Created in 1913 with the enactment of the Federal Reserve Act, the Federal Reserve (the Fed) is the central banking system of the U.S. The Fed functions as the bank of the U.S. government, overseeing the nation’s financial institutions. As the central bank, the Fed safeguards and manages the U.S. economy and its money supply with its economic and monetary policies, which makes it a very powerful global player.
One of the hardest lessons to learn is to buy assets when others are selling them. As an investment strategy, if there is value in something, at some point, the market will rebound, provided that there are fundamental reasons for this to occur. Take the case of our housing market. From the depths of the Great Recession until now, the housing market has made a huge move up. Yes, it was pushed by the Federal Reserve, but there were fundamental reasons why the housing market showed value as an investment strategy. One company that I’ve liked for many years is The Blackstone Group L.P. ... Read More
Do you feel wealthier today compared to last year? According to the Federal Reserve, you should, as the household net worth of Americans rose 2.5% between the second and third quarters of 2013 for a total of $77.3 trillion. (Source: “Financial Accounts of the United States,” Federal Reserve, December 9, 2013.) The Federal Reserve calculates household net worth by looking at the value of stocks, homes, and other assets, minus mortgages and debts. In fact, the nominal total wealth is at a record high. Adjusted for inflation, the current level of net worth is approximately one percent below the peak prior to the Great Recession. On paper, it appears as though econom ... Read More
This past weekend, a friend of mine made a statement that there must be a large amount of economic growth coming shortly because of the booming stock market, driven by investor sentiment. As I told him, the two are not necessarily tied together. Over the past few months, we have heard about how economic growth is about to accelerate here in America, and this has helped drive investor sentiment in the stock market higher. However, I think there are many questions that need to be answered before we can assume economic growth will reach escape velocity, and investor sentiment is heavily contaminated with a large addictio ... Read More
Just the other day, I was talking to a friend of mine who seemed extremely cheerful. I asked why, and he said that his investments have performed well over the past few months and he saw no reasons to worry. This is a common problem with investor sentiment; people tend to become complacent and only look to the recent past as an indication of what tomorrow will bring. This is quite dangerous. Investor sentiment is often wrong and can be used as a contrary indicator, buying when others are dumping their stocks and taking profits when others are blissfully unaware of the changing land ... Read More
I have been in this business a long time, and I believe that the best tactic is to combine as many positive factors as possible in order to have the highest probability of success. There are essentially three main methods to look at; this includes fundamental analysis, technical analysis, and quantitative models. You don’t need every single category of analysis to be completed; you just need enough evidence from all to indicate whether or not a stock or index will move up or down. Obviously, there is no 100% guarantee, only a level of probability. Taking a look at the precious metals market, over the past coup ... Read More