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Legendary Investor Jim Rogers Predicts A Stock Market Crash, And The World Yawns

Legendary investor Jim Rodgers has often been right, and often been wrong, about the future of U.S. financial markets. He’s completely bullish on the future of Asia, and in fact now lives officially in Singapore.

Now he’s calling for the worst stock market crash in our lifetime. Read more here.

He may be right. Or not.

It’s worth noting that when the stock markets first began flashing indications of overvaluation, they were at about half their current levels. Had we gone to cash in 2013 as the statistics suggested, we would have missed out on at least 1 of every 4 dollars in our diversified portfolios.

Why didn’t the financial markets crash after 2013? The unexpected happened: the Fed and other central banks of the world intervened to support financial markets.

I have my own emotional reservations about that: when governments intervene in markets as the mood strikes them, then markets become unquantifiable. But the money which has been made is quite real.

So now Jim Rogers says that the biggest stock market crash in our lifetime is imminent, he may be right. Stock markets ARE very overvalued, and have been for years. My response for all of us has been to stay very diversified and be a bit cautious. The result has been that our investment returns haven’t beaten the stock markets, but we’ve at least participated while remaining realistic about genuine dangers out there.

I also remember that the Financial Panic of 2008 was followed by a market boom.

Genuinely, we don’t know what will happen. Let’s also keep in mind that we want to buy low, and sell high, and we want to persist. Investing is a marathon, not a sprint.

Esteemed contrarian investor David Dreman has a warning about bonds.

David Dreman has earned a reputation as a superb contrarian investor over the past four decades. So when he writes a warning about bond investing, it’s worth reading. On the other hand, market support by central banks has been so extreme in recent years that rational investing expectations aren’t necessarily valid. The point of the article is solid, however: bonds are potentially at risk. Read here.

Let’s enjoy the ride…but remain a bit cautious.

While the stock markets are piling on gain after gain, this article is a decent yet extremely sobering read. There is ample reason to be a gentle skeptic about the current directions of our financial markets. On the other hand, there’s no compelling reason to go to cash either. The “Sweet Spot” of non-delusional investing seems to be a path of profound diversification and patience.

The Dow opened at 19,000 this morning!

This morning the Dow opened at 19,000 for the first time ever. We are experiencing another lesson in the short run unpredictability of markets. Aren’t we glad we didn’t sell everything in the face of political uncertainty? Now for the ten million dollar question: will these high levels last? My thought: we don’t know. Stay diversified! Read more here.

Pension defaults will probably be BIG in about 20 years. Possible solution: get your own money into a separate account.

If you read this LA Times article, you will find additional confirmation that we face looming social unrest and political challenges concerning underfunded defined benefit pensions. It is quite possible that in a few decades we will witness pooled defined benefit pensions experiencing a “renegotiation” of benefits. For that reason, maintaining our own pensions in separate accounts such as IRA rollovers becomes even more attractive. We can’t really foretell the future, but right now the numbers aren’t adding up.

Bill Gross has an opinion about our current political situation, and it’s worth reading.

Bill Gross is famous for decades of accurate bond market calls, and he predicted the the emergence of our “new normal” low return era. In fact he named it. Recently he’s also been wrong about the direction of interest rates, and he has a personal reputation as a bit of a diva. Considering all this, when he speaks or writes about our current political environment, we have to admit that he’s more informed than most, and worth consideration. Disclosure: we own Janus bond funds. Read his recent article here.

Interest rates are finally going up.

And the bond markets are recoiling in terror. After Donald Trump’s election as president we have seen interest rates rising implacably. In the long run this is probably healthy, since fully-functioning capital markets optimize when interest rates are set by supply and demand, not Federal Reserve diktat. If interest rates continue to rise, the bond markets will register solid losses in the coming year, especially in the long end of the curve. Read about the carnage here.

However, should a stock market decline emerge, then there’s likely to be a snap back in bond prices due to a flight to safety. Totally cashing out of bonds is probably not necessary at this point.

Our current plan is to wait and watch, and seek opportunities in both the bond and stock markets. I’m also preparing a “hail Mary” plan for a sudden interest rate shock. That’s certainly not necessary now.

I’m surprised!!! But not entirely…

Last night at 11 PM the S&P 500 stock market futures were down 800 points in expectation of a debacle in the financial markets, stemming from the uncertainty created by Donald Trump’s victory in the presidential election. I came to work early expecting chaos. Surprise! Markets are largely up, while interest rates have slightly increased and gold is up slightly. I am guessing that investors looked at the real data and decided that the immediate risks were not as great as imagined.

What IS up is biotech and health care, and we have positions in both. So we are enjoying and benefiting from that.

It’s probable that volatility will continue until people develop a clearer view of how a Trump presidency is going to work.

Calmness is a virtue.

Will Food Stocks Become a Bargain?

Check out this report. I’m reading this as mild price deflation. Once the dust clears we’ll look for bargains in food production. I’m also expecting that at some point soon we should be able to invest in legal marijuana farming via a mutual fund. At the moment, the bargains aren’t there. Yet.