Yesterday we discussed the way U.S. equity mutual funds surged in the fourth quarter of 2011, rising more than 10 percent. But that wasn't enough to bring investors back into the fold. Apparently spooked by the wave of losses we endured in the third quarter, investors pulled nearly $66 billion out of domestic stock funds in the fourth quarter last year.
That wasn't the only category to lose assets on the quarter. International stock funds, which gained a less-robust 4.3 percent for the fourth quarter on the way to an overall loss of 13.4 percent on the year, saw an outflow of $15.6 billion over the same time period.
Where was all that money going? Bond funds. Fixed-income funds took in $52.5 billion in new cash over the final three months of 2011. That breaks down as $41.2 billion into taxable-bond funds, and $11.3 billion into municipal-bond funds.
Tuesday, January 10, 2012
Monday, January 9, 2012
The Mutual Fund Scorecard
The investing year of 2011 saw a huge surge in the fourth quarter, one that was necessary to get us back to even on the year. That was certainly true in the mutual fund universe, as we're seeing with the flood of year-end numbers that are now coming in. The largest mutual fund category, domestic general stocks, saw a surge of 10.8 percent in the fourth quarter, which was only enough to get it back to a loss of 1.7 percent on the year.
What's remarkable is how consistent that pattern was across so many mutual fund sectors:
* Industrials gained 14.0 percent in the fourth quarter, but still lost 4.1 percent on the year.
* Energy stocks gained 13.2 percent in the fourth quarter, but still lost 4.6 percent on the year.
* Natural resources gained 12.7 percent in the fourth quarter, but still lost a whopping 14.5 percent on the year.
A couple of areas did buck the trend. Utilities gained 8.8 percent in the fourth quarter, which actually underperformed their yearlong return of 10.8 percent. Precious-metals stocks, on the other hand, lost ground in the fourth quarter to the tune of 6.1 percent, contributing to an overall 2011 loss of 20.6 percent.
What's remarkable is how consistent that pattern was across so many mutual fund sectors:
* Industrials gained 14.0 percent in the fourth quarter, but still lost 4.1 percent on the year.
* Energy stocks gained 13.2 percent in the fourth quarter, but still lost 4.6 percent on the year.
* Natural resources gained 12.7 percent in the fourth quarter, but still lost a whopping 14.5 percent on the year.
A couple of areas did buck the trend. Utilities gained 8.8 percent in the fourth quarter, which actually underperformed their yearlong return of 10.8 percent. Precious-metals stocks, on the other hand, lost ground in the fourth quarter to the tune of 6.1 percent, contributing to an overall 2011 loss of 20.6 percent.
Friday, January 6, 2012
A Strong December Jobs Report
The unemployment situation took another step forward this morning, with the release of the news that the economy added 200,000 jobs in the month of December. Overall, the unemployment rate ticked down from 8.6 percent to 8.5 percent, the lowest that figure has been since February 2009.
The private-sector news continues to be strong. In December, private-sector employment increased by 212,000 jobs, meaning that private businesses added a total of 1.9 million jobs over the course of 2011. Public-sector employment dropped by 12,000 jobs in December, and by 280,000 jobs in 2011.
One of the biggest gainers among industry sectors is what the government calls the "couriers and messengers" industry, which added 42,000 jobs in December. Other strong areas in December include retail (up 28,000), food service and drinking places (up 24,000), and health care (up 23,000).
The private-sector news continues to be strong. In December, private-sector employment increased by 212,000 jobs, meaning that private businesses added a total of 1.9 million jobs over the course of 2011. Public-sector employment dropped by 12,000 jobs in December, and by 280,000 jobs in 2011.
One of the biggest gainers among industry sectors is what the government calls the "couriers and messengers" industry, which added 42,000 jobs in December. Other strong areas in December include retail (up 28,000), food service and drinking places (up 24,000), and health care (up 23,000).
Thursday, January 5, 2012
Investing Fraud in Social Media
Social media has become a huge part of all our lives in recent years, so it stands to reason that we'd eventually see it put to use in investing fraud. An investment adviser named Anthony Fields, based in suburban Chicago, recently started going to LinkedIn discussion groups and began promoting "bank guarantees" and "medium-term notes," which eventually caught the notice of the SEC.
No one was foolish enough to fall for Fields' schemes, but the SEC has charged him with offering to sell more than $500 million in securities via various social media sites. According to the SEC, Fields also had no books or records to back up his deals, and held himself out as a broker-dealer when he was no such thing.
The SEC has also said that they've detected more such fraud cases involving social media, that this might just be the tip of the iceberg. It should go without saying that your financial future is not something that should be decided on a whim, as a result of something you came across on the Internet. It's fortunate that no one fell for Fields' LinkedIn spiel; let's hope that investors are too savvy to ever do so.
No one was foolish enough to fall for Fields' schemes, but the SEC has charged him with offering to sell more than $500 million in securities via various social media sites. According to the SEC, Fields also had no books or records to back up his deals, and held himself out as a broker-dealer when he was no such thing.
The SEC has also said that they've detected more such fraud cases involving social media, that this might just be the tip of the iceberg. It should go without saying that your financial future is not something that should be decided on a whim, as a result of something you came across on the Internet. It's fortunate that no one fell for Fields' LinkedIn spiel; let's hope that investors are too savvy to ever do so.
Wednesday, January 4, 2012
The Fed Predicts Its Own Moves
The Federal Reserve, as part of its bid for greater transparency, has announced that after its next Open Market Committee meeting, to be held later this month, the governors will released their predictions for when the Federal Funds rate will be raised. The benchmark Fed lending rate, you'll probably recall, has been at near-zero levels since December 2008. But the Fed is promising to reveal not just their forecast for when that rate will finally be increased, but where Fed governors see it going over the next several years, on a quarterly basis.
Will that matter? The Wall Street Journal contends that if businesses know when interest rates are likely to rise, it provides greater incentives for them to make investments now, before money becomes more expensive. And the Fed could be giving the bond market a blueprint by which it could set future yield curves.
In the near term, though, the whole issue might not make much difference. The Fed has already signaled that it won't raise the Fed Funds rate until at least mid-2013. And the Journal points out that there's a Fed Funds market that doesn't see any increase in the rate until at least 2014.
Will that matter? The Wall Street Journal contends that if businesses know when interest rates are likely to rise, it provides greater incentives for them to make investments now, before money becomes more expensive. And the Fed could be giving the bond market a blueprint by which it could set future yield curves.
In the near term, though, the whole issue might not make much difference. The Fed has already signaled that it won't raise the Fed Funds rate until at least mid-2013. And the Journal points out that there's a Fed Funds market that doesn't see any increase in the rate until at least 2014.
Tuesday, January 3, 2012
What's a Prediction Worth?
With the markets opening for brand-new 2012 business today, it's time to stop looking back at 2011 and to begin looking forward to the coming year. Reuters polled 40 economists and found that the consensus predicted gain for the S&P 500 was just under 7 percent for 2011. A similar poll conducted by Bloomberg found an average predicted gain of 7.2 percent.
That would, of course, be a substantial improvement over last year, which as we've seen, was virtually flat. But it's also the smallest predicted gain from these surveys since 2005. Every year since then, economists have expected 7 percent rise in the markets or better - and of course, they've often been very, very wrong.
For example, the Bloomberg survey last year forecast a gain in the S&P of just over 8 percent. To be fair, that was the biggest miss by the Bloomberg survey since 2008, when it had its worst year ever, predicting a 7 percent gain in a year when the index ended up with a loss of 38 percent.
That would, of course, be a substantial improvement over last year, which as we've seen, was virtually flat. But it's also the smallest predicted gain from these surveys since 2005. Every year since then, economists have expected 7 percent rise in the markets or better - and of course, they've often been very, very wrong.
For example, the Bloomberg survey last year forecast a gain in the S&P of just over 8 percent. To be fair, that was the biggest miss by the Bloomberg survey since 2008, when it had its worst year ever, predicting a 7 percent gain in a year when the index ended up with a loss of 38 percent.
Monday, January 2, 2012
The S&P Goes Nowhere
After all was said and done, the S&P 500 lost ground for the 2011 calendar year, after losing 0.43 percent of its value on Friday, the final trading day of 2011. In the end, the index lost a vanishingly small 0.04 percent on the year, the smallest change - in either direction - since 1947.
How minuscule was the change? The index closed on December 31, 2010, at 1257.64. Last Friday, December 30, 2011, the S&P closed at 1257.60. That's a total drop on the year of 0.04 points.
That's close enough to call it unchanged over the course of the year. The Nasdaq registered a slightly more noticeable loss for 2011, finishing down 1.8 percent. The Dow Jones Industrial Average, made up of 30 of the biggest stocks in the nation, finished the year up 5.5 percent.
How minuscule was the change? The index closed on December 31, 2010, at 1257.64. Last Friday, December 30, 2011, the S&P closed at 1257.60. That's a total drop on the year of 0.04 points.
That's close enough to call it unchanged over the course of the year. The Nasdaq registered a slightly more noticeable loss for 2011, finishing down 1.8 percent. The Dow Jones Industrial Average, made up of 30 of the biggest stocks in the nation, finished the year up 5.5 percent.
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