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Matt Coffina, editor of Morningstar’s StockInvestor newsletter, writes that stocks are pricey based on the Shiller price-to-earnings ratio, which “uses 10-year average of real GAAP earnings in the denominator.” The Shiller P/E is now at 26 or “about the 68th percentile relative to the last 25 years,” Coffina said. “So, in other words, the market has in general been cheaper, based on this measure, 68% of the time since the late 1980s. That’s certainly a cause for concern based on recent history.”
“So, what we’ve seen historically is that any time the Shiller P/E is above, say, 25.5, which is about the 60th percentile relative to the past 25 years, subsequent total returns for investors have been very poor, on average in the low-single digits, with some very severe drawdowns, and pretty much the only time investors have achieved an attractive total return from current valuation levels is if it was at the beginning of a speculative bubble. So, say, 1996 before the late ’90s bull market really got going, or 2002 and the lead-up to the housing bubble and the financial crisis. So, based on the Shiller P/E, I think there is definitely cause for concern from current valuation levels.”
America’s Wealth Gap Widened In The Last Decade (Bloomberg News)
The rich got richer and the poor got poorer between 2000 and 2011, according to the latest data from the Census Bureau. “Median net worth increased by $US61,379 for the top 20 per cent of households, which more than doubled the share of their wealth relative to lower-income groups, the report found,” writes Lorraine Woellert at Businessweek. “For those in the bottom 20 per cent, net assets minus liabilities declined by $US5,124. U.S. median household net worth fell by more than $US5,000, or 6.8 per cent, from 2000 to 2011.”
GARTMAN: This Is A Market Melt-Up (CNBC/Business Insider)
Dennis Gartman, author of The Gartman Letter thinks stock prices just want to move up. In an interview with CNBC he said, we had “a very severe 3.5-4% correction,” a few weeks ago. “Now you’re taking all of the news that I think is relatively evil for the market, expectations of tighter monetary policies, being brought closer rather than being deferred, the market has accepted that very well and here were are up 95 points on the day, I think you’re having a melt-up not a melt-down.”
Separately, in the Thursday edition of The Gartman Letter he wrote, “we see nothing that can or should de-rail the protracted global bull market. …It will end when it ends and it will end when trends lines are broken; it will end when a previous rally high fails to be taken out and a previous interim low is, instead, taken out to the downside.”
Wells Fargo Is Loading Up On Former Morgan Stanley Advisors (InvestmentNews)
Wells Fargo has been heavily recruiting from Morgan Stanley, reports Mason Braswell at InvestmentNews. Most recently, Wells recruited a duo with $US348 million in assets under management (AUM) bring the total assets recruited in the last three months to about $US1.4 billion from 10 advisors. By comparison, Morgan Stanley brought in $US110 million from a Wells Fargo advisor. The numbers come from InvestmentNews’ “Advisers on the Move database” and Braswell does point out “not all teams make their moves public when they change firms, so the numbers in the database may not be an accurate representation of the full scale of recruiting.”
Advisors Should Focus On A Niche If They Want To Grow Their Business (WealthManagement.com)
“Advisors who target a niche, often one based on a particular profession, stand a better chance of growing a business,” writes Anne Field at WealthManagement.com. But Field has some advice on how advisors can go about it. Take dentists for instance, Field suggests that you can network by going to big annual meeting of the Association of Dentists, but it might be more effective to “attend monthly meetings of your state association’s local offshoots.” She suggests discussing topics of interest like disability insurance. With baseball players Field suggests meeting them during spring training and focusing on subjects like “cash flow management and budgeting.”
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