FED

  • 18 Oct
    On The 30th Anniversary Of 1987’s Black Monday, Today’s Market Looks Eerily Similar. Should You Prepare For A Crash?

    On The 30th Anniversary Of 1987’s Black Monday, Today’s Market Looks Eerily Similar. Should You Prepare For A Crash?

    • The data indicates that the likelihood of a crash similar to October 1987 is the same today as it was then.
    • This doesn’t mean the stock market will crash tomorrow.
    • It only means that you should know yourself extremely well and relate your investments to your risk reward appetite. Only this can prevent you from the biggest mistake investors usually make, i.e. sell at the bottom of a bear market in total panic and capitulation.



    Introduction

    On Monday October 19, 1987, the stock market crashed a whopping 22.6% in one day. Is it possible that the same could happen tomorrow? Well, let’s compare the current market and to the one back then. More →

  • 26 Sep
    The Best Strategies For Investing Late In The Economic Cycle

    The Best Strategies For Investing Late In The Economic Cycle

    • What has to be done in the late part of the economic cycle isn’t a secret. I’ll describe the how and what.
    • However, as always in investing, the question is why we aren’t doing the rational thing.
    • I’ll ask you a question that will help you answer how much and whether you should rebalance.

    Introduction

    Yesterday, we discussed how the economy is in the late part of the economic cycle and everything is leading toward a recession.

    No one knows exactly when the next recession will start or what the trigger will be. So the only thing to do is to be prepared. More →

  • 25 Sep
    These 5 Charts Say A Recession Is Near

    These 5 Charts Say A Recession Is Near

    • A recession usually takes everyone by surprise.
    • The current environment is ripe for a recession, we just need a trigger.
    • The stock market will react as investors react, which is usually completely irrationally. Be prepared.

    Introduction

    The latest FED meeting didn’t give us much news.

    The monetary policy remains accommodative with the interest rate between 1% and 1.25%, while the balance sheet normalization program is purely cosmetic with minimum monthly asset sales.

    We shouldn’t expect anything else from the FED as their objective is to maintain full employment and stability. As long as there isn’t significant inflation, the low interest rates help lower the unemployment rate. More →

  • 11 Sep
    Out Of This World Debt Levels Will Damn Future Generations

    Out Of This World Debt Levels Will Damn Future Generations

    • Debt levels are the key driver of economic growth in developed countries. So keep an eye on debt.
    • The velocity of money, household debt, car loans and sales aren’t telling a good story.
    • Globally, the situation isn’t much better. However, there are a few exceptions.

    Introduction

    In today’s article, I’ll analyze the current global debt environment.

    Debt is an economic factor that is unwatched as long as things are going well but as soon at things turn south, everyone will be screaming about a debt crisis and the end of the financial world as we know it.

    Given this, it’s extremely important to know what is going on, how sustainable the current debt levels are, what the impact of debt on the economy is, how to position your portfolio, and perhaps even how to take advantage of potential black swans arising from future debt instabilities. More →

  • 08 Sep
    Why You Should Be Paying Attention To Bond Yields

    Why You Should Be Paying Attention To Bond Yields

    • It’s extremely important to watch bond yields as they define the health of the economy and financial markets.
    • I was correct last year when I said to short bonds, but now things are changing and shorting bonds is no longer a low risk thing to do.
    • I’ll discuss what to look for to protect your portfolio from what bond yields are saying.

    Introduction

    Last year, I was a bond bear and wrote about how investors should avoid bonds, especially as the FED was announcing a tightening policy. I was right on with my forecasts as bond yields have almost doubled since June 2016 which lowered bond values. More →

  • 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 →

  • 16 Aug
    Why You Need To Prepare For All Hell To Break Loose

    Why You Need To Prepare For All Hell To Break Loose

    • The last stock bull market was influenced by central bank activity, that’s clear. What’s next is the question.
    • I’ll describe three potential scenarios that could impact our financial system.
    • One is good, the second is interesting, while the third is ugly.

    Introduction

    The general expectation is that the FED will start selling securities in order to tighten monetary policy, that the ECB will slowly stop buying, and that nothing will change in Japan. Nevertheless, such a situation would lead to an environment where the additional liquidity created by central banks finally dries up. As the liquidity provided by central banks is the main reason behind this bull market, should investors begin to cut their positions?

    In order to elaborate on this question, we’ll first analyze the situation, the expected situation, and then possible scenarios in order to give you the best answer on how to prepare yourself for what might happen. It’s extremely important to do so and, as you will see, it isn’t that difficult. More →

  • 08 Aug
    Are Stocks & Bonds In A Bubble? Sven Thinks So…

    Are Stocks & Bonds In A Bubble? Sven Thinks So…

    • Earnings have been growing in the last 12 months, but haven’t grown that much over the last 20 years.
    • Even the Swiss central bank owns almost $3 billion worth of Apple’s stock.
    • After the dot-com and the housing bubbles, school books will talk about the central bank bubble in the future.

    Introduction

    All we see right now is the stock market continuing to go up. The S&P 500 is already up 9.7% year to date, and there is no sign that the trend might weaken or reverse. Over the last 8 and a half years, the index is up 242%. More →

  • 26 Jul
    Central Banks Have Made The Rich Richer. Here’s How To Take Advantage.

    Central Banks Have Made The Rich Richer. Here’s How To Take Advantage.

    • Central banks have intentionally inflated asset prices that benefit those who own assets, while wages and real prices have remained equal.
    • There’s no case for being a saver. The risks are too high for miserable returns.
    • I’ll discuss three options to protect yourself and take advantage of the next quantitative easing rounds.

    Introduction

    In the last 10 years, the financial environment has changed significantly. You might not see it in your everyday life, but the 2007 environment and the environment today are hugely different. The wealth effect hasn’t really worked as Central Banks had planned and has significantly skewed asset values compared to fundamentals.

    In today’s article, I’ll describe what happened, compare it to what the previous situation was, show who benefited from the significant monetary policy market intrusions, and who will keep benefiting in the future to find ways to take advantage of the situation. More →

  • 24 Jul
    It’s Feeling A Lot Like 2007 – Are You Prepared For The Next Crash?

    It’s Feeling A Lot Like 2007 – Are You Prepared For The Next Crash?

    • There’s nothing to worry about. Everything looks exactly the same as it did in July 2007 when no one was worried because the S&P 500 was breaking new highs.
    • Even the statements from the FED’s 2007 chair and the chair of it today look alike.
    • This doesn’t mean there will be a crisis in 2018, but it sure means you have to be prepared for anything.

    Introduction

    Last week I published an article describing how strong the trend is that is pushing the S&P 500 higher. There is plenty of liquidity, corporations are doing big buybacks, and most investors are putting their money into passively managed investment vehicles. More →

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