Good thing we’re diversified.

We haven’t (yet) responded to recent market turbulence by altering our portfolios. We’ve simply been maintaining our current very diversified allocations, which aren’t fully invested in the U.S. stock markets. As I wrote in my last posting, long term holding is a very decent tactic. And right now we’re a little bit allocated towards safety. From this position, it’s OK to ride out short term news. However, this weekend’s blog on “Wolf Street” is interesting....

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The Ten Year Anniversary of the day the world changed.

Ten years ago today, French mega-bank BNP Paribas announced it couldn’t place a value on its US-created collateralized debt obligations, complex toxic “derivative” investments, and thus was suspending client withdrawals from the funds which held them. That was the first indication that the most gigantic financial panic since the Great Depression in 1929 was about to unfold. The world has changed a lot since then. But many of the same structural flaws remain, patched and...

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Everyone expects to be a winner (and all children will be above average)

I’m reposting this here from the Heisenberg Report. According to this study, essentially everyone thinks the stock markets will finish higher in one year. Such a high level of optimism is some kind of record. My guess is that we got here because EVERYONE expects the central banks to intervene forever. Having painted themselves into this particular social expectation corner, it’s going to be interesting to see what the central banks do next. Way back...

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It probably isn’t what you think it is.

I’m back from a week in Maui with the family, with sun-browned skin despite the twice-daily application of reef-friendly sun block, and with my head brimming with fascinating ideas. Such as how Kamehameha, a relatively minor chief, was able to conquer all the islands between the years 1789 and 1810, because of a new technology: the flintlock musket. And how, after his death, the ali’i…the nobility…of Hawaii sold out their own nation’s resources and financial stability...

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A problem with reality

Is that sometimes it is so irrational. The financial markets are currently radiating “market bubble” and I’m reading a very well written quarterly update by the managers of the Forester Value Fund. It captures all the data which suggests that we are currently at market highs and we are at risk of a coming downturn in both the bond and stock arenas. But there’s a problem. Forester Value Fund TOTALLY ROCKED our stock market declines...

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Overvaluation and a Dysfunctional Society

A recent analysis by Goldman Sachs does a rather good job of summarizing the challenges of our current over-valued stock markets. Read it here. Essentially, domestic stock markets are overvalued, but supported by very low interest rates and a perception that central banks will forever intervene in any downturn. International stock markets are less expensive but subject to some unusual geopolitical risk. Watching the recent news with President Trump’s new unnecessary squabble and insult-trading with...

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We’re doing great! Now let’s stay cautious.

I’m reviewing clients’ portfolios this afternoon, and given that most of us are relatively conservative I’d say we’re on track for a nice finish for the 2nd quarter. I’m saying this while crossing all digits and holding my breath. Our international holdings, especially our emerging market holdings, have done great so far this year, which is quite emotionally rewarding since after we bought them last year they laid down like raccoon road kill for some...

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U.S. stock market gains are incredibly concentrated.

One of the hallmarks of mature U.S. stock markets is when index funds are doing better than actively managed mutual funds. That’s because the “rational” active managers are scared so they begin to avoid risk. The result is lagging returns relative to fearless, mindless index funds. I’ve seen this in 1987, 1990, 2000, and 2007. It can go on for years. Another indicator of mature stock markets is when the market concentrates into only a...

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The Biggest Iceberg Of Unrecognized Risk

It’s a ship-killer. While we obsess about the stock market, an even-bigger financial challenge is possibly looming in the future. Yet few people are paying attention. Debt has once again risen to outlandish proportions. Especially, state-driven debt and pension obligations may have reached a level which is impossible to pay back. Read more about yet another state’s financial struggle here. Why don’t we clearly know if these massive commitments are fundable? Because we don’t know...

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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...

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