the stock exchange, thousands of equities are traded, a billion shares change hands. The average share is "held" for mere minutes. No one seems to we seek out analysts who spin tales of "fundamental" brilliance, profitability, or income production.
On top of derivative trading in real things such as sectors, countries, companies, commodities, and industries, we have a myriad of index betting devices, short-long parlor games, option strategies, etc. What's a simple common share of Exxon to do? I've heard financial talk show hosts warn listeners to never, not ever, buy an individual equity!
  • Is today's movement in any individual equity the result of demand for the company shares themselves, or demand for the multiple funds, indices, and other derivatives that track or include the company in their "model"? How many derivative owners have a clue what's inside their ETF?
We are in an environment where investors feel smarter dealing in sectors than in companies; where 401k "retirement" plans (they really are not retirement plans, you know) are banned by regulators from offering even reasonably high yielding investment opportunities, and where government fiscal policies have forced millions of actual retirement savings accounts to seek refuge in the shark infested waters around Wall Street.
Market volatility is here to stay, at least until multi-level and multi-directional derivatives are relocated to the Las Vegas casinos where they belong, until regulators realize that 7% after higher expenses is better than 2% after minimal expenses, and until interest rates are allowed to return to somewhat normal levels... and this is what feels to some like an elevated level of uncertainty.
For the discernible future, we'll need to find a way, a methodology, that makes both of them our VBFs.
My articles always describe aspects of an investment process I have been using since the 1970's, as described in my book, "The Brainwashing of the American Investor". All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.


Article Source: http://EzineArticles.com/9932902

How to Use Automated Stock Trading to Win in the Market


The traditional method of trading and investing in the stock market is quickly being replaced. Technology offers advanced approaches to helping you win in the market. If you want to reduce risk from a highly volatile market, then you can use automated stock trading to change the outcome. There are several available technology tools, all which allow you to find more opportunities with the trades and investments you are interested in making.
The first step to automated stock trading is to know the qualities of the best software. You will find that several of the trading tools are based on basic equations that automate real time statistics. Others will automatically respond to stop - losses or your decisions to buy or sell. While these may work for some instances, it doesn't offer the freedom of choice. It also limits your capacity to find complete solutions with how to move in the market.
Another approach you can consider with automated stock trading is by looking at tools which assist with analysis. For instance, many traders and investors are now able to use automated tools for complex analytics, such as oscillators, to Bollinger Bands. If you have used these in the past and want a simple way to trade and invest in the market, then this will help with the tools you are interested in. Identifying the approaches with automated tools allows you to see exactly how the market is moving.
There are also advanced tools that identify your next moves in the market. Automated stock trading is now extending to systems which apply algorithms and formulas for your trades and investments. For instance, fractals look at the patterns and statistical data by using technology. It is then able to alert you and predict moves in the market before they happen. These tools create new solutions that sense how the market is moving, creating an extra analytical tool for your trades and investments.
By using automated stock trading, you can extend the possibilities of moving in the market. Despite many popular beliefs, using this approach does not allow a robot or technology to take over. Instead, the technology analyzes information and alerts you when there are changes in the market. With these opportunities, you will easily be able to find the best solutions for trading and investing in the market. With automated stock trading, you can change how you move in the market. The different tools are designed to provide you with basic insights as well as leading indications in the market.
Stephen has several years of experience in the stock market. He has used automated stock trading to create profitability of thousands of dollars. He now teaches others how to move in the market by using the best trading systems https://www.blusignalsystems.com/


Article Source: http://EzineArticles.com/9908264

Income Investing Fantasyland: High Dividend Equity ETFs and Mutual Funds


Several years ago, while fielding questions at an AAII (American Association of Individual Investors) meeting in Northeast NJ, a comparison was made between a professionally directed "Market Cycle Investment Management" (MCIM) portfolio and any of several "High Dividend Select" equity ETFs.
  • My response was: what's better for retirement readiness, 8% in-your-pocket income or 3%? Today's' response would be 7.85% or 1.85%... and, of course, there is not one molecule of similarity between MCIM portfolios and either ETFs or Mutual Funds.
I just took a (closer-than-I-normally-would-bother-to) "Google" at four of the "best" high dividend ETFs and a, similarly described, group of high dividend Mutual Funds. The ETFs are "marked-to" an index such as the "Dividend Achievers Select Index", and are comprised of mostly large capitalization US companies with a history of regular dividend increases.
The Mutual Fund managers are tasked with maintaining a high dividend investment vehicle, and are expected to trade as market conditions warrant; the ETF owns every security in its underlying index, all of the time, regardless of market conditions.
According to their own published numbers:
  • The four "2018's best" high dividend ETFs have an average dividend yield (i.e., in your checkbook spending money) of... pause to catch your breath, 1.75%. Check out: DGRW, DGRO, RDVY, and VIG.
  • Equally income unspectacular, the "best" Mutual Funds, even after slightly higher management fees, produce a whopping 2.0%. Take a look at these: LBSAX, FDGFX, VHDYX, and FSDIX.
Now really, how could anyone hope to live on this level of income production with less than a five or so million dollar portfolio. It just can't be done without selling securities, and unless the ETFs and funds go up in market value every month, dipping into principal just has to happen on a regular basis. What if there is a prolonged market down turn?
The funds described may be best in a "total return" sense, but not from the income they produce, and I've yet to determine how either total return, or market value for that matter, can be used to pay your bills... without selling the securities.
Much as I love high quality dividend producing equities ( Investment Grade Value Stocks are all dividend payers), they are just not the answer for retirement income "readiness". There is a better, income focused, alternative to these equity income production "dogs"; and with significantly less financial risk.
  • Note that "financial" risk (the chance that the issuing company will default on its payments) is much different from "market" risk (the chance that market value may move below the purchase price).
For an apples-to-apples comparison, I selected four equity focused Closed End Funds (CEFs) from a much larger universe that I have been watching fairly closely since the 1980s. They (BME, USA, RVT, and CSQ) have an average yield of 7.85%, and a payment history stretching back an average 23 years. There are dozens of others that produce more income than any of the ETFs or Mutual Funds mentioned in the "best of class" Google results.
Although I am a firm believer in investing only in dividend paying equities, high dividend stocks are still "growth purpose" investments and they just can't be expected to generate the kind of income that can be relied upon from their "income purpose" cousins. But equity based CEFs come very close.
  • When you combine these equity income monsters with similarly managed income purpose CEFs, you have a portfolio that can bring you to "retirement income readiness"... and this is about two thirds the content of a managed MCIM portfolio.
When it comes to income production, bonds, preferred stocks, notes, loans, mortgages, income real estate, etc. are naturally safer and higher yielding than stocks... as intended by the investment gods, if not by the "Wizards of Wall Street". They've been telling you for nearly ten years now that yields around two or three percent are the best they have to offer.
They're lying through their teeth.
Here's an example, as reported in a recent Forbes Magazine article by Michael Foster entitled "14 Funds that Crush Vanguard and Yield up to 11.9%"
The article compares both yield and total return, pointing out pretty clearly that total return is meaningless when the competition is generating 5 or 6 times more annual income. Foster compares seven Vanguard mutual funds with 14 Closed End Funds... and the underdogs win in every category: Total Stock Market, Small-Cap, Mid-Cap, Large-Cap, Dividend Appreciation, US Growth, and US Value. His conclusion:
  • "When it comes to yields and one-year returns, none of the Vanguard funds win. Despite their popularity, despite the passive-indexing craze and despite the feel-good story many want to believe is true-Vanguard is a laggard."
Hello! Time to get your retirement readiness income program into high gear and stop worrying about total returns and market value changes. Time to put your portfolio into a position where you can make this statement, unequivocally, without hesitation, and with full confidence:
"Neither stock market volatility nor rising interest rates are likely to have a negative impact on my retirement income; in fact, I am in a perfect position to take advantage of all market and interest rate movements of any magnitude, at any time... without ever invading principal except for unforeseen emergencies."
Not there yet? Try this.
*Note: no mention of any security in this article should be considered a recommendation of any kind, for any specific action: buy, sell, or hold.
My articles always describe aspects of an investment process I have been using since the 1970's, as described in my book, "The Brainwashing of the American Investor". All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.


Article Source: http://EzineArticles.com/9973018

The Importance of Environment, Social and Governance (ESG) Factors to Current Investment Trends


When did ethical and sustainable investment strategy become a serious consideration for shareholders, investors and asset managers?
Global investment focus of shareholders, investors, and investment managers is shifting. We are currently seeing the transfer of wealth to millennials, environmental disasters, costs and risks increasing, and improved performance of operations through sustainable practices.
The importance of environmental, social and governance (ESG) factors, in investment decision making, as Boston Consulting Group point out in their recent article;Investors Care More About Sustainability Than Many Executives Believe, that 75% of senior executives in investment firms see ESG factors as materially important to their investment decision. The disconnect is evident that only 60% of companies have a sustainability strategy, and just 25% have developed a clear business case for sustainability.[1]
ESG incorporates a wide range of impacts on the risk and return values of an investment. These issues may be surrounding regulation changes, business ethics, or direct impacts on financial, operational, strategic or reputational risks. Examples of such risks are:
Environmental: natural resources, waste, climate change, pollution, and clean technology.
Social: health and safety, local community, human rights, and human resources.
Governance: compliance, regulation, reporting, conflict of interest in employee, shareholder or board levels.
The transition from purely fundamental investment approaches, to consider the medium to long-term impacts of our business decisions in environment, social and governance will affect the market from small to medium business, suppliers, manufacturers, supply chain, agribusiness, healthcare, large corporates, and listed business all the way up to multinationals. Investment and flows of capital are what drive our economy and the complex ecosystem of the global economy understands the value of sustainable ESG strategy in where they want to invest their funds.
The Australian market has typically struggled when coming to terms with how to evaluate environmental, social and governance business policy, and often does not consider it cost effective. Reporting on ESG in Australia up until recently, was not an important process for listed business, and investment into internal ESG risk reduction strategy minimal.
The range of environmental impacts on businesses and their operations can vary significantly and some organisations are better placed to take advantage of these more than others. To quantify environmental risk is a challenging process to put in terms of monetary value, however, the transition to a low carbon economy is a key driving force. To achieve a low carbon economy requires investment into improving operational efficiencies within energy, waste and water usage by utilising clean technologies.
Social impacts and risks require analysis into a business's immaterial characteristics and not found on a balance sheet, such as culture, employee productivity, relationships with customers, health and safety, community engagement and sustainable supply chains. Social business decisions often surround ethics working in conjunction with profits. Although not often a direct impact on business performance, social and ethics are an important process of modern business practices.
External analysis on business governance processes can also present its challenges. Corporate behaviour, decision making and policy require listed business to report extensively usually wrapped up in large volumes of data. One clear example of governance risk was Volkswagen's diesel emissions scandal in 2015. In EY's report, Tomorrow's investment rules: How global institutional investors are using ESG to inform decision-making in 2015, (2015) mentioned that 'nearly two thirds of those surveyed believe that companies do not adequately disclose ESG risks.'[2]
Harvard Sustainability Review, (2012), did a direct comparison between High Sustainability organisations to Low Sustainability organisations of similar size, operations and sectors. 'In particular, we track corporate performance for 18 years and find that High Sustainability firms outperform Low Sustainability firms both in stock market as well as accounting performance.'[3]
The opportunity to improve ESG performance is at a crux for both listed and private business. Investments into sustainable practices improve long term bottom-line performance, mitigate risk and now represent an important part of business. Although driven by investors, companies need to realise the importance of comprehensive ESG reporting, creating sustainable strategy and building ethical business culture. The 21st century, educated, ethical investor and consumer is here, and they see value in sustainability.
[1] Unruh, Kiron, Kruschwitz, Reeves, Rubel, Meyer Zum Felde, G.U., D.K., N.K., M.R., H.R., A.F., 2016.Investors Care More About Sustainability Than Many Executives Believe. 1st ed. Global: Boston Consulting Group.
[2] Bell, Gordon, M.B., J.G., 2015. Tomorrow's investment rules: How global institutional investors are using ESG to inform decision-making in 2015. 1st ed. Global: Ernst and Young.
[3] Eccles, Ioannou, Serafeim, R.E. I.I. G.S., 2012. The Impact of Corporate Sustainability on Organizational Processes and Performance. 1st ed. USA: Harvard Business School.
By James Cronan | Sustainable Future Group


Article Source: http://EzineArticles.com/9951454

Rising Bond Rates Impact on the Stock Market


The recent stock market sell-off prompted a herd mentality among many investors. Moving with the flow of the crowd, investors large and small sold enough shares to cause the Nasdaq to fall 4.1%, S&P 500 3.3%, and Dow close to 5%.
Bond yields had much to do with the sudden drop in the stock indexes and there are reasons bond rates can prompt a down turn in the equities markets.
The Federal Reserve began to move short-term interest rates higher over a year ago and signaled it would raise rates further to 2.5 percent in December 2018, 3.0 percent in 2019, and 3.5 percent in 2020. Short term prime rates are a primary reason for bond rates going up.
The Fed game plan to increase prime rates over time signaled the bond market to strengthen its yields. On October 9, the 10-year note yielded 3.25%, following indications from the Federal Reserve that more rate hikes are in the future.
Individual and institutional investors view rising interest rates as a signal to move dollars out of the equity market and into fixed income investments. Rising bond yields throw off more interest income and are safer alternatives compared to dividend income from stocks.
Bonds compete for investor dollars and investors will seek the highest investment income with the greatest margin of safety.
Both the Fed prime rate and resulting bond yield are also a reason for determining the U.S. economic outlook. Economic expansion or contraction will respond to the costs of borrowing money.
Higher bond yields force companies to spend more dollars for expansion projects, resulting in more debt on their balance sheets. Thus, companies often cut back in research, development, and capital expansion when borrowing costs increase.
Investors also become sensitive to business slow downs and follow these closely. Because investors view their stock ownership as part ownership in a company, any expectation of business contraction affects their decisions to hold stock.
Negative changes in company growth and expansion result in lower cash flow, less money to pay stock dividends, and less incentive for owning a company's stock. Thus, stock valuations drop along with share prices.
When the Federal Reserve consistently raises prime interest rates and bond yields follow, history reflects money flowing out of stock investments and into bonds. As rates have steadily risen this year, this pattern has followed. Money has clearly moved from stock funds into bond investments with stock share prices dropping in lock step.
For the personal investor with a long holding period, rising bond yields are not a cause for alarm. The investor with a portfolio of growth stocks will see falling stock valuations as corporate businesses contract. For the investor primarily holding dividend stocks, not only will share prices contract but continued dividend increases become a concern.
However, personal investors holding shares in good companies with track records of solid performance can weather adverse effects on the economy as it relates to rising bond yields. The message here is that the caliber of a company and strength of its management team is much more important in the long run than any impact bond yields may have on the economy.
I have been an active investor for over 35 years. With the exception of employer 403(b) retirement plans, my investments have always been self-directed. My preferred investment style would fall into value investing with dividend growth and income as a long term objective.
Contact:


Article Source: http://EzineArticles.com/10023479

When Will The Next Market Crash Happen?

If only would be paid for every prediction of the next market crash I'd be very rich. We are so used to being brainwashed that most of us don't even notice any more to what extend this is happening 24/7.
Fact:You are not thinking for yourself, you are constantly told what to think
The permanent barrage from the financial media that only serves one objective that is to make you do something that is not to your benefit, but fills their offers in one way or other, has reached a point of beyond excess. Today you simply cannot turn on CNBC, Bloomberg or any other news channel without being brainwashed. This is not news any more.
I regularly receive emails from so called "leading market analysts" telling me of the big crash. Big crash mean that we must see a price drop of at least 15% in a short period of time.
Artificially induced fear rules the world of trading and investing
I just have one question: What happened to the big gold rally forecast by well respected analysts like Martin Armstrong for the last two years?
I don't know about you, but I am sick and tired with these pumped up hysterical market calls designed to get your attention and flatter their producers' egos. If I make the same market call long enough eventually it is going to happen.
Alas this is not the worst part of it:
Our brains simply cannot cope with this constant overload. If you think that listening to the news will help you become a better trader, think again. All it does it panders to a deeply rooted insecurity inside you that makes your mind susceptible to authority, fuelling insecurity, greed and dysfunctional trading behaviours.
Today everyone has guru status who has appeared on TV at least once
The entire guru industry is a media machine designed to disempower you and make the many trade forecasting services a lot of money. Unbeknown to your conscious awareness your brain is addicted to this kind of information overwhelm. If I asked you to stop listening to the news from today on for the next week or so, you'd find it very hard to do.
Most of what you are told is plain fabrication with no base on reality


When Will The Next Market Crash Happen?

Yet the story is repeatedly sold to you from many angles that eventually you believe it. Welcome to the biggest brainwashing machine out there.
Fact: Most of so called gurus are brilliant at selling and lousy at trading
I know quite a few of them and have seen their trading accounts. Believe me, you would be shocked.
I wonder: How many times have you been caught out in a trade you took just because you got swayed by the opinion of some trader who comes across as extremely knowledgeable and competent? I dread to think. I used to do it too. In fact, I lost way more money following the advice of other traders, brokers and famous analysts than I managed to lose trading my own style.
Distinguishing between what is true for your trading psychology and personality and separating the wheat from the chaff is a tall order.
Most traders' brains are simply not trained to manage their minds in a constructive way that serves them. They are too immersed in their unconscious addiction to know ahead of time where the market is going. I know this is tough talk, alas it is one of the few truths out there. Freeing yourself from the addiction to market news is one of the kindest things you can do for your brain and your trading account.
Mercedes Oestermann van Essen is a success coach and trading psychology coach. She works with financial professionals and entrepreneurs assisting them to create brain coherence and manage their internal states.
She is well known and respected for her cutting edge insights in the field of trading psychology. Mercedes Oestermann van Essen is the author of "The Buddhist Trader", available on Amazon.com and other books on personal development and trading psychology.
Her guided meditations for traders and investors increase harmony and coherence in your (trading) mind: [https://www.thebuddhisttrader.com/product/transformational-guided-meditations-academy/]
Please sign up for the "Buddhist Trader" newsletter at: [http://www.thebuddhisttrader.com] and discover invaluable information on spiritual success, neuro science, life transformation.


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