Inflation

  • 03 Oct
    Good Debt Explained: Why You May Want To Take Out A Loan To Invest

    Good Debt Explained: Why You May Want To Take Out A Loan To Invest



    • Investing isn’t only about choosing the right stocks, it’s also about proper capital allocation.
    • Taking on leverage to invest can be smart but it can also be incredibly dumb.
    • From an historical perspective, it could be a very smart thing to be ready to refinance your home and invest in stocks.

    Introduction

    Buffett and Munger praise themselves for never taking out loans for Berkshire and one of the most famous Buffett quotes is:

    “If you’re smart you don’t need debt, if you are not smart, you better stay far from debt.”

    However, this is another half-truth that he tells the world. More →

  • 26 Sep
    The Best Strategies For Investing Late In The Economic Cycle

    The Best Strategies For Investing Late In The Economic Cycle

    • What has to be done in the late part of the economic cycle isn’t a secret. I’ll describe the how and what.
    • However, as always in investing, the question is why we aren’t doing the rational thing.
    • I’ll ask you a question that will help you answer how much and whether you should rebalance.

    Introduction

    Yesterday, we discussed how the economy is in the late part of the economic cycle and everything is leading toward a recession.

    No one knows exactly when the next recession will start or what the trigger will be. So the only thing to do is to be prepared. More →

  • 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 →

  • 08 Sep
    Why You Should Be Paying Attention To Bond Yields

    Why You Should Be Paying Attention To Bond Yields

    • It’s extremely important to watch bond yields as they define the health of the economy and financial markets.
    • I was correct last year when I said to short bonds, but now things are changing and shorting bonds is no longer a low risk thing to do.
    • I’ll discuss what to look for to protect your portfolio from what bond yields are saying.

    Introduction

    Last year, I was a bond bear and wrote about how investors should avoid bonds, especially as the FED was announcing a tightening policy. I was right on with my forecasts as bond yields have almost doubled since June 2016 which lowered bond values. 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 →

  • 17 Jul
    How The Economic Machine Works & Why You Need To Prepare Your Portfolio For It

    How The Economic Machine Works & Why You Need To Prepare Your Portfolio For It

    • Productivity growth is the long-term key, make sure your portfolio follows it.
    • The global distribution of wealth is shifting very quickly.
    • Preparing your portfolio for what’s going to happen doesn’t even cost that much. On the contrary, it is even more profitable.

    Introduction

    Ray Dalio is famous for many things. One of them is his explanation of how the economic machine works where he describes how productivity growth, the long-term debt cycle, and the short-term debt cycle affect an economy.

    Today, I’ll briefly summarize his findings as they are reported in a 300-page document and, most importantly, see how Dalio’s economic philosophy can affect our investing strategies. More →

  • 10 Jul
    The FED & ECB Meeting Minutes Explained

    The FED & ECB Meeting Minutes Explained

    • Financial markets are very dependent on Central Bank activity.
    • The FED is slowly tightening, but the activity is more a façade than actual tightening. Europe is still easing.
    • The fact is that things will eventually change. When? Nobody knows. The only thing a savvy investor can do is protect themselves and take advantage of everything.

    Introduction

    Many don’t see that the current market is highly influenced by Central Banks.

    In the past 8 years, Central Banks have been continually putting money into the system. The FED has recently stopped doing so, but the ECB is still buying bonds, even corporate bonds, while the Bank of Japan has bought almost everything they can buy. So, it’s clear that high current asset prices are a direct result of Central Bank actions as the fundamentals haven’t really improved as much as asset prices have increased.

    The long-term picture is relatively easy to understand, but I must say, I was surprised by the short-term correlations between Central Bank activity and stock prices. More →

  • 04 Jul
    Why Yesterday’s Retirement Investing Advice Won’t Work In Today’s Environment

    Why Yesterday’s Retirement Investing Advice Won’t Work In Today’s Environment

    • Common retirement investing advice worked ok in the past, but could have been much better.
    • Why would you sell stocks that you bought a long time ago, and that are still growing and paying dividend, to buy bonds that yield less than inflation?
    • Over the long term, little differences amount to a huge difference. Take responsibility for your retirement.

    Introduction

    The common advice on retirement investing is to be overweight stocks when you are far from retirement and then overweight bonds when you are closer to retirement. Some funds offer target date retirement funds that have such a portfolio allocation.

    Vanguard’s target retirement funds invest up to 90% in stocks when you are more than 25 years from retirement, and then lower that exposure to about 50% when you retire. 7 years into retirement, you have 70% of your portfolio in bonds. More →

  • 29 May
    Are You Ready? The FED Says More Tightening Ahead

    Are You Ready? The FED Says More Tightening Ahead

    • The FED’s meeting minutes clearly signal more tightening ahead.
    • Inflation has consistently been above 2% in 2017, so we can say “bye bye” to low interest rates.
    • There’s a rosy scenario for the economy and a negative one. In both, stocks are bound to fall.

    Introduction

    Inflation is an extremely important factor concerning anything related to investing. Over time, there’s a huge difference between real (inflation adjusted) and nominal returns. Therefore, we always have to keep an eye on inflation and invest accordingly to minimize the risk of seeing inflation eat up our returns, and to maximize our real returns. More →

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