This morning at about 9 AM central, in response to the Coronavirus, the Federal Reserve announced an emergency 0.50% rate cut.
The initial response by the market was to send stocks and gold soaring. As the day wore on U.S. stocks crumbled losing about 3.5% at one point and ending the day down 2.8% while gold hung on for a 3%+ gain.
The 10-year Treasury yield continued to slide throughout the day (sending bond prices up) and even got below 1% for the first time ever! Think about that…in the almost-250 years of this great Republic we’ve just set a record low on bond yields. Continue reading “Fed Enacts Emergency Rate Cut. New Record Lows on Treasuries”
Yesterday, the Federal Reserve confirmed the market’s expectations and announced they would be cutting rates for a third time this year. The rate cut is an addition to the recently-announced program of supplying $120 BILLION in liquidity each night AND announcing the resumption of QE whereby they’ll be buying $60 BILLION of short-term Treasurys each month.
In other words, the Fed is pursuing policy that, until the recent Great Financial Crisis, was unprecedented. Why? Why are they pursuing emergency policy actions when the economy is supposedly strong, stock market is near all-time highs, unemployment near all-time lows and inflation supposedly around 2%? Continue reading “The Fed Cuts Rates for a Third Time…And Zombies”
As discussed at length, I have significant concerns about U.S. stock market valuations and what that may portend for the next bear market. After all, the most reliable valuation metrics are indicating the U.S. stock market is more expensive than ever before (including 1929 and 2000).
Although valuations aren’t useful for short-term trading, valuations do provide insight into the potential severity of the next downturn. So whether the next bear market has already kicked off with the January 26th peak or starts 12 months from now, the key to understand is it will likely be commensurate with the extremity of current valuations (i.e. severe).
A couple proactive approaches I’ve offered for consideration to preserve financial independence is either (1) under-weight U.S. stocks in favor of other asset classes, including bonds, and/or (2) incorporate “put options” to insulate portfolios from a significant stock market decline. Today, I’ll focus on what I’m doing within the bond sleeve of portfolios I manage. Continue reading “How I’m Managing Bond Investments At This Stage in the Cycle”
Often a new economic boom begins when things couldn’t get much worse. High unemployment, high inflation, low / negative growth, and stagnant / declining asset prices all contribute to a feeling of misery, which is usually the prevalent emotion at the bottom of a bear market or economic cycle.
Continue reading “Then vs. Now. The Beginning of A Long-Term Cycle vs. The End of One”
Back in February, CNBC interviewed Warren Buffett. For several weeks in advance the interview, CNBC asked viewers to submit questions via Twitter under the hashtag #AskWarren. I’m not sure how many questions were submitted, but they ended up choosing mine along with a few others.
This is pretty exciting for someone who knew from the age of 14 they wanted to be in finance and closely followed Warren Buffett, read his books, etc…
I’ve included a link to the video of the exchange below. This link will start the video at the point where my question was asked. You only need to listen for a couple minutes. Take a look. My question probably comes off as a little strange if you don’t know the context so, below the link, I explain the context of my question along with my response to his answer.
Continue reading “Warren Buffett Answered My Question on CNBC! Here’s My Response.”