Opinions
Larry Berman CFA, CMT, CTA A Comment -- General Comments From an Expert A Commentary COMMENT Sep 23, 2024
You might be interested:
Yes, could compress prices even more. Tariffs are taxes. In the US and Canada, we are overtaxed. Tariffs also make trade more difficult, but trade makes us richer. Doesn't think Trump actually knows what he's going to do, which makes it difficult to forecast.
His hope is that this is mostly posturing. Trump makes outrageous demands so that he has a very strong position to retreat from. That's the best we can hope for.
He's watching the "big, beautiful bill", which is big, but it's certainly not beautiful. The arithmetic around the USD is very bad for the US, and very good for gold. On-balance sheet liabilities of the US are about $36T, which is dwarfed by the off-balance sheet ones exceeding $100T. And those numbers are growing. The only way to honour these debts is to reduce the purchasing power of the US dollar, much like in the decade of the 1970s.
Note that he thinks the USD will do OK relative to other currencies. But in absolute terms, the spending power of the USD falls. This budget bill is a classic example of Republican and Democratic log-rolling (there isn't a constituency in Washington for reducing spending; there's only a constituency for advancing the interests of one's own district). Things are going to get worse. This is bad for the economy and its citizens, but good for gold.
Tax cuts without any reduction in spending basically amounts to fraud.
In his experience, silver is a late mover in a precious metals bull market. Happens when the generalist investor is attracted by the momentum in gold and comes into the precious metals market, and leadership generally changes from gold to silver. He'd expect that to occur because we're in a very endurable precious metals bull market.
It might not happen for a year or two, but you won't need him to tell you when it's occurred. Silver is extremely volatile to the upside when its time comes.
Two Types of Behavioral Biases: Cognitive and Emotional
To simplify the classifications, a cognitive error can be defined as an information processing error (statistical and/or memory). It is often the result of faulty reasoning. Many times an investor will "think" they are using a rational process in their decision making but fail due to these errors. Conversely, emotional biases are much harder to correct because they stem from impulse and/or intuition. Often an investor needs to first recognize these issues, then find a way to minimize the effects.
Unlock Premium - Try 5i Free
She doesn't find the numbers as strong as posted once you start reading through them. There are conflicting job reports. Yesterday's ADP number showed job losses. Today's report beat expectations, but expectations have come down. Looking on a YTD basis, the number of new jobs created is about half what it was for the same time period in 2023.
Details of today's report are not very optimistic. Outside of healthcare, not many industries are hiring. A lot of the jobs are government, whether municipal or state. Government jobs are the least productive in terms of economic productivity.
Her firm is being a bit more careful, positioning conservatively. This past quarter has seen exceptional market growth. But when it comes to the underlying economic data, that's been mixed or weak. When it comes to the disconnect between the market and the economy, it seems to have widened. Then you add in more uncertainty with geopolitical tensions and tariffs.
There are a lot of things to look out for, yet the market keeps making record highs. They see that, and they're a little bit concerned.
There are a lot of reasons why, and she doesn't have the one answer. Perhaps bad economic news makes investors think there's going to be a rate cut. After today's US job numbers, a rate cut likely won't happen this summer. We haven't really had a real recession since 2008-2009. Investors have gotten used to the idea that whenever there's any economic weakness, either central banks or governments will swoop in the save the day.
But with debt levels continuing to rise, there's a limit to how much governments can spend to support the economy. There are signs that the economy is slowing, so it's better to be cautious. Given risks in the market and current valuations, unlikely that markets will continue to post record highs in the second half of this year.
TFSA -- better to DRIP, or to take the cash and buy other dividend stocks?(A Commentary)
Jul 03, 2025What she does for clients is to take the dividend in cash. The DRIP is not a bad thing for accumulating stocks, but her firm likes to have a bit more control. Dividends come in, and they get to choose where to deploy it. This way gives you more flexibility.
For example, she owns AEM which has done very, very well. Instead of "dripping" in more shares at the elevated level, she'd rather put the dividends to work in something that's underperformed, is at a lower valuation, or has a higher yield.
Since she's a little nervous about the markets, she's taking dividends and putting them into money market funds as she waits for a market pullback.
Lesson for Boomers
Going forward for as long as you want to look into the future, the bond market is not going to protect investors the way it has for the last 40 years. Investors need to really rethink portfolio construction in retirement years. In financial planning school, they tell students that the older you get, the more safety and bonds you should have in your portfolio. When interest rates got very low a number of years ago, that didn't give the protection needed.
In a bond fund, you earn yield to maturity plus the interest rate risk. If interest rates are falling, you get the current yield plus the change in rates. But if rates go up, you get the current yield MINUS the change in rates. With inflation being stickier, bonds will be challenged. Higher inflation is a problem for bonds.
Looking at a chart, in 2018 the yield to maturity was 3.25%. Today, it's 3.70%. Long-term average inflation is about 2%, + or -, for decades. We didn't have to worry about it, and now we do. If inflation's back down to 2%, he's not sure it's going to stay there.
You need a higher return than a bond is going to give you today to keep up with inflation and grow your savings. Alternative ETFs such as ZWU, VCNS, ZWB, ZWC, and PJAN are what's needed to protect your portfolio, rather than conventional bonds. These are what you need to generate the income you'll need for retirement, to get a real return on your investment, more than just protection of principal.