Recession

  • 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 →

  • 25 Sep
    These 5 Charts Say A Recession Is Near

    These 5 Charts Say A Recession Is Near

    • A recession usually takes everyone by surprise.
    • The current environment is ripe for a recession, we just need a trigger.
    • The stock market will react as investors react, which is usually completely irrationally. Be prepared.

    Introduction

    The latest FED meeting didn’t give us much news.

    The monetary policy remains accommodative with the interest rate between 1% and 1.25%, while the balance sheet normalization program is purely cosmetic with minimum monthly asset sales.

    We shouldn’t expect anything else from the FED as their objective is to maintain full employment and stability. As long as there isn’t significant inflation, the low interest rates help lower the unemployment rate. More →

  • 21 Sep
    Here’s Why You Need To Think About The Current Market Risks

    Here’s Why You Need To Think About The Current Market Risks

    • Evolution hasn’t created us to look at risks in investing, which is something that can be very costly.
    • I’ll discuss in a simple, but straightforward way what the current market risks are to be aware of.
    • If you’re careful, you can earn up to $500k in 20 years on a $100k portfolio.

    Introduction

    Investing is a very delicate thing and few understand that we aren’t wired for success in it. Part of our brain, the amygdala, through millions of years of evolution, has taught us to fight when we might be wrong, to prove our dominance and our convictions in order to prevail and spread our genetics. 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 →

  • 30 May
    Why You Want Gold Miners In Your Portfolio Now

    Why You Want Gold Miners In Your Portfolio Now

    • Investing 5% of your portfolio in gold miners offers you the potential for a twenty-fold upside while the downside is just the invested 5%.
    • A macroeconomic analysis shows that there is a high chance that the FED won’t be able to significantly increase interest rates or trim its balance sheet.
    • More quantitative easing—similar to what is still going on in Europe and Japan—would easily bring gold above $2,000 per ounce. In that case, I wouldn’t exclude 1,000% jumps for miners.

    Introduction

    Lately I’ve been mentioning in a few articles how gold, especially gold miners, are a good hedge for a portfolio. My idea is that if you own gold miners with 5% of your portfolio, you are relatively well protected against whatever surprises we might see coming from the economy. More →

  • 25 May
    Building The Best Portfolio For The Upcoming Recession

    Building The Best Portfolio For The Upcoming Recession

    • Stocks will be hit badly. Low price earnings and high book values can provide some safety.
    • Bonds look much better than last year.
    • Alternative investments can be a jack-pot for your portfolio.

    Introduction

    Yesterday we discussed how a recession is imminent, especially if the trending down credit growth turns negative.

    The most important thing now for investors is to prepare for such an event. Today, we’re going to dig deeper into the recession-related investing risks as different asset classes will be affected differently. More →

  • 24 May
    As Credit Growth Slows, The First Recession Bell Tolls

    As Credit Growth Slows, The First Recession Bell Tolls

    • The economy can only grow as fast as productivity in the long term.
    • U.S. real GDP growth has been around 2% in the last 8 years while productivity growth has lingered at 0.5%.
    • Therefore, 75% of economic growth is under the influence of credit. Credit expansion is slowing down and turning negative.

    Introduction

    What do you do when your neighbor, that you know makes the same amount of money as you do, buys a Porsche, puts a big pool in their garden, remodels and refurnishes their house, and throws big parties to brag about it? More →

  • 08 May
    Heuristic Simplification Makes Everyone Happier, But It’s Terrible For Investing

    Heuristic Simplification Makes Everyone Happier, But It’s Terrible For Investing

    • Irrational behavior leads to higher risks and lower returns. We’ll show how to avoid it.
    • We’ll describe how a cognitive bias can be extremely dangerous in the current market environment.

    Introduction

    Standard finance assumes that investors always behave rationally and therefore it ignores cognitive and emotional biases that might affect investor behavior. But such phycological biases don’t only affect the individual investor, but can also affect the majority of the investing population. When the majority of investors behave irrationally, the market becomes inefficient and extremely dangerous as risks increase and longer-term returns turn negative.

    Today, I’ll describe the most common psychological bias affecting investors and making them behave irrationally. More →

  • 21 Apr
    Are We Already In A New Bear Market?

    Are We Already In A New Bear Market?

    • The biggest investor of them all just said that he will start cashing out. Hopefully, this won’t lead to a bear market, but it will certainly put the brakes on further growth.
    • Economic signals are mixed, the outlook is uncertain and as much as the low unemployment rate is positive, historically, that isn’t a good sign for the future.
    • As always, we’ll discuss what to do in this environment.

    Introduction

    It seems that the S&P 500 peaked on March 1, 2017. More →

  • 19 Apr
    The Next Bear Market Is Coming. Here’s Where It Will Start.

    The Next Bear Market Is Coming. Here’s Where It Will Start.

    • $2 billion a day flows into Vanguard to be mindlessly invested in the market through index funds.
    • When the only reason people invest is because staying on the sidelines means getting sore while others get rich, it usually spells trouble ahead.
    • When the investors plowing $2 billion per day understand what are they buying at extreme valuations, the next bear market will arrive and it will be terrible as the buying reverses to selling.

    Introduction

    A recent The New York Times article described how Vanguard, the $4.2 trillion mutual fund, is the fastest growing fund due to the attractiveness of passive investment vehicles and the average 0.12% fee the fund charges. The low fee is something I applaud as I strongly believe fees in the financial world should be minimal or performance related where nothing is paid if the manager doesn’t deliver. More →

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