Timing the Market: If Only You Knew What Mark Hulbert Knows…

by Alexander Green, Chief Investment Strategist
Monday, April 26, 2010: Issue #1246

For over a decade, I’ve been telling readers that timing the market isn’t just unhelpful… it actually hurts performance.

Now the evidence is even more definitive…

Sure, it’s easy to look back and see exactly when you could have been in or out of the market for maximum performance. That’s the beauty of hindsight.

But when you look ahead, things get a whole lot cloudier. So if you’re even thinking about jumping in or out based on some guru’s system or “market outlook,” listen up…

Trying to Time the Market? Don’t Do It!

The Journal of Financial Economics, an academic journal, recently published a new study – “Measuring Investor Sentiment With Mutual Fund Flows.”

Using easily available public information published by the Investment Company Institute, a mutual fund trade organization, the researchers focused on investor exchanges out of stock funds into bond funds and vice-versa.

This led to an interesting discovery…

• The research shows that market timers, as a group, have god-awful instincts. In fact, you could hardly find a better investment system than to do EXACTLY THE OPPOSITE of what they’re doing.
• The researchers built a hypothetical portfolio going all the way back to 1984 and switched back-and-forth between the S&P 500 and 90-day T-bills. They did the mirror opposite of what mutual fund flow figures showed switchers were doing.
• Over the next 25 years, the portfolio produced an annual return of 12% – 1.6% a year better than merely buying and holding the S&P 500.

To put this in concrete terms, buy-and-holders turned a $10,000 initial investment (with dividends reinvested) into $118,639 over the period.

Those who did the opposite of mutual fund timers, however, turned the same $10,000 into more than $170,000. (Most fund switchers, on the other hand, did about as well as someone betting on black or red at the roulette wheel.)

That’s not the best part, however…

An Impressive Performance… For Serious Contrarians Only

What makes these numbers even more impressive is that the contrarian portfolio took on far less risk than being fully invested in stocks. After all, it was invested in riskless T-bills nearly half the time.

I’m not actually recommending that you follow this strategy, incidentally. For one thing, past performance – as every investment prospectus reminds you – does not guarantee future results.

Plus, 25 years as a portfolio manager and investment writer have proved to me that the overwhelming majority of investors lack the emotional discipline to invest contrary to the crowd. (So when the chips are down, you may still be out.)

As Mark Hulbert, editor of the independent Hulbert Financial Digest, concludes, the average investor “would be far better off if he never engaged in market timing.”

The Oxford Club doesn’t. And it shows in our results…

A Top Five Ranking for 10 Years Running

Of course, every newsletter editor brags that his investment letter gives superior returns. The industry bears an uncanny resemblance to Lake Wobegone, where “all the women are strong, all the men are good-looking and all the children are above average.”

It’s worth noting, however, that Hulbert ranks The Oxford Club Communiqué among the top five letters in the nation for risk-adjusted performance over the past 10 years.

That allows us to give entirely honest answers to the two most commonly asked questions:

• “How has your investment advice worked out?” – Beautifully.
• “What do you think the market will do next?” – We haven’t the foggiest notion.

Good investing,

Alexander Green

Editor’s Note: Are you trying to time the stock market? Don’t! There’s a better way to tackle the investing process: let some of the best, most successful analysts in the business do the work for you.

The Oxford Club’s pragmatic, “market neutral” approach has generated consistent, impressive results for many years, based on real facts, information and numbers that matter, not arbitrary stock market indicators or timing.

For more details on how you can profit from the stocks in The Oxford Club’s Communiqué portfolio, please visit this link. You’ll see why the Hulbert Financial Digest has ranked the Communiqué in the top five investment newsletters over the past 10 years and get the latest investing ideas, insights and recommendations that can make you money for the next year and beyond.

Business/Finance, contrarian investing, Finance, Financial economics, Financial services, Funds, investment, market timing, Mutual fund, Portfolio, Rate of return, Socially-responsible investing, Stock fund

Use These “TIPS” to Protect Yourself Against Inflation

by Alexander Green, Chief Investment Strategist
Monday, April 19, 2010: Issue #1241

A recent Communiqué column of mine, in which I recommended Treasury Inflation-Protected Securities (TIPS), outraged a number of readers.

Why was it so upsetting? Because – and don’t ask me what they’re smoking – 17% of Americans actually approve of the job Congress is doing.

Taking both parties to task, however, I wrote:

#1: When George W. Bush and his fellow Republicans came to power a little more than nine years ago, they promised to cut wasteful spending, limit the size of government and move closer to a balanced budget.

Instead, they…

• Created a Medicare drug entitlement that will cost nearly $1 trillion in its first decade…
• Started a string of expensive financial bailouts that continues today…
• Passed a record number of earmarks…
• Increased federal spending 58% faster than inflation…
• Presided over a $2.5 trillion increase in the public debt.

#2: Then, last November – anxious for change – voters threw the bums out and put the Democrats in charge. The Democrats promised to change this reckless course and restore fiscal sanity to the country.

Instead, they tripled the budget deficit in their first year. The White House and the Congressional Budget Office now estimate that this year’s deficit will explode to $1.56 trillion – a post-World War II record at 11% of the overall economy – and add $9.7 trillion in debt over the next decade.

Facts vs. Opinions

Here are the other points I made…

#3: The Obama Administration’s own projections see the federal debt hitting $18.5 trillion by 2020. However, that was before the passage of the healthcare reform bill – the biggest new entitlement since the creation of Medicare in 1965.

#4: Unfunded liabilities for Social Security, Medicare, Medicaid, the prescription drug benefit and the new federal healthcare program have now jumped to $108 trillion, nearly eight times our annual GDP.

#5: Moody’s has threatened to downgrade the Triple-A rating of U.S. sovereign debt, perhaps within three years. A drop in our credit rating would both decrease the perceived safety of Treasury securities and increase the interest that Uncle Sam – excuse me, you, your children and your grandchildren – will pay on the deficit.

#6: Credit Suisse recently produced a report pointing out that the country whose debt profile most resembles that of Greece is – hold your breath – the United States. (If you believe a picture is worth a thousand words, try this: http://www.usdebtclock.org/)

#7: Down the road, Washington – with the reluctant consent of the Federal Reserve – could opt to solve this problem the way so many governments throughout history have – by inflating our way out of it.

Inflation: The Bane of Debt-Holders & A Godsend to Debtors

Inflation is the bane of debt-holders, of course. But it is a godsend to debtors – and Uncle Sam is the biggest of them all – as they can repay fixed obligations with increasingly worthless currency.

What surprised me was not that some readers had a difference of opinion. I always welcome that. It was that respondents uniformly barked that they didn’t want to hear my “political opinions.”

Opinions? Go back through these seven points and tell me which one contains an opinion. Even the last one modestly states that Uncle Sam “could opt” to inflate our way out of this problem.

As Jack Nicholson reminded us in A Few Good Men, some people can’t handle the truth. Especially when it’s something they don’t want to hear.

For example…

• When we warned 11 years ago about the massive bubble in Internet stocks, the majority of respondents gushed about the New Era and insisted we “just didn’t get it.”
• When we warned six years ago about the ominous housing bubble, many scoffed and insisted that home prices “always go up.”
• When we talk today about the threat to your financial security that Washington is creating with its Ponzi-style entitlement schemes, a lot of investors don’t want to hear that, either.

Believe me, I hope I’m wrong. I don’t want high inflation any more than you do.

Fortunately, inflation today is as tame as a kitten.

The Benefits of Treasury Inflation-Protected Securities & Three Ways to Buy Them

I only suggest that you buy Treasury Inflation-Protected Securities ( TIPS) as an important insurance policy. (Because when inflation – the thief that robs us all – rears its ugly head, neither stocks nor bonds do well.)

You can purchase inflation-protected Treasuries (TIPS) in three ways…

• Directly ( http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips_buy.htm).
• Through the Vanguard Inflation-Protected Securities Fund (VIPSX).
• Through the ETF equivalent – the iShares Barclays TIPS Bond Fund (NYSE: TIP).

There are several advantages to buying TIPS…

• TIPS pay interest every six months, just like a regular Treasury bond. But unlike traditional bonds, your principal increases each year by the amount of inflation, as measured by the consumer price index (CPI). Semi-annual interest payments also increase by the amount of inflation.
• The interest you receive is exempt from state and local (but not federal) income taxes.
• TIPS are less volatile than traditional bonds.
• They’re also excellent diversifiers.

Some investors complain that these securities haven’t done anything exciting lately. Of course not. We’ve been in the grip of disinflationary forces, not inflationary ones – and that won’t change next week or next month.

Protection Against The Government “Doing Something”

But as the deficit keeps expanding and the electorate grows increasingly unhappy, pressure will mount on the government to “do something.”

That “something” could be a decision to inflate our way out of this mess, rather than risk the kind of deflationary spiral that Japan has endured over the past two decades.

Bear in mind…

• The Fed has already taken interest rates close to zero…
• Congress has already tried a massive fiscal stimulus…
• The Federal Reserve has already created trillions out of thin air to mop up worthless securities.

If the economy stumbles again and further government action is taken, it could be even more reckless, resulting in inflation.

In the interest of full disclosure, however, that’s just my opinion.

Good investing,

Alexander Green

Editor’s Note: A lot has happened in the financial world since 1987. Bull markets… bear markets… inflation… deflation… upturns… downturns. The rise and fall of America’s biggest companies. Millions made. And millions lost.

And since that time – throughout all kinds of market conditions – The Oxford Club has helped its members generate $19 billion in wealth. Regardless of which direction our elected officials take the United States next… how much more debt we amass… or how high inflation goes, you can join this exclusive and elite group of investors and start profiting today.

The goal is simple: To build profits and protect wealth in any market climate. No matter whether you’re focused on the short term, or long term, there are various portfolios and investments tailored to your individual situation. Get more information on the many benefits that you’ll receive as an Oxford Club member.

Bonds, Business/Finance, debt, Deficit, Economics, Federal Reserve System, Finance, Government debt, inflation, Interest, Politics, Social Security, Treasury Inflation-Protected Securities, United States Treasury security

How to Retire Overseas: Why You Should “Think Outside the Borders”

by Alexander Green, Chief Investment Strategist
Monday, April 12, 2010: Issue #1236

It may seem like a dream for multi-millionaires only: Living in a mountainside or seaside villa with a spectacular view. Having a maid, a cook and a gardener take care of your home. Having your personal chauffeur drive you to town…

But it’s not. The dream is already a reality for thousands of middle-class Americans. And as the cost of living, housing, insurance and healthcare in the United States keeps rising, many tens of thousands more will soon follow them.

Whether you’re seeking an idyllic locale, the excitement of a new culture, the adventure of living in a foreign destination, or just a better lifestyle for less money, there has never been a better time to retire overseas.

And you may be surprised to learn that you can do it for as little as $900 a month…

How to Retire Overseas: The Complete A-Z

If you’ve even considered this idea before, you owe it to yourself to pick up Kathleen Peddicord’s superb new book – How to Retire Overseas.

I’ve known Kathleen for well over a decade. As the publisher and editor of International Living for more than 25 years, she understands living and retiring overseas better than anyone I’ve met.

Although she’s an American through and through, Kathleen and her family have lived in Paris, Ireland and now in Panama. She has explored business, investment and retirement opportunities throughout North America, Europe, Asia and Latin America.

In short, she knows her stuff.

She can tell you which countries:

• Have the best year-round temperatures.
• Which ones offer exemptions from import duties (the tax you’re charged when importing personal items or household goods).
• Which ones will allow you to employ a full-time maid for $150 a month or less.
• Which ones allow you to live comfortably on $1,200 a month… or less.

Retiring Overseas: 14 Countries with the Greatest Advantages

Kathleen goes onto list 14 countries that offer the greatest advantages to overseas retirees, including highly desirable locations like France and Argentina. For each country, she reveals the essential facts about:

• Cost of living
• Housing
• Climate
• Healthcare
• Infrastructure
• Language
• Culture
• Recreation and entertainment
• Safety
• Taxes
• Education
• Accessibility to the United States
• Special benefits for foreign retirees

The Benefits of An Overseas Lifestyle Without Giving Up U.S. Citizenship

Can you imagine yourself in a new home – on the front steps leading to a sugar-white beach? Sitting atop a balcony overlooking a bustling city? On a hillside villa with a superb view?

You don’t have to give up your U.S. citizenship. Kathleen shows you how to handle all the visa and passport requirements, as well as how to find or rent your home, establish secure bank accounts, obtain free or low-cost health insurance, make friends in your new hometown and avoid common pitfalls and mistakes.

Some, of course, have no inclination to live abroad. Others – like me – would relish the opportunity.

If you share my passion to really experience the world outside our borders – not just as a tourist, but also as a local – check out How to Retire Overseas. Even with the weak greenback, you can live in paradise for far less than you’d expect.

But you shouldn’t try it without an experienced guide. And I know none better than Kathleen Peddicord.

Alexander Green

Editor’s Note: There’s no better way to yourself on the fast-track to a secure, comfortable retirement than by following the recommendations in The Oxford Club’s Ultimate Retirement Letter. Designed specifically with retirees in mind, the portfolio is geared towards safer income investments that generate reliable, steady income over time. This monthly letter is just one of the many benefits that come with being an Oxford Club member. For the full details, take a look at Alexander Green’s report.

Aging, Alexander Green, Retirement, Social Issues, Termination of employment