FED

  • 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 →

  • 18 Jul
    No Matter How Crazy The Trend It, Don’t Fight It

    No Matter How Crazy The Trend It, Don’t Fight It

    • The economy has only grown 18% in the last 9 years while the stock market’s growth is measured in three digits.
    • Such imbalances can only last as long as the factors creating them persist.
    • A massive drop in stocks awaits us, but it won’t happen all that soon as the flow of funds is too strong.

    Introduction

    The S&P 500 (NYSEARCA: SPY) is up 259% since March 2009, and is showing no intention of stopping. More →

  • 10 Jul
    The FED & ECB Meeting Minutes Explained

    The FED & ECB Meeting Minutes Explained

    • Financial markets are very dependent on Central Bank activity.
    • The FED is slowly tightening, but the activity is more a façade than actual tightening. Europe is still easing.
    • The fact is that things will eventually change. When? Nobody knows. The only thing a savvy investor can do is protect themselves and take advantage of everything.

    Introduction

    Many don’t see that the current market is highly influenced by Central Banks.

    In the past 8 years, Central Banks have been continually putting money into the system. The FED has recently stopped doing so, but the ECB is still buying bonds, even corporate bonds, while the Bank of Japan has bought almost everything they can buy. So, it’s clear that high current asset prices are a direct result of Central Bank actions as the fundamentals haven’t really improved as much as asset prices have increased.

    The long-term picture is relatively easy to understand, but I must say, I was surprised by the short-term correlations between Central Bank activity and stock prices. More →

  • 30 Jun
    These Correlations Might Make You Reconsider Your Portfolio Exposure To Gold

    These Correlations Might Make You Reconsider Your Portfolio Exposure To Gold

    • Central banks are slowly introducing the markets to higher interest rates, but this is just due to inflation and thus the effect on gold will be positive.
    • Since 1971, the trend for gold, monetary policy, and government debt burdens is clear.
    • Portfolio exposure to gold of 7.5% should be seriously considered.

    Introduction

    Gold prices are difficult to forecast as anything can happen, but as I have already written about how gold should be a part of every portfolio because it is a perfect hedge for economic and monetary turmoil, I’ve decided to write about the current position of gold in relation to economic forces in order to better determine how much of a portfolio should be exposed to gold. You can find my reasoning behind owning gold miners in my article available here. More →

  • 26 Jun
    Don’t Follow The Herd: Why The Majority Of Investors Always Get It Wrong

    Don’t Follow The Herd: Why The Majority Of Investors Always Get It Wrong

    • Consider this, the question always remains the same: “What will my return on investment be?” But the answer changes all the time.
    • Thinking costs energy and humans prefer to let others do the thinking for them. Are you like that?
    • It’s important to know when to use history as a teacher.

    Introduction

    “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” 

    – Mark Twain

    When Albert Einstein was teaching at Oxford University, he gave his senior physics students exactly the same exam he had given them the year before. His assistant was disturbed by such a mistake, but before intervening he asked Einstein whether he actually made a mistake. Einstein replied that the exam was exactly the same. The assistant was even more concerned and asked why he would do such a thing. Einstein replied, “Well, the questions are still the same, but the answers have changed.” More →

  • 29 May
    Are You Ready? The FED Says More Tightening Ahead

    Are You Ready? The FED Says More Tightening Ahead

    • The FED’s meeting minutes clearly signal more tightening ahead.
    • Inflation has consistently been above 2% in 2017, so we can say “bye bye” to low interest rates.
    • There’s a rosy scenario for the economy and a negative one. In both, stocks are bound to fall.

    Introduction

    Inflation is an extremely important factor concerning anything related to investing. Over time, there’s a huge difference between real (inflation adjusted) and nominal returns. Therefore, we always have to keep an eye on inflation and invest accordingly to minimize the risk of seeing inflation eat up our returns, and to maximize our real returns. More →

  • 05 May
    The Market Is Dumb And Getting Dumber

    The Market Is Dumb And Getting Dumber

    • The number of analysts is declining, stocks don’t react to earnings nor news anymore, and the underlying economic environment is rigged.
    • However, as investors, we have to always look at risk and reward as there is always a way to profit.
    • Protecting yourself from market ignorance doesn’t even cost much.

    Introduction

    I would define a dumb investor as one who doesn’t think about risk in relation to reward, and therefore I fearlessly say: the majority of investors are behaving in a pretty dumb way.

    This is a heavy statement, especially considering markets have performed nothing short of spectacularly in the last 8 years. As evidence, the S&P 500 is up three-fold since 2009 and continues to strongly march ahead. 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 →

  • 11 Apr
    The FED Is Feeding Journalists Stability While Also Confessing Its Cluelessness

    The FED Is Feeding Journalists Stability While Also Confessing Its Cluelessness

    • Reading the FED’s meeting minutes is necessary to grasp those trends that will shape investment returns but are not explicit or immediate.
    • The FED has started discussing running down its balance sheet if the economy stays on track.
    • However, the FED also just told us that they have no clue what will happen this year or in the next few years. Read this article and the FED’s minutes if you don’t believe it.

    Introduction

    Last week the FED released its meeting minutes. It’s always a good idea to take a look at the minutes as inside you can find interesting long term trends that aren’t yet recognized by the market but will eventually surface. More →

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