Don’t forget that the San Fransisco Money Show is coming up in August, Doug will be presenting and we are very excited about our favorite money show of the year.
There is a Federal Reserve open market committee meeting this week. This means some volatility, but we are hoping for clarity and direction for the future of Quantitative Easing and other Federal Reserve policies.
Abroad, watch these international headlines in the days/weeks to come (none of which are affecting the markets in a severe way as of now, but important to keep in mind):
NSA and Snowden
Conflict in Syria
Unrest in Turkey
Weak emerging market currencies, equities and bonds
Weakness in Chinese market
Usually, in normal times, all of the financial markets around the world go up or down at the same time. As we all know, however, these are not normal times and there’s a lot of unusual market action out there. Emerging markets, China and other seemingly distant markets do matter for our portfolios, and we need to pay attention to them.
This is a podcast summary. For the full broadcast, click here.
There are a lot of scandals in Washington D.C. right now: Benghazi, AP, IRS and NSA. The environment when we look at Washington right now is pretty ugly, but President Obama still has a 48% approval rating. There is a definite correlation between stock market trends and the President’s approval rating, and that will be interesting to watch in the months ahead.
When we look at Washington, we are looking at the President’s approval rating, Treasury bonds, commodity prices, economic conditions and the U.S. dollar. So far there’s nothing here that is a red flag for investors. These scandals are troubling, but they are not spilling into the bond, stock, currency markets or economy at this time.
In the months to come, we believe that we will see significant drags on the economy from higher taxes and higher health insurance rates because of Obamacare. This is something significant to watch, although we don’t see it as a serious problem today.
This is a podcast summary. For more information, please listen to the entire broadcast here.
We got a letter this week from a client of ours, and we wanted to share a piece of it with you and our reaction, because this is a common fear and question for investors.
“I believe that U.S. cannot continue with its current debt load – no one country is big enough to bail the U.S. out once dollar is no longer the gold standard, and we’re concerned that the dollar is not strong. We are concerned about a sharply falling US dollar, and wondering if we need investment advice outside of the dollar or a safety net outside of the U.S.? ”
-A concerned client of Fabian Wealth Strategies
First off, it’s great that our clients are watching the markets and the international stage so closely. As money managers, we’re watching currency markets each and every day, and the big currencies to look at are the U.S. Dollar, Euro and Japanese Yen. Right now, the U.S. Dollar is enjoying a nice uptrend in value. There just aren’t great alternatives out there to the U.S. Dollar right now, and we have no evidence that the U.S. Dollar is declining at this time. We agree that the Federal Reserve’s bond buying actions are problematic, but it’s not adversely affecting the dollar right now. Seeing that the Japanese Yen and Euro are both engaging in similar Quantitative Easing strategies to a much greater extent than we are, and remembering that the global economy is very intertwined is helpful. There is a lot of economic stress in these areas of the world, and in order for the dollar to go down, other currencies would have to come up in value, and we don’t see that happening.
As a side note, we aren’t seeing a rapid rise in gold prices, either, which is its own form of currency. Since all currencies can’t go down at the same time, the U.S. dollar is in good shape. These are good questions and legitimate concerns, but right now we don’t see a reason to worry about the U.S. dollar.
This is a podcast summary. For more information, please listen to the entire broadcast here.
We keep hearing about bubbles in the stock market, and we want to address some of those concerns today. Three items we learned recently from Jeffrey Gundlach:
Quantitative easing not ending without negative consequences that force it to do so
Countries are debasing their currencies around the world
Global growth is slowing
Now, three items we got from Bill Gross recently:
Money is chasing risk
Bond bull market is coming to an end
Bubbles in stocks, bonds and real estate
Are there bubbles and risk out there, thanks to central bank action? Absolutely, but we think that our investors are well-prepared for the changing tides of the markets. For more information on how to become a Fabian Wealth Strategies investment client, please call our offices at 800-391-1118.
This is a podcast summary. For more information, please listen to the entire broadcast here.
See Doug live this week and next, in Santa Barbara and Las Vegas, respectively. Please get more information here.
We heard a new acronym this week: TINA, which stands for “There Is No Alternative” (to equities). CNBC and other media outlets are touting the wisdom of TINA, and refusing to see any bad news for equities.
It’s interesting to note that, for the first time in 17 years, the market has not had a 5% correction from January to May. This is an incredible grind higher, but we have not seen any real opportunities to enter this market, and the fundamental instability concerns us.
The economy is not doing all that well, but, as we just mentioned, the media and the markets see negative news as a positive these days, because it means that the Federal Reserve will continue its Quantitative Easing policies. There’s a tremendous amount of faith in the central banks out there, and we all know that this is going to end in an ugly way.
Risk is very high right now. We are seeing unprecedented heights, particularly with the fundamental economic weakening around the world. Remember, fads (tech stocks and real estate, to jog your memory) do not always serve individual investors well, so be very cautious with your investments and know where your risk is.
This is a podcast summary. For more information, please listen to the entire broadcast here.
Amazingly, the highs in the Dow are seen as the big story around the world. These new highs come at a price, however, and that’s what we need to talk about today.
Most investors believe inflation will be a big problem because of the Federal Reserve’s tampering in the market through Quantitative Easing. They are worried about the value of US dollar, commodities, healthcare, higher taxes, etc.
On the other hand, we could see deflation, which, frankly, we are more concerned about. If all of this money printing doesnt result in economic growth, than the economy will contract. Stocks usually advance ahead of economic growth so everyone is hopeful, but you need to be prepared for both inflation and deflation at the same time in your portfolio. Both could harm investors, and we don’t know, at this point, which way the economy is going to go.
Deflationary consequences:
Job losses
Assets deflate
Debt defaults
Inflationary consequences:
Devaluing of US dollar
Expensive gas, commodities, food, healthcare etc.
Sovreign debt defaults are going to come at some point and restarting economic growth is going to be very difficult if that happens, particularly in Europe. Our advice is this: prepare for an uncertain global economy, and ready your portfolio for both inflationary and deflationary action.
If you’d like more information or guidance on how to do that in your personal portfolio, please email us at askdoug(at)dougfabian(dot)com.
This is a podcast summary. For more information, please listen to the entire broadcast here.
All the financial markets around the world are positive as of now, which continues the euphoric excitement on Wall Street about our recent stock market highs.
Here’s the good news: unemployment rate declined, U.S. dollar high, jobless claims fell, U.S. stock market high.
But, as always, there’s a flip side. Here’s the bad news: productivity falling in U.S., factory outputs declining in U.S., Europe’s economy is not doing well and we see recession in 60% of the world.
Even though, as our title indicates, many people are partying and feeling good about the stock market, we believe that the fundamentals are weak and that risk is still very high in the markets. Exercise extreme caution, and remember that equities are in an uptrend because of central bank interference in the markets. Better opportunities are still to come, so hang on for the ride and don’t get swept up into the “party”.
If you’d like to find out more about how we can help you and your money face upcoming challenges, act now by listening to the Monday Morning Market Outlook podcast, and then by giving us a call at 800-391-1118.
As always, email any investment questions or concerns to askdoug(at)dougfabian(dot)com. We want to help you make the best possible decision for your portfolio. This is a podcast summary. For more information, please listen to the entire broadcast here.
We’d like to direct your attention to a very important article in the Los Angeles Times from this weekend:
“Has the bull market in stocks become ‘too big to fail’? The Federal Reserve’s efforts to keep the U.S. economy growing may not work unless the stock market keeps moving higher.”
“Officially, the Federal Reserve isn’t supposed to worry about keeping stock prices flying high.
But when Fed Chairman Ben S. Bernanke was asked about the market’s outlook last week on Capitol Hill, he sounded like a lot of bullish Wall Street investment strategists.”
We encourage you to read the whole article here, and remain alert and informed in the markets right now.
This is a podcast summary. For more information on this topic, please listen to our full broadcast.
As you know, we still believe that risk is high in the stock market right now. People keep asking us, but our market outlook remains the same, and we are still pursuing capital preservation over appreciation because of the government involvement in the financial markets, the unprecedented actions by central banks, and the warning signs in the economy.
However, it seems that our opinion is the minority. Concerns about the economy and the business climate seem to be falling on deaf ears, and Wall Street seems to creating a self-fulfilling prophecy for high stock prices right now. Investor bullishness and complacency is high in the markets, but we believe that this is the riskiest and most dangerous market action we have ever seen.
Why are we so concerned?
Because the national debt and deficit is a serious problem, but is not being dealt with. Gas prices are rising, we saw bad retail news this week from Wal-Mart, and China is losing ground in the market. Excessive money printing by the Federal Reserve and other central banks has made a huge debt bubble. Just remember, that things are not as they seem. Be aware that risk is high – we might even be seeing some warning signs of deflation out there. Be careful and cautious in your investments right now.
Manage risk in your portfolio!
Also, don’t forget to listen to recent teleconference for some of our latest investment advice for achieving your goals, and if you have questions about your specific financial plan or portfolio, please call us at 800-391-1118 or email askdoug(at)dougfabian(dot)com.
Right now, there is a high level of complacency and bullishness amongst investors and investment advisors. Remember that markets are psychological, and the crowd is usually wrong. Keep that in mind and be cautious with your investments, don’t get sucked into complacency this year.
Also, keep an eye on precious metals, especially with the current “currency wars” that we talked about this week. Bonds are still a good investment for the most part, and interest rates should remain low for the foreseeable future. If you have any questions about the financial markets and how this activity affects your portfolio, email us at askdoug(at)dougfabian(dot)com.
