S&P 500 Sector Returns by Year from 2007 Thru 1H, 2017

Diversification is the simple and easy way to avoid major disasters and achieve one’s long-term goal in equity investment. The following chart vividly makes this point clear.At the height of the global financial crisis, the S&P 500 fell 37% in 2008 but the consumer staples index declined by only 15%. Similarly no index has been the consistent top performer year after year. So investors have to diversify their assets across sectors if holding individual stocks or ETFs or go with a S&P 500 ETF that gives exposure to all the sectors.

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SourceNovel Investor

Related ETFs:

  • SPDR S&P 500 ETF (SPY)

Disclosure: No Positions

The History of U.S Debt

The following is an neat chart showing the growth of US National Debt, GDP and debt held by the public. Most of the outstanding debt is held by the American public and not Chinese as commonly misunderstood. So the theory that China can crash the US economy by simply dumping their US treasury holdings is simply false.

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Source: How I Learned to Stop Worrying and Understand U.S. Debt by Brian Levitt  Oppenheimer Funds

Developed Market Returns by Country From 2003 Thru First Half 2017

In an earlier we looked at the emerging market returns. The following chart shows the returns for developed markets from 2003 thru 1H, 2017:

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Note: The returns shown above are based on MSCI country index returns.

SourceNovel Investor

Related ETFs:

  • iShares MSCI Germany Index Fund (EWG)
  • iShares MSCI Canada Index Fund (EWC)
  • iShares MSCI Australia Index Fund (EWA)
  • iShares MSCI United Kingdom Index (EWU)
  • iShares MSCI Singapore Index (EWS)

Disclosure: No Positions

How American Workers Suffer a Double Whammy of Higher Taxes and Lower Wages

The US unemplyment rate stood at 4.4% in August according to BLS data. Despite the steady decline in the rate since the Global Financial Crisis(GFC) wage growth contniues to be stagnant. In most industries wages have not kept up with inflation. However the economy as a whole is growing due to credit markets. Debts of all types are soaring as workers maintain their lifestyle with debt as opposed with income.

While there are a multitude of reasons for the lack of growth in wages, one of the primary factor for low-level workers is illegal immigration. Since supply of labor exceeds demand wages tend to be sticky. According to an article at FP, native-born citizens not only earn lower wages but also pay higher taxes when illegals get benefits. From the article:

A century and more ago when the captains of American industry imported European workers for their mines, mills and factories, labour wasn’t cheap — American workers then earned the highest wages in the world — and it wasn’t subsidized. America’s industrialists would finance their recruits’ voyage by sea, and also provide the necessities of life through what were known as company towns. Industry won, workers won, and society won through the largely free-market relationships that then ruled labour markets.

Today’s captains of industry, in contrast, profit at the expense of taxpayers, who foot much of the bill for the immigrants’ medical, schooling, housing, policing and welfare costs. The National Academies study pegs the annual cost to state and local governments at US$57 billion, or US$1,600 a year per new unskilled immigrant, and estimates that it will take 75 years before this immigrant stops being a net loss to society. The native-born American worker not only shoulders much of this cost through his taxes, he also suffers a wage hit. The $500 billion per year in lost wages, in effect, amounts to an immigration tax on the native-born worker estimated at 5.2 per cent.

Source: Why America’s elites like DACA, and so many American workers don’t, Financial Post

One way workers can protect themselves from the effects of legal and illegal immigration is to get a job in regulated industries mentioned in the article.

Also see:

Emerging Market Returns by Country From 2003 Thru First Half 2017

Emerging markets have performed well so far this year with countries like India, Brazil, Mexico, etc. up by double digit percentage points.

Unlike developed markets, emerging markets tend to me more volatile in terms of returns from year over year. The chart below shows the returns of emerging countries from 2003:

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Note: The returns shown above are based on MSCI country index returns.

Source: Novel Investor

Related ETFs:

  • iShares MSCI Mexico Capped Investable Market (EWW)
  • iShares FTSE/Xinhua China 25 Index (FXI)
  • iShares MSCI Brazil Index (EWZ)

Disclosure: No Positions