It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment ‘risk’ by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.
~ Warren Buffett, letter to the shareholders of Berkshire Hathaway – February 24, 2018
Andrew Main at The Australian writes (May 21st) that the number of Australians who own stocks decreased by more than half a million between 2010 and 2012. According to an ASX survey, total share ownership (including managed funds) peaked at 55 per cent in 2004 before dropping to 38 per cent by 2012.
One of the biggest losers in the survey was the managed funds industry, which copped a shellacking through the GFC for the fact that its charges were in many cases out of line with the indifferent performance provided by fund managers. The percentage of investors who had equities exposure through managed funds fell from 32 per cent in 2004 to only 12 per cent in 2012. The survey concluded that a lot of investors had decided that they may be able to do better as investors by going direct and not paying a manager.
Read more at Half a million investors have walked away from stocks, ASX finds | The Australian.
Since the start of 2007, a cumulative $350 billion has flowed out of stock funds and a little over $1 trillion has moved into bond funds….. In 2011, 45% was in stock funds and 25% in bonds; in 2005, the mix was 55% for stocks and 15% in bonds…..
via AHEAD OF THE TAPE: Stocks Out of Fashion Amid a Bonding With Bonds – WSJ.com.
Comment:~ Low bond yields and higher risk premiums on stocks (stock earnings yield minus bond yield) highlight investors flight to safety. But this is no guarantee that bonds will continue to out-perform stocks. Bond yields must be close to hitting a “floor” and, with no further capital gains, investor returns will be meagre — while stocks grow increasingly attractive.
Interesting new stocks on my Top Momentum stock screen (Incredible Charts #48894):
Northern Graphite (daily chart)
Atna Resources (weekly chart)
Connacher Oil & Gas (weekly)
Imperial Metals (weekly)
Central banks are flooding the market with liquidity. It is hard for stocks not to go up, despite lousy economic data.
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Barry Ritholz on Yahoo.com
As the stock market moves down into the next daily cycle low and the selling pressure intensifies, this should drive the dollar index much higher. It remains to be seen if gold can reverse this pattern of weakness in the face of dollar strength, especially since the dollar will almost certainly be rallying violently during the intense selling pressure that is coming in the stock market.
via The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com.
When the dollar strengthens, gold normally falls. Except in times of high uncertainty (like the present), when demand for gold as a safe haven overcomes downward pressure from a stronger dollar. Buying gold at current prices is a bet that either Greece will default — a pretty safe bet — or that the Fed is again forced to use its printing press (not quite as certain).
