Millennials Have Less Assets Than The Prior Generation

Many consumer confidence surveys depend on how people feel about their own lives since it’s what they know best. If they are asked about the economy, their answer probably tells us about their job prospects more than anything. Confidence is really high before recessions because that’s when the labor [...]

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U.S. Households Are Overly Invested In Equities

The fact that households have a large allocation to equities is viewed as a positive by some because it provides a floor for the market. Others view it as a negative because the ownership rate is unsustainably high. The logic that households need to invest in equities is the [...]

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Past & Future US Equity Performance

Everyone knows the bull market is 9 years old; it is the longest bull market ever. However, the length of the bull market is largely irrelevant because it came very close to ending. It’s arbitrary to say a bear market is a 20% decline, but not a 19% decline. [...]

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The Trade War Just Started

With the US stock market near its all-time high and having a solid year, it’s easy to miss out on the global growth deceleration. The global economy is by no means terrible, but it has seen deceleration as the global synchronized growth narrative disappeared, with emerging markets feeling a [...]

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The Myth Of Retiring Early

Some of the most widely shared articles on the internet are on the concept of FIRE. Fire stands for Financial Independence Retire Early. The basic assumption is that you hate your job, so you will be happier by saving most of your money while you are working with the [...]

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Death Of Retail Didn’t Happen

Headlines skew reality because the media’s goal is to generate attention, not get the specifics of stories correct. This isn’t to say all or even most journalism is bad; it’s simply that journalists don’t think like investors and headlines aren’t always accurate. It’s easy to misinterpret trends if you [...]

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It’s Not The End Of The World, But…

Whenever we post an article that has arguments suggesting a negative outlook based on recent trends and indicators, we receive criticism from readers who are very bullish on stocks and claim anything negative is doom and gloom. Coincidentally, content containing negative developments receives the most attention which is ironic, [...]

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Valuations Aren’t The Main Catalyst Of This Bull Market

It’s obvious to most investors with any experience that they can’t justify buying an asset just based on the recent price action alone (technical analysis aside). You don’t buy based on price; you buy based on value. The price action means nothing without context. This point needs to be [...]

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Are New Valuation Methods Valid?

Some investors believe in maintaining the use of old models because they have historical precedence; new ideas can be risky to try. One example which comes to mind is when the 1990s tech firms were valued based on eyeballs instead of earnings. Believing in new models can easily turn [...]

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Consumer & Business Leverage & Risks For Economy

When the economy is near the end of the business cycle there tends to be excess leverage taken out by businesses and consumers. The recession washes away the bad loans to get back to equilibrium. It was important for the housing market to cool off after the run in [...]

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Is Poverty Down?

It’s well known that the economy hasn’t been working for a large percentage of the middle class and majority of the lower class because real wage growth has been practically nonexistent in most sectors of the economy despite the labor market showing strength suggesting that there is not enough [...]

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2016 Was A Recession

The US economy continues to outperform the rest of the world despite the fear of trade wars and with weakness in emerging markets and Europe. The chart below, using Haver Analytics data, gives an example of the stupendous U.S. growth. [REITs] Q2 hedge fund letters, conference, scoops etcSource: Haver Analytics The current [...]

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Are Top 10 Companies The Reason Behind Market Growth?

The number of American public companies is in decline. We have documented this trend in What The Number Of Public Companies Means. There has been an increase in concentration in many industries due to M&A activity. The giant internet firms, which have large moats, dominate their markets because they were [...]

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Expensive Valuations & Late Cycle Indicators

Investors are trying to figure out what it will take for the bull market to reach a new record high. Records have been set in the Russell 2000, the tech sector, and the S&P 400, but the most followed index, which is the S&P 500, hasn’t broken its January [...]

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Are Equities Over-Owned By Households?

Let’s be clear, there are valuation metrics, principally the CAPE ratio, which show equity prices in June 2018 are expensive. However, that doesn’t mean you need to be mislead by other false bearish narratives. Stocks can have low long term returns and there can also be wrong bearish arguments. [...]

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Avoid Investing Based On False Premises

Surprisingly, there are popular bearish narratives even as the stock market is a few percentage points away from its all-time high and the economy is in one of the greatest quarters of this expansion. Since there are popular bearish narratives, there are myths for us to bust on the [...]

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Is The Economy Overheating?

Near the end of the business cycle the most important factor to consider is whether inflation is getting out of control. The Fed’s goal is to have 2% year over year core PCE. The Fed likes to raise rates ahead of the goal being reached because once inflation accelerates, [...]

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2020 Forecast Doesn’t Warrant Current Valuations

The U.S. economy continues to show signs that the Q2 GDP growth rate might be above 4% which would be one of the best quarters of this expansion. If this rate were to continue, what some consider impossible would be happening. The bears say this is just a late [...]

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Is The ‘Gig Economy’ Real?

In an article from December 2017 we described the new ‘gig economy.’ For those unfamiliar, the gig economy is a reference to freelancers and short-term contract work becoming more prevalent in the economy. As we mentioned in the previous article, the results from surveys showed that independent contractors actually declined [...]

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Small Banks Are Disappearing

There is a natural fear that if the economy isn’t regulated, risks will occur which can hurt bystanders. For example, people fear that if the banks aren’t regulated, then they will make risky loans and go bankrupt. However, if banks are allowed to operate in their best interest, many [...]

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Strong Income & Consumer Spending Growth

This expansion has had slow real wage growth which has led many economists and investors to re-evaluate what drives wage growth. If you think supply and demand of labor drives wage growth, then recognize that the employment participation rate for prime age workers still signals there’s slack in the [...]

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