Investing Strategies. What is your move?

SC Maintenance said:
I don't foresee a recession either -mainly because its an accounting gimmick anyway, or at least it is when your money supply was artificially inflated.

Anyone that says inflation is less, isn't paying attention. Yes, food and fuel have gone up and down (and are doing up again) but core remains high.

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BTW - the fed likes to watch PCE. Its what Powell always references in his interviews, etc.

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I personally don't think there is going to be a "landing" either way. I think were in for a much longer inflationary environment than most others do. I think its going to be much harder to put the inflation genie back in the bottle than the fed increasing rates a few times. That doesn't make me pessimistic. It does mean I am looking for inflation hedges however.

Also, those looking at a down months and saying see, its over - I refer you to the 1970's. It went up and down and all over.

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There’s really no choice but to further devalue the currency to pay for things that were long spent. Much of the reason why I distrust so many, including those who lived through the depression and subsequent issues and who in their later years started us down this path.

I agree inflation hedges are important now. I’ve got years of stuff to pay for and kids to support for the next two decades. And then retirement years.
 
My take:

Housing - it depends. Housing is in a reversion to mean environment. Overpriced areas falling, underpriced areas rising. Housings lack of inventory is offsetting higher mortgage rates. Its a tug of war. When rates do fall, housing really will win.

Domestic equities have been overbought the last decade and ready to decline. International markets, especially Emerging markets and even Frontier markets are poised to lead the next 10-15 years.

10yr yields have yet to peak, and just hit its highest level since 2007, but they are getting closer to their inflection point. I think we are in the early innings of a bond bull market. Jeff Gundlach says bonds will offer equity like returns without the risk in the near future. I believe him.
 
If the world doesn't de-dollarize then we can always print our way out of recessions. Thanks to the bidenomics we printed a trillion dollars in one month after the debt ceiling compromise. The treasury is borrowing like crazy so I suspect they will inflate their way out of this and we will continue to prosper.

But if de-dollarization accelerates and we can't spread our money supply across the world then we might end up experiencing discomfort.
 
Vil_Riker said:
If the world doesn't de-dollarize then we can always print our way out of recessions. Thanks to the bidenomics we printed a trillion dollars in one month after the debt ceiling compromise. The treasury is borrowing like crazy so I suspect they will inflate their way out of this and we will continue to prosper.

But if de-dollarization accelerates and we can't spread our money supply across the world then we might end up experiencing discomfort.
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A much bigger mistake they made was not allowing Russia to pay their debts, even though they had dollars. Don't get me wrong, I would love to see all of Russia burn to a smoldering ruin - but you don't get to be the one world reserve currency if not everyone gets to use it. I think history will look at this as a huge blunder.

The bigger push away from dollars is countries, including those that are not enemies, looking at it and saying "hmm, that might be what happens to use if we do something they don't like. Maybe we should find a backup plan" - even more so than the printing.

China has printed at least 3 times as much in the last decade.
 
gfh77665 said:
10yr yields have yet to peak, and just hit its highest level since 2007, but they are getting closer to their inflection point. I think we are in the early innings of a bond bull market. Jeff Gundlach says bonds will offer equity like returns without the risk in the near future. I believe him.
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If I have this right you seem to be saying interest rates are almost to their inflection points, which will mean that yields will drop creating a bond bull market? Except T10 is at 4.32% today, which is still 3% below its historical norm. So you think there going up a little more then going to have a long term bull market?

I actually looked at this a month ago - but as a hedge. My idea was buy a T10. If stocks go up I don't care that it looses some money.

If stocks go down and rates plummet, I make some money.

My issue was the spread. At 4.32% what's the possible floor? There never going back go 0.5% like in the depths of covid, IMHO.

So you have maybe a 2% yield drop, which is like a 20% market improvement in your bond pricing.

However if we revert to mean of 7% yields you loose 30%. The risk no longer seemed worth the reward - to me at least.

Just trying to understand your trade?
 
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SC Maintenance said:
A much bigger mistake they made was not allowing Russia to pay their debts, even though they had dollars. Don't get me wrong, I would love to see all of Russia burn to a smoldering ruin - but you don't get to be the one world reserve currency if not everyone gets to use it. I think history will look at this as a huge blunder.

The bigger push away from dollars is countries, including those that are not enemies, looking at it and saying "hmm, that might be what happens to use if we do something they don't like. Maybe we should find a backup plan" - even more so than the printing.

China has printed at least 3 times as much in the last decade.
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I wonder just how bad the the Chinese economy is that they are trying to hide ?
 
Charles Schwab is in trouble with rising interest rates.


https://www.advisorhub.com/schwabs-7-trillion-empire-built-on-low-rates-is-showing-cracks/

” Like SVB, Schwab gobbled up longer-dated bonds at low yields in 2020 and 2021. That meant paper losses mounted in a short period as the Fed began boosting rates to stamp out inflation.

Three years ago, Schwab’s main bank had no unrealized losses on long-term debt that it planned to hold until maturity. By last March, the firm had more than $5 billion of such paper losses — a figure that climbed to more than $13 billion at year-end.

It shifted $189 billion of agency mortgage-backed securities from “available-for-sale” to “held-to-maturity” on its balance sheet last year, a move that effectively shields those unrealized losses from impacting stockholder equity. “

———————————————

“ Schwab’s other headache from higher interest rates stems from cash.

At the root of Schwab’s income is idle client money. The firm “sweeps” cash deposits from brokerage accounts to its bank, where it can reinvest in higher-yielding products. The difference between what Schwab earns and what it pays out in interest to customers is its net interest income, among the most important metrics for a bank.

Net interest income accounted for 51% of Schwab’s total net revenue last year.

“Schwab’s counting on inertia,” said Allan Roth, founder of Wealth Logic, a financial-planning firm.

After a year of rapidly rising rates, there’s greater incentive to avoid being stagnant with cash. While many money-market funds are paying more than 4% interest, Schwab’s sweep accounts offer just 0.45%.

While it’s an open question just how much money customers could move away from its sweep vehicles, Schwab’s management acknowledged this behavior picked up last year. “

.
 
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PimTac said:
I like to reference the secular bear market of 1966 to 1982. If you were at or near retirement during that period it was not good news.

“In January of 1966 the Dow Jones Industrial Average hit a level of 990. It would continue trading in a range of roughly 600 to 1,000 over the following 17 years. It once again reached 990 in December of 1982 before finally breaking out and heading higher.”
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My father sold his farm in 1965 at age 63 (retirement). He worked off and on doing farm work and carpentry (semi retirement) until he began feeling old. But feeling old was actually the presentation of a lymphoma which killed him in 1981 at age 78. So his retirement almost exactly coincided with the period you describe.

With memories of the market crashes in the 1920s he avoided investing in stocks. He invested only in "ultra safe" Canada Savings Bonds (fixed rate of interest set at the time of purchase, interest payable annually, cashable at any time). But he didn't understand inflation. He thought if he only spent the interest he'd be fine. But inflation effectively wiped out my parents financially.

When he retired he and my mother were quite well off. They could have bought 3 or 4 houses in the neighbouring city.

My mother lived until 2010. When she died she could not have bought a single house. And she had lived quite frugally.

So it wasn't just the stock market. In spite of high interest rates, inflation wiped out other investors.
 
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