The old normal allocation between the three most basic classes (Cash, Bonds and Stocks) is currently the new normal.

While the old normal return expectations for U.S. securities, and the allocation between U.S. securities and global securities (particularly emerging market securities) is not likely to be resemble the past; the old normal weighting between cash, bonds and stocks from whatever country is more likely to be used than not.

The last decade was abnormal in the preponderance of equity risk assumed in the aggregate across all households in the United States. The old normal is more balanced, which is something the typical investor advanced in age or wealth accumulation is seeking these days.

Based on Federal Reserve data from 1945, the average allocation between cash, bonds and stocks was approximately 10%, 40% and 50% respectively. The average over the past decade was about

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Robert Fisk (Independent): Secret plan to ditch the US dollar’s dominance uncovered, October 6, 2009. Arab states have launched a secret plan with China, Russia and France to stop using the US currency for oil trading.

• Ambrose Evans-Pritchard (Telegraph): China calls time on dollar hegemony, October 6, 2009. You can date the end of dollar hegemony from China’s decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.

• John Hussman (Hussman Funds): Defensive, but a measure of equanimity, October 5, 2009. My view continues to be that the intrinsic condition of the US economy has not improved, and that the green shoots we’ve observed are a transient artifact

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What Investors Can Learn From the Recent Celebrity Outbursts

by Marc Lichtenfeld, Advisory Panelist

There seems to be a breakdown in decorum lately. A few very public examples:

Congressman Joe Wilson (R-SC) yells out, “You lie!” at President Barack Obama while he’s addressing Congress about his healthcare reform plan. Tennis star Serena Williams threatens to shove a “bleeping” ball down the “bleeping” throat of a tennis official when a call went against her. Rapper Kanye West rips the microphone out of a 19-year-old award winner’s hands and proceeds to tell the audience that someone else was more deserving.

Moronic behavior, for sure. And of course, all three have issued apologies. But if you believe that there’s no such thing as negative press, all three have grabbed some free publicity. Wilson received over $1 million in campaign contributions after his outburst.

But what do these situations have

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“I want to say thank you to Adam Hewison and MarketClub for being instrumental in turning my trading from consistently losing money in futures to consistently making money. The Trade Triangles have simplified my approach (and my life) to the markets, while allowing me to have vastly better results. Being able to observe the Trade Triangles and their many winners in real time for the past couple years have given me the confidence in approaching the markets (which is priceless), and the conviction to execute trades.

Also, I am no longer suffering from analysis-paralysis in trading which

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Steel maker Nucor Corp.’s (NYSE: NUE) stock has rallied some 51% from its March 3 low of $29.84 a share and has twice bumped against its recent high of $49.91 a share. 

The stock is still a far cry from its record-high level of $83.56, but is only 0% below its 52-week high of $53.46.  Much has changed since then, as the U.S. auto industry is no longer producing the 16 million cars it produced in 2007, nor the 13 million it managed to sell last year.  This year we are looking at some 10 million units sold, according to J.D. Power and Associates, the leading forecaster in the industry.

But there is encouraging news:  The very quick restructuring of both General Motors Corp. (NYSE: GRM) and Chrysler Group LLC, the U.S. Federal Reserve’s efforts to stabilize the financial markets, and

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A word of explanation here before we go any further.  When I speak of stock trading intuition I am not referring to the phenomenon of knowing what is about to happen, such as having an intuition that the plane you are about to board is going to crash.

What I am referring to here is coup d’oeil, a French word which means “q quick look or glance.”  In the military, brilliant generals are said to possess coup d’oeil or “the power of the glance; the ability to immediately see and make sense of the battlefield.”  Carl von Clausewitz, the 19th Century military philosopher, wrote in his treatise ON WAR, that coup d’oeil is the military leader’s ability to recognize the precise moment of truth in battle “that the mind would ordinarily miss or would perceive only after long study and reflection” (102). 

In trading, you do not have a long time to

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In the currency market, the dollar moved lower against the euro. Late Friday, the euro was trading at $1.4215 vs. $1.4194 on Thursday. MarketWatch reported that the dollar lost ground to the euro after closely watched surveys indicated the 16-nation eurozone partially braked a fall in output in July.

The Munich-based Ifo Institute’s July German business climate index rose for the fourth-consecutive month in July, posting a reading of 87.3. Economists had forecast a rise to 86.5 from 85.9 in June.

Also, the preliminary Markit euro-zone composite purchasing managers’ index for July increased more than forecast.

The euro saw a modest jump versus the dollar after the data.

“All positive, but let’s not get carried away,” wrote strategists at Brown Brothers Harriman. “Germany’s Ifo index … is on the rise … but remains very low on a historical basis and Germany’s economy is still on track to contract by at least 5% this

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Stock market-wise, I wish we were back in July 2008. At that time, a 1% swing in the market was an anomaly. Today, it’s the norm. And even though we’ve seen volatility calm down somewhat in recent weeks, don’t be fooled. As we enter another earnings season, we’ll see volatility pick up again. So what are you going to do?

Paralysis is not an option. Neither is making 1% or less on your cash every year when there is a high probability of out-of-control inflation in the years ahead.

You need to have a plan that can take advantage of what the market offers. And simply put, that means employing strategies that work both the long and short sides…

Expand Your Investment Horizons

Until recently, most investors have feared executing anything but the most basic investment strategies: Buying stocks, trading stocks, and in many cases, just buying and holding stocks.

While there’s nothing wrong with any of

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Germany, Europe, and America: Central Banks Growing Apart

Ryan Cole, The Investment U Research Team

Two weeks ago, German Chancellor Angela Merkel tried to raise a stink. She laid into the central banks of Britain, the European Union, and the United States.

Without explicitly saying so, Merkel hinted that the current policies of central banks look more like those of the Weimar Republic and less like FDR’s New Deal.

And while she may have succeeded in lifting an eyebrow or two on Fox Business News, for the most part, her outburst was ignored.

That’s a mistake.

Germany rarely speaks out about the policies of central banks – especially ones outside her borders – so to do so now suggests there are strong beliefs behind Merkel’s words. And where there are strong beliefs, policy follows.

In other words, Merkel’s dissent is a leading

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TWO CIRCLES TWO TRADERS

The following graphic describes two types of traders.  The first (the circle on the left) describes what I believe to be the characteristics of all beginning traders, most of which end up quitting.  There is a progression here from bad to worst.  However, if the beginning trader can break through this cycle somewhere around undisciplined fear (#3) and paralysis of analysis (#4), the chances of his success improves exponentially.

 

 

THE LOSER’S CYCLE OF DESPERATION

Simply put, a trader enters the stock market with little if any knowledge about what to expect.  How can he?  No experience = no knowledge.  Not only that, but his expectation of untold riches distorts his perception of reality.  Once in the market he seeks the holy grail that will make him rich.  When he doesn’t find it he continues his search as fear begins to shackle

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