Asset Class Commentary - 2/5/2019

General Comments
I currently recommend a more risk-averse allocation than investors might have over a longer time horizon due to high equity valuation levels and high debt levels throughout the US economy.  READ MORE

2019 - A Time for Caution or Opportunity?

While several US economic indicators are positive and growing (new manufacturing orders, production, employment, order backlog), there are several reasons for investors to be cautious as 2019 begins.  READ MORE

The Fed's New Meme

On October 3, Federal Reserve Chairman Jerome Powell said that “we’re a long way from neutral at this point.”  By “neutral,” he meant an interest rate level that is consistent with price stability and has no significant impact on the economy via credit expansion or contraction. 

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  • Naseem Taleb Puts on his Black Swan Mask

    Naseem Taleb received much attention as the author of The Black Swan which was published in 2007.  In his book, he criticized the risk management methods used by the finance industry and warned about financial crises.  This Halloween, he made an appearance on Bloomberg News for an interview.  He started the interview wearing a black swan mask that a friend had given to him. 

    Howard Marks is Cautious

    Howard Marks is the Co-Chairman of Oaktree Capital Management, LP and has a reputation for providing some prescient commentary on the financial markets.  He is known for his memos to Oaktree clients which are available to the public on his firm’s website.  READ M

    Currencies and Sovereign Debt Issues

    The Turkish lira has declined 43.7% year-to-date.   Turkey had $466.7 billion of external debt at the end of the first quarter.  Much of the debt is denominated in euros or US dollars and is owned by European and American banks.  READ MORE

    Financial Markets Update

    The financial markets currently award high valuations to companies that are currently losing money or have little income or cash flow relative to the valuations on their businesses.  READ MORE

    Quantitative Tightening

    At the end of December 2007, the Federal Reserve Banks (the Fed) had total assets of $893.8 billion. 
    At the end of June 2018, the Fed had total assets of $4,305.5 billion.  READ MORE

    Gold's Place in Investment Portfolios

    A number of analysts favor the inclusion of gold and silver as part of an investment portfolio.  While many of the analysts who favor precious metals are with organizations that have precious metal products, their arguments are nevertheless compelling. 

    High Valuations, High Margin Debt, and Fed Policy

    The Shiller PE ratio (price divided by inflation-adjusted earnings for the past 10 years) for the S&P 500 is currently at 31.3.

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