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Wednesday, November 27, 2013

Gold & GLD Resistance and Support Charts

Charts showing the important resistance and support levels for Gold and its exchange traded fund, GLD.  This morning I sent buy and sell levels for potential GLD trades to my subscribers.  If you would like to get this email, subscribe to my newsletter and I will send it to you.

Gold appears to be testing its 3-year low near the 61.8% Fibonacci retracement of the run from $681 to $1,923.70 per ounce.  
Click images to view full size
If the  61.8% Fibonacci support fails, then the next major support level for gold is the 2008 high of $1,033.90.
This graph shows gold prices for the last three years .  


This graph shows resistance and support levels for GLD, the exchange traded fund for Gold and my first choice as a low cost way to trade gold.
More charts and current quotes:
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A Gold Digger

Tuesday, November 26, 2013

Burton Malkiel Asset Allocation Advice

This very interesting article from CNBC "Why traditional diversification is ‘downright dangerous" explains why Nobel Prize winner Burton Malkiel believes that traditional 60:40 stocks:bonds asset allocation is "downright dangerous."

Burton Malkiel is the chief investment officer at Wealthfront, a Princeton professor and author of the investment classic, "A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Completely Revised and Updated)," a book that helped launch the low-cost index-investing revolution.

Key Points:

"The investor in bonds is, I think, very likely to get badly hurt by sticking with the 60/40."


CNBC: Why did we ever get the 60/40 in the first place?
Malkiel: I don't know. And I don't like any kind of norm, because it depends on so many factors—and your personality.
The correct allocation ought to depend on individual circumstances. It is definitely not the right kind of thing for everybody. What I had in my "Random Walk" for the last several editions is a quite different allocation. You should have more equity orientation. Another rule of thumb: Jack Bogle has often said bonds should be a percentage equal to your age. I don't agree with that, either.
I think that allocation is particularly wrong today because we are in an age of financial repression. ... Europe and Japan are having trouble reining in budget deficits, and we have high debt in the U.S., too. (The governments) are deliberately keeping interest rates down. Even a U.S. bond index fund is not the right thing to do, because BND [Vanguard Total Bond Market ETF] is about two-thirds government or agency bonds.
The investor in bonds is, I think, very likely to get badly hurt by sticking with the 60/40.
CNBC: In the recent editions of "Random Walk," you suggested the following portfolio for an investor in his or her 50s—with each asset class represented by a low-cost fund—and for the percentage allocated to equities to be larger, depending on the age and risk tolerance of the investor:
  • Cash: 5 percent
  • Bonds: 27.5 percent
  • REITs: 12.5 percent
  • Stocks: 55 percent
How would you update that portfolio?
Malkiel: The recent editions were written when bonds had a generous yield. Today BND yields are about 2.4 percent. That is why we suggest the bond (safer) part of the portfolio be fine-tuned. We ... use high-quality dividend growth stocks for a part of what otherwise would be a straight bond portfolio. Also, we use some foreign bonds where debt/GDP is low and yields are relatively high.
The updated portfolio for an investor in his or her 50s would look like:
  • Cash: 5 percent
  • Dividend growth stocks, emerging market bonds and tax-exempt bonds: 27.5 percent
  • REITs: 12.5 percent
  • Stocks: 55 percent
You use that as a starting point and move allocations up or down, depending on your age.
Note that Malkiel doesn't like hedge funds or gold.  CNBC gets a lot of free content from hedge fund managers hoping the exposure will convince some watching to look them up and ask them to manage money for a 2% annual fee plus 20% of any gains, called "2 and 20" or "2.20" by Malkiel.

CNBC: How has your view of asset allocation changed over the years?
Malkiel: I'm more open to the idea that you need stability. You may not, as an individual, just be psychologically able to stand the amount of volatility that equities have. You want a little more stability. ... I can understand that. It depends on your ability to not go crazy and sell at the wrong time when the equities drop, as they do.
I'd like to broaden the definition of how you get the stability. It's just saying ... in today's world, bonds as the only possibility to add stability to a portfolio is a much too narrow way to look at it, and a suboptimal way.
We're talking about a broader definition of diversification. There are some financial advisors using this window to broaden it to include a lot of alternative asset classes, like gold.
Some are even suggesting hedge funds. I believe in wider diversification, but for me wider diversification would be to look at some emerging markets that are very unpopular. Or REITs. Real estate is a hard asset, good when inflation is low.
Something like a hedge fund that charges 2.20 percent is a sure loser. 
I'm not a big fan of gold. People say it's a hedge against Armageddon. If the world disappears, your asset allocation will be the least of your concerns.
CNBC: What are the criteria you use to judge an asset class?
Malkiel: You want to control the things you can control. Worry very much about the costs you pay. All of us who deal with the stock market need to be very modest about our ability to make money. But the one thing is certain: The lower the fee I pay ... the more there will be for other investments. Worry about taxes on an asset class, fees, and you do want to be diversified. It's a totally reasonable thing to want stability, but it is not clear to me that that means bonds—or U.S. bonds, specifically.
Note:  My "core conservative portfolio" is probably too conservative according to Malkiel with 50% in "fixed income" with none of it currently in bonds and 50% in equities and REITs.  My "aggressive core portfolio" with 20% "fixed income" (none of which are bonds) and "80%" in equity index funds plus a REIT and 20% of the total portfolio in an "explore portfolio" with some bonds fits his model quite well. 
This table shows my newsletter "Core and Explore Portfolios" from 1998 through the end of Q3
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State Street Investor Confidence Index vs the Dow

Today, the State Street Investor Confidence Index fell to 91.3 from last month's revised lower reading of 95.5.   
This chart shows the Dow (Dow Jones Industrial Average) plotted against the monthly reading for the State Street Investor Confidence Index.
Click to view full size chart 
According to State Street, "The State Street Investor Confidence Index® measures confidence directly and quantitatively by assessing the changes in investor holdings of equities, implementing a model developed by State Street Global Markets’ research partnership, State Street Associates. The more of their portfolio that institutional investors are willing to devote to equities, the greater the risk appetite or confidence."


This table shows my newsletter "Core and Explore Portfolios" from 1998 through the end of Q3
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Thursday, November 21, 2013

Investors Intelligence Sentiment vs S&P500

Investors Intelligence Survey Data of Bulls-Bears vs. Weekly S&P500

The “Investors Intelligence Survey“ or IIS is one of the oldest weekly sentiment indicators used today. Charts of the Investors’ Intelligence Survey (IIS) “Bulls over Bulls plus Bears” versus the market are key tools for stock market technical analysis or sentiment. The IIS began in January 1963 by A.W. Cohen and has been published every week ever since.


Chart of Investors Intelligence Sentiment Survey

Bulls / (Bulls+Bears) vs S&P500
Click to view full sized

More info at Investors' Intelligence Sentiment Indicator

This table shows my newsletter "Core and Explore Portfolios" from 1998 through the end of Q3
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Graph 10 & 30-Yr T-Bonds vs S&P500

This graph shows ten and thirty year US Treasury Bond rates versus the S&P500 from 1995 to today.
Click for full size image

For current quotes and charts, see: 
This table shows my newsletter "Core and Explore Portfolios" from 1998 through the end of Q3
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and get the November issue for free
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Wednesday, November 06, 2013

Finisar Bull of the Day Stock at Zacks

Zacks has Finisar (FNSR) as its Bull of the Day stock

Bull of the Day: Finisar 
by Brian Bolan Published on November 06, 2013

Summary of Key Points:
(Added charts are mine)

Lower CapEx Guidance from Ma Bell
Nearly the entire fiber optic industry had a dimmer switched lowered on their stock prices on October 24. AT&T reported earnings and after increasing CapEx spending in the 3rd quarter, analysts questioned if that rate would continue.

but the CapEx spending cut was only 5%
A simple search of the AT&T conference call transcript reveals the truth of what was said versus how it was interpreted. The CFO stated "we are not trying to limit CapEx spending by a standard compared to last year." 
He went on to say "I think we said in the past that we would expect the CapEx for this year to be in $21 billion range and for '14 and '15 to be in the $20 billion range and at this time we are not adjusting that or changing that." So while CapEx may be shrinking, it’s not as much as you may have believed. It’s also not so likely that this means a 5% cut across the board and fiber could even see an increase in CapEx.
and on Valuation he says:
The valuation of FNSR looks very attractive. While the trailing PE is well ahead of the industry average, the forward PE of 21x is right in line with it. More conservative measures like the price to book multiple and the price to sales multiple each show FNSR trading at a multiple that is less than half the industry average. As analysts continue to move estimates higher, the valuation will only become more attractive unless the stock vaults well above the recent 52 week high.

Disclosure:  I own Finisar with a very low cost basis and cover it in my newsletter.

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