Author: Andrew Packer

Economy

Game of Trades: Investors are About to Get Sucked Into the WORST SP500 Move in History

Posted on by Andrew Packer

The market is throwing off a number of recessionary signals. Spiking oil prices. An increasingly hawkish Federal Reserve. And many expecting a greater chance of a recession.

However, market fears can change on a dime. A reversal could lead to a move in markets back to their old all-time highs. And even to new highs. Why? Because markets tend to discount potential moves in the economy before they can occur, even when warning signals come out.

For instance, the stock market moved higher into 2007 even as many warning signs were in place similar to today. That includes soaring oil prices. And an inverted yield curve.

In the time it takes for these events to impact the economy, markets often have one final push higher.

It’s sometimes known as a melt-up. And when it’s happening, it tends to drive investors into the market. When it ends, it’s not pretty.

Right now, we may be in the final stages of a market reversal that could lead to new all-time highs. But after that, we could be back into a recession, and markets will tank. Investors should look for signs of a melt-up and look to profit, while being mindful that when it ends, they’ll want to be prepared.

 

For the full analysis with charts on the Game of Trades YouTube channel, click here.

Economy

Dividend Café: Something to Be Certain About

Posted on by Andrew Packer

These are difficult times. That’s something that can often be heard when the stock market isn’t trading near its all-time highs. But the fact of the matter is, there’s always something for the market to be worried about.

What’s more important is that history and logic can tell us certain truths about the market going forward.

Those who continue to support the view that markets should be avoided are likely going to be disappointed. That’s because history shows that, no matter what current market fear is under way, markets tend to move up over time.

In a market selloff, buyers can get better returns. They pay less for earnings during a time of uncertainty. On the flip side, investors who are certain tend to end up overpaying as uncertainty later sets in.

Investors who sit on the sidelines, however, will end up paying up over time. Because by the time they wait for a pullback, they may miss out on years of returns.

So while markets are certainly looking volatile right now, those who are bearish are likely being set up for worse returns than those who have the patience to sit through today’s markets.

Yes, things like valuation matter. But investors don’t have the luxury of investing in a world without uncertainty.

 

To hear the full podcast, click here.

Commodities

Wall Street Silver Official Podcast: Europe Imploding As Commodities Skyrocket

Posted on by Andrew Packer

No matter how advanced the economy gets, or how deeply one moves into the digital realm, the world still relies on commodities. These are key items in everything from food, to fuel, to any technology in use today.

Commodity prices have been rising over the past two years. That’s been fueled in part by an increase in the money supply. It’s also been fueled in part from increased demand thanks to new technologies which have increased demand.

In Europe, prices have exploded, as the region is heavily dependent on Russian oil and natural gas. The region has already had far higher energy prices compared to the US. But with lower imports and higher prices, the region is under tremendous pressure.

Jay Martin views Europe as being the worst off from Russia’s invasion of Ukraine. It could be the beginning of several other triggers that could lead to a recession in Europe.

Investors can potentially protect themselves with hard assets. That’s based on the view that assets like precious metals will thrive in a chaotic environment. And investors should look to protect themselves first, then look to profit.

One way to potentially thrive is with commodity stocks. Those stocks should lead to higher returns than the overall stock market in the months ahead.

For the full interview, listen in here.

Economy

The Breakdown, With NLW: Economists See Increasing Risk of Recession and Stagflation

Posted on by Andrew Packer

The past few weeks have seen a rising number of economists and analysts who see a rising risk of a recession in the US. A combination of factors is at play.

First, there’s rising interest rates. That tends to slow economic activity as the cost of capital rises. Then there’s Russia’s invasion of Ukraine. That has led to a supply shock in a number of key commodities.

And with the recent yield curve inversion, the view is that the odds of a recession are on the rise.

On “The Breakdown,” these latest pronouncements by prominent economists looks into detail on the risks for a rising recession.

The facts are simple. The Federal Reserve creating substantial stimulus over the past two years. Now there’s been a decision to withdraw that stimulus, as it’s clear that the Fed is trying to contain the inflation that’s it’s helped create.

The real issue here is whether we get a standard recession, where prices drop overall. Or, if we get stagflation. First coined in the 1970s, stagflation is the combination of a declining economy with rising prices.

Back in the 1970s, loose monetary policy allowed stagflation to rise. Many of the same conditions are in place today for that to happen again.

To hear the full podcast, click here.

Economy

The Plain Bagel: What Rising Rates ACTUALLY Mean For Your Investments

Posted on by Andrew Packer

With interest rates meaningfully off their lows and the Federal Reserve set to continue increasing interest rates this year, there’s a prospect that we may enter into a long-term rising rate environment for the first time in decades.

Higher interest rates—representing a higher cost to borrow money—can have huge implications on the economy, but also can impact different asset classes in different ways.

On the YouTube channel The Plain Bagel, a breakdown of historical data is made. It showcases how different assets have fared when interest rates rise.

One key idea among investors right now is that the stock market may underperform. That’s certainly true. But that doesn’t make bonds an obvious investment here. After all, rising interest rates mean falling bond prices. And as long as the price of something is falling, it’s better to sit in cash and wait for the lowest price possible.

Changes in interest rates also sometimes overlap with inflation and inflation expectations.

That can lead to big moves in hedge assets like gold. And some see cryptocurrencies as a potential hedge from other asset classes. However, the space hasn’t really existed during a period of sustained higher interest rates like in decades past.

Overall, investors should be cautious, look for opportunities, and look for stocks that can perform well during periods of high inflation and try to buy at the best price possible.

For the full video going over the implications of higher inflation rates, click here.

Economy

Noah Kagan: Asking 80 Year old Millionaires If It Was Worth It

Posted on by Andrew Packer

Investing is a journey with a few goals in mind. For most, that may mean the ability to retire, potentially as young as possible. Or it may mean having the ability to travel the world, or start a business among others.

On Noah Kagan’s Youtube channel, Noah interviews a number of retired millionaires, asking them how they got wealthy. And, more importantly, if they have any regrets about the paths they took to becoming wealthy.

All the interviewees had some unusual path in life. But nearly all were inventors or small business owners, rather than working at a high-paying job in finance or the law. And nearly all were interested in getting out of school as early as possible to start working.

Most noted that taking an entrepreneurial route enabled them to live well. That includes material wealth, as well as philanthropic efforts, and things like paying for a child’s education.

But that simply having the freedom to work on areas they loved was just as valuable on its own.

As for regrets, a few noted that working hard to provide for their families meant spending less time with their children.

But having setbacks and learning from them means that few could identify a big regret. And improving how to sell their ideas and document it for future use could be beneficial for anyone starting their own financial journey.

 

To hear the full interview of these wealthy 80 year olds, listen here.

Cryptocurrencies

Bitcoin 2022: The Future Is Bright with Michael Saylor & Cathie Wood

Posted on by Andrew Packer

Cryptocurrencies are a relatively new asset class, having been around for less than 15 years. The largest and most popular, Bitcoin, acts as a form of digital money that can be saved or spent. It’s grown a large following in part due to its structure of 21 million maximum Bitcoin that can ever be mined.

At the Bitcoin 2022 conference, ARK Investment founder Cathie Wood and Michael Saylor, CEO of MicroStrategy (MSTR), explain their reasoning for investing heavily in Bitcoin.

Wood went into why her fund started investing in Bitcoin in 2015. They were one of the earliest funds to do so. And why institutional investment of just a small allocation in the coming years could lead to a much higher price. Ark has a price prediction of $1 million per Bitcoin from a current price closer to $40,000.

Wood notes that Bitcoin is the, “First, Global, Private, Digital, Rules Based, Monetary System in the History of the World.” And that each word of that sentence has a profound investment implication.

Saylor, leveraged up the balance sheet at MicroStrategy to buy Bitcoin. He notes that fiat currencies like the dollar lose their purchasing power over time.

Saylor notes that he could have held purchasing power with gold over the past two years. But buying Bitcoin instead allowed his company to surge in value to over $5 billion.

Click here to hear the full conversation between these early adopters.

Income investing

Money For the Rest of Us: Investing in Business Development Companies and other Niche Assets

Posted on by Andrew Packer

With interest rates rising, and bond prices falling, investors are looking elsewhere for income and reasonable yields in a period of high inflation. They may be finding it with some niche assets on the market.

One such niche asset is the business development company, or BDC. Trading like a common stock, a BDC provides capital to small businesses. They may do so in exchange for debt or equity. They usually carry high yields, often in the 8 percent range.

On the Money for the Rest of Us podcast, a full 10 unusual asset categories that are available on stock exchanges are explored. They include closed asset funds, master limited partnerships, and BDCs, among others.

Each of these asset classes have their pros and cons, but tend to provide high income to their owners as a form of pass-through income.

The higher income may be taxed at a different tax rate than traditional dividends. Or some of the income may be considered a return of capital.

With such high yields, investors may not see much in the way of capital gains. However, for those seeking current income, these alternatives may fit the bill.

Currently, cash in the bank offers nearly no yield, or even a negative yield after inflation. So the higher return of these alternatives may be attractive for investors now.

 

To hear the full list of niche assets and what makes them different, listen here.

Income investing

Bigger Pockets: How to Counter the Biggest Risk of 2022’s Real Estate Cycle

Posted on by Andrew Packer

Many homeowners have enjoyed tremendous increases in wealth over the past two years as home prices have soared. But with mortgage rates rising and sales starting to slow in many markets, 2022 poses a number of risks for today’s homeowners and buyers.

At the Bigger Pockets podcast, Doug Lodmell provides insight on how real estate investors can protect their wealth right now.

First, the concept of asset protection is critical in any asset, not just real estate. How assets are protected matters, and conditions can change rapidly.

By setting up asset protection strategies, you can’t stop a creditor from coming after you. But you can ensure that there are enough hurdles that most of the time, it won’t be worth the effort.

For real estate investors, setting up an LLC, trust, or limited partnership can limit the personal risk of any real estate investment.

That includes assets that have already been owned for years. And investors who personally own assets like real estate may want to transfer ownership to an LLC, even if it may technically be against the terms of a mortgage to do so.

Today’s prospective real estate investors might be waiting for a housing crash. By waiting, the reasoning is that it takes out the risk of being invested during a crash.

But what if the market moves significantly higher from here before crashing? A real estate owner could miss out on getting in… and profiting.

 

For the full engaging discussion on asset protection and real estate, listen here.

Stock Picks

Morningstar Investing Insights: What You Need to Know About Utilities Stocks, Inflation and 3 Top Stocks

Posted on by Andrew Packer

Investors have pivoted away from growth to more defensive stocks in recent months. While many top funds and investors are still heavily invested in companies like Apple (AAPL), Alphabet (GOOG), and Microsoft (MSFT), due to their competitive durable advantages, other sectors look attractive now.

One such sector is the utility space. Investors like it for its consistency and steady cash flows, often paid out in the form of dividends.

However, customers may want to be cautious on utility investing. Typically, the regulatory issues facing utilities mean that higher electricity costs can’t be passed on to customers.

Raising electricity costs on customers can be a long, drawn-out process. That can impact how quickly a utility can react to changes in costs. In addition to their high capital costs, utilities may be a safe-haven investment, but they’re far from a growth play.

That said, utilities can still provide investors with a safe-haven investment in volatile markets. Especially as share prices and dividends can increase in time. That’s in contrast to bonds, where rising bond yields come at the expense of rising prices.

With inflation running high, investors need to find ways to invest and preserve their wealth beyond this destruction of purchasing power. Leaving cash in the bank, where yields remain low, or even still at zero percent, guarantees a loss of purchasing power over time.

 

To hear the full podcast, including content on how to best prepare your financial documents, listen here.