Category Archives: Transformation Changing Financial World

Has WWIII has already started …

Has “Sell in May” Gone Away?
Investors aren’t yet backing out of stocks this spring.


Healthy skepticism hasn’t motivated much selling. An old belief has lingered on Wall Street for years – the belief that investors should get out of stocks in May and get back into stocks in October. But here we are in May – and while analysts are wondering how much more upward progress stocks can make, gains are still occurring. On May 9, the S&P 500 closed at 1,626.67 – up 1.82% so far for the month after going +1.81% for April.1

A May retreat is hardly a given. You can readily find articles questioning the current rally, insisting a pullback is ahead. After all, didn’t stocks swoon in spring 2010 and spring 2011? Wasn’t last spring just an aberration?

The selloffs of spring 2010 and spring 2011 weren’t really prompted by seasonal behavior. You had the EU debt crisis, the twin calamities hitting Japan, and the debt ceiling fight (and the resulting U.S. credit rating downgrade) occurring. By contrast, across May-September 2012 the S&P 500 rose more than 4%.2

Going back decades, the case for selling in May appears just as inconclusive. During 1965-1984, the S&P lost ground 15 times in May – but that 20-year stretch included a 16-year secular bear market. From 1985-1997, the S&P 500 never had a down May.2,3

Conditions could support further gains. Earnings are sometimes called the mother’s milk of stocks, and we’ve seen about 5% Q1 earnings growth. The Fed is still purchasing $85 billion of Treasuries and mortgage-backed securities per month. Hiring has picked up. Consumer prices are barely rising. Money is regularly flowing into stock-based mutual funds this year for the first time since the market downturn of 2008.4,5

Beyond these factors, there is still enough optimism on Wall Street to counter skepticism. If the current bull market is getting long in the tooth, few see a bear market quickly emerging.

As recently noted, Morgan Stanley chief investment strategist David Darst maintains an informal 6-point bear market “checklist” – and Darst sees none of the six bearish signals currently flashing (Fed tightening, recession looming, bond spreads widening, evident investor euphoria, stretched stock price valuations, retreat in small caps + transportation + bank stocks). While the Fed’s easing may be fueling the rally more than anything else, QE3 is still continuing undiminished.5

The “sell in May” idea actually emerged in Great Britain, not America. Years ago, London brokers would go on holiday in May and head back to their desks in September, resulting in thin trading and subdued returns in the interim. Supposedly, this was how the “sell in May” pattern originated, and it may not even apply in Great Britain anymore: investors selling the Dow Jones STOXX 600 in May and buying back in for September would have lost money in three of the five years from 2008-12.6

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1 – [5/9/13]
2 – [5/3/13]
3 – [3/11/10]
4 – [5/9/13]
5 – [5/8/13]
6 – [5/7/13]

Massive Retirement Assumptions and Transformation Changing Financial World

Reassessing Retirement Assumptions
What makes financial sense for some baby boomers may not make sense for you.



There is no “typical” retirement. Many baby boomers want one and believe that they will have one, and their futures may indeed unfold as planned. For others, the story will be different. Just as there is no routine retirement, there are no rote financial moves that should be made before or during this phase of life, and no universal truths about the retirement experience.

Here are some commonly held assumptions – suppositions that may or may not prove true for you, depending on your financial and lifestyle circumstances.

#1. You should take Social Security as late as possible. Generally speaking, this is a smart move. If you were born in the years from 1943-1954, your monthly benefit will be 25% smaller if you claim Social Security at 62 instead of your “full” retirement age of 66. If you wait until 70 to take Social Security, your monthly benefit will be 32% larger than if you had taken it at 66.1

So why would anyone apply for Social Security benefits in their early 60s? The fact is, some seniors really need the income now. Some have health issues or the prospect of hereditary diseases influencing their choice. Single retirees don’t have a second, spousal income to count on, and that is another factor in the decision. For most people, waiting longer implies a larger lifetime payout from America’s retirement trust. Not everyone can bank on longevity or relative affluence, however.

#2. You’ll probably live 15-20 years after you retire. You may live much longer, especially if you are a woman. According to the Census Bureau, the population of Americans 100 or older grew 65.8% between 1980 and 2010, and 82.8% of centenarians were women in 2010. The real eye-opener: in 2010, slightly more than a third of America’s centenarians lived alone in their own homes. Had their retirement expenses lessened with time? Doubtful to say the least.2

#3. You should step back from growth investing as you get older. As many investors age, they shift portfolio assets into investment vehicles that offer less risk than stocks and stock funds. This is a well-regarded, long-established tenet of asset allocation. Does it apply for everyone? No. Some retirees may need to invest for growth well into their 60s or 70s because their retirement savings are meager. There are retirement planners who actually favor aggressive growth investing for life, arguing that the rewards outweigh the risks at any age.

#4. The way most people invest is the way you should invest. Again, just as there is no typical retirement, there is no typical asset allocation strategy or investment that works for everyone. Your time horizon, your risk tolerance, and your current retirement nest egg represent just three of the variables to consider when you evaluate whether you should or should not enter into a particular investment.

#5. Going Roth is a no-brainer. Not necessarily. If you are mulling a Roth IRA or Roth 401(k) conversion, the big question is whether the tax savings in the end will be worth the tax you will pay on the conversion today. The younger you are – roughly speaking – the greater the possibility the answer will be “yes”, as your highest-earning years are likely in the future. If you are older and at or near your peak earning potential, the conversion may not be worth it at all.

#6. A lump sum payout represents a good deal. Some corporations are offering current and/or former workers a choice of receiving pension plan assets in a lump sum payout instead of periodic payments. They aren’t doing this out of generosity; they are doing it because actuaries have advised them to lessen their retirement obligations to loyal employees. For many pension plan participants, electing not to take the lump sum and sticking with the lifelong periodic payments may make more sense in the long run. The question is, can the retiree invest the lump sum in such a way that might produce more money over the long run, or not? The lump sum payout does offer liquidity and flexibility that the periodic payments don’t, but there are few things as economically reassuring as predictable, recurring retirement income. Longevity is another factor in this decision.

#7. Living it up in your 60s won’t hurt you in your 80s. Some couples withdraw much more than they should from their savings in the early years of retirement. After a few years, they notice a drawdown happening – their portfolio isn’t returning enough to replenish their retirement nest egg, and so the fear of outliving their money grows. This is a good argument for living beneath your means while still carefully planning and budgeting some “epic adventures” along the way.

Your retirement plan should be created and periodically revised with an understanding of the unique circumstances of your life and your unique financial objectives. There is no such thing as generic retirement planning, and that is because none of us will have generic retirements.

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This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – [2/15/11]
2 – [1/7/13]

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