Author: Andrew Packer

Cryptocurrencies

Simply Bitcoin: Bitcoin Will Decouple and Save Regular People

Posted on by Andrew Packer

Investing can be challenging for a variety of reasons. For lower or middle-class consumers, getting started can be a challenge.

It’s ideal to build up some savings before investing. And when those savings are taking a hit due to inflation, it can seem like being stuck on a treadmill. That’s why investors need a place where they can save without having to worry about a declining purchasing power.

Historically, precious metals have fulfilled that purpose. Gold and silver have tended to hold up well against inflation. They have worked well historically as savings.

Today, most wealthy have a number of assets that are designed to rise as the money supply expands and inflation takes off.

For the middle class, that often includes a residence. A home bought with a mortgage that’s paid off over 15 or 30 years tends to be far more valuable decades down the line.

But home prices can be impacted by trends like rising interest rates. With a more challenging environment for buyers, prices are likely to decline.

More recently, some have seen cryptocurrencies as a place to save. In the 13-year history of the space, there have been some excellent returns. But savers need to be wary.

With large-cap cryptos like Bitcoin down 70 percent from last year’s highs, it’s a volatile space. And staking a crypto for dividends has likewise been a challenge with the volatility in the space. Even with those challenges, it may still offer excellent long-term returns.

To watch the full video, click here.

Income investing

Bigger Pockets Money: Why “Just Keep Buying” is the Smartest, Simplest Way to Get Rich

Posted on by Andrew Packer

During the recent bull market phrases like “stocks only go up” became the norm. After a year of stocks largely going down, such sentiments have disappeared. But it’s not entirely incorrect. The phrase was being used by traders to buy on a down day and flip for profits on the next market rally day.

Over a long enough timeframe, stocks tend to rise. So those who structure their investment plan accordingly can benefit from bear markets.

For those still investing in the markets, time is on your side. And over a 20-, 30-, or 40-year period, it makes sense to keep buying stocks. That strategy can work when stocks are up or down.

One such way to do this is with dollar cost averaging. Most investors with a 401k plan already do this. They set aside the same amount of payday after payday, and that capital is invested into a variety of funds.

That strategy has historically performed better than trying to buy the dip. The problem with that strategy is that investors never know the bottom. Even if investors could know the bottom, a dollar cost averaging strategy would still provide excellent returns over time.

That’s especially true for those who wait for a bear market every few years. Most bear markets may unwind a year or two of gains. But they don’t fully unwind the prior rally.

To listen the full podcast, click here.

Economy

ColdFusion: How the 2008 Financial Crisis Still Affects You

Posted on by Andrew Packer

While markets are supposed to be forward looking, investors often get caught up making comparisons to the past. There’s also a recency bias, so that more recent problems take hold front and center.

The most recent crisis that investors compare today’s markets to is the 2008 meltdown. Driven by an overleveraged housing market fueled by easy money, today’s markets face different challenges. But many pains from 2008 still remain.

The destruction of demand from the housing bust led to a number of problems still impacting economies today. That can include everything from reduced housing demand over the last decade, to lower fertility rates.

Some even see the crisis as the death of the “real economy.” Instead, we had a push towards creating a “wealth effect.”

Simply put, by printing money and allowing assets like stock prices to rise, policymakers bailed out the wealthy. As their wealth rose, they felt able to spend more on goods and services. That in turn finally stimulated the economy.

But it came at a high cost. Money printing and low interest rates distorted the capital structure. And investors are still struggling today as a result.

Today’s rapidly-rising interest rates have created a challenge. But so far, the effects are still low relative to the lasting effects of the 2008 crisis. And policymakers have learned that they can simply print money for any problem. That lesson may not always hold true, and could lead to trouble when that changes.

To watch the full video, click here.

Stock market

Game of Trades: No SP500 Bottom Has Occurred Without This Signal

Posted on by Andrew Packer

The stock market had a solid run over the past few weeks. While October is historically a poor month for market performance, stocks beat the average this time. The Dow rallied 14 percent.

That was also enough to break the recent downtrend in stocks. Momentum trends are starting to show as bullish once again. While the trend has been broken, it may not fully clear, especially with interesting rates continuing to rise.

That’s a healthy sign. Another healthy sign is that credit spreads are coming off their elevated levels from earlier in the year. It’s a sign of trouble in the credit markets, when tend to bleed out to all other markets.

Credit spreads also have trouble when unemployment is rising. That’s because when more people lose their jobs, there’s less spending. Across the entire economy, that can cause trouble for many marginal businesses.

That’s why prior credit issues have popped up in the market in 2000, and 2008, and even early 2020.

With unemployment still low, it’s unlikely we’ll see credit market issues anytime soon. While scary, the credit market locking up tends to result in looser monetary policies. So it’s also another sign that interest rates have more room to rise.

That’s a further tailwind to the current market, suggesting that stocks may have put in a short-term bottom, even if the stock market has tried to front-run this week’s Fed meeting.

To watch the full video, click here.

Economy

Lead-Lag Live: The Recession Narrative Changes Again

Posted on by Andrew Packer

After two quarters of a declining GDP, the data for the third quarter showed a 2.6 percent annualized gain. That’s enough to suggest that the economy’s mild contraction in the first part of the year was hardly a recession.

That’s resulting in a change in narrative. While many still see a recession in 2023, it’s also possible that the current struggling economy may continue rather than get worse.

If that’s the case, then financial markets may not be in bad shape. A further decline may not be likely, especially as markets tend to move up over time. The market’s overall bullish bias may overcome the current bearish narrative.

Some see the need for markets to have a catalyst to move higher. However, history hasn’t always shown that to be the case. Bears and bulls alike are both trying to determine where things are in the market cycle.

With fewer bears in the market than bullish analysts, it’s easy for the bears to stand out. That’s especially true when the market has been selling off. But good news tends to sell well to investors.

Market conditions have caused forecasts to become more complex. And many indicators that have often led the market now have a shorter lead time. Some have even dropped to the level of noise.

Overall, changing times result in how market narratives can change. And right now, with the overall market looking bearish, things may fare better than expected going forward.

 

To listen to the full interview, click here.

 

Income investing

Dividend Growth Investor: Twelve Dividend Growth Stocks Rewarding Shareholders With Raises

Posted on by Andrew Packer

Dividend-focused investing tends to filter out considerable market noise from growth stories. Growth stocks are rapidly repricing for a slowing economy. That’s made dividend stocks relatively better performers this year.

That’s a trend likely to continue. It will best continue with dividend growth stocks. These are companies that reward shareholders with annual dividend increases. Recently, a dozen such companies have raised their payouts. With market uncertainty still high, that bodes well for long-term buyers now.

One such example of a dividend growth company now is Crown Castle (CCI). The company operates and leases cell towers and fiber solutions.

CCI operates as a real estate investment trust (REIT). So they pay out 90 percent of their earnings to shareholders. And thanks to automatic price increase clauses in contracts, those earnings are expected to grow.

The company just raised its dividend by 6.5 percent, to $1.565 per share quarterly. The company has been raising its dividends since 2014.

Over the past 5 years, the annualized growth rate of the dividend has hit 8.7 percent. That’s a higher growth rate than inflation over same time, even with today’s high rates.

For investors focused on growing cash payouts, dividend growth companies offer better prices amid this latest bear market. While there’s no certainty when this bear market will end, dividend growth companies will keep delivering increasing piles of cash.

To read the full list of 12 companies raising dividends now, click here.

Personal finance

What Happens Next: Building the Perfect Portfolio

Posted on by Andrew Packer

Many investors have focused on a 60-40 portfolio. That provides a mix of stocks and bonds. This method generally works well, as bonds tend to be steady payers. And they tend to move opposite stocks.

This year has been a major exception. Rapidly-rising interest rates have taken a toll on bonds. And as bond prices have dropped, yields have risen. That’s made bonds competitive with stocks, as higher yields and lower risk have enticed investors looking for safety from the bear market.

It’s clear investors need to design a better portfolio to deal with years where both stocks and bonds drop. That will help better balance risk and reward, while also increasing diversification.

There’s no single perfect portfolio. Individual risk assessments and needs will ensure that. However, there are ways to better improve one’s portfolio.

One way could be with the use of options. Those could be used to better manage risks. Tools like call options can play to a market upside with less capital than buying a stock. Or selling covered calls can be used to generate income off of a stock position.

Overall, asset returns will vary. Thinking about the positions in one’s portfolio, their overall volatility, and position sizing are key factors for reducing risk. They can go a long way towards perfecting a portfolio.

To listen to the full podcast, click here.

 

Economy

esInvests: Market Bottomed and Headed to Top in 6 Months

Posted on by Andrew Packer

While many fear a further market decline, there are several reasons why investors could expect to see a recovery from here.

First, markets have been scared down by higher interest rates. With the Fed likely closer to ending its rate hike cycle at this point, that big fear could end. Second, we’re seeing signs in the credit market that a limit may have been reached. That could lead to easing conditions in the early part of next year.

There’s a strong chance that an easing in monetary policy will occur as inflation runs higher than expected.

That’s the good news. Looking beyond that next stage however, the economy could be in a rough shape.

That’s because the speed and extent of the latest interest rate hikes will likely lead to prolonged trouble in the bond markets. And the housing market is already showing signs of trouble with mortgage rates back to 15-year highs.

Investors should look for a rally on a central bank pivot. And such a rally may even lead to new highs. But that could also lead to a bigger bust later. Especially if inflation remains high and central bankers have to continually pivot back and forth on interest rates.

Ultimately, high volatility will remain for some time. But the worst may be over in the markets for now.

To watch the full interview, click here.

Economy

A Wealth of Common Sense: Everyone Is Predicting a Recession But No one is Acting Like It (Yet)

Posted on by Andrew Packer

The US saw negative GDP growth in the first two quarters of 2022. Historically, that’s a sign of a recession. However, one hasn’t been declared yet. However, a number of pundits, politicians, and bankers expect one in 2023.

Their reasoning? The economic slowdown already underway. Rising interest rates. And an inverted yield curve. In fact, these predictions have been a regular feature of financial headlines for months.

Yet despite the overall statistics about the economy now, and these predictions… it doesn’t feel like a recession.

Stores are full. Air travel is robust. And even with higher gas and grocery prices, there’s still strong signs of consumer spending.

And even with ever-higher prices rising faster than inflation, Disney (DIS) parks are at capacity every day.

That’s at odds with the stock market being down so much compared to a year ago. Or the housing market starting to slow significantly.

One likely reason for this trend? Soaring savings during the pandemic. So even with a recession potentially already here, consumers are still drawing down excess cash. When that money runs out, we could truly see a slowdown that makes for an official recession.

And when that finally happens, we may find that the Fed has raised interest rates too far, too fast. That could lead to a sharp reversal in policy, which could send asset prices rising again, even as consumers feel the pinch.

To read the full analysis, click here.

Stock market

Meet Kevin: A Massive, Sudden Market U-Turn

Posted on by Andrew Packer

The stock market may be down for the year, but that move hasn’t occurred in a straight line. There have been some powerful rallies that have lasted for weeks, before the downtrend has resumed.

With some strong performance in recent weeks, many are starting to expect another downturn. With inflation high, interest rates still rising, and with corporate earnings starting to show a slowdown, it’s easy to see why markets may fall. The question is only by how much.

The Fed’s rapid interest rate hikes this year will likely lead to a sizeable drop. One investment bank has come out to say that the Fed has been “in a hurry.” Rates have risen so far, so fast, that mortgage rates have more than doubled in a year.

And as rates have risen, so have bond yields. As yields have risen, stock multiples have historically cut back. So as long as rates are going up, it’s likely there’s more pressure on stocks.

Investors should also be mindful of seasonal trends. For the months May through October, on average, the S&P 500 has delivered no real returns in the past 60 years. Nearly all of the cumulative returns in stocks occurs between November and April.

With the market about to enter into a period of seasonal strength on average, investors may expect the bear market to end in a U-turn. But with interest rates still rising, that trend may be broken.

 

To view the full analysis, including the fully bearish analysis, click here.