INSERT INTO `wp_posts` VALUES (8375,3,'2021-06-14 18:01:59','2021-06-14 18:01:59','<!-- wp:spacer {\"height\":8} -->\n<div style=\"height:8px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading -->\n<h2>Holland, 1636</h2>\n<!-- /wp:heading -->\n\n<!-- wp:columns {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-top\"><!-- wp:column {\"verticalAlignment\":\"top\",\"width\":\"60%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\" style=\"flex-basis:60%\"><!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>One would suppose that there must have been some great virtue in this flower to have made it so valuable in the eyes of so prudent a people as the Dutch; but it has neither the beauty nor the perfume of the rose – hardly the beauty of the ‘sweet, sweet-pea;’ neither is it as enduring as either…\"</p><p>\"At last, however, the more prudent began to see that this folly could not last for ever… It was seen that somebody must lose fearfully in the end. As this conviction spread, prices fell, and never rose again. Confidence was destroyed, and a universal panic seized upon the dealers.\"</p><cite>– Tulipomania, Holland, 1636, excerpted from Extraordinary Popular Delusions &amp; the Madness of Crowds, written by Charles Mackay 1841</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:image {\"id\":4887,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Jan_Brueghel_the_Younger_Satire_Tulip_Mania_1640-1024x655.jpg\" alt=\"Painting, A Satire of Tulip Mania by Jan Brueghel, c. 1640\" class=\"wp-image-4887\"/><figcaption>A Satire of Tulip Mania by Jan Brueghel the Younger (ca. 1640) depicts speculators as brainless monkeys in contemporary upper-class dress.</figcaption></figure>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading -->\n<h2>Fast forward to 2017: Cryptocurrency Markets</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The quotes above referring to the Tulipomania of the 1600s may seem bizarre and distant to many. However, we see striking similarities between the investor psychology that once surrounded those antiquated tulip bulbs and that which is driving the current mania in cryptocurrencies, particularly Bitcoin:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-top\"><!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Wealth Managers Are Being Inundated With Calls About Bitcoin</p><cite>Bloomberg, 11/21/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Someone in 2010 bought 2 pizzas with 10,000 bitcoins – which today would be worth $100 million</p><cite>Business Insider, 11/28/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Owning bitcoin is so much damn fun</p><cite>Yahoo! Finance, 11/30/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin swings from bull to bear and back in a day </p><cite>Financial Times, 11/30/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin’s Wildest Ride: Up 40% in 40 Hours </p><cite>Wall Street Journal, 12/7/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin Futures Debut With 26% Rally, Trigger CBOE Trading Halts</p><cite>Bloomberg, 12/11/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bitcoin and the Lure of Decentralization</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Bitcoin is the most widely-recognized and largest cryptocurrency by market capitalization. Specifically, a cryptocurrency is a digital currency which has no central issuing or regulating authority, but instead uses a decentralized system of computers to record transactions and manage the issuance of new units. The digital asset relies on cryptography to prevent counterfeiting and fraudulent transactions. While over 1,000 unique cryptocurrencies exist today, they all share a common purpose: to enable and serve decentralized applications – a way to create a self-supporting service that no single entity operates or regulates.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Way of the future? It’s complicated…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Cryptocurrencies may sound like the way of the future, but they are incredibly complex and difficult to understand. To illustrate, let’s take a high-level look at a theoretical transaction paid for in Bitcoin, as depicted by the flow chart at the below. Once the transaction is proposed, independent entities (called “miners”) compete on the open network to time stamp and verify the transaction by performing computationally difficult calculations. The reward for winning the elaborate race to verify and add the transaction to the public digital ledger (the blockchain) is a fraction of the transaction’s value, plus a processing fee, both denominated in Bitcoin. The integrity of the ledger is upheld by the economic self-interest of the miners – pure, unadulterated capitalism.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8307,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/bitcoinflowchart.jpg\" alt=\"\" class=\"wp-image-8307\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bitcoin vs. Internet Bubble</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4739,\"width\":352,\"height\":416,\"sizeSlug\":\"large\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/bitcoin-1.png\" alt=\"Bitcoin vs. the Internet Bubble chart via Yahoo! Finance\" class=\"wp-image-4739\" width=\"352\" height=\"416\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Although Bitcoin has been in existence since 2009, its ascension to mainstream relevance is far more recent. Originally beloved by a very small group of passionate believers, Bitcoin saw relatively steady price appreciation in its early years while remaining virtually unknown to the general public. Over time, public enthusiasm surrounding Bitcoin has crescendoed, with the price of the digital currency rising exponentially, attracting hordes of amateur “investors” and speculators. As a result, the price of one Bitcoin has exploded by an absurd +3960% since the beginning of 2016! The ride has been volatile, including five drawdowns of at least -25% (daily close) during that period. Bitcoin’s meteoric rise dwarfs even the gains seen in the Internet Index at the peak of the notorious Tech Bubble. ➞</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Love at First Bit?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Why has the world seemingly become enamored with the concept of cryptocurrencies? The following are some of the advantages being widely touted by Bitcoin advocates:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Freedom </strong>– It is possible to send and receive Bitcoin payments anywhere in the world at any time, without scrutiny. Users don’t have to worry about third party delays or approvals, banking holidays, transfer limits, or any other laws due to lack of central authority.</li><li><strong>Anonymity </strong>– Anyone, of any age, from anywhere in the world, with access to the Internet can transact with Bitcoins without providing any paperwork or proof of identification. Since personal information is not being tied to transactions, the risk of identity theft is eliminated.</li><li><strong>Low Fees </strong>– Transaction fees for processing Bitcoin payments are relatively low. Additionally, digital currency exchanges (e.g., Coinbase) can help merchants process transactions by converting Bitcoins into fiat currency for a fee that is generally lower than most credit card processing fees.</li><li><strong>Less Risk for Merchants </strong>– Because Bitcoin transactions cannot be reversed and do not carry any personal information with them, merchants are protected from potential losses that could occur from credit card fraud.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>Despite the increasing hype and number of new Bitcoin advocates, doubters and skeptics abound – and you can count us among them. An asset’s value does not go parabolic without carrying extreme risk. In addition, there are numerous pitfalls and uncertainties associated with cryptocurrencies:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Price Volatility </strong>– It is impossible for Bitcoin to be a good store of value and a legitimate tool for transacting business when prices change so rapidly. Imagine trying to buy a car with Bitcoin when its value is gyrating by hundreds, or even thousands of dollars over a short period of time.</li><li><strong>Intangible </strong>– Many skeptics take issue with the fact that a Bitcoin is represented by a unique string of numbers stored on a hard drive – there is no physical coin.</li><li><strong>Moral Dilemma</strong> – The anonymity provided by Bitcoin is a double-edged sword, as it makes the digital currency inherently ideal for black market dealings.</li><li><strong>Regulation </strong>– The IRS has begun taxing digital currency gains and payments. Furthermore, there is the potential that certain countries could attempt to ban cryptocurrencies altogether, particularly if terrorist activities are funded by Bitcoin.</li><li><strong>Cybersecurity and Fraud </strong>– Digital currency assets can be stolen by hackers. Additionally, as the demand for cryptocurrencies has grown, scammers and poseurs have created their own bogus digital assets.</li><li><strong>Scalability</strong> – Major digital currency exchanges (e.g., Coinbase) have had difficulty handling traffic, which causes scalability and liquidity issues.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading -->\n<h2>Our Perspective</h2>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":4742,\"width\":462,\"height\":260,\"sizeSlug\":\"large\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/bitcoin-3-kings-cartoon.jpg\" alt=\"Cartoon depicting three wise men, one offering bitcoin...\" class=\"wp-image-4742\" width=\"462\" height=\"260\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Throughout history, there have been numerous examples of revolutionary ideas or innovations that turned into dangerous bubbles due to feverish speculation and Wall Street hype ─ regardless of the good intentions of the underlying concept. In our opinion, cryptocurrencies like Bitcoin are among them. Any dispute regarding the practical applications of Bitcoin matters not to the crazed speculators driving today’s rampant price gains.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Many will argue that cryptocurrencies are isolated from other aspects of the economy and financial markets. However, we are concerned that the potential impact of a violent collapse in cryptocurrency prices could be bigger and more far-reaching than anticipated. And we are not alone:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Why Bitcoin’s Bubble Matters</strong>  <span style=\"font-size: inherit;\">If there’s a price crash in the cryptocurrency, it could hit the tech sector–and more</span></p><cite>Wall Street Journal - 10/8/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><span style=\"font-size: inherit;\"><strong>Deutsche Bank Economist Says a Bitcoin Crash Would Endanger Global Markets</strong></span> </p><cite>Fortune - 12/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Whether speculation is in tulip bulbs, real estate, stocks, sub-prime mortgages, or cryptocurrencies, the pattern is usually the same. For investors, emotions run the gamut from greed, to defiance, to fear at any hint of a disruption in the system. Unless you have a voracious appetite for risk and a high tolerance for loss, today’s cryptocurrency bubble is best left to the speculators.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator {\"className\":\"is-style-default\"} -->\n<hr class=\"wp-block-separator is-style-default\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - December 15, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Bitcoin.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','Bitcoin - Tiptoe, through the Tulips...','We see striking similarities between the investor psychology that once surrounded those antiquated tulip bulbs and that which is driving the current mania in cryptocurrencies, particularly Bitcoin.','inherit','closed','closed','','2418-revision-v1','','','2021-06-14 18:01:59','2021-06-14 18:01:59','',2418,'https://ns2020-investech.investech.com/?p=8375',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8376,3,'2021-06-14 18:03:26','2021-06-14 18:03:26','<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:heading {\"className\":\"unclear\"} -->\n<h2 class=\"unclear\">Securities-Backed Loans… Just the Tip of the Iceberg?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Aging bull markets are naturally predisposed to excesses –particularly in debt and leverage– and once again nontraditional loans are taking center stage.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:image {\"id\":8264,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/iceberg-4ReskwNsh68-unsplash-1024x576.jpg\" alt=\"\" class=\"wp-image-8264\"/><figcaption>Nine-tenths of an iceberg\'s volume is below the water</figcaption></figure>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Markets are relaxing merrily on a powerful time bomb</strong> - Stock and bond market leverage is everywhere.</p><cite><em>Business Insider – 7/30/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>The article goes on to say, <em>\"Some of (this leverage) is transparent, such as NYSE margin debt which was $539 billion as of the June report. But the hottest form of stock and bond market leverage is opaque, offered by financial firms that usually don’t disclose the totals: securities-based loans (SBLs) – or “shadow margin” because no one knows how much of it there is.\"</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Innovative Lending Practices Make a Come-back</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been over 12 years since we warned about the highly questionable mortgage lending practices that mushroomed during the Housing Bubble. Now it appears that innovative lending is back in vogue. Securities-backed loans (SBLs) are among Wall Street’s hottest new products in this bull market, and they’ve been growing faster than Jack’s beanstalk over the past few years:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Borrowing With Stock Soars as Market Rises</strong></p><cite><em>Wall Street Journal, 7/28/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Fidelity taps Goldman Sachs to expand lending services through RIAs</strong></p><cite><em>Investment News, 7/27/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Goldman Sachs is launching a digital platform for the rich to borrow as much as $25 million</strong></p><cite><em>Reuters, 7/27/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Wall Street Sharks Entice Customers With Securities-Backed Loans</strong></p><cite><em>Seeking Alpha, 8/13/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>SBLs are often referred to as “shadow margin” because they’re not tracked in the margin debt figures, nor are they tracked by either the SEC or the brokerage regulator FINRA. Nobody knows how extensive such loans are, but based on anecdotal evidence they total at least $100 billion and we believe the figure could be much larger.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":4901,\"width\":483,\"height\":237,\"sizeSlug\":\"large\",\"linkDestination\":\"none\",\"className\":\"pushleft\"} -->\n<div class=\"wp-block-image pushleft\"><figure class=\"alignleft size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/MorganStanley-1024x502.png\" alt=\"Morgan Stanley ad for securities-backed loans\" class=\"wp-image-4901\" width=\"483\" height=\"237\"/><figcaption>Morgan Stanle<strong>y</strong> Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>According to a July 2017 Wall Street Journal article, Bank of America’s wealth unit had $40 billion in outstanding securities-backed loans at the end of 2016, up 140% from 2010. Morgan Stanley had $30 billion in these loans, more than double the amount in 2013. And, not to be left behind, Goldman Sachs is teaming up with Fidelity and other brokerages to broaden the availability of credit via its new digital lending program, “GS Select.”</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>What are securities-backed loans (SBLs), and why are they popular?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4902,\"width\":366,\"height\":310,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/WellsFargo.png\" alt=\"Wells Fargo advertising securities-backed loans\" class=\"wp-image-4902\" width=\"366\" height=\"310\"/><figcaption>Wells Fargo Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>In simple terms, SBLs are loans that are marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the securities in one’s investment portfolio without having to liquidate those holdings. Funds can be used for any purpose except buying more stock or repaying a margin loan. For instance, these loans might be used for buying real estate, investing in a business, funding education, or for personal use like taking a trip or paying for a wedding.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Fixed loans can run the gamut from $25,000 to $25 million or more, depending on the lender and the amount of collateral. A typical SBL agreement permits an investor to borrow from 50% to 95% of the value of the assets in his or her non-retirement investment account, based on the size of the portfolio and the types and mix of securities held. These lending arrangements can be set up as a fixed loan, but more often they’re established as a revolving SBL line of credit (SBLOC). It’s not uncommon for a firm to require that account assets have a market value of at least $100,000 to qualify for an SBLOC.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The sales pitch is irresistible!</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Looking at the promotional materials shown in this report from broker websites touting SBLs, who wouldn’t want to avail themselves of this offering? According to the ads, you’ve worked hard to grow your investments over the years; now you can capitalize on those assets to finance your dreams without drawing down your portfolio.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4903,\"width\":435,\"height\":319,\"sizeSlug\":\"large\",\"linkDestination\":\"none\",\"className\":\"pushright\"} -->\n<div class=\"wp-block-image pushright\"><figure class=\"alignright size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/UBS-1024x751.png\" alt=\"UBS advertising securities-backed loans\" class=\"wp-image-4903\" width=\"435\" height=\"319\"/><figcaption>UBS Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>With an SBLOC, the cash is readily available (up to the credit limits) any time you need it.</li><li>Other than securities related transactions, there are no restrictions on how you use the loan.</li><li>An SBLOC lets you keep your investment account intact, allowing it to continue to grow.</li><li>By borrowing to meet your cash needs, you can avoid selling securities and triggering capital gains taxes.</li><li>Because SBLs are backed by portfolio assets, interest rates can be much lower than traditional loans.</li><li>Once an SBLOC is in place, it can be used repeatedly and you’re only required to make monthly interest payments – there is no maturity date.</li><li>There are usually no fees to establish the loan or credit line and funds are available quickly. Goldman Sachs’ digital platform promotes a 24-hour turnaround.</li><li>Typically, no personal financial statements, tax returns, or other documents are required.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>What’s in it for the brokers?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4904,\"width\":346,\"height\":233,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/GoldmanSachs-300x204.png\" alt=\"Goldman Sachs securities lending advertisement\" class=\"wp-image-4904\" width=\"346\" height=\"233\"/><figcaption>Goldman Sachs Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>SBLs and lines of credit have become lucrative new sources of income for brokerages, helping to replace revenue lost due to recent cuts in commission rates. In addition, brokers retain portfolio assets, along with their associated fees, as customers can access cash without making withdrawals. In some cases, establishing these loans may factor into a broker’s compensation, and marketing these credit options creates “sticky” clients as it’s hard to transfer assets to another broker with a securities-backed loan outstanding. Even if a client doesn’t use the line of credit immediately, the longer it’s in place, the more likely it is that he or she will eventually tap it.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>So, where’s the risk with SBLs?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>With SBLs, as with all financial obligations, it’s vitally important to read the fine print or risks section before committing. Careful attention to this step reveals that brokerages and banks get all the benefits of secured, full-recourse loans, while customers take all the risk. This may seem acceptable in a healthy bull market, but it can be catastrophic to the pledged portfolio in a downturn.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The following are some of the risks that investors may face if they borrow against an investment account. It’s these risks that prompted the SEC and FINRA to issue a special Investor Alert in 2015 regarding this type of lending:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>If the value of the securities declines below a minimum level, you may be subject to a collateral “maintenance call” with little or no advanced warning, giving you minimal time to pay the loan or deposit more cash or securities in the account. Note that if this occurs, there are no extensions, and a broker can change its collateral maintenance requirement at any time without notifying you.</li><li>If you are unable to meet a maintenance call, the broker can liquidate part, or all, of your portfolio holdings at their discretion. You do not pick the stocks to sell. In a bear market, that could mean selling core holdings at a market bottom or alternatively realizing significant tax gains on long-held securities.</li><li>In a major downturn, you could be forced to forfeit all your pledged assets – in this case, the stocks, funds, and bonds in your portfolio. This is a major drawback to asset-backed loans…</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Why Goldman Sachs Seized a Client’s 217-Foot Yacht</strong></p><cite><em>Wall Street Journal - 8/10/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>In the worst-case scenario, you might lose more funds than are held in the collateral account, and as a full-recourse loan, you would be liable for any deficiency.</li><li>For SBLOCs, the interest rate on your loan is generally a floating rate that can change daily. With interest rates rising, the cost of your SBLOC could increase significantly.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>The proliferation of SBLs and SBLOCs obviously increases the risks in this late-stage bull market. While history shows that excessive debt accumulation does not trigger a stock market peak, it can accelerate and intensify losses when the leverage starts to unwind in a bear market. Today’s levels of these securities-backed loans are small relative to overall consumer and business debt, but they can be dangerous. Like subprime mortgage loans 10 years ago, if trouble appears in terms of mass collateral maintenance calls, it could be just the tip of the iceberg.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - September 15, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/pdf_files_wp/SBLs.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p></p>\n<!-- /wp:paragraph -->','Securities-Backed Loans','Securities-Backed Loans… Just the Tip of the Iceberg?\n\nAging bull markets are naturally predisposed to excesses –particularly in debt and leverage– and once again nontraditional loans are taking center stage.','inherit','closed','closed','','2472-revision-v1','','','2021-06-14 18:03:26','2021-06-14 18:03:26','',2472,'https://ns2020-investech.investech.com/?p=8376',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8377,3,'2021-06-14 18:04:07','2021-06-14 18:04:07','<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:heading {\"className\":\"unclear\"} -->\n<h2 class=\"unclear\">Securities-Backed Loans… Just the Tip of the Iceberg?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Aging bull markets are naturally predisposed to excesses –particularly in debt and leverage– and once again nontraditional loans are taking center stage.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:image {\"id\":8264,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/iceberg-4ReskwNsh68-unsplash-1024x576.jpg\" alt=\"\" class=\"wp-image-8264\"/><figcaption>Nine-tenths of an iceberg\'s volume is below the water</figcaption></figure>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Markets are relaxing merrily on a powerful time bomb</strong> - Stock and bond market leverage is everywhere.</p><cite><em>Business Insider – 7/30/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>The article goes on to say, <em>\"Some of (this leverage) is transparent, such as NYSE margin debt which was $539 billion as of the June report. But the hottest form of stock and bond market leverage is opaque, offered by financial firms that usually don’t disclose the totals: securities-based loans (SBLs) – or “shadow margin” because no one knows how much of it there is.\"</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Innovative Lending Practices Make a Come-back</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been over 12 years since we warned about the highly questionable mortgage lending practices that mushroomed during the Housing Bubble. Now it appears that innovative lending is back in vogue. Securities-backed loans (SBLs) are among Wall Street’s hottest new products in this bull market, and they’ve been growing faster than Jack’s beanstalk over the past few years:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Borrowing With Stock Soars as Market Rises</strong></p><cite><em>Wall Street Journal, 7/28/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Fidelity taps Goldman Sachs to expand lending services through RIAs</strong></p><cite><em>Investment News, 7/27/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Goldman Sachs is launching a digital platform for the rich to borrow as much as $25 million</strong></p><cite><em>Reuters, 7/27/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Wall Street Sharks Entice Customers With Securities-Backed Loans</strong></p><cite><em>Seeking Alpha, 8/13/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>SBLs are often referred to as “shadow margin” because they’re not tracked in the margin debt figures, nor are they tracked by either the SEC or the brokerage regulator FINRA. Nobody knows how extensive such loans are, but based on anecdotal evidence they total at least $100 billion and we believe the figure could be much larger.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":4901,\"width\":483,\"height\":237,\"sizeSlug\":\"large\",\"linkDestination\":\"none\",\"className\":\"pushleft\"} -->\n<div class=\"wp-block-image pushleft\"><figure class=\"alignleft size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/MorganStanley-1024x502.png\" alt=\"Morgan Stanley ad for securities-backed loans\" class=\"wp-image-4901\" width=\"483\" height=\"237\"/><figcaption>Morgan Stanle<strong>y</strong> Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>According to a July 2017 Wall Street Journal article, Bank of America’s wealth unit had $40 billion in outstanding securities-backed loans at the end of 2016, up 140% from 2010. Morgan Stanley had $30 billion in these loans, more than double the amount in 2013. And, not to be left behind, Goldman Sachs is teaming up with Fidelity and other brokerages to broaden the availability of credit via its new digital lending program, “GS Select.”</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>What are securities-backed loans (SBLs), and why are they popular?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4902,\"width\":366,\"height\":310,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/WellsFargo.png\" alt=\"Wells Fargo advertising securities-backed loans\" class=\"wp-image-4902\" width=\"366\" height=\"310\"/><figcaption>Wells Fargo Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>In simple terms, SBLs are loans that are marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the securities in one’s investment portfolio without having to liquidate those holdings. Funds can be used for any purpose except buying more stock or repaying a margin loan. For instance, these loans might be used for buying real estate, investing in a business, funding education, or for personal use like taking a trip or paying for a wedding.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Fixed loans can run the gamut from $25,000 to $25 million or more, depending on the lender and the amount of collateral. A typical SBL agreement permits an investor to borrow from 50% to 95% of the value of the assets in his or her non-retirement investment account, based on the size of the portfolio and the types and mix of securities held. These lending arrangements can be set up as a fixed loan, but more often they’re established as a revolving SBL line of credit (SBLOC). It’s not uncommon for a firm to require that account assets have a market value of at least $100,000 to qualify for an SBLOC.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The sales pitch is irresistible!</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Looking at the promotional materials shown in this report from broker websites touting SBLs, who wouldn’t want to avail themselves of this offering? According to the ads, you’ve worked hard to grow your investments over the years; now you can capitalize on those assets to finance your dreams without drawing down your portfolio.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4903,\"width\":435,\"height\":319,\"sizeSlug\":\"large\",\"linkDestination\":\"none\",\"className\":\"pushright\"} -->\n<div class=\"wp-block-image pushright\"><figure class=\"alignright size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/UBS-1024x751.png\" alt=\"UBS advertising securities-backed loans\" class=\"wp-image-4903\" width=\"435\" height=\"319\"/><figcaption>UBS Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>With an SBLOC, the cash is readily available (up to the credit limits) any time you need it.</li><li>Other than securities related transactions, there are no restrictions on how you use the loan.</li><li>An SBLOC lets you keep your investment account intact, allowing it to continue to grow.</li><li>By borrowing to meet your cash needs, you can avoid selling securities and triggering capital gains taxes.</li><li>Because SBLs are backed by portfolio assets, interest rates can be much lower than traditional loans.</li><li>Once an SBLOC is in place, it can be used repeatedly and you’re only required to make monthly interest payments – there is no maturity date.</li><li>There are usually no fees to establish the loan or credit line and funds are available quickly. Goldman Sachs’ digital platform promotes a 24-hour turnaround.</li><li>Typically, no personal financial statements, tax returns, or other documents are required.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>What’s in it for the brokers?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4904,\"width\":346,\"height\":233,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/GoldmanSachs-300x204.png\" alt=\"Goldman Sachs securities lending advertisement\" class=\"wp-image-4904\" width=\"346\" height=\"233\"/><figcaption>Goldman Sachs Advertisement</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>SBLs and lines of credit have become lucrative new sources of income for brokerages, helping to replace revenue lost due to recent cuts in commission rates. In addition, brokers retain portfolio assets, along with their associated fees, as customers can access cash without making withdrawals. In some cases, establishing these loans may factor into a broker’s compensation, and marketing these credit options creates “sticky” clients as it’s hard to transfer assets to another broker with a securities-backed loan outstanding. Even if a client doesn’t use the line of credit immediately, the longer it’s in place, the more likely it is that he or she will eventually tap it.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>So, where’s the risk with SBLs?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>With SBLs, as with all financial obligations, it’s vitally important to read the fine print or risks section before committing. Careful attention to this step reveals that brokerages and banks get all the benefits of secured, full-recourse loans, while customers take all the risk. This may seem acceptable in a healthy bull market, but it can be catastrophic to the pledged portfolio in a downturn.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The following are some of the risks that investors may face if they borrow against an investment account. It’s these risks that prompted the SEC and FINRA to issue a special Investor Alert in 2015 regarding this type of lending:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>If the value of the securities declines below a minimum level, you may be subject to a collateral “maintenance call” with little or no advanced warning, giving you minimal time to pay the loan or deposit more cash or securities in the account. Note that if this occurs, there are no extensions, and a broker can change its collateral maintenance requirement at any time without notifying you.</li><li>If you are unable to meet a maintenance call, the broker can liquidate part, or all, of your portfolio holdings at their discretion. You do not pick the stocks to sell. In a bear market, that could mean selling core holdings at a market bottom or alternatively realizing significant tax gains on long-held securities.</li><li>In a major downturn, you could be forced to forfeit all your pledged assets – in this case, the stocks, funds, and bonds in your portfolio. This is a major drawback to asset-backed loans…</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Why Goldman Sachs Seized a Client’s 217-Foot Yacht</strong></p><cite><em>Wall Street Journal - 8/10/17</em></cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>In the worst-case scenario, you might lose more funds than are held in the collateral account, and as a full-recourse loan, you would be liable for any deficiency.</li><li>For SBLOCs, the interest rate on your loan is generally a floating rate that can change daily. With interest rates rising, the cost of your SBLOC could increase significantly.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>The proliferation of SBLs and SBLOCs obviously increases the risks in this late-stage bull market. While history shows that excessive debt accumulation does not trigger a stock market peak, it can accelerate and intensify losses when the leverage starts to unwind in a bear market. Today’s levels of these securities-backed loans are small relative to overall consumer and business debt, but they can be dangerous. Like subprime mortgage loans 10 years ago, if trouble appears in terms of mass collateral maintenance calls, it could be just the tip of the iceberg.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - September 15, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/pdf_files_wp/SBLs.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p></p>\n<!-- /wp:paragraph -->','Securities-Backed Loans','Securities-Backed Loans… Just the Tip of the Iceberg?\n\nAging bull markets are naturally predisposed to excesses –particularly in debt and leverage– and once again nontraditional loans are taking center stage.','inherit','closed','closed','','2472-revision-v1','','','2021-06-14 18:04:07','2021-06-14 18:04:07','',2472,'https://ns2020-investech.investech.com/?p=8377',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8378,3,'2021-06-14 18:06:00','2021-06-14 18:06:00','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8270,\"mediaLink\":\"https://ns2020-investech.investech.com/rollercoaster-qac9q3pwhwg-unsplash/\",\"mediaType\":\"image\",\"mediaWidth\":38} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile\" style=\"grid-template-columns:auto 38%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/rollercoaster-qac9Q3pWHWg-unsplash-1024x768.jpg\" alt=\"\" class=\"wp-image-8270 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Tempted by high-flying ETFs in this aging bull market? </h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading -->\n<h2>Just remember… Excitement is highest as the roller coaster goes over the top!</h2>\n<!-- /wp:heading --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public. As indicated by the headlines below, passive index investing has become all the rage, and Exchange Traded Funds (ETFs) are the tool of choice:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>ETFs could see $1 trillion in inflows over the coming year</strong></p><cite>MarketWatch, 1/31/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Small investors’ move to ‘passive’ stock funds becomes a stampede</strong> </p><cite>LA Times, 4/9/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Global ETF assets reach $4tn</strong> <em>The global exchange traded fund industry smashed past $4tn in assets last month…</em> </p><cite>Financial Times, 5/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:paragraph {\"placeholder\":\"Content…\"} -->\n<p>And our personal favorite...</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Wheee! A Quadruple-Leveraged S&amp;P 500 ETF is Here</strong></p><cite>Barron\'s, 5/3/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:heading {\"level\":3} -->\n<h3>Exchange Traded Fund (ETF)</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The first Exchange Traded Fund (ETF) was launched in 1993, and although they were slow to start, ETFs have proliferated over the last decade, both in number (see graph at right) and the variety of index funds available. There’s now an ETF for nearly every strategy, no matter how esoteric, and that has helped fuel the passive investing craze.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":4829,\"sizeSlug\":\"full\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/number-of-etfs.png\" alt=\"Graph showing the number of ETFs (registered in the U.S.), Source: Investment Company Institute\" class=\"wp-image-4829\"/><figcaption>Number of ETFs (registered in the U.S.), Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Over the past 24 years, one can see the shift in interest from actively managed mutual funds toward passive investing. As shown in the graph below, net cash flows into actively managed funds were still four times larger than passive funds from 1993 through 2000. From 2001 through 2008, a change becomes evident as net cash flows for active funds turned negative while passive funds continued to grow. The disparity between the active and passive net cash flows during the current bull market (2009-2016) is remarkable, and it shows why there’s been a parabolic increase in the number of ETFs!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4831,\"width\":713,\"height\":397} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Active-vs-Passive-Stock-Funds-Inflows.png\" alt=\"Graph showing net cash flows into actively managed funds between 1993 and 2016.\" class=\"wp-image-4831\" width=\"713\" height=\"397\"/><figcaption>Active vs. Passive Domestic Stock Funds; Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>So, why has passive investing become all the rage in recent years?</strong></h3>\n<!-- /wp:heading -->\n\n<!-- wp:quote {\"align\":\"center\",\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center is-style-default\"><p>Excitement is Highest as the Roller Coaster Goes Over the Top.</p><cite>– Anonymous</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Many investors have been burned –not once, but twice– by the Tech Bubble of the 1990s and the Housing Bubble in 2007. Also, they are frustrated with the challenges of managing investments… a task that in this uncertain bull market has frequently seemed counterproductive.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The most popular index funds are touted as low-cost and broadly diversified, with a portfolio full of blue chip stocks. Moreover, ETFs offer “instant liquidity” with intraday trading compared to mutual funds that only settle at the end of each trading day. To the average investor, passive funds with minimal fees, implied safety, and lots of liquidity may appear to be the Holy Grail. As we’ll see, however, there is more to the story…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":4839,\"mediaType\":\"image\",\"mediaWidth\":43,\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 43%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Total-Assets-Domestic-Equity-Index-Funds.png\" alt=\"Graph showing the total assets in Domestic Equity Index Funds, 1990\'s to 2016\" class=\"wp-image-4839 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:paragraph -->\n<p>Just as the number of ETFs has grown, the past few years have witnessed an explosion in assets tied to passive investing that has extended to both mutual funds and ETFs (as shown in graph at right). A large part of the growth has been in ETFs, which are poised to overtake index mutual funds as the preferred indexing vehicle. Both types of products have doubled in assets just since 2012.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>It is important to recognize that passive investing is not a fresh new idea; in fact, the concept was introduced by John Bogle (the founder of Vanguard) in the 1970s. This strategy has shifted in and out of favor, becoming more popular as bull markets age and losing its luster only after the damage has been done by the next bear market. Just like riding a roller coaster, the peak in public enthusiasm often comes as the bull market is cresting the top.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>A Trip Back in Time…</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The rise in the popularity of index funds has been seen before.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"align\":\"center\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center\"><p>It’s like deja vu all over again.</p><cite>- Yogi Berra</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The late 1990s: </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the decade of the 1990s became the longest bull market in Wall Street history, the Tech Bubble wasn’t the only phenomenon catching investors’ attention. In 1998-99, headlines were touting the benefit of index investing as inflows reached record levels:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Saving for Retirement Index Fever</strong></p><cite> Fortune, 11/9/98</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Who Needs a Money Manager?</strong></p><cite>Business Week 2/22/99</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:paragraph -->\n<p>In <strong>March 1999</strong>, InvesTech Research published the issue shown at right, <a href=\"https://ns2020-investech.investech.com/subscriber-library/lemming-principle/\">comparing the emotional influx of index investors to lemmings</a>. However, instead of falling off a cliff, index investors fell into the largest bear market since the 1930s (the S&amp;P 500 Index lost -49.1%).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>2006-07:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Fast-forward to 2006-07:</strong> Index investing was even <em>more</em> popular at the peak of the last bull market (also one of the longer bull markets of the past 80 years):</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:image {\"align\":\"center\",\"id\":4840,\"width\":195,\"height\":201,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/V99I04-216x300.png\" alt=\"InvesTech Research newsletter, &quot;The Lemming Principle,&quot; March 12, 1999\" class=\"wp-image-4840\" width=\"195\" height=\"201\"/><figcaption>InvesTech Research newsletter, \"The Lemming Principle,\" March 12, 1999</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index Funds: So Hot Right Now</strong></p><cite>The Motley Fool, 12/11/06</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index funds help you avoid risks of stock selection, market timing</strong></p><cite>Boston Globe, 2/27/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Owning the S&amp;P 500 is cheap, easy and smart</strong></p><cite>USA Today, 7/20/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>In these previous periods, much like today, most investors perceived index funds – particularly the S&amp;P 500 Index funds – to be more diversified, safer investments.  We’ll discuss why index funds may not be all they’re thought to be…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>The Dark Side of Passive Investing – Live by the Index, Die by the Index</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As noted, history shows that index investing reaches the highest level of popularity in aging bull markets or near market peaks. The reason for this is that any type of “risk management” during a bull market tends to reduce or moderate a fund manager’s return. Consequently, it is not uncommon for a fully invested S&amp;P 500 Index fund to outperform most actively managed mutual funds and money managers when measured <em>solely </em>over the duration of a bull market.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>There are multiple reasons index or passive investing becomes more popular in an aging bull market. First, it is more comfortable. One doesn’t have the burden of making decisions about which stocks to invest in, or when to sell a stock if it rises or falls precipitously. Indexing also tends to remove the regret from bad decisions, because any loss can be attributed entirely to the market. Lastly, investing in an index fund is the cheapest and easiest way to take advantage of the market’s stellar gains which seem likely to continue. Yet before jumping into the indexing mania today, consider these inherent risks in passive investing…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>By definition, index funds also guarantee that you will suffer 100% of the next bear market’s decline.</strong> Regardless of which index you are matching, the index fund is required to stay fully invested regardless of market risk or volatility.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Assets flowing into the most popular index funds are funneling investments into the largest and most overvalued stocks in the market, driving them higher. </strong>The S&amp;P 500 is a capitalization weighted index, so money invested into these popular index funds is not evenly distributed in all 500 stocks. Rather, the largest companies by market cap receive a disproportionate amount of the investment. As a result, investors must take the good with the bad and favor the largest companies within the basket of 500 stocks, regardless of valuation and financial strength (or lack thereof).</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Market volatility increases when interest narrows to the index heavyweights. </strong>Only 50 stocks account for nearly 50% of S&amp;P 500 capitalization and one-half of an index fund’s portfolio. Additionally, the top 10 largest stocks comprise over 20% of the Index. As a result, downside risk in the next bear market could increase if selling pressure hits the largest stocks at the same time. The increased focus on index investing of late may very well increase both the size of, and speed at which the next bear market decline occurs.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":8324,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/iShares-Core-SP-500-ETF.jpg\" alt=\"\" class=\"wp-image-8324\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Intraday liquidity for ETFs can experience dramatic structural challenges in times of market distress. </strong>For example, during the market dislocation on August 24, 2015 the liquidity of most ETFs all but dried up just as the market opened. A confluence of problems –including circuit breakers, an obscure NYSE rule allowing market makers to delay posting prices, and a lack of futures data for large hedgers– all combined to take the bid out of the ETF space. Even large, well-established ETFs like the $116 billion iShares Core S&amp;P 500 ETF (IVV) saw unprecedented declines. As shown on the graph below, IVV fell -26% on the open, far more than the -5.3% drop of the underlying S&amp;P 500. As a result of this liquidity hiccup, or “flash crash” as it was called at the time, investors with outstanding market orders and stop-loss orders sold their shares in IVV for far less than their worth.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bottom Line</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The broad diversification and implied liquidity offered by index ETFs gives many investors a false sense of security. When passively investing in an index, devoid of risk management, investors are still subject to varying degrees of valuation and liquidity risk, and they bear the full brunt of cyclical market risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Risk Management is Vital to any Strategy – <em>Ignore at your own peril!</em></h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Many actively managed mutual funds and money managers take some steps to mitigate portfolio risk – at times to the detriment of bull market performance. Although passive indexing may appear to be easier and is also perceived to reduce risk, it ends up having the opposite effect during major downturns as it guarantees an investor will experience all of the losses in the corresponding market index. Remember, long-term performance is dependent not only on how much you make in the bull markets, but also how much you give back in the bear markets. Investments that are weighted toward the largest, most overvalued stocks and sectors are exactly the opposite of what might be used in a strategy that manages risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Index investing proponents generally downplay stock market cycles, but bear market survivability is a very real issue for many investors, particularly those in or nearing retirement. The decision to hold the course on an investment strategy usually depends on the severity of bear market losses and how long one’s portfolio remains underwater… in other words, how much time it takes to recover those losses.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>To effectively demonstrate this concept, the <strong>Ulcer Index </strong>was developed in 1987 by Peter Martin to measure the depth and duration of drawdowns from earlier highs in one’s portfolio. It provides a graphic illustration of the level of stress and ulcers (hence the name) that can emerge from suffering deep, prolonged losses in one’s retirement savings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Shown below are the comparative Ulcer Index graphs of the InvesTech Model Portfolio versus the Vanguard Total Stock Market Index (VTSMX), which is the largest and most popular fund on the market today.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8329,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/IT-Portfolio-vs-Vanguard-Ulcer-Index.jpg\" alt=\"\" class=\"wp-image-8329\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The starts of the last two bear markets are noted in March 2000 and October 2007, as well as their subsequent market bottoms in October 2002 and March 2009. The green dashed lines illustrate the number of months required after the market bottom for one’s portfolio to recover the losses. Above all, the red shaded areas designate how long, and how deep one’s portfolio was underwater. These are the so-called “ulcer” zones when an investor must wait and wonder how long it will be before his portfolio is whole again.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As you’ll note, InvesTech’s “risk management” strategy dramatically reduced the stress of the last two generational bear markets by limiting the time spent in the “ulcer” zones. While the InvesTech Model Portfolio didn’t outperform the Vanguard Total Stock Market Index Fund in the bull markets, our ability to manage and reduce risk provided a long-term return which more than doubled that of the Vanguard index fund. More importantly, InvesTech subscribers lost significantly less and recovered much more quickly during bear markets, avoiding the urge to panic out of the market at the wrong time.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It is this combination of achieving safe returns and managing downside risk that matters most in the long-term performance of one’s portfolio… and in the survivability of bear markets.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:uagb/inline-notice {\"block_id\":\"c98df53d\",\"noticeContent\":\"\\u003cp\\u003ePast performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  \\u003ca href=\\u0022https://ns2020-investech.investech.com/terms-of-use/\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003eRead full Disclosures here\\u003c/a\\u003e\\u003ca href=\\u0022http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003e.\\u003c/a\\u003e\\u003c/p\\u003e\"} -->\n<div class=\"wp-block-uagb-inline-notice uagb-inline_notice__outer-wrap uagb-inline_notice__align-left uagb-block-c98df53d\"><h4 class=\"uagb-notice-title\">Important Disclosure Information</h4><div class=\"uagb-notice-text\"><p>Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  <a href=\"https://ns2020-investech.investech.com/terms-of-use/\" target=\"_blank\" rel=\"noreferrer noopener\">Read full Disclosures here</a><a href=\"http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p></div></div>\n<!-- /wp:uagb/inline-notice -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - June 16, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format: <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/IndexingFever.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','Passive Investing: Inevitable Black Eye','Tempted by high-flying ETFs in this aging bull market? Just remember… Excitement is highest as the roller coaster goes over the top! In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public.','inherit','closed','closed','','2468-revision-v1','','','2021-06-14 18:06:00','2021-06-14 18:06:00','',2468,'https://ns2020-investech.investech.com/?p=8378',0,'revision','',0);
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INSERT INTO `wp_posts` VALUES (8386,3,'2021-06-15 16:47:39','2021-06-15 16:47:39','<!-- wp:spacer {\"height\":8} -->\n<div style=\"height:8px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading -->\n<h2>Holland, 1636</h2>\n<!-- /wp:heading -->\n\n<!-- wp:columns {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-top\"><!-- wp:column {\"verticalAlignment\":\"top\",\"width\":\"60%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\" style=\"flex-basis:60%\"><!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>One would suppose that there must have been some great virtue in this flower to have made it so valuable in the eyes of so prudent a people as the Dutch; but it has neither the beauty nor the perfume of the rose – hardly the beauty of the ‘sweet, sweet-pea;’ neither is it as enduring as either…\"</p><p>\"At last, however, the more prudent began to see that this folly could not last for ever… It was seen that somebody must lose fearfully in the end. As this conviction spread, prices fell, and never rose again. Confidence was destroyed, and a universal panic seized upon the dealers.\"</p><cite>– Tulipomania, Holland, 1636, excerpted from Extraordinary Popular Delusions &amp; the Madness of Crowds, written by Charles Mackay 1841</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:image {\"id\":4887,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Jan_Brueghel_the_Younger_Satire_Tulip_Mania_1640-1024x655.jpg\" alt=\"Painting, A Satire of Tulip Mania by Jan Brueghel, c. 1640\" class=\"wp-image-4887\"/><figcaption>A Satire of Tulip Mania by Jan Brueghel the Younger (ca. 1640) depicts speculators as brainless monkeys in contemporary upper-class dress.</figcaption></figure>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading -->\n<h2>Fast forward to 2017: Cryptocurrency Markets</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The quotes above referring to the Tulipomania of the 1600s may seem bizarre and distant to many. However, we see striking similarities between the investor psychology that once surrounded those antiquated tulip bulbs and that which is driving the current mania in cryptocurrencies, particularly Bitcoin:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-top\"><!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Wealth Managers Are Being Inundated With Calls About Bitcoin</p><cite>Bloomberg, 11/21/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Someone in 2010 bought 2 pizzas with 10,000 bitcoins – which today would be worth $100 million</p><cite>Business Insider, 11/28/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Owning bitcoin is so much damn fun</p><cite>Yahoo! Finance, 11/30/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin swings from bull to bear and back in a day </p><cite>Financial Times, 11/30/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin’s Wildest Ride: Up 40% in 40 Hours </p><cite>Wall Street Journal, 12/7/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin Futures Debut With 26% Rally, Trigger CBOE Trading Halts</p><cite>Bloomberg, 12/11/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bitcoin and the Lure of Decentralization</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Bitcoin is the most widely-recognized and largest cryptocurrency by market capitalization. Specifically, a cryptocurrency is a digital currency which has no central issuing or regulating authority, but instead uses a decentralized system of computers to record transactions and manage the issuance of new units. The digital asset relies on cryptography to prevent counterfeiting and fraudulent transactions. While over 1,000 unique cryptocurrencies exist today, they all share a common purpose: to enable and serve decentralized applications – a way to create a self-supporting service that no single entity operates or regulates.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Way of the future? It’s complicated…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Cryptocurrencies may sound like the way of the future, but they are incredibly complex and difficult to understand. To illustrate, let’s take a high-level look at a theoretical transaction paid for in Bitcoin, as depicted by the flow chart below. Once the transaction is proposed, independent entities (called “miners”) compete on the open network to time stamp and verify the transaction by performing computationally difficult calculations. The reward for winning the elaborate race to verify and add the transaction to the public digital ledger (the blockchain) is a fraction of the transaction’s value, plus a processing fee, both denominated in Bitcoin. The integrity of the ledger is upheld by the economic self-interest of the miners – pure, unadulterated capitalism.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8307,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/bitcoinflowchart.jpg\" alt=\"\" class=\"wp-image-8307\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bitcoin vs. Internet Bubble</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4739,\"width\":352,\"height\":416,\"sizeSlug\":\"large\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/bitcoin-1.png\" alt=\"Bitcoin vs. the Internet Bubble chart via Yahoo! Finance\" class=\"wp-image-4739\" width=\"352\" height=\"416\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Although Bitcoin has been in existence since 2009, its ascension to mainstream relevance is far more recent. Originally beloved by a very small group of passionate believers, Bitcoin saw relatively steady price appreciation in its early years while remaining virtually unknown to the general public. Over time, public enthusiasm surrounding Bitcoin has crescendoed, with the price of the digital currency rising exponentially, attracting hordes of amateur “investors” and speculators. As a result, the price of one Bitcoin has exploded by an absurd +3960% since the beginning of 2016! The ride has been volatile, including five drawdowns of at least -25% (daily close) during that period. Bitcoin’s meteoric rise dwarfs even the gains seen in the Internet Index at the peak of the notorious Tech Bubble. ➞</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Love at First Bit?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Why has the world seemingly become enamored with the concept of cryptocurrencies? The following are some of the advantages being widely touted by Bitcoin advocates:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Freedom </strong>– It is possible to send and receive Bitcoin payments anywhere in the world at any time, without scrutiny. Users don’t have to worry about third party delays or approvals, banking holidays, transfer limits, or any other laws due to lack of central authority.</li><li><strong>Anonymity </strong>– Anyone, of any age, from anywhere in the world, with access to the Internet can transact with Bitcoins without providing any paperwork or proof of identification. Since personal information is not being tied to transactions, the risk of identity theft is eliminated.</li><li><strong>Low Fees </strong>– Transaction fees for processing Bitcoin payments are relatively low. Additionally, digital currency exchanges (e.g., Coinbase) can help merchants process transactions by converting Bitcoins into fiat currency for a fee that is generally lower than most credit card processing fees.</li><li><strong>Less Risk for Merchants </strong>– Because Bitcoin transactions cannot be reversed and do not carry any personal information with them, merchants are protected from potential losses that could occur from credit card fraud.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>Despite the increasing hype and number of new Bitcoin advocates, doubters and skeptics abound – and you can count us among them. An asset’s value does not go parabolic without carrying extreme risk. In addition, there are numerous pitfalls and uncertainties associated with cryptocurrencies:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Price Volatility </strong>– It is impossible for Bitcoin to be a good store of value and a legitimate tool for transacting business when prices change so rapidly. Imagine trying to buy a car with Bitcoin when its value is gyrating by hundreds, or even thousands of dollars over a short period of time.</li><li><strong>Intangible </strong>– Many skeptics take issue with the fact that a Bitcoin is represented by a unique string of numbers stored on a hard drive – there is no physical coin.</li><li><strong>Moral Dilemma</strong> – The anonymity provided by Bitcoin is a double-edged sword, as it makes the digital currency inherently ideal for black market dealings.</li><li><strong>Regulation </strong>– The IRS has begun taxing digital currency gains and payments. Furthermore, there is the potential that certain countries could attempt to ban cryptocurrencies altogether, particularly if terrorist activities are funded by Bitcoin.</li><li><strong>Cybersecurity and Fraud </strong>– Digital currency assets can be stolen by hackers. Additionally, as the demand for cryptocurrencies has grown, scammers and poseurs have created their own bogus digital assets.</li><li><strong>Scalability</strong> – Major digital currency exchanges (e.g., Coinbase) have had difficulty handling traffic, which causes scalability and liquidity issues.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading -->\n<h2>Our Perspective</h2>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":4742,\"width\":462,\"height\":260,\"sizeSlug\":\"large\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/bitcoin-3-kings-cartoon.jpg\" alt=\"Cartoon depicting three wise men, one offering bitcoin...\" class=\"wp-image-4742\" width=\"462\" height=\"260\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Throughout history, there have been numerous examples of revolutionary ideas or innovations that turned into dangerous bubbles due to feverish speculation and Wall Street hype ─ regardless of the good intentions of the underlying concept. In our opinion, cryptocurrencies like Bitcoin are among them. Any dispute regarding the practical applications of Bitcoin matters not to the crazed speculators driving today’s rampant price gains.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Many will argue that cryptocurrencies are isolated from other aspects of the economy and financial markets. However, we are concerned that the potential impact of a violent collapse in cryptocurrency prices could be bigger and more far-reaching than anticipated. And we are not alone:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Why Bitcoin’s Bubble Matters</strong>  <span style=\"font-size: inherit;\">If there’s a price crash in the cryptocurrency, it could hit the tech sector–and more</span></p><cite>Wall Street Journal - 10/8/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><span style=\"font-size: inherit;\"><strong>Deutsche Bank Economist Says a Bitcoin Crash Would Endanger Global Markets</strong></span> </p><cite>Fortune - 12/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Whether speculation is in tulip bulbs, real estate, stocks, sub-prime mortgages, or cryptocurrencies, the pattern is usually the same. For investors, emotions run the gamut from greed, to defiance, to fear at any hint of a disruption in the system. Unless you have a voracious appetite for risk and a high tolerance for loss, today’s cryptocurrency bubble is best left to the speculators.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator {\"className\":\"is-style-default\"} -->\n<hr class=\"wp-block-separator is-style-default\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - December 15, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Bitcoin.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','Bitcoin - Tiptoe, through the Tulips...','We see striking similarities between the investor psychology that once surrounded those antiquated tulip bulbs and that which is driving the current mania in cryptocurrencies, particularly Bitcoin.','inherit','closed','closed','','2418-revision-v1','','','2021-06-15 16:47:39','2021-06-15 16:47:39','',2418,'https://ns2020-investech.investech.com/?p=8386',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8388,3,'2021-06-15 16:54:34','2021-06-15 16:54:34','','MLPs','','inherit','closed','closed','','mlps','','','2021-06-15 16:54:34','2021-06-15 16:54:34','',0,'https://ns2020-investech.investech.com/wp-content/uploads/2021/06/MLPs.pdf',0,'attachment','application/pdf',0);
INSERT INTO `wp_posts` VALUES (8389,3,'2021-06-15 16:55:03','2021-06-15 16:55:03','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><strong> The ABCs of MLPs…<br>What you don’t know can hurt you.</strong></p></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>In this era of ultra-low interest rates, investors are inevitably drawn to investments with attractive yields, and Master Limited Partnerships (MLPs) are among the most popular income-generating investments on the market today. These appear to be safe and secure places to invest as MLPs derive their income from revenue generating properties and infrastructure, but there’s more to the story.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>What are Master Limited Partnerships (MLPs)?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the name states, MLPs are limited partnerships which trade on major exchanges like common stock. They consist of a general partner (a sponsoring company in the same industry, which retains control of the business) and limited partners. When investors buy shares or units of the MLP, they become a limited partner in the business.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As partnerships, MLPs are eligible for special tax treatment and avoid “double taxation.” With common stock, dividends are essentially taxed twice – once at the corporate level before dividends are paid and again at the shareholder level, after the dividend is received. Partnerships –including MLPs– are treated as “pass-through” entities where the income and deductions are passed directly to the partners (investors) who pay the taxes. Thus, MLPs are taxed only once at the investor level.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5300,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/01/AlerianYield-300x166.png\" alt=\"Alerian MLP Index yield\" class=\"wp-image-5300\"/><figcaption>Yield on Alerian MLP Index</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Due to this favorable tax treatment, the level of distribution or yield for MLPs is generally high and can be very attractive to potential investors. One of the primary benchmarks used to track these publicly traded partnerships is the Alerian MLP Index, which includes 50 of the most prominent MLPs. The yield for this Index over the past 20 years is shown in the graph at right. Note that the yield has generally been in the 6-8% range, and has occasionally jumped to over 10%.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With yields like this, it’s no surprise that many investors consider MLPs to be a great source of potential income. But they aren’t as safe as commonly perceived, and there are important facts to consider before making an investment decision…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #1: Sector diversification options are limited.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Today, the majority of MLPs are in the energy sector and most are engaged in energy-related transportation, processing, and storage. This makes sector diversification problematic. Current tax regulations require that a publicly traded partnership must receive 90% of its income from specified sources, most of which pertain to natural resources. Thus, there are only a few MLP options outside of energy, and those are mostly in real estate and finance.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #2: Yields can be high, but distributions are not guaranteed.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Most MLPs manage to maintain distributions even in a weak economy. However, they need to have profits to make payouts. In recent downturns, it’s become apparent that distributions can decline or even disappear altogether. Several 2007 members of the Alerian MLP Index were forced to cut distributions significantly in the last recession (and it’s interesting to note that they have since been dropped from the Index).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Atlas Pipeline Partners LP (symbol: APL) is a prime example of the risk in MLP investing. Over the course of the last recession, the price of APL shares dropped more than 90% and distributions ceased. No distributions were made from May 2009 to November 2010.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #3: MLPs mean more work at tax time.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>When you invest in an MLP, you become a limited partner, so the tax picture is more complicated than when you simply own common stock. With stocks, investors pay taxes on dividends received. With MLPs, much of the tax on distribution income is deferred until you sell your shares. Briefly, this is how taxes work with an MLP…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>At year-end you receive a “K1” report from the partnership showing your portion of partnership income minus deductions for depreciation, depletion, etc. Due to these offsetting deductions, the net taxable income for the year is usually much less than the distributions paid out. The difference between the distribution and taxable income is treated as “return of capital” and reduces your cost basis. When you sell the shares, you will be required to pay income taxes on the “return of capital” portion, along with any capital gains above your initial investment. Bottom line, MLP investing requires extra work and forms at tax time, and it can lead to delays in filing as you wait for K1s to be issued.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #4: MLPs are generally not suitable investments for IRAs or pension plans.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>There are no restrictions on buying MLPs in qualified retirement plans, but they may not be a good investment option. One benefit of owning an MLP is that most taxes are deferred until sale, and that benefit is wasted in a tax deferred IRA. Also, although your retirement plan is tax exempt, it could end up owing taxes on MLP income. The reason is that any tax-exempt entity (like an IRA) that earns income from an outside business is subject to the “Unrelated Business Income Tax” (UBIT) after the first $1,000 of net income. As a partner in an MLP, your retirement plan could be considered to earn this sort of income.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #5: MLPs carry unknown risks.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s important to remember that these investments are not like bonds or preferred stocks which have a set par value. The price of MLP shares fluctuates like common stock. MLPs tend to be especially vulnerable to rising interest rates as they face increased competition from other income investments such as bonds or CDs. Higher interest rates also increase the cost of capital used for maintenance or expansion of MLP assets. In addition, economic swings can have a negative impact since most MLPs derive income from oil and gas properties, and utilization of these assets typically declines in a recession.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5301,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/01/AlerianMLP-300x202.png\" alt=\"Alerian price index took three years to surpass its peak in the bear market\" class=\"wp-image-5301\"/><figcaption>Alerian MLP Price Index</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>This variability in MLP performance is evident in the Alerian MLP Price Index shown at right. Although this Index has generally moved higher over the past 20 years, it hit a major peak in 2007 and again in 2014. Over the course of the last bear market, this MLP Index dropped more than 55% and it took over three years to surpass the 2007 peak.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The trajectory in this Index is also particularly worrisome. As investors have flocked to these popular investments, this Index has soared and valuations have climbed. Even with the sell-off in energy stocks, the average P/E ratio of the Alerian Index constituents is now 30x compared to an average P/E of 20.7x for the S&amp;P 500.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>Also, although MLPs currently enjoy tax favored status, be aware that tax rules can change at the stroke of a legislative pen.</strong> </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This has happened before. In the early 1980s, the first MLPs were a far more diverse group than they are today. Under the tax laws at the time, firms in a variety of energy and consumer industries were able to take advantage of this tax favored status including restaurants, hotels and cable TV. Even the Boston Celtics traded as an MLP at one time. In 1987 the tax code tightened, and under the new rules many of these partnerships no longer qualified for the tax advantages.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Also, in a more recent example, Canada’s 2006 Tax Fairness Plan implemented a new tax eventually amounting to more than 30% on most Canadian Income Trusts, which are similar tax-advantaged entities. The intention, of course, was to capture more tax revenue and make this form of business less attractive to existing corporations. Keep in mind that the U.S. government is seeking ways to generate more tax revenue right now and MLPs are currently exempt from paying corporate taxes.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Though MLPs offer an attractive yield, they do carry risks and can lose value. It’s important to recognize these are <em>not </em>simply safe, dividend paying alternatives to stocks or bonds. The risks in these MLPs are particularly acute today with continued demand for high-yield instruments, volatility in oil prices, and the likelihood of rising interest rates in the future.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>At this point in time, we do not view MLPs as a “safety-first” alternative, and advise following these guidelines if investing in MLPs today:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Limit allocation to no more than 10% of the portfolio.</li><li>Diversify among MLPs so you are not invested in just a single partnership.</li><li>Generally avoid buying MLPs in IRAs or other tax-exempt accounts.</li><li>Do your research, just as you would in selecting stocks. Study the partnership before investing and look for strong financial position (including stability of the general partner) and any hidden liabilities, as well as growth potential.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:spacer {\"height\":36} -->\n<div style=\"height:36px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":36} -->\n<div style=\"height:36px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Research Special Report originally published March 11, 2011 and updated May 27, 2015.  </h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format.  <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/MLPs.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','Investing in MLPs: The Rest of the Story','In this era of ultra-low interest rates, investors are inevitably drawn to investments with attractive yields, and Master Limited Partnerships (MLPs) are among the most popular income-generating investments on the market today. Learn the ABCs of MLPs… what you don’t know can hurt you. ','inherit','closed','closed','','2474-revision-v1','','','2021-06-15 16:55:03','2021-06-15 16:55:03','',2474,'https://ns2020-investech.investech.com/?p=8389',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8390,3,'2021-06-15 16:55:42','2021-06-15 16:55:42','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><strong> The ABCs of MLPs…<br>What you don’t know can hurt you.</strong></p></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>In this era of ultra-low interest rates, investors are inevitably drawn to investments with attractive yields, and Master Limited Partnerships (MLPs) are among the most popular income-generating investments on the market today. These appear to be safe and secure places to invest as MLPs derive their income from revenue generating properties and infrastructure, but there’s more to the story.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>What are Master Limited Partnerships (MLPs)?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the name states, MLPs are limited partnerships which trade on major exchanges like common stock. They consist of a general partner (a sponsoring company in the same industry, which retains control of the business) and limited partners. When investors buy shares or units of the MLP, they become a limited partner in the business.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As partnerships, MLPs are eligible for special tax treatment and avoid “double taxation.” With common stock, dividends are essentially taxed twice – once at the corporate level before dividends are paid and again at the shareholder level, after the dividend is received. Partnerships –including MLPs– are treated as “pass-through” entities where the income and deductions are passed directly to the partners (investors) who pay the taxes. Thus, MLPs are taxed only once at the investor level.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5300,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/01/AlerianYield-300x166.png\" alt=\"Alerian MLP Index yield\" class=\"wp-image-5300\"/><figcaption>Yield on Alerian MLP Index</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Due to this favorable tax treatment, the level of distribution or yield for MLPs is generally high and can be very attractive to potential investors. One of the primary benchmarks used to track these publicly traded partnerships is the Alerian MLP Index, which includes 50 of the most prominent MLPs. The yield for this Index over the past 20 years is shown in the graph at right. Note that the yield has generally been in the 6-8% range, and has occasionally jumped to over 10%.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With yields like this, it’s no surprise that many investors consider MLPs to be a great source of potential income. But they aren’t as safe as commonly perceived, and there are important facts to consider before making an investment decision…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #1: Sector diversification options are limited.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Today, the majority of MLPs are in the energy sector and most are engaged in energy-related transportation, processing, and storage. This makes sector diversification problematic. Current tax regulations require that a publicly traded partnership must receive 90% of its income from specified sources, most of which pertain to natural resources. Thus, there are only a few MLP options outside of energy, and those are mostly in real estate and finance.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #2: Yields can be high, but distributions are not guaranteed.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Most MLPs manage to maintain distributions even in a weak economy. However, they need to have profits to make payouts. In recent downturns, it’s become apparent that distributions can decline or even disappear altogether. Several 2007 members of the Alerian MLP Index were forced to cut distributions significantly in the last recession (and it’s interesting to note that they have since been dropped from the Index).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Atlas Pipeline Partners LP (symbol: APL) is a prime example of the risk in MLP investing. Over the course of the last recession, the price of APL shares dropped more than 90% and distributions ceased. No distributions were made from May 2009 to November 2010.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #3: MLPs mean more work at tax time.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>When you invest in an MLP, you become a limited partner, so the tax picture is more complicated than when you simply own common stock. With stocks, investors pay taxes on dividends received. With MLPs, much of the tax on distribution income is deferred until you sell your shares. Briefly, this is how taxes work with an MLP…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>At year-end you receive a “K1” report from the partnership showing your portion of partnership income minus deductions for depreciation, depletion, etc. Due to these offsetting deductions, the net taxable income for the year is usually much less than the distributions paid out. The difference between the distribution and taxable income is treated as “return of capital” and reduces your cost basis. When you sell the shares, you will be required to pay income taxes on the “return of capital” portion, along with any capital gains above your initial investment. Bottom line, MLP investing requires extra work and forms at tax time, and it can lead to delays in filing as you wait for K1s to be issued.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #4: MLPs are generally not suitable investments for IRAs or pension plans.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>There are no restrictions on buying MLPs in qualified retirement plans, but they may not be a good investment option. One benefit of owning an MLP is that most taxes are deferred until sale, and that benefit is wasted in a tax deferred IRA. Also, although your retirement plan is tax exempt, it could end up owing taxes on MLP income. The reason is that any tax-exempt entity (like an IRA) that earns income from an outside business is subject to the “Unrelated Business Income Tax” (UBIT) after the first $1,000 of net income. As a partner in an MLP, your retirement plan could be considered to earn this sort of income.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #5: MLPs carry unknown risks.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s important to remember that these investments are not like bonds or preferred stocks which have a set par value. The price of MLP shares fluctuates like common stock. MLPs tend to be especially vulnerable to rising interest rates as they face increased competition from other income investments such as bonds or CDs. Higher interest rates also increase the cost of capital used for maintenance or expansion of MLP assets. In addition, economic swings can have a negative impact since most MLPs derive income from oil and gas properties, and utilization of these assets typically declines in a recession.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5301,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/01/AlerianMLP-300x202.png\" alt=\"Alerian price index took three years to surpass its peak in the bear market\" class=\"wp-image-5301\"/><figcaption>Alerian MLP Price Index</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>This variability in MLP performance is evident in the Alerian MLP Price Index shown at right. Although this Index has generally moved higher over the past 20 years, it hit a major peak in 2007 and again in 2014. Over the course of the last bear market, this MLP Index dropped more than 55% and it took over three years to surpass the 2007 peak.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The trajectory in this Index is also particularly worrisome. As investors have flocked to these popular investments, this Index has soared and valuations have climbed. Even with the sell-off in energy stocks, the average P/E ratio of the Alerian Index constituents is now 30x compared to an average P/E of 20.7x for the S&amp;P 500.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>Also, although MLPs currently enjoy tax favored status, be aware that tax rules can change at the stroke of a legislative pen.</strong> </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This has happened before. In the early 1980s, the first MLPs were a far more diverse group than they are today. Under the tax laws at the time, firms in a variety of energy and consumer industries were able to take advantage of this tax favored status including restaurants, hotels and cable TV. Even the Boston Celtics traded as an MLP at one time. In 1987 the tax code tightened, and under the new rules many of these partnerships no longer qualified for the tax advantages.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Also, in a more recent example, Canada’s 2006 Tax Fairness Plan implemented a new tax eventually amounting to more than 30% on most Canadian Income Trusts, which are similar tax-advantaged entities. The intention, of course, was to capture more tax revenue and make this form of business less attractive to existing corporations. Keep in mind that the U.S. government is seeking ways to generate more tax revenue right now and MLPs are currently exempt from paying corporate taxes.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Though MLPs offer an attractive yield, they do carry risks and can lose value. It’s important to recognize these are <em>not </em>simply safe, dividend paying alternatives to stocks or bonds. The risks in these MLPs are particularly acute today with continued demand for high-yield instruments, volatility in oil prices, and the likelihood of rising interest rates in the future.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>At this point in time, we do not view MLPs as a “safety-first” alternative, and advise following these guidelines if investing in MLPs today:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Limit allocation to no more than 10% of the portfolio.</li><li>Diversify among MLPs so you are not invested in just a single partnership.</li><li>Generally avoid buying MLPs in IRAs or other tax-exempt accounts.</li><li>Do your research, just as you would in selecting stocks. Study the partnership before investing and look for strong financial position (including stability of the general partner) and any hidden liabilities, as well as growth potential.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:spacer {\"height\":36} -->\n<div style=\"height:36px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":36} -->\n<div style=\"height:36px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Research Special Report published March 11, 2011 - updated May 27, 2015.  </h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format.  <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/MLPs.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','Investing in MLPs: The Rest of the Story','In this era of ultra-low interest rates, investors are inevitably drawn to investments with attractive yields, and Master Limited Partnerships (MLPs) are among the most popular income-generating investments on the market today. Learn the ABCs of MLPs… what you don’t know can hurt you. ','inherit','closed','closed','','2474-revision-v1','','','2021-06-15 16:55:42','2021-06-15 16:55:42','',2474,'https://ns2020-investech.investech.com/?p=8390',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8391,3,'2021-06-15 16:55:54','2021-06-15 16:55:54','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><strong> The ABCs of MLPs…<br>What you don’t know can hurt you.</strong></p></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>In this era of ultra-low interest rates, investors are inevitably drawn to investments with attractive yields, and Master Limited Partnerships (MLPs) are among the most popular income-generating investments on the market today. These appear to be safe and secure places to invest as MLPs derive their income from revenue generating properties and infrastructure, but there’s more to the story.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>What are Master Limited Partnerships (MLPs)?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the name states, MLPs are limited partnerships which trade on major exchanges like common stock. They consist of a general partner (a sponsoring company in the same industry, which retains control of the business) and limited partners. When investors buy shares or units of the MLP, they become a limited partner in the business.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As partnerships, MLPs are eligible for special tax treatment and avoid “double taxation.” With common stock, dividends are essentially taxed twice – once at the corporate level before dividends are paid and again at the shareholder level, after the dividend is received. Partnerships –including MLPs– are treated as “pass-through” entities where the income and deductions are passed directly to the partners (investors) who pay the taxes. Thus, MLPs are taxed only once at the investor level.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5300,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/01/AlerianYield-300x166.png\" alt=\"Alerian MLP Index yield\" class=\"wp-image-5300\"/><figcaption>Yield on Alerian MLP Index</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Due to this favorable tax treatment, the level of distribution or yield for MLPs is generally high and can be very attractive to potential investors. One of the primary benchmarks used to track these publicly traded partnerships is the Alerian MLP Index, which includes 50 of the most prominent MLPs. The yield for this Index over the past 20 years is shown in the graph at right. Note that the yield has generally been in the 6-8% range, and has occasionally jumped to over 10%.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With yields like this, it’s no surprise that many investors consider MLPs to be a great source of potential income. But they aren’t as safe as commonly perceived, and there are important facts to consider before making an investment decision…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #1: Sector diversification options are limited.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Today, the majority of MLPs are in the energy sector and most are engaged in energy-related transportation, processing, and storage. This makes sector diversification problematic. Current tax regulations require that a publicly traded partnership must receive 90% of its income from specified sources, most of which pertain to natural resources. Thus, there are only a few MLP options outside of energy, and those are mostly in real estate and finance.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #2: Yields can be high, but distributions are not guaranteed.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Most MLPs manage to maintain distributions even in a weak economy. However, they need to have profits to make payouts. In recent downturns, it’s become apparent that distributions can decline or even disappear altogether. Several 2007 members of the Alerian MLP Index were forced to cut distributions significantly in the last recession (and it’s interesting to note that they have since been dropped from the Index).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Atlas Pipeline Partners LP (symbol: APL) is a prime example of the risk in MLP investing. Over the course of the last recession, the price of APL shares dropped more than 90% and distributions ceased. No distributions were made from May 2009 to November 2010.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #3: MLPs mean more work at tax time.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>When you invest in an MLP, you become a limited partner, so the tax picture is more complicated than when you simply own common stock. With stocks, investors pay taxes on dividends received. With MLPs, much of the tax on distribution income is deferred until you sell your shares. Briefly, this is how taxes work with an MLP…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>At year-end you receive a “K1” report from the partnership showing your portion of partnership income minus deductions for depreciation, depletion, etc. Due to these offsetting deductions, the net taxable income for the year is usually much less than the distributions paid out. The difference between the distribution and taxable income is treated as “return of capital” and reduces your cost basis. When you sell the shares, you will be required to pay income taxes on the “return of capital” portion, along with any capital gains above your initial investment. Bottom line, MLP investing requires extra work and forms at tax time, and it can lead to delays in filing as you wait for K1s to be issued.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #4: MLPs are generally not suitable investments for IRAs or pension plans.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>There are no restrictions on buying MLPs in qualified retirement plans, but they may not be a good investment option. One benefit of owning an MLP is that most taxes are deferred until sale, and that benefit is wasted in a tax deferred IRA. Also, although your retirement plan is tax exempt, it could end up owing taxes on MLP income. The reason is that any tax-exempt entity (like an IRA) that earns income from an outside business is subject to the “Unrelated Business Income Tax” (UBIT) after the first $1,000 of net income. As a partner in an MLP, your retirement plan could be considered to earn this sort of income.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Fact #5: MLPs carry unknown risks.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s important to remember that these investments are not like bonds or preferred stocks which have a set par value. The price of MLP shares fluctuates like common stock. MLPs tend to be especially vulnerable to rising interest rates as they face increased competition from other income investments such as bonds or CDs. Higher interest rates also increase the cost of capital used for maintenance or expansion of MLP assets. In addition, economic swings can have a negative impact since most MLPs derive income from oil and gas properties, and utilization of these assets typically declines in a recession.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5301,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/01/AlerianMLP-300x202.png\" alt=\"Alerian price index took three years to surpass its peak in the bear market\" class=\"wp-image-5301\"/><figcaption>Alerian MLP Price Index</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>This variability in MLP performance is evident in the Alerian MLP Price Index shown at right. Although this Index has generally moved higher over the past 20 years, it hit a major peak in 2007 and again in 2014. Over the course of the last bear market, this MLP Index dropped more than 55% and it took over three years to surpass the 2007 peak.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The trajectory in this Index is also particularly worrisome. As investors have flocked to these popular investments, this Index has soared and valuations have climbed. Even with the sell-off in energy stocks, the average P/E ratio of the Alerian Index constituents is now 30x compared to an average P/E of 20.7x for the S&amp;P 500.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>Also, although MLPs currently enjoy tax favored status, be aware that tax rules can change at the stroke of a legislative pen.</strong> </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This has happened before. In the early 1980s, the first MLPs were a far more diverse group than they are today. Under the tax laws at the time, firms in a variety of energy and consumer industries were able to take advantage of this tax favored status including restaurants, hotels and cable TV. Even the Boston Celtics traded as an MLP at one time. In 1987 the tax code tightened, and under the new rules many of these partnerships no longer qualified for the tax advantages.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Also, in a more recent example, Canada’s 2006 Tax Fairness Plan implemented a new tax eventually amounting to more than 30% on most Canadian Income Trusts, which are similar tax-advantaged entities. The intention, of course, was to capture more tax revenue and make this form of business less attractive to existing corporations. Keep in mind that the U.S. government is seeking ways to generate more tax revenue right now and MLPs are currently exempt from paying corporate taxes.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Though MLPs offer an attractive yield, they do carry risks and can lose value. It’s important to recognize these are <em>not </em>simply safe, dividend paying alternatives to stocks or bonds. The risks in these MLPs are particularly acute today with continued demand for high-yield instruments, volatility in oil prices, and the likelihood of rising interest rates in the future.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>At this point in time, we do not view MLPs as a “safety-first” alternative, and advise following these guidelines if investing in MLPs today:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Limit allocation to no more than 10% of the portfolio.</li><li>Diversify among MLPs so you are not invested in just a single partnership.</li><li>Generally avoid buying MLPs in IRAs or other tax-exempt accounts.</li><li>Do your research, just as you would in selecting stocks. Study the partnership before investing and look for strong financial position (including stability of the general partner) and any hidden liabilities, as well as growth potential.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:spacer {\"height\":36} -->\n<div style=\"height:36px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":7} -->\n<div style=\"height:7px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Research Special Report published March 11, 2011 - updated May 27, 2015.  </h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format.  <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/MLPs.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','Investing in MLPs: The Rest of the Story','In this era of ultra-low interest rates, investors are inevitably drawn to investments with attractive yields, and Master Limited Partnerships (MLPs) are among the most popular income-generating investments on the market today. Learn the ABCs of MLPs… what you don’t know can hurt you. ','inherit','closed','closed','','2474-revision-v1','','','2021-06-15 16:55:54','2021-06-15 16:55:54','',2474,'https://ns2020-investech.investech.com/?p=8391',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8393,3,'2021-06-15 16:57:51','2021-06-15 16:57:51','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8270,\"mediaLink\":\"https://ns2020-investech.investech.com/rollercoaster-qac9q3pwhwg-unsplash/\",\"mediaType\":\"image\",\"mediaWidth\":38} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile\" style=\"grid-template-columns:auto 38%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/rollercoaster-qac9Q3pWHWg-unsplash-1024x768.jpg\" alt=\"\" class=\"wp-image-8270 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Tempted by high-flying ETFs in this aging bull market? </h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading -->\n<h2>Just remember… Excitement is highest as the roller coaster goes over the top!</h2>\n<!-- /wp:heading --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public. As indicated by the headlines below, passive index investing has become all the rage, and Exchange Traded Funds (ETFs) are the tool of choice:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>ETFs could see $1 trillion in inflows over the coming year</strong></p><cite>MarketWatch, 1/31/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Small investors’ move to ‘passive’ stock funds becomes a stampede</strong> </p><cite>LA Times, 4/9/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Global ETF assets reach $4tn</strong> <em>The global exchange traded fund industry smashed past $4tn in assets last month…</em> </p><cite>Financial Times, 5/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:paragraph {\"placeholder\":\"Content…\"} -->\n<p>And our personal favorite...</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Wheee! A Quadruple-Leveraged S&amp;P 500 ETF is Here</strong></p><cite>Barron\'s, 5/3/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:heading {\"level\":3} -->\n<h3>Exchange Traded Fund (ETF)</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The first Exchange Traded Fund (ETF) was launched in 1993, and although they were slow to start, ETFs have proliferated over the last decade, both in number (see graph at right) and the variety of index funds available. There’s now an ETF for nearly every strategy, no matter how esoteric, and that has helped fuel the passive investing craze.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":4829,\"sizeSlug\":\"full\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/number-of-etfs.png\" alt=\"Graph showing the number of ETFs (registered in the U.S.), Source: Investment Company Institute\" class=\"wp-image-4829\"/><figcaption>Number of ETFs (registered in the U.S.), Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Over the past 24 years, one can see the shift in interest from actively managed mutual funds toward passive investing. As shown in the graph below, net cash flows into actively managed funds were still four times larger than passive funds from 1993 through 2000. From 2001 through 2008, a change becomes evident as net cash flows for active funds turned negative while passive funds continued to grow. The disparity between the active and passive net cash flows during the current bull market (2009-2016) is remarkable, and it shows why there’s been a parabolic increase in the number of ETFs!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4831,\"width\":713,\"height\":397} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Active-vs-Passive-Stock-Funds-Inflows.png\" alt=\"Graph showing net cash flows into actively managed funds between 1993 and 2016.\" class=\"wp-image-4831\" width=\"713\" height=\"397\"/><figcaption>Active vs. Passive Domestic Stock Funds; Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>So, why has passive investing become all the rage in recent years?</strong></h3>\n<!-- /wp:heading -->\n\n<!-- wp:quote {\"align\":\"center\",\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center is-style-default\"><p>Excitement is Highest as the Roller Coaster Goes Over the Top.</p><cite>– Anonymous</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Many investors have been burned –not once, but twice– by the Tech Bubble of the 1990s and the Housing Bubble in 2007. Also, they are frustrated with the challenges of managing investments… a task that in this uncertain bull market has frequently seemed counterproductive.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The most popular index funds are touted as low-cost and broadly diversified, with a portfolio full of blue chip stocks. Moreover, ETFs offer “instant liquidity” with intraday trading compared to mutual funds that only settle at the end of each trading day. To the average investor, passive funds with minimal fees, implied safety, and lots of liquidity may appear to be the Holy Grail. As we’ll see, however, there is more to the story…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":4839,\"mediaType\":\"image\",\"mediaWidth\":43,\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 43%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Total-Assets-Domestic-Equity-Index-Funds.png\" alt=\"Graph showing the total assets in Domestic Equity Index Funds, 1990\'s to 2016\" class=\"wp-image-4839 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:paragraph -->\n<p>Just as the number of ETFs has grown, the past few years have witnessed an explosion in assets tied to passive investing that has extended to both mutual funds and ETFs (as shown in graph at right). A large part of the growth has been in ETFs, which are poised to overtake index mutual funds as the preferred indexing vehicle. Both types of products have doubled in assets just since 2012.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>It is important to recognize that passive investing is not a fresh new idea; in fact, the concept was introduced by John Bogle (the founder of Vanguard) in the 1970s. This strategy has shifted in and out of favor, becoming more popular as bull markets age and losing its luster only after the damage has been done by the next bear market. Just like riding a roller coaster, the peak in public enthusiasm often comes as the bull market is cresting the top.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>A Trip Back in Time…</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The rise in the popularity of index funds has been seen before.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"align\":\"center\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center\"><p>It’s like deja vu all over again.</p><cite>- Yogi Berra</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The late 1990s: </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the decade of the 1990s became the longest bull market in Wall Street history, the Tech Bubble wasn’t the only phenomenon catching investors’ attention. In 1998-99, headlines were touting the benefit of index investing as inflows reached record levels:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Saving for Retirement Index Fever</strong></p><cite> Fortune, 11/9/98</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Who Needs a Money Manager?</strong></p><cite>Business Week 2/22/99</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:paragraph -->\n<p>In <strong>March 1999</strong>, InvesTech Research published the issue shown at right, <a href=\"https://ns2020-investech.investech.com/subscriber-library/lemming-principle/\">comparing the emotional influx of index investors to lemmings</a>. However, instead of falling off a cliff, index investors fell into the largest bear market since the 1930s (the S&amp;P 500 Index lost -49.1%).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>2006-07:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Fast-forward to 2006-07:</strong> Index investing was even <em>more</em> popular at the peak of the last bull market (also one of the longer bull markets of the past 80 years):</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:image {\"align\":\"center\",\"id\":4840,\"width\":195,\"height\":201,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/V99I04-216x300.png\" alt=\"InvesTech Research newsletter, &quot;The Lemming Principle,&quot; March 12, 1999\" class=\"wp-image-4840\" width=\"195\" height=\"201\"/><figcaption>InvesTech Research newsletter, \"The Lemming Principle,\" March 12, 1999</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index Funds: So Hot Right Now</strong></p><cite>The Motley Fool, 12/11/06</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index funds help you avoid risks of stock selection, market timing</strong></p><cite>Boston Globe, 2/27/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Owning the S&amp;P 500 is cheap, easy and smart</strong></p><cite>USA Today, 7/20/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>In these previous periods, much like today, most investors perceived index funds – particularly the S&amp;P 500 Index funds – to be more diversified, safer investments.  We’ll discuss why index funds may not be all they’re thought to be…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>The Dark Side of Passive Investing – Live by the Index, Die by the Index</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As noted, history shows that index investing reaches the highest level of popularity in aging bull markets or near market peaks. The reason for this is that any type of “risk management” during a bull market tends to reduce or moderate a fund manager’s return. Consequently, it is not uncommon for a fully invested S&amp;P 500 Index fund to outperform most actively managed mutual funds and money managers when measured <em>solely </em>over the duration of a bull market.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>There are multiple reasons index or passive investing becomes more popular in an aging bull market. First, it is more comfortable. One doesn’t have the burden of making decisions about which stocks to invest in, or when to sell a stock if it rises or falls precipitously. Indexing also tends to remove the regret from bad decisions, because any loss can be attributed entirely to the market. Lastly, investing in an index fund is the cheapest and easiest way to take advantage of the market’s stellar gains which seem likely to continue. Yet before jumping into the indexing mania today, consider these inherent risks in passive investing…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>By definition, index funds also guarantee that you will suffer 100% of the next bear market’s decline.</strong> Regardless of which index you are matching, the index fund is required to stay fully invested regardless of market risk or volatility.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Assets flowing into the most popular index funds are funneling investments into the largest and most overvalued stocks in the market, driving them higher. </strong>The S&amp;P 500 is a capitalization weighted index, so money invested into these popular index funds is not evenly distributed in all 500 stocks. Rather, the largest companies by market cap receive a disproportionate amount of the investment. As a result, investors must take the good with the bad and favor the largest companies within the basket of 500 stocks, regardless of valuation and financial strength (or lack thereof).</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Market volatility increases when interest narrows to the index heavyweights. </strong>Only 50 stocks account for nearly 50% of S&amp;P 500 capitalization and one-half of an index fund’s portfolio. Additionally, the top 10 largest stocks comprise over 20% of the Index. As a result, downside risk in the next bear market could increase if selling pressure hits the largest stocks at the same time. The increased focus on index investing of late may very well increase both the size of, and speed at which the next bear market decline occurs.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":8324,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/iShares-Core-SP-500-ETF.jpg\" alt=\"\" class=\"wp-image-8324\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Intraday liquidity for ETFs can experience dramatic structural challenges in times of market distress. </strong>For example, during the market dislocation on August 24, 2015 the liquidity of most ETFs all but dried up just as the market opened. A confluence of problems –including circuit breakers, an obscure NYSE rule allowing market makers to delay posting prices, and a lack of futures data for large hedgers– all combined to take the bid out of the ETF space. Even large, well-established ETFs like the $116 billion iShares Core S&amp;P 500 ETF (IVV) saw unprecedented declines. As shown on the graph below, IVV fell -26% on the open, far more than the -5.3% drop of the underlying S&amp;P 500. As a result of this liquidity hiccup, or “flash crash” as it was called at the time, investors with outstanding market orders and stop-loss orders sold their shares in IVV for far less than their worth.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bottom Line</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The broad diversification and implied liquidity offered by index ETFs gives many investors a false sense of security. When passively investing in an index, devoid of risk management, investors are still subject to varying degrees of valuation and liquidity risk, and they bear the full brunt of cyclical market risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Risk Management is Vital to any Strategy – <em>Ignore at your own peril!</em></h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Many actively managed mutual funds and money managers take some steps to mitigate portfolio risk – at times to the detriment of bull market performance. Although passive indexing may appear to be easier and is also perceived to reduce risk, it ends up having the opposite effect during major downturns as it guarantees an investor will experience all of the losses in the corresponding market index. Remember, long-term performance is dependent not only on how much you make in the bull markets, but also how much you give back in the bear markets. Investments that are weighted toward the largest, most overvalued stocks and sectors are exactly the opposite of what might be used in a strategy that manages risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Index investing proponents generally downplay stock market cycles, but bear market survivability is a very real issue for many investors, particularly those in or nearing retirement. The decision to hold the course on an investment strategy usually depends on the severity of bear market losses and how long one’s portfolio remains underwater… in other words, how much time it takes to recover those losses.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>To effectively demonstrate this concept, the <strong>Ulcer Index </strong>was developed in 1987 by Peter Martin to measure the depth and duration of drawdowns from earlier highs in one’s portfolio. It provides a graphic illustration of the level of stress and ulcers (hence the name) that can emerge from suffering deep, prolonged losses in one’s retirement savings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Shown below are the comparative Ulcer Index graphs of the InvesTech Model Portfolio versus the Vanguard Total Stock Market Index (VTSMX), which is the largest and most popular fund on the market today.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8329,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/IT-Portfolio-vs-Vanguard-Ulcer-Index.jpg\" alt=\"\" class=\"wp-image-8329\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The starts of the last two bear markets are noted in March 2000 and October 2007, as well as their subsequent market bottoms in October 2002 and March 2009. The green dashed lines illustrate the number of months required after the market bottom for one’s portfolio to recover the losses. Above all, the red shaded areas designate how long, and how deep one’s portfolio was underwater. These are the so-called “ulcer” zones when an investor must wait and wonder how long it will be before his portfolio is whole again.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As you’ll note, InvesTech’s “risk management” strategy dramatically reduced the stress of the last two generational bear markets by limiting the time spent in the “ulcer” zones. While the InvesTech Model Portfolio didn’t outperform the Vanguard Total Stock Market Index Fund in the bull markets, our ability to manage and reduce risk provided a long-term return which more than doubled that of the Vanguard index fund. More importantly, InvesTech subscribers lost significantly less and recovered much more quickly during bear markets, avoiding the urge to panic out of the market at the wrong time.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It is this combination of achieving safe returns and managing downside risk that matters most in the long-term performance of one’s portfolio… and in the survivability of bear markets.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:uagb/inline-notice {\"block_id\":\"3054c859\",\"noticeContent\":\"\\u003cp\\u003ePast performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  \\u003ca href=\\u0022https://ns2020-investech.investech.com/terms-of-use/\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003eRead full Disclosures here\\u003c/a\\u003e\\u003ca href=\\u0022http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003e.\\u003c/a\\u003e\\u003c/p\\u003e\"} -->\n<div class=\"wp-block-uagb-inline-notice uagb-inline_notice__outer-wrap uagb-inline_notice__align-left uagb-block-3054c859\"><h4 class=\"uagb-notice-title\">Important Disclosure Information</h4><div class=\"uagb-notice-text\"><p>Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  <a href=\"https://ns2020-investech.investech.com/terms-of-use/\" target=\"_blank\" rel=\"noreferrer noopener\">Read full Disclosures here</a><a href=\"http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p></div></div>\n<!-- /wp:uagb/inline-notice -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - June 16, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format: <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/IndexingFever.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','Passive Investing: Inevitable Black Eye','Tempted by high-flying ETFs in this aging bull market? Just remember… Excitement is highest as the roller coaster goes over the top! In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public.','inherit','closed','closed','','2468-revision-v1','','','2021-06-15 16:57:51','2021-06-15 16:57:51','',2468,'https://ns2020-investech.investech.com/?p=8393',0,'revision','',0);
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INSERT INTO `wp_posts` VALUES (8397,3,'2021-06-15 19:21:38','2021-06-15 19:21:38','<!-- wp:heading -->\n<h2>This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market.</h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The Coppock Guide or Curve was originally developed over 50 years ago by Edwin S. Coppock.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate of change plus an 11-month rate of change of a market index. In simpler terms, it’s really just a momentum oscillator. Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The historical value of the Coppock Guide lies in signaling or confirming low-risk buying opportunities that emerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottoms are usually sudden or “spiked” reversals, the Coppock Guide works amazingly well – as it did immediately after the bottom in 2009.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5352,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-1024x728.png\" alt=\"\" class=\"wp-image-5352\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Once the Coppock Guide drops to ‘0’ or below, a mere 1-point upturn can usually be treated as an excellent buying opportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive the profits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usually slow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market. <em>Except, that is, in a few cases…</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Double-Tops</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. <strong>When a double-top occurs without the Coppock falling to ‘0’, it identifies a bull market where corrections haven’t driven out nervous investors or cleansed excesses from the market. </strong>When those psychological excesses are not washed out, the nervousness can continue to build and extremes can multiply… with the result that the next downturn can become severe as everyone heads for the exits.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5353,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-table.png\" alt=\"\" class=\"wp-image-5353\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><br>So there is a critical historical aspect to double-tops: <em>They can result in nasty bears! </em>Double-tops have occurred only 7 times in 93 years – with 5 of them accompanying the start of the most notorious bear markets of the 20th century: 1929, 1969, 1973, 2000 and 2007.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The table at right shows the month of the second peak, along with the start of the S&amp;P 500 bear market. And a glance at those resulting bear markets reveals why the double-top in the Coppock Guide has been nicknamed a “Killer Wave.” The average decline (<em>excluding </em>the -86% loss in 1929) was almost -42%!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In summary, there are two critical lessons in this model. First is the inherent danger that accompanies a double-top in the Coppock Guide. Such a formation often precedes the biggest and most devastating bear markets. The second, and perhaps most important, lesson is the knowledge that the safest and most profitable buying opportunities appear after this Guide declines to (or below) ‘0’ and then turns upward.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When used with our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies and wait for the best buying opportunities that occur only a couple times each decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:paragraph -->\n<p>This special report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4></h4>\n<!-- /wp:heading -->','The Coppock Guide - Double Tops','This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market. It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another.','inherit','closed','closed','','2476-revision-v1','','','2021-06-15 19:21:38','2021-06-15 19:21:38','',2476,'https://ns2020-investech.investech.com/?p=8397',0,'revision','',0);
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INSERT INTO `wp_posts` VALUES (8401,3,'2021-06-15 19:26:39','2021-06-15 19:26:39','<!-- wp:heading -->\n<h2>This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market.</h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The Coppock Guide or Curve was originally developed over 50 years ago by Edwin S. Coppock.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate of change plus an 11-month rate of change of a market index. In simpler terms, it’s really just a momentum oscillator. Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The historical value of the Coppock Guide lies in signaling or confirming low-risk buying opportunities that emerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottoms are usually sudden or “spiked” reversals, the Coppock Guide works amazingly well – as it did immediately after the bottom in 2009.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5352,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-1024x728.png\" alt=\"\" class=\"wp-image-5352\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Once the Coppock Guide drops to ‘0’ or below, a mere 1-point upturn can usually be treated as an excellent buying opportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive the profits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usually slow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market. <em>Except, that is, in a few cases…</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Double-Tops</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. <strong>When a double-top occurs without the Coppock falling to ‘0’, it identifies a bull market where corrections haven’t driven out nervous investors or cleansed excesses from the market. </strong>When those psychological excesses are not washed out, the nervousness can continue to build and extremes can multiply… with the result that the next downturn can become severe as everyone heads for the exits.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5353,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-table.png\" alt=\"\" class=\"wp-image-5353\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><br>So there is a critical historical aspect to double-tops: <em>They can result in nasty bears! </em>Double-tops have occurred only 7 times in 93 years – with 5 of them accompanying the start of the most notorious bear markets of the 20th century: 1929, 1969, 1973, 2000 and 2007.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The table at right shows the month of the second peak, along with the start of the S&amp;P 500 bear market. And a glance at those resulting bear markets reveals why the double-top in the Coppock Guide has been nicknamed a “Killer Wave.” The average decline (<em>excluding </em>the -86% loss in 1929) was almost -42%!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In summary, there are two critical lessons in this model. First is the inherent danger that accompanies a double-top in the Coppock Guide. Such a formation often precedes the biggest and most devastating bear markets. The second, and perhaps most important, lesson is the knowledge that the safest and most profitable buying opportunities appear after this Guide declines to (or below) ‘0’ and then turns upward.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When used with our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies and wait for the best buying opportunities that occur only a couple times each decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Market Insight - Updated May 2013</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This special report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a><a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p>\n<!-- /wp:paragraph -->','The Coppock Guide - Double Tops','This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market. It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another.','inherit','closed','closed','','2476-revision-v1','','','2021-06-15 19:26:39','2021-06-15 19:26:39','',2476,'https://ns2020-investech.investech.com/?p=8401',0,'revision','',0);
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INSERT INTO `wp_posts` VALUES (8403,3,'2021-06-15 19:27:12','2021-06-15 19:27:12','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market.</p></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading -->\n<h2>The Coppock Guide or Curve was originally developed over 50 years ago by Edwin S. Coppock.</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate of change plus an 11-month rate of change of a market index. In simpler terms, it’s really just a momentum oscillator. Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The historical value of the Coppock Guide lies in signaling or confirming low-risk buying opportunities that emerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottoms are usually sudden or “spiked” reversals, the Coppock Guide works amazingly well – as it did immediately after the bottom in 2009.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5352,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-1024x728.png\" alt=\"\" class=\"wp-image-5352\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Once the Coppock Guide drops to ‘0’ or below, a mere 1-point upturn can usually be treated as an excellent buying opportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive the profits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usually slow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market. <em>Except, that is, in a few cases…</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Double-Tops</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. <strong>When a double-top occurs without the Coppock falling to ‘0’, it identifies a bull market where corrections haven’t driven out nervous investors or cleansed excesses from the market. </strong>When those psychological excesses are not washed out, the nervousness can continue to build and extremes can multiply… with the result that the next downturn can become severe as everyone heads for the exits.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5353,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-table.png\" alt=\"\" class=\"wp-image-5353\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><br>So there is a critical historical aspect to double-tops: <em>They can result in nasty bears! </em>Double-tops have occurred only 7 times in 93 years – with 5 of them accompanying the start of the most notorious bear markets of the 20th century: 1929, 1969, 1973, 2000 and 2007.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The table at right shows the month of the second peak, along with the start of the S&amp;P 500 bear market. And a glance at those resulting bear markets reveals why the double-top in the Coppock Guide has been nicknamed a “Killer Wave.” The average decline (<em>excluding </em>the -86% loss in 1929) was almost -42%!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In summary, there are two critical lessons in this model. First is the inherent danger that accompanies a double-top in the Coppock Guide. Such a formation often precedes the biggest and most devastating bear markets. The second, and perhaps most important, lesson is the knowledge that the safest and most profitable buying opportunities appear after this Guide declines to (or below) ‘0’ and then turns upward.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When used with our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies and wait for the best buying opportunities that occur only a couple times each decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Market Insight - Updated May 2013</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This special report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a><a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p>\n<!-- /wp:paragraph -->','The Coppock Guide - Double Tops','This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market. It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another.','inherit','closed','closed','','2476-revision-v1','','','2021-06-15 19:27:12','2021-06-15 19:27:12','',2476,'https://ns2020-investech.investech.com/?p=8403',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8404,3,'2021-06-15 19:27:42','2021-06-15 19:27:42','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market.</p><cite>citatyion</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading -->\n<h2>The Coppock Guide or Curve was originally developed over 50 years ago by Edwin S. Coppock.</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate of change plus an 11-month rate of change of a market index. In simpler terms, it’s really just a momentum oscillator. Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The historical value of the Coppock Guide lies in signaling or confirming low-risk buying opportunities that emerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottoms are usually sudden or “spiked” reversals, the Coppock Guide works amazingly well – as it did immediately after the bottom in 2009.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5352,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-1024x728.png\" alt=\"\" class=\"wp-image-5352\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Once the Coppock Guide drops to ‘0’ or below, a mere 1-point upturn can usually be treated as an excellent buying opportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive the profits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usually slow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market. <em>Except, that is, in a few cases…</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Double-Tops</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. <strong>When a double-top occurs without the Coppock falling to ‘0’, it identifies a bull market where corrections haven’t driven out nervous investors or cleansed excesses from the market. </strong>When those psychological excesses are not washed out, the nervousness can continue to build and extremes can multiply… with the result that the next downturn can become severe as everyone heads for the exits.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5353,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-table.png\" alt=\"\" class=\"wp-image-5353\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><br>So there is a critical historical aspect to double-tops: <em>They can result in nasty bears! </em>Double-tops have occurred only 7 times in 93 years – with 5 of them accompanying the start of the most notorious bear markets of the 20th century: 1929, 1969, 1973, 2000 and 2007.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The table at right shows the month of the second peak, along with the start of the S&amp;P 500 bear market. And a glance at those resulting bear markets reveals why the double-top in the Coppock Guide has been nicknamed a “Killer Wave.” The average decline (<em>excluding </em>the -86% loss in 1929) was almost -42%!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In summary, there are two critical lessons in this model. First is the inherent danger that accompanies a double-top in the Coppock Guide. Such a formation often precedes the biggest and most devastating bear markets. The second, and perhaps most important, lesson is the knowledge that the safest and most profitable buying opportunities appear after this Guide declines to (or below) ‘0’ and then turns upward.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When used with our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies and wait for the best buying opportunities that occur only a couple times each decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Market Insight - Updated May 2013</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This special report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a><a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p>\n<!-- /wp:paragraph -->','The Coppock Guide - Double Tops','This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market. It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another.','inherit','closed','closed','','2476-revision-v1','','','2021-06-15 19:27:42','2021-06-15 19:27:42','',2476,'https://ns2020-investech.investech.com/?p=8404',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8405,3,'2021-06-15 19:28:14','2021-06-15 19:28:14','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market.</p><cite>InvesTech Research</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading -->\n<h2>The Coppock Guide or Curve was originally developed over 50 years ago by Edwin S. Coppock.</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate of change plus an 11-month rate of change of a market index. In simpler terms, it’s really just a momentum oscillator. Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The historical value of the Coppock Guide lies in signaling or confirming low-risk buying opportunities that emerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottoms are usually sudden or “spiked” reversals, the Coppock Guide works amazingly well – as it did immediately after the bottom in 2009.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5352,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-1024x728.png\" alt=\"\" class=\"wp-image-5352\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Once the Coppock Guide drops to ‘0’ or below, a mere 1-point upturn can usually be treated as an excellent buying opportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive the profits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usually slow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market. <em>Except, that is, in a few cases…</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Double-Tops</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. <strong>When a double-top occurs without the Coppock falling to ‘0’, it identifies a bull market where corrections haven’t driven out nervous investors or cleansed excesses from the market. </strong>When those psychological excesses are not washed out, the nervousness can continue to build and extremes can multiply… with the result that the next downturn can become severe as everyone heads for the exits.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5353,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-table.png\" alt=\"\" class=\"wp-image-5353\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><br>So there is a critical historical aspect to double-tops: <em>They can result in nasty bears! </em>Double-tops have occurred only 7 times in 93 years – with 5 of them accompanying the start of the most notorious bear markets of the 20th century: 1929, 1969, 1973, 2000 and 2007.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The table at right shows the month of the second peak, along with the start of the S&amp;P 500 bear market. And a glance at those resulting bear markets reveals why the double-top in the Coppock Guide has been nicknamed a “Killer Wave.” The average decline (<em>excluding </em>the -86% loss in 1929) was almost -42%!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In summary, there are two critical lessons in this model. First is the inherent danger that accompanies a double-top in the Coppock Guide. Such a formation often precedes the biggest and most devastating bear markets. The second, and perhaps most important, lesson is the knowledge that the safest and most profitable buying opportunities appear after this Guide declines to (or below) ‘0’ and then turns upward.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When used with our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies and wait for the best buying opportunities that occur only a couple times each decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Market Insight - Updated May 2013</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This special report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a><a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p>\n<!-- /wp:paragraph -->','The Coppock Guide - Double Tops','This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market. It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another.','inherit','closed','closed','','2476-revision-v1','','','2021-06-15 19:28:14','2021-06-15 19:28:14','',2476,'https://ns2020-investech.investech.com/?p=8405',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8406,3,'2021-06-15 19:28:25','2021-06-15 19:28:25','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market.</p><cite>InvesTech Research</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading -->\n<h2>Originally developed over 50 years ago by Edwin S. Coppock.</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate of change plus an 11-month rate of change of a market index. In simpler terms, it’s really just a momentum oscillator. Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The historical value of the Coppock Guide lies in signaling or confirming low-risk buying opportunities that emerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottoms are usually sudden or “spiked” reversals, the Coppock Guide works amazingly well – as it did immediately after the bottom in 2009.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5352,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-1024x728.png\" alt=\"\" class=\"wp-image-5352\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Once the Coppock Guide drops to ‘0’ or below, a mere 1-point upturn can usually be treated as an excellent buying opportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive the profits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usually slow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market. <em>Except, that is, in a few cases…</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Double-Tops</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. <strong>When a double-top occurs without the Coppock falling to ‘0’, it identifies a bull market where corrections haven’t driven out nervous investors or cleansed excesses from the market. </strong>When those psychological excesses are not washed out, the nervousness can continue to build and extremes can multiply… with the result that the next downturn can become severe as everyone heads for the exits.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5353,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-table.png\" alt=\"\" class=\"wp-image-5353\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><br>So there is a critical historical aspect to double-tops: <em>They can result in nasty bears! </em>Double-tops have occurred only 7 times in 93 years – with 5 of them accompanying the start of the most notorious bear markets of the 20th century: 1929, 1969, 1973, 2000 and 2007.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The table at right shows the month of the second peak, along with the start of the S&amp;P 500 bear market. And a glance at those resulting bear markets reveals why the double-top in the Coppock Guide has been nicknamed a “Killer Wave.” The average decline (<em>excluding </em>the -86% loss in 1929) was almost -42%!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In summary, there are two critical lessons in this model. First is the inherent danger that accompanies a double-top in the Coppock Guide. Such a formation often precedes the biggest and most devastating bear markets. The second, and perhaps most important, lesson is the knowledge that the safest and most profitable buying opportunities appear after this Guide declines to (or below) ‘0’ and then turns upward.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When used with our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies and wait for the best buying opportunities that occur only a couple times each decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Market Insight - Updated May 2013</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This special report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a><a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p>\n<!-- /wp:paragraph -->','The Coppock Guide - Double Tops','This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market. It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another.','inherit','closed','closed','','2476-revision-v1','','','2021-06-15 19:28:25','2021-06-15 19:28:25','',2476,'https://ns2020-investech.investech.com/?p=8406',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8407,2,'2021-06-15 19:30:15','2021-06-15 19:30:15','','glacier-national-park-shutterstock_227970166','','inherit','closed','closed','','glacier-national-park-shutterstock_227970166','','','2021-06-15 19:30:15','2021-06-15 19:30:15','',6882,'https://ns2020-investech.investech.com/wp-content/uploads/2021/04/glacier-national-park-shutterstock_227970166.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (8409,3,'2021-06-15 19:36:25','2021-06-15 19:36:25','','coppock','','inherit','closed','closed','','coppock-3','','','2021-06-15 19:36:25','2021-06-15 19:36:25','',0,'https://ns2020-investech.investech.com/wp-content/uploads/2021/06/coppock.pdf',0,'attachment','application/pdf',0);
INSERT INTO `wp_posts` VALUES (8411,3,'2021-06-15 19:37:03','2021-06-15 19:37:03','<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market.</p><cite>InvesTech Research</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading -->\n<h2>Originally developed over 50 years ago by Edwin S. Coppock.</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate of change plus an 11-month rate of change of a market index. In simpler terms, it’s really just a momentum oscillator. Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The historical value of the Coppock Guide lies in signaling or confirming low-risk buying opportunities that emerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottoms are usually sudden or “spiked” reversals, the Coppock Guide works amazingly well – as it did immediately after the bottom in 2009.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5352,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-1024x728.png\" alt=\"\" class=\"wp-image-5352\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Once the Coppock Guide drops to ‘0’ or below, a mere 1-point upturn can usually be treated as an excellent buying opportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive the profits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usually slow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market. <em>Except, that is, in a few cases…</em></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Double-Tops</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. <strong>When a double-top occurs without the Coppock falling to ‘0’, it identifies a bull market where corrections haven’t driven out nervous investors or cleansed excesses from the market. </strong>When those psychological excesses are not washed out, the nervousness can continue to build and extremes can multiply… with the result that the next downturn can become severe as everyone heads for the exits.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5353,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/coppock-table.png\" alt=\"\" class=\"wp-image-5353\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><br>So there is a critical historical aspect to double-tops: <em>They can result in nasty bears! </em>Double-tops have occurred only 7 times in 93 years – with 5 of them accompanying the start of the most notorious bear markets of the 20th century: 1929, 1969, 1973, 2000 and 2007.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The table at right shows the month of the second peak, along with the start of the S&amp;P 500 bear market. And a glance at those resulting bear markets reveals why the double-top in the Coppock Guide has been nicknamed a “Killer Wave.” The average decline (<em>excluding </em>the -86% loss in 1929) was almost -42%!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In summary, there are two critical lessons in this model. First is the inherent danger that accompanies a double-top in the Coppock Guide. Such a formation often precedes the biggest and most devastating bear markets. The second, and perhaps most important, lesson is the knowledge that the safest and most profitable buying opportunities appear after this Guide declines to (or below) ‘0’ and then turns upward.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When used with our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies and wait for the best buying opportunities that occur only a couple times each decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Market Insight - Updated May 2013</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This special report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/coppock.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','The Coppock Guide - Double Tops','This little-known indicator has a remarkable 93-year track record of signaling the best, low-risk buying opportunities in the stock market. It’s been described as a “barometer of the market’s emotional state,” methodically tracking the ebb and flow of equity markets from one extreme to another.','inherit','closed','closed','','2476-revision-v1','','','2021-06-15 19:37:03','2021-06-15 19:37:03','',2476,'https://ns2020-investech.investech.com/?p=8411',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8414,2,'2021-06-15 19:39:05','2021-06-15 19:39:05','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8413,\"mediaLink\":\"https://ns2020-investech.investech.com/flathead-lake/flathead-lake-shutterstock_42619318/\",\"mediaType\":\"image\",\"imageFill\":true} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-image-fill\"><figure class=\"wp-block-media-text__media\" style=\"background-image:url(https://ns2020-investech.investech.com/wp-content/uploads/2021/04/flathead-lake-shutterstock_42619318.png);background-position:50% 50%\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/04/flathead-lake-shutterstock_42619318.png\" alt=\"\" class=\"wp-image-8413 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Lake Recreation</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Flathead Lake is a large natural lake in northwest Montana and is the largest natural freshwater lake by surface area that is west of the Mississippi in the contiguous United States. The lake is a remnant of the ancient, massive glacial dammed lake, Lake Missoula of the era of the last interglacial.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Recreation on and around the lake includes sailing, powerboating, waterskiing, swimming, fishing, picnicking, and camping. In the summer, roadside stands along the east shore offer a variety of locally grown cherries, apples, plums, and other fruits. There are numerous motels and rental cabins in addition to public campgrounds scattered all around the shoreline.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Visit <a href=\"https://discoverkalispell.com/things-to-do/flathead-lake/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Discover Flathead</a>.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->','Flathead Lake','Flathead Lake is a large natural lake in northwest Montana and is the largest natural freshwater lake by surface area that is west of the source of the Missouri River in the contiguous United States. The lake is a remnant of the ancient, massive glacial dammed lake, Lake Missoula of the era of the last interglacial.','inherit','closed','closed','','6903-revision-v1','','','2021-06-15 19:39:05','2021-06-15 19:39:05','',6903,'https://ns2020-investech.investech.com/?p=8414',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8415,2,'2021-06-15 19:44:51','2021-06-15 19:44:51','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8250,\"mediaLink\":\"https://ns2020-investech.investech.com/whitefish-chamber-of-commerce/whitefish-mt-unsplash-1539619219399-5dce796f647b/\",\"mediaType\":\"image\",\"imageFill\":true,\"focalPoint\":{\"x\":\"0.10\",\"y\":\"0.75\"}} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-image-fill\"><figure class=\"wp-block-media-text__media\" style=\"background-image:url(https://ns2020-investech.investech.com/wp-content/uploads/2021/04/whitefish-mt-unsplash-1539619219399-5dce796f647b.png);background-position:10% 75%\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/04/whitefish-mt-unsplash-1539619219399-5dce796f647b.png\" alt=\"\" class=\"wp-image-8250 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Welcome</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Whether you’re looking for a great place to raise a family, run a business, enjoy your retirement or simply take a well-deserved vacation, look no further—Whitefish, Montana has something for everyone! </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Founded at the turn of the 20th Century when the Great Northern Railway chose to put its northwestern Montana headquarters here, modern-day Whitefish is an island of commerce and culture, surrounded by an ocean of mountain recreation. Nestled at the northernmost tip of the majestic Flathead Valley, Whitefish offers residents a peaceful—yet active—lifestyle that is the envy of communities near and far. All you have to do is pick your pleasure—from hiking &amp; biking to boating &amp; cycling, from skiing &amp; skating, to floatin’ &amp; fishin’… you’ll find all that (and more!) in Whitefish.&nbsp;</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Visit <a href=\"https://www.whitefishchamber.org/\" target=\"_blank\" rel=\"noreferrer noopener\">Whitefish Chamber of Commerce.</a></p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->','Whitefish Chamber of Commerce','Founded at the turn of the 20th Century when the Great Northern Railway chose to put its northwestern Montana headquarters here, modern-day Whitefish is an island of commerce and culture, surrounded by an ocean of mountain recreation.','inherit','closed','closed','','6900-revision-v1','','','2021-06-15 19:44:51','2021-06-15 19:44:51','',6900,'https://ns2020-investech.investech.com/?p=8415',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8418,2,'2021-06-15 19:49:28','2021-06-15 19:49:28','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8417,\"mediaLink\":\"https://ns2020-investech.investech.com/alpine-theatre-project/alpine-theatre-project-pexels-photo-713149/\",\"mediaType\":\"image\",\"imageFill\":true} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-image-fill\"><figure class=\"wp-block-media-text__media\" style=\"background-image:url(https://ns2020-investech.investech.com/wp-content/uploads/2021/04/alpine-theatre-project-pexels-photo-713149.png);background-position:50% 50%\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/04/alpine-theatre-project-pexels-photo-713149.png\" alt=\"\" class=\"wp-image-8417 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Whitefish Theatre</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Alpine Theatre Project has been bringing Broadway talent, production, and education to Flathead Valley residents since 2004. Its artists have performed in over 190 Broadway productions, won 4 Tony Awards, 7 Emmy Awards, 4 Golden Globe Awards, and 1 Academy Award. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Since its founding, ATP has become one of the most talked-about and unique cultural institutions in the Inland Northwest, with notices in the New York Times, Los Angeles Times, American Theatre Magazine, and Frommer\'s Budget Travel Magazine, which named ATP as one of the attractions that make Whitefish, Montana \"One of the Top 10 Coolest Small Towns in America.\"</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Visit <a href=\"https://atpwhitefish.org/\" target=\"_blank\" rel=\"noreferrer noopener\">Alpine Theatre Project</a>.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->','Alpine Theatre Project','Alpine Theatre Project is a 501 nonprofit professional theatre company based in Whitefish, Montana. It presents musicals, plays and concerts. It also provides education and outreach to students in Montana\'s Flathead Valley.','inherit','closed','closed','','6891-revision-v1','','','2021-06-15 19:49:28','2021-06-15 19:49:28','',6891,'https://ns2020-investech.investech.com/?p=8418',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8419,2,'2021-06-15 19:57:44','2021-06-15 19:57:44','','whitefish-chamber-of-commerce-shutterstock_1264413673','','inherit','closed','closed','','whitefish-chamber-of-commerce-shutterstock_1264413673','','','2021-06-15 19:57:44','2021-06-15 19:57:44','',6900,'https://ns2020-investech.investech.com/wp-content/uploads/2021/04/whitefish-chamber-of-commerce-shutterstock_1264413673.png',0,'attachment','image/png',0);
INSERT INTO `wp_posts` VALUES (8420,2,'2021-06-15 19:57:53','2021-06-15 19:57:53','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8419,\"mediaLink\":\"https://ns2020-investech.investech.com/whitefish-chamber-of-commerce/whitefish-chamber-of-commerce-shutterstock_1264413673/\",\"mediaType\":\"image\",\"imageFill\":true} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-image-fill\"><figure class=\"wp-block-media-text__media\" style=\"background-image:url(https://ns2020-investech.investech.com/wp-content/uploads/2021/04/whitefish-chamber-of-commerce-shutterstock_1264413673.png);background-position:50% 50%\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/04/whitefish-chamber-of-commerce-shutterstock_1264413673.png\" alt=\"\" class=\"wp-image-8419 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Welcome</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Whether you’re looking for a great place to raise a family, run a business, enjoy your retirement or simply take a well-deserved vacation, look no further—Whitefish, Montana has something for everyone! </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Founded at the turn of the 20th Century when the Great Northern Railway chose to put its northwestern Montana headquarters here, modern-day Whitefish is an island of commerce and culture, surrounded by an ocean of mountain recreation. Nestled at the northernmost tip of the majestic Flathead Valley, Whitefish offers residents a peaceful—yet active—lifestyle that is the envy of communities near and far. All you have to do is pick your pleasure—from hiking &amp; biking to boating &amp; cycling, from skiing &amp; skating, to floatin’ &amp; fishin’… you’ll find all that (and more!) in Whitefish.&nbsp;</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Visit <a href=\"https://www.whitefishchamber.org/\" target=\"_blank\" rel=\"noreferrer noopener\">Whitefish Chamber of Commerce.</a></p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->','Whitefish Chamber of Commerce','Founded at the turn of the 20th Century when the Great Northern Railway chose to put its northwestern Montana headquarters here, modern-day Whitefish is an island of commerce and culture, surrounded by an ocean of mountain recreation.','inherit','closed','closed','','6900-revision-v1','','','2021-06-15 19:57:53','2021-06-15 19:57:53','',6900,'https://ns2020-investech.investech.com/?p=8420',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8429,1,'2021-06-15 21:30:04','2021-06-15 21:30:04','','Subscriptions Group','','publish','closed','closed','','subscriptions-group','','','2021-08-17 13:32:17','2021-08-17 19:32:17','',0,'https://ns2020-investech.investech.com/?post_type=product&#038;p=8429',0,'product','',0);
INSERT INTO `wp_posts` VALUES (8430,1,'2021-06-15 21:35:59','2021-06-15 21:35:59','','Special Renewal Terms','','publish','closed','closed','','special-renewal-terms','','','2021-09-07 13:28:19','2021-09-07 19:28:19','',0,'https://ns2020-investech.investech.com/?post_type=product&#038;p=8430',0,'product','',0);
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INSERT INTO `wp_posts` VALUES (8432,1,'2021-06-15 15:34:26','2021-06-15 21:34:26','','Special Renewal Terms - 4 year','Subscription Term: 4 year','publish','closed','closed','','special-renewal-terms-4-year','','','2021-09-07 13:28:19','2021-09-07 19:28:19','',8430,'https://ns2020-investech.investech.com/?post_type=product_variation&#038;p=8432',2,'product_variation','',0);
INSERT INTO `wp_posts` VALUES (8433,1,'2021-06-15 15:34:26','2021-06-15 21:34:26','','Special Renewal Terms - 5 year','Subscription Term: 5 year','publish','closed','closed','','special-renewal-terms-5-year','','','2021-09-07 13:28:19','2021-09-07 19:28:19','',8430,'https://ns2020-investech.investech.com/?post_type=product_variation&#038;p=8433',3,'product_variation','',0);
INSERT INTO `wp_posts` VALUES (8434,2,'2021-06-15 21:52:39','2021-06-15 21:52:39','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8355,\"mediaLink\":\"https://ns2020-investech.investech.com/whitefishmtusa-juli32019-mainstreetinwhitefish/\",\"mediaType\":\"image\",\"imageFill\":false} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/shutterstock_1656675451-whitefish-1024x515.jpg\" alt=\"\" class=\"wp-image-8355 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>City of Whitefish</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Located in the Northern Rocky Mountains of Montana, Whitefish is nestled at the edge of Glacier National Park. Each season offers breathtaking opportunity to experience the millions of acres of mountains, forests, lakes, and rivers.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Visit <a href=\"https://explorewhitefish.com/\" target=\"_blank\" rel=\"noreferrer noopener\">Explore Whitefish.</a></p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->','Explore Whitefish','Located in the Northern Rocky Mountains of Montana, Whitefish is nestled at the edge of Glacier National Park. Each season offers breathtaking opportunity to experience the millions of acres of mountains, forests, lakes, and rivers.','inherit','closed','closed','','6877-revision-v1','','','2021-06-15 21:52:39','2021-06-15 21:52:39','',6877,'https://ns2020-investech.investech.com/?p=8434',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8452,3,'2021-06-16 14:32:57','2021-06-16 14:32:57','','New Paradigm Report','','inherit','closed','closed','','new-paradigm-report','','','2021-06-16 14:32:57','2021-06-16 14:32:57','',0,'https://ns2020-investech.investech.com/wp-content/uploads/2021/06/New-Paradigm-Report.pdf',0,'attachment','application/pdf',0);
INSERT INTO `wp_posts` VALUES (8454,3,'2021-06-16 14:35:30','2021-06-16 14:35:30','<!-- wp:heading -->\n<h2>Is Wall Street in a \'New Paradigm Era\'... or merely an \'Old Bubble\' carried to New Extremes?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Santayana, an early 20th Century philosopher, once said, “Those who do not learn from the past, are doomed to repeat it.” And Sir Isaac Newton, who lost the equivalent of over $1,000,000 investing in the South Sea bubble of 1720,  remarked, “I can measure the motions of bodies, but I cannot measure human folly.” However to this day, analysts cannot agree as to what constitutes a bubble… or how to recognize a bubble before the inevitable washout and aftermath.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It is widely perceived that the U.S. economy and stock market have embarked on a “New Paradigm Era” in which old rules no longer apply and traditional barriers have been broken. Yet as Federal Reserve Chairman Alan Greenspan warned Congress on February 26th 1997, “Regrettably, history is strewn with visions of such ‘new eras’ that, in the end, have proven to be a mirage.” This is an insight into one such likely mirage…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>What Constitutes A Bubble?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:quote {\"align\":\"left\"} -->\n<blockquote class=\"wp-block-quote has-text-align-left\"><p>That the free enterprise economy is given to recurrent episodes of speculation will be agreed… This process, once it is recognized, is clearly evident, and especially so after the fact. So also, if more subjectively, are the basic attitudes of the participants. These take two forms. There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely… Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course… For built into this situation is the eventual and inevitable fall. Built in also is the circumstance that it cannot come gently or gradually. When it comes it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape. Something, it matters little –although it will always be debated– triggers the ultimate reversal.<br></p><cite><strong>A Short History of Financial Euphoria<br></strong>John Kenneth Galbraith</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Historically, bubbles have always been a part of the lessons of investing. There was the Japanese stock market and real estate bubble which popped in 1989. In domestic real estate, there was the not so “recession-proof” California, as well as the price deflation or washouts of condominiums in Hawaii… residences in the Northeast… commercial office space in the oil belt… and numerous other regions in the 1980’s. Many investors may also remember $850 gold… $50 silver… $37 oil… numismatics… baseball cards… and the list goes on.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In the stock market, bubbles are usually limited to individual sectors which ride high on excessively exuberant expectations – only to plunge back to earth later. Yet history has left several notable eras which were recognized as “bubbles” only in the eventual and inevitable devastation. Seasoned investors may remember the “Nifty Fifty” era… the “Go-Go Fund” era… or even the “Investment Trust” era of the 1920’s.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>A Short History of Financial Euphoria</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In essence, a bubble is created when objectivity, reasoning, and valuation give way to greed and the desire for profits. In “A Short History of Financial Euphoria,” author Galbraith describes the common seeds of past manias that inevitably give way to disastrous consequences:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"ordered\":true} -->\n<ol><li>The basic premise that investing involves a trade-off between risk/reward is lost as investors are “captured by the wondrous satisfaction from accruing wealth. The very increase in values thus captures the thoughts and minds of those being rewarded.”</li><li>The belief that “some new price-enhancing circumstance is in control” – that there is “something new in the world” that justifies a permanently higher level of valuation.</li><li>The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”</li><li>The “condemnation at those who express doubt or dissent. … because of defective imagination or other mental inadequacy they are unable to grasp the new and rewarding circumstances.”</li></ol>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Healthy Bull Market to Dangerous Bubble</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Yet only in the aftermath, is a “bubble” identified as a bubble. While in progress, it can only be recognized by its symptoms which are common with speculative eras of the past. At what point does a healthy bull market turn into a bubble ripe for the popping? Here are a few differences:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5946,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/marketbubble-1024x308.jpg\" alt=\"Table detailing the characteristics of a healthy bull market and the characteristics when it swings to a dangerous bubble.\" class=\"wp-image-5946\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading -->\n<h2>Time For A Reality Check...</h2>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5953,\"width\":356,\"height\":351,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/overvaluation-extremes-300x296.jpg\" alt=\"Overvalutaion dot chart showing the extremes present at historic market tops.\" class=\"wp-image-5953\" width=\"356\" height=\"351\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Wall Street consensus is that the U.S. has entered a “new era” of tame inflation, low interest rates, and rising productivity that will carry economic prosperity well into the new millennium. If so, say pundits, then today’s extreme valuation levels in the stock market are justified. Just how extreme is stock overvaluation? The figure below shows the S&amp;P 500 Price-to-Dividend Ratio on the vertical scale, and the S&amp;P Industrials Price-to-Book Value Ratio on the horizontal scale. Simply, the higher on the chart, or the farther to the right a year appears, the more overvalued it is. Clearly, when compared to overvaluation at some of the most historic market tops such as 1929, 1968, 1972, and 1987… today (1998) is off-the-chart!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Consensus on Wall Street is also that today’s investor is smarter, better informed, more patient, and longer-term oriented than in the past. Consequently, it is believed that today’s mutual fund holder will never panic in a bear market. However, not all agree with this consensus:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":37} -->\n<div style=\"height:37px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:quote {\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote is-style-default\"><p><strong>Investors may overreact to a downturn, SEC warns</strong><br>Inexperienced investors who have known only the bull market of the last decade could react ‘precipitously’ to a downturn and ‘at great cost to themselves and our markets’, Mr. Arthur Levitt, chairman of the Securities and Exchange Commission<br>warned yesterday.</p><cite>London Financial Times – Feb 26, 1997</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>And Federal Reserve officials also appear nervous as evidenced by this Congressional Testimony in early 1997:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote is-style-default\"><p>History demonstrates that participants in financial markets are susceptible to waves of optimism… Excessive optimism sows the seeds of its own reversal in the form of imbalances that tend to grow over time. When unwarranted expectations ultimately are not realized, the unwinding of these financial excesses can act to amplify a downturn</p><cite>Federal Reserve Chairman Alan Greenspan<br>– Feb 26, 1997</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Meanwhile, the cold fact remains that the assets in equity mutual funds now total $3,164 Billion, as compared to $226 Billion in October 1990 at the start of this bull market. Quite simply, 93% of the money in stock mutual funds has not experienced a bear market or even a -15% correction in blue chip averages!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Perhaps more ominously, an overwhelming majority of fund investors believe they never will experience such a decline. This late 1996 Lou Harris poll reveals that 85% expect the next 10 years to be as spectacular or better than the past decade. 78% are not expecting a mild bear market of -20%. And almost half think that minor -10% corrections are a thing of the past:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5954,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/surveyfundinvestors-1024x224.jpg\" alt=\"survey of fund investors expectations and the actual risk since 1900.\" class=\"wp-image-5954\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><strong>Just how far out of touch are these investor expectations with reality?</strong> Compare the “actual risk” for all the years of this century (above right). A -10% correction has occurred in 65 years, or once every 1.5yrs on average – yet 7 years have lapsed since the last. A -20% decline has triggered every 2.5yrs – again, over 7 years since the last. A -30% bear hits every 4.6yrs – last seen during the ’87 Crash. And a major bear, with -40% losses, strikes about every 8.7yrs… last felt by investors 23 years ago!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p>Is it a contest to see who can forecast the highest level for the stock market? No… more likely it’s just a not-so-mild case of “irrational exuberance” feared by the Federal Reserve.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"right\",\"id\":5959,\"width\":414,\"height\":305,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/dow10000-300x221.jpg\" alt=\"Newspaper clipping of When and How the Dow may hit 20,000 by 2007.\" class=\"wp-image-5959\" width=\"414\" height=\"305\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:spacer {\"height\":20} -->\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":7533,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/05/assets.jpg\" alt=\"\" class=\"wp-image-7533\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":163} -->\n<div style=\"height:163px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:paragraph -->\n<p>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Since 1981, the number of mutual funds have multiplied at a rate far above any historical experience… far above the “Go-Go Fund” era of the 1960’s… and far above the “Investment Trust” era of the 1920’s.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:spacer {\"height\":222} -->\n<div style=\"height:222px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5963,\"width\":273,\"height\":349,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/mutualfunds.jpg\" alt=\"Bar chart of mutual funds increasing year over year.\" class=\"wp-image-5963\" width=\"273\" height=\"349\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":5967,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/investmentsclubs-294x300.jpg\" alt=\"Bar chart of investment clubs surpassing the Go-Go Fund era.  \" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p>The number of investment clubs has increased over 5-fold in the current bull market. Today, more than 1 in 3 adults own mutual funds – a 66% increase in four years. That easily surpasses the “Go-Go Fund” era in which 1 in 4 adults owned stocks when the washout began in 1969.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p>Market historians note that stock market bubbles have been accompanied by a “bubble” in the price of a seat on the New York Stock Exchange. In March 1998, a seat sold for a cool $2.0 million – far above the peak prior to the 1987 Crash. Also note the 1929 and 1966-69 peaks… which will become relevant in the next section of this report.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":5972,\"width\":269,\"height\":371,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/nyse-seat.jpg\" alt=\"Bar chart of cost of seat on NYSE soaring in 1998.\" class=\"wp-image-5972\" width=\"269\" height=\"371\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5973,\"width\":382,\"height\":378,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/nasdaq-pe-ratio-300x297.jpg\" alt=\"NASDAQ P/E Ratio up to 81.2 in 1998.\" class=\"wp-image-5973\" width=\"382\" height=\"378\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Safety in diversification? Certainly not in small-caps. The cumulative P/E ratio of all domestic NASDAQ stocks has been hitting unprecedented, frothy levels. It would require a decline of over -75% to take the NASDAQ P/E ratio back to where it started this bull market in October 1990.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5978,\"width\":387,\"height\":334,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/mergers-300x258.jpg\" alt=\"Mergers &amp; Acquisitions line chart also increasing in late 90s.\" class=\"wp-image-5978\" width=\"387\" height=\"334\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Mergers and acquisitions? Since 1996, there’s been no “deal” too big, too expensive, or too leveraged for Wall Street to piece together.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5979,\"width\":392,\"height\":316,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/margin-debt66-300x242.jpg\" alt=\"Margin debt graph soaring to record levels in the late 90s.\" class=\"wp-image-5979\" width=\"392\" height=\"316\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Margin debt (money borrowed to purchase stocks) has soared to record levels – even relative to the size of the economy. Note how far it is above the dangerous peaks in 1987, 1972, and 1968… just prior to the three biggest bear markets of the past half century. And of course, this doesn’t include the second mortgages, refinancings, or record credit card debt that has been used to divert funds into the stock market.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The Inevitable Questions:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:list -->\n<ul><li><strong>What has driven stocks to such overvalued extremes?</strong></li><li><strong>Why do the SEC and our Federal Reserve seem so worried?</strong></li><li><strong>Why are investor expectations so out-of-touch with reality?</strong></li><li><strong>What has created so many symptoms of a dangerous “bubble”?</strong></li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading -->\n<h2>TODAY: The Not So “New Paradigm Bubble”</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Many reasons, excuses, and theories have been postulated for Wall Street’s exuberance today. They range from advances in technology, to increases in productivity, to changing demographics (aging baby-boomers). Yet these all miss the mark in explaining how Wall Street arrived at DJIA 9000 from DJIA 800 in 1982. In 1981 when President Reagan took office, interest rates were above 13%, gold had recently hit $850/oz, the DJIA was at the same level as in 1966, and real estate was considered by all to be the safest, best long-term investment. What happened? What changed public opinion so dramatically?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p><strong>The answer is “disinflation”. </strong>As inflation receded over the past 16 years, so did the fear or expectations of inflation. Gold lost its luster. Real estate washouts in the oil belt, California, and the Northeast removed its “safe haven” perception. And as interest rates slipped year after year, thrifty CD and money market fund savers were pushed to seek other alternatives… the stock market. A “Disinflation Era” is not new… and neither is the dangerous bubble which it can create. Let’s examine historical precedent:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5988,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/90s-inflation-rate-300x298.jpg\" alt=\"5 year inflation rate graph over the djia increasing.\" class=\"wp-image-5988\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><strong>THE INVESTMENT TRUST ’20s</strong><br><strong>Start:</strong> August 1921 – as the high inflation of World War I receded.<br><strong>Stocks:</strong> DJIA up 6-fold in 8 years.<br><strong>THE GO-GO FUND ’60s</strong><br><strong>Start:</strong> June 1949 – as the high inflation of World War II (and the Korean War) receded.<br><strong>Stocks:</strong> DJIA up 6-fold in 17 years (with subsequent tops in 1968 and 1973).<br><strong>THE MUTUAL FUND MANIA ’90s</strong><br><strong>Start:</strong> August 1982 – as the high inflation of the Vietnam War and the 1970s receded.<br><strong>Stocks:</strong> DJIA up 11-fold in 16 years.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Here are the ominous parallels and sequence of events in these “Disinflation Eras”:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5989,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/1-correctionless-market-1024x167.jpg\" alt=\"Correctionless market contains an image with headlines from 1929, 1966, and today.\" class=\"wp-image-5989\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5990,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/2-mutual-fund-mania-1024x577.jpg\" alt=\"Mutual Fund Mania with headlines from 1929, 1966, and today.\" class=\"wp-image-5990\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5991,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/3-extreme-overvaluation-1024x235.jpg\" alt=\"Extreme overvaluation with headlines.\" class=\"wp-image-5991\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5992,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/4-old-rules-1024x442.jpg\" alt=\"Old Rules no longer apply headlines\" class=\"wp-image-5992\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5993,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/5-unparalleled-stability-1024x266.jpg\" alt=\"Unparalleled stability headlines\" class=\"wp-image-5993\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5994,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/6-supply-demand-1024x314.jpg\" alt=\"Supply and demand imbalance headlines\" class=\"wp-image-5994\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5995,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/7-riskless-attitude-1024x258.jpg\" alt=\"Riskless attitude headlines\" class=\"wp-image-5995\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5996,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/8-perpetual-prosperity-1024x442.jpg\" alt=\"Perpetual economic prosperity headlines\" class=\"wp-image-5996\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5997,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/9-new-era-hype-1024x452.jpg\" alt=\"New era hype headlines\" class=\"wp-image-5997\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5998,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/10-11-1024x567.jpg\" alt=\"Federal Reserve Censure and scolding the federal reserve headlines\" class=\"wp-image-5998\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5999,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/washout-1024x269.jpg\" alt=\"Inevitable washout headlines\" class=\"wp-image-5999\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading -->\n<h2>What the Future Holds...</h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>A stock market bubble can be prevented, but it can’t be corrected…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Painful recessions and periodic bear markets can usually prevent the valuation extremes and sentiment excesses that create a dangerous bubble. Yet tragically, this simple, historic fact must be relearned every time. For example, after the Japanese stock market and real estate collapse, the former head of the Bank of Japan lamented:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>Looking back, we now feel that we should have applied the brakes on the excessive boom much earlier… However, back in those days, as [consumer] prices were not rising, it was difficult to obtain people’s understanding for a policy aimed at achieving sustainable economic growth by monetary tightening.</p><cite>Yasushi Mieno, Former Governor, Bank of Japan</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>The historical truth that bubbles can be prevented but not corrected even appears obvious to those involved in creating the current bubble, as evidenced by this 1996 quote from the former Federal Reserve Vice-Chairman:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>It’s very hard to surgically prick a balloon. You may let out a lot more air than you bargained for.</p><cite>Alan Blinder, Former Vice Chairman, Federal Reserve</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>And in an article from 30 years ago, the current Federal Reserve Chairman wrote this critique of the 1929 Crash:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>The excess credit which the Fed pumped into the economy spilled over into the stock market – triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence.</p><cite>Alan Greenspan, “Gold and Economic Freedom”, 1966</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Yet the mere presence of a bubble, even with all the overvaluation and extremes, rarely pops itself. It may continue to inflate, transparent to those inside the bubble, until some external event causes the initial pinhole. As John Galbraith noted about past bubbles, “Something, it matters little –although it will always be debated–  triggers the ultimate reversal.”</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>From whence could the pin or trigger come?…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6002,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/global-disc-rates-289x300.jpg\" alt=\"Global discount rates graph dropping\" class=\"wp-image-6002\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Global economic and financial turmoil offer a number of potential sources. Recessions in Germany and Japan have driven interest rates down to 1/3 of levels in 1991-92 (or 1/12 in the case of Japan). However, the frenzied effort to jumpstart foreign economies has instead pushed excess liquidity into the U.S. financial markets.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":6003,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/net-foreign-purchases-300x211.jpg\" alt=\"Net foreign purchases of U.S. Treasury Bonds and Notes\" class=\"wp-image-6003\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>As a result, purchasing of U.S. Treasuries by foreign investors and central banks has soared to unprecedented levels. The short-term benefits have funded our trade deficit, supported the Dollar, and sloshed liquidity into Wall Street. The obvious danger is what might happen now that this trend shows signs of reversing.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6004,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/global-derivatives-207x300.jpg\" alt=\"Global derivatives market bar chart increasing\" class=\"wp-image-6004\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Another potential trigger resides in the global derivatives market. It’s assumed by today’s young gun-slinging money managers that such leveraged derivatives are as liquid as cash – even in a falling market or financial crisis. However, note that the face value of these global derivatives now totals over $41 trillion… 6 times larger than in the last U.S. recession… and 17 times larger than when liquidity disappeared during the 1987 Crash. That $41 trillion has never experienced a true global recession or liquidity crisis. What happens if speculators all want out at the same time?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":6005,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/household-credit-300x292.jpg\" alt=\"Household credit as a percentage of disposable personal income\" class=\"wp-image-6005\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Liquidity could also prove a problem for today’s consumers. Household debt (even as a percentage of income) continues to rise to record levels. Personal bankruptcies are also at record levels – even in this 8th year of economic expansion. With consumer spending accounting for 2/3’s of GDP growth, how long can households keep heading the wrong way down a oneway street?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6006,\"width\":374,\"height\":182,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/ici-liquid-300x146.jpg\" alt=\"ICI liquid asset ratio decreasing to 5.1%\" class=\"wp-image-6006\" width=\"374\" height=\"182\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>If illiquidity is the trigger, mutual funds are sitting on the target. Cash reserves, tracked by ICI, have been reduced to the lowest levels of this 16-year disinflation bull. Meanwhile, nervous fund families, including Fidelity and Vanguard, have requested permission from the SEC to borrow from money market funds to meet redemptions if necessary. Some are even “investing” cash reserves in stock index futures. Is it confidence, ignorance, or recklessness that leads mutual funds down the same path as in the Go-Go Fund 1960’s, or as the Investment Trusts of the late 1920’s?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Threat of a Crash…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:list -->\n<ul><li>l This 7.8 years without a -15% correction in the DJIA is virtually double the previous record. Among the 5 longest such periods… are the 1929 Crash and 1987 Crash. Coincidence?</li><li>l This 16th year without the DJIA dropping under the previous year’s low is double the previous record of 8 years… which ended in the 1929 Crash. Coincidence?</li><li>l Intraday volatility (daily high-to-low) is averaging over 2% (~180 DJIA points) for 1997-98. Among the 3 previous records… again, 1929 and 1987. Coincidence?</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>Historical precedent paints a foreboding picture. A “crash” is always a possibility in a correctionless, overvalued stock market. And none have been as correctionless or as overvalued as this one. Wall Street confidence relies heavily on the Federal Reserve and its ability to control or halt a meltdown scenario. Media has publicized the “un”official Plunge Protection Team, comprised of the Federal Reserve, Treasury, SEC, and CFTC – all of whom are “thinking carefully about how they would respond to the unthinkable” on Wall Street. Only time will tell if such confidence is misplaced…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><strong>Plunge Protection Team<br></strong>White House Group Shapes Plans to Ensure<br>Any Market Free Fall Is Contained</p><cite>The Washington Post</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Weighing the Dangers…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Today’s parallels with history, and repeated warnings from the SEC and the Federal Reserve carry ominous overtones. A correctionless bull market, record overvaluation, plus public exuberance all add up to unprecedented risk – for the stock market, as well as the U.S. economy. By July 1998, stock market capitalization (in relation to GDP) has reached over twice the peak before the last recession or prior to the 1987 stock market crash. Simply stated, even a mild bear market of -25% from today’s lofty levels, would wipe out $2.8 trillion – with more economic impact than any bear market of the past 60 years!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6010,\"width\":358,\"height\":344,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/stock-market-capitalization-300x288.jpg\" alt=\"\" class=\"wp-image-6010\" width=\"358\" height=\"344\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>To Alan Greenspan, who wrote so astutely of the lessons of 1929, the threat must  weigh heavily. The anecdotal evidence is overwhelming that Wall Street is in some type of bubble – a mania where valuations and expectations have disconnected from reality. If that is indeed the case, then what lies ahead is inevitable. And the downside risk is grossly underestimated by today’s investor. With valuations based on the broad S&amp;P 500 Index (but downside risk expressed in more familiar DJIA point terms), the table below shows how far today’s stock market could tumble before hitting 70-year average valuations. NOTE: This is only to average valuation levels since 1928, not the extreme lows that are typical in most bear markets!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":6012,\"width\":380,\"height\":166,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/valuation-risk-300x130.jpg\" alt=\"\" class=\"wp-image-6012\" width=\"380\" height=\"166\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>In one sense, it doesn’t matter whether today’s bubble unwinds in a deflationary crisis as in 1929, or in a series of protracted bear markets as in the late 60’s. The consequences for the average investor were the same. Those who blindly followed a buy-&amp;-hold strategy were devastated, both financially and psychologically. Meanwhile, those investors who recognized the dangers and took evasive action weathered the fallout – or even profited handsomely in the years that followed.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It also matters little, if it is a bubble, what circumstance or event is blamed for “pricking” the overinflated balloon. Inevitably, the fact remains that much of the fault must lie with Wall Street itself. If not for the sirens and aggressive marketing in an overextended, overheated, overvalued bull market, then the excesses and speculation couldn’t reach such extremes. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The purpose of this special report is not to frighten or build the case for a crash. Our sole objective is to educate. It is a dangerous, perhaps even financially fatal assumption to think the next 5 years will be a repeat of the recent past. But historical precedent cannot be ignored. The 1980’s and 90’s are not the first era where investors have been pushed away from inflation hedges, real estate, bonds, and cash. And, as revealed inside, it would not be the first such bubble created by these disinflation forces. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Only time, and 20/20 hindsight, will reveal if today’s “new era” is a mirage – merely  an old era carried to new levels of excess. Unfortunately, the symptoms are present and warning flags are flying high. <strong>Yet even if Wall Street is in a bubble destined to deflate, one must also remember that the devastation which followed the late 20’s and late 60’s created tremendous profit opportunities for those astute investors who understood and perceived what was happening. The historical perspective and evidence presented in this report serve as a vital step in that direction.</strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/New-Paradigm-Report.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','The New Paradigm... Era -or- Bubble?','A critical look at the unprecedented events that unfolded on Wall Street during the high-tech bubble of the late 1990s. Was it a New Era? Or was history repeating itself? What were the danger signs every investor should have known?','inherit','closed','closed','','2497-revision-v1','','','2021-06-16 14:35:30','2021-06-16 14:35:30','',2497,'https://ns2020-investech.investech.com/?p=8454',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8455,3,'2021-06-16 14:37:18','2021-06-16 14:37:18','<!-- wp:heading -->\n<h2>Is Wall Street in a \'New Paradigm Era\'... or merely an \'Old Bubble\' carried to New Extremes?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Santayana, an early 20th Century philosopher, once said, “Those who do not learn from the past, are doomed to repeat it.” And Sir Isaac Newton, who lost the equivalent of over $1,000,000 investing in the South Sea bubble of 1720,  remarked, “I can measure the motions of bodies, but I cannot measure human folly.” However to this day, analysts cannot agree as to what constitutes a bubble… or how to recognize a bubble before the inevitable washout and aftermath.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It is widely perceived that the U.S. economy and stock market have embarked on a “New Paradigm Era” in which old rules no longer apply and traditional barriers have been broken. Yet as Federal Reserve Chairman Alan Greenspan warned Congress on February 26th 1997, “Regrettably, history is strewn with visions of such ‘new eras’ that, in the end, have proven to be a mirage.” This is an insight into one such likely mirage…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>What Constitutes A Bubble?</h2>\n<!-- /wp:heading -->\n\n<!-- wp:quote {\"align\":\"left\"} -->\n<blockquote class=\"wp-block-quote has-text-align-left\"><p>That the free enterprise economy is given to recurrent episodes of speculation will be agreed… This process, once it is recognized, is clearly evident, and especially so after the fact. So also, if more subjectively, are the basic attitudes of the participants. These take two forms. There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely… Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course… For built into this situation is the eventual and inevitable fall. Built in also is the circumstance that it cannot come gently or gradually. When it comes it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape. Something, it matters little –although it will always be debated– triggers the ultimate reversal.<br></p><cite><strong>A Short History of Financial Euphoria<br></strong>John Kenneth Galbraith</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Historically, bubbles have always been a part of the lessons of investing. There was the Japanese stock market and real estate bubble which popped in 1989. In domestic real estate, there was the not so “recession-proof” California, as well as the price deflation or washouts of condominiums in Hawaii… residences in the Northeast… commercial office space in the oil belt… and numerous other regions in the 1980’s. Many investors may also remember $850 gold… $50 silver… $37 oil… numismatics… baseball cards… and the list goes on.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In the stock market, bubbles are usually limited to individual sectors which ride high on excessively exuberant expectations – only to plunge back to earth later. Yet history has left several notable eras which were recognized as “bubbles” only in the eventual and inevitable devastation. Seasoned investors may remember the “Nifty Fifty” era… the “Go-Go Fund” era… or even the “Investment Trust” era of the 1920’s.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>A Short History of Financial Euphoria</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>In essence, a bubble is created when objectivity, reasoning, and valuation give way to greed and the desire for profits. In “A Short History of Financial Euphoria,” author Galbraith describes the common seeds of past manias that inevitably give way to disastrous consequences:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"ordered\":true} -->\n<ol><li>The basic premise that investing involves a trade-off between risk/reward is lost as investors are “captured by the wondrous satisfaction from accruing wealth. The very increase in values thus captures the thoughts and minds of those being rewarded.”</li><li>The belief that “some new price-enhancing circumstance is in control” – that there is “something new in the world” that justifies a permanently higher level of valuation.</li><li>The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”</li><li>The “condemnation at those who express doubt or dissent. … because of defective imagination or other mental inadequacy they are unable to grasp the new and rewarding circumstances.”</li></ol>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Healthy Bull Market to Dangerous Bubble</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Yet only in the aftermath, is a “bubble” identified as a bubble. While in progress, it can only be recognized by its symptoms which are common with speculative eras of the past. At what point does a healthy bull market turn into a bubble ripe for the popping? Here are a few differences:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5946,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/marketbubble-1024x308.jpg\" alt=\"Table detailing the characteristics of a healthy bull market and the characteristics when it swings to a dangerous bubble.\" class=\"wp-image-5946\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading -->\n<h2>Time For A Reality Check...</h2>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5953,\"width\":356,\"height\":351,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/overvaluation-extremes-300x296.jpg\" alt=\"Overvalutaion dot chart showing the extremes present at historic market tops.\" class=\"wp-image-5953\" width=\"356\" height=\"351\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Wall Street consensus is that the U.S. has entered a “new era” of tame inflation, low interest rates, and rising productivity that will carry economic prosperity well into the new millennium. If so, say pundits, then today’s extreme valuation levels in the stock market are justified. Just how extreme is stock overvaluation? The figure below shows the S&amp;P 500 Price-to-Dividend Ratio on the vertical scale, and the S&amp;P Industrials Price-to-Book Value Ratio on the horizontal scale. Simply, the higher on the chart, or the farther to the right a year appears, the more overvalued it is. Clearly, when compared to overvaluation at some of the most historic market tops such as 1929, 1968, 1972, and 1987… today (1998) is off-the-chart!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Consensus on Wall Street is also that today’s investor is smarter, better informed, more patient, and longer-term oriented than in the past. Consequently, it is believed that today’s mutual fund holder will never panic in a bear market. However, not all agree with this consensus:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":37} -->\n<div style=\"height:37px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:quote {\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote is-style-default\"><p><strong>Investors may overreact to a downturn, SEC warns</strong><br>Inexperienced investors who have known only the bull market of the last decade could react ‘precipitously’ to a downturn and ‘at great cost to themselves and our markets’, Mr. Arthur Levitt, chairman of the Securities and Exchange Commission<br>warned yesterday.</p><cite>London Financial Times – Feb 26, 1997</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>And Federal Reserve officials also appear nervous as evidenced by this Congressional Testimony in early 1997:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote is-style-default\"><p>History demonstrates that participants in financial markets are susceptible to waves of optimism… Excessive optimism sows the seeds of its own reversal in the form of imbalances that tend to grow over time. When unwarranted expectations ultimately are not realized, the unwinding of these financial excesses can act to amplify a downturn</p><cite>Federal Reserve Chairman Alan Greenspan<br>– Feb 26, 1997</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Meanwhile, the cold fact remains that the assets in equity mutual funds now total $3,164 Billion, as compared to $226 Billion in October 1990 at the start of this bull market. Quite simply, 93% of the money in stock mutual funds has not experienced a bear market or even a -15% correction in blue chip averages!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Perhaps more ominously, an overwhelming majority of fund investors believe they never will experience such a decline. This late 1996 Lou Harris poll reveals that 85% expect the next 10 years to be as spectacular or better than the past decade. 78% are not expecting a mild bear market of -20%. And almost half think that minor -10% corrections are a thing of the past:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5954,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/surveyfundinvestors-1024x224.jpg\" alt=\"survey of fund investors expectations and the actual risk since 1900.\" class=\"wp-image-5954\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><strong>Just how far out of touch are these investor expectations with reality?</strong> Compare the “actual risk” for all the years of this century (above right). A -10% correction has occurred in 65 years, or once every 1.5yrs on average – yet 7 years have lapsed since the last. A -20% decline has triggered every 2.5yrs – again, over 7 years since the last. A -30% bear hits every 4.6yrs – last seen during the ’87 Crash. And a major bear, with -40% losses, strikes about every 8.7yrs… last felt by investors 23 years ago!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p>Is it a contest to see who can forecast the highest level for the stock market? No… more likely it’s just a not-so-mild case of “irrational exuberance” feared by the Federal Reserve.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"right\",\"id\":5959,\"width\":414,\"height\":305,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/dow10000-300x221.jpg\" alt=\"Newspaper clipping of When and How the Dow may hit 20,000 by 2007.\" class=\"wp-image-5959\" width=\"414\" height=\"305\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:spacer {\"height\":20} -->\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":7533,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/05/assets.jpg\" alt=\"\" class=\"wp-image-7533\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":163} -->\n<div style=\"height:163px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:paragraph -->\n<p>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Since 1981, the number of mutual funds have multiplied at a rate far above any historical experience… far above the “Go-Go Fund” era of the 1960’s… and far above the “Investment Trust” era of the 1920’s.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:spacer {\"height\":222} -->\n<div style=\"height:222px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5963,\"width\":273,\"height\":349,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/mutualfunds.jpg\" alt=\"Bar chart of mutual funds increasing year over year.\" class=\"wp-image-5963\" width=\"273\" height=\"349\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":5967,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/investmentsclubs-294x300.jpg\" alt=\"Bar chart of investment clubs surpassing the Go-Go Fund era.  \" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p>The number of investment clubs has increased over 5-fold in the current bull market. Today, more than 1 in 3 adults own mutual funds – a 66% increase in four years. That easily surpasses the “Go-Go Fund” era in which 1 in 4 adults owned stocks when the washout began in 1969.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p>Market historians note that stock market bubbles have been accompanied by a “bubble” in the price of a seat on the New York Stock Exchange. In March 1998, a seat sold for a cool $2.0 million – far above the peak prior to the 1987 Crash. Also note the 1929 and 1966-69 peaks… which will become relevant in the next section of this report.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":5972,\"width\":269,\"height\":371,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/nyse-seat.jpg\" alt=\"Bar chart of cost of seat on NYSE soaring in 1998.\" class=\"wp-image-5972\" width=\"269\" height=\"371\"/></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5973,\"width\":382,\"height\":378,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/nasdaq-pe-ratio-300x297.jpg\" alt=\"NASDAQ P/E Ratio up to 81.2 in 1998.\" class=\"wp-image-5973\" width=\"382\" height=\"378\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Safety in diversification? Certainly not in small-caps. The cumulative P/E ratio of all domestic NASDAQ stocks has been hitting unprecedented, frothy levels. It would require a decline of over -75% to take the NASDAQ P/E ratio back to where it started this bull market in October 1990.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5978,\"width\":387,\"height\":334,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/mergers-300x258.jpg\" alt=\"Mergers &amp; Acquisitions line chart also increasing in late 90s.\" class=\"wp-image-5978\" width=\"387\" height=\"334\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Mergers and acquisitions? Since 1996, there’s been no “deal” too big, too expensive, or too leveraged for Wall Street to piece together.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5979,\"width\":392,\"height\":316,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/margin-debt66-300x242.jpg\" alt=\"Margin debt graph soaring to record levels in the late 90s.\" class=\"wp-image-5979\" width=\"392\" height=\"316\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Margin debt (money borrowed to purchase stocks) has soared to record levels – even relative to the size of the economy. Note how far it is above the dangerous peaks in 1987, 1972, and 1968… just prior to the three biggest bear markets of the past half century. And of course, this doesn’t include the second mortgages, refinancings, or record credit card debt that has been used to divert funds into the stock market.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4><strong><em>Reality Check: Bull or Bubble?</em></strong></h4>\n<!-- /wp:heading -->\n\n<!-- wp:spacer {\"height\":51} -->\n<div style=\"height:51px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The Inevitable Questions:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:list -->\n<ul><li><strong>What has driven stocks to such overvalued extremes?</strong></li><li><strong>Why do the SEC and our Federal Reserve seem so worried?</strong></li><li><strong>Why are investor expectations so out-of-touch with reality?</strong></li><li><strong>What has created so many symptoms of a dangerous “bubble”?</strong></li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading -->\n<h2>TODAY: The Not So “New Paradigm Bubble”</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Many reasons, excuses, and theories have been postulated for Wall Street’s exuberance today. They range from advances in technology, to increases in productivity, to changing demographics (aging baby-boomers). Yet these all miss the mark in explaining how Wall Street arrived at DJIA 9000 from DJIA 800 in 1982. In 1981 when President Reagan took office, interest rates were above 13%, gold had recently hit $850/oz, the DJIA was at the same level as in 1966, and real estate was considered by all to be the safest, best long-term investment. What happened? What changed public opinion so dramatically?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p><strong>The answer is “disinflation”. </strong>As inflation receded over the past 16 years, so did the fear or expectations of inflation. Gold lost its luster. Real estate washouts in the oil belt, California, and the Northeast removed its “safe haven” perception. And as interest rates slipped year after year, thrifty CD and money market fund savers were pushed to seek other alternatives… the stock market. A “Disinflation Era” is not new… and neither is the dangerous bubble which it can create. Let’s examine historical precedent:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5988,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/90s-inflation-rate-300x298.jpg\" alt=\"5 year inflation rate graph over the djia increasing.\" class=\"wp-image-5988\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p><strong>THE INVESTMENT TRUST ’20s</strong><br><strong>Start:</strong> August 1921 – as the high inflation of World War I receded.<br><strong>Stocks:</strong> DJIA up 6-fold in 8 years.<br><strong>THE GO-GO FUND ’60s</strong><br><strong>Start:</strong> June 1949 – as the high inflation of World War II (and the Korean War) receded.<br><strong>Stocks:</strong> DJIA up 6-fold in 17 years (with subsequent tops in 1968 and 1973).<br><strong>THE MUTUAL FUND MANIA ’90s</strong><br><strong>Start:</strong> August 1982 – as the high inflation of the Vietnam War and the 1970s receded.<br><strong>Stocks:</strong> DJIA up 11-fold in 16 years.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Here are the ominous parallels and sequence of events in these “Disinflation Eras”:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5989,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/1-correctionless-market-1024x167.jpg\" alt=\"Correctionless market contains an image with headlines from 1929, 1966, and today.\" class=\"wp-image-5989\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5990,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/2-mutual-fund-mania-1024x577.jpg\" alt=\"Mutual Fund Mania with headlines from 1929, 1966, and today.\" class=\"wp-image-5990\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5991,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/3-extreme-overvaluation-1024x235.jpg\" alt=\"Extreme overvaluation with headlines.\" class=\"wp-image-5991\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5992,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/4-old-rules-1024x442.jpg\" alt=\"Old Rules no longer apply headlines\" class=\"wp-image-5992\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5993,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/5-unparalleled-stability-1024x266.jpg\" alt=\"Unparalleled stability headlines\" class=\"wp-image-5993\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5994,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/6-supply-demand-1024x314.jpg\" alt=\"Supply and demand imbalance headlines\" class=\"wp-image-5994\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5995,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/7-riskless-attitude-1024x258.jpg\" alt=\"Riskless attitude headlines\" class=\"wp-image-5995\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5996,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/8-perpetual-prosperity-1024x442.jpg\" alt=\"Perpetual economic prosperity headlines\" class=\"wp-image-5996\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5997,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/9-new-era-hype-1024x452.jpg\" alt=\"New era hype headlines\" class=\"wp-image-5997\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5998,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/10-11-1024x567.jpg\" alt=\"Federal Reserve Censure and scolding the federal reserve headlines\" class=\"wp-image-5998\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5999,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/washout-1024x269.jpg\" alt=\"Inevitable washout headlines\" class=\"wp-image-5999\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading -->\n<h2>What the Future Holds...</h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>A stock market bubble can be prevented, but it can’t be corrected…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Painful recessions and periodic bear markets can usually prevent the valuation extremes and sentiment excesses that create a dangerous bubble. Yet tragically, this simple, historic fact must be relearned every time. For example, after the Japanese stock market and real estate collapse, the former head of the Bank of Japan lamented:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>Looking back, we now feel that we should have applied the brakes on the excessive boom much earlier… However, back in those days, as [consumer] prices were not rising, it was difficult to obtain people’s understanding for a policy aimed at achieving sustainable economic growth by monetary tightening.</p><cite>Yasushi Mieno, Former Governor, Bank of Japan</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>The historical truth that bubbles can be prevented but not corrected even appears obvious to those involved in creating the current bubble, as evidenced by this 1996 quote from the former Federal Reserve Vice-Chairman:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>It’s very hard to surgically prick a balloon. You may let out a lot more air than you bargained for.</p><cite>Alan Blinder, Former Vice Chairman, Federal Reserve</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>And in an article from 30 years ago, the current Federal Reserve Chairman wrote this critique of the 1929 Crash:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>The excess credit which the Fed pumped into the economy spilled over into the stock market – triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence.</p><cite>Alan Greenspan, “Gold and Economic Freedom”, 1966</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Yet the mere presence of a bubble, even with all the overvaluation and extremes, rarely pops itself. It may continue to inflate, transparent to those inside the bubble, until some external event causes the initial pinhole. As John Galbraith noted about past bubbles, “Something, it matters little –although it will always be debated–  triggers the ultimate reversal.”</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>From whence could the pin or trigger come?…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6002,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/global-disc-rates-289x300.jpg\" alt=\"Global discount rates graph dropping\" class=\"wp-image-6002\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Global economic and financial turmoil offer a number of potential sources. Recessions in Germany and Japan have driven interest rates down to 1/3 of levels in 1991-92 (or 1/12 in the case of Japan). However, the frenzied effort to jumpstart foreign economies has instead pushed excess liquidity into the U.S. financial markets.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":6003,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/net-foreign-purchases-300x211.jpg\" alt=\"Net foreign purchases of U.S. Treasury Bonds and Notes\" class=\"wp-image-6003\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>As a result, purchasing of U.S. Treasuries by foreign investors and central banks has soared to unprecedented levels. The short-term benefits have funded our trade deficit, supported the Dollar, and sloshed liquidity into Wall Street. The obvious danger is what might happen now that this trend shows signs of reversing.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6004,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/global-derivatives-207x300.jpg\" alt=\"Global derivatives market bar chart increasing\" class=\"wp-image-6004\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Another potential trigger resides in the global derivatives market. It’s assumed by today’s young gun-slinging money managers that such leveraged derivatives are as liquid as cash – even in a falling market or financial crisis. However, note that the face value of these global derivatives now totals over $41 trillion… 6 times larger than in the last U.S. recession… and 17 times larger than when liquidity disappeared during the 1987 Crash. That $41 trillion has never experienced a true global recession or liquidity crisis. What happens if speculators all want out at the same time?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":6005,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/household-credit-300x292.jpg\" alt=\"Household credit as a percentage of disposable personal income\" class=\"wp-image-6005\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Liquidity could also prove a problem for today’s consumers. Household debt (even as a percentage of income) continues to rise to record levels. Personal bankruptcies are also at record levels – even in this 8th year of economic expansion. With consumer spending accounting for 2/3’s of GDP growth, how long can households keep heading the wrong way down a oneway street?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6006,\"width\":374,\"height\":182,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/ici-liquid-300x146.jpg\" alt=\"ICI liquid asset ratio decreasing to 5.1%\" class=\"wp-image-6006\" width=\"374\" height=\"182\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>If illiquidity is the trigger, mutual funds are sitting on the target. Cash reserves, tracked by ICI, have been reduced to the lowest levels of this 16-year disinflation bull. Meanwhile, nervous fund families, including Fidelity and Vanguard, have requested permission from the SEC to borrow from money market funds to meet redemptions if necessary. Some are even “investing” cash reserves in stock index futures. Is it confidence, ignorance, or recklessness that leads mutual funds down the same path as in the Go-Go Fund 1960’s, or as the Investment Trusts of the late 1920’s?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Threat of a Crash…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:list -->\n<ul><li>l This 7.8 years without a -15% correction in the DJIA is virtually double the previous record. Among the 5 longest such periods… are the 1929 Crash and 1987 Crash. Coincidence?</li><li>l This 16th year without the DJIA dropping under the previous year’s low is double the previous record of 8 years… which ended in the 1929 Crash. Coincidence?</li><li>l Intraday volatility (daily high-to-low) is averaging over 2% (~180 DJIA points) for 1997-98. Among the 3 previous records… again, 1929 and 1987. Coincidence?</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>Historical precedent paints a foreboding picture. A “crash” is always a possibility in a correctionless, overvalued stock market. And none have been as correctionless or as overvalued as this one. Wall Street confidence relies heavily on the Federal Reserve and its ability to control or halt a meltdown scenario. Media has publicized the “un”official Plunge Protection Team, comprised of the Federal Reserve, Treasury, SEC, and CFTC – all of whom are “thinking carefully about how they would respond to the unthinkable” on Wall Street. Only time will tell if such confidence is misplaced…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><strong>Plunge Protection Team<br></strong>White House Group Shapes Plans to Ensure<br>Any Market Free Fall Is Contained</p><cite>The Washington Post</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Weighing the Dangers…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Today’s parallels with history, and repeated warnings from the SEC and the Federal Reserve carry ominous overtones. A correctionless bull market, record overvaluation, plus public exuberance all add up to unprecedented risk – for the stock market, as well as the U.S. economy. By July 1998, stock market capitalization (in relation to GDP) has reached over twice the peak before the last recession or prior to the 1987 stock market crash. Simply stated, even a mild bear market of -25% from today’s lofty levels, would wipe out $2.8 trillion – with more economic impact than any bear market of the past 60 years!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":6010,\"width\":358,\"height\":344,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/stock-market-capitalization-300x288.jpg\" alt=\"\" class=\"wp-image-6010\" width=\"358\" height=\"344\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>To Alan Greenspan, who wrote so astutely of the lessons of 1929, the threat must  weigh heavily. The anecdotal evidence is overwhelming that Wall Street is in some type of bubble – a mania where valuations and expectations have disconnected from reality. If that is indeed the case, then what lies ahead is inevitable. And the downside risk is grossly underestimated by today’s investor. With valuations based on the broad S&amp;P 500 Index (but downside risk expressed in more familiar DJIA point terms), the table below shows how far today’s stock market could tumble before hitting 70-year average valuations. NOTE: This is only to average valuation levels since 1928, not the extreme lows that are typical in most bear markets!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":6012,\"width\":380,\"height\":166,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/valuation-risk-300x130.jpg\" alt=\"\" class=\"wp-image-6012\" width=\"380\" height=\"166\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>In one sense, it doesn’t matter whether today’s bubble unwinds in a deflationary crisis as in 1929, or in a series of protracted bear markets as in the late 60’s. The consequences for the average investor were the same. Those who blindly followed a buy-&amp;-hold strategy were devastated, both financially and psychologically. Meanwhile, those investors who recognized the dangers and took evasive action weathered the fallout – or even profited handsomely in the years that followed.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It also matters little, if it is a bubble, what circumstance or event is blamed for “pricking” the overinflated balloon. Inevitably, the fact remains that much of the fault must lie with Wall Street itself. If not for the sirens and aggressive marketing in an overextended, overheated, overvalued bull market, then the excesses and speculation couldn’t reach such extremes. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The purpose of this special report is not to frighten or build the case for a crash. Our sole objective is to educate. It is a dangerous, perhaps even financially fatal assumption to think the next 5 years will be a repeat of the recent past. But historical precedent cannot be ignored. The 1980’s and 90’s are not the first era where investors have been pushed away from inflation hedges, real estate, bonds, and cash. And, as revealed inside, it would not be the first such bubble created by these disinflation forces. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Only time, and 20/20 hindsight, will reveal if today’s “new era” is a mirage – merely  an old era carried to new levels of excess. Unfortunately, the symptoms are present and warning flags are flying high. <strong>Yet even if Wall Street is in a bubble destined to deflate, one must also remember that the devastation which followed the late 20’s and late 60’s created tremendous profit opportunities for those astute investors who understood and perceived what was happening. The historical perspective and evidence presented in this report serve as a vital step in that direction.</strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>InvesTech Special Report published July 1998</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/New-Paradigm-Report.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','The New Paradigm... Era -or- Bubble?','A critical look at the unprecedented events that unfolded on Wall Street during the high-tech bubble of the late 1990s. Was it a New Era? Or was history repeating itself? What were the danger signs every investor should have known?','inherit','closed','closed','','2497-revision-v1','','','2021-06-16 14:37:18','2021-06-16 14:37:18','',2497,'https://ns2020-investech.investech.com/?p=8455',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8456,3,'2021-06-16 14:40:01','2021-06-16 14:40:01','<!-- wp:spacer {\"height\":8} -->\n<div style=\"height:8px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading -->\n<h2>Holland, 1636</h2>\n<!-- /wp:heading -->\n\n<!-- wp:columns {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-top\"><!-- wp:column {\"verticalAlignment\":\"top\",\"width\":\"60%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\" style=\"flex-basis:60%\"><!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p>One would suppose that there must have been some great virtue in this flower to have made it so valuable in the eyes of so prudent a people as the Dutch; but it has neither the beauty nor the perfume of the rose – hardly the beauty of the ‘sweet, sweet-pea;’ neither is it as enduring as either…\"</p><p>\"At last, however, the more prudent began to see that this folly could not last for ever… It was seen that somebody must lose fearfully in the end. As this conviction spread, prices fell, and never rose again. Confidence was destroyed, and a universal panic seized upon the dealers.\"</p><cite>– Tulipomania, Holland, 1636, excerpted from Extraordinary Popular Delusions &amp; the Madness of Crowds, written by Charles Mackay 1841</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:image {\"id\":4887,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Jan_Brueghel_the_Younger_Satire_Tulip_Mania_1640-1024x655.jpg\" alt=\"Painting, A Satire of Tulip Mania by Jan Brueghel, c. 1640\" class=\"wp-image-4887\"/><figcaption>A Satire of Tulip Mania by Jan Brueghel the Younger (ca. 1640) depicts speculators as brainless monkeys in contemporary upper-class dress.</figcaption></figure>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading -->\n<h2>Fast forward to 2017: Cryptocurrency Markets</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The quotes above referring to the Tulipomania of the 1600s may seem bizarre and distant to many. However, we see striking similarities between the investor psychology that once surrounded those antiquated tulip bulbs and that which is driving the current mania in cryptocurrencies, particularly Bitcoin:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-top\"><!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Wealth Managers Are Being Inundated With Calls About Bitcoin</p><cite>Bloomberg, 11/21/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Someone in 2010 bought 2 pizzas with 10,000 bitcoins – which today would be worth $100 million</p><cite>Business Insider, 11/28/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Owning bitcoin is so much damn fun</p><cite>Yahoo! Finance, 11/30/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"top\"} -->\n<div class=\"wp-block-column is-vertically-aligned-top\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin swings from bull to bear and back in a day </p><cite>Financial Times, 11/30/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin’s Wildest Ride: Up 40% in 40 Hours </p><cite>Wall Street Journal, 12/7/17</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Bitcoin Futures Debut With 26% Rally, Trigger CBOE Trading Halts</p><cite>Bloomberg, 12/11/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bitcoin and the Lure of Decentralization</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Bitcoin is the most widely-recognized and largest cryptocurrency by market capitalization. Specifically, a cryptocurrency is a digital currency which has no central issuing or regulating authority, but instead uses a decentralized system of computers to record transactions and manage the issuance of new units. The digital asset relies on cryptography to prevent counterfeiting and fraudulent transactions. While over 1,000 unique cryptocurrencies exist today, they all share a common purpose: to enable and serve decentralized applications – a way to create a self-supporting service that no single entity operates or regulates.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Way of the future? It’s complicated…</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Cryptocurrencies may sound like the way of the future, but they are incredibly complex and difficult to understand. To illustrate, let’s take a high-level look at a theoretical transaction paid for in Bitcoin, as depicted by the flow chart below. Once the transaction is proposed, independent entities (called “miners”) compete on the open network to time stamp and verify the transaction by performing computationally difficult calculations. The reward for winning the elaborate race to verify and add the transaction to the public digital ledger (the blockchain) is a fraction of the transaction’s value, plus a processing fee, both denominated in Bitcoin. The integrity of the ledger is upheld by the economic self-interest of the miners – pure, unadulterated capitalism.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8307,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/bitcoinflowchart.jpg\" alt=\"\" class=\"wp-image-8307\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bitcoin vs. Internet Bubble</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4739,\"width\":352,\"height\":416,\"sizeSlug\":\"large\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/bitcoin-1.png\" alt=\"Bitcoin vs. the Internet Bubble chart via Yahoo! Finance\" class=\"wp-image-4739\" width=\"352\" height=\"416\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Although Bitcoin has been in existence since 2009, its ascension to mainstream relevance is far more recent. Originally beloved by a very small group of passionate believers, Bitcoin saw relatively steady price appreciation in its early years while remaining virtually unknown to the general public. Over time, public enthusiasm surrounding Bitcoin has crescendoed, with the price of the digital currency rising exponentially, attracting hordes of amateur “investors” and speculators. As a result, the price of one Bitcoin has exploded by an absurd +3960% since the beginning of 2016! The ride has been volatile, including five drawdowns of at least -25% (daily close) during that period. Bitcoin’s meteoric rise dwarfs even the gains seen in the Internet Index at the peak of the notorious Tech Bubble. ➞</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Love at First Bit?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Why has the world seemingly become enamored with the concept of cryptocurrencies? The following are some of the advantages being widely touted by Bitcoin advocates:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Freedom </strong>– It is possible to send and receive Bitcoin payments anywhere in the world at any time, without scrutiny. Users don’t have to worry about third party delays or approvals, banking holidays, transfer limits, or any other laws due to lack of central authority.</li><li><strong>Anonymity </strong>– Anyone, of any age, from anywhere in the world, with access to the Internet can transact with Bitcoins without providing any paperwork or proof of identification. Since personal information is not being tied to transactions, the risk of identity theft is eliminated.</li><li><strong>Low Fees </strong>– Transaction fees for processing Bitcoin payments are relatively low. Additionally, digital currency exchanges (e.g., Coinbase) can help merchants process transactions by converting Bitcoins into fiat currency for a fee that is generally lower than most credit card processing fees.</li><li><strong>Less Risk for Merchants </strong>– Because Bitcoin transactions cannot be reversed and do not carry any personal information with them, merchants are protected from potential losses that could occur from credit card fraud.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>Despite the increasing hype and number of new Bitcoin advocates, doubters and skeptics abound – and you can count us among them. An asset’s value does not go parabolic without carrying extreme risk. In addition, there are numerous pitfalls and uncertainties associated with cryptocurrencies:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Price Volatility </strong>– It is impossible for Bitcoin to be a good store of value and a legitimate tool for transacting business when prices change so rapidly. Imagine trying to buy a car with Bitcoin when its value is gyrating by hundreds, or even thousands of dollars over a short period of time.</li><li><strong>Intangible </strong>– Many skeptics take issue with the fact that a Bitcoin is represented by a unique string of numbers stored on a hard drive – there is no physical coin.</li><li><strong>Moral Dilemma</strong> – The anonymity provided by Bitcoin is a double-edged sword, as it makes the digital currency inherently ideal for black market dealings.</li><li><strong>Regulation </strong>– The IRS has begun taxing digital currency gains and payments. Furthermore, there is the potential that certain countries could attempt to ban cryptocurrencies altogether, particularly if terrorist activities are funded by Bitcoin.</li><li><strong>Cybersecurity and Fraud </strong>– Digital currency assets can be stolen by hackers. Additionally, as the demand for cryptocurrencies has grown, scammers and poseurs have created their own bogus digital assets.</li><li><strong>Scalability</strong> – Major digital currency exchanges (e.g., Coinbase) have had difficulty handling traffic, which causes scalability and liquidity issues.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading -->\n<h2>Our Perspective</h2>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":4742,\"width\":462,\"height\":260,\"sizeSlug\":\"large\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/bitcoin-3-kings-cartoon.jpg\" alt=\"Cartoon depicting three wise men, one offering bitcoin...\" class=\"wp-image-4742\" width=\"462\" height=\"260\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Throughout history, there have been numerous examples of revolutionary ideas or innovations that turned into dangerous bubbles due to feverish speculation and Wall Street hype ─ regardless of the good intentions of the underlying concept. In our opinion, cryptocurrencies like Bitcoin are among them. Any dispute regarding the practical applications of Bitcoin matters not to the crazed speculators driving today’s rampant price gains.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Many will argue that cryptocurrencies are isolated from other aspects of the economy and financial markets. However, we are concerned that the potential impact of a violent collapse in cryptocurrency prices could be bigger and more far-reaching than anticipated. And we are not alone:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Why Bitcoin’s Bubble Matters</strong>  <span style=\"font-size: inherit;\">If there’s a price crash in the cryptocurrency, it could hit the tech sector–and more</span></p><cite>Wall Street Journal - 10/8/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><span style=\"font-size: inherit;\"><strong>Deutsche Bank Economist Says a Bitcoin Crash Would Endanger Global Markets</strong></span> </p><cite>Fortune - 12/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Whether speculation is in tulip bulbs, real estate, stocks, sub-prime mortgages, or cryptocurrencies, the pattern is usually the same. For investors, emotions run the gamut from greed, to defiance, to fear at any hint of a disruption in the system. Unless you have a voracious appetite for risk and a high tolerance for loss, today’s cryptocurrency bubble is best left to the speculators.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator {\"className\":\"is-style-default\"} -->\n<hr class=\"wp-block-separator is-style-default\"/>\n<!-- /wp:separator -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - December 15, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Bitcoin.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','Bitcoin - Tiptoe, through the Tulips...','We see striking similarities between the investor psychology that once surrounded those antiquated tulip bulbs and that which is driving the current mania in cryptocurrencies, particularly Bitcoin.','inherit','closed','closed','','2418-revision-v1','','','2021-06-16 14:40:01','2021-06-16 14:40:01','',2418,'https://ns2020-investech.investech.com/?p=8456',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8457,2,'2021-06-16 14:44:39','2021-06-16 14:44:39','','Special Renewal Terms - 1 Year Subscription','Subscription Term: 1 Year Subscription','trash','closed','closed','','special-renewal-terms__trashed','','','2021-09-07 09:27:13','2021-09-07 15:27:13','',8430,'https://ns2020-investech.investech.com/?post_type=product_variation&#038;p=8457',1,'product_variation','',0);
INSERT INTO `wp_posts` VALUES (8460,3,'2021-06-16 14:51:07','2021-06-16 14:51:07','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8270,\"mediaLink\":\"https://ns2020-investech.investech.com/rollercoaster-qac9q3pwhwg-unsplash/\",\"mediaType\":\"image\",\"mediaWidth\":38} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile\" style=\"grid-template-columns:auto 38%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/rollercoaster-qac9Q3pWHWg-unsplash-1024x768.jpg\" alt=\"\" class=\"wp-image-8270 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Tempted by high-flying ETFs in this aging bull market? </h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading -->\n<h2>Just remember… Excitement is highest as the roller coaster goes over the top!</h2>\n<!-- /wp:heading --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public. As indicated by the headlines below, passive index investing has become all the rage, and Exchange Traded Funds (ETFs) are the tool of choice:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>ETFs could see $1 trillion in inflows over the coming year</strong></p><cite>MarketWatch, 1/31/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Small investors’ move to ‘passive’ stock funds becomes a stampede</strong> </p><cite>LA Times, 4/9/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Global ETF assets reach $4tn</strong> <em>The global exchange traded fund industry smashed past $4tn in assets last month…</em> </p><cite>Financial Times, 5/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:paragraph {\"placeholder\":\"Content…\"} -->\n<p>And our personal favorite...</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Wheee! A Quadruple-Leveraged S&amp;P 500 ETF is Here</strong></p><cite>Barron\'s, 5/3/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:heading {\"level\":3} -->\n<h3>Exchange Traded Fund (ETF)</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The first Exchange Traded Fund (ETF) was launched in 1993, and although they were slow to start, ETFs have proliferated over the last decade, both in number (see graph at right) and the variety of index funds available. There’s now an ETF for nearly every strategy, no matter how esoteric, and that has helped fuel the passive investing craze.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":4829,\"sizeSlug\":\"full\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/number-of-etfs.png\" alt=\"Graph showing the number of ETFs (registered in the U.S.), Source: Investment Company Institute\" class=\"wp-image-4829\"/><figcaption>Number of ETFs (registered in the U.S.), Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Over the past 24 years, one can see the shift in interest from actively managed mutual funds toward passive investing. As shown in the graph below, net cash flows into actively managed funds were still four times larger than passive funds from 1993 through 2000. From 2001 through 2008, a change becomes evident as net cash flows for active funds turned negative while passive funds continued to grow. The disparity between the active and passive net cash flows during the current bull market (2009-2016) is remarkable, and it shows why there’s been a parabolic increase in the number of ETFs!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4831,\"width\":713,\"height\":397} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Active-vs-Passive-Stock-Funds-Inflows.png\" alt=\"Graph showing net cash flows into actively managed funds between 1993 and 2016.\" class=\"wp-image-4831\" width=\"713\" height=\"397\"/><figcaption>Active vs. Passive Domestic Stock Funds; Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>So, why has passive investing become all the rage in recent years?</strong></h3>\n<!-- /wp:heading -->\n\n<!-- wp:quote {\"align\":\"center\",\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center is-style-default\"><p>Excitement is Highest as the Roller Coaster Goes Over the Top.</p><cite>– Anonymous</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Many investors have been burned –not once, but twice– by the Tech Bubble of the 1990s and the Housing Bubble in 2007. Also, they are frustrated with the challenges of managing investments… a task that in this uncertain bull market has frequently seemed counterproductive.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The most popular index funds are touted as low-cost and broadly diversified, with a portfolio full of blue chip stocks. Moreover, ETFs offer “instant liquidity” with intraday trading compared to mutual funds that only settle at the end of each trading day. To the average investor, passive funds with minimal fees, implied safety, and lots of liquidity may appear to be the Holy Grail. As we’ll see, however, there is more to the story…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":4839,\"mediaType\":\"image\",\"mediaWidth\":43,\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 43%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Total-Assets-Domestic-Equity-Index-Funds.png\" alt=\"Graph showing the total assets in Domestic Equity Index Funds, 1990\'s to 2016\" class=\"wp-image-4839 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:paragraph -->\n<p>Just as the number of ETFs has grown, the past few years have witnessed an explosion in assets tied to passive investing that has extended to both mutual funds and ETFs (as shown in graph at right). A large part of the growth has been in ETFs, which are poised to overtake index mutual funds as the preferred indexing vehicle. Both types of products have doubled in assets just since 2012.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>It is important to recognize that passive investing is not a fresh new idea; in fact, the concept was introduced by John Bogle (the founder of Vanguard) in the 1970s. This strategy has shifted in and out of favor, becoming more popular as bull markets age and losing its luster only after the damage has been done by the next bear market. Just like riding a roller coaster, the peak in public enthusiasm often comes as the bull market is cresting the top.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>A Trip Back in Time…</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The rise in the popularity of index funds has been seen before.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"align\":\"center\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center\"><p>It’s like deja vu all over again.</p><cite>- Yogi Berra</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The late 1990s: </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the decade of the 1990s became the longest bull market in Wall Street history, the Tech Bubble wasn’t the only phenomenon catching investors’ attention. In 1998-99, headlines were touting the benefit of index investing as inflows reached record levels:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Saving for Retirement Index Fever</strong></p><cite> Fortune, 11/9/98</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Who Needs a Money Manager?</strong></p><cite>Business Week 2/22/99</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:paragraph -->\n<p>In <strong>March 1999</strong>, InvesTech Research published the issue shown at right, <a href=\"https://ns2020-investech.investech.com/subscriber-library/lemming-principle/\">comparing the emotional influx of index investors to lemmings</a>. However, instead of falling off a cliff, index investors fell into the largest bear market since the 1930s (the S&amp;P 500 Index lost -49.1%).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>2006-07:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Fast-forward to 2006-07:</strong> Index investing was even <em>more</em> popular at the peak of the last bull market (also one of the longer bull markets of the past 80 years):</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:image {\"align\":\"center\",\"id\":4840,\"width\":195,\"height\":201,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/V99I04-216x300.png\" alt=\"InvesTech Research newsletter, &quot;The Lemming Principle,&quot; March 12, 1999\" class=\"wp-image-4840\" width=\"195\" height=\"201\"/><figcaption>InvesTech Research newsletter, \"The Lemming Principle,\" March 12, 1999</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index Funds: So Hot Right Now</strong></p><cite>The Motley Fool, 12/11/06</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index funds help you avoid risks of stock selection, market timing</strong></p><cite>Boston Globe, 2/27/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Owning the S&amp;P 500 is cheap, easy and smart</strong></p><cite>USA Today, 7/20/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>In these previous periods, much like today, most investors perceived index funds – particularly the S&amp;P 500 Index funds – to be more diversified, safer investments.  We’ll discuss why index funds may not be all they’re thought to be…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>The Dark Side of Passive Investing – Live by the Index, Die by the Index</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As noted, history shows that index investing reaches the highest level of popularity in aging bull markets or near market peaks. The reason for this is that any type of “risk management” during a bull market tends to reduce or moderate a fund manager’s return. Consequently, it is not uncommon for a fully invested S&amp;P 500 Index fund to outperform most actively managed mutual funds and money managers when measured <em>solely </em>over the duration of a bull market.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>There are multiple reasons index or passive investing becomes more popular in an aging bull market. First, it is more comfortable. One doesn’t have the burden of making decisions about which stocks to invest in, or when to sell a stock if it rises or falls precipitously. Indexing also tends to remove the regret from bad decisions, because any loss can be attributed entirely to the market. Lastly, investing in an index fund is the cheapest and easiest way to take advantage of the market’s stellar gains which seem likely to continue. Yet before jumping into the indexing mania today, consider these inherent risks in passive investing…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>By definition, index funds also guarantee that you will suffer 100% of the next bear market’s decline.</strong> Regardless of which index you are matching, the index fund is required to stay fully invested regardless of market risk or volatility.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Assets flowing into the most popular index funds are funneling investments into the largest and most overvalued stocks in the market, driving them higher. </strong>The S&amp;P 500 is a capitalization weighted index, so money invested into these popular index funds is not evenly distributed in all 500 stocks. Rather, the largest companies by market cap receive a disproportionate amount of the investment. As a result, investors must take the good with the bad and favor the largest companies within the basket of 500 stocks, regardless of valuation and financial strength (or lack thereof).</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Market volatility increases when interest narrows to the index heavyweights. </strong>Only 50 stocks account for nearly 50% of S&amp;P 500 capitalization and one-half of an index fund’s portfolio. Additionally, the top 10 largest stocks comprise over 20% of the Index. As a result, downside risk in the next bear market could increase if selling pressure hits the largest stocks at the same time. The increased focus on index investing of late may very well increase both the size of, and speed at which the next bear market decline occurs.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":8324,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/iShares-Core-SP-500-ETF.jpg\" alt=\"\" class=\"wp-image-8324\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Intraday liquidity for ETFs can experience dramatic structural challenges in times of market distress. </strong>For example, during the market dislocation on August 24, 2015 the liquidity of most ETFs all but dried up just as the market opened. A confluence of problems –including circuit breakers, an obscure NYSE rule allowing market makers to delay posting prices, and a lack of futures data for large hedgers– all combined to take the bid out of the ETF space. Even large, well-established ETFs like the $116 billion iShares Core S&amp;P 500 ETF (IVV) saw unprecedented declines. As shown on the graph below, IVV fell -26% on the open, far more than the -5.3% drop of the underlying S&amp;P 500. As a result of this liquidity hiccup, or “flash crash” as it was called at the time, investors with outstanding market orders and stop-loss orders sold their shares in IVV for far less than their worth.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bottom Line</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The broad diversification and implied liquidity offered by index ETFs gives many investors a false sense of security. When passively investing in an index, devoid of risk management, investors are still subject to varying degrees of valuation and liquidity risk, and they bear the full brunt of cyclical market risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Risk Management is Vital to any Strategy – <em>Ignore at your own peril!</em></h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Many actively managed mutual funds and money managers take some steps to mitigate portfolio risk – at times to the detriment of bull market performance. Although passive indexing may appear to be easier and is also perceived to reduce risk, it ends up having the opposite effect during major downturns as it guarantees an investor will experience all of the losses in the corresponding market index. Remember, long-term performance is dependent not only on how much you make in the bull markets, but also how much you give back in the bear markets. Investments that are weighted toward the largest, most overvalued stocks and sectors are exactly the opposite of what might be used in a strategy that manages risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Index investing proponents generally downplay stock market cycles, but bear market survivability is a very real issue for many investors, particularly those in or nearing retirement. The decision to hold the course on an investment strategy usually depends on the severity of bear market losses and how long one’s portfolio remains underwater… in other words, how much time it takes to recover those losses.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>To effectively demonstrate this concept, the <strong>Ulcer Index </strong>was developed in 1987 by Peter Martin to measure the depth and duration of drawdowns from earlier highs in one’s portfolio. It provides a graphic illustration of the level of stress and ulcers (hence the name) that can emerge from suffering deep, prolonged losses in one’s retirement savings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Shown below are the comparative Ulcer Index graphs of the InvesTech Model Portfolio versus the Vanguard Total Stock Market Index (VTSMX), which is the largest and most popular fund on the market today.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8329,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/IT-Portfolio-vs-Vanguard-Ulcer-Index.jpg\" alt=\"\" class=\"wp-image-8329\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The starts of the last two bear markets are noted in March 2000 and October 2007, as well as their subsequent market bottoms in October 2002 and March 2009. The green dashed lines illustrate the number of months required after the market bottom for one’s portfolio to recover the losses. Above all, the red shaded areas designate how long, and how deep one’s portfolio was underwater. These are the so-called “ulcer” zones when an investor must wait and wonder how long it will be before his portfolio is whole again.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As you’ll note, InvesTech’s “risk management” strategy dramatically reduced the stress of the last two generational bear markets by limiting the time spent in the “ulcer” zones. While the InvesTech Model Portfolio didn’t outperform the Vanguard Total Stock Market Index Fund in the bull markets, our ability to manage and reduce risk provided a long-term return which more than doubled that of the Vanguard index fund. More importantly, InvesTech subscribers lost significantly less and recovered much more quickly during bear markets, avoiding the urge to panic out of the market at the wrong time.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It is this combination of achieving safe returns and managing downside risk that matters most in the long-term performance of one’s portfolio… and in the survivability of bear markets.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:uagb/inline-notice {\"block_id\":\"eb724b53\",\"noticeContent\":\"\\u003cp\\u003ePast performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  \\u003ca href=\\u0022https://ns2020-investech.investech.com/terms-of-use/\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003eRead full Disclosures here\\u003c/a\\u003e\\u003ca href=\\u0022http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003e.\\u003c/a\\u003e\\u003c/p\\u003e\"} -->\n<div class=\"wp-block-uagb-inline-notice uagb-inline_notice__outer-wrap uagb-inline_notice__align-left uagb-block-eb724b53\"><h4 class=\"uagb-notice-title\">Important Disclosure Information</h4><div class=\"uagb-notice-text\"><p>Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  <a href=\"https://ns2020-investech.investech.com/terms-of-use/\" target=\"_blank\" rel=\"noreferrer noopener\">Read full Disclosures here</a><a href=\"http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p></div></div>\n<!-- /wp:uagb/inline-notice -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - June 16, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format: <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/IndexingFever.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','Passive Investing: Inevitable Black Eye','Tempted by high-flying ETFs in this aging bull market? Just remember… Excitement is highest as the roller coaster goes over the top! In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public.','inherit','closed','closed','','2468-revision-v1','','','2021-06-16 14:51:07','2021-06-16 14:51:07','',2468,'https://ns2020-investech.investech.com/?p=8460',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8461,3,'2021-06-16 14:51:09','2021-06-16 14:51:09','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8270,\"mediaLink\":\"https://ns2020-investech.investech.com/rollercoaster-qac9q3pwhwg-unsplash/\",\"mediaType\":\"image\",\"mediaWidth\":38} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile\" style=\"grid-template-columns:auto 38%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/rollercoaster-qac9Q3pWHWg-unsplash-1024x768.jpg\" alt=\"\" class=\"wp-image-8270 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Tempted by high-flying ETFs in this aging bull market? </h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading -->\n<h2>Just remember… Excitement is highest as the roller coaster goes over the top!</h2>\n<!-- /wp:heading --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public. As indicated by the headlines below, passive index investing has become all the rage, and Exchange Traded Funds (ETFs) are the tool of choice:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>ETFs could see $1 trillion in inflows over the coming year</strong></p><cite>MarketWatch, 1/31/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Small investors’ move to ‘passive’ stock funds becomes a stampede</strong> </p><cite>LA Times, 4/9/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Global ETF assets reach $4tn</strong> <em>The global exchange traded fund industry smashed past $4tn in assets last month…</em> </p><cite>Financial Times, 5/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:paragraph {\"placeholder\":\"Content…\"} -->\n<p>And our personal favorite...</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Wheee! A Quadruple-Leveraged S&amp;P 500 ETF is Here</strong></p><cite>Barron\'s, 5/3/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:heading {\"level\":3} -->\n<h3>Exchange Traded Fund (ETF)</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The first Exchange Traded Fund (ETF) was launched in 1993, and although they were slow to start, ETFs have proliferated over the last decade, both in number (see graph at right) and the variety of index funds available. There’s now an ETF for nearly every strategy, no matter how esoteric, and that has helped fuel the passive investing craze.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":4829,\"sizeSlug\":\"full\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/number-of-etfs.png\" alt=\"Graph showing the number of ETFs (registered in the U.S.), Source: Investment Company Institute\" class=\"wp-image-4829\"/><figcaption>Number of ETFs (registered in the U.S.), Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Over the past 24 years, one can see the shift in interest from actively managed mutual funds toward passive investing. As shown in the graph below, net cash flows into actively managed funds were still four times larger than passive funds from 1993 through 2000. From 2001 through 2008, a change becomes evident as net cash flows for active funds turned negative while passive funds continued to grow. The disparity between the active and passive net cash flows during the current bull market (2009-2016) is remarkable, and it shows why there’s been a parabolic increase in the number of ETFs!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4831,\"width\":713,\"height\":397} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Active-vs-Passive-Stock-Funds-Inflows.png\" alt=\"Graph showing net cash flows into actively managed funds between 1993 and 2016.\" class=\"wp-image-4831\" width=\"713\" height=\"397\"/><figcaption>Active vs. Passive Domestic Stock Funds; Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>So, why has passive investing become all the rage in recent years?</strong></h3>\n<!-- /wp:heading -->\n\n<!-- wp:quote {\"align\":\"center\",\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center is-style-default\"><p>Excitement is Highest as the Roller Coaster Goes Over the Top.</p><cite>– Anonymous</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Many investors have been burned –not once, but twice– by the Tech Bubble of the 1990s and the Housing Bubble in 2007. Also, they are frustrated with the challenges of managing investments… a task that in this uncertain bull market has frequently seemed counterproductive.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The most popular index funds are touted as low-cost and broadly diversified, with a portfolio full of blue chip stocks. Moreover, ETFs offer “instant liquidity” with intraday trading compared to mutual funds that only settle at the end of each trading day. To the average investor, passive funds with minimal fees, implied safety, and lots of liquidity may appear to be the Holy Grail. As we’ll see, however, there is more to the story…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":4839,\"mediaType\":\"image\",\"mediaWidth\":43,\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 43%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Total-Assets-Domestic-Equity-Index-Funds.png\" alt=\"Graph showing the total assets in Domestic Equity Index Funds, 1990\'s to 2016\" class=\"wp-image-4839 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:paragraph -->\n<p>Just as the number of ETFs has grown, the past few years have witnessed an explosion in assets tied to passive investing that has extended to both mutual funds and ETFs (as shown in graph at right). A large part of the growth has been in ETFs, which are poised to overtake index mutual funds as the preferred indexing vehicle. Both types of products have doubled in assets just since 2012.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>It is important to recognize that passive investing is not a fresh new idea; in fact, the concept was introduced by John Bogle (the founder of Vanguard) in the 1970s. This strategy has shifted in and out of favor, becoming more popular as bull markets age and losing its luster only after the damage has been done by the next bear market. Just like riding a roller coaster, the peak in public enthusiasm often comes as the bull market is cresting the top.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>A Trip Back in Time…</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The rise in the popularity of index funds has been seen before.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"align\":\"center\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center\"><p>It’s like deja vu all over again.</p><cite>- Yogi Berra</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The late 1990s: </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the decade of the 1990s became the longest bull market in Wall Street history, the Tech Bubble wasn’t the only phenomenon catching investors’ attention. In 1998-99, headlines were touting the benefit of index investing as inflows reached record levels:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Saving for Retirement Index Fever</strong></p><cite> Fortune, 11/9/98</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Who Needs a Money Manager?</strong></p><cite>Business Week 2/22/99</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:paragraph -->\n<p>In <strong>March 1999</strong>, InvesTech Research published the issue shown at right, <a href=\"https://ns2020-investech.investech.com/subscriber-library/lemming-principle/\">comparing the emotional influx of index investors to lemmings</a>. However, instead of falling off a cliff, index investors fell into the largest bear market since the 1930s (the S&amp;P 500 Index lost -49.1%).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>2006-07:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Fast-forward to 2006-07:</strong> Index investing was even <em>more</em> popular at the peak of the last bull market (also one of the longer bull markets of the past 80 years):</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:image {\"align\":\"center\",\"id\":4840,\"width\":195,\"height\":201,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/V99I04-216x300.png\" alt=\"InvesTech Research newsletter, &quot;The Lemming Principle,&quot; March 12, 1999\" class=\"wp-image-4840\" width=\"195\" height=\"201\"/><figcaption>InvesTech Research newsletter, \"The Lemming Principle,\" March 12, 1999</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index Funds: So Hot Right Now</strong></p><cite>The Motley Fool, 12/11/06</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index funds help you avoid risks of stock selection, market timing</strong></p><cite>Boston Globe, 2/27/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Owning the S&amp;P 500 is cheap, easy and smart</strong></p><cite>USA Today, 7/20/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>In these previous periods, much like today, most investors perceived index funds – particularly the S&amp;P 500 Index funds – to be more diversified, safer investments.  We’ll discuss why index funds may not be all they’re thought to be…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>The Dark Side of Passive Investing – Live by the Index, Die by the Index</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As noted, history shows that index investing reaches the highest level of popularity in aging bull markets or near market peaks. The reason for this is that any type of “risk management” during a bull market tends to reduce or moderate a fund manager’s return. Consequently, it is not uncommon for a fully invested S&amp;P 500 Index fund to outperform most actively managed mutual funds and money managers when measured <em>solely </em>over the duration of a bull market.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>There are multiple reasons index or passive investing becomes more popular in an aging bull market. First, it is more comfortable. One doesn’t have the burden of making decisions about which stocks to invest in, or when to sell a stock if it rises or falls precipitously. Indexing also tends to remove the regret from bad decisions, because any loss can be attributed entirely to the market. Lastly, investing in an index fund is the cheapest and easiest way to take advantage of the market’s stellar gains which seem likely to continue. Yet before jumping into the indexing mania today, consider these inherent risks in passive investing…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>By definition, index funds also guarantee that you will suffer 100% of the next bear market’s decline.</strong> Regardless of which index you are matching, the index fund is required to stay fully invested regardless of market risk or volatility.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Assets flowing into the most popular index funds are funneling investments into the largest and most overvalued stocks in the market, driving them higher. </strong>The S&amp;P 500 is a capitalization weighted index, so money invested into these popular index funds is not evenly distributed in all 500 stocks. Rather, the largest companies by market cap receive a disproportionate amount of the investment. As a result, investors must take the good with the bad and favor the largest companies within the basket of 500 stocks, regardless of valuation and financial strength (or lack thereof).</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Market volatility increases when interest narrows to the index heavyweights. </strong>Only 50 stocks account for nearly 50% of S&amp;P 500 capitalization and one-half of an index fund’s portfolio. Additionally, the top 10 largest stocks comprise over 20% of the Index. As a result, downside risk in the next bear market could increase if selling pressure hits the largest stocks at the same time. The increased focus on index investing of late may very well increase both the size of, and speed at which the next bear market decline occurs.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":8324,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/iShares-Core-SP-500-ETF.jpg\" alt=\"\" class=\"wp-image-8324\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Intraday liquidity for ETFs can experience dramatic structural challenges in times of market distress. </strong>For example, during the market dislocation on August 24, 2015 the liquidity of most ETFs all but dried up just as the market opened. A confluence of problems –including circuit breakers, an obscure NYSE rule allowing market makers to delay posting prices, and a lack of futures data for large hedgers– all combined to take the bid out of the ETF space. Even large, well-established ETFs like the $116 billion iShares Core S&amp;P 500 ETF (IVV) saw unprecedented declines. As shown on the graph below, IVV fell -26% on the open, far more than the -5.3% drop of the underlying S&amp;P 500. As a result of this liquidity hiccup, or “flash crash” as it was called at the time, investors with outstanding market orders and stop-loss orders sold their shares in IVV for far less than their worth.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bottom Line</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The broad diversification and implied liquidity offered by index ETFs gives many investors a false sense of security. When passively investing in an index, devoid of risk management, investors are still subject to varying degrees of valuation and liquidity risk, and they bear the full brunt of cyclical market risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Risk Management is Vital to any Strategy – <em>Ignore at your own peril!</em></h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Many actively managed mutual funds and money managers take some steps to mitigate portfolio risk – at times to the detriment of bull market performance. Although passive indexing may appear to be easier and is also perceived to reduce risk, it ends up having the opposite effect during major downturns as it guarantees an investor will experience all of the losses in the corresponding market index. Remember, long-term performance is dependent not only on how much you make in the bull markets, but also how much you give back in the bear markets. Investments that are weighted toward the largest, most overvalued stocks and sectors are exactly the opposite of what might be used in a strategy that manages risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Index investing proponents generally downplay stock market cycles, but bear market survivability is a very real issue for many investors, particularly those in or nearing retirement. The decision to hold the course on an investment strategy usually depends on the severity of bear market losses and how long one’s portfolio remains underwater… in other words, how much time it takes to recover those losses.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>To effectively demonstrate this concept, the <strong>Ulcer Index </strong>was developed in 1987 by Peter Martin to measure the depth and duration of drawdowns from earlier highs in one’s portfolio. It provides a graphic illustration of the level of stress and ulcers (hence the name) that can emerge from suffering deep, prolonged losses in one’s retirement savings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Shown below are the comparative Ulcer Index graphs of the InvesTech Model Portfolio versus the Vanguard Total Stock Market Index (VTSMX), which is the largest and most popular fund on the market today.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8329,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/IT-Portfolio-vs-Vanguard-Ulcer-Index.jpg\" alt=\"\" class=\"wp-image-8329\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The starts of the last two bear markets are noted in March 2000 and October 2007, as well as their subsequent market bottoms in October 2002 and March 2009. The green dashed lines illustrate the number of months required after the market bottom for one’s portfolio to recover the losses. Above all, the red shaded areas designate how long, and how deep one’s portfolio was underwater. These are the so-called “ulcer” zones when an investor must wait and wonder how long it will be before his portfolio is whole again.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As you’ll note, InvesTech’s “risk management” strategy dramatically reduced the stress of the last two generational bear markets by limiting the time spent in the “ulcer” zones. While the InvesTech Model Portfolio didn’t outperform the Vanguard Total Stock Market Index Fund in the bull markets, our ability to manage and reduce risk provided a long-term return which more than doubled that of the Vanguard index fund. More importantly, InvesTech subscribers lost significantly less and recovered much more quickly during bear markets, avoiding the urge to panic out of the market at the wrong time.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It is this combination of achieving safe returns and managing downside risk that matters most in the long-term performance of one’s portfolio… and in the survivability of bear markets.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:uagb/inline-notice {\"block_id\":\"eb724b53\",\"noticeContent\":\"\\u003cp\\u003ePast performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  \\u003ca href=\\u0022https://ns2020-investech.investech.com/terms-of-use/\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003eRead full Disclosures here\\u003c/a\\u003e\\u003ca href=\\u0022http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003e.\\u003c/a\\u003e\\u003c/p\\u003e\"} -->\n<div class=\"wp-block-uagb-inline-notice uagb-inline_notice__outer-wrap uagb-inline_notice__align-left uagb-block-eb724b53\"><h4 class=\"uagb-notice-title\">Important Disclosure Information</h4><div class=\"uagb-notice-text\"><p>Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  <a href=\"https://ns2020-investech.investech.com/terms-of-use/\" target=\"_blank\" rel=\"noreferrer noopener\">Read full Disclosures here</a><a href=\"http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p></div></div>\n<!-- /wp:uagb/inline-notice -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - June 16, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format: <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/IndexingFever.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','Passive Investing: Inevitable Black Eye','Tempted by high-flying ETFs in this aging bull market? Just remember… Excitement is highest as the roller coaster goes over the top! In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public.','inherit','closed','closed','','2468-revision-v1','','','2021-06-16 14:51:09','2021-06-16 14:51:09','',2468,'https://ns2020-investech.investech.com/?p=8461',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (8462,3,'2021-06-16 14:51:21','2021-06-16 14:51:21','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":8270,\"mediaLink\":\"https://ns2020-investech.investech.com/rollercoaster-qac9q3pwhwg-unsplash/\",\"mediaType\":\"image\",\"mediaWidth\":38} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile\" style=\"grid-template-columns:auto 38%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/rollercoaster-qac9Q3pWHWg-unsplash-1024x768.jpg\" alt=\"\" class=\"wp-image-8270 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Tempted by high-flying ETFs in this aging bull market? </h2>\n<!-- /wp:heading -->\n\n<!-- wp:heading -->\n<h2>Just remember… Excitement is highest as the roller coaster goes over the top!</h2>\n<!-- /wp:heading --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public. As indicated by the headlines below, passive index investing has become all the rage, and Exchange Traded Funds (ETFs) are the tool of choice:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>ETFs could see $1 trillion in inflows over the coming year</strong></p><cite>MarketWatch, 1/31/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Small investors’ move to ‘passive’ stock funds becomes a stampede</strong> </p><cite>LA Times, 4/9/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Global ETF assets reach $4tn</strong> <em>The global exchange traded fund industry smashed past $4tn in assets last month…</em> </p><cite>Financial Times, 5/10/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:paragraph {\"placeholder\":\"Content…\"} -->\n<p>And our personal favorite...</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Wheee! A Quadruple-Leveraged S&amp;P 500 ETF is Here</strong></p><cite>Barron\'s, 5/3/17</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:heading {\"level\":3} -->\n<h3>Exchange Traded Fund (ETF)</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The first Exchange Traded Fund (ETF) was launched in 1993, and although they were slow to start, ETFs have proliferated over the last decade, both in number (see graph at right) and the variety of index funds available. There’s now an ETF for nearly every strategy, no matter how esoteric, and that has helped fuel the passive investing craze.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:image {\"align\":\"center\",\"id\":4829,\"sizeSlug\":\"full\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/number-of-etfs.png\" alt=\"Graph showing the number of ETFs (registered in the U.S.), Source: Investment Company Institute\" class=\"wp-image-4829\"/><figcaption>Number of ETFs (registered in the U.S.), Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:paragraph -->\n<p>Over the past 24 years, one can see the shift in interest from actively managed mutual funds toward passive investing. As shown in the graph below, net cash flows into actively managed funds were still four times larger than passive funds from 1993 through 2000. From 2001 through 2008, a change becomes evident as net cash flows for active funds turned negative while passive funds continued to grow. The disparity between the active and passive net cash flows during the current bull market (2009-2016) is remarkable, and it shows why there’s been a parabolic increase in the number of ETFs!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4831,\"width\":713,\"height\":397} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Active-vs-Passive-Stock-Funds-Inflows.png\" alt=\"Graph showing net cash flows into actively managed funds between 1993 and 2016.\" class=\"wp-image-4831\" width=\"713\" height=\"397\"/><figcaption>Active vs. Passive Domestic Stock Funds; Source: Investment Company Institute</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3><strong>So, why has passive investing become all the rage in recent years?</strong></h3>\n<!-- /wp:heading -->\n\n<!-- wp:quote {\"align\":\"center\",\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center is-style-default\"><p>Excitement is Highest as the Roller Coaster Goes Over the Top.</p><cite>– Anonymous</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:paragraph -->\n<p>Many investors have been burned –not once, but twice– by the Tech Bubble of the 1990s and the Housing Bubble in 2007. Also, they are frustrated with the challenges of managing investments… a task that in this uncertain bull market has frequently seemed counterproductive.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The most popular index funds are touted as low-cost and broadly diversified, with a portfolio full of blue chip stocks. Moreover, ETFs offer “instant liquidity” with intraday trading compared to mutual funds that only settle at the end of each trading day. To the average investor, passive funds with minimal fees, implied safety, and lots of liquidity may appear to be the Holy Grail. As we’ll see, however, there is more to the story…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":4839,\"mediaType\":\"image\",\"mediaWidth\":43,\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 43%\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/Total-Assets-Domestic-Equity-Index-Funds.png\" alt=\"Graph showing the total assets in Domestic Equity Index Funds, 1990\'s to 2016\" class=\"wp-image-4839 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:paragraph -->\n<p>Just as the number of ETFs has grown, the past few years have witnessed an explosion in assets tied to passive investing that has extended to both mutual funds and ETFs (as shown in graph at right). A large part of the growth has been in ETFs, which are poised to overtake index mutual funds as the preferred indexing vehicle. Both types of products have doubled in assets just since 2012.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:paragraph -->\n<p>It is important to recognize that passive investing is not a fresh new idea; in fact, the concept was introduced by John Bogle (the founder of Vanguard) in the 1970s. This strategy has shifted in and out of favor, becoming more popular as bull markets age and losing its luster only after the damage has been done by the next bear market. Just like riding a roller coaster, the peak in public enthusiasm often comes as the bull market is cresting the top.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>A Trip Back in Time…</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The rise in the popularity of index funds has been seen before.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:quote {\"align\":\"center\"} -->\n<blockquote class=\"wp-block-quote has-text-align-center\"><p>It’s like deja vu all over again.</p><cite>- Yogi Berra</cite></blockquote>\n<!-- /wp:quote -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The late 1990s: </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As the decade of the 1990s became the longest bull market in Wall Street history, the Tech Bubble wasn’t the only phenomenon catching investors’ attention. In 1998-99, headlines were touting the benefit of index investing as inflows reached record levels:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Saving for Retirement Index Fever</strong></p><cite> Fortune, 11/9/98</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Who Needs a Money Manager?</strong></p><cite>Business Week 2/22/99</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns {\"verticalAlignment\":\"center\"} -->\n<div class=\"wp-block-columns are-vertically-aligned-center\"><!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\"><!-- wp:paragraph -->\n<p>In <strong>March 1999</strong>, InvesTech Research published the issue shown at right, <a href=\"https://ns2020-investech.investech.com/subscriber-library/lemming-principle/\">comparing the emotional influx of index investors to lemmings</a>. However, instead of falling off a cliff, index investors fell into the largest bear market since the 1930s (the S&amp;P 500 Index lost -49.1%).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>2006-07:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Fast-forward to 2006-07:</strong> Index investing was even <em>more</em> popular at the peak of the last bull market (also one of the longer bull markets of the past 80 years):</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"verticalAlignment\":\"center\",\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column is-vertically-aligned-center\" style=\"flex-basis:33.33%\"><!-- wp:image {\"align\":\"center\",\"id\":4840,\"width\":195,\"height\":201,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-medium is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/V99I04-216x300.png\" alt=\"InvesTech Research newsletter, &quot;The Lemming Principle,&quot; March 12, 1999\" class=\"wp-image-4840\" width=\"195\" height=\"201\"/><figcaption>InvesTech Research newsletter, \"The Lemming Principle,\" March 12, 1999</figcaption></figure></div>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index Funds: So Hot Right Now</strong></p><cite>The Motley Fool, 12/11/06</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Index funds help you avoid risks of stock selection, market timing</strong></p><cite>Boston Globe, 2/27/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p><strong>Owning the S&amp;P 500 is cheap, easy and smart</strong></p><cite>USA Today, 7/20/07</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:block {\"ref\":5343} /-->\n\n<!-- wp:paragraph -->\n<p>In these previous periods, much like today, most investors perceived index funds – particularly the S&amp;P 500 Index funds – to be more diversified, safer investments.  We’ll discuss why index funds may not be all they’re thought to be…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>The Dark Side of Passive Investing – Live by the Index, Die by the Index</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As noted, history shows that index investing reaches the highest level of popularity in aging bull markets or near market peaks. The reason for this is that any type of “risk management” during a bull market tends to reduce or moderate a fund manager’s return. Consequently, it is not uncommon for a fully invested S&amp;P 500 Index fund to outperform most actively managed mutual funds and money managers when measured <em>solely </em>over the duration of a bull market.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>There are multiple reasons index or passive investing becomes more popular in an aging bull market. First, it is more comfortable. One doesn’t have the burden of making decisions about which stocks to invest in, or when to sell a stock if it rises or falls precipitously. Indexing also tends to remove the regret from bad decisions, because any loss can be attributed entirely to the market. Lastly, investing in an index fund is the cheapest and easiest way to take advantage of the market’s stellar gains which seem likely to continue. Yet before jumping into the indexing mania today, consider these inherent risks in passive investing…</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>By definition, index funds also guarantee that you will suffer 100% of the next bear market’s decline.</strong> Regardless of which index you are matching, the index fund is required to stay fully invested regardless of market risk or volatility.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Assets flowing into the most popular index funds are funneling investments into the largest and most overvalued stocks in the market, driving them higher. </strong>The S&amp;P 500 is a capitalization weighted index, so money invested into these popular index funds is not evenly distributed in all 500 stocks. Rather, the largest companies by market cap receive a disproportionate amount of the investment. As a result, investors must take the good with the bad and favor the largest companies within the basket of 500 stocks, regardless of valuation and financial strength (or lack thereof).</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Market volatility increases when interest narrows to the index heavyweights. </strong>Only 50 stocks account for nearly 50% of S&amp;P 500 capitalization and one-half of an index fund’s portfolio. Additionally, the top 10 largest stocks comprise over 20% of the Index. As a result, downside risk in the next bear market could increase if selling pressure hits the largest stocks at the same time. The increased focus on index investing of late may very well increase both the size of, and speed at which the next bear market decline occurs.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":8324,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/iShares-Core-SP-500-ETF.jpg\" alt=\"\" class=\"wp-image-8324\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Intraday liquidity for ETFs can experience dramatic structural challenges in times of market distress. </strong>For example, during the market dislocation on August 24, 2015 the liquidity of most ETFs all but dried up just as the market opened. A confluence of problems –including circuit breakers, an obscure NYSE rule allowing market makers to delay posting prices, and a lack of futures data for large hedgers– all combined to take the bid out of the ETF space. Even large, well-established ETFs like the $116 billion iShares Core S&amp;P 500 ETF (IVV) saw unprecedented declines. As shown on the graph below, IVV fell -26% on the open, far more than the -5.3% drop of the underlying S&amp;P 500. As a result of this liquidity hiccup, or “flash crash” as it was called at the time, investors with outstanding market orders and stop-loss orders sold their shares in IVV for far less than their worth.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Bottom Line</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The broad diversification and implied liquidity offered by index ETFs gives many investors a false sense of security. When passively investing in an index, devoid of risk management, investors are still subject to varying degrees of valuation and liquidity risk, and they bear the full brunt of cyclical market risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Risk Management is Vital to any Strategy – <em>Ignore at your own peril!</em></h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Many actively managed mutual funds and money managers take some steps to mitigate portfolio risk – at times to the detriment of bull market performance. Although passive indexing may appear to be easier and is also perceived to reduce risk, it ends up having the opposite effect during major downturns as it guarantees an investor will experience all of the losses in the corresponding market index. Remember, long-term performance is dependent not only on how much you make in the bull markets, but also how much you give back in the bear markets. Investments that are weighted toward the largest, most overvalued stocks and sectors are exactly the opposite of what might be used in a strategy that manages risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Index investing proponents generally downplay stock market cycles, but bear market survivability is a very real issue for many investors, particularly those in or nearing retirement. The decision to hold the course on an investment strategy usually depends on the severity of bear market losses and how long one’s portfolio remains underwater… in other words, how much time it takes to recover those losses.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>To effectively demonstrate this concept, the <strong>Ulcer Index </strong>was developed in 1987 by Peter Martin to measure the depth and duration of drawdowns from earlier highs in one’s portfolio. It provides a graphic illustration of the level of stress and ulcers (hence the name) that can emerge from suffering deep, prolonged losses in one’s retirement savings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Shown below are the comparative Ulcer Index graphs of the InvesTech Model Portfolio versus the Vanguard Total Stock Market Index (VTSMX), which is the largest and most popular fund on the market today.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":8329,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/06/IT-Portfolio-vs-Vanguard-Ulcer-Index.jpg\" alt=\"\" class=\"wp-image-8329\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The starts of the last two bear markets are noted in March 2000 and October 2007, as well as their subsequent market bottoms in October 2002 and March 2009. The green dashed lines illustrate the number of months required after the market bottom for one’s portfolio to recover the losses. Above all, the red shaded areas designate how long, and how deep one’s portfolio was underwater. These are the so-called “ulcer” zones when an investor must wait and wonder how long it will be before his portfolio is whole again.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As you’ll note, InvesTech’s “risk management” strategy dramatically reduced the stress of the last two generational bear markets by limiting the time spent in the “ulcer” zones. While the InvesTech Model Portfolio didn’t outperform the Vanguard Total Stock Market Index Fund in the bull markets, our ability to manage and reduce risk provided a long-term return which more than doubled that of the Vanguard index fund. More importantly, InvesTech subscribers lost significantly less and recovered much more quickly during bear markets, avoiding the urge to panic out of the market at the wrong time.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>It is this combination of achieving safe returns and managing downside risk that matters most in the long-term performance of one’s portfolio… and in the survivability of bear markets.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:uagb/inline-notice {\"block_id\":\"eb724b53\",\"noticeContent\":\"\\u003cp\\u003ePast performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  \\u003ca href=\\u0022https://ns2020-investech.investech.com/terms-of-use/\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003eRead full Disclosures here\\u003c/a\\u003e\\u003ca href=\\u0022http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\\u0022 target=\\u0022_blank\\u0022 rel=\\u0022noreferrer noopener\\u0022\\u003e.\\u003c/a\\u003e\\u003c/p\\u003e\"} -->\n<div class=\"wp-block-uagb-inline-notice uagb-inline_notice__outer-wrap uagb-inline_notice__align-left uagb-block-eb724b53\"><h4 class=\"uagb-notice-title\">Important Disclosure Information</h4><div class=\"uagb-notice-text\"><p>Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  <a href=\"https://ns2020-investech.investech.com/terms-of-use/\" target=\"_blank\" rel=\"noreferrer noopener\">Read full Disclosures here</a><a href=\"http://Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by InvesTech Research) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.\" target=\"_blank\" rel=\"noreferrer noopener\">.</a></p></div></div>\n<!-- /wp:uagb/inline-notice -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:spacer {\"height\":33} -->\n<div style=\"height:33px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading {\"level\":4} -->\n<h4>Excerpt from <em>InvesTech Research</em> - June 16, 2017</h4>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format: <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/IndexingFever.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF.</a></p>\n<!-- /wp:paragraph -->','Passive Investing: Inevitable Black Eye','Tempted by high-flying ETFs in this aging bull market? Just remember… Excitement is highest as the roller coaster goes over the top! In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public.','inherit','closed','closed','','2468-revision-v1','','','2021-06-16 14:51:21','2021-06-16 14:51:21','',2468,'https://ns2020-investech.investech.com/?p=8462',0,'revision','',0);
