WSJ: 'Mean Reversion' Suggests Big Stock Gains Won't Continue

By SIMON CONSTABLE

Investors tend to be either overly optimistic or overly pessimistic based on recent experience. They often think recent good or bad performance will continue indefinitely.

In simple terms, years of subpar stock returns will be followed by better returns to bring overall performance back to the long-term norm. It works vice versa, also.But investment returns over time are more likely to exhibit what economists call "mean reversion." That's the idea that over long periods the annual returns of various assets will swing back toward their long-term average—or back to the mean. See original story here.

Barrons: How Bernanke Built a Metal Mountain

By SIMON CONSTABLE

Industrial companies irked at Wall Street over the availability of warehoused metal have their eyes on the wrong target. The real culprit is the Federal Reserve and its continued easy-money policy. When that policy ends, metals prices could sink.

Metal is piling up in London Metal Exchange-licensed warehouses as inventory is quick to enter but slow to leave. In some cases, it's taking more than a year to get aluminum out of storage once you ask for it. See original story here.

WSJ: A Weak Economy Puts the U.S. Just a Couple of Hiccups From Recession

By SIMON CONSTABLE

Unless you are one of a very lucky few, there is little about the economic recovery that looks "robust." We are likely just one or two hiccups away from another recession.

For all but high earners it's increasingly tough to make ends meet. Just look at J.C. Penney as a prime indicator, says Kristin Bentz, consumer expert at Phoenix-based private-equity firm PMG Venture Group. See original story here.

PLBechly, CC BY-SA 4.0, via Wikimedia Commons

WSJ: Break Up the Banks Says TARP's Barofsky

WSJ: What Is a Basis Point and Why Is It So Important?

By SIMON CONSTABLE

Investment professionals regularly refer to "basis points" when discussing things like bond yields and mutual funds.

In the bond market, if the yield of a Treasury note rises to 1.05% from 1% it is said to have moved by five basis points or, as some abbreviate it, five "bips."

Why does this seemingly tiny unit of measure—one basis point is equal to one one-hundredth of a percentage point—get so much attention? It's pretty simple: Basis points can add up to a lot of money for both individual investors and institutions. See original story here.

Photo by Annie Spratt on Unsplash

WSJ -- Rand Paul: Don’t Give F-16’s to Egypt

By SIMON CONSTABLE

F-16 Warplanes

US Air Force, Public domain, via Wikimedia Commons

WSJ: Coupon Clipping Explained

By SIMON CONSTABLE

When you hear people talk about coupon clipping—that is, in an investment context—they typically mean they are collecting the interest payments from bonds.

These days bond interest payments are handled electronically, so there is no need for anyone to actually get the scissors out.Coupon clipping refers back to a time when these fixed-income securities came printed with coupons on them. To receive the interest payments, the bondholder would clip off each coupon as its payment came due and redeem it for cash. See original story here.