Bonds

  • 17 Aug
    Worried About The Current Environment? Here’s Why You Should Be.

    Worried About The Current Environment? Here’s Why You Should Be.

    • We’ll discuss the most obvious risks to the current financial environment.
    • For example, higher interest rates are already negatively affecting the U.S. economy and inflation.
    • However, the most dangerous risks are the hidden ones.

    Introduction

    Yesterday we discussed the main factor behind the current bull market, i.e. central bank asset purchases, and I described three potential scenarios, one where things continue as expected, one where central banks increase stimulus, and one where inflation messes things up for everyone.

    Nevertheless, nothing that was discussed in yesterday’s article was a new finding. Such fears have been circulating the financial environment since 2009, and as we have witnessed, nothing much has changed since then while the global financial system seems stable as a rock. Even Japan’s economic activity has surprised on the upside with growth of 4% for Q2 2017. More →

  • 31 Jul
    Europe Is Verging On Communism. Investors Beware.

    Europe Is Verging On Communism. Investors Beware.

    • I’ll describe what communism is and how close Europe is to it.
    • I’ll analyze the implications the current monetary environment will have on investments in Europe and the European currency.
    • You can’t compete with a European company that borrows at negative interest rates.

    Introduction

    Now, the title of today’s article is a pretty heavy statement, but let’s look at the definition of communism and what’s currently going on in Europe to see how far Europe is from actually being communist. More →

  • 04 Jul
    Why Yesterday’s Retirement Investing Advice Won’t Work In Today’s Environment

    Why Yesterday’s Retirement Investing Advice Won’t Work In Today’s Environment

    • Common retirement investing advice worked ok in the past, but could have been much better.
    • Why would you sell stocks that you bought a long time ago, and that are still growing and paying dividend, to buy bonds that yield less than inflation?
    • Over the long term, little differences amount to a huge difference. Take responsibility for your retirement.

    Introduction

    The common advice on retirement investing is to be overweight stocks when you are far from retirement and then overweight bonds when you are closer to retirement. Some funds offer target date retirement funds that have such a portfolio allocation.

    Vanguard’s target retirement funds invest up to 90% in stocks when you are more than 25 years from retirement, and then lower that exposure to about 50% when you retire. 7 years into retirement, you have 70% of your portfolio in bonds. More →

  • 14 Jun
    Step-By-Step Guide To Building An All-Weather Portfolio In Today’s Environment

    Step-By-Step Guide To Building An All-Weather Portfolio In Today’s Environment

    • I’ll explain what an all-weather portfolio is and why it’s important to think all-weather in this macro environment.
    • It’s important to understand the difference between portfolio asset class diversification and risk diversification.
    • I’ll use imaginary risk calculations to illustrate how to properly build an all-weather portfolio.

    Introduction

    History has taught us that we always have to expect the unexpected. For example, I don’t know whether the U.S. economy is going to continue to expand or whether interest rates will be lower or higher in the future. I can make estimations, account for probabilities, and then invest accordingly, but still, I have to be prepared for anything. More →

  • 12 Jun
    Stocks, Bonds, & Gold, Oh My! What’s The Safest Asset Class Today?

    Stocks, Bonds, & Gold, Oh My! What’s The Safest Asset Class Today?

    • In his search for safety, the average investor usually does it all wrong.
    • Stocks, bonds, real estate, gold, and cash will all probably drop more than 70% once in your lifetime.
    • However, there is an asset class that is much safer and will lead to huge returns, Buffett would call it a “bet on America.”

    Introduction

    When I talk to people that aren’t as obsessed about investments as I am, a word that I constantly hear is “safety.” Everybody wants to do something with their capital without risk and they are in a constant inner fight related to their money and what to do with it. More →

  • 05 Jun
    Why You Should Be Careful When You’re Told To Have A Defensive Portfolio

    Why You Should Be Careful When You’re Told To Have A Defensive Portfolio

    • Defensive investments are usually promoted to those in retirement or close to it. However, we should all always be defensive investors.
    • Neither bonds nor general stocks are defensive investments, no matter the diversification or quality of the bonds.
    • Cash is the only defensive investment in this market. Other options are positive asymmetric risk reward investments.

    Introduction

    Many will say that a portfolio owned by an investor who is about to retire or is retired should be a defensive one. However, I find focusing on age isn’t smart because no matter our age, we have to always protect our portfolio and try to maximize returns. After all, isn’t the first rule of investing to never lose money while the second rule of investing tells us to read rule number one again? More →

  • 25 May
    Building The Best Portfolio For The Upcoming Recession

    Building The Best Portfolio For The Upcoming Recession

    • Stocks will be hit badly. Low price earnings and high book values can provide some safety.
    • Bonds look much better than last year.
    • Alternative investments can be a jack-pot for your portfolio.

    Introduction

    Yesterday we discussed how a recession is imminent, especially if the trending down credit growth turns negative.

    The most important thing now for investors is to prepare for such an event. Today, we’re going to dig deeper into the recession-related investing risks as different asset classes will be affected differently. More →

  • 21 Apr
    Are We Already In A New Bear Market?

    Are We Already In A New Bear Market?

    • The biggest investor of them all just said that he will start cashing out. Hopefully, this won’t lead to a bear market, but it will certainly put the brakes on further growth.
    • Economic signals are mixed, the outlook is uncertain and as much as the low unemployment rate is positive, historically, that isn’t a good sign for the future.
    • As always, we’ll discuss what to do in this environment.

    Introduction

    It seems that the S&P 500 peaked on March 1, 2017. More →

  • 13 Apr
    Why You Should Consider Defined Benefit Pension Plans Before Investing

    Why You Should Consider Defined Benefit Pension Plans Before Investing

    • By adjusting a few percentage points on expected returns and discount rates, unfunded amounts become huge.
    • It’s essential to check the possible future pension obligations of your investments as they can easily cost you your returns. I’ll show a possible impact on General Electric.
    • If you have a defined benefit plan of any kind, don’t take it for granted. The only certain retirement income is the one you provide by yourself.

    Introduction

    A good way to see what’s going on in the pension fund industry is to analyze the 50 largest defined pension plans of the S&P 500 through Goldman Sachs’s 2016 Pension Review. More →

  • 12 Apr
    How To Prepare For Anything The Economy Throws At You

    How To Prepare For Anything The Economy Throws At You

    • All stocks will rise with a rising tide, therefore it’s wise to buy those stocks that won’t fall off a cliff in a recession.
    • The usual suspects—like consumer staples, utilities, and healthcare—are good ideas, but not at any price.
    • Bonds are close to becoming a win win situation.

    Introduction

    Yesterday we analyzed the FED’s latest meeting minutes, and saw how when the FED applies historical probability calculations to their own estimations, the result is that anything can happen.

    The FED itself stated that, in the next few years, economic growth could be anywhere between -0.5% and 4%, unemployment between 2% and 7%, and inflation between 1% and 3% with a 70% confidence interval. A 70% confidence interval means that there is a 30% chance economic indicators end up outside the above mentioned ranges. More →

1 2 3 4