This article was contributed by Portfolio Wealth Global.
One of the topics that we see coming up in the financial media is the fear of a lost decade ahead. I want to discuss this subject since we have an army of billionaires who are warning everyone that it’s coming. One common denominator of these billionaires is age: they’re all older and actually are well into their retirement years.
Ray Dalio, who has been sounding the alarm for several years (while missing out on Bitcoin and delivering sub-market returns), is 71-years-old.
Charlie Munger, who has now joined the chorus of value investing legends who proclaim that traditional P/E ratios are sensationally-high, warns that stocks will return very low yields for years.
Jeremy Grantham, a value investor worth billions, who correctly predicted many incredible price forecasts, is actually saying that today’s bubble is greater than the Dotcom era.
Charlie Munger is 97-years-old and Grantham is 82-years-old.
They all gloriously missed Bitcoin, while we highlighted the bullish thesis below $500/coin.
They have all missed the rise of the tech giants and they are all obsessed with valuing companies from one angle only.
Their angle, unfortunately, is quite flawed, especially if we take the last 15-20 years as a case study.
There wouldn’t have been any point, from the year 2001 until the present day, where the analyses they conducted on securities would have put Amazon.com on their radar!
That’s crazy!
Even if they look at some of the best-performing companies of recent years, their approach to investing is limited to what they’re accustomed to and they’d admit that they would not have purchased shares in it, retroactively.
Warren Buffett, who has been great friends with Bill Gates since the early 1990s, missed out on Microsoft!
My point is that today’s market is expensive in many regards, compared with history, since interest rates are super-low, but will higher rates really crash stocks beyond belief?
The reason investors sell out of stocks is because they can lend money to governments and corporations, a strategy that is considered to be of lower-risk and becomes more enticing if interest rates rise.
Under this Biden/Harris/Pelosi regime, the government plans to spend a whole bunch. They want to embark upon an infrastructure program worth anywhere from $2tn to $4tn. They want to keep helping families with children and eradicate poverty (well-intended, but impossible) and this costs money.
The philosophy behind it is that the government borrows at such low yields that the ROI today is attractive since the impact of these programs will result in wealthier generations in the future.
Government debt is one thing, but corporations, those that don’t get to print currency to pay for their grandiose ideas, owe a collective $10tn to lenders.
This doesn’t necessarily qualify as a bubble, but the risks here are huge.
The message I have for you is that the government under Biden/Harris plans on spending heavily. We don’t see any reason to believe government debt will have any insolvency challenges, but the likely damage in the corporate bonds market is colossal, should rates rise.
The next downturn will expose how bad things are, but I made sure that I own no company with a debt burden on their books, nor do I hold any security that relies upon financing to bankroll its business.
That debt cycle is a recipe for disaster and I don’t plan to dabble in it.
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Rate of inflation is reported in the 1.5-2.0 range.
Rate of return on AAA rated muni bonds is in the 1.5-2.0 range.
Because, more money was printed, in order to service the debt.
People dislike the expression, tax shelter, or they use it very carefully; that would be illegal. Technically, you would report the whereabouts of your money, not hide it from the govt. And, the bonds would offer a temporary, legal, reportable, tax benefit, until you have sold them.
The only use for it, I see, is a hedge against inflation. Once you have factored in the spending power of those dollars, you break even, more or less.
Whereas, under your mattress, the greenback would have lost considerable value, over some decades.
“A recent growing trend in the municipal bond market is pricing long-term callable bonds at a premium. This pricing approach has emerged due to a preference among certain institutional investors and, consequently, underwriters that sell bonds to these particular investors. What does this mean for investors?”
Wait 20-30yrs for maturity. Higher yields in the range of 5% are higher risk, because so much can happen over 30yrs.
Makes perfect sense that
Prez Bidet would be giving away money to lots of states. After all, he does have to
reimburse those governors who pushed the faux corona narrative and thereby helped him steal, um , I meant “win”
the presidency.?
More stimulus! More spending! More!More!More!
Won’t affect us. Doesn’t matter – not our money.
Biden – Harris – Pelosi
The biggest nightmare this country faces now is having
cadaver Joe as president.
That is our biggest downturn,
financial or otherwise.
Recent Headline:
“It’s Over”: As Far As Wall Street Is Concerned, COVID
Is History
A little off topic but,
Rumors are circulating that “covid” is scheduled to return
during the next presidential
election cycle in 2024.
Get right with the Lord God Almighty,through His Son Jesus Christ. It makes no difference how rich or how poor you are in this life. Billions or trillions of dollars will never save you from God’s judgment. It’s appointed for every man to die once,and after that the judgment. Life is but a vapor compared to the endless ages of eternity. There is a way that seems right unto men but the end thereof is death. God the Father loves you,His Son Jesus Christ is the Lamb of God Who took away the sin of the world. He accomplished a perfect redemption for you, for everyone who believes in Him and confesses their sins calling on His name. It’s not a religion,it’s not the corrupt system of Christendom. It’s having your sins washed away and having the divine eternal life of God inside you. And having a relationship with God the Father and His Son Jesus Christ. The love of God poured out in your soul and filled with His enjoyment.