FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Actually, Stocks Hit All Time Highs A While Ago (Advisor Perspectives)
There’s been a lot of excitement about the Dow hitting a record high. But Doug MacKay, Bill Hoover, and Mike Czekaj of Broadleaf Partners argue that a look at total indices would show those all-time highs were actually reached a while ago and the current hype is inaccurate.
“The Dow Jones Industrial Average and the S&P 500 indices do not include the compounding effect of dividends paid by member companies. Any retiree will tell you that dividends represent a return of capital and useful income in the real economy. If you had reinvested those dividends back in the index as they were paid, the old time highs reached in October of 2007 likely would have been passed some time ago.”
They explain that the S&P 500 is hovering near its highs but if we looked at the S&P 500 index including dividends, its highs were probably already crossed in August 2012. This is important because: 1) “If the common indices – including dividends – hit new highs as much as a year ago, then not only are reports of all-time highs old news, but the reality might even serve as an encouragement rather than a deterrent to new investors.” 2) “Dividends do matter”.
Broker Banned From Securities Industry After Recommendation To NFL Players (The Wall Street Journal)
Lighthouse Point broker Jeffrey Rubin has been banned from the securities industry after his recommendation caused NFL players to lose millions of dollars.
Though Finra didn’t identify the player, the Wall Street Journal says public records show that it was Tennessee Titans cornerback Samari Rolle who lost $3 million. Rubin had recommended investing in a casino in Alabama, and 30 other NFL players also invested in it based on his referrals.
This Chart Shows What Happens After The Stock Market Hits A High (S&P Capital IQ)
Now that we’ve hit an all time high S&P Capital IQ’s Sam Stovall thinks stocks will fall in the near term. He drew up a chart that showed that the median gain only lasts two months.
Photo: S&P Capital IQ
The Picture-Perfect World Is Not Unrealistic (JP Morgan)
“In the picture-perfect world: We are all aware that the equity market looks “overheated” and that there are many stumbling blocks ahead, as we argued last week. The uncertainty surrounding the US sequestration and Italian election looms large, not to mention potential oppositions to Abe’s TPP drive from within his own party.
“What we might have learned in the past week, however, is that as long as economic recovery stays in its track, the equity market, albeit subject to short-term corrections, will likely steam ahead.
“So let us assume that sequestration will become less of an issue and US economic growth remains intact. We will also assume that Italy will not abandon Euro and Abe’s economic agenda will receive approval from inside and out.
“While this may sound all too picture-perfect, it is by no means unrealistic, in our view. And if we are right, comparing the current levels to the levels seen from 2005 to 2007 may become much more reasonable.”
“When two competing investment theories are presented with no definitive proof of which is better, the simpler one is better,” according to Rick Ferri.
In the case of efficient and inefficient markets, he says investors should pick the former. Those who believe in efficient markets go with diversified portfolios and don’t try and “time markets”. While the latter works for some people it doesn’t mean it will work for everyone and it doesn’t even those investors who have done it successfully once can replicate the result. What’s more? The costs for mistiming markets are too high.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.