Category: INO.com Contributors

Powell Starting to Change His Tune

Posted on by Matt Thalman

Federal Reserve Chairman Jerome Powell should have started the November Federal Reserve meeting press conference with one of the more widely used movie quotes, "there's a storm coming." Chairman Powell's comments after the Fed meeting were certainly the most hawkish we have heard from him.

First, the Federal Reserve Board unanimously voted for the 0.75% rate hike. That alone is a sign that all members of the Fed believe we still need to slow the economy to fight inflation.

During the press conference, Powell took this perhaps another step further when he was asked a question and responded that inflation hasn't been coming down as fast as the Fed had hoped.

Powell's answer about inflation not coming down as his team expected came after he indicated the likelihood of a soft landing was diminishing. Powell mentioned that November's 0.75% hike, the fourth hike of that amount in four consecutive meetings, was "fast pace," however, he also insisted that it was "appropriate" given our current situation, referring to high inflation.

Powell also stated the Fed has some ways to go with future rate hikes. He continued, "We may move to higher levels than we thought."

Another concerning statement came when Powell said, "the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive."

I had written in the past that I felt the Fed Chairman was "sugar coating" the inflation situation to help stabilize the economy and the market's reactions to his comments.

However, Jerome Powell's comments on November 2, 2022, were the first time he did not come across as soft or sugar-coating about what is happening with inflation and the economy. In several ways, the Federal Reserve Chairman is telling the world that inflation is enemy number one and that what the Fed has done up to this point is not working.

So, what does this all mean for the average investor? Continue reading "Powell Starting to Change His Tune" →

Who Let The DOGE Out?

Posted on by Aibek Burabayev

Last week the top ten cryptocurrencies ranking was reshuffled as Dogecoin (DOGE) shot straight to the eighth place with a market cap just under $18 billion. If we skip stable coins and exchange related coin BNB then this meme coin seized the #4 spot right below the Ripple (XRP).

If we look at the seven-day performance of top ten cryptos in the table below – none of them could boast the triple digit gain that we see in Dogecoin with +125% growth.

If this rally stays intact, the Ripple could lose its #3 spot soon. The price of the DOGE should add another 1/3 to 18 cents for this to happen.

top 10 coins

Source: coinmarketcap.com

What has fueled such a strong rally of this coin? The main reason is the hope that comes with the final takeover of Twitter by Elon Musk, who is a big fan of the DOGE and he pledged to support this meme coin.

Let me show you the anatomy of the rally in the 3-hour chart below. Continue reading "Who Let The DOGE Out?" →

The Downside of High-Reward, High-Risk Investing

Posted on by Matt Thalman

Over the past number of years, the best investments nearly all came out of the technology sector. We had terms like the FANNG stocks coined, we were told value-investing was dead, and year after year, the stable dividend-paying stocks just slowly trailed behind high-flying technology companies.

But, towards the end of November 2021, things began to change.

In November of 2021, the Nasdaq was up 130% on a five-year chart but is now up just 61%. The same chart shows the Dow was up 55% when the NASDAQ hit its peak but is now up just 37% over the last five years. On a year-to-date chart, the NASDAQ is down 31%, while the Dow is off just 11%.

If you look at individual technology stocks, it can get even worse. For example, Tesla is down 44% year-to-date, while Meta is off more than 70% since the start of the year.

But, something like boring old Coke-Cola, is flat on the year. And I should mention Coke is yielding a 2.96% dividend, which, if calculated into the year-to-date return, would put your investment ahead for 2022. Not very many big-name NASDAQ technology stocks can say that.

Every investor wants a big return. Seeing a stock climb 10, 20, 30 percent, or more in a single year. And it certainly beats seeing a stock climb a measly 4 to 6 percent.

However, the more important thing investors need to remember is that when stocks rise by double digits or more, they probably carry a lot more risk than a stock that hardly looks alive.

The Dow Jones Industrial average is full of stocks that creep along. They don't seem like suitable investments if you look at them on one-year charts. But, over decades, these stocks have been outstanding performers, especially if you add dividends, when considering their total returns.

Furthermore, the slow growth comes with low, or at the very least, much lower risk than the higher return stocks. That low risk could be what keeps you from making a rash decision with your portfolio.

When a holding in your account is down 40 or 50 percent in a year, it is easy to simply say you are cutting your losses and selling the stock.

However, history has proven the best method of investing is a long-term buy and hold. And that means holding stocks when they are down or lost massive amounts of value. Continue reading "The Downside of High-Reward, High-Risk Investing" →

Not All Gold Miners Are Created Equal

Posted on by Taylor Dart

It’s been a challenging two years for investors in the gold space, with the metals making no progress since Q3 2020 and the Gold Miners Index (GDX) suffering a 52% decline from its highs.

This violent bear market can be attributed to significant margin compression for most gold producers, with them being hit by inflationary pressures (fuel, steel, cyanide, labor) and the impact of a lower gold price on sales.

The result? Margins are down over 25% on average from Q3 2020 peak levels.

GDX Chart

(Source: TC2000.com)

On the surface, this might not seem like a very attractive investment thesis given that gold producers are price-takers, gold continues to trend lower, and they’re already seeing margin compression at $1,660/oz.

However, the 52% correction in the GDX has left sector-wide valuations at their lowest levels since 2018, when all-in-sustaining cost margins were at $200/oz, nowhere near the $500/oz margins currently.

Hence, I believe this negativity is more than priced into the sector, especially if gold can find a floor near $1,600/oz, which looks likely given that we have extreme pessimism.

That said, not all miners are created equal, so it’s essential to focus on quality and those names bucking the margin trend. In this update, we’ll look at two names trading at deep discounts to net asset value that have outstanding business models: Continue reading "Not All Gold Miners Are Created Equal" →

CDs Are Back In Style

Posted on by George Yacik

For the past 20 years or so, old-fashioned saving has gone out of style. Back in the 1980s and 1990s, you could build a fairly respectable—and guaranteed—return on your retirement portfolio by buying bank certificates of deposit.

Since then, of course, we’ve encountered one seemingly endless economic crisis after another—the dot com bust, the 2001 terrorist attacks, the 2008 global financial crisis, and the 2020 Covid-19 pandemic—that have basically forced the Federal Reserve to lower interest rates to or near zero percent.

That policy, of course, largely destroyed the CD (certificate of deposit) market and forced savers, however reluctantly, to buy stocks instead, because There (Was) Is No Alternative, or TINA.

If you wanted to earn any kind of return on your portfolio, you really had no choice but to buy stocks, either directly or through mutual funds and ETFs.

And that strategy has paid off pretty nicely for most people over the past two decades, provided they could stomach the roller coaster ride that the stock market has put them through over that time.

Until now.

Now the Fed has suddenly re-discovered monetary restraint in the form of higher interest rates to slay the inflationary beast it helped to create.

Since the end of last year, when the Fed finally came around to the notion that inflation wasn’t transitory and signaled that the party was over, stocks and bonds have tanked. If your retirement portfolio is only down 15% or so since then, consider yourself lucky.

But there is a positive flipside to the Fed’s new hawkish interest rate policy, and that is that it is now fashionable—and financially savvy—again to start shopping in the CD market. (If you’re in the market to buy a house, however, with mortgage rates now at 7% and rising, I’m afraid you missed the boat.)

Instead of following the stock market’s gyrations, mostly southward, here’s something that might cheer you up a little. Visit the brokered CD page on Schwab or Fidelity or wherever your account is and take a look at the rates being offered. I think you’ll be both surprised and pleased. You’ll want to party like it’s 1999. Continue reading "CDs Are Back In Style" →