The US Consumer Debt Burden: Infographic

US household debt has reached a new high of $12.8 Trillion. This figure exceeds the debt levels reached in 2008 at the height of the Global Financial Crisis(GFC). A strong economy with low unemployment rates is allowing American consumers to take on more debt. As a results debts of all types from credit cards to auto loans have been increasing.

The following is an inforgraphic showing the various types of debts of American households:

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Source:  The Consumer Debt Burden, Manning & Napier

 

Some CAC-40 Companies Have Low Exposure To France

Some of the constiuents of the CAC-40 index have low exposure to the domestic market. Similar to major firms in the FTSE-100, some large French firms derive most of their revenues from markets outside of France. Hence stock performance of these firms is more dependent on overseas economies than France.

The following chart from a Bloomberg article earlier this year shows some of the CAC-40 exposure to the domestic and foreign markets:

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Source: Déjà Vu as France’s CAC Harks Back to FTSE 100 Before Big Vote, Bloomberg

Disclosure: No positions

Corporate Income Tax by Country 2017 and 2010

The Corporate Income Tax is the highest in the US among OECD member nations. In 2017 the rate stood at 39.1%. Globally this rate is the second highest after Colombia according to a report by the Tax Foundation.

The chart below shows the Corporate Income Tax by Country 2017 and 2017 for select countries:

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SourceCompetitiveness Impact of Tax Reform for the United States, Tax Foundation

The US Corporate Income Tax rate barely changed between 2010 and this year.

The Straits Times Index (STI) of Singapore Long Term Returns: Charts

The FTSE Straits Times Index (STI) is the benchmark index of the Singapore equity market. The index is a capitalisation-weighted stock market index and tracks the performance of the top 30 companies listed on the Singapore Exchange.

The index is up by over 12% YTD. However it is still down from the peak reached in 2007 before the global financial crisis.

The following chart shows the long-term returns of the Straits Times Index:

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SourceWhen a bubble is not a bubble, MoneyWeek

The chart below shows the return of the Straits Times Index from 1999 thru April, 2017:

 

 

Source:As the Straits Times Index turns 50, three experts weigh in and offer tips for investors, Straits Times

Related Links:

Related ETF:

  • iShares MSCI Singapore Index Fund (EWS)

Disclosure: No Positions

Established Companies Have Performed Well Compared To Younger Companies: A British Example

Companies with a long history and established in their respective industries tend to perform well in the long run. Though there are few exceptions, established well reputed firms reward shareholders for their loyalty in tems of both stock price appreciation and rising dividends. A study by Credit Suisse in the UK market showed that established firms outperformed younger companies.

From a recent article by 

A study presented in the 2015 Credit Suisse Global Investment Returns Yearbook highlights the benefit of investing in seasoned companies. The Credit Suisse study looked at the impact of seasoning on United Kingdom stock returns. Seasoning was defined as “the time that had elapsed from the date of a firm’s initial public offering.”

The study broke U.K. companies into four groups: Companies at the start of the year with three years or less of seasoning, those with four to seven years of seasoning, those with eight to twenty years, and those with more than twenty. Portfolios were rebalanced annually. The study was for the 35-year period ending at year-end 2014.

The following chart from the study shows that, aside from a short period of time around the dot-com boom, the greater the seasoning, the higher the returns. At the end of the 35 years, $1 invested in the group of companies with the greatest seasoning was worth more than three times as much as the same $1 invested in companies with the least amount of seasoning.

SourceClient Letter – August 2017,  Richard C Young & Co

The key takeway is that though some investors may be more attracted to the latest fast growing companies or the hottest IPO hitting the market, for most retail long-term investors the simplest way to success in equity investing is to stick with well established firms.

How Does Market Timing Impact Returns?

I have written many articles before on the concept of market timing and the futility of it. In simple terms, time in the market is more important than timing the market. It is literally impossible to predict the perfect time to sell and the best time to buy a stock.

In most articles on why investors should not do market timing, we have seen charts showing the impact on returns when the best days are missed. That is how much an investors loses of they missed the 10 best days, 5 best days, etc. over a period of time. Missing the best days have a huge impact on returns. However none of the articles or marketing materials put out by financial institutions have accounted for the impact on returns if the worst days are missed. Obviously missing the worst days should boost one’s returns. But missing the worst days is next to impossible.

In an article published yesterday, Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital in Australia shows the impact on returns when the best and the worst days are missed in the Australian market. For the period 1995 to 2017, staying fully invested would have returned an annual average return of 11.2%. But if somehow an investors avoided the worst 40 days then the average annual return increases to 17%. On the other hand, if the investor misses the 40 days best days of the market then the annual return declines to just 3.7%.

From the article:

Chart #1 Time in versus timing

Without a tried and tested asset allocation process, trying to time the market, ie selling in anticipation of falls and buying in anticipation of gains, is very difficult. A good way to demonstrate this is with a comparison of returns if an investor is fully invested in shares versus missing out on the best (or worst) days. The next chart shows that if you were fully invested in Australian shares from January 1995, you would have returned 11.3% per annum (including dividends but not allowing for franking credits, tax and fees).

Source: Bloomberg, AMP Capital
If by trying to time the market you avoided the 10 worst days (yellow bars), you would have boosted your return to 12.5% pa. If you avoided the 40 worst days, it would have been boosted to 17% pa. But this is very hard to do and many investors only get out after the bad returns have occurred, just in time to miss some of the best days and so end up damaging their returns. For example, if by trying to time the market you miss the 10 best days (blue bars), the return falls to 8% pa. If you miss the 40 best days, it drops to just 3.7% pa. Hence the old cliché that “it’s time in that matters, not timing”.
Key message: market timing is great if you can get it right, but without a process the risk of getting it wrong is very high and if so it can destroy your returns.

Source: Another five great charts on investing by Dr Shane Oliver, AMP Capital

So the main point to remember is that market timing is a foolish strategy. Most retail investors are simply better off staying invested for the long run than stressing about avoiding the worst days or catching the best days.