Bank of Japan

  • 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 →

  • 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 →

  • 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 →

  • 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 →