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Money

Buy on the rumor, sell on the news in this bear market

After holding the December 2018 low of 2351 on March 19, the S&P 500 dipped below that support on Friday, March 20. And then plunged below that technical level on Monday, March 23, finally closing at 2237.And then, the rumor rally on Tuesday and Wednesday has sent the S%P 500 back up to 2544 as of 1:20 p.m in New York. With the bill facing some procedural hurdles in the House, I think there could be more "rumor" to be confirmed over the next few days, I suppose, but I think the positive rumors are now "news" and are reflected in this latest rally. And if you want to speculate on rumors, I'd direct your attention to the report on new claims for unemployment that is due tomorrow, Thursday, morning. The number of Americans filing initial claims for unemployment is project to hit a record-breaking 1.5 million for the week ended March 21, according to economists polled by Bloomberg.

When We’re All Afraid of the Dark

Last year, my wife and I went on a two week vacation to celebrate a milestone birthday. <br />One of our stops was a small Italian town on the Amalfi Coast.  During the day, my wife enjoyed exploring around town, sometimes by herself, sometimes with friends.  She would come back with stories of little shops that she found as she wandered about.  Every evening, we walked to a restaurant and, following a wonderful meal, held hands while taking an evening stroll. <br />One night, as we sauntered down a moonlit street, without a streetlight in sight, she dropped my hand and drew my arm around her.  She asked me, “do you feel safe?”  I thought it a very strange question.  After all, we were in a town with very little crime where most of the population relied heavily on tourism.  I am, by nature, cautious and even possibly overly vigilant— I thought that there was no way we could be in any danger.  I asked what her worries were.  She said, “I don’t know, walking at night just feels different, scarier.” <br />She was walking the same streets that she walked during the day. But now, at night, she needed the assurance that someone else was watching out for her.<br />Today’s market environment is much like that stroll along a dark street.  For the past decade, many investors believed they would be able to choose virtually any stock or US market index and experience a double digit return.  For many people, that has been a reality. <br />However, the world has changed. <br />Today, we see market volatility, sudden and dramatic unemployment, and questions of when, if ever, we will return to normal.  While you may have felt confident in your own investment decisions over the past decade, today you may not be as sure. <br />Studies have shown that working with a financial advisor results in better overall financial performance. Vanguard, one of the world’s largest investment companies, has been examining this for 15 years. Based on research, analysis, and testing, Vanguard concluded that, yes, there is a quantifiable increase in return from working with a financial advisor. Vanguard calls this advantage the Advisor’s Alpha. When certain best practices are followed, the result can be an Alpha in the 3 percent per year range.<br />A separate study by Russell Investments, a large money management firm, came to a similar conclusion. Russell estimates a good financial advisor can increase investor returns by 3.75 percent.<br />This is to say that your financial advisor can help you maintain a proper course even when the rest of the world has gone dark.  Conversely, your “trusted news source” is designed to give you the most sensational headlines— and at times like these, those headlines can scare you into making questionable decisions.  As a fiduciary, your financial advisor is legally obligated to give you the advice that is in YOUR BEST INTEREST.  We will always be available to help you maintain, correct, or even set a new course.  You can be confident that any decision that you make has been made after weighing all possible outcomes and scenarios.<br />If the world seems a little bit scarier today than it did last year, we understand.  While we may not put our arm around you, we are certainly here to help navigate these uncertain times.<br /><br /><br /> It All Starts With A Conversation<br /> <br /> Talk to an Advisor Today<br /> <br /><br /><br />Further Reading:<br />Morningstar: The value of working with a financial advisor—study<br /><br />

GM dividend looks safe for now after credit line draw down

General Motors (GM) drew down its $16 billion credit line today to maximize its financial cushion as the auto industry headed into a very uncertain future. The $16 billion drawdown adds to the $16 billion in cash that General Motors projects to have on hand by the end of the month. That $32 billion is certainly enough to pay the $560 million dividend for the first quarter. The company is scheduled to declare its second quarter dividend on April 27. I'd guess that GM will try to keep that dividend for another quarter, but everything depends on the course of the coronavirus recession.

Selling HDFC Bank out of 50 Stocks Portfolio as India declares coronavirus lockdown

In normal markets I don't sell stocks out of my long-term 50 Stocks Portfolio on changes in market direction. This is definitely a buy-and-hold-ish portfolio. But these aren't normal times either for financial markets or economies and today, March 24, I'm selling shares of HDFC Bank (HDB) out of this portfolio. The position shows a 120.66% gain since I initiated it on December 30, 2008. The ADRs are up 8.95% today, as of 2:30 p.m. New York time, along with the rally in the general market on hopes that a coronavirus rescue package will pass the Senate today. The bank remains my pick for the best bet in the Indian market and I expect that over the long term the company will continue to grow its market share. But...

Cover those shorts! S&P 500 up 9.38% but most heavily shorted stocks rocket ahead of the general market

Stocks are up Big Time today on speculation that the Senate will finally pass a $1.8 trillion (remember when it was just $1.2 trillion?) coronavirus rescue package. As of the close today, March 24, the Standard & Poor's 500 was up 9.38% to 2437.33, and the Dow Jones Industrial Average had climbed 11.37%. The NASDQ Composite was higher by 8.12% and the Russell 2000 small cap index had gained 9.39%. The iShares MSCI Emerging Markets ETF (EEM), had climbed 7.48%. But those gains were penny change compared to the soaring price of the most shorted stocks on the markets.

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