Author: Andrew Packer

Cryptocurrencies

Bitcoin Magazine: If We’re Not Careful, The AI Revolution Could Become the ‘Great Homogenization’

Posted on by Andrew Packer

Artificial intelligence (AI) has become the biggest investment trend of the past few years. While some see it on par with the hype over the internet, AI is growing at a faster pace. And just like the internet revolution, it will change how we live and work.

Some even fear this new technology. They see AI as something that could backfire, and turn against it human creators.

However, like any other technology, AI is simply a tool. Whether it improves lives or makes them worse depends on the user.

Plus, today’s much-hyped AI isn’t necessarily as intelligent as it seems. AI tools are able to look through databases of information to provide responses. In a way, that’s more like communicating with a parrot than the digital equivalent of a human mind.

That’s because today’s AI tools use probability engines and rule-based algorithms to answer questions. It’s also why there are plenty of examples of the latest versions of AI coming up with unusual responses to unusual questions.

What AI can do from here is move to a language user interface, allowing technologies to respond with voice commands, rather than manual input. That’s similar to having an in-person conversation versus a string of letters or emails. The efficiency of transmitting data will speed up.

The real question is how this tool could be used to impact language and therefore thought. And that’s where the real risk lies.

 

To read the full analysis on the AI opportunity, click here.

Income investing

BiggerPockets: How I Make $1 Million in Annual Cash Flow After Less Than 10 Years of Investing

Posted on by Andrew Packer

Investing takes time. That’s a concept that can get overlooked in a bull market when prices soar higher by the day. But with diligence, hard work, and patience, investing in nearly any asset class can pay off well.

For most Americans, their home becomes their largest source of wealth. Further investments in real estate can make a big difference in long-term returns.

That’s because real estate often involves borrowing most of the money needed to make a purchase, and paying it off over time. While many are fearful of debt, the kind of debt used to buy cash-flowing real estate can come in handy.

For real estate, as with investing in stocks, the specific opportunities matter. As the old adage goes, location, location, location.

Some local markets may be a great investment opportunity right now. Others might be overpriced or incapable of seeing big gains moving forward.

The biggest hurdle to real estate investing is capital. Getting enough money for a down payment on a property may mean having to start small.

Investors can then flip properties for larger deals over time. It could also mean refinancing existing properties or using home equity lines of credit to obtain more income.

 

To look at all the ways you can grow your wealth and cash flow through real estate, click here.

Stock market strategies

Tastylive: The Last Time Markets Looked Like This, Volatility SPIKED

Posted on by Andrew Packer

Market volatility has dropped to its lowest level since the start of the pandemic. Generally, volatility refers to how much investors and traders expect the market to move daily.

When the market is moving up or down 1-2 percent daily, volatility is high. When stocks trade closer to half a percent daily or less, volatility is low. Over time, market volatility falls into an average range. Currently, we’re dropping below that average range.

That could actually prove a warning sign. When volatility get low, it tends to spike higher It may indicate complacence by investors. Or that the market range was calming down ahead of a big reversal trend.

Part of the move lower could just be an adjustment from 2022. During last year’s bear market, volatility stayed over 20 for 91 percent of the time. Historically, the volatility index averages 17-20, so this represented a prolonged period of elevated volatility.

Since 1990, there have been 40 periods where volatility has been low for one month or longer. On average, these periods last 146 days, or about five months. When the trend ends, however, volatility tends to spike higher.

Overall, volatility is low most of the time. When volatility spikes higher, it’s a better time to make more options trades. And when it’s at the lower end of the range, investors should scale back.

 

To watch the full analysis, click here.

Income investing

Dividend Growth Investor: Five Dividend Growth Companies Increasing Distributions to Shareholders

Posted on by Andrew Packer

As the market continues to rally this year, investors continue to remain bullish. One confirmation of that move is the fact that companies continue to increase their dividend payouts.

Unlike earnings, which can be subject to various accounting changes, a company needs cash on hand to make a dividend payment. And companies that can increase those payments over time, say for at least 10 consecutive years, tend to be fantastic long-term performers for investors.

Some of these companies play to long-term trends in the economy, such as the aging of America. As the average age increases, spending on healthcare-related services tends to rise.

That can be seen with the dividend boost by UnitedHealth Group Incorporated (UNH). The diversified healthcare company just hiked its quarterly dividend to $1.88 per share, an increase of about 14 percent.

While that’s a big jump, it’s actually a bit slower than their 10-year annualized rate of 23 percent dividend growth. Fortunately for investors, UNH has managed to increase its dividend for 14 years in a row.

While the current dividend yield is about 1.5 percent at current prices, continued increases by the low double-digits are likely to occur in the years ahead.

If the dividend yield stays about the same, that translates to a continued share price increase. That’s good news for investors in dividend growth stocks, who often see excellent long-term gains as well.

 

To view the full list of recent dividend growth stocks, click here.

Economy

FX Evolution: Stocks Always Do This… FOMC The Catalyst?

Posted on by Andrew Packer

The Federal Reserve has finally paused its policy of interest rate hikes. However, the central bank came out with a hawkish policy statement. Specifically, the bank indicated that there may be two more rate hikes this year.

The central bank now expects interest rates to peak at 5.6 percent this year. And that there won’t be any rate cuts this year. Markets had been expecting a shift lower by the end of the year.

While the market sold off on the news on Wednesday, it quickly shifted back to close the day flat. That’s because traders viewed the potential for further rate hikes with skepticism.

However, there’s some precedent. Australia’s and Canada’s central banks have raised interest rates after pausing earlier in the year.

Overall, it looks like there may be more downside than upside in markets in the coming months. Stocks look overbought, and could pull back. The S&P 500 recently had five straight days closing over its 50-day moving average, a new record.

Given the Fed meeting and as the inflation data on Tuesday, stocks were at their most hedged for all of 2023. With those trades unwinding, markets may see bigger moves in the coming weeks, and likely to the downside.

Investors should remain cautious in the months ahead, and look for a pullback playing out in the weeks to come.

 

To watch the full analysis, click here.

Cryptocurrencies

DataDrivenInvestor: When Will the Bear Market End? Macro 101 for Crypto Investors

Posted on by Andrew Packer

The last bull market in cryptocurrencies hit amid a perfect storm. The pandemic shut down many communal activities. Many were given stimulus checks. But markets remained open. That create a surge in traders across all financial assets, just as a crypto rally was getting underway.

The end result? A massive flood of first-time investors. They poured into everything, but many small cryptos soared as influencers were able to direct some capital into these small projects.

However, the party didn’t last long. Rising inflation led to the start of a rate hike cycle. And the crypto market hit its mid-cycle peak. But, once all the money that was going to flood into crypto had gone in, there was nowhere to go but down.

Looking at the flip side, investors today should be looking at when the current bear market for crypto will end. It’s hard to tell. There’s still massive regulatory uncertainty. And it isn’t being helped by a hostile SEC and other regulatory agencies.

But, for those who look at sound risk management, such as diversification and small position sizes, it may be possible to win out in this space yet again. It will also mean taking a long-term view. And positioning ahead of the next bitcoin halving in 2024.

That can help investors be in the right place at the right time. And not blow up their crypto portfolios along the way.

 

To read the full analysis, click here.

Stock market strategies

Tastylive: Time to Trade Less?

Posted on by Andrew Packer

The market has been fairly calm so far this year. Aside from a brief spike in volatility as the second, third, and fourth-largest bank failures in U.S. history occurred. Overall, it’s been a much calmer ride compared to 2022.

That may sound like good news… but for traders, it’s actually bad news. When markets don’t have big daily swings, there’s lower volatility. And that means lower option premiums to trade.

The volatility index, or VIX, got back under 15. Typically, the index averages around 20, and can spike to 40 or higher in a crisis. The read under 15 is the lowest since February 2020, right before the Covid crash.

However, about 30 percent of all trading days since 2000 have been lower. So we’re not quite back to historic lows yet.

Some see low volatility as a sign that the market is getting too quiet. And that volatility could spike higher. One measure of risk during these periods, known as the skew, suggests that could be the case.

When volatility is low at 15, a move to 25 is a 60 percent move higher. And such a move could occur in just a day or two depending on market events.

So traders may want to scale back on making trades, or move towards options trades that take advantage of low premiums today.

 

To watch the full video, click here.

Income investing

GenExDividendInvestor: Retirement with Dividends vs Without

Posted on by Andrew Packer

While some investors gravitate towards dividend stocks for their long-term appreciation potential, others may look for immediate income. But dividend stocks can also help to construct a portfolio for future retirement.

From a financial standpoint, retirement on one level means the loss of a major source of income. Even Social Security payments won’t fully cover that income. So replacing that income with dividend stocks, particularly ones that pay growing dividends, can provide a substantial benefit.

The trick? Start by investing in high-quality companies as early as your 40s. That ensures that you have time for the power of dividend growth to compound before it’s needed.

Ideally, that would include utilizing a retirement account, such as an IRA or Roth IRA. A Roth uses income that’s been taxed now, with the future gains being tax-free. That’s a better account for those investing in stocks for the long term.

Investors can look at dividend aristocrats and kings to build a portfolio. These are companies that have raised their dividends for at least 25 and 50 years, respectively. And it’s important to buy a few different companies across different industries for diversification.

Dividends that aren’t needed right away can be reinvested in the same stock, or can be used to buy stakes in new positions. But income from retirement accounts will eventually have to be used for distributions once the withdrawal age is hit.

 

To watch the full video, click here.

Economy

IBKR Podcasts: What? No Recession?

Posted on by Andrew Packer

Investors have expected a recession for nearly a year now. The Federal Reserve has been raising interest rates since last March. And in 15 months, they’ve managed to raise rates at their fastest rate since the early 1980s.

Meanwhile, the banking sector has shown the strain of that intense pace of hikes. Regional banks that invested in U.S. Treasuries had a duration mismatch, and faced losses as customers pulled deposits. Yet signs suggest that fears of a recession are overblown.

While consumer sentiment is declining, other economic indicators may suggest a potential “soft landing” for the economy after all.

Markets expect that the Federal Reserve will hold interest rates steady from here. And that interest rates will likely decline if signs point to a recession. But if there is no sign of a recession, then interest rates may stay at the current level through the end of the year.

This view may explain why the market rally of 2023 has slowed. Volatility has declined to its lowest level in over three years.

However, this economic cycle has been dominated by the pandemic. The massive stimulus that started in 2020 to keep the economy afloat continued for nearly two years. We’re now just entering the first year with interest rates over zero percent to bring down inflation.

So while the market returns for the year may slow from here, we may not get a recession. And that could mean interest rates stay higher for longer.

 

To listen to the full podcast, click here.

Stock market

FX Evolution: Nobody Is Talking About This…

Posted on by Andrew Packer

The S&P 500 has popped out of bear market territory, with a 20 percent rise off of its lows this week. However, shares moved back down on hitting that level. Stocks now stand at one of their longest bear markets since 1948.

This potential bear market could fully end in the coming weeks, as other sectors outside of tech are starting to move higher. A continued rally over 4,200 on the S&P 500 will confirm the new bull market.

That’s amid concerns of a slowing economy. Even with rising interest rates, the labor market remains hot. Even revised numbers from prior months show considerable growth.

But investors generally remain a bit on the cautious side. That’s seen with sentiment, which isn’t hugely bullish. And investors continue to show strong demand for Treasuries, even after the debt ceiling has been resolved.

Meanwhile, consumer discretionary stocks are trading at their widest spreads compared to the overall market. That’s usually a sign of danger in the market, and a sign that the S&P 500 may peak around 4,300.

Finally, we’re in a pre-election year. Historically, this year is one of the poorer performers on average. And stocks tend to see a selloff in the summer months that goes into the fall. So investors may want to take some profits here, with stocks at their highs for 2023, ahead of a possible pullback.

 

To watch the full video, click here.