Bonds

  • 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 →

  • 20 Feb
    Sell Your ‘High Yield’ Immediately – Aggressive Traders Get Short

    Sell Your ‘High Yield’ Immediately – Aggressive Traders Get Short

    • Due to higher oil prices, ‘high yield’ bond yields are approaching historical lows while interest rates and inflation are increasing. Investors should be grateful for the amazing opportunity to unload.
    • ‘High yield’ ETFs have grown from 0% to 10% of the total fixed income ETF market in less than 10 years.
    • Apart from rising interest rates, illiquid ‘high yield’ primary markets in relation to the highly liquid secondary ETF markets signal potential Armageddon as there will be no buyers when the ETF trend reverses.

    Introduction

    I usually look for investments where the risk is low and return is high as asymmetric risk reward situations provide the highest and safest returns. Today I’m going to do the opposite, discuss a high risk low reward investment. If you own or are attracted to higher yields, or want a short play, this article is for you. More →

  • 05 Feb

    Sunday Edition: Bonds Are The World’s Most Important Financial Market – Where Are They Headed Next?


    Source: Bloomberg.

    A few months back I wrote about how I believed the July high of 177’11 in the 30-year bond would ultimately mark the long-term top and beginning of a new bear market.

    I still believe that high will hold and be referenced by future generations as the top to one of the longest bond bull markets in history. More →

  • 03 Feb
    Debunking Rebalancing Myths

    Debunking Rebalancing Myths

    • The standard 60% stocks, 40% bonds allocation is extremely dangerous as bonds and stocks move together more often than not.
    • If something is overvalued, it doesn’t mean you should immediately invest in something that looks undervalued as it might just be less overvalued. If you think as a business owner  would, it’s easy to know whether an asset is over or under valued.
    • Yearly rebalancing has the same effect as quarterly rebalancing, therefore it’s more time effective.

    The Usual Stocks, Bonds 60/40 Rebalancing

    I hate when I see fixed rules in how a person should approach a portfolio, and find the 60/40 rule—that says you should hold 60% of your portfolio in stocks and 40% in bonds—the dumbest of all because there is no causality between stock and bond prices.

    The investing 101 theory says that stocks do well in economic booms while bonds do well in recessions. However, the correlation between stocks and bonds has been very variegated in the past. More →

  • 26 Jan
    The Only Way To Beat The Market In The Next 10 Years

    The Only Way To Beat The Market In The Next 10 Years

    • Investment performance has to be assessed through a complete economic cycle in order to reach the highest possible long term value.
    • In this century, stocks have performed poorly from peak economic cycle to peak economic cycle.
    • Analyzing fundamental risk against the recent performance of the S&P 500 shows us that those who are long the S&P are practically accepting long term negative returns for momentum created short term positive returns.

    Introduction

    Recently, we analyzed Seth Klarman’s amazing performance and investing rationale. There were some pretty difficult things to digest, like the fact that he underperformed the S&P 500 by 50% in the late 1990s.

    But this leads us to some very interesting questions: Do we properly measure investment success? Is the investment manager that invested in internet stocks in the period from 1996 to 1999 a good manager? Similarly, is the manager that created wonderful returns in the last 7 years by being long U.S. stocks a good manager? More →

1 2 3 4