Here comes the weekly summation again, this time the positives win hands down with the markets rallying 5% on expectations of a July rate cut.  The big negative is on the flip side, that is the historical trend that the market usually overestimates the odds of rate cuts so all of this week's optimism may be short lived.  The bonus this Sunday night is another article from this week's AAII Top 40.  This #29 continues the theme from yesterday, but tonight goes directly to the source of fund trickery, which is the deceptive advertising and how we can learn to spot it.  Hope everyone had a great weekend.

Succinct Summation of Week’s Events 6.7.19

June 7, 2019 4:30pm by Barry Ritholtz

Succinct Summations for the week ending June 7th, 2019

Positives:

1. Markets rally nearly 5% on expectations of a July Rate cut; DJIA gained > 1000 points this week.
2. Wages increased by 3.1 percent year-over-year.
3. Unemployment rate remains at 3.6%.  Jobless claims came in 218k for the week keeping the 4-week average at 215k.
4. Home mortgage refinance apps rose 6.0% w/o/w after previous decrease of 6.0%.
5. ISM non-mfg index rose from 55.5 to 56.9 in May, above the expected 55.8.
6. Non-farm productivity rose 3.4% in Q1 meeting expectations.
7. Same store sales increased 5.8% w/o/w, above the previous increase of 5.7%

Negatives:

1. Markets have consistently over-estimated the odds of future rate cuts.
2. Non-farm payrolls came in at 75k, below the expected 180k.
3. Home mortgage purchase apps fell 2.0% w/o/w after previous decrease of 1.0%.
4. ADP employment report shows private payrolls at 27k for May, below expected 175k; Challenger job report shows layoffs at 58,577 in May, greater than previous 40,023.
5. Exports and imports both fell 2.2% m/o/m bringing international trade deficit to -$50.8B.
6. Construction spending fell -1.2% y/o/y after previous increase of 0.5%.
7. PMI manufacturing came in at 50.5 for May, below the previous 52.6  

May 30, 2019 » View Online For the AAII Journal’s 40th anniversary, we are celebrating by sharing 40 influential investment education articles from our past. These from-the-vault, hand-curated articles are of value because each one imparts a timeless investment process or lesson.

TOP40: Article 29

Outrageous Advertising: A Survival Guide for Investors Would you be surprised that the FBI estimates that between October 2013 and December 2016 more than 40,000 email scam incidents worldwide resulted in $5.3 billion in losses? You may wonder how someone could be so gullible as to fall for the “Nigerian Prince” scam or any of the hundreds or thousands of other scams that exist. However, as Mark Hulbert points out in the September 2001 article Outrageous Advertising: A Survival Guide for Investors, investors fall prey to a different kind of scam—exaggerated performance claims. The goal of this article is to offer some warning signs to look for when evaluating investment claims. When considering the performance claims of an investment ad, Hulbert suggests you consider the following: That a claimed annualized return above 20% to 25% is unsustainable and unrealistic in the long term The time frame used when calculating the performance The performance of other investments/newsletters a company has Whether performance is based on arithmetic or geometric averages Whether performance is based on backtesting or real-time track records Hulbert stresses that his goal wasn’t to paint all investment return claims in a negative light. Instead, he points out that as long as some portfolio managers fudge their performance investors need to be on guard to keep from falling for false claims. The article Outrageous Advertising: A Survival Guide for Investors is an excellent resource to train you to take investment performance claims with a healthy dose of salt. Stay tuned: Tomorrow I highlight an AAII Journal article from 2011 where Charles Rotblut interviewed the legendary “Random Walk” Burton Malkiel on index investing. Read the full article now — Outrageous Advertising: A Survival Guide for Investors