Market Prospects Darken

Stocks have lost a lot of ground of late.  In the last month, the most used stock index, the S&P 500, has dropped over 10 percent.  Volatility from one day to the next is sufficient to unnerve even the most cold-blooded investor.  What may be still more upsetting, the Federal Reserve (Fed) has promised to constrain credit and …

The Federal Reserve Raises Interest Rates

After pursuing an easy money policy for years, the Federal Reserve (Fed) has finally made a change.  A recent statement announced four essential moves: The Fed would end its program of adding liquidity to markets in which it directly bought securities –– what policy makers call “quantitative easing.”It has raised the rate on the benchmark federal …

What Drives This Market Rally?

People are worried.  Society seems to have degenerated into partisan bickering and, too frequently, violence.  Democrats and Republicans seem more set on thwarting each other than serving the nation.  Inflation seems to have gotten away from the Federal Reserve (Fed).  Supply chains are failing.  And yet, despite this dispiriting picture, stocks continue to rise.  Is it that market participants are unaware …

COVID-10 Diary Number 7 (July 8, 2020)

Would negative interest rates help the economy recover from anti-virus strictures and propel the stock market rally?  President Donald Trump seems to think so.  He has publicly pressured Federal Reserve Board (Fed) Chairman Jay Powell to pursue just such a policy, saying that the country deserves the “gift” of below-zero interest rates.  Though the Fed …

Bill Gates Embarrasses Himself, But Offers an Investment Lesson Nonetheless

Bill Gates of Microsoft fame and fortune gave an interview recently, and though he embarrassed himself, the exchange offers investors an important lesson: No one has secret knowledge. Someone may perhaps have special knowledge, but nothing that amounts to magic. The Gates interview teaches this important point in two different ways: He spoke on the …

The Bond Part of Your Portfolio

The last post explained general decisions in creating a portfolio, what financial professionals call asset allocation.  This post focuses on the bonds in the portfolio. Bond decisions focus on two main considerations, maturity risk and credit risk. Maturity Risk  This is the tradeoff between yield and the term to maturity of the bonds. Long-maturity bonds tend to pay …

Which to Pay First

In response to my last post about what to do with surplus cash, an insightful reader asked whether it is best to pay off credit cards first or student loans.  Definitely, pay the cards first.  The most onerous student loan debt carries a lower interest rate than the least burdensome credit card.  Pay the cards …