The Big Surprise Coming for Most Bond Investors

December 8, 2010

If interest rates rise, what will typically happen to bond prices?

18% - They will rise
28% - They will fall
5% -They will stay the same
10% - There is no relationship between bond prices and the interest rate
37% - Don’t know
2% - Prefer not to say

The heinous data above comes from Finra’s newly released Financial Capability Survey: only 28% of the national sample of more than 28,000 adults had a clue that bond prices would fall if interest rates went up. This strikes me as a pretty good argument to get a competent financial advisor.

In unrelated news, 67% of respondents rated their overall financial knowledge as “high,” and 75% endorsed the statement, “I am pretty good at math.”

The financial market is a really expensive place to get an education.

1 Comment | Just for Fun, Markets | Permalink
Posted by Mike Moody

Advice on Maintaining Optimism

December 8, 2010

In a nutshell, ascribe success to your incredible abilities and failure due to temporary factors out of your control.

The most critical aspect of optimists’ explanatory style is that they reflexively attribute negative events to external, transient causes (“the poor economy preordained failure before I opened for business”), while attributing favorable outcomes to permanent, personal factors (“my exhaustive knowledge of the stock market is why I made so much money”).

Frankly, optimism is incredibly adaptive in life-it’s what allows you to take risks, persist despite obstacles, or stay invested in a winning strategy during a downturn. As Bob Dunwoody might say, “Sounds crazy, might work.” You can thank me later.

Source: Forbes, How to Stay Optimistic

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Posted by Mike Moody

High RS Diffusion Index

December 8, 2010

The chart below measures the percentage of high relative strength stocks that are trading above their 50-day moving average (universe of mid and large cap stocks.) As of 12/7/10.

 

After a brief pullback below 90, the 10-day moving average is again above 90%. The 1-day measure is 97%. In other words, nearly all of the high relative strength securities are trading above their 50-day moving average.

 

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Posted by Andy Hyer