In this example, a tail-hedged portfolio would spend 0.5% of its equity exposure every month buying 2-month put options that are about 30% out-of-the-money. After one month, those put options are sold and new ones bought according to the same methodology. Spitznagel demonstrates the value of this methodology in the chart below. When Tobin’s Q is in its uppermost quartile, the portfolio he describes above outperforms a simple buy-and-hold approach by about 4% per year.
When living in Australia between 1995 and 2005, I worked with someone who was 100% convinced that the Australian house price increases were unsustainable, that the market had peaked, and that selling out and getting back in a couple of years was a brilliant idea. Unfortunately, this was around 2002 or 2003 and all that Australian prices did for the next 7 or 8 years was to continue to increase. Last I heard from her, she and her husband had given up any hope of ever again owning their own house.
Some enduring red flags, Filia said, are in the form of politics and geopolitics — growing populism across Europe as well as Middle East and Asian tensions. But more than that he sees shrinking liquidity — central bank spending flows in reverse for the first time in a decade — as the "first real crash test" for momentum and volatility, as well as rising interest rates.
3. They also found, to the surprise of some readers I’m sure, “that some widely cited economic variables displayed an unexpected, counterintuitive correlation with future returns. The ratio of govern- ment debt to GDP is an example: Although its R2makes it seem a better performer than others, the reason is actually opposite to what one would expect—the government debt/GDP ratio has had a positive relationship with the long-term realized return. In other words, higher government debt levels have been associated with higher future stock returns, at least in the United States since 1926″.
So take this time to go over your holdings and tally up how much you have in stocks and how much in bonds. If you're not sure of the asset make-up in some of your investments — which may be the case if you own funds that invest in a combination of stocks and bonds — plug the names or ticker symbols of your funds into Morningstar's Instant X-Ray tool, and you'll see how your portfolio overall is divvied up between stocks, bonds and cash.
If you break up the components of the correction, the entire fall was concentrated in financials and other sectors where there are valuation concerns. Even within the large cap space, the correction was sharpest in stocks like Kotak Bank, Adani Ports, Bajaj Finserv, Bajaj Finance etc where there already are valuation concerns. The basket selling was largely restricted to stocks like Yes Bank, Indiabulls and DHFL, which were in the news as well as stocks where valuation concerns have been around for quite some time.
Hi Jack, I can’t offer advice and I can’t imagine a first time buyer buying in North County. Oceanside home prices are up 11% in the last year, so a lot of buyers/investors are optimistic. I don’t see availability improving much in San Diego County and with the economy so strong, things look good. However, with geo political uncertainty, you need to be able survive a crash anytime in the next 5 years!
When markets are very volatile, the overall trend tends to be down. So what investors should be hoping for are extremely boring days on Wall Street when not much happens. That has been the usual state of affairs for much of the past decade, but now volatility has returned with a vengeance. The following is how CNBC summarized the carnage that we witnessed on Friday…
By the end of October, stock markets had fallen in Hong Kong (45.5%), Australia (41.8%), Spain (31%), the United Kingdom (26.45%), the United States (22.68%) and Canada (22.5%). New Zealand's market was hit especially hard, falling about 60% from its 1987 peak, and would take several years to recover. The damage to the New Zealand economy was compounded by high exchange rates and the Reserve Bank of New Zealand's refusal to loosen monetary policy in response to the crisis, in contrast to countries such as West Germany, Japan and the United States, whose banks increased short-term liquidity to forestall recession and would experience economic growth in the following 2–3 years.
In a 2011 article that appeared on the Wall Street Journal on the eve of the anniversary of the 2010 "flash crash", it was reported that high-frequency traders were then less active in the stock market. Another article in the journal said trades by high-frequency traders had decreased to 53% of stock-market trading volume, from 61% in 2009. Former Delaware senator Edward E. Kaufman and Michigan senator Carl Levin published a 2011 op-ed in The New York Times a year after the Flash Crash, sharply critical of what they perceived to be the SEC's apparent lack of action to prevent a recurrence.
From October 6–10 the Dow Jones Industrial Average (DJIA) closed lower in all five sessions. Volume levels were record-breaking. The DJIA fell over 1,874 points, or 18%, in its worst weekly decline ever on both a points and percentage basis. The S&P 500 fell more than 20%. The week also set 3 top ten NYSE Group Volume Records with October 8 at #5, October 9 at #10, and October 10 at #1.
The stock market crash of October 1929 led directly to the Great Depression in Europe. When stocks plummeted on the New York Stock Exchange, the world noticed immediately. Although financial leaders in the United Kingdom, as in the United States, vastly underestimated the extent of the crisis that would ensue, it soon became clear that the world's economies were more interconnected than ever. The effects of the disruption to the global system of financing, trade, and production and the subsequent meltdown of the American economy were soon felt throughout Europe.
Japanese asset price bubble 1991 Lasting approximately twenty years, through at least the end of 2011, share and property price bubble bursts and turns into a long deflationary recession. Some of the key economic events during the collapse of the Japanese asset price bubble include the 1997 Asian financial crisis and the Dot-com bubble. In addition, more recent economic events, such as the late-2000s financial crisis and August 2011 stock markets fall have prolonged this period.
We are humbled by the overwhelming response we received for the "Invest Like a Pro" Virtual Stock Contest. We hope the last three months were as exciting for you as they were for us. Our goal was to take you on an eventful journey where you could mimic a real trading experience without any risk but at the same time win real cash prizes. In the process we hope you were able to brush up on your stock picking skills.