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Wealth Building Strategies

Stock Ownership Figures Look Nothing Like A Bubble

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Posted by Chris Ciovacco - Ciovacco Capital Management

on Wednesday, 08 November 2017 06:57

Summary

Are stock ownership figures nearing bubble territory?

Latest polling data provides some insight into the bull's sustainability.

Are annual charts leaning bullish or bearish?

A Euphoric, All In Bubble?

Once a year, Gallup conducts a poll that provides some insight into the sustainability of the bull market in stocks (SPY). The concept of an investment bubble implies irrational investor confidence. If skepticism and fear were near all-time, bubble-like lows, we would expect a very high percentage of U.S. households to be in the stock market (VTI), as was the case near the euphoric 2007 stock market peak (see graph below).

saupload Gallup2007HouseholdOwnershipChart

Are We Back To Bubble Territory In 2017?

....continue reading HERE



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Wealth Building Strategies

The Six Groups of Investors and Traders

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Posted by Martin Armstrong - Armstrong Economics

on Wednesday, 25 October 2017 05:45

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The recent report by the Commodity Futures Trading Commission (CFTC), shows that the professional investors have continued to bet on falling Dow Jones “short” as private investors are starting to bet heavily on rising prices ( “Long”). Professional investors remain suspicious of a further rise in the US stock market. The private investors’ view is exactly the opposite. The question is; Who will be right?

There have been plenty of times that the professional is dead wrong and the average person on the street has actually outperformed the professionals. Reuters reported that 69% of hedge fund investors expected the second half of 2017 to be worse than the first half. So why are the professionals so pessimistic?

When you live and breath the market every single day, it is hard to get a grip on vertical markets. The professionals, more so that even the average street investor, tends to do worse in such markets because it makes them uncomfortable. Then there is the self-gratifying notion that the market is over when the retail invest comes in. But they tend not to look at the fact that there is a huge difference between the average retail investor and the person who has never invested who rushes in to join the party at the top simply be everybody else if there.

MAA-TokyoI have told the story before how I was doing an institutional only seminar in Tokyo at the Imperial Hotel. This individual bribed someone in the hotel to get in. He came up to me and apologized offering to pay. He said he just had to speak to me. I asked him what was the problem, He explained he had bought the Japanese share market on the very day of the high and now it was crashing. His investment was $50 million. But the intrigue came when he said it was the first time in his life he had purchased any stock. He then had my attention since I was talking to the guy who bought the high.

I asked him what made him buy that day for the first time in his life? He said brokers had called him every year saying the Nikkei rallied on average 5% every January with the New Year. He watched it for 7 years and then finally bought the high. That is what I mean as the difference between the average retail investor and the fool who rushes in at the end because everybody else is there. It is when that final group of people rush in that marks the end of the market – not when simply average investors buy who follow the market generally.

We have four actual groups:



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Wealth Building Strategies

This billionaire’s “$5 million test” will make you a way better investor

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Posted by Simon Black - Sovereign Man

on Thursday, 19 October 2017 19:16

supertankIn 1982, a man named Jim Tisch bought seven supertankers for $42 million. He found them by cold calling companies he found in the Yellow Pages. 

Yes, $42 million is a lot of money… but these tankers were each four football fields long. That’s a lot of steel. And they could carry between 2-3 million barrels of oil. 

And these ships were built just eight years earlier at a cost of $50 million apiece. 

Jim Tisch is the son of the legendary Laurence “Larry” Tisch, the late billionaire founder of Loews. Corp – a conglomerate that has owned hotels, movie theaters, insurance, cigarettes, oil and watches over the years. 

And like his Dad, Jim had a nose for value… 

Low oil prices in the early 1970’s (around $3 a barrel) caused demand to soar. To keep up with the growing demand, everyone rushed to build supertankers (which can take years to complete).   

Then the Arab oil embargo in 1973 sent oil prices soaring to $12 a barrel by 1975. 

The Iranian Revolution (and ousting of the Shah) followed in 1979… And Iran drastically slashed its output. Oil jumped to over $37 a barrel. 

Now there was much less oil coming out of Iran (and a year later, Iraq), but the tankers were still floating in the water. 

Tisch started sniffing around for tankers in the early 80s, when, according to Tisch, only 30% of the global fleet was necessary to meet demand. 

That’s why he was able to buy at an almost 90% discount. As he said at a 2006 speech at Columbia University: 

[S]hips were trading at scrap value. That’s right. Perfectly good seven-year-old ships were selling like hamburger meat – dollars per pound of steel on the ship. Or, to put it another way, one was able to buy fabricated steel for the price of scrap steel. We had confidence that with continued scrapping of ships and increased oil demand, one day the remaining ships would be worth far more than their value as scrap. 

By 1990, the market for tankers was turning around… too many ships were scrapped and the volume of oil coming from the Persian Gulf was increasing. 

Noting the strength, Tisch sold a 50% interest in his ships for 10 times his initial investment.
 
He still maintained half ownership… and collected enormous cashflows from operating those ships. 
 
When he first stepped foot on a supertanker, Tisch said he formulated the “Jim Tisch $5 million test.”


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Wealth Building Strategies

How Much Money Do You Need To Retire On Dividends Alone?

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Posted by Contrarian Outlook

on Wednesday, 18 October 2017 08:12

This is a better question to ask than the typical “magic number” formula that most “first-level” thinking firms tout. Let’s review why their approach is fatally flawed, so that we can derive a more reliable method of our own based in actual reality (and funded by actual dividend payments.)

Fidelity Says What?

You should aim to have 10 times your final salary in savings.

But why? I suppose they are claiming that, if you earned $100,000 in your final year working, that you’ll want to earn this much in income every year for the rest of your life.

So, Fidelity says save a million bucks and you’re in good shape.

But how exactly is $1,000,000 supposed to throw off $100,000 in excess income annually?

Fidelity’s Strategic Dividend & Income Fund (FSDIX) pays 2.38% today. Which means, if you follow their advice to a tee, and buy their flagship income fund, you are earning $23,800 per year in income from your million-dollar stake.

That’s a start. But where exactly is the other 76.2% of you income supposed to come from?

Apparently this is up to us to figure out, because we’ve run out of sage advice from this respected investment firm. So let’s see if we can piece together a full retirement ourselves.

Shall We Also Withdraw 4% Annually?

We saved a million like they said, and we’re earning less than our neighborhood coffee barista. I presume we’re now supposed to sell shares to make up the difference. Most mainstream-following financial advisors say that we can sell 4% of our portfolio annually for income, so let’s try this.

FSDIX has returned 7.54% annually since inception, so a 4% yearly drawdown appears sustainable. However, we see three glaring pitfalls.

First, another 4% means another $40,000 per million for a total of $63,800. Still not what we are looking for.

Second, this particular fund has underperformed the S&P 500 over the last year, three years, five years and ten years. It’s also underperformed the broader market since inception (2003).

So what exactly was the point of buying a dividend fund when we were going to have to sell shares anyway? And see them appreciate less than a dumber, cheaper index fund?

FSDIX (Purple Bar) Underperforms – Always
FSDIX-Always-Underperforms-Graphic



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Wealth Building Strategies

Chart: The Trillion Dollar Club of Asset Managers

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Posted by Visual Capitalist

on Tuesday, 10 October 2017 07:00

$1T+ CLUB IS DOMINATED BY U.S. BASED ASSET MANAGERS

In the late 1700s, it was the start of the battle of stock exchanges: in 1773, the London Stock Exchange was formed, and the New York Stock Exchange was formed just 19 years later. 

And while London was a preferred destination for international finance at the time, England also had laws that restricted the formation of new joint-stock companies. The law was repealed in 1825, but by then it was already too late.

In the U.S., exchanges in New York City and Philadelphia took full advantage by dealing in stocks early on. Eventually, for this and a variety of other reasons, the NYSE emerged as the most dominant exchange in the world – helping propel New York and Wall Street to the center of finance.

THE CENTER OF FINANCE

Wall Street, and the U.S. in general, is now synonymous with finance – and most of the world’s largest banks, funds, and investors maintain a presence nearby. The biggest asset management companies, which pool investments into securities such as stocks and bonds on behalf of investors, are no exception to this. 

Today’s chart shows all global companies with over $1 trillion in assets under management (AUM).

Not surprisingly, all but 17.1% of assets managed by this $1 Trillion Club are overseen by companies based in the United States.

trillion



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