Archive - March 2015

1
The Fed Can’t Reach Inflation Target 85% Of The Past 19 Years
2
Lower Oil, Less Looking For It
3
Schwab Intelligent Portfolios: Incomplete Rebalancing Algorithm
4
The Top 10 Investment Pitfalls You – or Your Advisor – Often Commit
5
Risk of Recession Rising

The Fed Can’t Reach Inflation Target 85% Of The Past 19 Years

The Federal Reserve’s favorite inflation gauge, the PCE, has only gotten above the Fed’s target of 2% for three full years in 2005, 2006, and 2007 in the past 19 years. The years 2005-07 were when China imported an enormous amount of commodities far in excess of what would be used on a sustainable basis. That probably caused inflation to exceed the 2% target during those years. I guess one could joke that the Fed is so incompetent that they can’t even create inflation despite an enormous increase in the money supply from $4Trillion of Quantitative Easing. Thus, had there …

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Lower Oil, Less Looking For It

You already know that oil prices are lower than they have been in a long time, in part because U.S. oil production is higher than it has ever been, and still climbing steeply. But you have to wonder how long these conditions will last, since lower oil prices make it less economical for oilfield services companies to drill.

The below chart, courtesy of the oilfield services company Baker Hughes, may be the most dramatic illustration of economic reality you will see this month. It shows how the U.S. has increased the millions of barrels of oil per day that we’re …

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Schwab Intelligent Portfolios: Incomplete Rebalancing Algorithm

Schwab recently released Schwab Intelligent Portfolios (SIPs), “an automated investment advisory service.” It claims to “make professional advisory services available to anyone with $5,000 to invest.”

In reality, SIPs only offers one service: to “build, monitor and rebalance your portfolio,” and it doesn’t do that well.

We previously explained how SIPs builds a portfolio based on your risk tolerance, a useless measure. Now we review the two pros and nine cons of how Schwab monitors and rebalances portfolios.

Pro: Drift-Based Rebalancing

SIPs provides “daily check-ins” where “excess ETF shares are sold, and the proceeds are used to …

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The Top 10 Investment Pitfalls You – or Your Advisor – Often Commit

Here are the top 10 investment pitfalls I often see individuals AND advisors committing.

If you’re a “do it yourself” investor, review this check list (below). If you’ve entrusted your investments to an advisor, there’s no guarantee he or she may not be committing some of these avoidable errors!

Error #10 – The left hand doesn’t see what the right hand is doing.

Splitting up your money amongst various managers “to see who does best” is a terrible idea. “Joanne” has a $3 million portfolio divided amongst 3 managers. One manager takes a very conservative tack, while another manager uses …

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Risk of Recession Rising

Durable goods orders fell 1.4% in part due to less demand from oil producers for capital equipment. The Atlanta Federal Reserve said GDP for first quarter revised down to 0.2%.  The annual inflation rate is 0.0%. If the U.S. calculated inflation as is done in Europe where housing costs are not counted then inflation would be about 1.5% lower. The problem with counting housing in the CPI index is that if only a few wealthy people pay high prices for a home that distorts the market.
    The formula for estimating interest rates for the ten year Treasury is real …

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