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INVESTOR IN THE FAMILY Radio

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Welcome to Investor in the Family Radio! Below you'll find our entire catalog of podcasts, beginning with the most recent at the top.

I hope you'll enjoy this investing journey as much as I have.

Best,

Brian

Dec 20, 2016

Overview

  • Bank for International Settlements (central bank for central banks) posed the question, “A paradigm shift in the markets?”
  • US elections have produced big changes in the markets based on expectations of strong growth in economy and corporate profits, and higher inflation
  • Problem, expectations are so strong they border on certainty
    • Assuming Trump platforms will be enacted as he presented them and promptly
  • Most expect:
    • GDP growth of 2% after inflation
    • Interest rates (10-yr Treasury note) to 3% from 2.59%
    • US stocks should return single digit %
  • This tight range in consensus expectations has led two sage market observers (David Rosenberg and Doug Kass) to invoke Rule #9 of Bob Farrell (Merrill Lynch’s legendary former market guru)
    • “When all forecasters and experts agree, something else is going to happen”
  • Especially striking?
    • VIX (measures risk) and hovers near year’s lows
    • This serene confidence is also evident in high-yield bond market where investors are not asking for much for the risk they bear (half that of last February)
  • Consensus assumptions:
    • Trump will follow through on some of his plans on day one (ex: declare China a currency manipulator)
      • Note: China does not meet the four criteria of the US to be declared a currency manipulator
      • China has actually been liquidating foreign assets in an attempt to stabilize the yuan
      • China has been experiencing what is akin to a bank run as individuals are trying to move money overseas
      • Concerns of confrontation in South China Sea to test Trump administration
      • Chinese warship seized an underwater survey drone used by US Navy last week
    • Assume Trump’s fiscal plans will sail through Congress, especially his tax cuts
    • Assume oil prices will continue recovery as opposed to another drop in prices
  • Bottom line, there is strong assumption that the positives from November’s elections will come to pass and quickly, but the history of 2016 is that what was expected didn’t happen and what couldn’t happen did
  • This suggests risks ahead
  • My thoughts:
    • I continue to believe caution is very wise at this stage
    • Caution, not fear
    • Fundamentals clearly say there is higher probability of something bad happening than something good
    • Be extra strict with what you’re willing to buy
    • Save cash so you can be nimble to when opportunities arise (fall in markets)
    • REALLY hard to sell when things are “good”
    • REALLY hard to be patient
    • I am wrestling with this with my portfolio, I have positions I’m still waiting to develop, I have hopes for them, I want to keep my activity low, but the markets and good judgment say “caution”

Other news

  • The Economist wrote about the fall of Aleppo
    • Main point: as America has stepped back, the vacuum has been filed not by “responsible” countries for the greater good, but the likes of Russia and Iran which are both very anti-US and the West as a whole
    • By failing to stand up for what is supposedly believes in, America and the West just showed the world that it’s values are just words and can be ignored without consequence
  • My thoughts:
    • The world is fracturing
    • As the West looks inward to “heal” economies (unsuccessfully) the “bad guys” are filling the void
    • Increases concerns over increasing global conflict
    • More reasons for caution

Have questions? Let me know: brian @investorinthefamily.com

Visit http://investorinthefamily.com/ to become a better investor today.

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Disclaimer: All readers must be fully responsible for and make their own investing decisions. Nothing on this article or website is to be considered formal advice or recommendation.