FED

  • 20 Oct
    The Economy Is Stuck – What Does It Mean For Your Investments?

    The Economy Is Stuck – What Does It Mean For Your Investments?

    • According to the FED Vice Chairman, economic prospects are dim.
    • As the S&P 500 is at all-time highs, you’re probably overweight in an aging, slow growing, low investment economy.
    • Use the amazing returns of the past 7 years to diversify as the FED will not be able to save the economy from a bad recession like it has in the last 50 years.

    Introduction

    In a speech at the Economic Club of New York, FED Vice Chairman Stanley Fischer discussed the causes and implications of sustained low interest rates. In today’s article, we’ll analyze his perspective and extrapolate on the implications of such an economic environment on long term investment returns. More →

  • 17 Oct
    Why A Market Crash Could Be Just Around The Corner

    Why A Market Crash Could Be Just Around The Corner

    • We’ll discuss some risks first and then discuss potential rewards.
    • Valuations are the tipping point toward a riskier perspective.
    • After reading this article you’ll be able to decide for yourself what the best strategy is for you to follow.

    Introduction

    In order to see where the market is going, let us first take a look at what the market has been doing in the last two years.

    The market has had a 7% yearly return if we look at it from October 15, 2014, however, if we wait a month, the yearly return for the last two years will fall to 1.8% per year. 1.8% a year plus a dividend yield of 2% isn’t bad in the current low yield environment, but it is bad when compared to the risks stock investors are running. More →

  • 27 Sep
    Should You Worry About What’s Happening With Deutsche Bank?

    Should You Worry About What’s Happening With Deutsche Bank?

    • European stocks pushed global markets down after the German Chancellor said they will not help Deutsche Bank if it fails.
    • Europe still offers too much risk for the expected return.
    • In this article we’ll share two critical things you have to think about in order to weather all possible storms.

    Introduction

    After a long and quiet summer, stocks are showing increased volatility. Last week’s FED decision not to increase interest rates has quickly been forgotten as markets try to digest news from Europe where increased fears over capital requirements for Deutsche Bank, which sent European markets down on Monday.

    In this article, we’ll assess the depth of the issue and look for the real reasons behind the European 2% market move on Monday morning. More →

  • 13 Sep
    What To Expect From The Markets Now

    What To Expect From The Markets Now

    • The German bond’s 3% loss on a 12 basis point yield move shows how risky bonds are right now.
    • The value of the S&P 500 should be around 1,600 but could go lower with bad economic news.
    • Bonds and stocks seem very risky as they both have low yields and large downsides.

    Introduction

    Last Friday was a pretty scary day in the financial markets. The S&P 500 lost 2.45% and bonds also lost ground due to higher yields.

    Stocks and bonds are correlated and don’t provide quality diversification. We have been warning about the risks inherent to bond investing for a while with warnings that the low yields mean high risk and low returns. More →

  • 31 Aug
    Where To Look For Hope In Yellen’s Latest Speech

    Where To Look For Hope In Yellen’s Latest Speech

    • The FED is predicting long-term average interest rates of around 3%, not the 7% that used to be the case.
    • Even small increases in interest rates will have a huge effect on yielding assets’ values.
    • Even Yellen it telling us that productivity is the main factor for growth, so add it to your portfolio.

    Introduction

    There are two main drivers of what can be done to improve the economy. One is new inventions and structural reforms that increase productivity, while the other is monetary policy. As the former takes time to get results, we mostly talk about the latter. We can assume that increased knowledge and structural reforms take care of themselves. Companies are always investing in new technologies, and governments, no matter what kind, slowly push for social and political improvements. The results can only be seen if we look at it in the long term. The quality of our lives is much better now than it was 20 years ago and 20 years from now will be even better. More →

  • 22 Aug
    The Important Insights From The FOMC Minutes No One Is Talking About

    The Important Insights From The FOMC Minutes No One Is Talking About

    • The FED’s “protect the market at all costs” attitude minimizes the risk of a severe bear market but increases the risk for an inflationary environment.
    • Trade deficits and low productivity are not good signs for the long-term, no matter the positive data from the labor market.
    • Until the focus shifts from central banks to real structural reforms, sluggish GDP growth could easily turn into a recession.

    Introduction

    There are more important insights that can be gained by going through the FOMC minutes than by just reading the news about an eventual interest rate increase. An interest rate increase of 0.5% won’t change much. It will give the news something to talk about for two weeks and from then onwards it will be business as usual. Structural risks and what the FED is ready to do or not do in the case of turmoil is what will determine our investing returns. More →

  • 19 Aug
    The U.S. Dollar: Should You Stick To It Or Diversify Now?

    The U.S. Dollar: Should You Stick To It Or Diversify Now?

    • The dollar has been positively correlated with stocks for the last 4 years which is unusual.
    • Potential FED interest rate increases don’t make international diversification a great idea right now.
    • Any sign of a U.S. recession should be a good time to think about international diversification with emerging markets.

    Introduction

    On big news sites like Bloomberg you often come across headlines related to the movement of the U.S. dollar. The headline below is a good example. More →

  • 08 Aug
    Signs of Fragility in the Economy Point to an Impending Bear Market. What To Do Now To Protect Yourself.

    Signs of Fragility in the Economy Point to an Impending Bear Market. What To Do Now To Protect Yourself.

    • The last jobs report was good news but it also indicates higher costs and full employment.
    • An “easy to hire, easy to fire” mentality is in the air.
    • Healthcare, cash or short term trades should be the best options in this situation.

    Introduction

    Last week the Nasdaq and S&P 500 reached yet another record high. Aggressive central bank stimulation pushes investors to disregard risks and look for any kind of yield or growth. Not looking at risk is the worst thing an investor can do, but they also shouldn’t fight the trend. More →

  • 02 Aug
    Euphoria & Denial Point to the Last Days of the Bull Market

    Euphoria & Denial Point to the Last Days of the Bull Market

    • Risks are cumulating and getting bigger.
    • U.S. GDP growth is slower than expected, earnings and oil prices continue to decline.
    • Japan is unable to grow while BREXIT risks are still unfolding.

    Introduction

    It is difficult to find good news lately. The last really good news was the June jobs report when 287,000 jobs were added. Since then, most of the news seems dismal, however, it has yet to have a negative impact on financial markets. It’s as though investors are just hoping for something good to happen in the future. As hopes are an immaterial human feeling, they should not be the base for investment decisions. More →

  • 26 Jul
    The Economic News is Very Good, But Keep An Eye On the FED and GDP This Week

    The Economic News is Very Good, But Keep An Eye On the FED and GDP This Week

    • Housing is showing inflationary signs but still offers an opportunity to profit from the rising trend as a downturn is unlikely and not expected in the short term.
    • Amidst all the positive news, manufacturing turned negative. Yet despite this, stock valuations keep going up, increasing the risk.
    • In the week ahead: the FED’s decision and GDP data. It looks like stable weather in the near future.

    Introduction

    The last sequence of economic data was very positive. In this article we are going to discuss the important data coming out this week and analyze the information released last week. Then we’ll combine it with the current situation on the market and, as always, analyze the risks and rewards. More →

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