FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
KOESTERICH: Stock Valuation And Investor Sentiment Don’t Justify Bubble Fears Just Yet (BlackRock Blog)
To understand if U.S. stocks are in bubble territory, BlackRock’s Russ Koesterich thinks investors should look at valuation and sentiment. In terms of valuation, he writes that stocks aren’t cheap by they are still far from their previous peaks. He pays close attention to the Shiller P/E Ratio. “Today’s reading, in the mid 20s, suggests below average returns in coming years. A further advance would suggest a more serious problem. By way of comparison, the indicator reached a high of around 30 prior to the 1929 crash and was close to 45 in 2000,” Koesterich writes.
In terms of sentiment investors should look at both what investors are doing and what they are thinking. Looking at the put/call ratios and Bullish/Bearish Sentiment from the survey by the American Association of Individual Investors (AAII), Koesterich writes “that both metrics suggest bullishness, but not craziness.”
Bottomline: “For now, the preponderance of the evidence still suggests that stocks are not so overvalued, nor investors so exuberant, as to justify the ‘B’ word just yet.”
Peter Lynch, legendary money manager who was formerly at the head of Fidelity’s Magellan Fund sat down with Charlie Rose on Bloomberg TV for a rare chat on investing. Lynch gave Rose his “Three C’s” of investing — complacency, concern, and capitulation. “Being complacent is the worst one,” Lynch said. “If you’re working hard, you can avoid it.” He also said its important to get into a stock when the company still has years of growth ahead. He said investors should get into a stock in the “first, second, third inning, not when they’re drawing up the line-up.”
Retail Alternatives Are The Next Frontier For Asset Managers (Goldman Sachs)
Retail liquid alternatives (RLAs) which include “long/short equity, multi-alternatives, currencies, market neutral, managed futures, real estate, energy and commodities,” provide an immense investment opportunity for asset managers, according to Goldman Sachs’ Marc Irizarry. “RLAs” are in the early stages of a 5-10 year growth trend, generating 15-20% organic growth annually, capable of producing a $US2 trillion AuM opportunity–reminiscent of early stage ETF growth.”
The Financial Industry Regulatory Authority has voted to increase arbitrator pay to $US600 for each hearing day, instead of the current $US400 rate. The chairperson of the panel would receive an extra $US125 per day instead of $US75. “To cover these honoraria increases, FINRA would increase the member firm surcharges and case processing fees for claims larger than $US250,000. The proposal would also increase filing fees for investors, associated persons, or firms bringing claims of more than $US500,000,” according to the press release. This is the first change to arbitrator pay since 1999 but it has yet to be approved by the SEC.
There Never Was A Golden Era Of Retirement (The Motley Fool)
Americans between the ages of 55 – 64 have a median networth of $US180,000, according to Nieslsen Claritas. “Only 58% of us are even saving for retirement in the first place. Of that group, 60% have less than $US25,000 put away … a full 30% have less than $US1,000,” according to ConvergEx Group. But this is hardly a new problem, writes Morgan Housel at the Motley Fool. He says here never was a golden era when Americans could enjoy retirement and that “by some measures, retirees are in a better position today than at any other time in modern history.”
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