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Wealth Building Strategies

Build Your Economic Storm Shelter Now

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Posted by John Mauldin - Mauldin Economics

on Monday, 25 September 2017 05:45

Local Mess
The Uneven Distribution of Pension Problems
Personal Storm Planning
Change Your Scenery
Chicago, Lisbon, Denver, Lugano, and Hong Kong

If you’re idly conversing with someone you don’t know well, the weather is usually a safe topic. It affects everyone in some way, so it’s a shared experience – but there’s something else, too. The weather is no one’s fault. It is what it is, so you need not worry that the other person will blame you for it. None of us can control the weather. And lately, the weather has been interesting, unless you had to live through its more extreme manifestations. Then it’s been hell. Before this week, I would’ve said that Harvey and Irma wrought devastation in Texas and Florida. But then Maria thrashed Puerto Rico and took devastation to a whole new level. I have a lot of friends who live in Puerto Rico, and I’m not sure how things are going to go for them over the next few months.

We can prepare for storms when we know they’re coming, but we can’t stop them in their tracks or change their path. That’s true for both hurricanes and the public pension problem I wrote about last week. Where pensions are concerned, we have the financial equivalents of weather satellites and hurricane hunter aircraft feeding us detailed data. We know the barometer is dropping fast. The eyewall is forming. But we can’t do much about the growing storm, except get out of the way.

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Problem is, the coming pension and unfunded government liabilities storm is so big that many of us simply can’t get out of the way, at least not without great difficulty. This holds true not just for the US but for almost all of the developed world.



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Wealth Building Strategies

Contrarian Investing: Make Money the Smart Way

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Posted by Richa Argwal

on Thursday, 21 September 2017 05:54

 

  • shutterstock 162221975-1024x819-2The best thing that happens to us is when a great company gets into temporary trouble... We want to buy them when they're on the operating table. - Warren Buffett

 

A quick history lesson...

In 1963, the world's largest credit card company, American Express, was involved in the 'salad oil scandal'.

AmEx had just created a warehousing division to make loans to businesses using inventory as collateral.

A commodities trader (and known swindler) named Anthony 'Tino' De Angelis saw an opening for a massive fraud.

He began stockpiling his warehouses with tanks of soybean oil. He then used warehouse certificates from American Express as collateral to borrow heavily from American Express and as many as fifty other lenders.

When American Express sent inspectors to check De Angelis' inventory, they did not notice that - except for the thin layer of oil floating on top - the tanks were filled with water.

When the fraud was finally exposed, AmEx stock crashed more than 40%. The eventual damage to the company would be US$175 million.



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Wealth Building Strategies

Advice from the trader who made $1+ billion in 1929...

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Posted by Simon Black - Sovereign Man

on Tuesday, 19 September 2017 06:10

Co-authored by Simon Black & Tim Price via SoverignMan 

In the late spring of 1720, Sir Isaac Newton decided to sell his stocks. 

Newton had been an investor in the South Sea Company, a famous enterprise which effectively commanded a trading monopoly with South America. 

The investment had already made Newton a lot of money, he was up more than 100% in a very short time. 

In fact, investors were clamoring to buy up the South Sea Company’s stock, and the share price kept climbing. And climbing. 

Newton sensed that the market was getting overheated. It no longer made sense to him. So he sold. 

There was only one problem: the share price of the South Sea Company kept climbing. 

All of Newton’s friends were getting rich. So, against his better judgement, Newton went back in, repurchasing shares at more than three times the price of his original stake. 

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The market then collapsed, and he lost virtually all his life savings. 

The experience is said to have given rise to his bemused response: 



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Wealth Building Strategies

Investment Advice for My Children and Grandchildren

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Posted by Axel Merk - Merk Investments LLC

on Wednesday, 13 September 2017 06:42

gesellschaft-300x198Okay, so I don’t have grandchildren yet, but I want to increase the odds you read beyond the title if you are old enough to have grandchildren. Should the investment advice we give to someone young truly be different from that given to someone old? And given where asset prices are, is it responsible to tell anyone to pile into the markets? Here are my thoughts on the topic, hopefully applicable not just for my children:

Hedge fund manager Ray Dalio likes to say he chose the first stock he ever bought because it cost less than $5 a share, given that his savings from caddying at the time were, well, five bucks. That story is a great icebreaker but also highlights with what’s wrong with our industry: when we think about investing, we immediately think about the stock market. Let’s take a step back.

My oldest recently returned back to college having completed a summer job. Thanks to our “Golden College Fund” (our kids’ college savings is in physical gold; please see this 2014 Forbes article for details), our son in the fortunate position that he doesn’t have to pay off college debt with his earnings. If he did, paying off college debt – like any other debt – is a choice of whether one expects a higher rate of return with one’s investments (after tax) than if one were to pay off the debt. It’s also a choice of risk tolerance, as a debt-free person has much less to worry about. 



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Wealth Building Strategies

Deflation and the Markets; are deflationary forces here to stay

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Posted by Sol Palha - Tactical Investor

on Friday, 08 September 2017 06:52

Machines are worshipped because they are beautiful and valued because they confer power; they are hated because they are hideous and loathed because they impose slavery. Bertrand Russell

Manufacturing output continues to improve, even though the number of manufacturing jobs in the U.S. continues to decline and this trend will not stop.  While some Jobs have gone overseas, the new trend suggests that automation has eliminated and will continue to eliminate a plethora of jobs.  As this trend is in the early phase, the momentum will continue to build in the years to come. 

Machines are faster, cheaper and don’t complain; at least not yet. So from a cost cutting and efficiency perspective, there is no reason to stick with humans.  This, in turn, will continue to fuel the wage deflation trend. Sal Guatieri an Economist at the Bank of Montreal in a report titled   “Wage Against the Machine,” states that automation is responsible for weak wage growth.

“It’s unlikely that insecurities from the Great Recession are still weighing, given high levels of consumer confidence,” he wrote. “However, automation could be a longer-lasting influence on worker anxieties and wages. If so, wages could remain low for a while, restraining inflation and interest rates.”

Guatieri goes on to state that “The defining feature of a job at risk from automation is repetition”.  This puts a lot of jobs at risk, many of which fall under the so-called highly skilled category today; for example, Accountants, Lawyers, Radiologists, X-Ray technician, etc.  

North American business order record number of robots 

In 2016, they order 35,000 robots, 10% more than in 2015.  But that is nothing compared to China, which ordered 69,000 robots in 2016, South Korea ordered 38,000 and Japan for its small size ordered 35,000 robots.  This proves that jobs are not going overseas but are being taken over by machines. Nothing will stop this trend; a trend in motion is unstoppable. 

The largest user of robots is the automotive sector; in North America, over 20,000 of the 35,000 robots went to the automotive sector. Once upon a time, over 80% of the work done in this sector was done by humans, but robots perform today over 80%. 

The total amount spent on robots in 2015 was $71 billion; experts project that this amount will surge to almost $135 billion by 2019.  The trend continues to gain traction.  Amazons purchase of whole foods and Lidl’s entry into the US market has triggered a grocery war, and automation is going to be one of the main ways to remain competitive in this industry.  Amazon already has a massive robot workforce; they use over 45,000 robots.  Sales of robots will triple from current levels by 2019

Robots 1

The number of robots sold in the US will jump by 300% over the next nine years, according to the ABI research. It’s simple math; more automation equates to fewer jobs. One industrial robot replaces about six jobs. For now, the automotive industry continues to lead the way, but as companies are pushed to become more competitive, we expect companies in every sector to embrace automation.  



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