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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. 

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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



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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.



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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

Brighter Outlook for Commodities Suggests a Fresh Look at Investment Benefits and Risks

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Posted by Pimco - Canadian Perspectives

on Tuesday, 25 April 2017 07:56

Screen Shot 2017-04-25 at 7.28.19 AM

Returns in the commodities markets have improved over the past year amid stronger macroeconomic activity and supply-side tightening, and our outlook for the next 12 months has brightened.

While considerable uncertainties remain for all commodity sectors, we believe the worst market trends may be behind us. As we look ahead to the next 12 months, commodities will likely reclaim a diversifying role in portfolios, given growing inflation risks and shrinking correlations between commodities and other assets.

At this point in the business cycle, we think investors should consider positioning commodities allocations to at least match benchmark targets, if not modestly exceed them.

...continue reading this analysis & don't miss the Investment and portfolio allocation outlook



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Wealth Building Strategies

What Is Asset Allocation For Everybody Else?

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Posted by Richard Shaw via Safehaven

on Thursday, 20 April 2017 06:28

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....also from Safehaven: Fantasyland Reality Check: Fed's Beige Book Makes Absurd Claims in at Least 3 Places



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