Posts by Aaron Task
- Daily Ticker2 days ago
Investing in index funds vs. individual securities is the best bet for individual investors, according to academic studies and nearly all responsible market pundits. And yet, our recent discussion on the subject touched a nerve with viewers.
"I found 65 actively managed funds that returned better than the 10.8% annual return since inception that have been around longer than Vanguard S&P 500 (VFINX)," writes Louis. "EVERY SINGLE ONE OF THEM is actively managed. There are many thousands of average & below average funds out there - but there are plenty of good choices. BEST BET: a diversified portfolio, with someone else paying attention, to make sure you not only get the best returns (which we're taught is the holy grail) but that we meet the financial goals we've set in the time frame we choose."
Related: Have Index Funds Become Too Popular?
- Daily Ticker3 days ago
After a blockbuster rally that saw gold surge nearly 700% from 2000 to its peak in September 2011, the shine has come off the yellow metal. With gold now down 36% from its 2011 peak, investors are understandably rushing for the exits: Nearly $70 billion in assets have been redeemed from gold-related ETFs this year, Bloomberg reports. No matter whether you think gold is a "barbarous relic" or the only real currency, there's probably a lot about the precious metal you don't know. Matthew Hart, author of Gold: The Race for the World's Most Seductive Metal, reveals some top secrets about gold in the accompanying video, including: America Is Still on the Gold Standard: Richard Nixon unilaterally ended the dollar’s convertibility to gold in 1971, a date that lives in infamy for many gold-bugs. But America's 8,000-ton gold reserve is statutorily committed to support the dollar through a system of gold certificates issued by the Treasury and held by the Federal Reserve, Hart notes. Gold is carried on the government’s books at a value of just $42 an ounce, covering only a tiny fraction of the world's supply of dollars. Adjust for current prices of around $1241, the gold would actually cover almost a third of U.S. circulating currency. A "True" Gold Standard Is No Panacea: Returning to a "real" gold standard would create instability in the financial markets, not stability, Hart argues. In the aftermath of the 2008 crisis, central bankers here and abroad responded by flooding the system with capital. "If we hadn't done that, most people think the crisis would've been way worse," the author says. "You can't do that if you're on the gold standard; you can't issue more money if you don't have more gold." Of course, supporters of the gold standard think we never would've had the crisis in the first place if we'd been on a "true" gold standard in the years leading up to 2008. China Is the World's Largest Gold Producer: OK, maybe this isn't news to true gold aficionados but the rest of us probably think of Australia, America or South Africa as top gold-producing countries. China produced 370 tons of gold last year – compared to 250 tons from Australia and 230 from the United States. But what makes China's spot as the top producer even more remarkable is that it doesn’t have a single big mine. Instead, they have tens of thousands of small ones – many of them illegal. The California "Rush" Wasn't All That: The gold rush of 1848-1857 reshaped California's destiny and was such a huge event that there's an NFL football team (the San Francisco 49ers) named after it. In roughly 10 years, the "49ers" -- aided by black slaves and indentured Chinese laborers -- produced about 850 tons of gold, or roughly what the industry currently produces every four months, Hart notes. "The gold rush we're justing seeing the end of now absolutely dwarfed the California gold rush," he says. They Weren't Going
- Daily Ticker6 days ago
The wealth of American households hit a nominal record of $77.3 trillion in the third quarter, according to data released this week by the Federal Reserve. The third-quarter household wealth number wasn’t a record on an inflation-adjusted basis but given the stock market’s rally since Sept. 30, it’s almost certainly at a record now. (Even with the record decline, the S&P 500 is still up about 5.6% in the fourth quarter.) Given recent events such as the fast food workers strike, Occupy Google and ho-hum start to holiday shopping season (based on what retailers are saying vs. the government data) we were pleasantly surprised to hear Americans are doing so well. But digging into the numbers a little bit we couldn’t help be reminded of the “Really!?!” segments Seth Meyers and Amy Poehler made famous on SNL’s Weekend Update. As in…Really? Household wealth is at a record high? You know what else is at a record — at least until very recently — The Dow Jones Industrial Average? That's one big reason why the data says Americans are richer. Oh, and by the way, the wealthiest 10% of U.S. households own about 80% of stocks. You know what else is at a record? The number of people on Food Stamps! 47 million! Really! No wonder most Americans aren't feeling very good about their finances these days. Nearly a-third of Americans believe we're still in a recession and 39% say the national economy is getting worse, according to a recent poll by American Research Group. Really!?! As Lauren Lyster and I discuss in the accompanying video, it isn’t hard to imagine why... Let's start with wages. Household net worth is now back to 2007 levels, meaning before the Great Recession. But in the same timeframe, wages have stagnated and real (i.e. inflation-adjusted) household income was down 6.1% in October 2013 from the median average of $55,686 in December 2007, according to Sentier Research. The housing market's rebound is a big factor in household net worth. But more Americans are renting now — 35% last year vs. 31% in 2004 — and half of U.S. renters pay more than 30% or more of their income on rent, up a whopping 12 percentage points from a decade ago, according to Harvard's Joint Center for Housing Studies. Consumers are also holding more debt besides mortgages, notably credit cards, auto loans and student loans, which are also at record levels - over $1 trillion. So really Ben Bernanke, the next time your statisticians want to tell Americans their wealth is at a record high, make them include an asterisk that these records are really driven by the richest Americans. After all, they have most of the money! And for the nearly 11 million Americans without a job and the 7.7 million more working part-time — but not by choice — please remember to thank the wealthiest among us for helping America achieve this new milestone. Really!
- Daily Ticker10 days ago
The rollout of the Affordable Care Act, aka Obamacare, was a "debacle" and President Obama has taken heat for repeatedly telling Americans "if you like your plan you can keep it." That claim turned out to be false and the president's poll numbers tumbled. But the president's other big claim -- about "bending the cost curve" -- is turning out better than even one of the act's biggest supporters would've guessed. "The cost story is better than I expected," says Peter Orszag, former director of the Congressional Budget Office and director of the Office of Management and Budget during President Obama's first term. "At time the legislation passed, the conventional wisdom said 'this thing solves coverage but does nothing on costs,'" he recalls. "The experience since suggests the coverage part was a little rockier than people expected but the cost story turned out much better than anyone could have anticipated at the time." Related: Obamacare's Unintended Losers
- Daily Ticker10 days ago
It has become conventional wisdom in recent years that America is in decline, perhaps terminally so.
Josef Joffe, a professor at Stanford and editor of the German weekly magazine Die Zeit, turns this mindset on its head in his new book: The Myth of America's Decline."
It's a cyclical phenomenon," Joffe says of the predictions of America's decline. But just as "declinists" were wrong about Russia in the 1950s and Japan in the 1980s, current forecasts about America playing second fiddle to China will also prove wrong, he says.
"All the Asian dragons and tigers started out at double-digit speed, then came down like Japan to nothing, or South Korea to 4%" growth, Joffe notes. "The [export-driven] model runs out of steam" because it's based on investment at the cost of consumption, and features too much state interference leading to over-investment in certain sectors, leading to declining marginal returns, he explains.
- Daily Ticker13 days ago
Friday’s jobs report capped a week of mostly solid economic news, once again spurring chatter about whether and when the Fed will taper. Ahead of the jobs data, I spoke with Roger Altman, chairman of Evercore Partners and former Deputy Secretary of the Treasury, about the outlook for monetary policy. While acknowledging the “huge debate” over the efficacy of quantitative easing and the exit strategy to (presumably) come, Altman broadly praised the Fed’s efforts since the 2008 crisis. “The Fed has done yeoman’s work,” he says. “The country is better off for the Fed having been as aggressive on monetary policy than if it hadn’t.” Specifically, Altman cites the “considerable repair” to household balance sheets, thanks in large part to the recovery of the stock market and U.S. home prices. The ‘reinflation’ of those assets was “a very explicit goal of QE,” he says. However, the investment banker does believe the Fed should declare ‘mission accomplished’ and reduce its accommodation because overall economic growth remains “subpar.” To Altman, that is not a sign of QE’s failure but “the limits of monetary policy” and the huge challenge the Fed faced after the credit bubble burst. (Of course, the Fed’s role in helping pump up that bubble is another story.) On another separate but related issue, Altman does not believe the stock market is in another bubble, a view that was gaining credence before the 5-day slide in stocks that is set to be halted by Friday’s gains. “I don’t see much sign of bubble-like activity a la 2006 and 2007 [in housing] or going back to 1998-1999-2000 in the tech sector,” he says in the accompanying interview, taped at a Hamilton Project event in Washington D.C. earlier this week. “Stock prices are pretty high by historical standards but I don’t think they’re crazy high.”
- Aaron Task at Daily Ticker16 days ago
Updated from 10:00 a.m. EST
Since the financial crisis of 2008, scores of books have been written about its cause. Many of them, notably Reckless Endangerment by Josh Rosner and Grethchen Morgenson, placed much of the blame for the crisis on Fannie Mae and Freddie Mac. (Update: Although much of the narrative focuses on the expansion of Fannie Mae -- and its rising influence with members of Congress -- Rosner says his book names investment banks as the "main culprits" in the crisis. "No industry contributed more to the corruption...than Wall Street," he writes.)
Indeed, most observers believe Fannie and Freddie contributed to the housing bubble that burst in 2008, and only 20% of Americans view the government-sponsored enterprises (GSEs) favorably, according to a June 2013 poll by On Message Inc.
- Aaron Task at Daily Ticker17 days ago
Neither government dysfunction, the sequester, the botched rollout of Obamacare, nor fear of Fed tapering has stopped the market from its appointed rounds with records highs this year. Neither, to date, have escalating tensions in the East and South China Seas.
Last week, the Chinese government took the unprecedented step of declaring its sovereignty over the airspace above the Senkaku Islands, over which Japan claims sovereignty, prompting a robust response from the U.S.
"This unilateral action constitutes an attempt to change the status quo in the East China Sea,” U.S. Secretary of State John Kerry said last week. “Escalatory action will only increase tensions in the region and create risks of an incident."
- Aaron Task at Daily Ticker27 days ago
New Yorkers of certain age might remember Crazy Eddie’s annual "Christmas Sale…in August."
We’re not there quite yet but national retailers are, more than ever, trying to get the holiday shopping season started sooner.
This Friday, a full week before Black Friday, Best Buy (BBY) is launching its “holiday price guarantee,” offering shoppers a refund or price match for any item found at a lower price at a “major competitor.” Best Buy’s offer is good until Dec. 24, excluding the period from Thanksgiving Day through Cyber Monday.
- Aaron Task at Daily Ticker27 days ago
The Ultimate Fighting Championship, better known as UFC, has been a huge hit with audiences across America -- and around the world. UFC is the largest Pay-Per-View event provider in the world, claims a global audience of over 1 billion and is broadcast in over 149 countries and territories, in 30 different languages.
But, to date, UFC hasn’t been able to get a license in New York, home to Madison Square Garden, a.k.a. ‘the World’s Most Famous Arena’ and the scene of some of history’s greatest boxing matches -- as well as pro and amateur wrestling, and Muy Thai kickboxing.
“We’re legal in 49 of 50 states and everywhere else around the world,” UFC chairman & CEO Lorenzo Fertitta tells me in the accompanying video. “It’s strange, odd – the only place we’re not allowed is New York.”
Even stranger, perhaps, is why UFC hasn’t (yet) made it here: Union opposition from across the country with no link to athletics of any kind.