book

  • Stranger Things: An Unprecedented Period of Low Volatility Will Run Its Course

    The rise of stock prices, coupled with the lack of market volatility, in the past 12 months has been wonderful. I hope you have enjoyed it as much as I have! However, it is unprecedented. Global equity indexes have not experienced a decline of more than 4% for more than 14 months in a row. Never in history has there been such a long period of low volatility. This is truly one of the “stranger things” that I have witnessed in my almost 25 years of managing financial assets and in my 35 years as a professional investor. Is this the new normal? Have we entered a new era? Sadly, I do not think it is possible.

    It’s not that months of low volatility and rising stock prices are uncommon, it’s just that this one is much longer than most. When I revisit similar periods of low volatility paired with advancing stock prices, there appears to be some common ingredients. Almost always low volatility and rising stocks come with an environment of better than expected economic and profit growth, underinvested institutional and individual investors (high cash balances) and some type of outside stimulus that make stocks the most sought after investment alternative. Historically, these phenomena have been most common during periods of economic and profit improvement – think 1985, 2003 and 2009. When I consider the financial circumstances of the past 14 months, this all fits neatly into place. We have certainly experienced a significant recovery in global economic and profit growth, which caught the over worried and underinvested public and private investor by surprise. Pile on the significant pro-growth fiscal policy, such as tax cuts, and you get the makings of a huge demand for stock exposure. The mere concept of trillions in currencies chasing a fixed number of publicly traded stocks makes for higher stock prices with low volatility – the Holy Grail!

    This cozy and profitable environment will eventually end – and we don’t dare predict when so as not to spoil its longevity. However, investors would be wise to prepare for a return to a more normal stock market. Still profitable – but not as cozy. There is enough economic and profit growth momentum for stocks to continue upward – and we believe for quite some time. Global stock prices based on earnings (Price/Earnings Ratios) are not excessive at 18.3 and the “E” continues to grow at a great clip, with the help of fiscal stimulus. This should keep the P/E reasonable as equity prices rise. What this market will be missing going forward are the over worried and underinvested public and private investors. They are no longer underinvested or as worried. Over the past 14 months every dip in stock prices was met with piles of cash itching to get more fully invested, preventing normal stock market corrections. Now that those cash levels have been depleted, we can expect business as usual. As global stock markets grind higher, we will likely see very normal 8-10% corrections along the way.

    Whenever we get our first real correction in stock prices we should be prepared. The numbers can be a bit unsettling when the Dow Jones Industrial Average is above 26,000 (it was 700 when I started in the business!). A simple and normal market correction of 8-10% would be the equivalent of 2000-2600 points! Don’t let the absolute numbers mess with your brain or emotions – try to keep your wits and look at your portfolio and the market in terms of percentages.

    For the fixed income investor, the higher interest rates that have come with the stronger economy and profit cycle are a blessing. I expect the Federal Reserve to continue raising rates this year which will make purchases of bonds even more attractive. This is not a time to own bond funds or bond exchange traded funds. These products perform very poorly as rates rise, which investors are just starting to experience. I only invest in individual bonds, which will benefit me well as rates continue higher.

    I am optimistic in regard to outlook, however circumstances could change or get “stranger”.

    *****

    New review on Amazon for The Journey To Wealth!

    5 Stars

    “Before I delve into the content of this book I want to take a moment to gush about the formatting and aesthetic of this book. The book is incredibly well organized and the layout is both pleasing and makes the information very accessible. Each page is laid out with a variety of different images. This includes beautiful black and white photos, sketches that illustrate ideas, and a lot of informative graphs. All this put together made me excited to read the material. The book itself is chalk full of material. This book covers a wide variety of information, from the history of the Global Market to how to select individual stocks to grow wealth. The information is portrayed through excerpts, facts, terminology, graphs, and an accessible voice. I found this book to be very helpful in my own understanding and I loved reading the book. James E. Demmert proves himself to be incredibly knowledgeable about the subject matter. I would highly recommend this book to those looking to learn about investing.”

    Thank you Emerson!

    *****

    If you want to learn more about investing and take command of your wealth, my book can help.

    Purchase the Paperback for only $14.95 Today on Amazon.

    No matter your level of experience, The Journey to Wealth teaches you to invest using a clear, easy-to-follow sequence of concepts. In a four-step process, you will learn how to identify your lifestyle goals for building immediate and long-term wealth, as well as how to invest according to your risk tolerance and needs. Straight-forward detailed explanations, charts and graphs, inspiring citations about wealth creation, and artwork will keep you reading, learning, and creating a SMART investment plan for your future.

  • Happy New Year and Hello 2018!

    In terms of investment performance it is almost sad to say goodbye to 2017.  Global politics, tragedies and dramas aside, it was an unusually great year for stock market investors. The global economy had just the right ingredients to make for stellar stock market returns – a global economic and profit cycle recovery, coupled with historically low interest rates, and a large crowd of underinvested institutional and individual investors. Historically, this rare combination delivers above average stock price performance and 2017 did not disappoint! It was a particularly good year for global investors as foreign markets outperformed US indexes.  However, can we expect more of the same for 2018?

    Though we would welcome a repeat of ‘17 in ’18, we find it highly doubtful based on my research and historical precedent. As we discussed one year ago, the first year of a global economic recovery and profit cycle can produce tremendous stock price performance and we would suggest most of that is now behind us. Many of the data points that sent stock prices soaring over the past 18 months – namely better economic and corporate profit growth – were a surprise to most investors.  This coupled with a large crowd of underinvested institutions and individuals caused a huge appetite for stock purchases and this tremendous demand for stock itself is the primary reason for the “way better than average” return of stocks.  At this point the element of significant positive surprises on the economic and profit fronts are quite slim and most of the underinvested have put their funds to work.  Does that mean that the party is over for stock market returns?  No way.  The party is just likely to be more subdued, and much better than the bond market could muster in terms of return.

    I have suggested that we have been at the beginning stages of a new business cycle and bull market for over a year now, and that the bull market of 2009-15 died with the 20 percent decline in equities during ‘15-‘16.  This was not and is still not conventional wisdom.  As I follow my theory, I see no reason why the current economic, profit cycle and bull market cannot continue for a number of years.  Unlike the media and many other investors today, I believe that the stock market is reasonably priced and that economic growth and corporate profits will continue to expand, supporting even higher stock prices as we move forward.  However, the stock price trajectory of 2017 will most likely shift down a few notches in 2018 to a level more in tune with profit growth in the 8-12% range, still far superior to just about any other liquid investment!  In terms of volatility 2017 exhibited one of the least volatile years in history with no corrections of 3% or more!  Investors would be wise to expect normal volatility (8-10% corrections) to return in 2018 as both foreign and domestic stocks churn higher. It should be a good and more normal year for stock investors.

    As you may be aware Janet Yellen, the Federal Reserve chair, raised interest rates four times in the past 12 months and she and her replacement Jerome Powell will likely continue this policy to normalize interest rates.  Expect two to three rate hikes in 2018 assuming the economy and profit growth stay on course.  These rate hikes pose risks to bond mutual fund and bond Exchange Traded Funds – areas that I always avoid.  A significant rise in rates could cause these bond funds to fall in value and create massive selling and significant volatility in these instruments.  That risk (which we are not subject to) aside, a higher interest rate environment is welcome to those of us that buy individual bonds and can lock in these higher yields.  Hopefully, a healthy economy will bring attractive bond yields to your portfolio in the coming year.

    Here’s to a Happy New Year! Time to take command of your wealth. My book can help.

    Purchase the Paperback for only $14.95 Today on Amazon.

    No matter your level of experience, The Journey to Wealth teaches you to invest using a clear, easy-to-follow sequence of concepts. In a four-step process, you will learn how to identify your lifestyle goals for building immediate and long-term wealth, as well as how to invest according to your risk tolerance and needs. Straight-forward detailed explanations, charts and graphs, inspiring citations about wealth creation, and artwork will keep you reading, learning, and creating a SMART investment plan for your future.

     

  • Investing Just Got A Little Easier

    Today I am pleased to announce the launch of a paperback version of my award-winning book, The Journey To Wealth, which is now available on Amazon and priced at 63% less than the hardcover edition.

    The old rules of investing simply no longer work. In today’s uncertain times it’s no wonder that nearly 80% of Americans do not invest. Yet people at all income levels can transform their lives with a basic understanding of financial markets and a solid, stress-free investment strategy. 

    The Journey To Wealth distills the jargon of financial markets and equips readers with the tools they need to achieve financial independence. It is my hope that this new edition will be more accessible to the millions of Americans who are not currently investing but would like to start. It is far better to have a prosperous society than a struggling one, which is why I am passionate about this opportunity to share my tried and tested strategies with a wider audience.

    Success as an investor in today’s financial markets often requires going against much of Wall Street’s so-called “wisdom.” My book helps readers develop a personalized wealth plan tailored to their particular lifestyle, goals, and family circumstances. Too many investors fall prey to the same catastrophic mistakes. Such pitfalls can easily be avoided with my SMART investing philosophy, which includes:

    • Knowing about different types of investment instruments and understanding their pros and cons
    • Understanding the history of financial markets
    • Recognizing and taking advantage of market patterns and cycles
    • Learning how to maximize returns while managing risks

    In short, my book demystifies the process of investing and empowers readers to make wise investment decisions. Anyone can discover that investing the right way will help you achieve financial freedom. Here’s to your financial future!

    The Journey to Wealth strikes a winning combination: authoritative information written by a polished professional presented in a highly digestible, extremely attractive, high-quality package. — Barry Silverstein, Foreword Reviews

    Winner of The 2017 Indie Excellence Book Award. Winner of the 2017 Beverly Hills Book Award.

    Finalist in the 2017 Best Book Awards. Honorable Mention in the 2017 New York Festival of Books.

     

    Purchase Your Copy for only $14.95 Today on Amazon.

    No matter your level of experience, The Journey to Wealth teaches you to invest using a clear, easy-to-follow sequence of concepts. In a four-step process, you will learn how to identify your lifestyle goals for building immediate and long-term wealth, as well as how to invest according to your risk tolerance and needs. Straight-forward detailed explanations, charts and graphs, inspiring citations about wealth creation, and artwork will keep you reading, learning, and creating a SMART investment plan for your future.

     

     

  • Radio Interview on “People of Distinction” with Al Cole

    I was recently interviewed about my book, The Journey To Wealth, with nationally syndicated talk show host Al Cole.  His show, People of Distinction, is  featured nationally w/CBS RADIO, BBC & NPR on the #1 iTunes radio network.

    Al and I had a great discussion on investing in the world today, the fact that many people aren’t taking part in the stock market and why they should start.  Here is the replay:

    To learn more about SMART investing, check out my book:

    Purchase Your Copy Today on Amazon.

    No matter your level of experience, The Journey to Wealth teaches you to invest using a clear, easy-to-follow sequence of concepts. In a four-step process, you will learn how to identify your lifestyle goals for building immediate and long-term wealth, as well as how to invest according to your risk tolerance and needs. Straight-forward detailed explanations, charts and graphs, inspiring citations about wealth creation, and artwork will keep you reading, learning, and creating a SMART investment plan for your future.

     

  • Markets Don’t Go Up Forever

    I hope you are enjoying the profitability that stock ownership can provide as global stock indexes continue to reach new highs. Year-to-date most indexes have reached double digit returns, with global indexes providing the most upside.

    I believe that the last bear market occurred in 2015-16 when global indexes fell 20% and corporate profits experienced a very mild recession. Over the past year we have been witness to a significant global corporate profit and business cycle recovery. Though many have called this a “Trump Bump,” it should be obvious at this point that the improving global economy and corporate profits cycle has little to do with the US President and more to do with how the business cycle works. The best part of our message today is that we believe that this new bull market has a brighter and longer future than most investors believe.

    Corporate profit cycles last years – not months – and this one is in its infancy. Though many investors are in awe that the Dow Jones Industrial Average is over 22,000, they should try to remember that it is simply a number – it was 800 when I started my career! What is more important is the price of the market related to its underlying profitability or “price-to-earnings ratio.” In statistical terms the market is nowhere near overvalued. In fact, there are sectors of the market that still trade at ridiculously inexpensive multiples to earnings – not at all a symptom of a market that is overvalued.

    There are many investors who question the future longevity of this market strength – which is another indication that we are far from a market top. However, there is a much larger crowd who seem immune to the old adage, “what goes up must (at some point) come down.” Though we believe that the recent market strength is well justified and has “legs,” we would not advise investing without some tools to manage the risk of this thesis being wrong and to protect your portfolio from catastrophic loss. As you know, we employ our Active Risk Management process specifically for this reason – this includes actively managing your asset allocation, your sector exposure and the careful placement of stop loss orders – the combination of which we call our “plan B.”

    I find it hard to believe that today’s investors would invest aggressively without some sort of “plan B” should it all come to a crashing halt. Surely investors must recall the recessions and corresponding stock market declines of 35-55% that have occurred several times in the past two decades?  Or the time it took for stocks to recoup those losses – on average six to seven years?  I find the short term memory of the average investor just plain astonishing. However, with the media’s attention on passive/robo/index investing, perhaps we can’t blame these naïve investors for getting sucked in! Let’s face it – while markets are going up the tide lifts all ships and your average index fund will participate in market returns. However this view is extremely shortsighted, particularly when it comes to the bulk of an investor’s wealth as they approach important timelines, such as retirement. They say that stock market history is riddled with investors repeating the same mistakes. The lack of some sort of “plan B” risk management appears to be the most obvious.

    The increasing popularity of passive/robo/index investing should be a warning to all investors to employ risk management tools and a plan for avoiding catastrophic loss, for the next inevitable and eventual market decline may just be much bigger than expected. In the meantime, continue to invest with an eye towards growth and be well prepared should things go awry. My book can help.

    No matter your level of experience, The Journey to Wealth teaches you to invest using a clear, easy-to-follow sequence of concepts. In a four-step process, you will learn how to identify your lifestyle goals for building immediate and long-term wealth, as well as how to invest according to your risk tolerance and needs. Straight-forward detailed explanations, charts and graphs, inspiring citations about wealth creation, and artwork will keep you reading, learning, and creating a SMART investment plan for your future

    Purchase Your Copy Today on Amazon.