INSERT INTO `wp_posts` VALUES (16683,2,'2023-02-13 17:48:29','2023-02-13 23:48:29','<!-- wp:heading {\"level\":3} -->\n<h3>Stay up to date with the latest economic trends by following us here! This new, <em>free</em> section tracks important economic indicators you should be watching.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column {\"width\":\"100%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:100%\"><!-- wp:uagb/modal {\"block_id\":\"c85c0be1\",\"modalTrigger\":\"icon\",\"icon\":\"calendar-days\",\"buttonText\":\"\",\"buttonIcon\":\"calendar-days\",\"modalWidth\":1000,\"iconSize\":60,\"iconColor\":\"#00467F\",\"btnLinkColor\":\"\",\"btnBgColor\":\"#00467F\",\"imgTagHeight\":350,\"imgTagWidth\":350,\"showBtnIcon\":true,\"maxHeight\":100,\"btnBorderTopLeftRadius\":0,\"btnBorderTopRightRadius\":0,\"btnBorderBottomLeftRadius\":0,\"btnBorderBottomRightRadius\":0,\"btnBorderStyle\":\"none\"} -->\n<div class=\"wp-block-uagb-modal uagb-block-c85c0be1 uagb-modal-wrapper\" data-escpress=\"disable\" data-overlayclick=\"disable\"><div class=\"uagb-modal-trigger\"><svg xmlns=\"https://www.w3.org/2000/svg\" viewBox=\"0 0 448 512\"><path d=\"M160 32V64H288V32C288 14.33 302.3 0 320 0C337.7 0 352 14.33 352 32V64H400C426.5 64 448 85.49 448 112V160H0V112C0 85.49 21.49 64 48 64H96V32C96 14.33 110.3 0 128 0C145.7 0 160 14.33 160 32zM0 192H448V464C448 490.5 426.5 512 400 512H48C21.49 512 0 490.5 0 464V192zM64 304C64 312.8 71.16 320 80 320H112C120.8 320 128 312.8 128 304V272C128 263.2 120.8 256 112 256H80C71.16 256 64 263.2 64 272V304zM192 304C192 312.8 199.2 320 208 320H240C248.8 320 256 312.8 256 304V272C256 263.2 248.8 256 240 256H208C199.2 256 192 263.2 192 272V304zM336 256C327.2 256 320 263.2 320 272V304C320 312.8 327.2 320 336 320H368C376.8 320 384 312.8 384 304V272C384 263.2 376.8 256 368 256H336zM64 432C64 440.8 71.16 448 80 448H112C120.8 448 128 440.8 128 432V400C128 391.2 120.8 384 112 384H80C71.16 384 64 391.2 64 400V432zM208 384C199.2 384 192 391.2 192 400V432C192 440.8 199.2 448 208 448H240C248.8 448 256 440.8 256 432V400C256 391.2 248.8 384 240 384H208zM320 432C320 440.8 327.2 448 336 448H368C376.8 448 384 440.8 384 432V400C384 391.2 376.8 384 368 384H336C327.2 384 320 391.2 320 400V432z\"></path></svg></div><div class=\"uagb-effect-default uagb-modal-popup uagb-block-c85c0be1\"><div class=\"uagb-modal-popup-wrap\"><div class=\"uagb-modal-popup-content\"><!-- wp:html -->\n<p align=\"center\"><iframe src=\"https://calendar.google.com/calendar/embed?height=600&amp;wkst=1&amp;bgcolor=%23ffffff&amp;ctz=America%2FDenver&amp;src=aW52ZXN0ZWNoQGludmVzdGVjaC5jb20&amp;color=%23039BE5\" style=\"border:solid 1px #777\" width=\"800\" height=\"600\" frameborder=\"0\" scrolling=\"no\"></iframe></p>\n<!-- /wp:html -->\n\n<!-- wp:paragraph -->\n<p><strong>These release dates represent the day the information is available from their respective sources. Check InvesTech Research’s Economic Trends for an update on these releases.</strong></p>\n<!-- /wp:paragraph --></div><div class=\"uagb-modal-popup-close\"><svg xmlns=\"https://www.w3.org/2000/svg\" viewBox=\"0 0 320 512\"><path d=\"M310.6 361.4c12.5 12.5 12.5 32.75 0 45.25C304.4 412.9 296.2 416 288 416s-16.38-3.125-22.62-9.375L160 301.3L54.63 406.6C48.38 412.9 40.19 416 32 416S15.63 412.9 9.375 406.6c-12.5-12.5-12.5-32.75 0-45.25l105.4-105.4L9.375 150.6c-12.5-12.5-12.5-32.75 0-45.25s32.75-12.5 45.25 0L160 210.8l105.4-105.4c12.5-12.5 32.75-12.5 45.25 0s12.5 32.75 0 45.25l-105.4 105.4L310.6 361.4z\"></path></svg></div></div></div></div>\n<!-- /wp:uagb/modal --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"100%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:100%\"><!-- wp:paragraph {\"align\":\"left\"} -->\n<p class=\"has-text-align-left\">Click the calendar icon to check release dates for data covered in our <em>Economic Trends</em>. If calendar no work, click here.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:spacer {\"height\":\"50px\"} -->\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:query {\"queryId\":38,\"query\":{\"perPage\":3,\"pages\":0,\"offset\":\"0\",\"postType\":\"investech-insights\",\"order\":\"desc\",\"orderBy\":\"date\",\"author\":\"\",\"search\":\"\",\"exclude\":[],\"sticky\":\"\",\"inherit\":false,\"parents\":[]},\"className\":\"economic-trends\"} -->\n<div class=\"wp-block-query economic-trends\"><!-- wp:post-template -->\n<!-- wp:post-title {\"isLink\":true} /-->\n\n<!-- wp:post-author {\"showBio\":false,\"byline\":\"Director Of Research Services\",\"textColor\":\"accent\",\"fontSize\":\"medium\"} /-->\n\n<!-- wp:post-date {\"textColor\":\"accent\",\"fontSize\":\"small\"} /-->\n\n<!-- wp:post-featured-image {\"isLink\":true,\"width\":\"50%\",\"align\":\"right\"} /-->\n\n<!-- wp:post-excerpt {\"moreText\":\"More...\"} /-->\n\n<!-- wp:spacer {\"height\":\"25px\"} -->\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"/>\n<!-- /wp:separator -->\n<!-- /wp:post-template --></div>\n<!-- /wp:query -->\n\n<!-- wp:html -->\n<p align=\"center\"><iframe src=\"https://calendar.google.com/calendar/embed?height=600&amp;wkst=1&amp;bgcolor=%23ffffff&amp;ctz=America%2FDenver&amp;src=aW52ZXN0ZWNoQGludmVzdGVjaC5jb20&amp;color=%23039BE5\" style=\"border:solid 1px #777\" width=\"800\" height=\"600\" frameborder=\"0\" scrolling=\"no\"></iframe></p>\n<!-- /wp:html -->','Economic Trends','','inherit','closed','closed','','16275-revision-v1','','','2023-02-13 17:48:29','2023-02-13 23:48:29','',16275,'https://ns2020-investech.investech.com/?p=16683',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5918,3,'2021-03-03 20:19:59','2021-03-03 20:19:59','<!-- wp:heading -->\n<h2>Special Note for New Subscribers</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.</strong>  The following information will assist you in getting started with InvesTech. It involves the decisions that must be made by an investor who wishes to bring their portfolio allocation more into alignment with InvesTech’s strategy:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Determine your invested allocation</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Determine your current invested allocation by totaling the amounts you have invested in equities (individual stocks, stock mutual funds, ETFs, and international stocks/funds). Divide this by your total equity portfolio size. This is your percent invested allocation.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Refer to the InvesTech invested recommendation and allocations</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Refer to the InvesTech “percent” invested recommendation and allocations listed in the Model Fund Portfolio. If you are holding a portfolio that is similar in composition, sector weighting, and percent invested allocation to what we are currently recommending in the Model Fund Portfolio, it is unnecessary to make any changes at this time. Just wait for InvesTech’s next recommendation, generally made on the Friday Financial Hotline, to either add new positions or take profits… and act accordingly with your own holdings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Adjust your portfolio</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Adjust your portfolio, if necessary. Purchases after our initial recommendations must be made at your discretion; however, if your portfolio mix is dramatically different from our current recommendations and sector weightings, you may wish to consider changes to more closely align the portfolio with our model. For example, check your mutual funds for their weightings in each sector. If the combination of your stocks, ETFs, and mutual funds give your portfolio significantly more or less exposure to a particular sector or category (such as international or small-cap) than we recommend, then you may wish to adjust your holdings to bring them more in line with our recommendations.<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>An exception would be if we warn on the Hotline or in the newsletter against new purchases in a particular area. This usually means that we believe sector leadership is changing or most of the profits on a position have already been achieved and new investment would not be advisable. In that case, it is better to wait in the safety of a money market fund for our next recommendation. Depending on market conditions, we may advise bringing your portfolio in line with our recommendations by phasing into the market. Please review the Model Fund Portfolio published in the current issue for more information.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Remember, InvesTech’s strategy is not a short-term market timing system, but a long-term “risk allocation” strategy based on highly sophisticated indicators.</strong> Our objective is NOT to try to forecast stock movements in advance, but to correctly assess the market environment. When market indicators point to a strong, low-risk buying opportunity, we will recommend an aggressively invested position and growth oriented sectors. Conversely, we will inform you when our indicators show risk has risen to an unacceptable level so that you can take steps to protect your portfolio. This risk-averse strategy will help you to preserve capital in times of market vulnerability so that you will be ready and able to take advantage of the next low-risk buying opportunity when it arrives.</p>\n<!-- /wp:paragraph -->','Note for New Subscribers','The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.','inherit','closed','closed','','5858-revision-v1','','','2021-03-03 20:19:59','2021-03-03 20:19:59','',5858,'https://ns2020-investech.investech.com/5858-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5920,3,'2021-03-03 20:23:34','2021-03-03 20:23:34','<!-- wp:heading -->\n<h2>Special Note for New Subscribers</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.</strong>  The following information will assist you in getting started with InvesTech. It involves the decisions that must be made by an investor who wishes to bring their portfolio allocation more into alignment with InvesTech’s strategy:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Determine your invested allocation</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Determine your current invested allocation by totaling the amounts you have invested in equities (individual stocks, stock mutual funds, ETFs, and international stocks/funds). Divide this by your total equity portfolio size. This is your percent invested allocation.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Refer to the InvesTech invested recommendation and allocations</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Refer to the InvesTech “percent” invested recommendation and allocations listed in the Model Fund Portfolio. If you are holding a portfolio that is similar in composition, sector weighting, and percent invested allocation to what we are currently recommending in the Model Fund Portfolio, it is unnecessary to make any changes at this time. Just wait for InvesTech’s next recommendation, generally made on the Friday Financial Hotline, to either add new positions or take profits… and act accordingly with your own holdings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Adjust your portfolio</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Adjust your portfolio, if necessary. Purchases after our initial recommendations must be made at your discretion; however, if your portfolio mix is dramatically different from our current recommendations and sector weightings, you may wish to consider changes to more closely align the portfolio with our model. For example, check your mutual funds for their weightings in each sector. If the combination of your stocks, ETFs, and mutual funds give your portfolio significantly more or less exposure to a particular sector or category (such as international or small-cap) than we recommend, then you may wish to adjust your holdings to bring them more in line with our recommendations.<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>An exception would be if we warn on the Hotline or in the newsletter against new purchases in a particular area. This usually means that we believe sector leadership is changing or most of the profits on a position have already been achieved and new investment would not be advisable. In that case, it is better to wait in the safety of a money market fund for our next recommendation. Depending on market conditions, we may advise bringing your portfolio in line with our recommendations by phasing into the market. Please review the Model Fund Portfolio published in the current issue for more information.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Remember, InvesTech’s strategy is not a short-term market timing system, but a long-term “risk allocation” strategy based on highly sophisticated indicators.</strong> Our objective is NOT to try to forecast stock movements in advance, but to correctly assess the market environment. When market indicators point to a strong, low-risk buying opportunity, we will recommend an aggressively invested position and growth oriented sectors. Conversely, we will inform you when our indicators show risk has risen to an unacceptable level so that you can take steps to protect your portfolio. This risk-averse strategy will help you to preserve capital in times of market vulnerability so that you will be ready and able to take advantage of the next low-risk buying opportunity when it arrives.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:paragraph {\"fontSize\":\"small\"} -->\n<p class=\"has-small-font-size\">IMPORTANT DISCLOSURE INFORMATION: 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 strategy recommended and/or undertaken by InvesTech) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Please see additional IMPORTANT DISCLOSURE INFORMATION at www.investech.com.</p>\n<!-- /wp:paragraph -->','Note for New Subscribers','The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.','inherit','closed','closed','','5858-revision-v1','','','2021-03-03 20:23:34','2021-03-03 20:23:34','',5858,'https://ns2020-investech.investech.com/5858-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5922,3,'2021-03-03 20:24:21','2021-03-03 20:24:21','<!-- wp:heading -->\n<h2>Special Note for New Subscribers</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.</strong>  The following information will assist you in getting started with InvesTech. It involves the decisions that must be made by an investor who wishes to bring their portfolio allocation more into alignment with InvesTech’s strategy:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Determine your invested allocation</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Determine your current invested allocation by totaling the amounts you have invested in equities (individual stocks, stock mutual funds, ETFs, and international stocks/funds). Divide this by your total equity portfolio size. This is your percent invested allocation.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Refer to the InvesTech invested recommendation and allocations</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Refer to the InvesTech “percent” invested recommendation and allocations listed in the Model Fund Portfolio. If you are holding a portfolio that is similar in composition, sector weighting, and percent invested allocation to what we are currently recommending in the Model Fund Portfolio, it is unnecessary to make any changes at this time. Just wait for InvesTech’s next recommendation, generally made on the Friday Financial Hotline, to either add new positions or take profits… and act accordingly with your own holdings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Adjust your portfolio</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Adjust your portfolio, if necessary. Purchases after our initial recommendations must be made at your discretion; however, if your portfolio mix is dramatically different from our current recommendations and sector weightings, you may wish to consider changes to more closely align the portfolio with our model. For example, check your mutual funds for their weightings in each sector. If the combination of your stocks, ETFs, and mutual funds give your portfolio significantly more or less exposure to a particular sector or category (such as international or small-cap) than we recommend, then you may wish to adjust your holdings to bring them more in line with our recommendations.<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>An exception would be if we warn on the Hotline or in the newsletter against new purchases in a particular area. This usually means that we believe sector leadership is changing or most of the profits on a position have already been achieved and new investment would not be advisable. In that case, it is better to wait in the safety of a money market fund for our next recommendation. Depending on market conditions, we may advise bringing your portfolio in line with our recommendations by phasing into the market. Please review the Model Fund Portfolio published in the current issue for more information.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Remember, InvesTech’s strategy is not a short-term market timing system, but a long-term “risk allocation” strategy based on highly sophisticated indicators.</strong> Our objective is NOT to try to forecast stock movements in advance, but to correctly assess the market environment. When market indicators point to a strong, low-risk buying opportunity, we will recommend an aggressively invested position and growth oriented sectors. Conversely, we will inform you when our indicators show risk has risen to an unacceptable level so that you can take steps to protect your portfolio. This risk-averse strategy will help you to preserve capital in times of market vulnerability so that you will be ready and able to take advantage of the next low-risk buying opportunity when it arrives.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":90} -->\n<div style=\"height:90px\" 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:paragraph {\"fontSize\":\"small\"} -->\n<p class=\"has-small-font-size\">IMPORTANT DISCLOSURE INFORMATION: Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. 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INSERT INTO `wp_posts` VALUES (5923,3,'2021-03-03 20:25:07','2021-03-03 20:25:07','<!-- wp:heading -->\n<h2>Special Note for New Subscribers</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.</strong>  The following information will assist you in getting started with InvesTech. It involves the decisions that must be made by an investor who wishes to bring their portfolio allocation more into alignment with InvesTech’s strategy:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>1. Determine your invested allocation</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Determine your current invested allocation by totaling the amounts you have invested in equities (individual stocks, stock mutual funds, ETFs, and international stocks/funds). Divide this by your total equity portfolio size. This is your percent invested allocation.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>2. Refer to the InvesTech invested recommendation and allocations</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Refer to the InvesTech “percent” invested recommendation and allocations listed in the Model Fund Portfolio. If you are holding a portfolio that is similar in composition, sector weighting, and percent invested allocation to what we are currently recommending in the Model Fund Portfolio, it is unnecessary to make any changes at this time. Just wait for InvesTech’s next recommendation, generally made on the Friday Financial Hotline, to either add new positions or take profits… and act accordingly with your own holdings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>3. Adjust your portfolio</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Adjust your portfolio, if necessary. Purchases after our initial recommendations must be made at your discretion; however, if your portfolio mix is dramatically different from our current recommendations and sector weightings, you may wish to consider changes to more closely align the portfolio with our model. For example, check your mutual funds for their weightings in each sector. If the combination of your stocks, ETFs, and mutual funds give your portfolio significantly more or less exposure to a particular sector or category (such as international or small-cap) than we recommend, then you may wish to adjust your holdings to bring them more in line with our recommendations.<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>An exception would be if we warn on the Hotline or in the newsletter against new purchases in a particular area. This usually means that we believe sector leadership is changing or most of the profits on a position have already been achieved and new investment would not be advisable. In that case, it is better to wait in the safety of a money market fund for our next recommendation. Depending on market conditions, we may advise bringing your portfolio in line with our recommendations by phasing into the market. Please review the Model Fund Portfolio published in the current issue for more information.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Remember, InvesTech’s strategy is not a short-term market timing system, but a long-term “risk allocation” strategy based on highly sophisticated indicators.</strong> Our objective is NOT to try to forecast stock movements in advance, but to correctly assess the market environment. When market indicators point to a strong, low-risk buying opportunity, we will recommend an aggressively invested position and growth oriented sectors. Conversely, we will inform you when our indicators show risk has risen to an unacceptable level so that you can take steps to protect your portfolio. This risk-averse strategy will help you to preserve capital in times of market vulnerability so that you will be ready and able to take advantage of the next low-risk buying opportunity when it arrives.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":90} -->\n<div style=\"height:90px\" 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:paragraph {\"fontSize\":\"small\"} -->\n<p class=\"has-small-font-size\">IMPORTANT DISCLOSURE INFORMATION: Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. 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INSERT INTO `wp_posts` VALUES (5924,3,'2021-03-03 20:25:42','2021-03-03 20:25:42','<!-- wp:heading -->\n<h2>Special Note for New Subscribers</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.</strong>  The following information will assist you in getting started with InvesTech. It involves the decisions that must be made by an investor who wishes to bring their portfolio allocation more into alignment with InvesTech’s strategy:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Determine your invested allocation</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Determine your current invested allocation by totaling the amounts you have invested in equities (individual stocks, stock mutual funds, ETFs, and international stocks/funds). Divide this by your total equity portfolio size. This is your percent invested allocation.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Refer to the InvesTech invested recommendation and allocations</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Refer to the InvesTech “percent” invested recommendation and allocations listed in the Model Fund Portfolio. If you are holding a portfolio that is similar in composition, sector weighting, and percent invested allocation to what we are currently recommending in the Model Fund Portfolio, it is unnecessary to make any changes at this time. Just wait for InvesTech’s next recommendation, generally made on the Friday Financial Hotline, to either add new positions or take profits… and act accordingly with your own holdings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Adjust your portfolio</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Adjust your portfolio, if necessary. Purchases after our initial recommendations must be made at your discretion; however, if your portfolio mix is dramatically different from our current recommendations and sector weightings, you may wish to consider changes to more closely align the portfolio with our model. For example, check your mutual funds for their weightings in each sector. If the combination of your stocks, ETFs, and mutual funds give your portfolio significantly more or less exposure to a particular sector or category (such as international or small-cap) than we recommend, then you may wish to adjust your holdings to bring them more in line with our recommendations.<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>An exception would be if we warn on the Hotline or in the newsletter against new purchases in a particular area. This usually means that we believe sector leadership is changing or most of the profits on a position have already been achieved and new investment would not be advisable. In that case, it is better to wait in the safety of a money market fund for our next recommendation. Depending on market conditions, we may advise bringing your portfolio in line with our recommendations by phasing into the market. Please review the Model Fund Portfolio published in the current issue for more information.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Remember, InvesTech’s strategy is not a short-term market timing system, but a long-term “risk allocation” strategy based on highly sophisticated indicators.</strong> Our objective is NOT to try to forecast stock movements in advance, but to correctly assess the market environment. When market indicators point to a strong, low-risk buying opportunity, we will recommend an aggressively invested position and growth oriented sectors. Conversely, we will inform you when our indicators show risk has risen to an unacceptable level so that you can take steps to protect your portfolio. This risk-averse strategy will help you to preserve capital in times of market vulnerability so that you will be ready and able to take advantage of the next low-risk buying opportunity when it arrives.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":90} -->\n<div style=\"height:90px\" 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:paragraph {\"fontSize\":\"small\"} -->\n<p class=\"has-small-font-size\">IMPORTANT DISCLOSURE INFORMATION: 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 strategy recommended and/or undertaken by InvesTech) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Please see additional IMPORTANT DISCLOSURE INFORMATION at www.investech.com.</p>\n<!-- /wp:paragraph -->','Note for New Subscribers','The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.','inherit','closed','closed','','5858-revision-v1','','','2021-03-03 20:25:42','2021-03-03 20:25:42','',5858,'https://ns2020-investech.investech.com/5858-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5925,3,'2021-03-03 20:30:00','2021-03-03 20:30:00','<!-- wp:heading -->\n<h2>Managing risk in the final stages of a market cycle</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Managing risk in the final stages of a market cycle is vitally important for preserving capital and generating superior long-term investment returns.  With a safety-first investment strategy, the first line of defense for protecting assets is to selectively take profits off the table and hold the proceeds in cash. Adjusting stock and sector weightings toward more resilient areas of the market can also fortify a portfolio. When bear market warning flags begin to wave, adding a bear fund can further reduce exposure to downside market movements and lower portfolio volatility.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Bear Fund Fundamentals</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>A bear fund is a mutual fund or exchange-traded fund (ETF) designed to increase in value as the market drops. Conversely, the fund will lose value when the market rises. The original bear market mutual funds have been around since the mid-1990s, and several bear fund ETFs following the same principles were incepted just over a decade ago, prior to the last bear market. At InvesTech Research, the primary reason for using a bear fund is as an “insurance policy” to offset potential losses in core holdings of the portfolio during market declines. Our recommendation to add a bear fund to the Model Fund Portfolio has raised some questions from our subscribers. The most frequently asked questions –some simple, some more complex– are addressed below.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why use a bear fund instead of selling positions and raising cash?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Increasing cash in the portfolio is an important part of a defensive strategy, but there are several reasons for maintaining select long positions and partially offsetting them with the “insurance policy” of a bear market fund:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Diversification</strong>: Bear fund insurance allows you to hold onto more stocks in a portfolio, thus maintaining greater diversification while counteracting the impact of a stock or sector that doesn’t perform as anticipated.</li><li><strong>Lower portfolio volatility</strong>: Market volatility usually increases as risks rise. A strategy that manages risk is inherently less volatile, and by “neutralizing” a portion of the portfolio, volatility is reduced.</li><li><strong>Dividends</strong>: Dividend payments continue for the positions that are maintained in a portfolio.</li><li><strong>Reduce capital gains tax</strong>: In taxable accounts, selling stocks can create sizeable realized gains. Limiting sales can lessen the tax bite.</li><li><strong>Prepare for the next bull market</strong>: When risks begin to resolve and the time is right to increase market allocation, new additions for the portfolio must be properly vetted prior to purchase. In the meantime, exposure can be quickly increased by removing the bear fund, which “de-neutralizes” a portion of the portfolio to participate in the market recovery without delay.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>What do we mean by a “net” long position?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4803,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/ModelPortfolioBarChart.png\" alt=\"InvesTech Model Fund Portfolio Allocation\" class=\"wp-image-4803\"/><figcaption>InvesTech Model Fund Portfolio Allocation</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The “net” long position in the Model Fund Portfolio is currently 55%. But how does this all add up?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As illustrated in the chart at right, current holdings include 63% long funds (blue), 8% short bear fund (red), and 29% cash (yellow). The bear fund effectively “neutralizes” or offsets the impact of an equivalent position of long holdings (shaded blue area). In other words, if the long position moves down, the bear fund moves up and the return on that combination should be negligible for the day. Therefore, the net long position, or overall exposure to the equity market, is the 63% long position minus the 8% short position which is equal to a 55% “net” long position.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why is the ProShares Short S&amp;P 500 ETF (SH) a good choice for the Model Fund Portfolio?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>We recommended SH for a number of reasons. Our portfolio holdings are based on S&amp;P 500 sectors, so it’s appropriate to select an inverse index fund correlated to this broad market Index. ProShares Short S&amp;P 500 was incepted in 2006 and has a solid track record through the last bear market. It is the largest and most liquid inverse S&amp;P 500 fund, currently holding over $1.6B in assets. We also like some of the advantages ETFs have over mutual funds such as lower expense ratios and the ability to trade throughout the day.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Finally, this fund is passively managed to inversely correlate to the Index’s daily returns. Actively managed funds typically focus on profiting from shorting individual stocks, frequently use resource holdings, and may concentrate on attempts to time the market. Performance can vary depending on the manager’s ability to pick the right stocks to short. Thus, for a safety-first strategy, a more predictable passive fund is the best choice for our purposes.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4801,\"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/2020/12/bear_market_funds2.png\" alt=\"Bear Market Alternative Funds\" class=\"wp-image-4801\"/><figcaption><strong>Bear Market Alternatives</strong></figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>We’ve assembled a list of some of the larger funds that have longer track records, including both ETFs and mutual funds. Before purchasing any on the list above, you should perform your own due diligence to determine the suitability for your portfolio. Reasons for providing these additional choices include:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Some retirement accounts are limited to mutual fund investments only.</li><li>When using a passively managed fund, it’s best to choose one based on an index that most closely matches your portfolio holdings.</li><li>If you are willing to accept the added risk that comes with an actively managed fund, you may want to consider one of the total return alternatives.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>If a passive bear fund offsets the market on a daily basis, what happens over a longer period of time?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Due to the compounding of daily returns, performance over periods longer than one day will likely differ from the inverse of the target index. To demonstrate, let’s look at an exaggerated example of how compounding affects returns.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4802,\"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/2020/12/SH_SP500_07_10.png\" alt=\"S&amp;P 500 and SH after the stock market peak in October 2007\" class=\"wp-image-4802\"/><figcaption>S&amp;P 500 and SH after the stock market peak in October 2007</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Assume that both ProShares Short S&amp;P 500 (SH) and the S&amp;P 500 start with a value of $100. On Day 1, the S&amp;P 500 loses 10% causing SH to gain 10%. The S&amp;P 500, therefore, ends Day 1 with a price of $90, while SH has grown to $110. If on Day 2 the S&amp;P 500 loses 10% again, its price drops to $81 and SH increases to $121. While achieving perfect correlation on a daily basis, after two days the S&amp;P 500 is down 19% and SH is up 21%.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>If the stock market continues to decline after purchasing a bear fund, gains can be much more than you might expect due to progressively larger dollar changes based on the increasing value of the investment. On the other hand, if the stock market rises persistently after a bear fund is purchased, the daily percentage changes result in progressively smaller dollar changes as the value of the investment decreases. Hence, investors lose less than they might expect when the fund’s return over the course of the rally is calculated.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>This point is illustrated in the graphs at right, which show the S&amp;P 500 and SH after the stock market peak in October 2007. Clearly, bear funds can serve as valuable “insurance” in a declining market, even if the position is held past the market bottom. <strong>One important note:</strong> bear fund performance in trendless, volatile markets is less predictable than in markets persistently trending up or down. In fact, due to compounding effects, an inverse index fund may even decline as the market remains flat.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why don’t you use a leveraged bear fund?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>A leveraged bear fund is designed to go up two or three times as much as its benchmark goes down on a daily basis. “More” might sound better to the average investor; however, trying to time bear markets or corrections rarely works, and one can easily get burned with leveraged funds if the market doesn\'t move as anticipated and the compounding effect is magnified. With this in mind, we’d avoid the leveraged bear market funds due to the increased volatility and risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary: A Safety-first Approach</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Bear market funds should be used to neutralize portfolio risk and help you sleep at night – not as a tool for speculative short-term trading. With a safety-first investment strategy, an inverse index fund can serve as an effective, low cost insurance offering an efficient way to offset rising market risk and reduce portfolio volatility. When considering a bear fund, the following guidelines should be helpful:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Use bear funds as an insurance to offset a portion of your portfolio investments.</li><li>Stay with the passively managed bear funds that inversely correlate with the broader indexes.</li><li>Choose the larger more liquid funds with longer track records.</li><li>Gradually implement a bear fund position as a bear market becomes more likely.</li><li>Do not use leveraged funds.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>If bear funds are not an option for your portfolio, the alternative is to reduce your long positions to reach the target “net” allocation and hold the balance in cash.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format.&nbsp;<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 -->','The \"Bare Necessities\" About Bear Funds','Managing risk in the final stages of a market cycle is vitally important for preserving capital and generating superior long-term investment returns. ','inherit','closed','closed','','2457-revision-v1','','','2021-03-03 20:30:00','2021-03-03 20:30:00','',2457,'https://ns2020-investech.investech.com/2457-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5927,3,'2021-03-03 20:30:35','2021-03-03 20:30:35','<!-- wp:heading -->\n<h2>Managing risk in the final stages of a market cycle</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Managing risk in the final stages of a market cycle is vitally important for preserving capital and generating superior long-term investment returns.  With a safety-first investment strategy, the first line of defense for protecting assets is to selectively take profits off the table and hold the proceeds in cash. Adjusting stock and sector weightings toward more resilient areas of the market can also fortify a portfolio. When bear market warning flags begin to wave, adding a bear fund can further reduce exposure to downside market movements and lower portfolio volatility.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Bear Fund Fundamentals</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>A bear fund is a mutual fund or exchange-traded fund (ETF) designed to increase in value as the market drops. Conversely, the fund will lose value when the market rises. The original bear market mutual funds have been around since the mid-1990s, and several bear fund ETFs following the same principles were incepted just over a decade ago, prior to the last bear market. At InvesTech Research, the primary reason for using a bear fund is as an “insurance policy” to offset potential losses in core holdings of the portfolio during market declines. Our recommendation to add a bear fund to the Model Fund Portfolio has raised some questions from our subscribers. The most frequently asked questions –some simple, some more complex– are addressed below.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why use a bear fund instead of selling positions and raising cash?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Increasing cash in the portfolio is an important part of a defensive strategy, but there are several reasons for maintaining select long positions and partially offsetting them with the “insurance policy” of a bear market fund:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Diversification</strong>: Bear fund insurance allows you to hold onto more stocks in a portfolio, thus maintaining greater diversification while counteracting the impact of a stock or sector that doesn’t perform as anticipated.</li><li><strong>Lower portfolio volatility</strong>: Market volatility usually increases as risks rise. A strategy that manages risk is inherently less volatile, and by “neutralizing” a portion of the portfolio, volatility is reduced.</li><li><strong>Dividends</strong>: Dividend payments continue for the positions that are maintained in a portfolio.</li><li><strong>Reduce capital gains tax</strong>: In taxable accounts, selling stocks can create sizeable realized gains. Limiting sales can lessen the tax bite.</li><li><strong>Prepare for the next bull market</strong>: When risks begin to resolve and the time is right to increase market allocation, new additions for the portfolio must be properly vetted prior to purchase. In the meantime, exposure can be quickly increased by removing the bear fund, which “de-neutralizes” a portion of the portfolio to participate in the market recovery without delay.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>What do we mean by a “net” long position?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4803,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/ModelPortfolioBarChart.png\" alt=\"InvesTech Model Fund Portfolio Allocation to cash, bear fund, and long funds.\" class=\"wp-image-4803\"/><figcaption>InvesTech Model Fund Portfolio Allocation</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The “net” long position in the Model Fund Portfolio is currently 55%. But how does this all add up?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As illustrated in the chart at right, current holdings include 63% long funds (blue), 8% short bear fund (red), and 29% cash (yellow). The bear fund effectively “neutralizes” or offsets the impact of an equivalent position of long holdings (shaded blue area). In other words, if the long position moves down, the bear fund moves up and the return on that combination should be negligible for the day. Therefore, the net long position, or overall exposure to the equity market, is the 63% long position minus the 8% short position which is equal to a 55% “net” long position.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why is the ProShares Short S&amp;P 500 ETF (SH) a good choice for the Model Fund Portfolio?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>We recommended SH for a number of reasons. Our portfolio holdings are based on S&amp;P 500 sectors, so it’s appropriate to select an inverse index fund correlated to this broad market Index. ProShares Short S&amp;P 500 was incepted in 2006 and has a solid track record through the last bear market. It is the largest and most liquid inverse S&amp;P 500 fund, currently holding over $1.6B in assets. We also like some of the advantages ETFs have over mutual funds such as lower expense ratios and the ability to trade throughout the day.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Finally, this fund is passively managed to inversely correlate to the Index’s daily returns. Actively managed funds typically focus on profiting from shorting individual stocks, frequently use resource holdings, and may concentrate on attempts to time the market. Performance can vary depending on the manager’s ability to pick the right stocks to short. Thus, for a safety-first strategy, a more predictable passive fund is the best choice for our purposes.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4801,\"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/2020/12/bear_market_funds2.png\" alt=\"alternatives to bear market funds\" class=\"wp-image-4801\"/><figcaption><strong>Bear Market Alternatives</strong></figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>We’ve assembled a list of some of the larger funds that have longer track records, including both ETFs and mutual funds. Before purchasing any on the list above, you should perform your own due diligence to determine the suitability for your portfolio. Reasons for providing these additional choices include:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Some retirement accounts are limited to mutual fund investments only.</li><li>When using a passively managed fund, it’s best to choose one based on an index that most closely matches your portfolio holdings.</li><li>If you are willing to accept the added risk that comes with an actively managed fund, you may want to consider one of the total return alternatives.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>If a passive bear fund offsets the market on a daily basis, what happens over a longer period of time?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Due to the compounding of daily returns, performance over periods longer than one day will likely differ from the inverse of the target index. To demonstrate, let’s look at an exaggerated example of how compounding affects returns.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4802,\"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/2020/12/SH_SP500_07_10.png\" alt=\"S&amp;P 500 and SH after the stock market peak in October 2007\" class=\"wp-image-4802\"/><figcaption>S&amp;P 500 and SH after the stock market peak in October 2007</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Assume that both ProShares Short S&amp;P 500 (SH) and the S&amp;P 500 start with a value of $100. On Day 1, the S&amp;P 500 loses 10% causing SH to gain 10%. The S&amp;P 500, therefore, ends Day 1 with a price of $90, while SH has grown to $110. If on Day 2 the S&amp;P 500 loses 10% again, its price drops to $81 and SH increases to $121. While achieving perfect correlation on a daily basis, after two days the S&amp;P 500 is down 19% and SH is up 21%.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>If the stock market continues to decline after purchasing a bear fund, gains can be much more than you might expect due to progressively larger dollar changes based on the increasing value of the investment. On the other hand, if the stock market rises persistently after a bear fund is purchased, the daily percentage changes result in progressively smaller dollar changes as the value of the investment decreases. Hence, investors lose less than they might expect when the fund’s return over the course of the rally is calculated.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>This point is illustrated in the graphs at right, which show the S&amp;P 500 and SH after the stock market peak in October 2007. Clearly, bear funds can serve as valuable “insurance” in a declining market, even if the position is held past the market bottom. <strong>One important note:</strong> bear fund performance in trendless, volatile markets is less predictable than in markets persistently trending up or down. In fact, due to compounding effects, an inverse index fund may even decline as the market remains flat.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why don’t you use a leveraged bear fund?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>A leveraged bear fund is designed to go up two or three times as much as its benchmark goes down on a daily basis. “More” might sound better to the average investor; however, trying to time bear markets or corrections rarely works, and one can easily get burned with leveraged funds if the market doesn\'t move as anticipated and the compounding effect is magnified. With this in mind, we’d avoid the leveraged bear market funds due to the increased volatility and risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary: A Safety-first Approach</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Bear market funds should be used to neutralize portfolio risk and help you sleep at night – not as a tool for speculative short-term trading. With a safety-first investment strategy, an inverse index fund can serve as an effective, low cost insurance offering an efficient way to offset rising market risk and reduce portfolio volatility. When considering a bear fund, the following guidelines should be helpful:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Use bear funds as an insurance to offset a portion of your portfolio investments.</li><li>Stay with the passively managed bear funds that inversely correlate with the broader indexes.</li><li>Choose the larger more liquid funds with longer track records.</li><li>Gradually implement a bear fund position as a bear market becomes more likely.</li><li>Do not use leveraged funds.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>If bear funds are not an option for your portfolio, the alternative is to reduce your long positions to reach the target “net” allocation and hold the balance in cash.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format.&nbsp;<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 -->','The \"Bare Necessities\" About Bear Funds','Managing risk in the final stages of a market cycle is vitally important for preserving capital and generating superior long-term investment returns. ','inherit','closed','closed','','2457-revision-v1','','','2021-03-03 20:30:35','2021-03-03 20:30:35','',2457,'https://ns2020-investech.investech.com/2457-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5928,3,'2021-03-03 20:31:26','2021-03-03 20:31:26','<!-- wp:heading -->\n<h2>Managing risk in the final stages of a market cycle</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Managing risk in the final stages of a market cycle is vitally important for preserving capital and generating superior long-term investment returns.  With a safety-first investment strategy, the first line of defense for protecting assets is to selectively take profits off the table and hold the proceeds in cash. Adjusting stock and sector weightings toward more resilient areas of the market can also fortify a portfolio. When bear market warning flags begin to wave, adding a bear fund can further reduce exposure to downside market movements and lower portfolio volatility.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Bear Fund Fundamentals</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>A bear fund is a mutual fund or exchange-traded fund (ETF) designed to increase in value as the market drops. Conversely, the fund will lose value when the market rises. The original bear market mutual funds have been around since the mid-1990s, and several bear fund ETFs following the same principles were incepted just over a decade ago, prior to the last bear market. At InvesTech Research, the primary reason for using a bear fund is as an “insurance policy” to offset potential losses in core holdings of the portfolio during market declines. Our recommendation to add a bear fund to the Model Fund Portfolio has raised some questions from our subscribers. The most frequently asked questions –some simple, some more complex– are addressed below.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why use a bear fund instead of selling positions and raising cash?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Increasing cash in the portfolio is an important part of a defensive strategy, but there are several reasons for maintaining select long positions and partially offsetting them with the “insurance policy” of a bear market fund:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li><strong>Diversification</strong>: Bear fund insurance allows you to hold onto more stocks in a portfolio, thus maintaining greater diversification while counteracting the impact of a stock or sector that doesn’t perform as anticipated.</li><li><strong>Lower portfolio volatility</strong>: Market volatility usually increases as risks rise. A strategy that manages risk is inherently less volatile, and by “neutralizing” a portion of the portfolio, volatility is reduced.</li><li><strong>Dividends</strong>: Dividend payments continue for the positions that are maintained in a portfolio.</li><li><strong>Reduce capital gains tax</strong>: In taxable accounts, selling stocks can create sizeable realized gains. Limiting sales can lessen the tax bite.</li><li><strong>Prepare for the next bull market</strong>: When risks begin to resolve and the time is right to increase market allocation, new additions for the portfolio must be properly vetted prior to purchase. In the meantime, exposure can be quickly increased by removing the bear fund, which “de-neutralizes” a portion of the portfolio to participate in the market recovery without delay.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>What do we mean by a “net” long position?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4803,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignright size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/ModelPortfolioBarChart.png\" alt=\"InvesTech Model Fund Portfolio Allocation to cash, bear fund, and long funds.\" class=\"wp-image-4803\"/><figcaption>InvesTech Model Fund Portfolio Allocation</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>The “net” long position in the Model Fund Portfolio is currently 55%. But how does this all add up?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As illustrated in the chart at right, current holdings include 63% long funds (blue), 8% short bear fund (red), and 29% cash (yellow). The bear fund effectively “neutralizes” or offsets the impact of an equivalent position of long holdings (shaded blue area). In other words, if the long position moves down, the bear fund moves up and the return on that combination should be negligible for the day. Therefore, the net long position, or overall exposure to the equity market, is the 63% long position minus the 8% short position which is equal to a 55% “net” long position.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why is the ProShares Short S&amp;P 500 ETF (SH) a good choice for the Model Fund Portfolio?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>We recommended SH for a number of reasons. Our portfolio holdings are based on S&amp;P 500 sectors, so it’s appropriate to select an inverse index fund correlated to this broad market Index. ProShares Short S&amp;P 500 was incepted in 2006 and has a solid track record through the last bear market. It is the largest and most liquid inverse S&amp;P 500 fund, currently holding over $1.6B in assets. We also like some of the advantages ETFs have over mutual funds such as lower expense ratios and the ability to trade throughout the day.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Finally, this fund is passively managed to inversely correlate to the Index’s daily returns. Actively managed funds typically focus on profiting from shorting individual stocks, frequently use resource holdings, and may concentrate on attempts to time the market. Performance can vary depending on the manager’s ability to pick the right stocks to short. Thus, for a safety-first strategy, a more predictable passive fund is the best choice for our purposes.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4801,\"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/2020/12/bear_market_funds2.png\" alt=\"alternatives to bear market funds\" class=\"wp-image-4801\"/><figcaption><strong>Bear Market Alternatives</strong></figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>We’ve assembled a list of some of the larger funds that have longer track records, including both ETFs and mutual funds. Before purchasing any on the list above, you should perform your own due diligence to determine the suitability for your portfolio. Reasons for providing these additional choices include:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Some retirement accounts are limited to mutual fund investments only.</li><li>When using a passively managed fund, it’s best to choose one based on an index that most closely matches your portfolio holdings.</li><li>If you are willing to accept the added risk that comes with an actively managed fund, you may want to consider one of the total return alternatives.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>If a passive bear fund offsets the market on a daily basis, what happens over a longer period of time?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Due to the compounding of daily returns, performance over periods longer than one day will likely differ from the inverse of the target index. To demonstrate, let’s look at an exaggerated example of how compounding affects returns.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":4802,\"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/2020/12/SH_SP500_07_10.png\" alt=\"S&amp;P 500 and SH after the stock market peak in October 2007\" class=\"wp-image-4802\"/><figcaption>S&amp;P 500 and SH after the stock market peak in October 2007</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Assume that both ProShares Short S&amp;P 500 (SH) and the S&amp;P 500 start with a value of $100. On Day 1, the S&amp;P 500 loses 10% causing SH to gain 10%. The S&amp;P 500, therefore, ends Day 1 with a price of $90, while SH has grown to $110. If on Day 2 the S&amp;P 500 loses 10% again, its price drops to $81 and SH increases to $121. While achieving perfect correlation on a daily basis, after two days the S&amp;P 500 is down 19% and SH is up 21%.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>If the stock market continues to decline after purchasing a bear fund, gains can be much more than you might expect due to progressively larger dollar changes based on the increasing value of the investment. On the other hand, if the stock market rises persistently after a bear fund is purchased, the daily percentage changes result in progressively smaller dollar changes as the value of the investment decreases. Hence, investors lose less than they might expect when the fund’s return over the course of the rally is calculated.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>This point is illustrated in the graphs at right, which show the S&amp;P 500 and SH after the stock market peak in October 2007. Clearly, bear funds can serve as valuable “insurance” in a declining market, even if the position is held past the market bottom. <strong>One important note:</strong> bear fund performance in trendless, volatile markets is less predictable than in markets persistently trending up or down. In fact, due to compounding effects, an inverse index fund may even decline as the market remains flat.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Why don’t you use a leveraged bear fund?</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>A leveraged bear fund is designed to go up two or three times as much as its benchmark goes down on a daily basis. “More” might sound better to the average investor; however, trying to time bear markets or corrections rarely works, and one can easily get burned with leveraged funds if the market doesn\'t move as anticipated and the compounding effect is magnified. With this in mind, we’d avoid the leveraged bear market funds due to the increased volatility and risk.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Summary: A Safety-first Approach</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Bear market funds should be used to neutralize portfolio risk and help you sleep at night – not as a tool for speculative short-term trading. With a safety-first investment strategy, an inverse index fund can serve as an effective, low cost insurance offering an efficient way to offset rising market risk and reduce portfolio volatility. When considering a bear fund, the following guidelines should be helpful:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list {\"className\":\"is-style-default\"} -->\n<ul class=\"is-style-default\"><li>Use bear funds as an insurance to offset a portion of your portfolio investments.</li><li>Stay with the passively managed bear funds that inversely correlate with the broader indexes.</li><li>Choose the larger more liquid funds with longer track records.</li><li>Gradually implement a bear fund position as a bear market becomes more likely.</li><li>Do not use leveraged funds.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph -->\n<p>If bear funds are not an option for your portfolio, the alternative is to reduce your long positions to reach the target “net” allocation and hold the balance in cash.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator\"/>\n<!-- /wp:separator -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format.&nbsp;<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 -->','The \"Bare Necessities\" About Bear Funds','Managing risk in the final stages of a market cycle is vitally important for preserving capital and generating superior long-term investment returns. \n\nWhy use a bear fund instead of selling positions and raising cash?','inherit','closed','closed','','2457-revision-v1','','','2021-03-03 20:31:26','2021-03-03 20:31:26','',2457,'https://ns2020-investech.investech.com/2457-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5930,3,'2021-03-03 20:33:46','2021-03-03 20:33:46','<!-- wp:heading -->\n<h2>Special Note for New Subscribers</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.</strong>  The following information will assist you in getting started with InvesTech. It involves the decisions that must be made by an investor who wishes to bring their portfolio allocation more into alignment with InvesTech’s strategy:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Determine your invested allocation</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Determine your current invested allocation by totaling the amounts you have invested in equities (individual stocks, stock mutual funds, ETFs, and international stocks/funds). Divide this by your total equity portfolio size. This is your percent invested allocation.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Refer to the InvesTech invested recommendation and allocations</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Refer to the InvesTech “percent” invested recommendation and allocations listed in the Model Fund Portfolio. If you are holding a portfolio that is similar in composition, sector weighting, and percent invested allocation to what we are currently recommending in the Model Fund Portfolio, it is unnecessary to make any changes at this time. Just wait for InvesTech’s next recommendation, generally made on the Friday Financial Hotline, to either add new positions or take profits… and act accordingly with your own holdings.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Adjust your portfolio</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Adjust your portfolio, if necessary. Purchases after our initial recommendations must be made at your discretion; however, if your portfolio mix is dramatically different from our current recommendations and sector weightings, you may wish to consider changes to more closely align the portfolio with our model. For example, check your mutual funds for their weightings in each sector. If the combination of your stocks, ETFs, and mutual funds give your portfolio significantly more or less exposure to a particular sector or category (such as international or small-cap) than we recommend, then you may wish to adjust your holdings to bring them more in line with our recommendations.<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>An exception would be if we warn on the Hotline or in the newsletter against new purchases in a particular area. This usually means that we believe sector leadership is changing or most of the profits on a position have already been achieved and new investment would not be advisable. In that case, it is better to wait in the safety of a money market fund for our next recommendation. Depending on market conditions, we may advise bringing your portfolio in line with our recommendations by phasing into the market. Please review the Model Fund Portfolio published in the current issue for more information.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Remember, InvesTech’s strategy is not a short-term market timing system, but a long-term “risk allocation” strategy based on highly sophisticated indicators.</strong> Our objective is NOT to try to forecast stock movements in advance, but to correctly assess the market environment. When market indicators point to a strong, low-risk buying opportunity, we will recommend an aggressively invested position and growth oriented sectors. Conversely, we will inform you when our indicators show risk has risen to an unacceptable level so that you can take steps to protect your portfolio. This risk-averse strategy will help you to preserve capital in times of market vulnerability so that you will be ready and able to take advantage of the next low-risk buying opportunity when it arrives.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":90} -->\n<div style=\"height:90px\" 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:paragraph {\"fontSize\":\"small\"} -->\n<p class=\"has-small-font-size\">IMPORTANT DISCLOSURE INFORMATION: 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 strategy recommended and/or undertaken by InvesTech) will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Please see additional IMPORTANT DISCLOSURE INFORMATION at www.investech.com.</p>\n<!-- /wp:paragraph -->','Note for New Subscribers','The InvesTech Model Portfolio is designed for individual investors who want to follow our allocation and sector recommendations for the equity/fund portion of their portfolio.  Bring your portfolio in line with InvesTech\'s with these steps...','inherit','closed','closed','','5858-revision-v1','','','2021-03-03 20:33:46','2021-03-03 20:33:46','',5858,'https://ns2020-investech.investech.com/5858-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5932,3,'2021-03-04 18:14:04','2021-03-04 18:14:04','<!-- wp:spacer {\"height\":20} -->\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:heading -->\n<h2>InvesTech Research: A Proven Track Record for over 40 Years</h2>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":4264,\"width\":512,\"height\":342,\"sizeSlug\":\"large\",\"className\":\"push-left\"} -->\n<div class=\"wp-block-image push-left\"><figure class=\"alignleft size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/11/office-photo-2-1024x683.jpg\" alt=\"\" class=\"wp-image-4264\" width=\"512\" height=\"342\"/><figcaption>Jim and his staff maintain over 120 years of financial and market data, and create all of the custom analysis software used by InvesTech Research in Whitefish, Montana.</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Based in scenic <a href=\"https://www.whitefishchamber.org/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Whitefish, Montana</a>, InvesTech Research offers a unique “safety-first\" strategy to our readers. Through our proven proprietary models and objective analysis, InvesTech has a 40-year history of accurately predicting market risk – telling investors when to be most bullish and when to become cautious.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>InvesTech Research is over 2,200 miles away from Wall Street and we see this distance from main-stream financial industries as a core component of our philosophy and objective methodolgies. We love our mountain view and are proud to be “Far From the Madding Crowd,” able to offer our readers the clear, researched, objective market analysis you rely on to inform your investment decisions.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3,\"className\":\"unclear\"} -->\n<h3 class=\"unclear\">A Philosophy Based on Experience</h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5161,\"width\":177,\"height\":236,\"sizeSlug\":\"full\",\"linkDestination\":\"none\",\"className\":\"spotlight-blue\"} -->\n<div class=\"wp-block-image spotlight-blue\"><figure class=\"alignright size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/01/kiplingers-best-2015.jpg\" alt=\"Kiplinger\'s, &quot;The Best List, 2015\" class=\"wp-image-5161\" width=\"177\" height=\"236\"/><figcaption>Rated \"Best Source of Investment Advice\" by Kiplinger’s Personal Finance, 2015</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Formerly a project manager for IBM Research with a number of domestic and international patents to his credit, founder and president Jim Stack has a graduate degree in engineering, with post-graduate study in business. After launching InvesTech Research in 1979, Jim began national circulation of the InvesTech Reseach Narket Newsletter in December 1982.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Today, InvesTech publishes the InvesTech Research Market Newsletter, and the Interim Bulletin, which has earned widespread recognition for its time-proven risk allocation strategy, as well as its in-depth analysis of the Federal Reserve. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Learn more about <a href=\"https://ns2020-investech.investech.com/about-us/\">our philosophy</a> here.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Meet the InvesTech Research Team</h2>\n<!-- /wp:heading -->\n\n<!-- wp:group {\"align\":\"wide\",\"className\":\"wide-wrap\"} -->\n<div class=\"wp-block-group alignwide wide-wrap\"><div class=\"wp-block-group__inner-container\"><!-- wp:media-text {\"mediaId\":1745,\"mediaLink\":\"https://ns2020-investech.investech.com/james-stack-team/jbs/\",\"mediaType\":\"image\",\"mediaSizeSlug\":\"large\",\"imageFill\":false,\"className\":\"bio-card\"} -->\n<div class=\"wp-block-media-text alignwide is-stacked-on-mobile bio-card\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/07/JBS-731x1024.jpg\" alt=\"James Stack, Founder and President, InvesTech Research\" class=\"wp-image-1745 size-large\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading {\"level\":3} -->\n<h3>James Stack</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>President</strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Jim Stack is founder and president of InvesTech Research. Jim is dedicated to helping investors develop an objective, safety-first investment strategy focused on risk management which he provides through his research and writing of the InvesTech Research newsletter.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":1713,\"mediaLink\":\"https://ns2020-investech.investech.com/james-stack-team/ecp/\",\"mediaType\":\"image\",\"mediaSizeSlug\":\"large\",\"imageFill\":false,\"className\":\"bio-card\"} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile bio-card\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/07/ECP-731x1024.jpg\" alt=\"Eli Petropoulos, Senior Market Analyst, IT\" class=\"wp-image-1713 size-large\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading {\"level\":3} -->\n<h3>Eli Petropoulos</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Senior Market Analyst</strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Eli Petropoulos drives idea generation and newsletter content as well as writing for each InvesTech publication. In addition, he is critical to analyzing, maintaining, and interpreting InvesTech’s private financial database and its proprietary indicators.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:media-text {\"mediaId\":1748,\"mediaLink\":\"https://ns2020-investech.investech.com/james-stack-team/clm/\",\"mediaType\":\"image\",\"mediaSizeSlug\":\"large\",\"imageFill\":false,\"className\":\"bio-card\"} -->\n<div class=\"wp-block-media-text alignwide is-stacked-on-mobile bio-card\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/07/CLM-731x1024.jpg\" alt=\"Christina Maloney, Director of Research Services, IT\" class=\"wp-image-1748 size-large\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading {\"level\":3} -->\n<h3>Christina Maloney</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Director of Research Services</strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Christina Maloney facilitates and supports daily operations from initial planning to the digital &amp; print publishing stages of the service. She is also highly involved in the newsletter design and website development for the firm.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":1714,\"mediaLink\":\"https://ns2020-investech.investech.com/james-stack-team/bjg/\",\"mediaType\":\"image\",\"mediaSizeSlug\":\"large\",\"imageFill\":false,\"className\":\"bio-card\"} -->\n<div class=\"wp-block-media-text alignwide has-media-on-the-right is-stacked-on-mobile bio-card\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/07/BJG-732x1024.jpg\" alt=\"Bailey Gage, Subscription Manager, IT\" class=\"wp-image-1714 size-large\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading {\"level\":3} -->\n<h3>Bailey Gage</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Subscription Manager</strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Bailey Gage provides the highest level of customer service to InvesTech subscribers with accurate subscription processing and detailed account maintenance. She is also a key participant in research and graphic creation for our publications and marketing materials.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:media-text {\"mediaId\":1747,\"mediaLink\":\"https://ns2020-investech.investech.com/james-stack-team/las-1/\",\"mediaType\":\"image\",\"mediaSizeSlug\":\"large\",\"imageFill\":false,\"className\":\"bio-card\"} -->\n<div class=\"wp-block-media-text alignwide is-stacked-on-mobile bio-card\"><figure class=\"wp-block-media-text__media\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/07/LAS-1-732x1024.jpg\" alt=\"Lisa Stack, CFO, InvesTech Research\" class=\"wp-image-1747 size-large\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading {\"level\":3} -->\n<h3>Lisa Stack</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>Chief Financial Officer</strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Lisa Stack participated in growing InvesTech Research in its early years. She is now integral to its financial operations and strategic planning as well as providing leadership to the company’s ongoing vision.</p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text --></div></div>\n<!-- /wp:group -->\n\n<!-- wp:group -->\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container\"><!-- wp:block {\"ref\":5238} /-->\n\n<!-- wp:heading {\"textAlign\":\"center\",\"fontSize\":\"medium\"} -->\n<h2 class=\"has-text-align-center has-medium-font-size\">InvesTech Research has been featured in the following publications:</h2>\n<!-- /wp:heading -->\n\n<!-- wp:block {\"ref\":5175} /-->\n\n<!-- wp:buttons {\"align\":\"center\"} -->\n<div class=\"wp-block-buttons aligncenter\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https://ns2020-investech.investech.com/in-the-news/\">Find us In the News</a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\n\n<!-- wp:block {\"ref\":5238} /--></div></div>\n<!-- /wp:group -->\n\n<!-- wp:group {\"className\":\"wall-to-wall neutral-warm max-wrap-90\"} -->\n<div class=\"wp-block-group wall-to-wall neutral-warm max-wrap-90\"><div class=\"wp-block-group__inner-container\"><!-- wp:block {\"ref\":5238} /-->\n\n<!-- wp:heading {\"textAlign\":\"left\"} -->\n<h2 class=\"has-text-align-left\">Why Whitefish, Montana? Check out our view!</h2>\n<!-- /wp:heading -->\n\n<!-- wp:media-text {\"mediaId\":1168,\"mediaType\":\"image\",\"imageFill\":true} -->\n<div class=\"wp-block-media-text alignwide 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/2020/06/whitefish-1024x576.jpg);background-position:50% 50%\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/06/whitefish-1024x576.jpg\" alt=\"Whitefish\" class=\"wp-image-1168 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:paragraph {\"placeholder\":\"Content…\"} -->\n<p>While visiting Whitefish, you may also enjoy our <a aria-label=\"undefined (opens in a new tab)\" href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/07/BestofBrochure.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Best of Whitefish</a> brochure, which was assembled by our staff and includes our favorite restaurants and activities in the area. Please be aware some businesses may have altered their operating hours due to Covid-19 restrictions. </p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:media-text -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>You\'re invited.</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Our doors are open to subscribers visiting the Whitefish area provided proper social distancing guidelines are met.  We are also following Montana\'s directive to require the use of face coverings.  If you would like to visit our office, please call us at <a href=\"tel:8009558500\">(40</a><a href=\"tel:4068627777\">6) 862-7777</a>, Mon - Fri 8:30am to 5:00pm Mountain Time to schedule.  </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:block {\"ref\":5238} /--></div></div>\n<!-- /wp:group -->','About InvesTech Research','','inherit','closed','closed','','777-revision-v1','','','2021-03-04 18:14:04','2021-03-04 18:14:04','',777,'https://ns2020-investech.investech.com/777-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5934,3,'2021-03-04 18:46:33','2021-03-04 18:46:33','<!-- wp:heading -->\n<h2>Strategy and Performance</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As an investor in today’s volatile markets, you naturally have questions about our strategy and the historical performance of our Model Portfolio. Over the past 40 years, InvesTech has earned a widely respected reputation for our objective analysis and safety-first investment philosophy. While profits are important, we know that earning profits is only half the picture. Preserving one’s portfolio (and profits) through a severe bear market like 2000-02 or 2007-09 can make the difference between a comfortable retirement or financial disaster.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:columns -->\n<div class=\"wp-block-columns\"><!-- wp:column -->\n<div class=\"wp-block-column\"><!-- wp:paragraph -->\n<p>InvesTech\'s time-proven strategy involves measuring market risk – and taking maximum advantage of those investment opportunities when risk is the lowest. Our objective is to contain losses in a bear market to less than half of the decline of the broad market averages and to capture at least 80% of the upside during bull markets. Historically, we have been successful in achieving this goal which not only outperforms market averages over the long-term, but also significantly reduces volatility.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Hulbert Ranking</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The final issue of the Hulbert Financial Digest, published in February 2016, included the ranking of top mutual fund newsletters and showed that InvesTech Research was #1 in long-term performance –both for risk adjusted and unadjusted performance– with an annualized gain of 8.7% per year… almost double the Wilshire 5000\'s annual return over the same period.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":4522,\"width\":768,\"height\":394,\"sizeSlug\":\"large\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/11/Hulbert-1024x525.png\" alt=\"Clipping from Hulbert Financial Digest ranking InvesTech against other top mutual fund newsletters.\" class=\"wp-image-4522\" width=\"768\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:heading -->\n<h2><strong>InvesTech’s Performance (2000 – current)</strong></h2>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5840,\"width\":403,\"height\":512,\"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/2021/03/itperfgraph-806x1024.jpg\" alt=\"\" class=\"wp-image-5840\" width=\"403\" height=\"512\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Back-to-back devastating bear markets in 2000-02 and 2007-09 have left most investors questioning the viability of a buy-and-hold strategy. At InvesTech we do not follow a buy-and-hold investment philosophy. Instead, we adjust equity exposure according to our assessment of market risk. This judgment is made based on InvesTech\'s time-tested proprietary technical indicators, historical analysis, and current economic and political forces.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Our safety-first investment philosophy led investors safely through the bear market of 2000-02. During this period, our defensive holdings and high-cash position protected subscribers from devastating bear market losses and kept our Model Portfolio essentially intact. In the 2007-09 bear market we achieved our objective of limiting losses to less than half the decline of the market averages (graph at right). In April 2009, just weeks after the official bear market low, we once again began increasing our invested allocation in anticipation of a new bull market. Since January 2000, the InvesTech Model Portfolio has gained 440.6%, while the S&amp;P 500 is up only 283.9% (including dividends). During the period January 1, 2000 through September 30, 2020, annualized performance of the InvesTech Model Portfolio was +8.4% compared to the S&amp;P 500 Total Return Index gain of +6.6%.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>During the Bubble Years (1996-1999)</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>InvesTech’s technical indicators were among the first to confirm the U.S. stock market had embarked on a dangerous valuation bubble. That placed our safety-first philosophy in direct conflict with the mania on Wall Street. We made a very difficult decision during this period to step aside from the bubble. While we did not track our Model Portfolio performance prior to 2000, Hulbert Financial Digest data showed our total return for 1996 closely approximated that of a money market fund.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In defense of our high-cash position, we do not come across bubbles every day on Wall Street. This one, along with 1929, had been the only two clearly definable bubbles of the century. While we have developed new technical tools that will, hopefully, allow us to take part in and profit from similar situations in the future, we will never abandon the principles of our safety-first philosophy.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Performance Prior to the Bubble (pre-1996)</h2>\n<!-- /wp:heading -->\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:paragraph -->\n<p>In 1996, InvesTech was recognized as one of only six financial advisory newsletters to have beaten the market on a risk-adjusted basis since inception in the early 1980s. And an October 1995 Forbes article described InvesTech’s long-term portfolio performance as “more or less impervious to declines.”</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The reason is simple: InvesTech has an established reputation for maximizing safety-first profits. But reducing risk from major bear markets can be even more important, as shown in 1987 when InvesTech received widespread recognition from USA Today, The Washington Post, and Los Angeles Times for moving to a 100% cash position just prior to the October Crash.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As an experienced investor, you must decide what performance means to you. Someone who is willing to wait 10 years or more to recover after losing two-thirds of their portfolio in a generational bear market, may not agree with our safety-first approach. On the other hand, if you have a deep respect for market risk and the impact that a devastating bear market can have on your portfolio or emotional well-being, then InvesTech Research offers what you are looking for… a risk-averse strategy and the ability to identify and take advantage of the best profit opportunities when they appear.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"><!-- wp:image {\"id\":5838,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/perf-table-533x1024.jpg\" alt=\"\" class=\"wp-image-5838\"/></figure>\n<!-- /wp:image --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:separator {\"className\":\"is-style-dots\"} -->\n<hr class=\"wp-block-separator is-style-dots\"/>\n<!-- /wp:separator -->\n\n<!-- wp:paragraph -->\n<p>Also available to read in PDF format.  Download the PDF.</p>\n<!-- /wp:paragraph -->','Model Fund Portfolio Performance','As an investor in today’s volatile markets, you naturally have questions about our strategy and the historical performance of our Model Portfolio. ','inherit','closed','closed','','5821-revision-v1','','','2021-03-04 18:46:33','2021-03-04 18:46:33','',5821,'https://ns2020-investech.investech.com/5821-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5935,3,'2021-03-04 19:05:57','2021-03-04 19:05:57','<!-- wp:media-text {\"mediaPosition\":\"right\",\"mediaId\":4988,\"mediaType\":\"image\"} -->\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/2021/01/rollercoaster.png\" alt=\"Thrilled people at the top of roller coaster about to plunge.\" class=\"wp-image-4988 size-full\"/></figure><div class=\"wp-block-media-text__content\"><!-- wp:heading -->\n<h2>Tempted by high-flying ETFs in this aging bull market? 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 at left, 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 -->\n<h2><strong>So, why has passive investing become all the rage in recent years?</strong></h2>\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: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. In the next two pages, we’ll discuss why index funds may not be all they’re thought to be…</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:paragraph -->\n<p>First published in our June 16, 2017 issue. 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','','','2021-03-04 19:05:57','2021-03-04 19:05:57','',2468,'https://ns2020-investech.investech.com/2468-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5936,3,'2021-03-04 19:07:13','2021-03-04 19:07:13','<!-- wp:heading -->\n<h2>The Indexing Craze</h2>\n<!-- /wp:heading -->\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:paragraph -->\n<p>The indexing craze… it’s sure to be remembered as a hallmark of the 1990s! What has made investing in the S&amp;P 500 so popular these days? If you buy into a recent Business Week article, “Index funds are cheap, easy–and they’re changing the way Americans invest.” A value investor might disagree, since index funds are holding a group of stocks which are at their most overvalued levels in history.  However, in a sense, they are “cheap”… you don’t have to pay a fund manager to search for attractive stocks, and there are few transaction fees when the portfolio doesn’t change much from year to year. As for “easy,” that’s a different story. Our October 23, 1998 issue of the InvesTech Mutual Fund Advisor devoted considerable space to dispelling some of the myths of easy profits and safety that enthusiasts claim for these funds.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Saving for Retirement Index Fever</p><cite>Fortune, 11/9/98</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\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Who Needs a Money Manager?</p><cite>Business Week, 2/22/99</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:paragraph -->\n<p>The popularity of investing in a large-cap index is a phenomenon of long-running bull markets, especially in the latter stages like today. There are several reasons for this. After years of positive gains in the stock market, new investors latch on to the implied idea that making money is simple. It’s also assumed that index funds are safer than other mutual funds because many S&amp;P 500 stocks have widely recognized names. And finally, index funds are the obvious choice for novice investors who tend to be drawn in during late stage bull markets. [Just try to talk a non-investor into putting money into the stock market in the depths of a recession when bull markets are typically born!] During the longest running bull markets, like today, index funds appear attractive even to more experienced investors, simply because that’s when they outperform other funds.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading -->\n<h2>Historical Perspective</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>They may be at the height of popularity now, but index funds aren’t just a phenomenon of the 1990’s. If you were investing in 1975 you would have seen this announcement in U.S. News &amp; World Report:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5397,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/usnews.png\" alt=\"\" class=\"wp-image-5397\"/><figcaption>\"Invest in the Stock-Market Average?,\" World Report, Dec. 29, 1975</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Index funds were a hot new concept in 1975, just in time to dramatically UNDER-perform the majority of stocks. Over the next seven years, the smallest 20% of NYSE issues outperformed the S&amp;P 500 by more than 5-fold (752% versus 150%). After this less-than-spectacular start, the popularity of index funds came and went with the market cycles for the next decade. They really started to proliferate only when the current bull market turned into a large-cap bonanza beginning in 1994.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Last year, index funds attracted nearly 19% of all money invested in mutual funds. And Vanguard Index 500 with $74 billion is close to passing #1 Fidelity Magellan in net assets. But that’s just the tip of the iceberg, as the majority of mutual funds are now investing in the “big 50 ” –the 50 largest-cap stocks in the S&amp;P 500– simply to keep pace with that index’s momentum. This flow of money into a handful of large stocks affects not only the market averages, but it can have long-term repercussions for the market as well as your future investment strategy.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>The Impact</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Here’s the current, and potential, impact as we see it…<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Investor psychology is distorted. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5403,\"width\":374,\"height\":611,\"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/2021/02/top-20.png\" alt=\"\" class=\"wp-image-5403\" width=\"374\" height=\"611\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Many novices view index funds as a type of variable rate CD. In Canada, one of our readers reports roadside billboards are promoting a guaranteed principle type of market index investment over GICs (the Canadian equivalent of a CD). What happens when index funds fail to return that expected 11%, or worse, when a major bear market wipes out 40-50%. Someone’s going to be left holding the bag.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3,\"className\":\"unclear\"} -->\n<h3 class=\"unclear\">More and more “non-index” funds are actually indexing a large part of their portfolios. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As index funds have been the only ones to keep pace with market averages in recent years, the natural reaction is for fund managers to change strategy. The philosophy seems to be, “If I can’t outperform the market, at least try to imitate it.” The result is an increasing number of equity funds that look like mini-index fund clones as managers are dragged into the same stocks. Any fund wanting to match or beat the averages must hold at least some of the “big 50 ” of the S&amp;P 500. To make this point, we looked at the portfolios of the ten top performing “non-index” growth funds for the past 12 months. On  Average, 5 of the top 10 holdings in each portfolio are among the 20 largest stocks in the S&amp;P.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As an example, take the Fidelity Dividend Growth fund which, by its very name, seems to imply conservative growth with a focus on dividends. But there’s nothing conservative about an annual portfolio turnover rate exceeding 105% for each of the last 5 years. And its dividend yield is only 0.4% – less than one-third the dismal yield of the S&amp;P 500.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3,\"className\":\"unclear\"} -->\n<h3 class=\"unclear\">Investments in momentum related funds are funneling into the most overvalued stocks in the market, driving them even higher. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Remember, the S&amp;P 500 is a capitalization weighted index, so money going into index funds is not evenly distributed in all 500 stocks. Only fifty stocks account for 55% of S&amp;P 500 capitalization and 55% of an index fund portfolio. That leaves the other 450 stocks to split the rest. Indexing contributes to explosive run-up and overvaluation in these top 50 stocks. Microsoft today is valued at 1.4 times the total capitalization of GE, Intel, Merck, Wal-Mart, Pfizer, Exxon, Coca-Cola, IBM, Cisco, AND Microsoft in December of 1990 at the start of this bull market. And America Online, which has yet to show any significant earnings, is now valued at more than ANY of the ten largest companies in the U.S. in 1990!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Market volatility increases whenever interest narrows to just a few stocks. All eyes are on the same select group (the largest companies in the S&amp;P 500). Any news or earnings surprises can cause wild gyrations in price as funds scramble to dump or pile into hot movers. No wonder the intraday volatility in 1999 is running the highest for any bull market year since 1929!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Finally, indexing amplifies the technical distortion in the markets. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The current issue of the InvesTech Market Analyst takes an insightful look at what’s really happening in breadth and other technical divergences. With support from the “big-50\" stocks of the S&amp;P, the closely watched indexes like the DJIA and NASDAQ simply don’t reflect these divergences. For a broader view of the market, take a close look at the Russell 2000 Index (premier small cap index) or the Value-Line Composite Index (an equally weighted index of 1700 stocks).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Investment Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>First, we advise that you examine the individual stock holdings in any mutual fund you own – especially for any funds that have “performed” well over the last couple years. Ask yourself, “How ‘indexed’ is this fund?” We’ve listed the 20 largest cap stocks of the S&amp;P 500 in the table shown here. If you find more than 3 or 4 of these stocks in the top 20 portfolio holdings of your fund, then take heed – your fund is nibbling on indexing.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In addition, avoid judging a future fund by its 1997-98 performance. If a fund was near the top of the performance list for these past two years, chances are it was momentum investing. Blue chip stocks are often the last to peak in a long-running bull market, benefiting from a “flight to safety” as other stocks falter. Unfortunately, when they fall from overvalued heights, they can be the last to recover from a recession.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5406,\"width\":514,\"height\":530,\"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/2021/02/mutualfundperf.png\" alt=\"\" class=\"wp-image-5406\" width=\"514\" height=\"530\"/><figcaption>\"Mutual Fund Performance\" graph from 1991-93</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>This past bull market illustrates our point. Index funds have enjoyed the run up in blue chip stocks, handily beating most actively managed funds over the last few years. Since 1994, the Vanguard 500 Index Fund has more than doubled the total return of the average small stock fund, and provided 1.6 times the return of the average value fund. This performance may seem unbeatable, but it’s only part of the story. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>This \"Mutual Fund Performance\" graph from 1991-93 reveals the comparative performance of the Vanguard 500 during the first three years of this bull market… the safest years to be invested. Note that the average “value” fund outperformed by a factor of 1.4… and the average small company fund literally doubled the return of the Vanguard 500 Index fund. From the perspective of risk management now (and future profits later), it’s never been more critical to know your mutual fund or prospective mutual fund. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>We firmly believe the big-cap leaders of today will again become the laggards after the next bear market washout. If that is the case, then you don’t want to find your portfolio indexed to under-performance at what may become one of the best buying opportunities of our lifetime.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":38} -->\n<div style=\"height:38px\" 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\":38} -->\n<div style=\"height:38px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:paragraph -->\n<p>This report is also available to read in PDF format.&nbsp;<a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/InvesTech-V99I04-Indexing.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','The Lemming Principle','Just as relevant today as in the Tech Bubble of the 1990s, this issue (originally published in March 1999) is particularly enlightening in view of today\'s infatuation with passive and index investing. Instead of falling off a cliff, these lemmings fell into the largest bear market since the 1930s!','inherit','closed','closed','','2470-revision-v1','','','2021-03-04 19:07:13','2021-03-04 19:07:13','',2470,'https://ns2020-investech.investech.com/2470-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5937,3,'2021-03-04 19:08:43','2021-03-04 19:08:43','<!-- wp:heading -->\n<h2>The Indexing Craze</h2>\n<!-- /wp:heading -->\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:paragraph -->\n<p>The indexing craze… it’s sure to be remembered as a hallmark of the 1990s! What has made investing in the S&amp;P 500 so popular these days? If you buy into a recent Business Week article, “Index funds are cheap, easy–and they’re changing the way Americans invest.” A value investor might disagree, since index funds are holding a group of stocks which are at their most overvalued levels in history.  However, in a sense, they are “cheap”… you don’t have to pay a fund manager to search for attractive stocks, and there are few transaction fees when the portfolio doesn’t change much from year to year. As for “easy,” that’s a different story. Our October 23, 1998 issue of the InvesTech Mutual Fund Advisor devoted considerable space to dispelling some of the myths of easy profits and safety that enthusiasts claim for these funds.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Saving for Retirement Index Fever</p><cite>Fortune, 11/9/98</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\":\"33.33%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:33.33%\"><!-- wp:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Who Needs a Money Manager?</p><cite>Business Week, 2/22/99</cite></blockquote>\n<!-- /wp:quote --></div>\n<!-- /wp:column -->\n\n<!-- wp:column {\"width\":\"66.66%\"} -->\n<div class=\"wp-block-column\" style=\"flex-basis:66.66%\"><!-- wp:paragraph -->\n<p>The popularity of investing in a large-cap index is a phenomenon of long-running bull markets, especially in the latter stages like today. There are several reasons for this. After years of positive gains in the stock market, new investors latch on to the implied idea that making money is simple. It’s also assumed that index funds are safer than other mutual funds because many S&amp;P 500 stocks have widely recognized names. And finally, index funds are the obvious choice for novice investors who tend to be drawn in during late stage bull markets. [Just try to talk a non-investor into putting money into the stock market in the depths of a recession when bull markets are typically born!] During the longest running bull markets, like today, index funds appear attractive even to more experienced investors, simply because that’s when they outperform other funds.</p>\n<!-- /wp:paragraph --></div>\n<!-- /wp:column --></div>\n<!-- /wp:columns -->\n\n<!-- wp:heading -->\n<h2>Historical Perspective</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>They may be at the height of popularity now, but index funds aren’t just a phenomenon of the 1990’s. If you were investing in 1975 you would have seen this announcement in U.S. News &amp; World Report:</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"center\",\"id\":5397,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/02/usnews.png\" alt=\"\" class=\"wp-image-5397\"/><figcaption>\"Invest in the Stock-Market Average?,\" World Report, Dec. 29, 1975</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Index funds were a hot new concept in 1975, just in time to dramatically UNDER-perform the majority of stocks. Over the next seven years, the smallest 20% of NYSE issues outperformed the S&amp;P 500 by more than 5-fold (752% versus 150%). After this less-than-spectacular start, the popularity of index funds came and went with the market cycles for the next decade. They really started to proliferate only when the current bull market turned into a large-cap bonanza beginning in 1994.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Last year, index funds attracted nearly 19% of all money invested in mutual funds. And Vanguard Index 500 with $74 billion is close to passing #1 Fidelity Magellan in net assets. But that’s just the tip of the iceberg, as the majority of mutual funds are now investing in the “big 50 ” –the 50 largest-cap stocks in the S&amp;P 500– simply to keep pace with that index’s momentum. This flow of money into a handful of large stocks affects not only the market averages, but it can have long-term repercussions for the market as well as your future investment strategy.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>The Impact</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Here’s the current, and potential, impact as we see it…<br></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Investor psychology is distorted. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5403,\"width\":374,\"height\":611,\"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/2021/02/top-20.png\" alt=\"\" class=\"wp-image-5403\" width=\"374\" height=\"611\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Many novices view index funds as a type of variable rate CD. In Canada, one of our readers reports roadside billboards are promoting a guaranteed principle type of market index investment over GICs (the Canadian equivalent of a CD). What happens when index funds fail to return that expected 11%, or worse, when a major bear market wipes out 40-50%. Someone’s going to be left holding the bag.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3,\"className\":\"unclear\"} -->\n<h3 class=\"unclear\">More and more “non-index” funds are actually indexing a large part of their portfolios. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>As index funds have been the only ones to keep pace with market averages in recent years, the natural reaction is for fund managers to change strategy. The philosophy seems to be, “If I can’t outperform the market, at least try to imitate it.” The result is an increasing number of equity funds that look like mini-index fund clones as managers are dragged into the same stocks. Any fund wanting to match or beat the averages must hold at least some of the “big 50 ” of the S&amp;P 500. To make this point, we looked at the portfolios of the ten top performing “non-index” growth funds for the past 12 months. On  Average, 5 of the top 10 holdings in each portfolio are among the 20 largest stocks in the S&amp;P.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>As an example, take the Fidelity Dividend Growth fund which, by its very name, seems to imply conservative growth with a focus on dividends. But there’s nothing conservative about an annual portfolio turnover rate exceeding 105% for each of the last 5 years. And its dividend yield is only 0.4% – less than one-third the dismal yield of the S&amp;P 500.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3,\"className\":\"unclear\"} -->\n<h3 class=\"unclear\">Investments in momentum related funds are funneling into the most overvalued stocks in the market, driving them even higher. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Remember, the S&amp;P 500 is a capitalization weighted index, so money going into index funds is not evenly distributed in all 500 stocks. Only fifty stocks account for 55% of S&amp;P 500 capitalization and 55% of an index fund portfolio. That leaves the other 450 stocks to split the rest. Indexing contributes to explosive run-up and overvaluation in these top 50 stocks. Microsoft today is valued at 1.4 times the total capitalization of GE, Intel, Merck, Wal-Mart, Pfizer, Exxon, Coca-Cola, IBM, Cisco, AND Microsoft in December of 1990 at the start of this bull market. And America Online, which has yet to show any significant earnings, is now valued at more than ANY of the ten largest companies in the U.S. in 1990!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Market volatility increases whenever interest narrows to just a few stocks. All eyes are on the same select group (the largest companies in the S&amp;P 500). Any news or earnings surprises can cause wild gyrations in price as funds scramble to dump or pile into hot movers. No wonder the intraday volatility in 1999 is running the highest for any bull market year since 1929!</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>Finally, indexing amplifies the technical distortion in the markets. </h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The current issue of the InvesTech Market Analyst takes an insightful look at what’s really happening in breadth and other technical divergences. With support from the “big-50\" stocks of the S&amp;P, the closely watched indexes like the DJIA and NASDAQ simply don’t reflect these divergences. For a broader view of the market, take a close look at the Russell 2000 Index (premier small cap index) or the Value-Line Composite Index (an equally weighted index of 1700 stocks).</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Investment Strategy</h2>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p>First, we advise that you examine the individual stock holdings in any mutual fund you own – especially for any funds that have “performed” well over the last couple years. Ask yourself, “How ‘indexed’ is this fund?” We’ve listed the 20 largest cap stocks of the S&amp;P 500 in the table shown here. If you find more than 3 or 4 of these stocks in the top 20 portfolio holdings of your fund, then take heed – your fund is nibbling on indexing.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In addition, avoid judging a future fund by its 1997-98 performance. If a fund was near the top of the performance list for these past two years, chances are it was momentum investing. Blue chip stocks are often the last to peak in a long-running bull market, benefiting from a “flight to safety” as other stocks falter. Unfortunately, when they fall from overvalued heights, they can be the last to recover from a recession.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5406,\"width\":514,\"height\":530,\"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/2021/02/mutualfundperf.png\" alt=\"\" class=\"wp-image-5406\" width=\"514\" height=\"530\"/><figcaption>\"Mutual Fund Performance\" graph from 1991-93</figcaption></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>This past bull market illustrates our point. Index funds have enjoyed the run up in blue chip stocks, handily beating most actively managed funds over the last few years. Since 1994, the Vanguard 500 Index Fund has more than doubled the total return of the average small stock fund, and provided 1.6 times the return of the average value fund. This performance may seem unbeatable, but it’s only part of the story. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>This \"Mutual Fund Performance\" graph from 1991-93 reveals the comparative performance of the Vanguard 500 during the first three years of this bull market… the safest years to be invested. Note that the average “value” fund outperformed by a factor of 1.4… and the average small company fund literally doubled the return of the Vanguard 500 Index fund. From the perspective of risk management now (and future profits later), it’s never been more critical to know your mutual fund or prospective mutual fund. </p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>We firmly believe the big-cap leaders of today will again become the laggards after the next bear market washout. If that is the case, then you don’t want to find your portfolio indexed to under-performance at what may become one of the best buying opportunities of our lifetime.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:spacer {\"height\":38} -->\n<div style=\"height:38px\" 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\":38} -->\n<div style=\"height:38px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n<!-- /wp:spacer -->\n\n<!-- wp:paragraph -->\n<p>This report was originally published March 1999 and is also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/InvesTech-V99I04-Indexing.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','The Lemming Principle','Just as relevant today as in the Tech Bubble of the 1990s, this issue (originally published in March 1999) is particularly enlightening in view of today\'s infatuation with passive and index investing. Instead of falling off a cliff, these lemmings fell into the largest bear market since the 1930s!','inherit','closed','closed','','2470-revision-v1','','','2021-03-04 19:08:43','2021-03-04 19:08:43','',2470,'https://ns2020-investech.investech.com/2470-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5938,3,'2021-03-04 19:19:01','2021-03-04 19:19:01','<!-- 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 {\"align\":\"center\",\"id\":4898,\"width\":381,\"height\":240,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/12/iceberg.jpg\" alt=\"SBLs are the tip of the iceberg\" class=\"wp-image-4898\" width=\"381\" height=\"240\"/><figcaption>Nine-tenths of an iceberg\'s volume is below the water</figcaption></figure></div>\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\":471,\"height\":231,\"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=\"471\" height=\"231\"/><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\":229,\"height\":194,\"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=\"229\" height=\"194\"/><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\":357,\"height\":262,\"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=\"357\" height=\"262\"/><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,\"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/2020/12/GoldmanSachs-300x204.png\" alt=\"Goldman Sachs securities lending advertisement\" class=\"wp-image-4904\"/><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:paragraph -->\n<p>First published in our September 15, 2017 issue. Also available to read in PDF format. <a href=\"https://ns2020-investech.investech.com/wp-content/pdf_files_wp/SBLs-2017.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download the PDF</a>.</p>\n<!-- /wp:paragraph -->','Securities-Backed Loans','\nSecurities-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','','','2021-03-04 19:19:01','2021-03-04 19:19:01','',2472,'https://ns2020-investech.investech.com/2472-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5943,3,'2021-03-04 19:33:07','2021-03-04 19:33:07','<!-- wp:heading -->\n<h2>The ABCs of MLPs…<br>What you don’t know can hurt you.</h2>\n<!-- /wp:heading -->\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 below. 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:paragraph -->\n<p>Though MLPs offer an attractive yield, they do carry risks and can lose value. It’s important to recognize these are not 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:heading -->\n<h2>Strategy</h2>\n<!-- /wp:heading -->\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:paragraph -->\n<p>InvesTech Research Special Report also available to read in PDF format.  <a href=\"https://ns2020-investech.investech.com/wp-content/uploads/2020/08/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','','','2021-03-04 19:33:07','2021-03-04 19:33:07','',2474,'https://ns2020-investech.investech.com/2474-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5946,3,'2021-03-04 20:11:18','2021-03-04 20:11:18','','marketbubble','','inherit','open','closed','','marketbubble','','','2021-03-04 20:11:18','2021-03-04 20:11:18','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/marketbubble.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5947,3,'2021-03-04 20:12:53','2021-03-04 20:12:53','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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: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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" class=\"wp-image-5946\"/></figure></div>\n<!-- /wp:image -->','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','','','2021-03-04 20:12:53','2021-03-04 20:12:53','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5949,3,'2021-03-04 20:24:53','2021-03-04 20:24:53','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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 -->\n<h2>A Short History of Financial Euphoria</h2>\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading -->\n<h2>Healthy Bull Market to Dangerous Bubble</h2>\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=\"\" class=\"wp-image-5946\"/></figure></div>\n<!-- /wp:image -->','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','','','2021-03-04 20:24:53','2021-03-04 20:24:53','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5951,3,'2021-03-04 20:26:36','2021-03-04 20:26:36','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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: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 -->','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','','','2021-03-04 20:26:36','2021-03-04 20:26:36','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5953,3,'2021-03-04 20:35:26','2021-03-04 20:35:26','','overvaluation-extremes','','inherit','open','closed','','overvaluation-extremes','','','2021-03-04 20:35:26','2021-03-04 20:35:26','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/overvaluation-extremes.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5954,3,'2021-03-04 20:43:28','2021-03-04 20:43:28','','surveyfundinvestors','','inherit','open','closed','','surveyfundinvestors','','','2021-03-04 20:43:28','2021-03-04 20:43:28','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/surveyfundinvestors.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5955,3,'2021-03-04 20:44:40','2021-03-04 20:44:40','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/2021/03/overvaluation-extremes.jpg\" alt=\"\" class=\"wp-image-5953\"/></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:quote {\"className\":\"is-style-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><p>Investors may overreact to a downturn, SEC warns<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-headline-highlight\"} -->\n<blockquote class=\"wp-block-quote is-style-headline-highlight\"><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=\"\" 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 -->','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','','','2021-03-04 20:44:40','2021-03-04 20:44:40','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5956,3,'2021-03-04 20:48:06','2021-03-04 20:48:06','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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:quote {\"className\":\"is-style-default\"} -->\n<blockquote class=\"wp-block-quote is-style-default\"><p>Investors <strong>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=\"\" 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 -->','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','','','2021-03-04 20:48:06','2021-03-04 20:48:06','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5957,3,'2021-03-04 20:48:37','2021-03-04 20:48:37','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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 -->','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','','','2021-03-04 20:48:37','2021-03-04 20:48:37','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5959,3,'2021-03-04 20:57:10','2021-03-04 20:57:10','','dow10000','','inherit','open','closed','','dow10000','','','2021-03-04 20:57:10','2021-03-04 20:57:10','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/dow10000.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5960,3,'2021-03-04 20:58:51','2021-03-04 20:58:51','','schwabassets','','inherit','open','closed','','schwabassets','','','2021-03-04 20:58:51','2021-03-04 20:58:51','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5961,3,'2021-03-04 20:59:10','2021-03-04 20:59:10','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"id\":5960,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets-124x300.jpg\" alt=\"\" class=\"wp-image-5960\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade:</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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','','','2021-03-04 20:59:10','2021-03-04 20:59:10','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5963,3,'2021-03-04 21:00:30','2021-03-04 21:00:30','','mutualfunds','','inherit','open','closed','','mutualfunds','','','2021-03-04 21:00:30','2021-03-04 21:00:30','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/mutualfunds.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5964,3,'2021-03-04 21:01:02','2021-03-04 21:01:02','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5960,\"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/schwabassets-124x300.jpg\" alt=\"\" class=\"wp-image-5960\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->','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','','','2021-03-04 21:01:02','2021-03-04 21:01:02','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5966,3,'2021-03-04 21:04:03','2021-03-04 21:04:03','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:cover {\"overlayColor\":\"secondary-blue\"} -->\n<div class=\"wp-block-cover has-secondary-blue-background-color has-background-dim\"><div class=\"wp-block-cover__inner-container\"><!-- wp:paragraph {\"align\":\"center\",\"placeholder\":\"Write title…\",\"fontSize\":\"large\"} -->\n<p class=\"has-text-align-center has-large-font-size\"></p>\n<!-- /wp:paragraph --></div></div>\n<!-- /wp:cover -->','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','','','2021-03-04 21:04:03','2021-03-04 21:04:03','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5967,3,'2021-03-04 21:04:45','2021-03-04 21:04:45','','investmentsclubs','','inherit','open','closed','','investmentsclubs','','','2021-03-04 21:04:45','2021-03-04 21:04:45','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/investmentsclubs.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5968,3,'2021-03-04 21:04:54','2021-03-04 21:04:54','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5967,\"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/investmentsclubs-294x300.jpg\" alt=\"\" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image -->','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','','','2021-03-04 21:04:54','2021-03-04 21:04:54','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5970,3,'2021-03-04 21:05:43','2021-03-04 21:05:43','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"id\":5967,\"sizeSlug\":\"medium\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-medium\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/investmentsclubs-294x300.jpg\" alt=\"\" class=\"wp-image-5967\"/></figure>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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','','','2021-03-04 21:05:43','2021-03-04 21:05:43','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5972,3,'2021-03-04 21:08:18','2021-03-04 21:08:18','','nyse-seat','','inherit','open','closed','','nyse-seat','','','2021-03-04 21:08:18','2021-03-04 21:08:18','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/nyse-seat.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5973,3,'2021-03-04 21:12:13','2021-03-04 21:12:13','','nasdaq-pe-ratio','','inherit','open','closed','','nasdaq-pe-ratio','','','2021-03-04 21:12:13','2021-03-04 21:12:13','',2497,'https://ns2020-investech.investech.com/wp-content/uploads/2021/03/nasdaq-pe-ratio.jpg',0,'attachment','image/jpeg',0);
INSERT INTO `wp_posts` VALUES (5974,3,'2021-03-04 21:13:04','2021-03-04 21:13:04','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5967,\"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/investmentsclubs-294x300.jpg\" alt=\"\" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5972,\"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/nyse-seat-216x300.jpg\" alt=\"\" class=\"wp-image-5972\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Market historians note that stock market bubbles have been<br>accompanied by a “bubble” in the price of a seat on the New<br>York Stock Exchange. In March 1998, a seat sold for a cool<br>$2.0 million – far above the peak prior to the 1987 Crash. Also<br>note the 1929 and 1966-69 peaks… which will become relevant<br>in the next section of this report.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5973,\"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/nasdaq-pe-ratio-300x297.jpg\" alt=\"\" class=\"wp-image-5973\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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','','','2021-03-04 21:13:04','2021-03-04 21:13:04','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
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INSERT INTO `wp_posts` VALUES (5980,3,'2021-03-04 21:22:55','2021-03-04 21:22:55','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5967,\"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/investmentsclubs-294x300.jpg\" alt=\"\" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5972,\"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/nyse-seat-216x300.jpg\" alt=\"\" class=\"wp-image-5972\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Market historians note that stock market bubbles have been<br>accompanied by a “bubble” in the price of a seat on the New<br>York Stock Exchange. In March 1998, a seat sold for a cool<br>$2.0 million – far above the peak prior to the 1987 Crash. Also<br>note the 1929 and 1966-69 peaks… which will become relevant<br>in the next section of this report.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5973,\"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/nasdaq-pe-ratio-300x297.jpg\" alt=\"\" class=\"wp-image-5973\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5978,\"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/mergers-300x258.jpg\" alt=\"\" class=\"wp-image-5978\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Mergers and acquisitions? Since 1996, there’s been no “deal” too big, too expensive, or too leveraged for Wall Street to piece together.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5979,\"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/margin-debt66-300x242.jpg\" alt=\"\" class=\"wp-image-5979\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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','','','2021-03-04 21:22:55','2021-03-04 21:22:55','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5982,3,'2021-03-04 21:26:14','2021-03-04 21:26:14','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Public investment funds placed with the nation’s largest discount brokerage firm have risen over 19-fold in less than a decade.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5967,\"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/investmentsclubs-294x300.jpg\" alt=\"\" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5972,\"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/nyse-seat-216x300.jpg\" alt=\"\" class=\"wp-image-5972\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:paragraph -->\n<p>Market historians note that stock market bubbles have been<br>accompanied by a “bubble” in the price of a seat on the New<br>York Stock Exchange. In March 1998, a seat sold for a cool<br>$2.0 million – far above the peak prior to the 1987 Crash. Also<br>note the 1929 and 1966-69 peaks… which will become relevant<br>in the next section of this report.</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5973,\"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/nasdaq-pe-ratio-300x297.jpg\" alt=\"\" class=\"wp-image-5973\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5978,\"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/mergers-300x258.jpg\" alt=\"\" class=\"wp-image-5978\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>Mergers and acquisitions? Since 1996, there’s been no “deal” too big, too expensive, or too leveraged for Wall Street to piece together.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5979,\"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/margin-debt66-300x242.jpg\" alt=\"\" class=\"wp-image-5979\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- wp:list -->\n<ul><li>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.</li></ul>\n<!-- /wp:list -->\n\n<!-- wp:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></p>\n<!-- /wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>The Inevitable Questions:</h3>\n<!-- /wp:heading -->\n\n<!-- wp:paragraph -->\n<p><strong>• What has driven stocks to such overvalued extremes?<br>• Why do the SEC and our Federal Reserve seem so worried?<br>• Why are investor expectations so out-of-touch with reality?<br>• What has created so many symptoms of a dangerous “bubble”?</strong></p>\n<!-- /wp:paragraph -->\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>The answer is “disinflation”. 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 -->','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','','','2021-03-04 21:26:14','2021-03-04 21:26:14','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5984,3,'2021-03-04 21:37:39','2021-03-04 21:37:39','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- 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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5967,\"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/investmentsclubs-294x300.jpg\" alt=\"\" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- 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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5972,\"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/nyse-seat-216x300.jpg\" alt=\"\" class=\"wp-image-5972\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- 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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5973,\"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/nasdaq-pe-ratio-300x297.jpg\" alt=\"\" class=\"wp-image-5973\"/></figure></div>\n<!-- /wp:image -->\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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5978,\"width\":334,\"height\":288,\"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=\"\" class=\"wp-image-5978\" width=\"334\" height=\"288\"/></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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5979,\"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/margin-debt66-300x242.jpg\" alt=\"\" class=\"wp-image-5979\"/></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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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: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>The answer is “disinflation”. 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 -->','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','','','2021-03-04 21:37:39','2021-03-04 21:37:39','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
INSERT INTO `wp_posts` VALUES (5986,3,'2021-03-04 21:39:32','2021-03-04 21:39:32','<!-- 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>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?</p>\n<!-- /wp:paragraph -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\"></a></div>\n<!-- /wp:button --></div>\n<!-- /wp:buttons -->\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:paragraph -->\n<p>1) 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.”<br>2) 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.<br>3) The illusion that, except for temporary setbacks, “values are going up permanently and indefinitely.”<br>4) 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.”</p>\n<!-- /wp:paragraph -->\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=\"\" 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,\"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/overvaluation-extremes-300x296.jpg\" alt=\"\" class=\"wp-image-5953\"/></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: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=\"\" 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:image {\"align\":\"right\",\"id\":5959,\"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/dow10000-300x221.jpg\" alt=\"\" class=\"wp-image-5959\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- 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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5960,\"width\":163,\"height\":394,\"sizeSlug\":\"full\",\"linkDestination\":\"none\"} -->\n<div class=\"wp-block-image\"><figure class=\"alignleft size-full is-resized\"><img src=\"https://ns2020-investech.investech.com/wp-content/uploads/2021/03/schwabassets.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"163\" height=\"394\"/></figure></div>\n<!-- /wp:image -->\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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5963,\"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/mutualfunds-234x300.jpg\" alt=\"\" class=\"wp-image-5963\"/></figure></div>\n<!-- /wp:image -->\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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5967,\"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/investmentsclubs-294x300.jpg\" alt=\"\" class=\"wp-image-5967\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- 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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5972,\"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/nyse-seat-216x300.jpg\" alt=\"\" class=\"wp-image-5972\"/></figure></div>\n<!-- /wp:image -->\n\n<!-- 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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5973,\"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/nasdaq-pe-ratio-300x297.jpg\" alt=\"\" class=\"wp-image-5973\"/></figure></div>\n<!-- /wp:image -->\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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"right\",\"id\":5978,\"width\":334,\"height\":288,\"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=\"\" class=\"wp-image-5978\" width=\"334\" height=\"288\"/></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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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:image {\"align\":\"left\",\"id\":5979,\"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/margin-debt66-300x242.jpg\" alt=\"\" class=\"wp-image-5979\"/></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:paragraph {\"textColor\":\"maroon\"} -->\n<p class=\"has-maroon-color has-text-color\"><strong><em>Reality Check: Bull or Bubble?</em></strong></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: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>The answer is “disinflation”. 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 -->','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','','','2021-03-04 21:39:32','2021-03-04 21:39:32','',2497,'https://ns2020-investech.investech.com/2497-revision-v1/',0,'revision','',0);
