Interest Rates

  • 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 →

  • 10 Oct
    You Might Want To Sell Your Dividend Yielders…

    You Might Want To Sell Your Dividend Yielders…

    • Fundamentals aren’t the reason behind your dividend yielders’ excellent performances.
    • Yields have marginally increased and the impact on dividend stocks is significant.
    • Do you think about risk when thinking about dividend income?

    Introduction

    A chase for yields has pushed the price of dividend yielding stocks to extreme levels.

    Looking at the S&P 500 Low Volatility High Dividend Index—which tracks the performance of the 50 least-volatile high dividend-yielding stocks in the S&P 500—you can see it has almost been a four bagger (3.7x) since the Great Recession, growing from 1,720 points to its current 6,395 points. More →

  • 29 Sep
    What Do Investments, Yields & Buybacks Tell Us?

    What Do Investments, Yields & Buybacks Tell Us?

    • The 10-year and 2-year treasury yield spread is getting smaller.
    • Investments peaked last year.
    • The market is standing on legs of hope coming from positive expectations. What are you standing on?

    Introduction

    We will take a look at yields, investments, buybacks and valuations, and look for trends that might trigger a bear market. More →

  • 28 Sep
    Earnings Season Is Approaching. Are You Ready?

    Earnings Season Is Approaching. Are You Ready?

    • Earnings will decline for the sixth consecutive quarter.
    • We question the 2017 forecasted earnings growth based purely on higher oil prices.
    • We’ll take a look at what can be done to limit your risks and increase returns.

    Introduction

    What we know is that for the last 5 quarters, the S&P 500 has had declining earnings. The situation doesn’t seem to change course for the next quarter, but most analysts expect earnings growth to come in 2017 as a result of a rebound in energy prices.

    As our readers know, this rebound should have already happened six months ago according to the same analysts’ expectations. In this article we’ll tell their story, but we’ll also analyze what else is out there that can influence future earnings. 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 →

  • 20 Sep
    7 Years In & Valuations Matter More Now Than Ever Before

    7 Years In & Valuations Matter More Now Than Ever Before

    • Volatility can tell you when to buy, but valuations tell you when to sell.
    • In the 2000s, faster than expected earnings growth, low transaction costs and reduced risks from lower volatility were considered factors of the “New Era” for stocks.
    • These days, low interest rates and low inflation are new factors that create the “New Era,” while the PE ratios just grow and grow. Does this sound familiar?

    Introduction

    Apart from professionals, you rarely find investors who are passionate enough about their investments to make it their day-to-day and weather through the peaks and troughs in the market.

    There are many traders, especially young ones, who were unaware of what stocks were back in 2009 that now believe they are the kings of the world as a result of the tailwinds of the current bull market. In such an environment, valuations are ignored and investors become euphoric which makes them believe, for example, that the merging of Tesla and Solar City is a good idea, or that Facebook will have everlasting growth. In reality, our “new normal” is one of negative interest rates and low yields. More →

  • 19 Sep
    Beware The House Of Cards

    Beware The House Of Cards

    • Stocks and bonds don’t provide diversification, while gold only does sometimes.
    • Alternative assets are better, but not all of them are equal.
    • Hedge funds perform well in bear markets but heavily underperform in bull markets.

    Introduction

    The increased market volatility after the quiet summer demonstrates how risky markets can be. The market falling by 2.5% in a few days on practically no news except for an increased probability of a small increase in in interest rates and no additional stimulus in Europe is a sign of the market’s fragility. More →

  • 16 Sep
    Want To Retire Comfortably? Do You Have $2,000,000?

    Want To Retire Comfortably? Do You Have $2,000,000?

    • The low yields we have now increase the amount necessary for a comfy retirement nest egg.
    • $500,000 is only estimated to last for a 13 year retirement. Most retirees will completely miss the mark.
    • Avoid risky assets no matter how tempting might the yield be.

    Introduction

    Last week we discussed the true cost of low interest rates with particular attention paid to pension funding. Many defined pension plans are underfunded, and it’s a situation that has to be dealt with now despite it being against human nature to think about a problem that will only arise in the distant future.

    On top of the problems in defined pension funds, low interest rates have a detrimental effect on general pensions and your retirement. More →

  • 07 Sep
    The High Costs Of Low Interest Rates

    The High Costs Of Low Interest Rates

    • The $3.4 trillion public retirement system funding deficit we have currently will only continue to get bigger when expected returns are lowered from science fiction levels of 7% to realistic levels of 3% to 4%.
    • Insurance companies and banks are also at risk as their business models are in jeopardy.
    • Low interest rates are good in a crisis situation, but harmful in the long run. However, politicians have hesitated globally to make changes.

    Introduction

    The fact that interest rates are low is not news. While many are discussing whether the FED will raise rates or not, few analyze what the long term costs of such an artificial environment will be.

    The environment is artificial because if it weren’t for the low rates, or negative rates in many parts of the world, there would be no lending as you don’t lend below a certain interest rate. In any case, this will have severe consequences on the economy, liquidity, inflation, banks, insurance companies, and retirement funds, and could create bubbles that will take years to deleverage. 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 →

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