6/4/2013 5:45 PM ET|
12 reasons not to fear market bubble
7. ETFs include fixed-income offerings that can be "laddered" to produce less volatility
This means it's possible for income investors to diversify yields by using low-fee funds. S&P Capital IQ says there is $250 billion invested in fixed-income ETF funds. Half of the funds S&P covers are less than three years old. Investors have shown strong demand for new offerings like the iSharesBond 2016 Investment Grade Corporate Bond ETF (IBCB), launched in April, and PowerShares Global Select Short Term Bond Portfolio, filed in March.
A less conservative move, but one that could pay off if rates rise, are new funds like the ProShares High Yield-Interest Rate Hedged ETF, which is made up of high-yield, short-term debt mixed with Treasury futures designed to gain value as rates rise. In addition, investors already have put more money into floating-rate bank funds than they did during all of last year, according to Lipper.
8. Stock valuations are near historically normal levels based on earnings
The Fed insists it will not boost rates until a recovery has been confirmed. But there may be room to doubt outsized earnings growth. Corporate sales are not rising.
"It is not often mentioned that companies are benefiting from operating [profit] margins that are near the highest in history," says fund manager Roumell. The recent years of low rates and hiring cutbacks have created easy profits that will not continue. "If you look at it this way, stocks are a lot more expensive," he says.
9. Fund managers have been aggressively buying low duration (short-term) bonds to fill income needs, which will lessen the impact
The funds will attract new buyers with higher yields when rates rise. That might support the market, but it doesn't mean bond fund investors will reap the benefits. In fact, they should beware of sticker shock. Financial Industry Regulatory Authority Chairman Richard Ketchum recently warned financial advisers to "remind clients that bond funds are not the same as directly owning fixed securities -- if the market moves, losses will occur instantaneously and there will be no ability to hold a bond to maturity."
10. Mutual funds that invest in stocks and bonds, like target-date or balanced funds, have reduced exposure to long-term fixed-income debt to soften the impact of rate rises on widely held retirement funds
No downside to caution here.
11. Income investors have shifted into dividend stocks, floating-rate funds and real estate investment trusts, which can raise dividends as interest rates rise and inflation increases, or high-yield bonds that do better in a stronger economy
As investors diversify income holdings, the market is vulnerable to a bond crash.
12. Moderate growth and inflation will help the stock market, and a moderate rise in interest rates will help savers
In "the post-crisis way of thinking," people have been "reluctant to embrace views of modest growth and inflation" even though "it's what we now have," Levitt says. On that front, at least, things may really be better than we think.
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The reasons why to fear a market bubble are the national debt, the still dismal unemployment, millions of homes being held by banks to inflate home prices, the government propaganda of a recovery and the Fed Reserve's spending well over a $trillion plus dollars that don't exist over several years propping up this overvalued market.
That bubble is peaking as creating and flooding Wall Street with too much monopoly money is taking its toll. Buying our own debt with faux money is financial suicide.
Hang on to yer butts cause that loud bang coming will be this Ponzi scheme bursting.
When are the talking heads going to acknowledge the housing recovery isn't what it is portrayed to be. These prices aren't being pushed up by individuals buying up the lions share of houses. This is a market being forced up by the hedge fund sector turning us into a nation of renters. They are now going public with more and more REIT's and shifting the risk to the individual investors while pulling in 6 and 7 digit salaries. Don't worry, the government will end up bailing out this monster of their own design, and just like the big banks, nobody will serve a single day of jail time.
Haven't we been batting this around for over a month now ?
When will the Fed act ?
When the EU gets close to 6.5% !! (we may have a answer Friday)
The fourth paragraph hit every issue on the head; Start reviewing your positions as they might relate to these warnings and make changes accordingly. If you just sit there and fuss about what the Fed is doing, or worry about the EU, Japan, or the many other things without ACTING, then you get tossed to the whims of all those 'forces vying for their slice of the pie'.
Remember: NO FEAR!!
Who pays for this propaganda? It's like Goebbels is back with the Third Reich behind him singing in chorus: "A showering we will go... A showering we will go... Who, hoo, yeah, in the bath we gonna go..."
No bubble? What do you call the last fifteen years?
Just like DEM Barney Frank screaming at O'Reilly that Fannie Mae and Freddie Mac were "just fine" and zero risk weeks before collapse.
The whole article is a joke.
Beware of the cheerleaders trying to blind you.
Whether the financial markets collapses or not I have no idea, honestly the easiest trade there is is taking the opposite side of the masses.
Remember professionals buy the lows and sell very high, ask yourselves to whom in the greatest fool game.
Hey gambling addicts...go ahead...spend juniors college fund...spend that mortgage payment on one last buy in the market...go ahead...its only going to continue to keep going higher...we swear it will...
signed - your friendly neighborhood trade broker fleece artist : )
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