Asset Allocation

Don't give in to your flight instinct in response to the latest stock market volatility. Running for cover in cash right now promises to be the worst possible move. I know, I know. Cash is supposed to be the ultimate safe haven. A riskless investment, if you will but, in truth, cash is the proverbial "Death Star". [Let me explain why and show you some irrefutable proof.] Words: 544; Charts: 3

Stocks rallied through May this year mostly on expectations of continued easy money from the Federal Reserve but after the Fed indicated last week that tapering could begin as early as this fall, coupled with concerns about Chinese growth, stocks sharply reversed course and Treasury yields spiked. I expect market volatility to last through the summer as investors remain uncertain about the future of monetary policy and the strength of the global recovery. That said, I wouldn’t advocate abandoning stocks. Here's 3 reasons why.

How could everything be selling off at once? Aren’t the various different asset classes (stocks, bonds, gold) meant to be hedges against each other? The simple answer is that although it would be great if that were the case, it isn’t — it never was.

Eiffel tower patterns can be very important to your portfolio construction & management because, when you experience the left side of the tower, you often experience the right side as well which often results in declines of as much as 50% from the peak. Currently it would appear that three specific assets could well be forming such patterns.

A recent Trim Tabs report claims that almost every single asset class in the world is overvalued yet, while there may be some areas that are frothy, to claim that almost every single asset class in the world is overvalued is a bit of a stretch. This article refutes these claims.

It wasn't so long ago that irrational exuberance over the housing market had seized investors' logic, and the same thing is happening to US stocks right now. Fair-weather investors are abandoning gold equities and jumping into the US market in the hopes of making an easy buck, just as people bought property near the housing peak hoping to flip it before those adjustable-rate mortgages reset... My advice: don't gamble your savings on the hope that there will be a greater fool who will come along and buy your inflated assets at even higher prices.

Time for another sentiment update 0n what the various surveys and committment of traders have to say about the future price expectations for the U.S. stock markets, U.S. Treasury bonds, various currencies and a wide range of commodities including gold and silver. "And the surveys say...!"

The financial media gives plenty of attention to China and Japan, but one Asian country that just doesn’t seem to receive its due is South Korea. Some of the most-attractive investment opportunities in the world can be found in South Korea. In fact, the average South Korea stock is about 40% cheaper than U.S. stocks on a price-to-earnings basis, trading at an average of 9.6 times trailing earnings compared to 17 times for U.S. stocks.

There’s certainly no shortage of things to worry about right now related to the US economy but one thing we’re not too worried about right now is inflation. So what are the implications for investors? Here are four.

US equities remain the only major asset class not [to] experience a bear market or an annualised negative performance during the current investment cycle. This is very rare. The last time US equities posted even a -1% annualised total return was back in middle of 2009, almost five years ago. [As such,] this asset class now presents the most risk to long term investors. [Read on, there's more!] Words: 676; Charts: 3