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The Best of What They Said and I Read Week Ending 8/11/2019

“The Best of What They Said and I Read” week ending 8/11/2019 

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice


Bloomberg – August 8, 2019 – The Non-Weirdness of Negative Interest Rates – Joe Weisenthal 

  • “German government bonds with maturities going out to 30 years now trade with negative interest rates. UBS Group AG plans to charge an annual fee of 0.6% for some wealthy clients to hold their money…Negative rates are showing up everywhere…turning on their heads traditional notions of lending and borrowing…A lender is supposed to get paid to part with capital, while a borrower is supposed to pay to use that cash for some purpose. It seems crazy that anyone would voluntarily part with their money, only to end up with less of it.”
  • “But what if negative rates are totally normal? ...Imagine, for a moment, a time before the existence of a financial system. Rather than people accumulating wealth in pieces of paper (cash, bonds, stocks, etc.), the main way to build up wealth is to buy lots of physical things. Mansions, art, stores of grain, and so on. It should be obvious that this kind of wealth costs money to maintain. It degrades. You have to pay security guards. It can all go up in smoke in a fire. You can keep your wealth in physical things, but you’ll constantly pay a price for that—a negative interest rate, if you will.”
  • “Of course, all this exists today. If you want to hold gold and watches and sentimental things at a bank, you pay to rent a safe deposit box…If you want to hold your wealth in land, then you pay in insurance and security and property taxes.”
  • “…This is the world we have today. Thanks to ever-increasing wealth concentration and meager growth across the developed world, you have some people sitting on incredible piles of cash and a shortage of people with robust opportunities to borrow and use that cash.   There’s a reason Europe is ground zero for the explosion in negative rates. Growth has been mediocre seemingly forever, there is still tons of wealth, and beyond that, there's a relative shortage of stable institutions in which to park money…In the meantime, there’s lots of money out there and a limited capacity to store it all. So increasingly, savers are going to have to pay for money storage services.”  

The Wall Street Journal – August 7, 2019 – “Overheard”

  •  “U.S. stock futures were in a decidedly better mood as Tuesday began than they were on Monday, rising 0.5% as Asian markets shut shop for the day.  It wouldn’t be the first time.  “Turnaround Tuesday,” when stocks rebound from Monday selloffs sparked by bad news over the weekend, is a part of market folklore.  But the phenomenon is backed by unusually strong evidence. Take 2008, the worst year in the history of the S&P 500 index.  An investor who bought the benchmark at Monday’s closing price and sold again after Tuesday’s trading would have made a 23% gain by the end of December.  In fact, since the beginning of 1980, the S&P 500’s average Tuesday gain has been 0.07% - the best of any day of the week…” 

U.S. Global Investors - Investor Alert – August 9, 2019 – Frank Holmes 

  •  “…The major market indices finished down this week. The Dow Jones Industrial Average lost 0.75 percent. The S&P 500 Stock Index fell 0.46 percent, while the Nasdaq Composite fell 0.56 percent. The Russell 2000 small capitalization index lost 1.34 percent this week”
  • “…Stocks offer more than bonds for income-oriented U.S. investors for the first time in Donald Trump’s presidency. This conclusion is based on a comparison between the dividend yield on the S&P 500 Index and the yield on 10-year Treasury notes. The gap turned positive Thursday after being negative since Nov. 10, 2016, two days after Trump was elected and two months before he took office, according to data compiled by Bloomberg.”
  • “…Smaller U.S. investors are so pessimistic about stocks that they may have set the stage for a market rebound, if history is any indication. Just 21.7 percent of the participants in a survey by the American Association of Individual Investors were bullish in the week ended Wednesday, and 48.2 percent were bearish. The gap favored the bears by more than 25 percentage points for just the 10th time since mid-2009. After the earlier instances, the S&P 500 Index had an average gain of 9.8 percent during the next three months.”
  • “…According to a confidential U.N. report seen by Reuters, North Korea is funding its weapons of mass destruction with cryptocurrency and fiat currency stolen from banks and exchanges. The report says that North Korea has used “widespread and increasingly sophisticated” hacks to collect roughly $2 billion, which is laundered over the web, reports CoinDesk.”

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