Wealth Building Strategies

Angst in America, Part 7: The Angst of the Millennial Generation

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Posted by John Mauldin -Thoughts From The Frontline

on Monday, 08 May 2017 13:41

170507 TFTF heroAre High Home Prices Turning American Millennials Into the New Serfs?
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“Being young and having no job remains stubbornly common. Wages for young people fortunate enough to get a job have gone down. Inflation-adjusted wages for young high school graduates were 11 percent higher in 2000 than they were more than a decade later, and inflation-adjusted wages of young college graduates (four years only) have fallen by more than 5 percent. Unemployment rates for young college graduates have been running for years now in the neighborhood of 10 percent and underemployment rates near 20 percent. The sorry truth is that a lot of young people are facing diminished job opportunities, even several years after the formal end of the recession in 2009, when the economy began to once again expand after a historic contraction.”



Wealth Building Strategies

Best Investment Practices

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Posted by Axel Merk - Merk Investments LLC

on Thursday, 04 May 2017 07:32

How does one construct a portfolio in an era of seemingly ever rising and highly correlated asset prices? Years of asset prices moving higher has changed both retail and institutional investors; it has changed the industry; and, in my humble opinion, those changes spell trouble. The prudent investor might want to take note to be prepared. 


I allege that for many, investing is no longer about prudent asset allocation, but about expressing themes. If you like green technology, you tilt your portfolio towards green energy. If you are socially conscious, there’s an ETF for that. I have no problem with anyone alloca



Wealth Building Strategies

Know When To Hold Your Winners

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Posted by Jon Markman's Pivotal Point

on Tuesday, 02 May 2017 07:43

Last week, as the Nasdaq Composite Index crossed 6,000 for the first time, Robert Shiller, a Nobel laureate economist, made the rounds in the financial press.

He’s worried. Valuations are historically high. A crash is coming, eventually, he argues.

With his carefully measured tone and impeccable academic pedigree —  he’s a professor at the Yale School of Management — Shiller is the perfect pundit.

Jesse Livermore, the tenacious trader immortalized in the 1923 investment classic Reminiscences of a Stock Operator, warned about pundits. He hated tips and claimed following them had lost him hundreds of thousands of dollars.

He learned to trust his own analysis. He learned to trust the power of trends and to ignore punditry.

Shiller’s concern is based on something called the Cyclically Adjusted Price-to-Earnings ratio, better known as the CAPE. It’s a valuation model that takes a conservative ten-year average of corporate earnings and divides by the comparable metric for price. And CAPE has reached levels not seen since 1929 and 2000, two dates that send shivers down most investors’ spines.

The rest of the economic story does not help the bulls’ case, either. Those periods were characterized by extremely high levels of Gross Domestic Product growth. In 2000, GDP growth was north of 4%. Last week, GDP was reported at a measly 0.7%.


Screen Shot 2017-05-02 at 7.14.46 AMIt’s not the first time in recent years that the CAPE has been high. The ratio pushed near current levels in 1998. At the time, the dotcom era was in full stride. In the ensuing two years, the most speculative stocks became even more dear as prices sprinted higher. For example, adjusted for splits, Amazon (AMZN) zoomed from less than $5 in 1998 to $113 in 2000.

Something like that could happen again. “We’re in an oddball enough mood,” Shiller admits.

The economist explains that President Trump is a game-changing figure, for better or worse, who wants to disrupt the underlying fundamentals of the capital markets. Changing the corporate tax code would be bullish for stocks in the near term.

However, periods of extreme optimism have an ugly common denominator, Shiller notes with a wry smile. They always lead to crashes.

Shiller is right, empirically. However, that information is not particularly useful.

Livermore understood that the most important attribute of a successful investor is the ability to hold winners. He called this “sitting tight,” and it is not as easy as it appears.

Too many investors want to sell winners quickly. They believe stock strength merits selling.



Wealth Building Strategies

Increase Your Returns Without Taking Big Risks

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Posted by Patrick Ceresna

on Saturday, 29 April 2017 08:23

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Wealth Building Strategies

Artificial Intelligence Confounds Its Creators

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Posted by Jon Markman's Pivotal Point

on Saturday, 29 April 2017 07:32

Advanced artificial intelligence is far from that. Algorithms are constantly learning, often in unusual ways, and at an exponential rate. It’s one of the cornerstones of the New Gilded Age.

Unfortunately, nobody really knows how they learn. And that should scare you, a lot.

When Siri doesn’t know the answer to a question, she demurs. She may quip or make a snarky comment to obfuscate, then send you to Wikipedia.

“Hey Siri, what is the meaning of life?” Siri: “It’s nothing Nietzsche couldn’t teach you.” Cute.

When Google (GOOGL) wanted to improve the way its machine-learning software translates languages, it started by feeding it massive amounts of data.

In short order, the software had common translations. Soon, accuracy rates improved. Later, the software began translating between languages it had not even studied.

Initially, engineers were perplexed. They later concluded the AI had devised a brand-new language, or “interlingua”, to make sense of language pairs. Once it had the cipher, the rest was a snap.

Screen Shot 2017-04-29 at 7.03.52 AM

When Nvidia (NVDA) decided to enter the self-driving car race, it started with neural networks watching humans drive, sometimes badly. Soon, the AI could steer, brake and accelerate just like a person.

Later, using a batch of sensors and a learning, trunk-mounted brain, the AI could drive well enough to navigate winding dirt roads, driving rain and thick fog.

Engineers admit, the system is so complicated even they don’t really know how the software is arriving at all of its decisions, MIT Technology Review reports.

This is the part where most people start worrying about Hollywood-style Terminators.

I will admit, the idea of machines making their own choices based on processes that even their creators don’t understand is unsettling, at best. And plenty of smart people like Stephen Hawking, Bill Gates and Elon Musk have sounded alarms about unintended consequences.

In a world where machines learn, why wouldn’t they develop emotions and all of the other frailties that cause us silly humans to act irrationally? It could get seriously weird, and dangerous.

That does not mean there will not be terrific investment opportunities.

AI is a game-changing technology. It is already having a positive impact on the bottom line for businesses ranging from financial services to transportation. Ultimately, it will change business models. New services will be born.

I will continue to recommend companies like Alphabet (GOOGL) and Amazon (AMZN), that are poised to take advantage of this important trend.

That’s the thing about the New Gilded Age. So many technologies are progressing exponentially, this truly is the age of invention. Almost anything is possible. Even the scary stuff.

And by the way, Nietzsche was wrong about the meaning of life. It is not without meaning, value or compressible truth. At least that is what I want the machines to think, if they’re listening.

Best wishes,

Jon Markman



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