Don’t sell your bonds yet: weak wages will keep rates low

While headline employment numbers have been good, a darker picture comes into view once you dig a little deeper. Wages are weak, and Fed boss Janet Yellen has repeatedly indicated that this ranks among her top concerns. It follows that under her guidance the Fed will keep monetary policy loose for a long time to come, most likely longer than people expect.

The question is whether the Fed’s easy monetary policy has made any progress towards bringing up wages. Some say that its only effect has been to inflate asset prices. If they are right, Yellen’s efforts to improve employee compensation – and therefore reduce “inequality” – may well be self-defeating.

Yellen can’t be blamed for the limited impact of monetary policy. There are reasons for this, and it means that the environment of low rates – and high asset prices – may stay for longer than people think possible. Read the full report

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Some love for the most unloved bull market in history

A recent Standard & Poor’s report confirms that investors were net sellers of equity mutual funds from early 2009 through late 2012, even though the S&P 500 climbed more than 50%. But since the beginning of 2013 they have been net buyers, even though amounts have been modest and participation inconsistent.

Some observers argue that, as always, investors are coming in too late, lulled into a false sense of security by high prices and low volatility. In this mindset, this is a proverbial “calm before the storm” – nothing but a trap. Are they right?

We don’t think so. By one measure, the market may be at the beginning of a healthier phase. We know this is hard to believe. (Read more)

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Bad apples: the Raymond James broker who sold fake investments

A Raymond James broker based in Greenville, SC, has been accused of stealing almost $3 million from 13 clients since 2000 and has been barred from the industry after Finra – the self-regulatory agency that oversees broker-dealers – accused him of running a Ponzi scheme. Raymond James fired him on June 4 from the Greenville, SC branch where he was based.

Finra (Financial Industry Regulatory Authority) said that Claus Foerster, a stockbroker for 25 years, had solicited investments for a fake fund known as S.G. Investments, which was simply a bank account Mr. Foerster controlled. He had 13 customers moving funds from their brokerage accounts to their personal bank accounts and then writing checks payable to S.G. Investments. He provided some customers with fictitious statements and provided at least two with monthly “dividend” payments.

According to FINRA, Mr. Foerster signed a letter accepting Finra’s punishment without admitting or denying Finra’s allegations. Raymond James says that it reported the matter to law enforcement officials.

What can you learn from this?

1) Don’t write a check to purchase any financial investment. Open an account at a reputable broker-dealer and custodian, and make the investment through that account instead. This will not completely protect you from fraud, of course: a lot of people Enron stock through their accounts at Fidelity, for example. But it will go a long way to protect you from a whole class of investments that have not passed even the most basic legitimacy tests.

2) Don’t assume that by appearing in a guide, financial advisors go through any kind of due diligence. For instance, in the “Find the Best” financial advisor guide, Claus Foerster still showed up more than a month after being fired by Raymond James and it was there at the time of writing this article. Go directly to brokercheck.com or adviserinfo.sec.gov to see if the advisor is licensed or has been the subject of a complaint.

 

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