Author: Smart Investing

Cryptocurrencies

Coin Stories Podcast: Michael Saylor on Bitcoin crash, Luna/Terra Meltdown

Posted on by Smart Investing

No asset class has had as rough a week as cryptocurrencies. One of the top 10 cryptos by market cap, Luna/Terra, has seen its value implode overnight.

As a “stablecoin” supposedly pegged to the US dollar, the selloff has sent shockwaves across other stablecoins, as well as Bitcoin, as Luna/Terra dumped its Bitcoin reserves onto the market in a failed attempt to stem its losses.

This has created a potential liquidity event that may send further shockwaves across the space in the coming weeks. On the Coin Stories Podcast, Michael Saylor, CEO of MicroStrategy (MSTR) and Bitcoin enthusiast, surveys the damage done from this drop.

Currently, markets are just tracking inflation based on the CPI index, which has been lagging. And it hasn’t reflected the massive inflation in assets that occurred at the start of the money printing and zero percent interest rates that started in early 2020.

Now, that process is reversing as interest rates rise and the economy has slowed to a crawl. So it’s no surprise that asset classes that surged higher have since come back down. And as those asset classes come down, weaker cryptocurrencies and stocks will likely fare worse than average.

Ultimately, the current market drop will likely lead to a market event that requires central banks to reverse course. That means going back to coninue printing fiat currency. That should bode well for cryptocurrencies, with Bitcoin continuing to get the lion’s share of the space.

To listen to the full and wide-ranging interview, click here.

Economy

Oblivious Investor: How to Invest with a Looming Recession

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For many investors, recessions are a painful lesson in holding the wrong stocks for the wrong amount of time.

And investors often miss the simple truth that the stock market and the economy aren’t the same. The Covid-19 lockdowns resulted in a recession, but stimulus payments and other forms of entertainment being closed led to a rise in stock trading that sent markets into overdrive in 2020.

What matters in the stock market relates to profits. With rising economic uncertainty and higher interest rates, traders see lower profit potential in growth stocks. That’s why they gravitate towards the safety of more “slow and steady” stocks.

For most investors, the real way to win in any economic climate is to find a comfortable strategy—and then stick with it. It will underperform at times and outperform at others. And that strategy may need to change as life events cause changes as well.

But by following a strategy, and sticking to it, even during a recession, investors avoid cashing out at the worst possible time. Or losing out by chasing investment strategies that just performed well, but likely won’t again for some time.

However, investors might want to consider changing the fixed-income part of their portfolio. That way, they can adjust to rising interest rates today.

For the full analysis on why most investors should simply stay the course, click here.

 

Income investing

Sure Dividend: 4 Consistently High Paying Dividend Stocks With Growth Potential

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Market declines are solid opportunities for investors to refocus on great companies with strong fundamentals. Such companies also tend to pay out solid dividends.

But there’s usually a trade-off with dividends. Higher current yields tend to mean less cash is reinvested in the business for future growth. That keeps a lid on share price appreciation. Ideally, an investor will want to find companies that can grow and also grow their dividend payouts.

This combination is hard to find, for a number of reasons. Years of low interest rates likely pushed many income investors into dividend stocks in general. And that raised prices on those stocks, which lowered yields.

Currently, only 65 companies are even dividend aristocrats, defined as S&P 500 companies that have raised their dividends for at least 25 consecutive years.

A few of those companies have the potential to not only continue raising their dividends, but also see above-average growth in the years ahead.

One such example is electronics retailer Best Buy (BBY). While sales have slid in the short-term, the company’s ongoing growth and dividend payout increases give it the right blend for investors today. Those looking for income now and a growth kicker when markets turn around would be well-served by this company.

To read the full list of four stocks balancing rising dividend payouts and strong growth, click here.

Commodities

Wall Street Silver: Fed Risking Market Collapse With Rate Hikes

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So far this cycle, the Federal Reserve has hiked interest rates to just 0.75 percent. That’s a far cry compared to prior rate hike cycles. Yet the market has had a strong reaction to those hikes.

One reason may be that coming off of zero percent is hard. With a rising cost to borrow money, stocks are likely to drop as corporations scale back spending plans. And rising interest rates are bad for bond prices.

While credit markets have taken this move in stride, any potential shutdown of that market could lead to the Fed rapidly reversing course.

And there’s a view that a slowing economy will likely force the Fed to stop hiking interest rates. That would be well before they finish with the rate hikes they’ve sold to the market in the past few months.

In short, there’s an expectation that interest rates won’t rise for much longer—but it will take some more market chaos for that to happen.

That could be a boon for precious metals, as they’ve held up strongly in the past few months. While other asset classes have pulled back in the past few months, gold and silver have held up relatively well.

There’s even an argument to be made that this asset class is forming a new base price around today’s levels, which could lead to a surge higher in the future.

To listen to the full analysis on the Wall Street Silver podcast, listen here.

Economy

Minority Mindset: What ETFs To Buy ASAP For A Recession

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With the markets now starting to price in a potential recession, investors can now start to look for opportunities to buy great assets at a significant discounts from their highs.

In the stock market, those who start buying the dip now may end up panic selling on any further drop. But those who pick the right blend of stocks and diversify appropriately can set themselves up to succeed in markets today.

The Minority Mindset YouTube channel goes over 5 exchange-traded funds, or ETFs, that offer diversification and low fees. That includes the S&P 500 ETF (SPY), a basket owning the largest 500 publicly-traded companies today.

Overall, this ETF will mimic the overall market. With stocks well off their highs and investors panicking, starting to dollar-cost average into the S&P 500 now could be attractive.

Other ETFs also play to more defensive ways of looking at the market. That includes ETFs that specifically own a basket of consumer goods stocks or even precious metals.

And for those with a long-term bullish outlook right now, this could be an ideal time to get into the tech space. A number of ETFs play to themes of innovation. That includes the ARK Innovation ETF (ARKK), which has now underperformed since its inception.

The key is to continue to focus on the long-term, and not let any further swings in the market from here throw investors off their game and cash out at the worst time.

To hear the full list of ETFs for navigating today’s markets, click here.

 

Economy

Minority Mindset: The Housing Market Is About to Go INSANE…

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It’s no surprise that home prices have been on the rise. For existing homeowners, that’s generally good news. For those looking to buy a home, it isn’t. And now interest rates are rising, and so are mortgage rates.

The cost of home ownership is now growing 10 times faster than wages, which have been having a strong year coming out of the pandemic. This imbalance points to a correction in home prices ahead.

One sign of this trend is the rise of interest in adjustable-rate mortgages, or ARM. As pointed out on the Minority Mindset YouTube channel, these loans haven’t been popular in a while. But they allow banks to make money now on loans as conventional mortgage rates rise and demand dries up.

ARMs offer a teaser rate for the first 5 years of the mortgage. And if rates drop at any time before then, homeowners can potentially refinance into a lower rate. However, that may not be available – which could lead to soaring home financing costs down the line, and lead to a rise in foreclosures.

While the housing market still looks strong, rising rates and lower transactions, combined with the rise of ARMs, points to a potential slowdown for home prices in the months ahead, although some markets will vary.

To view the full details on rising homeowner costs and how it’s impacting the market, click here.

Cryptocurrencies

What Bitcoin Did: Bitcoin is Truth with Jeff Booth & Austin Hill

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For most in financial markets, Bitcoin and other cryptocurrencies offer a way to quickly make – or lose—money. However, since the start of Bitcoin in 2009, the project has taken on a considerable number of other dimensions beyond the monetary one.

That makes Bitcoin uniquely positioned to solve a number of society’s problems looming today. And ongoing improvements in the Bitcoin protocol can better ensure a positive outcome for mankind in the years ahead.

In the What Bitcoin Did podcast, guests Jeff Booth and Austin Hill look at Bitcoin. They show how having a secure, unconfiscatable form of money can help preserve and expand human freedom.

The results are bearing out in El Salvador. They became the first country to make Bitcoin legal tender less than a year ago. Since then, the country has seen a surge in tourism and an inflow of capital.

That’s in stark contrast to other small Latin American nations. Many tend to get stuck into paying debt to the International Monetary Fund.

Additionally, Bitcoin can be used to circumnavigate currency controls. That impacts the ability of many in impoverished nations to trade goods or services internationally.

Meanwhile, the use of Bitcoin as a payment method and form of savings can prove a better hedge against a local currency. That’s true even with the recent price volatility.

To listen to the full podcast, click here.

Income investing

Dividend Growth Investor: Nine Dividend Growth Stocks Rewarding Shareholders With a Raise

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Market selloffs can be a challenging time. Even great companies can get sold off with speculative names. That’s why investors should look for strategies that stand the test of time, and stick with them.

One such strategy is to invest in dividend-paying companies with a history of growing that payout over time. And to simply buy and hold them as long as they can continue growing their payout.

While it may seem like there are slim pickings in today’s markets, a number of companies are still performing well. And they’re raising their dividend payout to shareholders as a result.

The Dividend Growth Investor blog looks at companies that have a history of raising their dividend annually for at least 10 years running. That’s long enough to cover multiple economic cycles and conditions.

Today, a select number of companies are raising their payouts. Some are as small as a 4 percent increase, with one raising its dividend by 25 percent.

Besides the growth of the payout itself, investors should note the company’s earnings. And their payout ratio, which is the percentage of the company’s earnings going into the dividend. And on top of that, overall valuation for shares plays a role.

While the share price of any stock can go down in the short-term, a dividend growth company backed by rising earnings will tend to rise over time. That makes for a sound strategy in today’s markets.

To view the latest list of companies that just raised their dividends, click here.

Stock market

Of Dollars and Data: Right Now, But Wrong Later

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The stock market has turned bearish. And many investors are now expecting a further drop in stocks every day, rather than a gradual rise as seen during a bull market. That may lead many to cash out of stocks now, following their latest drop over the past few months, while waiting for a market rebound.

Such a move may save further losses in the short-term. But the data shows that such a move may be a mistake in the long-term.

As reviewed in the Of Dollars and Data blog, investors could sell off stocks six months into a decline (about now for the current drop). If they start buying again about six months after the bottom, to ensure the bear market is generally over, they tend to lose out.

Only in two instances, the end of the dotcom bubble, and the housing crash, would have seen this strategy beat the market. That’s because both of those drops featured crashes of nearly 50 percent from the top, and played out over an 18-month period.

Because markets often have six-month periods where there’s an overall drop, this strategy creates a lot of false positives. That could mean selling out after a drop, taking a loss, and missing out on most of the recovery gains.

All in all, it’s clear that market timing can have mixed results. Generally, it makes more sense to take a buy and hold approach with market drops, rather than trying to time big moves in and out.

To see the full data points why, click here.

Economy

Meet Kevin: WFT *JUST* Happened- Inflation Disaster & CPI Numbers

Posted on by Smart Investing

This month’s inflation data had a little of something for everyone – but just a little. Inflation did drop year-over-year. But it also came in higher than expected. That still leaves inflation rates at their second-highest level in over 40 years.

The biggest issue is that core inflation rose higher than expected, thanks in part to rising food prices. Core inflation is the key metric used by the Fed when determining interest rates.

On the YouTube channel Meet Kevin, there’s a deeper dive behind those headline numbers. And it’s clear that the core number is holding up strongly, against expectations for a larger amount of goods and services coming down.

The biggest determination for core inflation is food, energy prices, and transportation costs. So when energy prices rise, transportation prices tend to rise as well, which tends to magnify the costs.

That explains why airline prices are up 33 percent over the past year, with an 18.6 percent jump in the March numbers, one of the biggest reasons for inflation coming in strongly.

These numbers suggest that bond yields will continue to rise, with 10-year Treasury yields still holding up near 3 percent. And that the Fed will need to continue hiking interest rates relatively aggressively, in order to ensure that inflation gets knocked down even further.

To view the full breakdown on the latest change in CPI and what it means, click here.