Wow! This was a shocker. Yesterday the bankers in Frankfurt came unglued. In an attempt to stimulate the euro-area economy, Mario Draghi and his compatriots at the European Central Bank threw everything they could think of at the European financial system. Not only did the ECB lower interest rates further into negative territory, offer banks another sweet financing deal, and expand the rate of money printing, they also decided to include corporate bonds in their bond buying program. Yup, the ECB is now directly financing private businesses in the euro-area to stimulate growth. Sounds more … [Read more...]
Archives for March 2016
Millennials Moving to the Burbs
The best investment I ever made in my early 20s was buying a multi-family in Marlborough, MA when I was working out there at Fidelity Investments. I like this trend for Millennials. I have always believed that owning your home is the best investment you can make when you’re young. Here the Globe's Prashant Gopal explains that young millennials are fleeing the higher priced cities to buy in the suburbs: Cities may be the top choice for millennials who rent apartments, but young home buyers are moving in droves to the suburbs, where prices are lower and backyards are plentiful. The share … [Read more...]
Vanguard GNMA Outlook 2016
With the Fed hiking short-term interest rates for the first time in almost a decade in December, and signaling to investors that additional interest rate hikes are going to come at a gradual pace, the fixed-income landscape has the potential to change profoundly over coming months, quarters, and years. Is your portfolio prepared for such a change? If you have been reaching for yield in long maturity bonds or low-quality securities, because let’s face it, the Fed has deprived Americans of yield for far too long, now is the time to reexamine your fixed-income portfolio. If interest … [Read more...]
The Big Short and The Prudent Man
If you want to lose even more faith in the big banks on Wall Street then see the movie The Big Short. It’s an excellent portrayal of what ignited the Great Recession based on Michael Lewis’ book of the same title. It never ceases to amaze me how little we learn from history—one that's littered with financial disasters. If you want to make money and keep it then you would be wise to focus your attention on the prudent man rule. Bevis Longstreth writes in the footnotes of Modern Investment Management and the Prudent Man Rule: Of course, it was early recognized that market manipulators could … [Read more...]
Afternoon Reads
Japanese Department Stores Big Winners from Negative Rates (Financial Times) Hedge Funds Getting Hit Hard on Mining Shorts (Financial Times) Bubble Watch in China (WSJ) How to Survive a Bear Market (WSJ) This Bull Market is a Greybeard (Fortune) Junk Bonds Getting Riskier (Bloomberg) Economists and Voters Sour on Abenomics (Bloomberg) … [Read more...]
Are Big Interest Rate Hikes Coming?
Commit to a Life of Success
You may be familiar with Shane Ellison from his book Over-the Counter Natural Cures and his action-oriented website www.thepeopleschemist.com. I’ve read his book several times and refer to it, and his website, regularly. Shane suffers no fools. He tells it the way he sees it, often times, with language not meant, shall we say, for the dinner table. Recently a client and I were talking about sports—wrestling in particular—and he was reminded of Shane’s blog: My New Year’s Resolution 2016. In it Shane talks about how he’s helping his 10-year old son Blair commit to a life of success through … [Read more...]
Fed Made to Look like Fools
Following its December meeting, the Fed announced to the world it was hiking interest rates for the first time in almost a decade—a meager 0.25%—and that further increases would come at a gradual pace looking at “realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.” With the economy already at maximum employment by the Fed’s definition of the term and inflation heading higher, economists read the Fed statement to mean an interest rate hike at every other meeting. Then came January. Global markets fell sharply to start the … [Read more...]
The Maximizers
“Meltdown? Absolutely baked into the cake as I write to you, and becoming more of a deep midterm concern for me as time passes,” wrote Dick Young in Intelligence Report back in July 2015. And here we are a short way into 2016 and the speculative NASDAQ index is down over 8%. As Dick notes, “In recent issues, my goal has been to work especially hard at providing you intelligence that will keep you safe and dividend-centric during what I consider the inevitable coming meltdown.” Safe and dividend-centric—sort of has a ring to it, does it not? It does to me. Those words have been pounded into … [Read more...]