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  • Stocks At Record High, Treasuries At Record Low - A Rarity

    Stocks as measured by the S&P 500 and the Dow have cruised to new record highs over the last week. Treasury yields on 10-year notes and 30-year bonds moved to all-time record lows last week. Historically, these two things rarely happen at the same time. In fact, the S&P 500 has hit a record high when the 10-year Treasury note yield was below 2% only once in the last 40 years.

    The fact that stocks are at new highs and Treasury yields are at new lows is largely due to red-hot foreign demand for US securities. There are continued worries about the UK and Europe in the wake of "Brexit" and rising concerns about China's economy. With negative interest rates spreading around the world, foreign investors are gobbling up Treasuries which still have positive yields and adding US equities as well. Some say this is the "New Normal." But is it?

    That's what we'll talk about today.

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  • Stocks Plunge Most On Record Last Week, Oil Down 10%

    In the first week of 2016, US stocks plunged by more than in any other first week of January since records have been kept (before 1900). The Dow Jones Industrial Index fell over 1,000 points from 17,591 at the close on December 31 to 16,519 at the close last Friday – a loss of over 6% in one week.

    The S&P 500 Index shed over 100 points from 2043.7 at the close on December 31 to 1922.0 at the close last Friday – a loss of 6.0% in one week. The Nasdaq Composite lost 7.3% during the worst first week of January on record.

    Most global stock markets were hit with similar losses or even worse in some cases. Investors around the world were stunned and are wondering what happened in the worst New Year’s  week in history for share prices – and worry if more pain is to follow.

    The financial media maintained that the carnage was caused primarily due to new economic data out of China, which was worse than expected. I will get into that as we go along today, but the rout was due to more than just disappointing Chinese data.

    The collapse in crude oil prices since mid-2014 is also becoming a serious global concern for reasons I will outline below. The price of West Texas Intermediate Crude has collapsed over 70% since mid-2014 from near $105 per barrel to below $33 a barrel as of last Friday’s close. It fell 10% last week alone and is down so far this week.

    While sharply lower gasoline and energy prices are a boon to consumers, there are now serious concerns about sovereign debt defaults in numerous oil producing countries. In addition, there are growing fears of global deflation as a result of collapsing oil and other commodity prices. I will tell you why below.

    Yet before we get into the complicated issues raised above, let’s take a few moments to discuss last Friday’s stronger than expected unemployment report for December.

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  • Passive Vs. Active Investing, a New Perspective

    Since the bear market low in early March 2009, US stocks have come roaring back, the last few days not withstanding. In fact, the Dow Jones and the S&P 500 are within striking distance of their all-time highs. It is not surprising, then, that advocates for passive buy-and-hold strategies are once again singing their praises: See we told you, the market always comes back!

    What they fail to mention, however, is that hundreds of thousands (if not millions) of investors bailed out of the stock markets in late 2008 and early 2009 and never got back in. The S&P 500 Index plunged almost 51% from its October 2007 high to the low in early March 2009. Not many investors had the stomach for that kind of collapse. Yet the buy-and-hold crowd would now have you believe that everyone held onto their stocks and mutual funds during that period. Not so!

    Today, we will take a fresh, objective look at buy-and-hold versus the actively-managed programs we recommend at Halbert Wealth Management that aim to make at least market rates of return during up cycles, and hold downside losses to a minimum. I will give you the pros and cons of both strategies and show you how you can get these professionally-managed programs in your portfolio (if you don't have them already).

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