Crypto looked like a bubble from very early on. It may still be essentially an institutional scam. But who knows what the future may bring? And who knows how blockchain technology might transform the world? Meanwhile we’re staying away from the frenzy.https://www.bloomberg.com/news/articles/2018-09-12/crypto-s-crash-just-surpassed-dot-com-levels-as-losses-reach-80?cmpid=BBD091218_MKT&utm_medium=email&utm_source=newsletter&utm_term=180912&utm_campaign=markets
I am in complete agreement that technical education is often as good as a college degree. Most important is to embrace the idea of some sort of education to mazimize our families’ earnings potential. In other words, in general, learning skills via education is often a great choice, anecdotes aside.
Goldman Sachs has released a report which warns of a potential stock market decline ahead. We don’t really know what will happen. Nevertheless I feel that it’s prudent to stay diversified and allocated to a relatively conservative spectrum of mutual funds. As the new Goldman Sachs report notes, “many investors are wondering how long the economic cycle and bull market can last, and what type of conditions could follow. The difficulty in answering these questions is that the current cycle has been difficult to pin down. It has been, and remains, a very unusual cycle, making historical comparisons less reliable.” https://www.zerohedge.com/news/2018-09-05/goldmans-bear-market-indicator-shows-crash-dead-ahead-asks-should-we-be-worried
It’s always a judgement call, even a guess, but if we are in good health and able to work, and there isn’t a giant nest egg or inheritance waiting, it’s often better to postpone drawing social security until the maximum age, which is 70. The reason for this is that benefits rise as we postpone. If we live longer than average, our decisions should (hopefully) pay off. https://www.marketwatch.com/story/why-people-who-claim-social-security-early-often-live-to-regret-it-2018-09-04?siteid=bigcharts&dist=bigcharts
Consider Putin’s efforts to rebuild the Russian empire from the standpoint of organized crime seeking to optimize itself financially. The amount of disinformation, hate-baiting, distraction, and violence is astonishing, but all that covers up an even more awsome level of mindful corruption. I believe that Putin intends to literally corrupt the entire western financial system for financial gain and political control. Is the Putin organization willing to destroy the financial underpinnings of the west? Probably only if it stands to gain financially. Thus our plan to keep investments simple and diversified seems appropriate. https://euobserver.com/justice/142726
Here’s an insightful study by Oppenheimer concerning the differences between India and China as investment venues. While emerging markets represent some of the fastest growing economies in the world, they also contain a lot of political risk, currency risk, and financial opacity. Often we can’t clearly see what is really happening! That means we can’t always recognize true bargains, so we can’t make well-supported decisions. Nevertheless, over the long term, carefully-targeted emerging market investments have a real probabilty of doing quite well. With that in mind, our emerging market holdings are diversified, analysis-driven, cautious, and small, as well as placed with experienced managers.
Most families lose their wealth by the third generation. But it doesn’t need to be that way. https://www.theatlantic.com/business/archive/2015/09/richest-families-grandkids-gilded-age/405892/
It really IS possible to blow a billion dollar fortune. In fact it’s probable. Study how the Vanderbilts lost the unloseable fortune: drama, lack of diversification, and dissipation. You will see why it’s so hard to master intergenerational wealth. https://www.forbes.com/sites/natalierobehmed/2014/07/14/the-vanderbilts-how-american-royalty-lost-their-crown-jewels/#33c197bf353b
My last entry on January 30th, 2018, suggested that US stock markets were potentially overvalued. Apparently others agreed with that assessment, because early in February, in the face of rising interest rates, American stock markets dropped (almost) 10%. At that point I was guessing…a perfect word for it…that the financial markets would continue to decline to more reasonable levels. However, I chose to do no trading because I wasn’t confident.
Good choice. This week, U.S. stock markets strongly reversed, producing one of the best weeks in years. I suppose that had I been courageous we could have bought the dip, but I was too conservative for that.
Meanwhile international markets fell more, and have recovered less.
With the prospect of rising interest rates in mind, I perceive that the possibility of a downturn more wrenching than what we have experienced is still quite possible. Where we were before somewhat vulnerable, we are now substantially more vulnerable. My guess is that this week’s recovery is driven by FOMO, Fear Of Missing Out, not from any rational expectation.
Meanwhile I’m watching the bond market, and interest rates finally seem to be stirring, moving up. That’s a real, genuine game changer, potentially negatively, for many reasons.
Bottom line: for the time being, I’m maintaining our current asset allocations. But I’m targeting potential bargains, and I’m watching the horizon. Something profound may be happening. Frankly probably not, because most warnings don’t actually materialize into anything real. But what if…? Read more here.
As the accompanying article spells out, the Value Line Manager’s Appreciation Potential statistic is now 20%. This suggests that the stock market is more overvalued than it has been since 1969.
Read the article here.
The Value Line Appreciation Statistic has been giving off overvaluation signals since 2013. It’s been screaming of imminent disaster since 2015. THIS IS WHY we have been so conservatively allocated. Yet, in hindsight, our allocations have been too conservative because not even the VLMAP can beat central bank stimulus.
As the article indicates, the VLMAP statistic has also been accurate in the long term.
In my 2012 book, “Dollars and Common Sense: Taking Charge of Your Investments in the Tumultuous 21st Century”, I wrote on page 166:
- The Value Line Estimated Median Appreciation Potential statistic is BELOW 50%.
- The Price/Earnings ratio for the S&P 500 or its proxy index mutual funds is OVER 20.
Move back to the next-lowest risk level in your portfolio allocation, and adjust your portfolio accordingly.”
The Price/Earnings ratio for the S&P 500 is now 22.85.
Classically, this suggests a rather large downturn is ahead. But the VLMAP and the P/E statistics also hinted at downturns in 2013, 2014, 2015, 2016, and 2017, albeit not as extremely as they are now. Central banks won the day, and now investors are convinced that they will always save us. Always. But what if investors’ expectations are wrong?
If, like the proverbial broken clock which is right twice a day, we DO experience a substantial correction in the financial markets, then we are poised to take advantage. If stocks are worth owning for their wealth-creating power now, then the same will be true when they are cheaper. Patience. Our portfolios are already relatively safely allocated.