Wealth Building Strategies

Wealth Building Strategies

Is The Fabulous Boom Complete?

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Posted by Bob Hoye - Institutional Advisors

on Friday, 23 March 2018 11:45

Screenshot 2018-03-23 11.38.26


Guys at the Fed still think that crude oil prices going up is bad for the stock market. Obviously, there is still little regard for empiricism at the Fed. The stock market goes up with crude and then it goes down when crude goes down. The establishment has a similar problem in thinking that rising interest rates are bad. No, short-dated rates, such as T- Bills, increasing confirm that the boom is on. Reversing and turning down indicates the boom is over.

Since the first of February, the Bill-rate has jumped from 1.40% to 1.77%.

Then there are solar cells that generate electricity from raindrops rolling down the matrix. Could be exciting in Vancouver, which is the city by the rainforest. The way we locals tell the weather is straightforward. If you can see the mountains, you know it is going to rain. If you can’t see them, you know it is raining.

And then if it rains after dark – solar cells would work! The presence of “Goldilocks” is noted.

That meteorology staffers are using super computers to mine cryptocurrencies may be as sound as their forecasts that the Earth is going to fry.

Stock Markets

On the bigger picture, financial markets have been enjoying a fabulous boom. Is it complete?

Our concern is that when it expires, the recession will start virtually with the bear market. During the usual cycle the stock market peaks some 9 to 12 months before the economy does. At the end of great financial bubbles, the record has been that the recession starts virtually as speculation blows out and collapses.

We used this in 2007 when the S&P peaked in October and the recession started in that fateful December. Fateful, because that was the month that Harvard economist, Greg Mankiw, boasted that nothing could go wrong. The Fed had a “dream team” of economists. Fateful, because it was the start of the worst contraction since the 1930s.

Our October 4th Pivot outlined that even the DJIA would be “bubbled”, which was a bold call. Also outlined was that there were previous examples of outstanding speculations completing in the December-January window. The Bitcoin phenomenon peaked in the middle of December and seems to be following the path following the climax of previous bubbles such as with gold and silver in January 1980, or the Nikkei in December 1989.

Another point was that the senior indexes would likely peak somewhat after the feverish speculations did. The high for the S&P was set on January 26th, which was also the high for the NYSE Comp (NYA).

Following the initial hit, the market was likely to churn around, building a base for a rally into May-June.

So far, so good, but to be prudent it is best to look to the threats that accompany magnificent frenzies. The real threat is that the markets have been hyper. The “threats” from credit markets or industrial commodities are actually catalysts.

Any change in the credit markets could place some big accounts offside. As with Bear Stearns in June 2007, Clarence Hatry in the summer of 1929 and Jay Cooke (“a savior of the nation”) in late September 1873. A decline in industrial commodities would be a negative.

As we have been noting, credit markets could enjoy some seasonal “sunshine” at around May. When financial conditions are speculative () there can be a turn to adversity later in the year (??).




E-MAIL bhoye.institutionaladvisors@telus.net

WEBSITE: www.institutionaladvisors.com 


Wealth Building Strategies

What Are the 15 Most Important Investing Years?

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Posted by Andrew Ruhland

on Monday, 12 March 2018 10:35

Andrew details some of the challenges faced by investors as they enter the MOST important phase of their planning for end-of-work and retirement.



Wealth Building Strategies

Game Plan for Late-Cycle Investing

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Posted by Financial Sense Advisors, Inc

on Thursday, 08 March 2018 06:01

The three key themes in the current market environment - a rise in volatility, inflation, and investor sentiment - are characteristics of a business cycle in its later stages. Taking Warren Buffet's rule #2 "Don't Lose Money" to heart, they make a comprehensive case for a late-cycle investing game plan which includes shifting away from stocks towards cash, % bearing assets and commodities and commodity-related stocks. - Robert Zurrer for Money Talks

Theme # 1 – Rising Volatility

Investors have been spoiled over the last two years with record low levels of volatility in virtually every asset class, causing some investors entering 2018 to throw caution to the wind as euphoric levels of greed crept into the market. The title to our quarterly newsletter was "Records Were Made to Be Broken" and the recent market decline has ended some of those records already. Using S&P 500 data going back to the Great Depression, the US stock market set a new record of going 311 days without a 3% decline and 404 days without a 5% decline. We are unlikely to repeat these feats any time soon as we believe investors should anticipate a more volatile environment going forward as we transition through a major turning point in global monetary policy.

In the aftermath of the Great Recession of 2007-2009, we saw central banks respond with unprecedented stimulus using zero-interest-rate-policy (ZIRP) and quantitative easing (QE) to expand their balance sheets to unimaginable levels. The collective result of these actions was an end to the Great Recession and the beginning of new liquidity-fueled economic expansions and bull markets around the world.

The global liquidity tide of easy money began to slow down first with the US Fed ending its QE program in 2014, eventually raising interest rates in 2015 for the first time since 2006. Along with a steady increase in rates, the Fed is also on track to shrink its balance sheet to the tune of an estimated $420 billion this year and $600 billion next year. Though President Trump has enacted a stimulative tax cut, as Dave Rosenberg recently pointed out (Lunch with Dave, 12/28/17), estimates project $140 billion in stimulus for economy-wide earnings this year with additional gains of $80 billion next year—a small offset to the liquidity drain from monetary policy.

Further adding to the monetary liquidity drain will be the European Central Bank (ECB), which is slated to end its QE program later this year. According to Wells Fargo, the combined purchases of the world’s two biggest central banks—the Fed and ECB—will turn negative beginning this summer and only accelerate in the second half of the year.

02Source: Advisors Perspective

Furthermore, when we look at the annual growth rate of the top seven central banks' balance sheets, we see that it will likely turn negative in 2019 for the first time since 2015. If you can recall, 2015 into 2016 was a very tumultuous period with back-to-back double digit declines and fears over a major market top in the works.

global qe negative

For the better part of the last decade stock prices and central bank balance sheets have been joined at the hip so anything to upset the apple cart should not be dismissed. As the global liquidity tide starts to go out over the next year, we are likely to see who has been swimming naked (as Warren Buffett famously remarked). This should also add to further volatility, a common characteristic seen in the later stages of the business cycle.

Theme # 2 – Rising Inflation



Wealth Building Strategies

The World's Cobalt Supply Is in Jeopardy

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Posted by Frank Holmes - US Global Investors

on Wednesday, 28 February 2018 09:13

Cobalt has soared 180 percent in the past 3 years, driven by demand and a increasing absence of supply. There is lots of cobalt to be mined though and Apple has embarked on a program to buy directly from miners. With an imminent 8 bull market in commodities coming (Jack Crooks: The Next Big 8 Year Bull Market) Frank Holmes outlines the opportunities and describes one of the companies Apple is in negotion with - Robert Zurrer for Money Talks 

COMM-cobalt-produced-globally-batteries-power-consumer-electronics-electric-vehicles-02232017Disney’s Black Panther is in theaters right now, breaking all kinds of box office records and wowing audiences. The film features a fictional, highly-advanced African country known as Wakanda, whose vast wealth and prosperity are derived almost exclusively from the mining of a rare, fantastical metal called vibranium.

In its own colorful way, Black Panther does an excellent job dramatizing mining’s important role in supplying the world with much-needed raw materials. Vibranium is the basis for everything in the film, from the title character’s flashy superhero suit to Wakanda’s otherworldly infrastructure and vehicles, to its futuristic medicine and weaponry.

Like Wakanda, the real Africa is rich in minerals and metals, many of them extremely valuable. Think platinum and palladium in South Africa, diamonds in Botswana, copper in Zambia and cobalt in the Democratic Republic of the Congo.

Unfortunately, many African countries have not been managed as well as the one depicted in the film. Corruption and fiscal instability, coupled with inconsistencies in taxation and mining policies, make operating on the continent challenging for foreign producers, to say the least. Three years ago, I argued that Africa could mine its way to prosperity if only it addressed the hindrances that keep explorers and producers away. I stand by those words today.

Consider Congo, which produces roughly two-thirds of the world’s cobalt, an essential component in lithium-ion batteries. Lawmakers there recently voted to raise taxes and royalties on profits and metals produced. That includes cobalt, whose price has soared 180 percent in the past three years on red-hot electric vehicle (EV) demand. The country’s state-owned mining company, Gécamines SA, is also pushing the government to renationalize the entire mining industry.

CObalt prices continue to surge on electric car demand
click to enlarge

Admittedly, the fictional Wakanda appears to have a nationalized metals and mining sector. But because the country is so advanced and self-sustaining, it has no need for outside investment. That’s not the case with many real-life African nations, which are literally, in some cases, sitting on a gold mine.

Cobalt Supply Shortage Could Boost Prices Even More



Wealth Building Strategies

Benjamin Graham's Timeless Advice

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Posted by GuruFocus.com

on Thursday, 22 February 2018 06:00

Born in 1894, Graham, author of the Intelligent Investor worked in managerial economics and investing which led to value investing within mutual funds, hedge funds, diversified holding companies. Throughout his career, Graham had many notable disciples who went on to receive substantial success in the world of investment, including Warren Buffett who described him as "the most influential person in his life after my own father" - Robert Zurrer for Money Talks

bjOf all the well-known investors out there today, none has a reputation that comes anywhere near that of Benjamin Graham. Even though this godfather of investing has been dead for many years, he still shapes the investment ideas and styles of thousands of investors alive today thanks to his timeless advice.

Indeed, despite the fact that the financial world has changed tremendously since Graham’s death, his advice is still highly relevant as, as he once said, “The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.”

Below I’ve gathered some more quotes from Graham, which provide an insight into his way of thinking, and when taken together, offer a sort of guide for investors of all experiences on how to invest and think about the markets. I guarantee you’ll take something away from the below. Even if you’ve been an investor for many decades, it’s always sensible to remind yourself of the principles of sound investment, so you don’t stray into bad habits.

Benjamin Graham's timeless advice 

“The individual investor should act consistently as an investor and not as a speculator. This means... that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.”

“The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and



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