Commodities have all been selling off lately, and this signals a slowdown in the global economy. Gold particularly is a commodity that shows us what people are feeling emotionally. With all of the Quantitative Easing and national budget deficits, many national economies are engaging in unsustainable practices. Remember that gold is essentially “real” money, and will probably be a good investment once again in the weeks and months to come.
A lot of people (and the media) think that lower oil, food, basic materials, gold, silver and other commodity prices is good news – after all, it makes our goods and services cheaper. It’s common to think that this means investors are no longer worried about global instability.
We’d take issue with that – we think investors still have a lot to worry about, there are a lot of volatile forces at work in the market right now. This commodity sell-off also means that there’s a slowdown in the global economy, and the supply is more than demand, so this is deflationary action.
Where do we go from here, and what does this market action tell us? A few things:
This is a podcast summary. For more information, please listen to the entire broadcast here.
The Asian markets are in the process of resetting, as geo-political and economic forces effect those markets. As we look at the next three quarters of 2013, as long as the world doesn’t enter a global recession, we’ll likely get great buying opportunities in Asia in the months to come.
In contrast, the U.S. market has not reset itself. It’s not in a good position for buyers, because volatility and risk is very high, and we think that a reset is on its way – and that will be a great opportunity to inject capital into the market.
ETF Quick Facts:
We believe that ETFs are excellent vehicles and we use them for the majority of our client portfolios.
However, there are some very good mutual funds out there, as well, and we encourage you to not get locked into only one investment style. If there’s a mutual fund that manages risk and implements a strategy that cant be duplicated with an ETF, we will definitely use it if it’s reasonably priced.
So, don’t get sucked into a ETF vs. Mutual Fund debate. Both can be used effectively with the right education, goals and portfolio outlook.
This is a podcast summary. For more information, please listen to the entire broadcast here.
Wealth taxes are taxes on successful people. In the U.S., the only stated wealth tax is estate taxes. However, we think that there are some disturbing trends on the horizon for the wealthy or those who wish to be wealthy.
For example, here in California, we have a wealth tax, Proposition 30, which was voted in November. This was a retroactive tax on anyone whom the state of California deems as wealthy, and it was a significant amount. Also, as we saw in the country of Cyprus recently, depositors of banks were taxed - which is a significant wealth tax.
We are also hearing that annual asset taxes are currently being considered in Europe, meaning that you would have to round up all of your assets and be taxed on the value of those every year. In the U.S., an IRA tax was proposed by President Obama recently, on anyone who has an IRA in excess of three million dollars. That is a serious wealth tax and something that investors need to be aware of.
These wealth tax trends are disturbing to us, and this is something that high-net-worth investors must start strategizing about in the months and years to come, unfortunately.
This is a podcast summary. For more information, please listen to the entire broadcast here.
Doug will be speaking live on May 9 in Santa Barbara for the American Association of Individual Investors. For ticket information and more details, please call our offices at 800-391-1118.
Also, Doug will be presenting at the Money Show on May 14-15 in Las Vegas. See the Money Show website for ticket information – we look forward to seeing you at one of these events!
We’re also working on three new reports for High Monthly Income, and new newsletter for Successful Investing subscribers. We’ve got a lot of stuff going on here at Fabian Wealth Strategies, so stay informed and up-to-date with us and the markets. That said, now is the time to pay close attention to the markets. So much going on, we’re are going into a new phase of volatility. For example:
The good news:
The bad news:
We are seeing the first signs of a potential correction in U.S. stock markets, and we’re also seeing global markets showing weakness. There’s talk about a financial disaster in Japan, because of unprecedented Quantitative Easing and crumbling demographics (one in three Japanese citizens is over 60 years old), so despite the current stock market party there, we need to be aware of what’s coming. In addition, the U.S. stock market is overvalued and risky. Treasury bonds are going up this week, and bonds are still performing pretty well.
Pay close attention to the following things:
As always, if you have questions about the state of your portfolio or market action, email questions or concerns to askdoug(at)dougfabian(dot)com.
This is a podcast summary. For more information, please listen to the entire broadcast here.
If you’re feeling left out of the stock market, don’t fret. This is an expensive and risky time to jump into the stock market, and we think that better investment opportunities are still to come.
The market is still being fueled by the actions of the Federal Reserve, and we believe that an amount of patience and knowledge will pay off for investors. There’s an important editorial by Ron Paul about the “Great Cyprus Bank Robbery” that sheds some light on what’s going on in Europe and what we need to be aware of here in the U.S. We are not trying to be alarmist, but we do think that learning from the issues in the banking system in Europe is wise for investors.
We recently read this Market Watch article: Why Bond Funds and ETFs are Breaking
We disagree with this article, though, since we don’t believe that the U.S. economy can handle higher interest rates, and the Federal Reserve can’t afford to raise interest rates, which would hurt bond holders. It doesn’t make sense to sell bonds and buy stocks, particularly when looking for long-term money.
Recently, we sold emerging market bonds and high-yield bonds and purchased more high-grade corporate bonds. If we get a correction in equities, it will hurt the more speculative bonds, and we want to be prepared for that. Overall, we believe that bonds are in good shape and that there is no bond bubble as of today.
As always, if you have questions about the state of your portfolio or market action, email questions or concerns to askdoug(at)dougfabian(dot)com.
This is a podcast summary. For more information, please listen to the entire broadcast here.
To answer that question, we tend to agree with value investors like John Hussman, who says that the U.S. stock market is overbought, overvalued and overbullish on a short-term basis. We expect to see a correction sometime soon, and any geopolitical news or economic instability will make those corrections stronger.
Speculation is what’s driving this market, and it’s at a very high level right now. Investors often get sucked into this, and need to be careful about being pulled into a risky environment. Risk is something that people often assess after the fact, unfortunately, but we think that right now there’s a risk factor of at least -10, maybe more if world news gets more negative.
This is a podcast summary. For more information, please listen to the entire broadcast here.
For many of our long-time clients, you know that April is the anniversary of the financial newsletter that Doug’s mom and dad started from their dining room table in 1977, and that Doug has stewarded since 1990. Doug got a chance to reminisce about the newsletter and the family business with his dad over Easter weekend – the world has changed and evolved, but some things stay the same.
In other family business news, Doug’s two sons, David and Michael, struck out on their own in their own business endeavors in March of this year. We wish them well and the best of luck on their new venture, and we continue to focus our efforts here at Fabian Wealth Strategies, investing wisely and advising our clients and readers, just as Dick Fabian did for so many years.
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There’s been a mix of positive and negative market action of late, and the U.S. is the top performing stock market in the world. It’s up on sentiment, expectation and money flowing from the Federal Reserve. We need to realize that the rest of the world is mostly down and that the fundamentals are looking risky for investors. There’s a disconnect between commodities and stocks – usually they move in the same direction, but right now they’re not. Growth is not that good, so we expect that stocks will fall to match commodities, rather than commodities rising to meet stock prices.
This is a podcast summary. For more information, please listen to the entire broadcast here.