Author: Andrew Packer

Personal finance

BiggerPockets: Generational Wealth 101 and Getting Started in a Tough Market

Posted on by Andrew Packer

Investing is putting wealth to work to create more wealth over time. For some investors, saving to buy a home or take a vacation is the goal. Others may have longer-term goals, like creating and keeping generational wealth.

Real estate is an asset that can be held for generations. It offers price appreciation and cash flow. But investing for generational wealth is different than looking to make a quick profit.

For generational wealth, it may mean just investing in markets that can continue growing for decades. Plus, a rising population and increased demand will likely lead to substantially higher prices.

Getting started may be tough right now. However, it may be the best time.

That’s because mortgage rates are high. But home prices haven’t sold off that much. Should mortgage rates drop materially lower, home prices may start soaring higher again.

Fortunately, starting investors in real estate can take advantage of first-time homebuyer programs. That can substantially reduce the down payment requirements. Also, today’s high-rate mortgage can be refinanced after the rates have dropped.

Homebuyers can also buy multi-unit properties and live in one of the units. Or even rent out individual rooms in a home. Either way, there are many ways to get started, so that the compounding power can start to take place over time.

 

To listen to the best ways to think generationally with real estate now, click here.

Income investing

Dividend Growth Investor: Eighteen Companies Rewarding Shareholders With a Raise

Posted on by Andrew Packer

Whether the market moves up or down, stocks are just fractions of a business. Some of those businesses decide to use their excess cash flows to reward the owners of that business by paying a dividend.

Over time, they have more cash coming in to go out to shareholders. These dividend growth stocks are a fraction of the overall market. But they offer safe, consistent returns for patient investors. That makes for a simple strategy to beat the market over time.

Recently 18 companies have announced dividend increases .The increases have been as small as a 1.6 percent increase in the dividend to an 18 percent rise.

The largest rise came from Sherwin-Williams (SHW). The painting retailer is increasing its payout from $0.61 to $0.72 per share. It’s also the 45th year the company has paid an increased dividend to its owners.

With a current yield of 0.9 percent, the yield isn’t large. But long-term holders will make a great return thanks to the dividend growth over time.

Another company increasing its payout now is the Coca-Cola Company (KO). The beverage manufacturer pays a 3.3 percent dividend, and just increased its payout by 5.4 percent.

Coca-Cola has also raised its dividend for the past 62 years. Today’s buyers will likely see more decades of dividend growth ahead.

 

To view the full list of companies raising their dividends now, click here.

Economy

George Gammon: Interview: Hedge Fund Manager Reveals Secrets You’ll Never Hear on CNBC

Posted on by Andrew Packer

While the mainstream view is that the economy is faring well, as evidenced by the stock market near all-time highs, there are other views.

One view is that the world is getting into a war footing. That view looks at the money being spent around the world, particularly in the Russia/Ukraine conflict. Under that view, growth may not be as strong, as resources are going to the war effort rather than on private-sector spending.

Another view is that we are in a stagflation environment. That’s a world where wages and the economy grow slowly, but inflation remains stubbornly high. The past three months of sticky inflation data would support the idea of at least some stagflation.

That’s also not a growth environment, or one conducive to stock market returns. The last stagflation of the 1970s saw massive inflation and a bear market combine. The result was the worst real performance for stocks since the 1930s.

For now, the market may not be pricing in further supply shocks. Global commodities could be cut off from global conflicts. That could lead to skyrocketing costs. When commodities can no longer be moved quickly or cheaply, other changes such as monetary policy is irrelevant.

Investors may want to consider commodity-related investments as a hedge against the dangers of both stagflation and global conflict.

 

To watch the full interview, click here.

Stock market strategies

The Lead-Lag Report: Dissecting the AI Revolution’s Economic Ripple Effects

Posted on by Andrew Packer

AI has been the market’s hot trend for over a year now. It’s allowed many big-tech companies playing to the trend to reach new all-time highs. Companies have reported how they’re investing in AI tools to improve their returns.

On the surface, there’s much that looks similar to the rollout of the internet. For society, that could mean fantastic improvements in productivity in the coming years. It could even rival the productivity boom of the 1990s.

And, much like the 1990s, investors may first overcommit capital to AI investments. A great AI technology may not necessarily make a good investment.

The internet era saw the rise of plenty of companies that sounded attractive on paper. But they failed to earn a profit from the idea, and failed.

Likewise, the capital moving into AI projects will likely see some of it wasted. That means investors should be cautious on where they invest.

AI industry leaders such as Nvidia (NVDA) also trade at a high valuation. If they were to lose market share for some reason, that valuation could drop substantially.

Even if Nvidia continues its lead, it could see slowing returns over time. That could be comparable to how companies like Microsoft (MSFT) slowed down after it saturated the computer market, and before they started looking into other lines of business.

 

 To listen to the full interview, click here.

Stock market

Elliott Wave Options: S&P Worries Inflation Too Hot! … Correction Coming?

Posted on by Andrew Packer

Last week’s economic data showed that both consumer and producer inflation is staying higher than expected. That’s a concern for the market, as declining inflation is key for interest rates to come down later in the year.

Meanwhile, markets have fared well in the first few weeks of 2024, with the S&P 500 breaking to a new all-time high over 5,000. That move may not last, as the latest data could mean a pullback is ahead.

If such a pullback does play out in the next few weeks, it will be in line with market seasonality. The back half of February, and most of March, is often a poorly-performing time for stocks, as earnings season winds down.

The headline inflation data can give the market an explanation for this seasonal decline. From a technical perspective, stocks have been trending higher in overbought territory for weeks.

Both of those signal that a small pullback could be a good thing for investors. Those who have missed out on the market’s recent run should get the chance to make additional buys in the coming weeks.

A market correction this time of year is typically in the 5-10 percent range. That should be enough for more volatile positions to see an even steeper drop before they start to turn around and head higher.

 

To view the full analysis, click here.

Cryptocurrencies

Swan Bitcoin: Bitcoin Hits $50K – FOMO Rally to All Time Highs Next?

Posted on by Andrew Packer

2024 could be a breakout year for bitcoin. The cryptocurrency more than doubled in 2023 from its 2022 lows. But the approval and trading of 11 bitcoin ETFs have given the crypto a surge in demand.

Already, these ETFs have attracted nearly $30 billion in investor interest. And money will continue to trickle in, now that these ETFs can be used to passively acquire bitcoin in a retirement account. That suggests that there could be more upside ahead.

Even better, bitcoin is on track for its next halving in April. That’s the event that causes new bitcoin supply to get cut in half.

Since its inception, bitcoin has already gone through three halvings. Each halving cycle has led to a massive jump higher in price in the subsequent months.

It’s possible that bitcoin moves to $100,000 by the end of the year. If so, that would mark a new all-time high compared to 2021’s all-time high just shy of $70,000.

The combination of rising demand and reduced future supply bode well for prices.

Investors may not see the massive price jumps of prior bitcoin moves. But they can likely see market-beating returns with bitcoin this year. One bitcoin starts to make new highs, so too will other cryptos as traders look to catch-up.

 

To get the full data on why bitcoin is poised to surge higher, click here.

 

Income investing

The Average Joe Investor: I Back-Tested a Covered Call Strategy with Real Option Data

Posted on by Andrew Packer

Investors have several ways to increase their income. That can include investing in dividend growth stocks. Or investing high-yield stocks such as real estate investment trusts or pipeline companies.

Investors looking for more have other tools as well, provided they’re willing to go to the options market. Call options can be used to generate extra income. This strategy of selling call options on stocks an investor owns is known as covered call writing.

There are a few caveats. As an option contract is standardized for 100 shares, an investor must first own 100 shares of a stock.

Using a dividend stock like Coca-Cola (KO), for instance, buy-and-hold investors can earn a 3.1 percent dividend. That’s based on $0.46 in quarterly income per share.

While a single option contract may go for just a few cents, multiplying that out by 100 shares can mean monthly returns and extra $40-60 per month.

That can greatly increase the annual total income, adding another 4-5 percent to total returns.

However, there are risks to any strategy. If shares soar higher, investors risk being called away. That may mean having to get back in at a higher price later.

Or finding a new stock to invest in with the capital. Such events frequently occur when selling covered calls.

 

To look at the full strategy and how it works, click here.

 

Economy

Data Driven Investor: Why the Normalcy Bias is Dangerous for Investors

Posted on by Andrew Packer

Sometimes, investors get caught in market changes like a deer in the headlights. We tend to have a great few years of market performance between sharp bear markets. So it’s easy to lose our edge and forget that markets can go down.

We often have big changes occurring that take some time for investors to figure out. In economic terms, this is called normalcy bias. We continue thinking that things are normal, until it’s clear that they are not.

In a life-or-death situation, sticking with normalcy bias can lead to death. In a financial situation, it can mean being too late to avoid large losses.

Last year’s banking crisis led many investors to sudden major losses. Those who saw dangers in regional banks invested elsewhere instead. Or sold out as soon as the danger became apparent.

At the end of a crisis, the normalcy bias means investors remain fearful.

Following a bear market, a new bull market is met with skepticism. Cash stays on the sidelines. It’s only after a big move higher that the last of the fearful money moves in.

We’re now in the second year of a bull market. Investors who missed out on the bottom in late 2022 or the opportunity to buy after the various drops in 2023 may start to move soon.

When that happens, a new round of cash could flood into markets, sending them higher.

 

To get a full understanding of normalcy bias and how it impacts your investment returns, click here.

Stock market

A Wealth of Common Sense: Is the U.S. Stock Market Too Concentrated?

Posted on by Andrew Packer

Currently, six stocks in the S&P 500 have market caps of over $1 trillion. That’s up from zero a decade ago. And the largest companies have been flirting with a $3 trillion market cap.

Individual companies in the group, such as Nvidia (NVDA) now have a market cap higher than the entire Chinese stock market. The numbers are incredibly large. It also raises the question of market concentration.

Historically, when just a few stocks have dominated the overall market, there has been a fast reversal.

The tech bubble of the late 1990s saw a handful of tech stocks reach high valuations. Those crumbled. And the stock market concentration crumbled with it.

Just 10 years ago, the top 10 stocks in the S&P 500 made up 20 percent of the index. Today, that ratio is 34 percent.

There are two ways this imbalance can return back to its original trends. First, either these big tech companies underperform and trend lower. Or, other companies could outperform while big tech stocks take a breather.

In either event, investors may want to lighten on the big tech names now. And look for other investment opportunities.

While concentration may continue to increase, when the trend reserves, it could change quickly. Investors may want to take some profits on tech stocks and look for other opportunities now.

 

To read the full implications of today’s high market concentration, click here.

 

Economy

FX Evolution: Stocks Might Have Just Made a Big Switch

Posted on by Andrew Packer

After hitting all-time highs last week, cracks have started to appear in the stock market. This could be a moment where markets make a healthy pullback, before moving even higher in the months ahead.

Given how bullish the market has acted the past few months, this kind of pullback is healthy. It’s also seasonal in nature. Investors tend to see a pullback after a strong start to the year.

While the market has been trending higher since late October, stocks are now showing signs of rotation. Investors are taking profits on high-flying tech stocks. And capital is starting to move to other parts of the market.

Over the longer-term, this is a strong sign of a healthy market. Investors are still bullish overall. However, a selloff in tech stocks could lead to a market pullback. That’s because these companies tend to be more volatile than the overall market.

In the meantime, central banks are looking to cut interest rates later this year. The data increasingly suggests that will be later rather than sooner.

A slow pace of rate cuts indicates a relatively strong economy. In contrast, fast rate cuts indicate that there’s an issue in the economy that needs to be addressed immediately.

So while the market may pull back in the coming weeks, we’re on track for better longer-term moves higher this year.

 

To view the full analysis, click here.