How Not to Buy at the Highs or 294 Chances to Screw Up

via Systematic Relative Strength

Being an investor is tough.  Nothing moves in a straight line, except maybe a fake Bernie Madoff-type account.  Everything proceeds in sawtooth fashion, and each up and down seems cleverly calculated to play on your emotions just enough to tempt you to take action at the wrong time.  In fact, we could be headed into a correction right now.  Carl Richards of Behavior Gap has an awesome illustration of the basic problem:

Source: Carl Richards/Behavior Gap  (click to enlarge)

According to DALBAR data, the dips are pretty good at causing investors to bail out.  DALBAR’s most recent study released in March 2012 showed that the average stock fund investor made annual returns of only 3.49% over the last 20 years versus an annual return of 7.81% for the S&P 500.  The average investor “generally abandons investments at inopportune times,” according to their research.  That’s a polite way of saying that investors panic when the market goes down and they sell out, often near the lows.

And there is plenty of temptation.  According to uber-reliable Ned Davis Research, as summarized in this Wells Fargo market update, there have been 294 dips of 5% or more since 1928.  In other words, you usually have three or four chances a year to screw up.  Considering that most investors have a 20-30 year life cycle, that’s a lot of dips to deal with.

Read the rest here.

Ivanhoff lists the 4 stocks with new all time highs on the StockTwits 50 list.

Eric Platt

Traders are quick to talk trash on the floor, especially when its a stock they’re short.

But there are a number of companies that have developed a rabid like following — some good, most bad — that get investors talking.

Business Insider compiled a list of the 21 most controversial stocks.

The companies have made headlines over the past year for possible fraud, massive growth, a sex scandal, hostile shareholders, and poor executive decisions, among other reasons.

Read the rest here.

Joe Weisenthal

The latest quarterly letter from GMO’s Jeremy Grantham is out (.pdf), and as always it’s a must read.

If you’re an investor, especially one inside the industry, it’s especially valuable.

Basically, he talks about one of the main reason that anyone trades: To keep their own careers. And it’s this career preservation that causes the kind of wild herding that causes the market to move like crazy. That’s because in a desperate bid to avoid missing any big moves, investors’ attempts to catch everything exacerbates the moves.

via Wayne Hale’s Blog

Now that Discovery is safely delivered to the Smithsonian, I think I can tell the story of how we nearly lost her in July of 2005, and how well intentioned, highly motivated,  hard working, smart people can miss the most obvious.

via TMZ.com

Dick Clark — famed TV producer, and “New Year’s Rockin’ Eve” host — died from a massive heart attack this morning … TMZ has learned.

He was 82.

Details surrounding his death are unclear, but Clark had suffered a significant stroke in 2004 — forcing him to retire from his hosting gig at “New Years’ Rockin’ Eve,” which he created in 1972.

Ryan Seacrest took over in 2006. Dick has co-hosted the show ever since.

Before suffering a stroke, Clark told Larry King he suffered from Type 2 diabetes.

Clark has been married 3 times — and has 3 children from his first two marriages. He is survived by his current wife Kari Wigton.

“For now, Dick Clark … so long.”

Developing…

Read here:

After a one-day reprieve, and a big rally in the Dow, financial markets were backsliding again Wednesday amid ongoing concerns about Europe generally and Spain particularly.

In Europe, major bourses fell after separate reports showed weaker-than-expected construction data for the EU and Italy. U.S. stocks slid from the open and were lower in recent trading, albeit modestly, with weakness in tech giants IBM and Intel weighing on major averages.

Beyond the daily focus on the latest earnings and economic data, global investors are focused on prospects for a bailout of Spain, notwithstanding protests from EU and Spanish officials.

This week, Euro Group president and Luxembourg Prime Minister Jean-Claude Juncker declared “Spain is on track” and said he “does not think Spain will need any kind of external support.”

German Finance Minister Wolfgang Schaeuble made similar comments and said its wrong to compare Spain with Greece or Portugal. “The fundamental data in Spain is not comparable to those in the countries that are under a program,” he said, Reuters reports.

Meanwhile, Prime Minister Mariano Rajoy has repeatedly said Spain doesn’t need or want an international bailout.

But the data, and the bond market, tell a different story.

Spanish bond yields remain above 6% and even Tuesday’s “successful” bond auction came at much-higher yields vs. a year-ago.

Unlike Greece or Portugal, which suffered from massive deficit spending, Spain is reeling from the bursting of a housing bubble, which makes America’s look tame by comparison.

Non-performing loans at Spanish banks hit 8.2% in February, the highest level since 1994, Bloomberg reports, citing Bank of Spain data. By comparison, non-performing loans at U.S. banks (defined as over 90-days past due) stood at 2.8% in the fourth quarter and fell steadily from 3.3% at the start of 2011, according to the St. Louis Fed.

In March, Spanish banks tapped the European Central Bank’s special lending facility for around $411 billion in loans, a record amount in the short history of the ECB’s Long Term Refinancing Operation (LTRO) and double the level from February.

The good news is the ECB has put this program in place. Along with the European Financial Stability Facility (EFSF), the LTRO should provide a cushion for Spain to put budget reforms in place. In addition, Spain has already pre-funded about 50% of its debt rollovers for 2012.

The bad news is that it’s hard to imagine a scenario where Spanish banks won’t eventually need a bailout. Unemployment in Spain is nearly 25% and austerity measures are likely to result in less economic activity, at least in the short-term, which means more loans going bad and more pressure on bank balance sheets.

The really bad news is markets are already looking beyond Spain to prospects for a bailout of Italy, which is one of the world’s-largest economies and has a GDP 50% larger than Spain’s. If and when the time comes to rescue Italy, discussions about the sustainability of the euro and the EU “grand experiment” will move from the realm of theoretical to acute reality, as Henry and I discuss in the accompanying video.

Barbara Boxer knows a thing or two about corruption. She can tell you first hand that when you have someone abusing taxpayer money, they won’t stop unless they get fired.

Washington (CNN) — Describing the billions of dollars in contracts and services handled by the General Services Administration as a den of temptation, senators from both parties called Wednesday for the agency at the center of a spending scandal to clean house as it roots out corruption.

“The party’s over,” declared Democratic Sen. Barbara Boxer of California, chairwoman of the Senate Environment and Public Works Committee, at the third congressional hearing in three days on the controversy that has embarrassed the Obama administration in an election year.

Speaking to GSA Inspector General Brian Miller and Acting Administrator Dan Tangherlini, Boxer said the panel “will support you and encourage you to clean house” at the vast federal procurement agency.

At the same time, Boxer emphasized that the GSA has a history of misconduct dating back decades under Republican and Democratic administrations, and that it was a person appointed by President Barack Obama who uncovered the latest wrongdoing.

Boxer and other Democrats sought to frame the controversy as an ongoing problem at GSA rather than anything unique to the Obama administration, and Republicans on the panel cited what they called a systematic failure resulting from a culture of misconduct at the agency.

Ranking Republican Sen. James Inhofe of Oklahoma said of the GSA that “if there’s anyone who has a propensity to do something dishonest, that’s where they ought to be” because “they deal with huge numbers.”

“I am concerned that this type of waste has become an embedded part of the culture at the GSA,” Inhofe said, noting the wrongdoing occurred at a time of fiscal austerity, including calls by Obama to cut government waste. “One can only wonder what kind of waste would have occurred in a better economy.”

Boxer later used an extended closing statement to encourage Tangherlini to take substantive steps to solve the problems at GSA once and for all, no matter what it takes.

“There still are ugly things that are going to come out. Let’s face it,” Boxer said of continuing investigations by Miller.

Government or corporate instances of corruption welcome.

Read here:

From the General Services Administration’s lavish parties and outrageous bonuses to reports that U.S. Secret Service agents partied with prostitutes, the actions of some government employees has raised new questions about how the U.S. government and its agencies are spending hard-earned taxpayers’ money.

If you know of instances of wasteful spending or gross misconduct by major corporations or federal government agencies and their employees, drop FoxNews.com a line. We’ll investigate your confidential tips and, if they check out, we will expose what’s happening to your taxpayer dollars. Send tips to: [email protected]

I’m just using the news section to talk my own book.

Nothing to see here.

But C only lost 92% of its stock price over the last 5 years. If you don’t pay a jackass like Pandit $15 million, you might get second rate management like Dick Fuld, and then where would you be?

Read here:

Is Citigroup (C) CEO Vikram Pandit worth $15 million?

Citi shareholders don’t think so. They gave a vote of no confidence to Pandit’s board-approved compensation package on Tuesday, snubbing Pandit and sounding a clarion call to other investors: It’s time to fight excessive executive pay.

Shareholders definitely made a bold statement by rejecting the offer but their vote is nonbinding, meaning Citi’s board can still pay Pandit the proposed $14.9 million compensation package this year.

After accepting a $1 salary in 2009 and 2010, Pandit’s compensation increased to around $7 million last year. He also received a $40 million retention package that will be paid out over the next few years.

According to The Wall Street Journal, Citigroup is the first major bank to have experienced shareholder backlash against executive pay. Just two percent of compensation packages were voted down last year based on research by ISS Proxy Advisory Services, a provider of corporate governance solutions to financial firms.

Shareholders have singled out executive pay over the past few years as CEO salaries have reached unprecedented levels, even in the face of falling stock prices and disappointing company performance.

WASHINGTON (Reuters) – The government will face a major test on whether it has the capacity to govern when it faces big tax and budget decisions at the end of the year, U.S. Treasury Secretary Timothy Geithner said on Wednesday.

Before 2013, the country will be forced to deal with the expiration of tax cuts that affect nearly all taxpayers, automatic budget cuts, as well as another debate over raising the country’s debt limit.

“It will be a big test in Washington, a big test of the country to govern itself in how Washington deals with those challenges,” Geithner said ahead of a meeting on Friday of finance ministers from the Group of 20, representing the world’s leading industrialized and emerging market economies.

A protracted fight over how to rein in the country’s trillion dollar plus deficits and raise the debt limit in 2011 forced the government to the brink of several shutdowns and stripped the country of its top credit rating.

The Treasury expects the country to hit the debt ceiling or the legal limit it is allowed to borrow before the end of the year and individual tax cuts enacted under former President George W. Bush – known as the Bush tax cuts – will expire December 31.

As well, $1.2 trillion in automatic budget cuts are set to kick in early January, which will force the Obama administration and Congress to deal with the country’s fiscal problems.

“Hopefully we use it as an opportunity to make another significant step towards long term fiscal reform at that time,” Geithner said.

(Reuters) – BlackRock Inc (NYS:BLK – News), the world’s largest asset manager, said first-quarter profits were steady, bolstered by strong inflows into its popular iShares exchange-traded fund business.

But despite the inflows and booming equity markets during the first quarter, revenue at New York-based BlackRock declined $33 million, or 1 percent, to $2.2 billion, the firm said on Wednesday. Investors continued to favor the firm’s indexed funds over actively managed accounts, which typically generate higher fees, though not necessarily higher profit margins.

Shares of BlackRock, fell 2.4 percent to $196.88 on Wednesday on the New York Stock Exchange. Through Tuesday, the shares had gained 12 percent this year, compared with a 10 percent gain in the S&P 500 index (.SPX).

Chief executive Laurence Fink kept a tight hand on expenses. Even as BlackRock rolled out a new global ad campaign around the slogan “Investing for a New World,” Fink cut operating expenses by $50 million, or 3 percent, to $1.4 billion on lower office occupancy, fund and compensation costs.

Net income increased to $572 million, or $3.14 per share, from $568 million, or $2.89 per share, in the same quarter a year before.

NEW YORK (Reuters) – Shares in Chesapeake Energy Corp (NYS:CHK – News) fell nearly 10 percent on Wednesday after a Reuters report that Chief Executive Aubrey McClendon had borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells.

The stock dropped 9.6 percent to $17.28 in early afternoon. Shares last traded at that level in July 2009.

The volume of Chesapeake shares changing hands was more than double the 10-day moving average, and the stock was the most actively traded on the New York Stock Exchange.

“It’s certainly not a positive article,” said Capital One Southcoast analyst Marshall Carver. “I think that has something to do with” the stock drop.

At a previously planned presentation to analysts and investors Wednesday morning, McClendon did not mention the Reuters report.

The CEO, who appeared subdued compared with his usual upbeat demeanor, was not asked about the report as he discussed the company’s drilling program and asset sales.

The news threatens to “put a cloud” over the company’s planned initial public offering of its oilfield services unit, Brean Murray analyst Ray Deacon said.

Chesapeake wants to raise up to $862.5 million from the IPO, first announced on Monday.

“Now that loan documents are made public, it just adds another layer of complexity to an already opaque corporate web,” Deacon said.

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