One advantage of hindsight is that it offers a sense of superiority over the past mistakes of others. We all make far more errors than we like to admit, so why not take a moment to learn from the missteps of those before us?
A straightforward analysis of historical pricing trends can quickly highlight the collective delusions of the past. Once a market peak is reached, it becomes glaringly obvious in retrospect. A bit of scrutiny might help us safeguard our hard-earned investments from turning to dust.
Consider bitcoin as an example. What were the thought processes of those who purchased bitcoin for over $17,000 in late 2017? How could they not foresee an impending price drop? Now, more than 16 months later, that bitcoin is worth approximately $5,230—a staggering decline of about 69 percent from their initial investment.
Furthermore, if bitcoin does not reach $1 million by the end of 2020, John McAfee, the cybersecurity mogul, will face an outrageous consequence: he’ll have to consume a part of his anatomy on live television. Clearly, McAfee leaned on his proprietary pricing model before making such a bold claim. Perhaps a more rigorous back-testing of his model was in order before he went public. Continue reading
The trajectory of American businesses has taken a troubling turn over the last decade. Research from the Securities Industry and Financial Markets Association reveals that by November 2018, non-financial corporate debt had surged to over $9.1 trillion.
What does this $9.1 trillion figure signify, and what are the potential ramifications? Let’s take a moment to dissect this stark number.
For context, non-financial corporate debt totaling $9.1 trillion is nearly equivalent to half of the real U.S. GDP. Thus, the quest for profits among private enterprises has necessitated a considerable buildup of debt. Moreover, like much of today’s debt, this is likely to become problematic at the most inconvenient times.
To illustrate, corporate debt that grows more rapidly than profits resembles a ripe tomato left too long on a grocery shelf—it spoils without warning. Frank Holmes, in an article featured in Forbes, shares grim insights: Continue reading
The first quarter of 2019 has concluded, but before we bid it farewell, a moment of reflection is warranted. To aid this, we present two key indicators: Gross Domestic Product (GDP) and government debt.
According to the latest updates from the New York Fed’s GDP Nowcast, GDP for the quarter grew at an annualized rate of merely 1.3 percent. To put this in perspective, a 1.3 percent raise in a salary is virtually insignificant, as any worker could attest.
In stark contrast, the U.S. deficit for the fiscal year 2019 is projected to reach around $1.1 trillion, marking an increase of approximately 5 percent relative to the existing $22.2 trillion national debt. This means that government debt is escalating at a rate about 3.85 times faster than nominal GDP, which stands at roughly $21 trillion.
These two metrics provide a rough gauge of the economy’s health. Deficit spending is significantly outpacing economic growth. Heavy doses of fiscal stimulus are being administered, yet the economy appears to be treading water. In summary, the current state of affairs is troubling. Continue reading
The America we once understood—the country we were taught about in school—has long since faded. In reality, it began to disappear well before many of us ever stepped into a classroom. Yet, the myths and legends of America persist.
One such myth is that America secures democracy worldwide. Another is the belief that the American press serves to hold the government accountable. There’s also the myth that the U.S. Constitution stands as the supreme legal framework of the land. Additionally, there’s the idea that the Federal Reserve sustains price stability. The list continues endlessly…
In the 21st century, maintaining these myths and legends has become increasingly perilous. This peril encompasses the risk of leading America towards a major geopolitical conflict while also jeopardizing the financial stability of hardworking Americans and those who skirt responsibility.
Navigating how to save and invest for an uncertain future presents a monumental challenge. While no guarantees exist, one may speculate that simply investing in an S&P 500 index fund over the next 30 years may not suffice. Continue reading
