Advertisements

The Fear Fund: Nancy Davis’ ETF Aims To Protect Investors From Scary Stuff, Like Recession And Inflation

Stocks have recovered from last fall’s crash, low interest rates stretch out to the horizon and the VIX volatility index is half what it was at Christmas. Sit back and coast to a comfortable retirement.

No, don’t, says Nancy Davis. This veteran derivatives trader runs Quadratic Capital Management, where her somewhat contrarian view is that investors, all too complacent, are in particular need of insurance against financial trouble.

The Quadratic Interest Rate Volatility & Inflation Hedge ETF, ticker IVOL, is designed to provide shelter from both inflation and recession. Its actively managed portfolio mixes inflation-protected Treasury bonds with bets, in the form of call options, on the steepness of the yield curve.

Those options are cheap, for two reasons. One is that, at the moment, there is no steepness: Yields on ten-year bonds are scarcely higher than yields on two-year bonds. The other is that the bond market is strangely quiet. Low volatility makes for low option prices.

                                   

“Volatility has been squashed by central bank money printing,” Davis says, before delving deep into the thicket of option mathematics. If volatility in interest rates rebounds to a normal level, her calls will become more valuable. Alternatively, she would get a payoff if the yield curve tilts upward, which it has a habit of doing when inflation surges, stocks crash or real estate is weak.

If IVOL is all about peace of mind for the investor, it’s all about risk for its inventor. Davis, 43, has poured her heart, soul and net worth into Quadratic, of which she is the founder and 60% owner. If the three-month-old exchange-traded fund takes off, she could become wealthy. If it doesn’t, Quadratic will struggle.

The fund showed its worth in the first week of August, climbing 2% as the stock market sank 3%. But it needs a much bigger shock to stock or bond prices in order to get big. It has gathered only $58 million so far. A crash had better arrive soon; IVOL’s call options expire next summer. Quadratic, moreover, needs to somehow scale up without inspiring knockoff products from ETF giants like BlackRock.

Davis was a precocious trader. As an undergraduate at George Washington University, she took grad courses in financial markets while earning money doing economic research for a consulting firm. She put some of her paychecks into a brokerage account. “Some women love to buy shoes,” she says. “I love to buy options.”

This was in the 1990s, a good time to indulge a taste for calls. Davis made out-of-the-money bets on technology stocks, which paid off well enough to cover the down payment, in 1999, on a New York City apartment. Nice timing.

There may be a sour grape, but there’s also truth in her current philosophy that hedge funds are not such a great deal for investors. ETFs, she says, are more liquid, more transparent and cheaper.

Davis spent a decade at Goldman Sachs, most of it on the firm’s proprietary trading desk, then did a stint at a hedge fund. At 31 she quit to actively manage two kids. Returning to Wall Street after a three-year hiatus, she worked for AllianceBernstein and then did what few women do, especially women with children: She started a hedge fund.

Quadratic, whose assets once topped $400 million, used a hedge fund platform at Cowen & Co. When Cowen ended the partnership last year, Davis set about reinventing her firm. There may be a sour grape, but there’s also truth in her current philosophy that hedge funds are not such a great deal for investors. ETFs, she says, are more liquid, more transparent and cheaper.

IVOL’s 1% annual fee is stiff, but Davis says it’s justified for a fund that is not only actively managed but also invested in things that ordinary folk cannot buy. If you want to duplicate her position in the Constant Maturity Swap 2-10 call due July 17, you’d need to know what banker to ring for a quote, because this beast is not traded on any exchange. Each of these calls, recently worth $7.71, gives the holder the right to collect a dollar for every 0.01% beyond 0.37% in the spread between ten-year interest rates and two-year interest rates. The spread has to move a long way up before the option is even in the money. But at various times in the past the spread has hit 2%. Could it do that again? Maybe, at which point the option pays $163.

Starting a firm like Quadratic is like buying an out-of-the-money call: long odds, big payoff. Davis is doing what she was doing in college. You can’t stop a trader from trading.

Get Forbes’ daily top headlines straight to your inbox for news on the world’s most important entrepreneurs and superstars, expert career advice, and success secrets.

Source: The Fear Fund: Nancy Davis’ ETF Aims To Protect Investors From Scary Stuff, Like Recession And Inflation

196K subscribers

Nancy Davis, founder and CIO of Quadratic Capital Management, introduces her new ETF that takes advantage of interest volatility and inflation expectations: IVOL. In this interview with Real Vision’s co-founder & CEO Raoul Pal, Davis deconstructs the structure of the ETF, highlights the cost of carry associated with the strategy, and discusses her macro outlook and where she thinks the yield curve is headed next. Filmed on May 29, 2019. Watch more Real Vision™ videos: http://po.st/RealVisionVideos Subscribe to Real Vision™ on YouTube: http://po.st/RealVisionSubscribe Watch more by starting your 14-day free trial here: https://rvtv.io/2KHDkoc About Trade Ideas: Top traders unveil their specific plans for cashing in on the market’s next move. In these short videos, our traders cut straight to the point and lay out their thoughts on the best risk-reward trades of the moment. Each episode concludes with a visual recap of trade details including profit-loss potential and trade duration. About Real Vision™: Real Vision™ is the destination for the world’s most successful investors to share their thoughts about what’s happening in today’s markets. Think: TED Talks for Finance. On Real Vision™ you get exclusive access to watch the most successful investors, hedge fund managers and traders who share their frank and in-depth investment insights with no agenda, hype or bias. Make smart investment decisions and grow your portfolio with original content brought to you by the biggest names in finance, who get to say what they really think on Real Vision™. Connect with Real Vision™ Online: Twitter: https://rvtv.io/2p5PrhJ Instagram: https://rvtv.io/2J7Ddlw Facebook: https://rvtv.io/2NNOlmu Linkedin: https://rvtv.io/2xbskqx The ETF Play on Interest Rate Volatility (w/ Nancy Davis) https://www.youtube.com/c/RealVisionT… Transcript: For the full transcript visit: https://rvtv.io/2KHDkoc NANCY DAVIS: So we invest with options with a directional bias on everything. So our new product that we recently launched, IVOL, is the first inflation expectations and interest rate volatility fund out there. It’s a exchange traded product. RAOUL PAL: Does anybody even know what that means? NANCY DAVIS: So what we do is for an investor, if you’re an equity investor, you want to have tail protection, for instance. It’s hard to own equity volatility as an asset allocation trade because it decays so aggressively. So it’s a more benign way to carry volatility as an asset class from the long side using fixed income vol. It’s not as sensitive as equity vol, but it’s a lot lower level. Like, the vol we’re buying is 2, 2 basis points a day in normal space. So it’s very, very cheap, in my opinion, and it gives you a way to have an asset allocation to the factor risk of volatility without having as much decay as you would in the equity space. And then for a fixed income investor, the big risk there is obviously Central Bank policy, fiscal spending, trade wars, as well as inflation expectations. And we saw a need to really give a fixed income investor a way to capitalize on the deflation that’s been priced into the market for the next decade. I mean, so current US inflation is around 2%. The five-year break-even is 1.59%. So that’s an opportunity in an option space. And so it’s long options with TIPS. And so that gives investors exposure. It gives you inflation-protected income, but also options that are sensitive to inflation expectations. And we think it’s pretty– you know, you’re never going to time these macro calls perfectly. But given the Central Bank in the US is so focused right now on increasing inflation expectations, and there’s been so much talk about the yield curve inverting– and that’s kind of crazy. If you step back and you’re like, all right, we have a $3.9 trillion balance sheet. We have a fiscal budget deficit. We have unclear or radically changing monetary policy. If you look where we are now with so many cuts priced into the interest rate markets in the US versus where we were four months ago, it’s wildly different. And at the same time, interest rate volatility is literally at generational lows. Equity, while people talk about equity vol, I think VIX today is 17. It’s low, I guess, in the context. But when you look at a percentile, like one-year vol over the last decade in equities, it’s about the 70th percentile. So it might be low, but it doesn’t mean it’s cheap. Interest rate volatility is literally at, like, 2, 1, you know, 0.

Advertisements

Council Post: How To Prepare For The Recession As A Real Estate Investor

It seems like all the talk these days is centered around the inevitable recession. I see an article every day claiming that the end is near. Recently, the yield curve inverted, which many point to as a strong indicator of an oncoming recession. But, there are also many experts who claim the economy is strong. They cite strong growth, spending, development and other indicators to support their theory. No matter which way you lean, it is inevitable that there will be a market correction/recession at some point. It’s impossible to say for sure when or how bad it will be.

As a real estate investor, you want to be prepared for when it does happen. If you think back to the last crash in 2008, the best deals were the years after that. If you had capital, you made a lot of money. It almost didn’t even matter what you bought because prices were so insanely low. What I’ve heard most from investors looking back at it is, “I wish I would’ve bought more properties.”

Even though you can’t predict when it will happen, you can still take steps to get prepared. If you’re prepared, you’ll be able to capitalize. Let’s go over how people will be affected during the recession.

Sellers

In a recession, there will be many more distressed sellers than there are today. Since the last downturn, sellers have been able to refinance or sell if they got in a tight spot because of appreciation. Since prices will be going down, many will not have enough equity to refinance or sell. They’ll have to face foreclosure or a short sale. The sellers who do have equity will want to sell out of fear that they’ll lose their equity if they wait any longer.

Flippers

Many flippers will have exited the market. Prior to the recession actually happening, they’ll notice inventory rising, days on market increasing and their properties selling for less than anticipated. As a result, their margins will tighten. They may lose money or simply not make the return needed to justify the risk. Therefore, there will be far fewer flippers than you see today.

Wholesalers

Many wholesalers will leave the market. Even though there are more distressed sellers, there are fewer sellers with equity. They’ll notice that there aren’t as many flippers to sell to anymore either. The flippers who have weathered the storm will ask for significant discounts in order to do a deal. Wholesalers’ margins will begin to tighten to the point where it doesn’t make sense to spend marketing dollars anymore.

Contractors

Contractors will not have as many job opportunities since there will be fewer people buying and renovating homes. In order to get jobs, they will have to lower their prices to stay busy.

Real Estate Agents

With fewer buyers and sellers in the marketplace, there will be more competition to acquire clients. Real estate agents will have to spend more marketing dollars to attract them or take discounted commissions.

All these people play a vital role in real estate investing. You should ask yourself where you fit in with all of this. What’s the best position to be in?

The answer: become a cash investor.

In today’s market there are a lot of cash investors, but many will be wiped out or scared during the recession. So there will be far less competition in all aspects of real estate investing. The cash investors who do stay in it will own the market during a recession. With cash, you have many options. You can choose to flip homes with little competition. You can buy a bunch of discounted rentals and build your portfolio. Or you can lend the money to operators and have them do all the work for you.

Again, the No. 1 regret people told me they had after the last recession was that they didn’t buy enough homes. It wasn’t that they wish they would’ve wholesaled more homes or sold more homes as an agent. The person actually buying homes is the one who thrives in the recession.

The cash investor will be able to buy directly from all the motivated sellers with less competition. They’ll be able to buy from wholesalers at deeper discounts because there are more deals than money. They’ll be able to get cheaper labor from contractors because they’ll be one of the only sources of consistent work, and agents will work harder to find deals for cash investors because there will be fewer retail clients.

As you prepare for an oncoming recession, the most important thing you can do is become a cash investor. Here are a few ways how:

• If you have properties or assets, consider selling some so that you have more liquidity.

• If you’re a wholesaler or real estate agent, look into raising capital so that you can start buying the deals you find.

• If you’re a flipper, start building more relationships and using more lenders now so a trusting relationship is in place before the recession hits.

We don’t know when the next recession will be, but it doesn’t really matter. You should be preparing as if it could be tomorrow. Figure out how you can become a cash investor, and you will be ready for it.

Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?

Ryan Pineda is the CEO of Homerun Offer.

Source: Council Post: How To Prepare For The Recession As A Real Estate Investor

Lets talk about a potential recession, what might happen, and how you can best prepare – enjoy! Add me on Instagram: GPStephan – Avocado Toast Merch: https://bit.ly/2DhFyo3 GET $50 OFF FOR A LIMITED TIME WITH COUPON CODE: THANKYOU50 The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $125 million in sales: https://goo.gl/UFpi4c Join the private Real Estate Facebook Group: https://www.facebook.com/groups/there… So first, lets talk about what’s influencing the market and what factors we should be made aware of: The first is rising interest rates: This means that the cost of borrowing money is expected to INCREASE over the next few years. When borrowing gets more expensive, you either need to RAISE prices to keep the profit margins the same – which means things get more expensive to you as the customer. Second, we’ve begun seeing the warning signs of the INVERTED YEILD CURVE – which, according to just about every article out there, the inverted yield curve has historically been associated with a high likelihood of upcoming recession. Third, we have the tariffs and the uncertainty surrounding what may or may not happen. And when it comes to investments, the ONE thing all investors dislike is UNCERTAINTY. When people are UNCERTAIN, they don’t invest, they hold cash…and that causes stock prices to fall. And fourth…we’re seeing a slow down in nearly all markets. Here’s what I think is going to happen… First, I’ve noticed QUITE a lot of what I call “gamblers fallacy.” This is the expectation that the market will drop, JUST because we’ve been in the longest bull market in HISTORY and that means it’s “overdue” and more likely to happen. Second, I believe that a lot of our “Recession Talk” is already SOMEWHAT factored into the price. Think of all the people NOT investing right now because they want to wait for lower prices…that is, in itself, self fulfilling and lowering prices. And third…no one, including myself, knows whats going to happen. No ONE. And fourth, you have so many false news articles designed to APPEAR like credible new sources so they get pumped through Facebook and Blogs for the sole purpose of manipulating you into buying their products. Well here’s the reality: First, NO ONE can predict when a recession will happen. We’ve been seeing these articles since 2013 from people who claim the recession is coming any month now. It’s never ending. You’ll read about this one expert predicting something, then another expert predicting something else, and they keep repeating themselves until eventually, one of them is right. Then they use that credibility of being right ONCE to propel them into the next opportunity. Second, it’s important you PREPARE for a recession in ways you can CONTROL: First, you CAN control whether or not you keep a 3-6 month fund in the event you lose your job or something unexpected comes up. This is absolutely ESSENTIAL for you to do. Second, you CAN control whether or not to have too many outstanding debts that might need to be paid down. If you’re over leveraged, or if you have high interest debt, it’s in your best interest to pay those off to free up cashflow in the event of a downturn. Third, you CAN control how much you spend…if you’re spending is too high, it’s important to cut those back so that you can save more money to invest. And when you DO invest, invest long term. Ideally, these are investments you should plan to keep 10-20 years. For me, I see lower prices as an opportunity. And to alleviate some of these concerns, you don’t need to just drop ALL of your money in the market at once…buy a small amount each and every month. This way, if the price goes down..you’re buying in cheaper and cheaper over time. If it goes up, you’re buying in little bit little…and anytime when it comes to investing, slow and steady wins the race. This isn’t about making an immediate 10% profit in a month…this is about investing for your future in a slow, stable way where you don’t feel stressed whether the market goes up or down. For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com My ENTIRE Camera and Recording Equipment: https://www.amazon.com/shop/grahamste… Favorite Credit Cards: Chase Ink 80k Bonus Point Offer – https://www.referyourchasecard.com/21… American Express Platinum – http://refer.amex.us/GRAHASOxHd?XLINK…

3 Ways to Recession-Proof Your Company & Why Right Now Is the Best Time to Do It

David Barrett survived the Great Recession by making his business as boring as possible.In 2007, the founder and CEO of Expensify was trying to launch a prepaid debit card that would enable–and hopefully encourage–charitable giving to panhandlers in San Francisco. But, as forecasts of economic turmoil mounted, investors were interested only in ideas that sounded “sane and reasonable,” he says. So Barrett started pitching the safest related product he could imagine: an automated expense-report management system.

That worked; Barrett secured enough money to quit his full-time job in April 2008. He still intended to pursue the card idea, but soon hit a production snag–and with the economy in free fall, Barrett recalls thinking, “Shit, I really need to make a business out of this right now.” So he doubled down on business-expense management.

Almost 1.4 million small businesses with employees closed from 2008 through 2010, according to the U.S. Small Business Administration. Expensify, now with five offices and a staff of 120, wasn’t one of them–a feat Barrett attributes to those pre-recession pivots. They taught him to “build a product that is needed in a downturn,” he says. “Sell aspirin, not vitamins.”

Recession war stories may seem out of place during this prolonged period of economic growth, but there are signs that a slowdown is on the way. A June 2019 survey from the National Association for Business Economics put the risks of a recession beginning before the end of 2020 at 60 percent. A third of the 2019 Inc. 5000 CEOs expect a recession to begin this or next year, with another third bracing for one in 2021. Whenever the downturn hits, these steps can help your business weather it.

Fundraise.

Build your cash reserves while you can. Serial entrepreneur Mitch Grasso had a potential downturn in the back of his mind while raising capital for his latest venture, Beautiful.ai. The presentation software company raised $11 million in Series B funding in March 2018, just 17 months after a $5.25 million Series A round. “I chose to raise money earlier than I would have otherwise, even though it cost me probably a little more” in terms of valuation, says Grasso. “If there’s money on the table, take it sooner rather than later. You’ll always find a way to spend it.”

Conduct consumer research.

You might not be able to pivot your entire business model, so figure out what products and services your customers will need even in poor conditions, says Carlos Castelán, managing director of the Navio Group, a retail business consulting firm.

Ryan Iwamoto, co-founder of caregiving service 24 Hour Home Care, started asking his customers for their input when the federal government introduced sweeping rules for home health care agencies in 2016. He wanted to be “the first in market to educate them on all the regulations coming down in our industry,” Iwamoto says. “It allowed us to build better relationships”–and has helped boost his company’s revenue by more than 68 percent since the law changed, he reports.

Ink multiyear contracts with clients, not vendors.

Earlier this year, during a regular assessment of her company’s revenue targets, Sandi Lin considered the potential impact of an economic slowdown. The co-founder and CEO of Skilljar was happy to discover half of the customer training platform’s revenue was on multiyear contracts, meaning “at least theoretically, that even if all of our other customers went bankrupt,” Skilljar would have some runway–and less pressure to scramble for new business.

Lin applies the opposite approach for vendor contracts; while Skilljar is sponsoring a major customer conference this fall, she negotiated a minimal commitment on room nights and seats with the hotel and venue. Which is a smart business practice in good times, too; as Lin says, “the most important job of an entrepreneur is to survive.”

By: Jeanine Skowronski

Source: 3 Ways to Recession-Proof Your Company–and Why Right Now Is the Best Time to Do It

WATCH MY PREVIOUS VIDEO ► https://youtu.be/SCCMp_PVxz8 WATCH MY NEXT VIDEO ► https://youtu.be/9Pa7mAcKmXo ———————————————————– FINANCIAL STEWARDSHIP ACADEMY (USE DISCOUNT CODE: “FREEDOM” FOR 30% OFF) ► http://bit.ly/Buy-FSA-Webinar ———————————————————– ▼ 30 DAY GUIDE TO REDUCING STRESS AT WORK▼ ============== EBOOK FOR MOMS (30% OFF DISCOUNT CODE: STRESSFREE30) ► http://bit.ly/Reduce-Stress-eBook PAPERBACK (AMAZON) ► http://amzn.to/2yvaQaS KINDLE (AMAZON) ► http://amzn.to/2lUZ57W AUDIO (AUDIBLE) ► http://amzn.to/2oEp3sJ iBOOK (APPLE) ► http://bit.ly/StressiBook ———————————————————– FREE DETOX SYSTEM FOR MOMS ► http://bit.ly/10DayMBDS SMART MOM’S TRANSFORMATION SYSTEM ($100 OFF DISCOUNT CODE “TRANSFORM”) ► http://bit.ly/Buy-SMTS ———————————————————– Brief Overview: Small and Large businesses can get hit pretty hard during recessions so it’s important to choose a business that can withstand the ups and downs that come with the economy. There’s lots of different options and ideas to choose from if you are new to small business, but there’s also some ideas that you can choose to diversify your income streams if you already own a business or multiple businesses. The key is to pick a person, product, and/or company that you know, like, and trust to make sure you have the best chance of success during the ups and downs. ———————————————————– ▼ NEXT STEPS▼ ============== SUBSCRIBE ► http://bit.ly/LanceMcGowanYT SHARE ► This video with someone that would benefit from it COMMENT ► On what you liked most about this video! ———————————————————– ▼ SEARCH ▼ =========== #lancemcgowan #fsa #financial #financialstewardshipacademy #finances #finance #stewardship #biblical #bible youtube for more videos! ———————————————————– ▼ BUSINESS INQUIRIES▼ ===================== Email Lance at support@lancemcgowan.com with questions OR Email Tanner at frigaardtanner@gmail.com ———————————————————– ▼ SEND ME MAIL▼ ===================== Lance McGowan 11700 W Charleston Blvd #170-415 Las Vegas, NV 89135 ———————————————————– Disclaimer: The information contained on the Lance McGowan YouTube channel and videos are provided for general and educational purposes only and do not constitute any legal, medical or other professional advice on any subject matter. These statements have not been evaluated by the FDA and are not intended to diagnose, treat or cure any disease. Always seek the advice of your physician or other qualified health professional prior to starting any new diet or treatment and with any questions you may have regarding a medical condition. If you have or suspect that you have a medical problem, promptly contact your health care provider.

A Recession Won’t Wreck Your Retirement…But This Will

Here is what matters if you’ve made it and want to keep it.Do the financial markets have your attention? I assume so. After all, Wednesday’s 800-point drop in the Dow was the worst day in the U.S. stock market this year. And while many investors missed it, the December 2018 plunge in stock prices capped off a 20% decline which started in October. That could have put a big divot in the plans of folks recently retired or in the late stages of their careers.

Stumbling at the finish line?

Demographics tell us that there is massive group of people who are between 55 and 70 years old. They are the majority of the “Baby Boomer” generation. Many of them have built very nice nest eggs, thanks to a robust U.S. economy over the last 40 years. That period of technological innovation and globalization of the economy also produced four decades of generally falling interest rates. That’s provided a historic opportunity to build wealth, if you saved well and invested patiently.

But now here we are, with a stock market near all-time highs and interest rates crashing toward zero. The tailwind that lifted Baby Boomers in their “accumulation” years may flip to a headwind, just in time for them to start using the money.

Focus on what matters

At this stage of their investment life, Baby Boomers are tempted from all directions. They are told to bank on index funds, 60/40 portfolios, structured products and private partnerships. And, while there are merits to each, I am telling you what I see as someone who has been hanging around investment markets since this Baby Boomer was a Wall Street rookie in the beloved World Trade Center in NYC: much of it is bunk. It’s a distraction. It’s a sales pitch.

Take these over-hyped attempts by wealth management firms to boost their bottom line and scale their businesses, and bring your attention to your own priorities. Today, as much as any time in the past 10 years, your focus should be on true risk-management.

That does not necessarily mean running to cash. That is an outright timing move, and it borders on speculation. But it does mean that the intended use of your accumulated assets (when you need it, how much you need, and how you will navigate the markets of the future) should be

inward-looking. It should not be based on trying to guess what the stock market is going to do.

Rate cut? Check. Inversion? Check. Giant stock market drop? We’ll see.

uncaptioned
Source: ycharts.com

The big news on Wednesday was the “inversion” of a closely-watched part of the U.S. Treasury yield curve. Translated to English, that means for the first time since 2007, U.S. Bonds maturing in 10 years yielded less than those due in 2 years. This is far from the first inversion we have seen between different areas of the Treasury market. However, it is the one that is most widely-followed as a recession warning signal.

The chart above shows 3 things that were essentially in sync around the time the last 2 stock bear markets began. The 10-2 spread inverted, but then quickly reverted to normal. The Fed cut interest rates for the first time in a while. And, the S&P 500 peaked in value, and fell over 40% from that peak.

Let that sink in, given what we have witnessed in just the past 2 weeks. Then, fast-forward to today, where we find ourselves in a very similar situation regarding inversion and the Fed. See this chart below:

uncaptioned
Source:ycharts.com

What stands out the most to me in that chart is how the spread between the 10-year and 2-year yields is almost perfectly opposite that of the S&P 500’s price movement. That is, when the 10-2 spread is dropping, the S&P 500 is usually moving higher. But when that spread starts to rise, at it is likely to soon, the S&P 500 falls…hard. As a career chartist, I just can’t ignore that.

I have been writing about the threat of an eventual “10-2 inversion” in Forbes.com since April, 2017. It finally happened this week, 19 months into what increasingly looks like a period of muted returns for investors. That is, if they follow rules identical to those they followed for the past 10 years.

Recessions are bad, but this is worse

We saw on display this week what I have been talking about since early last year: that it will not take the declaration of a recession to tip the global stock market into a panic-driven selloff that rips through retirement efforts. All that is needed is for stock prices to follow through to the downside is to actually see the market react to the preponderance of evidence that has been building for a while now.

In other words, it is the market’s fear of the future (recession) and not the actual event that is most important. By the time a recession is officially declared, you won’t need to react. The damage will already be done.

Specifically, a slowing global economy, excessive “easy money” policies by the Fed and its global counterparts, and a frenzied U.S. political environment. This has shaken investor confidence, and now the only thing that ultimately matters in your retirement portfolio: the prices/values of the securities you own, is under pressure.

What to do about it

First, don’t fall prey to the hoards of market commentators whose livelihood depends on progressively higher stock prices. Corrections are not always healthy, diversification is often a ruse, and long-term investing is for 25 year-olds!

For those who have “fought the good fight” to get to the precipice of a retirement they have darn well earned, the last thing they want is to have this inanimate object (the financial markets) knock them back toward a more compromised retirement plan.

The best news about today’s investment climate is that the tools we have to navigate through them are as plentiful as ever. Even in a period of discouragingly low interest rates for folks who figured on 4-6% CDs paying their bills in retirement, bear markets in stocks and bonds can be dealt with, and even exploited for your benefit.

Bull or bear? You should not care!

Maybe this is not “the big one” that bearish pundit have been warning about. Perhaps it is just another bump in the road of a historically long bull market for both stocks and bonds. But again, market timing and headline events like 10-2 spreads, recessions and the like are not your priority.

What your priority is, if you want to improve your chances of success toward and through retirement, is something different. Namely, to get away from the jargon and hype of financial media, simplify your approach, and take a straightforward path toward preserving capital in a time of uncommon threats to your wealth. I look forward to sharing insight on that in the coming days.

Comments provided are informational only, not individual investment advice or recommendations. Sungarden provides Advisory Services through Dynamic Wealth Advisors

To read more, click HERE

Follow me on Twitter or LinkedIn. Check out my website.

I am an investment strategist and portfolio manager for high net worth families with over 30 years of industry experience. A thought-leader, book author and founder of a boutique investment advisory firm in South Florida. My work for Forbes.com aims to break investment myths and bring common sense analysis to my audience. Connect with me on Linked In, follow me on Twitter @robisbitts. Visit our website at www.SungardenInvestment.com

Source: A Recession Won’t Wreck Your Retirement…But This Will

Creative Planning President and Founder Peter Mallouk discusses why he thinks the economy is in good shape, who should look to alternative investing and how to invest for retirement. He also discusses why he is not a fan of crypto.

Subscribe to Yahoo Finance: https://yhoo.it/2fGu5Bb

About Yahoo Finance: At Yahoo Finance, you get free stock quotes, up-to-date news, portfolio management resources, international market data, social interaction and mortgage rates that help you manage your financial life. Connect with Yahoo Finance: Get the latest news: https://yhoo.it/2fGu5Bb

Find Yahoo Finance on Facebook: http://bit.ly/2A9u5Zq

Follow Yahoo Finance on Twitter: http://bit.ly/2LMgloP

Follow Yahoo Finance on Instagram: http://bit.ly/2LOpNYz

The Week Recession Talk Grew Very Loud

Topline: Recession fears—which have gone up and down and back up just in the past nine months—suddenly seem here to stay for the foreseeable future, as global growth slows to a crawl amid trade war fears. Here’s what happened this week, along with key reactions:

  • Goldman Sachs issued a note Monday saying a trade deal between the U.S. and China is not expected to be made before the 2020 presidential election.
  • On Tuesday, Trump walked back planned tariffs on China, delaying some until after holiday shopping, his first acknowledgment that tariffs impact U.S. shoppers.
  • On Wednesday, Germany’s economy was reported to have shrunk as it contends with Trump’s tariffs and trade war with China.
  • Trump also blasted the Federal Reserve Wednesday on Twitter, as he blamed the central bank for dragging down the U.S. economy and returns on government bonds.
  • Then Wednesday’s close registered the worst stock performance of 2019, as investors were spooked by Germany, China and the much-discussed inverted yield curve.
  • China responded on Thursday by promising a retaliation, threatening “necessary countermeasures.”
  • Global markets responded, with the Nikkei and FTSE 100 closing down over 1% Thursday.
  • By Friday, the Dow rebounded 300 points before closing bell, while the S&P recovered 40 points and the tech-heavy NASDAQ bounced almost 130. But the Dow still lost 1.5% for the week, while the S&P edged slightly down at 0.3%.
  • Globally, the FTSE 100 regained 50 points, while the Nikkei recovered 13 Friday, but both indexes ended the week lower than where they started.
  • Analysts pegged the stock market’s slight Friday recovery to an increase in government bond yields.

Key background: The yield curve is the difference in interest rates (or returns) between short-term and long-term bonds. Usually, investors get more money when they invest in 10-year bonds over three-month short-term bonds. The yield curve is also a pretty accurate historical predictor of recessions, so when it happens, economists and investors alike get worried. This year, the yield curve inverted in March and May, and it happened again Wednesday, contributing to the stock market’s tumble.

Further reading:

Why Trade War Plus Yield Curve Equals Recession (John T. Harvey)

Markets Panic For The Second Week In A Row (Milton Ezrati)

Fed Poised To React Swiftly To Persistent Yield Curve Inversion, With More Rate Cuts (Pedro Nicolaci da Costa)

Follow me on Twitter. Send me a secure tip.

I’m a New York-based journalist covering breaking news at Forbes. I hold a master’s degree from Columbia University’s Graduate School of Journalism. Previous bylines: Gotham Gazette, Bklyner, Thrillist, Task & Purpose, and xoJane.

Source: The Week Recession Talk Grew Very Loud

 

Three Reasons Recession Fears Have Suddenly Increased

Topline: Falling stocks, trade wars and an inverted Treasury yield curve are three signs that analysts say are predicting a U.S. recession—the only problem, however, is that no one can definitively tell when (or if) one will actually happen.

  • The White House announced Tuesday it would delay some China tariffs from September 1 until December 15, causing the Dow Jones Industrial Average to zoom up nearly 500 points by mid-morning.
  • Stocks fell Monday and were predicted to decline Tuesday, as uncertainty mounts for a China trade deal and global economic health.
  • After Trump surprised the world with more tariffs on Chinese goods, Goldman Sachs analysts estimate a new trade deal will not materialize before the 2020 election.
  • In the bond market, an inverted Treasury yield curve—long used by economists as a recession predictor—is nearing the same level it had reached before the 2007 recession.
  • Bank of America analysts said the odds of a recession happening in the next year are greater than 30%.
  • And Morgan Stanley analysts predict a recession in the next nine months if the trade war between the U.S. and China continues to escalate.
  • Overall, economists cannot accurately forecast recessions, but they suggest de-escalating the trade war with China could soothe fears—and help Trump’s reelection chances.

Surprising fact: Analysis by the New York Times found that recent economic downturns occur in late summer. August of 1989, 1998, 2007, 2011 and 2015 all saw slowdowns.

Key background: One of the Trump’s key platforms is a strong economy, and the stock market has reached historic highs since he assumed office. The President has often used Twitter to demand economic changes, like interest rate cuts and trade deals, and the markets tend to respond to the president’s Twitter proclamations, but it remains to be seen if the economy will continue to grow.

Follow me on Twitter. Send me a secure tip.

I’m a New York-based journalist covering breaking news at Forbes. I hold a master’s degree from Columbia University’s Graduate School of Journalism. Previous bylines: Gotham Gazette, Bklyner, Thrillist, Task & Purpose, and xoJane

Source: Three Reasons Recession Fears Have Suddenly Increased

 

Private Sector GDP Growth is Kind of Anemic

Today’s GDP report got me curious about something: how does private sector GDP compare to total GDP? That is, if you pull out government contributions to GDP growth, what does purely private-sector growth look like? Here it is:

Private sector growth has been declining since the start of the expansion, and that decline has picked up speed over the past two years. It’s no wonder President Trump was so eager to agree to sizeable increases in the federal budget this week. He knows perfectly well that his tax cut has worn off and he needs all the help he can get from government spending to prop up an increasingly anemic private sector. For the next year, anyway.

Personal consumption was up a healthy 4.3 percent, but business investment plummeted -5.5 percent. Exports were down and imports were flat. Federal government spending added more than usual to GDP by about 0.4 percentage points. State government spending was also higher than average, by about 0.2 percentage points. If government spending had been at normal levels, GDP would have increased 1.5 percent instead of 2.1 percent. Inflation was higher than last quarter.

Overall, this is an OK but not great GDP report for the private sector, saved only by higher government spending.

The most remarkable thing about Donald Trump is how eerily stable his approval rating is. Here is 538’s chart over the past year:

After the Republican tax cut passed in late 2017, Trump’s approval rating rose to 41 percent and it’s stayed within two points of that ever since. I don’t know if this is good or bad—bad for Trump, I suppose, since that’s a tough re-elect number—or if there’s much Trump can do to improve it. But it’s definitely unusual. It sure looks like nearly everyone has their mind made up about Trump and isn’t likely to change it.

 

Source: Private sector GDP growth is kind of anemic

Japan-South Korea Tensions Spur The Need For Courage And Creativity

A series of incidents have driven relations between Japan and South Korea to new lows. Frustration has mounted as each government has blamed the other for the sorry state of affairs. Though domestic politics is partially to blame, the real problem is more deeply rooted. Each country sees the other as the cornerstone of its own national identity, and their respective self-images make conflict inevitable. While the U.S. can help the two countries address this problem, only courageous and inventive leadership in Tokyo and Seoul can resolve it…………….

Source: Japan-South Korea Tensions Spur The Need For Courage And Creativity

Is a Recession Coming – Brooke Crothers

1.jpg

In December 2007, Larry Kudlow, then a talking head for the business network CNBC, proclaimed, “There’s no recession coming. It’s not going to happen.” That same month, the economy plunged into the worst economic downturn since the Great Depression. This week, Larry Kudlow, now the director of the National Economic Council, stood on the White House lawn and struck a familiar note: “I’m reading some of the weirdest stuff [about] how a recession is right around the corner. Nonsense,” he said. “Recession is so far in the distance, I can’t see it……….

 

 

Donate us if you like

%d bloggers like this:
Skip to toolbar