The last time Americans were given a "new form of money," the country abandoned the convertibility of dollars into gold, and the value of the fiat dollar has declined ever since. You can see on the chart below that the dollar is a pittance of its former value. Now, the world's central bankers are looking toward the adoption of another "new form of money"—central bank digital currencies (CBDCs). Agustín Carstens, the head of the Bank for International Settlements (a.k.a. the BIS, often called the central bank of central banks), wants to introduce CBDCs as "these new forms of money will … [Read more...]
Gobble, Gobble, Gobble the Rule of 72
Savvy investors are gobbling up these yields. Because you don’t need to compound big numbers to have big success. To double your money, you could do it with T-bills paying more than five percent today, compounding them for 15 years. But the key is, will they stay at five percent? Think about the Rule of 72. The math. Dividing 72 by a compound interest rate tells you how many years it takes to double your money. But it’s tricky. Because T-bills have a short lifespan. They provide comfort for three months at a time. It’s why investors are gobbling them up. They’re hard to pass up. But I … [Read more...]
Chicago Cries Out for Safety
The Chicago Tribune is begging the city's new mayor, Brandon Johnson, for help with its crisis of crime. The editors of the paper remind Mayor Johnson that "There is no more important job for a big-city mayor than public safety." They write: Progressive politicians in recent years seem to have lost sight of that. We’ve heard plenty of brusque dismissals of traditional anti-crime methods. And lots of talk about focusing instead on the root causes of crime. Chicagoans, are beginning to lose patience. In West Town and Logan Square last week, a coalition of 10 community groups called on … [Read more...]
Can the Federal Reserve Control Inflation?
According to new research by the Cato Institute's Center for Monetary and Financial Alternatives, the answer to the question "Can the Federal Reserve control inflation?" is no. Jai Kedia writes at Cato: Research by Cato’s Center for Monetary and Financial Alternatives (CMFA) shows that there is not much empirical support for the notion that the Fed can precisely control inflation. Earlier this year, Cato published a paper that suggested monetary policy was the least important contributor to inflation, far behind both demand and supply factors in the economy. However, that paper used … [Read more...]
Risk and Reward: An Efficient Frontier
Originally posted July 26, 2018. The Efficient Frontier, created by Harry Markowitz in 1952, measures the efficient diversification of investments that delivers the highest level of return at the lowest possible risk. Investors must consider the trade-offs between risk and reward in their portfolios. You can see on the chart below an efficient frontier line representing risk vs. reward for a portfolio allocated between different proportions of stocks and bonds using data back to 1977. On the vertical axis is the return earned by the portfolios, and along the horizontal axis is a measure … [Read more...]
Buy Fixed Income Rates Not Seen in 22 Years
You hear it all the time today. “I’m getting an incredible rate on my money,” or “I can get you this on your money.” And so on and so forth. Yes, Your Survival Guy can see it, too, especially with rates at levels we haven’t seen in around 22 years. Opportunities are everywhere for the fixed-income investor. But that doesn’t mean you dump all your existing positions. That’s throwing the baby out with the bathwater. Because when you sell an existing bond for pennies on the dollar, just to buy a higher yielding one, you’re making more interest on less dollars than what you initially started … [Read more...]
ESG Bankers Worried about Legal Blowback for Greenwashing
Only recently, you read about BlackRock's ironic backpedaling on ESG because of its effect on supply chains for electric vehicles. Now, some more ESG chickens are coming home to roost as ESG bankers are becoming worried that the borrowers they've been lending to aren't quite up to the ESG standards they had claimed. Now the bankers are adding clauses to loans allowing them to strip the loans of their ESG designations. Greg Ritchie and Alastair Marsh report for Bloomberg: Bankers servicing one of the world’s biggest ESG debt markets are now actively seeking legal protections to guard against … [Read more...]
Are You Looking for Investment Counsel? 2 Questions
Are you looking for investment counsel? If you are, then Your Survival Guy recommends asking these two questions first: "Are you a fiduciary?" and "Who is your custodian?" Because once you get the answers to those two questions, a lot of confusion and heartache can be avoided. Here's why. When you work with a fiduciary, you work with someone who is required by law to make investment decisions in your best interest. On the other hand, those held to the less strict and more common suitability standard are not. They can, for example, put your money in a similar product with higher fees because … [Read more...]
Investing Habits of the Fairly Weathy: #5 Math
Dear Fairly Wealthy Investor, You might be better off staying in bed. It's that bad. One morning, you wake up, and there's a full-page spread in the Wall Street Journal on the perils of a balanced portfolio. It reports how owning stocks and bonds in a 60-40 mix is dead. Nonsense. And it's not just them. When you're in the business of selling newspapers, newsletters, or email subscriptions, it's what gets attention that sells. Which is a disservice to you, my valued reader. You and I know investing is hard because we know the work it takes to save 'til it hurts. These guys are about … [Read more...]
Success of the Irish
In The Wall Street Journal, Stephen Moore and Steve Forbes discuss Ireland's success after cutting taxes and abandoning the welfare state model. They write: European Union officials and Treasury Secretary Janet Yellen are pushing for a global minimum corporate tax, and no wonder. High-tax countries are getting bled to death, while low-tax ones experience stunning growth. Ireland, whose economy grew by 12.5% last year—faster than any other European nation—is one of the greatest tax-cutting success stories of modern times. The Journal recently reported that Ireland is “swimming in money.” … [Read more...]
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