Author: Andrew Packer

Cryptocurrencies

Simply Bitcoin Unfiltered: You Simply Haven’t Done the Work

Posted on by Andrew Packer

The cryptocurrency space is a dead market right now. The enthusiasm of 2020 and 2021 wore off with last year’s price decline. And to make matters worse, the bankruptcy of several cryptocurrency brokers and lenders has brought added pain.

However, this space has had its ups and downs before. The cycles are bigger than in traditional markets like stocks and bonds. So those who buy during a down market may be richly rewarded.

Investors buying during a crypto winter will likely want to start with bitcoin. It’s the largest cryptocurrency by market cap. And it solves the problem of storing value in the digital era.

Bitcoin can be understood as a network of users. Part of the price value of bitcoin is derived from the number of users. But that’s not the only factor.

Understanding the full nuance of bitcoin can fill entire books. And it’s different than other projects like Ethereum which are designed to fulfill a different role for digital transfers.

What does matter for investors right now is that they should own their own bitcoin (and any other cryptocurrencies).

While taking self-custody of an asset can be new and intimidating at first, it can avoid leaving those assets on a centralized exchange. That avoids a partial or total loss should such an exchange fail.

 

To read the full analysis, click here.           

Passive Income

Dividend Growth Investor: Keeping Investing Fees Low Matters

Posted on by Andrew Packer

Investors have to deal with significant uncertainties, as investing is largely an exercise in predicting an unknown future. That can lead to big problems for investors who bet heavily on a potential outcome that doesn’t come to pass.

Fortunately, there are a few factors that investors can control. And one of the biggest that can impact a portfolio’s value over time is keeping fees to a minimum. The difference can amount to hundreds of thousands of dollars over time.

The reason is simple. The more fees you pay per year, the more of a drag you have on your performance. Wealthy investors may not matter, which is why they pay hedge funds “2 and 20” to manage their money. Every year, they shell out 2 percent off the top… and 20 percent of any profits the fund makes.

Yet most hedge funds on average don’t outperform the market. And most don’t even hedge, so they often get into trouble when a leveraged bet doesn’t play out.

Fortunately for everyday investors, fees are coming down. That’s making it easier to avoid the hefty drag on investment performance. And some index funds have such low fees that investors can earn just about the market’s return over time with little risk of any one position blowing up a portfolio.

Investors would be wise to look at the fees they’re paying on funds, including those in their 401(k) plans.

 

To read the full analysis, click here.

Stock market strategies

The Big Picture: Maria Vassalou on the Small-Cap Effect

Posted on by Andrew Packer

Smaller companies tend to grow faster than larger ones over time. The reasoning is that it’s easier for a company doing $1 million in business to double compared to a company doing $1 billion in annual revenue.

Yet even though investors know that there’s this outperformance, it hasn’t gone away. That reason may be due to several factors, such as the fact that small cap companies tend to be riskier, and that they don’t pay an income.

The data shows that the higher risk in small caps stems largely from the higher risk of default. In that event, an investor could lose their entire stake in an investment.

It’s also clear that when the economy is growing, smaller-cap growth plays will perform well. In a flat or down market, value companies, no matter their size, tend to be the stronger performers.

With a significant amount of today’s capital moving toward passive investing in larger stocks, there may be more opportunities for investors in small-cap stocks.

Even a modest allocation of 10 percent to smaller companies could lead to excess returns for a portfolio that’s largely geared towards generating market returns.

Small cap stocks may provide a worthwhile solution to investors looking to beat the market.

 

To read or listen to the full interview, click here.

Commodities

Kitco News: Massive U.S. Dollar Dump? BRICS to Launch New Currency Causing Tsunami of Inflation

Posted on by Andrew Packer

Most Americans overlook the fact that the U.S. dollar is the world’s reserve currency. That means it’s the currency of choice for global trade. In turn, there’s a strong demand for U.S. dollars.

Even though the dollar has weakened over time, it’s held up better against most other currencies. That’s made it a relative value, akin to being the best house on the block. However, with U.S. government debt rising rapidly, and interest rates rising too, other currencies may look more attractive.

That’s partly why many central banks around the world have been diversifying their reserves. That includes the reduction in dollar holdings, as well as an increase of other fiat currencies as well as gold.

Dollar demand in global trade has been declining in recent years. This trend has picked up in recent years, a process known as “dedollarization.” The U.S. dollar could even stop being the currency of choice for global trade in assets such as oil.

This is a trend, not something that will immediately change overnight. But the process is in motion, and there could be more inflation stateside if there’s less demand for U.S. dollars overseas.

Investors will want to own real assets if inflation is going to stay higher for longer. That includes precious metals, as well as real estate and quality stocks that can pass on higher costs to consumers.

 

To listen to the full interview, click here.

Stock market strategies

Game of Trades: This Warned the SP500 Bull Traps in 2008 and 2001

Posted on by Andrew Packer

It appears the economy is teetering on a recession… and yet it isn’t. At least quite yet. Corporate earnings have slowed. But the job market remains strong. Inflation has come down, but not as much as many would have hoped by well.

Expectations for a recession have been on the rise for over a year now. The peak for those expectations occurred in June 2022, and have since come back a bit.

Since then, markets have had some strong rallies, and recession fears have been declining. However, search trends for a recession suggest that all is not well.

Concerns about a recession rose in 2007 and peaked in early 2008. However, the economy did enter a recession, one of its steepest, in late 2008. Similar trends occurred in late 2019, well before the Covid panic in early 2020.

That suggests that a recession could be in the works later this year.

Another indicator is the unemployment rate. Typically, the job market reaches its full capacity near the peak of a bull cycle. The job market of the past few years has had some big gyrations, but we’re back near historic lows for unemployment.

In short, the signs of a recession are strong. So investors may want to scale back on their stock investments following the rally since the start of the year.

 

To watch the full video, click here.

Cryptocurrencies

Bitcoin Magazine: Recalling the Bitcoin Exchange Failure That Was Much Bigger Than FTX

Posted on by Andrew Packer

The cryptocurrency market attracted millions of new investors during the last bull run. Many parked their capital in centralized exchanges, similar to exchanges where investors hold other assets like stocks or bonds.

Some of those exchanges faced liquidity problems during last year’s outflows. And FTX, one of the largest of them, appears to have been the peak of the crisis… for now. However, it’s not the only exchange to have failed.

Nor is it the largest in terms of impacting the crypto space as a whole. Nine years have now passed since crypto exchange Mt. Gox imploded. The exchange was handling as much as 70 percent of all global bitcoin trades at the time.

The platform experienced a series of hacks and management problems, leading to its collapse in February 2014.

At the time, customers lost over 800,000 bitcoin – a massive amount considering there will only ever be 21 million.

As a percentage of the crypto market, there will likely be now bigger failure than the Mt. Gox collapse. However, the issues were fundamentally the same as the FTX collapse. Investors put too much trust into a centralized institution.

Cryptocurrencies were designed to be decentralized. And the collapse of lending and staking platforms over the past year has driven the point home – in many cases painfully.

 

To read the full article, click here.

Income investing

Sure Dividend: 2 Safe Dividend Stocks For The Next Market Pullback

Posted on by Andrew Packer

Markets continue to face the impact of rising interest rates. 2022 saw both stocks and bonds take a dive as the Federal Reserve raised rates at their most aggressive level in over 40 years.

Inflation remains far from over. But with the Fed slowing its rate of interest rate increases, things look clear. Chances are, however, we’ll see another market pullback before we truly get an all-clear signal. That’s especially true with rising skepticism in the markets today.

Investors looking for protection in this market can find a safe haven with dividend stocks. However, they’ll want to find companies that tend to be immune from changes in the economy. That narrows the field considerably.

One area is in the utility space. It’s a highly regulated part of the market. So that leaves little room for growth. However, it tends to mean consistent, if moderate, increases in earnings over time. And that tends to make for a company that can pay out a steady, and slightly-growing, dividend.

NextEra Energy (NEE) is a utility that could offer some growth as well. It operates in an area with rapid population growth. And over the past few years, it’s been one of the best performers in the utility space. That doesn’t look to change anytime soon.

 

To learn more about the other safe dividend play in the next market pullback, click here.

Private equity

Bigger Pockets: How to Start a Real Estate Portfolio with Just $10K

Posted on by Andrew Packer

For most Americans, the biggest source of wealth in their lifetime comes from the equity built up in their home. And for many wealthy investors, no matter where they build their wealth, much of it tends to end up in real estate.

However, there tend to be sizeable barriers to entry. It takes a considerable amount of money to make a down payment on a property. Fortunately, that doesn’t need to be an impediment to get started investing in real estate.

Conventional real estate investing involves putting down 20 percent of the purchase price. With the average home valued over $350,000, investors would need nearly $70,000 to get started.

However, there are ways to get started with far less, even no money down. But an investor with some cash at the table, even $10,000 has a surprising number of options.

One strategy is to bring in a partner. While a partner may bring in most of the money for a deal, and will also get a substantial amount of the value of the property, it can be a simple way to get started. And the profits from a partnership deal can be rolled into a new deal in time.

Another strategy is house hacking. It involves buying a home, then renting out individual rooms, a guest house or the like. This strategy can be used with first-time homebuyers, which typically require less money down.

 

To hear the full list of ways to get started investing in real estate with little or no money, click here.

Stock market

A Wealth of Common Sense: Does Long-Term Investing Work Outside of the United States?

Posted on by Andrew Packer

While investing with the long term in mind can be volatile, it does offer substantial benefits for investors who follow through and stick with it. However, that performance is generally viewed through the lens of investors based in the United States.

That’s because the U.S. has built up its capital markets substantially. That’s made it possible to inexpensively invest in a market index. That allows investors to earn the return of the overall stock market over time.

However, this may suffer from a survivorship bias. As some companies decline or even go bankrupt, they’re replaced from the index with younger, faster-growing ones.

Investors in individual stocks may suffer – or benefit – from owning the biggest losers or winners. But index investors continue to earn a fairly consistent return over time.

Does this trend play out internationally? The latest data shows that, generally, long-term investing in foreign markets can lead to good returns. Overall, those returns are a bit lower, and some countries have had some big wipeouts along the way.

However, it’s clear that investors who look for bargains in the global market outside the U.S. should fare well if they stick with a long-term strategy. Given that many international markets have lower valuations on average, there could even be a relative outperformance in the next few years.

 

To read the full report, click here.

Stock market

ValueWalk: Stock Investing Risk Is Variable, Not Constant

Posted on by Andrew Packer

Investors tend to think of the stock market as having some risk, at least over the short term. But investors also know that it’s the asset class that produces the best returns over time.

However, to average those returns over time, there’s a lot of variability. Some years see massive returns for stocks. Other years see declines. And just as prices can fluctuate wildly, so too can market risk.

Buy and hold investors acquire stocks – shares of companies really – with the long term in mind. It’s somewhat based on the view that companies will improve their performance over time.

But investor expectations can also play a role in how asset prices change. That can either boost or depress a potential investment, which impacts its future returns.

Investments are less risky when market participants are generally depressed. And they can be riskier when investors throw caution to the wind and are willing to pay a premium for companies with little more than a story behind them.

This throws the concept of the efficient market theory on its head. Markets can’t always price everything in perfectly. If they did, we wouldn’t have extreme bargains – or get extremely overpriced stocks at other times.

Overall, market valuation will always have some degree of subjective views weighing on prices. Recognizing when markets are being irrational and offering better bargains can make it less risky to be an investor.

 

To read the full analysis, click here.