Debt

  • 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 →

  • 23 Feb
    Bubble, Crisis, Bubble, Crisis – Debunking The Chinese Real Estate Sector

    Bubble, Crisis, Bubble, Crisis – Debunking The Chinese Real Estate Sector

    • The Chinese government is controlling the real estate market and allowing short, two-year boom bust cycles.
    • Western investors don’t understand China and see either a bubble or a crash.
    • The best way to invest is to seize the wild market swings created by such erratic behavior.

    Introduction

    The question we would all like to know the answer to is this: is the Chinese real estate market in a bubble?

    If it is, any kind of burst would create a credit crisis, lower economic growth, and quickly spill over first on global financial markets, and consequently onto the global economy.

    There is no consensus on whether or not Chinese real estate is in a bubble. I’m going to describe both perspectives to give you the best information possible for China and Chinese real estate related investments. More →

  • 12 Jan
    The Edge Of The Cliff No One Wants To See: A Look At The Economic Cycle & Debt

    The Edge Of The Cliff No One Wants To See: A Look At The Economic Cycle & Debt

    • The economic recovery hasn’t lowered debt levels while interest rates are starting to increase.
    • Expect lower consumer, corporate, and government spending.
    • When you invest, please be aware of what is described below.

    Introduction

    Nature works in cycles, there is winter, summer, drought, rain, monsoons, a year with mosquitos, one without, El Niño, La Niña, a good crop, bad crop, etc. As we are part of nature, cyclicality is inherent to our behavior and our behavior is reflected in the economy as we are the economy.

    It’s important to continually analyze and mark where we are in the economic cycle in order to have a better perspective on how to position ourselves as investors. Most analysts and financial professionals look in the rear-view mirror to predict the future and then focus on only one year. This is because it doesn’t pay to look beyond a year as it would force them to tell the truth and consequently lower their selling commissions because not many would invest if they knew that there was a risk of losing 50% of their investment in the next few years. More →

  • 09 Dec
    Check Your Dividend Yielders Before It’s Too Late

    Check Your Dividend Yielders Before It’s Too Late

    • Higher interest rates will increase required returns while higher debt costs will lower available cash for dividends.
    • However, things vary extremely among sectors so check your portfolio stock by stock.
    • The current 5% shareholder yield is unsustainable with aggregate earnings yielding 3.93%.

    Introduction

    Things are changing!

    We have been enjoying a period where yielders were in high demand as interest rates declined. However, there are two things that will have a severe impact on dividends and asset prices. The first is that low interest rates enabled companies to take on more debt and increase their return to shareholders while keeping their interest expenses low. The second is that with the Fed about to increase interest rates and the yield on the 10-year treasury note up 75% from its July low, the value of your dividend yielders is also about to collapse because stocks simply carry more risk than treasuries. More →

  • 04 Dec
    Sunday Edition: A Debt Bomb Sure To Implode

    Sunday Edition: A Debt Bomb Sure To Implode

    The recent spike in interest rates over the last few months is a hot topic among financial news and media outlets. And it should be – it’s alarming.

    The rate on the 30-Year U.S. Treasury Bond shot up from 2.10% in early July to over 3% where it now sits. Many, including myself, are now calling for the end of the 35+ year bond bull market.

    I believe when we look back in 20 years, the 177’11 July high in bonds will mark the beginning of a new long-term bear market in bonds. More →