Insight: Mom and Pop Investors Miss out on Stock Market Gains

(Reuters) – Stocks have more than doubled since the financial crisis and are closing in on a five-year high, but many Main Street investors have been absent from the party – especially those with the least saved.

Those who missed much of the rally did so because they reduced equity exposure after the benchmark S&P 500 index plummeted 57 percent between late 2007 and March 2009, according to an analysis by Reuters of mutual fund flows and changes in assets held in retirement accounts. Investors with the smallest savings typically saw the lowest percentage recovery in returns.

And while some have returned to the stock market during the subsequent rally, plenty of small investors remain on the sidelines.

“This is the most uncelebrated bull market in history,” said Tony Ferreira, managing director at Cogent Research, which provides research and consulting for large fund managers. “In the old days, people would be jumping on the bandwagon, but nobody’s chasing equity performance this time. Many people are still scared to wade back into the water.”

Read the rest here.

Advocates of high frequency trading (HFT) like to point to the advantages it brings in terms of market efficiency.

The Futures Industry Association Principal Traders Group, a trade association, which includes high frequency traders, said in a September statement that “as markets have become more automated and competitive … trading costs are lower, markets are deeper and more liquid, and prices better reflect information about the value of stocks and commodities.”

But recent testimony before the US Senate Banking Committee and a new study by the Federal Reserve Bank of Chicago both paint HFT in a rather different light.

Read the rest here.

Phil Pearlman is out with a fantastic piece of wisdom. I recommend you give it a read, here.

This makes sense. The best way to wake up the youth to the creeping socialism and over-reaching Obama government is to FUCK WITH THEIR FOOD.

They hope to further their efforts with a cafeteria boycott that will cost the school money, and students like Faris said they want to know why they are paying the price for other people’s problems.

“If somebody’s obese why should someone like me who’s not obese have to suffer, and eat a small meal when I’d rather have a bigger meal?” he said.

Read the rest here.

It’s been a while since I updated the Turnaround Tuesday study, so I thought I would do so today.The stats tables below all show results of buying at the close when SPX is down for a certain number of days and the exiting the following day.  The results are broken out by day of the week.  Note that the day listed is the trigger day – not the performance day.  So the Monday trigger tracks Tuesday’s performance.  Tuesday’s trigger tracks Wednesday’s performance… and so on.

See the results, and whether Turnaround Tuesdays are legit or not, here.

Could you pack more into each day if you did everything at the optimal time?

A growing body of research suggests that paying attention to the body clock, and its effects on energy and alertness, can help pinpoint the different times of day when most of us perform our best at specific tasks, from resolving conflicts to thinking creatively.

Read the rest here.

Banks should be required to reduce by half the amount they can borrow against equity to make the financial system safer, according to former Federal Deposit Insurance Corp. Chairman Sheila Bair.

Bair called for a “hard-and-fast” leverage ratio of 8 percent in “Bulls by the Horns,” her memoir of the financial crisis published this month. That’s double the 4 percent ratio U.S. banks must adhere to currently and more than twice the 3 percent called for by new global rules on bank capital.

Lenders could borrow about 13 times their equity, based on Bair’s suggestion, compared with 25 times under existing U.S. rules. Bair, 58, who stepped down from the FDIC last year, was a proponent of the Basel Committee on Banking Supervision introducing a simple leverage ratio, which ignores the riskiness of different loans in setting minimum capital requirements. While the Basel committee agreed on including such a ratio, European countries have balked at implementation.

Read the rest here.

Matt Damon and John Krasinski ran into a big problem while making their film “Promised Land”; how they solved it tells us a lot about Hollywood.

Some time ago, the two actors decided to make a movie about fracking — a method of getting once-inaccessible oil and gas out of the ground that has become the bête noire of many environmentalists.

….

I broke the news that “Promised Land” was about fracking and now I can reveal that the script’s seen some very hasty rewriting because of real-world evidence that anti-fracking activists may be the true villains.

In courtroom after courtroom, it has been proved that anti-fracking activists have been guilty of fraud or misrepresentation.

Read the rest here.

U.S. Army Lieutenant General (Ret.) William Jerry Boykin claims that individuals with connections to the Muslim Brotherhood hold security clearances in both the Pentagon and the Department of Defense.

Read the rest here.

(Reuters) – Europe is in the midst of another crisis: not debt, but grapes. Yields are sharply lower, down nearly 40 percent in some of parts of Portugal, which means winemakers will have fewer grapes to blend and, in the end, fewer bottles to offer.

Read the rest here.

Big beat.

Consumer confidence surged from 61.3 last month to 70.3 this month.

That’s well ahead of estimates of 63.1.

Needless to say this has all kinds of ramifications, if it holds up.

The significance is both political and economic if the consumer is feeling better.

Here’s the full announcement from the Conference Board…

About three-quarters of executives from a mixed universe of institutional investors think a significant tail-risk event is likely to very likely within the next 12 months, according to a new survey from State Street Global Advisors.

Survey respondents — money managers, family offices, consultants and private banks — expect the five most likely causes of a tail-risk event in the next year would be a global economic recession (36%); a recession in Europe (35%); the breakup of the eurozone (33%); Greece dropping the euro (29%); and a recession in the U.S. (21%). (Percentages total more than 100% because respondents could select multiple causes.)

About 80% said they believe that tail-risk management should be an integral part of portfolio management, and 73% said they are better prepared to weather a severe market downturn since making strategic asset allocation changes after the 2008 market crash.

Read the rest here.

Germany and its two closest allies in the eurozone appeared to step back on Tuesday from a key agreement that would free Spain and Ireland of billions in debt incurred through bailing out their banks.

Read the rest here.

Some hilarious shit…

NEW YORK (AP) — A quiet day on Wall Street turned into the worst sell-off in three months after a Federal Reserve official said he doubted the bank’s effort to boost economic growth would work.

Charles Plosser, president of the Fed’s Philadelphia branch, told an audience Tuesday that the Fed’s effort to support the economy would likely fall short of its goals.

The speech probably startled some investors who had faith in the Fed’s latest plan, said Jack Ablin, chief investment officer Harris Private Bank. The plan includes buying $40 billion in mortgage bonds each month until the economy improves.

“So many investors have bought into the illusion,” he said. “And it was like Plosser pulled up the curtain on the Wizard of Oz.”

Read the rest here.

Technological change is as disruptive in financial markets as in any other. It creates new business models and threatens the profitability of established players, just as in the high street.

The rise of high frequency trading, powered by computer algorithms, is a case in point. Over the past five years, this has come to dominate trading, accounting for 60-80 per cent of volume, depending on the market. The high frequency traders have chased away the traditional market makers, and in doing so have substituted good liquidity for bad, according to some critics.

Read the rest here.

I think it’s hard to disagree that the poor could stop being poor–at least as the US currently defines poverty–if they behaved differently; it’s basically numerically impossible to fall under the poverty line if you finish high school, wait to have children until you get married, and both work full time.  On the other hand, as I wrote a while back, I think this ignores the evidence that when you are poor–“which is to say”, noted George Orwell of unemployed coal miners, “when you are underfed, harassed, bored, and miserable”–it is actually much harder to make those choices than Bryan seems to imagine.  Which is why the poor of Orwell’s England also struggled with things like obesity and dental decay from consuming too much sugar and not enough vegetables; it is hard to get interested in dieting if a sugar high is the nicest thing that ever happens to you.

There’s also what I’d call the implicit left view, which is that, as Jesus said, “The poor, you will always have with you.”  This Noah Smith post on poverty in Japan seems to encapsulate it pretty well.  In response to Caplan, Smith argues out that about 16% of the Japanese seem to be poor, even though they are notoriously crime free, averse to single parenthood, and not big drinkers or drug users.  These are people who work, but need to scrimp on things like food, and eschew vacations, in order to afford even more necessary items such as medical care and school uniforms.  “Poverty in a prosperous society usually does not mean living in rags on a dirt floor,” Tokyo social welfare professor Masami Iwata told the New York Times. “These are people with cellphones and cars, but they are cut off from the rest of society.”

Interesting…is this like getting a trophy just for showing up to practice and sticking it out til the end of the season?

Read the article here.

A downturn in US transportation stocks is indicating a deeper slowdown in the global economy and suggesting that the broader market rally has more to do with central bank action than fundamental strength from corporate America.

The rest of the article is worth a read, here.

Read Mauldin’s latest piece here.

(Reuters) – North Korea plans to allow farmers to keep more of their produce in an attempt to boost agricultural output, a source with close ties to Pyongyang and Beijing said, in a move that could boost supplies, help cap rising food prices and ease malnutrition.

Read the rest here.