Investiv Daily

  • 07 Feb
    The Nature of Wall Street Works Against Investors

    The Nature of Wall Street Works Against Investors

    • Being detailed about your investments and knowing where the interest of your financial intermediary lies is essential for your financial well being.
    • Fees, underwriting commissions, investment fads, and Wall Street’s short term focus cost investors more than 1% a year.
    • On a $100,000 initial portfolio, a 2% yearly difference in returns after 30 years adds up to $738,675.

    Introduction

    The bold statement The Nature of Wall Street Works Against Investors is the title of the second chapter of Seth Klarman’s book Margin of Safety – Risk-Averse Value Investing Strategies for the Thoughtful Investor.

    As the book is an essential read for every investor but very difficult to come by and expensive to get, I am summarizing it for you alongside adding updated commentary in relation to the current market situation. More →

  • 06 Feb
    Sven Sees Recession On The Horizon

    Sven Sees Recession On The Horizon

    • An analysis of employment, interest rates, currency, and inflation suggests a recession is inevitable in the next few years.
    • The FED can’t change economic laws nor protect us from ourselves. On the contrary, the FED will lead us into a recession in order to prevent a future depression.

    Introduction

    The FED didn’t raise rates last Wednesday but they are still on track to raise rates two to three times in 2017. The FED’s goal is to “foster maximum employment and price stability” through economic activity expanding at a moderate pace and inflation rising to, and stabilizing at 2%.

    What we know is that inflation has been slowly rising and will reach 2% relatively soon. The labor market is strong and yields have been increasing in the expectation of higher interest rates.

    A concept that always eludes economists, consequently also members of the FED, is stability. By looking at a model, an economist is trained to think that the economy can be controlled. But history shows that a stable scenario is never the case. In today’s article, I’ll forecast what lies ahead of us by looking at how the last two economic cycles developed. 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 →

  • 02 Feb
    It’s Time To Pay Attention To The Euro

    It’s Time To Pay Attention To The Euro

    • Currency movements can be easily explained through macro trends, but the timing isn’t that precise. However, long term investors can reach additional returns by following a few easy steps.
    • Cyclical currency patterns are natural, and under the influence of economic growth in the long term.
    • The dollar is approaching its peak and is ready to return to its historical mean.

    Introduction

    In last weekend’s Sunday Edition, Investiv Founder, Shane Rawlings, elaborated on how long term macro trends inflect exactly at the moment when there seems to be a general consensus that the trend will last for a long, long time.

    Nobody was buying stocks in 1981 because they thought high inflation would stay around forever. On the other hand, in the 1990s, people were convinced that the best investment was internet stocks. And in the 2000s, the conviction shifted to the real estate market as it seemed that the only way to go was up forever.

    Currently there is a strong conviction that the U.S. dollar is going to strengthen as interest rates rise and the U.S. economy grows, and while Europe continues with monetary easing. More →

  • 01 Feb
    There’s Trouble Ahead For The S&P 500

    There’s Trouble Ahead For The S&P 500

    • Analyzing the S&P 500 through Klarman’s principles signals trouble ahead as the market is highly speculative, diverges from fundamentals, and is at a high level because yields are low.
    • Further, future earnings estimations that keep the market high are extremely optimistic.
    • An analysis of Klarman’s portfolio shows that it’s still possible to find value in the markets, and to lower risks and increase returns by having a margin of safety.

    Introduction

    Yesterday, we reviewed Chapter 1 of Seth Klarman’s book Margin of Safety – Risk-Averse Value Investing Strategies for the Thoughtful Investor.

    Today, we’re going to analyze the current market according to the investing principles described in yesterday’s article. More →

  • 31 Jan
    Where Most Investors Stumble

    Where Most Investors Stumble

    • Are you a speculator or an investor? Speculators usually don’t survive more than one economic cycle while investors reach decent returns.
    • It’s of extreme importance to distinguish whether an asset is an investment or a speculation.
    • We’ll list 11 characteristics of successful investors, and 13 characteristics of unsuccessful investors.

    Introduction

    Last week, we discussed Seth Klarman’s performance and approach to investing.

    Today, we’re going to dig into his book Margin of Safety – Risk-Averse Value Investing Strategies for the Thoughtful Investor. As it’s a very rare and expensive book full of extremely valuable insights, I believe our readers will find huge value in this series of articles. More →

  • 30 Jan
    There’s Buzz Around Cobalt But Don’t Buy Yet

    There’s Buzz Around Cobalt But Don’t Buy Yet

    • The cobalt hype reminds me of the 2008 uranium and 2011 rare earth element spikes. Both ended badly for investors.
    • The bull case is tempting, but you should always investigate mining costs of junior miners because the cheapest way to get to cobalt is as a by-product, and there are big copper mines that can supply it.
    • Be careful of dilutive capital raises, liquidity issues, and stock liquidity and all other issues that penny stocks have, no matter how attractive the cobalt pitch might seem.

    Introduction

    Many of you might be wondering what’s going on with cobalt as its price has gone up lately which has created an interesting buzz in the financial world.

    On top of it, many mention cobalt alongside sexy names like Tesla (NASDAQ: TSLA) which further increases the buzz.

    Today I’ll shed some light on cobalt in order to see if there is a long term profitable trend forming in its supply and demand, or if it’s just a fad like rare earths, graphite, or uranium were back in their days. More →

  • 29 Jan
    Sunday Edition: The Mighty Dollar

    Sunday Edition: The Mighty Dollar

    Several weeks ago, I wrote about how I believe it’s possible to time financial markets with a high degree of accuracy.

    In today’s article, I want to discuss the US dollar and why I believe it is nearing a long-term top (sometime in the next 6 to 18 months), and how you can use this trend change to make a small fortune. More →

  • 27 Jan
    What See’s Candy & WhatsApp Can Teach Us About Creating Shareholder Value

    What See’s Candy & WhatsApp Can Teach Us About Creating Shareholder Value

    • Stock option compensation rewards management if the market does well, business performance is almost irrelevant.
    • BlackRock and Vanguard are becoming more assertive in the implementation of better governance policies. However, it seems it’s only a rhetoric given that they own 9% of corporate America.
    • Two examples show how CEOs can have opposing attitudes toward shareholder value.

    Introduction

    Today, we’ll dig deeper into corporate governance as it’s essential for our long-term investment returns.

    We’ve already discussed how buybacks mostly negatively affect long term shareholder value. But apart from buybacks, there are other interesting, more subtle issues that can help us lower our risks and increase returns.

    We’ll analyze what Larry Fink and William McNabb have to say about corporate governance, and we’ll look at a few examples of how CEOs manage their companies in order to show examples of good and bad practices. More →

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