The stock market has shown signs of improvement through some energy companies. However, investors are still in doubt if this growth is sustainable? Will it last or it is just fast?
The economy has been at an almost standstill over the last 12 months. Market trends have shown odd highs and lows. Likewise, for stock market stalkers, the close of business Friday is indeed very interesting.
The Bulls Awaken – The Gains
The stock market has remained mostly flat during the week; however there have been signs of a revival in the markets. Southwestern Energy Co stock has risen 15%, Norfolk Southern Corp stock has risen 10.53%, and Range Resources Corp stock has risen 6.94%. Likewise, DOW stock has risen by 21.23 points (0.12%, up 3.32% overall in 2016), S&P has risen by 0.1 points (0.00%, up 2.33% overall in 2016. Other companies with gains include Endo International PLC (+2.15), Murphy Oil Corp (+2.03), Chesapeake Energy Corp (+0.36), and Hess Corp (+3.20).
The Bear Hasn’t Given Up – The Loses
It’s not all good news. Microsoft Corp stock has fallen by 7.17%, Perrigo Company PLC stock has fallen by 5.70% and Alphabet Inc (GOOGL) stock has fallen by 5.41%. Same case as NASDAQ stock which has taken a hit with a loss of 39.658 points (0.80%, down 2.02% overall in 2016).
Other companies with losses include Alphabet Inc (GOOG) (-40.37), Starbucks Corp (-2.96), American Airlines Group Inc (-.80), Royal Caribbean Cruises Ltd (-3.00), and United Continental Holdings Inc (-2.02).
Winners and Losers
The figures have revealed strong gains within energy companies and huge losses within technology companies. Investors were concentrating on companies earnings. Despite the gains, the overall picture was not good.
American Airlines Group Inc current stock price of $38.21 (-1.80) has been blamed on the costs of labour and weak fares.
The Worldwide Markets
The global markets are not looking that much better. London (FTSE 100) fell by 1.11%, whereas Hong Kong (HANG SENG) fell by 0.72% and Germany (DAX) fell by 0.60%. In contrast Japan (NIKKEI 225) rose by 1.20%.
Other global markets include –
- Shanghai Composite (China) +0.22%
- Mexican Bolsa (Mexico) +0.12%
- CAC 40 (France) -0.29%
- Brazil Bovespa (Brazil) 1.35%
What This Means For The Future
The stock market is full of ups and downs; it rarely ever stays static for a prolonged period of time. So, the big question at the moment is will the stock market continue to slowly rise?
There are reasons to believe that the markets will continue to improve. Investors have been putting their money towards junk bonds and small companies, a move which is considered brave. Also, overall, stocks tend to rise over a period of time.
However, more companies are reporting a decline in earnings. This could affect the market whilst investors are taking earnings into consideration. When stocks appear to be falling, sellers will attempt to sell their shares at a lower price.
Stocks and shares should generally be seen as a long-term investment rather than short-term. The bottom line is that it is impossible to say for certain. Too many influences have an effect on the market.
Financial experts believe that if you compare crashes of the past with the current trends going on at the moment then we could soon be heading for another crash sooner than we think. It is generally a shared view amongst the industry that we have not learnt out a lesson from the last financial crash.
One expert who is predicting another crash is James Dale Davidson. Davidson is a well-respected economist who has correctly predicted financial crashes in the past. Davidson is so well respected that he has made impressions with a number of political powers including George Bush snr, Donald Trump, and Ronald Regan.
His fears for the economy have been documented in a leaked video. Davidson states in the video that several warning signs indicate that it is time to sell. He goes on to say that the financial collapse is already on our doorstep.
Davidson did not intend for the video to be shown publically but since it’s leaked it has caused a lot of controversies.
Should we be paying attention to Davidson?
There Has To Be Crashes In The Economy
If you go by the basic principle that what goes up must go down then it would seem that another financial crash is inevitable. Think of the economy as a cycle where you have recovery, growth, decline, and then collapse. The economy is reliant on the financial industry to stimulate growth, when this is no longer possible then the whole thing collapses.
Friday’s stock market shows a small percentage of growth. Although any signs of growth are an achievement, we cannot dismiss the overall picture. The real question should be “is further growth actually possible?”
Republicans Ready To Finalize Stimulus Bill As Dems Continue To Squabble
Treasury Secretary Steve Mnuchin and White House Chief of Staff Mark Meadows met with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on Saturday. This is a rare weekend session to try and break the stalemate between Republicans and Democrats over the next stimulus bill.
No deal was finalized. However, Mnuchin said he and Meadows were willing to meet with Democrats every day. This can go on until an agreement is reached.
The sticking point for Republicans is an unwillingness to extend the $600 per week unemployment benefit. They feel the amount needs to be pared down to a more reasonable $200 per week so that unemployed workers have a financial incentive to find work instead of making more money by remaining unemployed.
Unsurprisingly, Democrats want the $600 to be reinstated and have tied it to a host of other demands that have nothing to do with the pandemic, like their insistence on approving $1 trillion to be sent to state and local governments to fund budget shortfalls, food stamp increases, and assistance to renters and homeowners. Mnuchin said that’s “something we’re not going to do.”
Democrats Refuse to Agree
Mnuchin appeared on ABC’s “This Week” yesterday. There, he said the White House understands the need for extra unemployment benefits. However, he also says the Democrats are holding up the deal.
“The president is very concerned about the expiration of the unemployment insurance,” Mnuchin said, adding “We proposed a one-week extension at $600 so that, while we negotiate a longer term solution, at least all those people don’t lose their money. I’m surprised the Democrats won’t agree to that. They’re insistent on having a larger deal.”
He also said that Republicans aren’t willing to burden our country with more debt.
“There’s obviously a need to support workers, support the economy,” Mnuchin said. “On the other hand, we have to be careful about not piling on enormous amounts of debt.”
Until a Deal Is Made
He added that the White House supports a one-week extension of the $600 per week until a deal is struck. However, he believes $200 is a more appropriate amount for the extra weekly benefit.
“There are cases where people are overpaid,” Mnuchin said.
He did add that both sides agreed on the need for another $1200 stimulus payment for Americans, and that once approved, the checks could be in the mail within a week.
Both sides have agreed to meet daily until a deal is struck, and at least one Democrat sounds optimistic that a deal will be reached sooner rather than later.
“This was the longest meeting we’ve had and it was more productive than the other meetings,” said Schumer. “We’re not close yet, but it was a productive discussion — now each side knows where they’re at.”
Chief of Staff Meadows, however, doesn’t expect a deal is forthcoming. Appearing yesterday on CBS’s “Face The Nation,” Meadows said, “I’m not optimistic that there will be a solution in the very near term.”
Here’s Why The ‘Cockroach Portfolio’ Is Gaining Popularity
Ray Dalio, the founder of Bridgewater Capital, calls it the “all-weather portfolio” and it’s helped his investment management firm amass roughly $140 billion in assets.
Former Libertarian presidential candidate Harry Browne called it his “fail-safe investing” portfolio. Additionally, It just had its best three-month return ever. It returned 18%, far exceeding its average annual return of 7%.
Browne’s investing philosophy was that when times are good, stocks do well. Meanwhile, bad times are good for Treasury bonds, and gold does well during stagflation. Also, cash is king during a recession or crisis.
Since we don’t know what the future holds, Browne advocated for putting 25% of your portfolio into each asset class. He also suggests being prepared for whatever comes. With bonds, gold, and Treasury’s in your portfolio, you’ll underperform during a bull market. However, you can more than make up for it by softening the blow during a down market.
The “Cockroach” Portfolio
Back in 2012, Dylan Grice, a former strategist with SG Securities, called that type “the cockroach” portfolio. He dubbed it as such due to its ability to survive anything thrown at it.
“What I like best about cockroaches,” wrote Grice, “isn’t just their physical hardiness, it’s the simple algorithm they use to survive. According to Richard Bookstaber, that algorithm is ‘singularly simple and seemingly suboptimal: it moves in the opposite direction of gusts of wind that might signal an approaching predator.’ And that’s it. Simple, suboptimal, but spectacularly robust.”
Grice has calculated that for long-term investors, this type of portfolio has done at least as well as the traditional 60/40 stock and bond mix since the early 1970s. But most importantly, it managed to avoid any massive drawdowns.
And just like cockroaches, your first job is surviving as an investor, says Groce, while prospering is job number two.
A Similar Approach
Fortunately for investors who are looking for this type of portfolio, an ETF has recently launched that follows the same approach as the “cockroach” portfolio.
It’s called The Advanced Research Investment Solutions Risk Parity ETF (RPAR) and was launched last November. Alex Shahidi, the managing partner and co-chief investment officer, says they’re up to $620 million in assets so far.
He says the ETF has returned 12% so far this year compared to 1% for the S&P 500.
Most importantly, during the crash in March it fell just 15%, less than half of the drop in the S&P 500.
According to Shahidi, the fund is 25% stocks, 15% industrial commodities, 17.5% gold, 20% long-dated Treasury inflation-protected securities and 42% long-term Treasury bonds. Total exposure to the market is 120%, because the fund is 20% leveraged.
The stock mix is half U.S. and half overseas stocks, with the overseas portion tilted toward high volatility emerging markets.
Nobody knows what the market will do next, so Shahidi says you want to be prepared for any outcome. “You want to be diversified to (different) economic environments,” he added.
He did say that “If I had to pick an asset class for the next 10 years, it would be gold.”
How To Buy Gold For Your Investment Portfolio – Part 2
Yesterday was part one of buying gold and silver coins for your investment portfolio. With gold and silver both on a hot streak, investors are looking for the fastest way to gain exposure to and buy precious metals. You must be prudent and exercise caution so you don’t make a mistake and find yourself with a bad investment.
Do: Buy Gold With Your Savings
Don’t borrow money to buy gold. Use your savings so when you take possession of your gold, it’s yours without any claims against it. With volatile gold prices, you don’t want to be paying back a loan on your gold if the price suddenly dips.
Don’t: Buy Gold With Credit
The current financial system is built on fiat currency and debt with dollars being printed out of thin air. The reason to own gold is the opposite of that. So to purchase gold by using the system it is protecting against defeats the purpose of owning gold. Just use your savings and own your gold outright from day one.
Do: Store Coin Nearby
If a crisis hits and you need access to your gold, you don’t want to be out in public trying to retrieve your gold. So whether it’s in a small safe hidden in your house or buried in your yard, keep your gold nearby for easy access.
Don’t: Store Coins In a Safety Deposit Box
Storing your gold at a bank sounds like a safe decision. But it’s a bad idea for a few reasons. The first is that if there were ever a crisis, you have to go to the bank to retrieve your gold. That assumes the banks will be open during a crisis. Then you have to get access to your safety deposit box, retrieve your coins and safely get them home. That’s a lot of things that need to go right during a crisis. Additionally, gold has been confiscated before. Here in the US, gold was confiscated in 1933 under Franklin Roosevelt. If it were to happen again, gold stored at home, where there is no record if it, is much safer.
Do: Only Invest With Money You Don’t Need For Awhile
Nobody knows when inflation will hit, or the dollar will collapse, or when gold prices will finally take off. But we aren’t trying to time any of those occurrences. The reason to own gold is a long term store of value. So you don’t want to speculate in gold. We could see prices move higher or significantly lower. But long term, history has shown that gold prices steadily march higher as the dollar steadily declines in value. So when buying gold, make sure it’s with money that you don’t need in an emergency. We suggest using savings or other funds that you don’t need to worry about getting access to for at least five years.
If you have any more questions about investing in gold, find a reputable gold coin dealer near you. They will be glad to answer questions.
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