Photo Credit: picme1983 || Imagine a hurricane that never stops entirely
This should be a short post. When valuations are high, volatility is typically high as well. When interest rates are low, volatility also is high. Why? A situation has been set up by the functional equivalent of the “Wizard of Oz” where small changes to interest rates or economic activity will have big impact on stock prices.
And so I am telling you, be ready for whippy markets. The sorcerer’s apprentices at the Fed, gamely trying to cover for their bosses (Congress) who have no coherent idea of what to do, will keep short-term, high-quality interest rates low.
And that’s fine, not, as even the slightest variation in wording will make economic agents jumpy. When markets are priced to perfection, even the slightest breeze makes the branches at the top of the tree move hard.
My advice to you is simple. Run a balanced portfolio, and resist the trends. Buy low, sell high. Sell to the greedy, and buy from those who panic.
Final note: as far as economics goes, there is very little difference between the red and blue parties. The purple party controls DC, and all they do is run huge deficits and ask the Fed to monetize them via expanding bank credit. Would that we could vote them all out of office, balance the budget on an accrual basis, and link the dollar to gold.
We are going to have some significant disaster out of the current policy, but I can’t tell what kind of disaster will come. They expected inflation in the Great Depression, and got deflation, as the rich were able to protect their interests. That may happen this time as well. Don’t be too certain that we will get inflation.
The alleged sorcerers at the Fed spend their days bickering about CPI versus PCE, neither of which is remotely correlated with actual cost of living. You never see Greenspan or bernanke or yellen or Powell at a supermarket. They don’t pay their own health insurance or deductible. They don’t drive themselves to work or use their own cars, they haven’t visited a gas station in decades. How can these people claim to know about an economy they don’t even participate in?
Medicare is talking about a 7% increase next year, that’s for “free” medical care. How many Federal Reserve PhDs would it take to figure out 7% is much higher than 2%?
Who cares what Powell thinks about inflation? Are we supposed to believe he suddenly bought his own groceries?
Let me know when these so called “experts” figure out that 7 is greater than 2.
Please explain how it happened?
They expected inflation in the Great Depression, and got deflation, as the rich were able to protect their interests.
David – you are afraid to answer the question of why CFA members should continue to pay dues to Charlottesville every year to bankroll a PR campaign against the analyst profession… oh, and building a giant endowment so they can pay themselves more than most members forever.
CFAI won’t release numbers, but two large societies in the USA are suggesting that over 10k members opted to stop paying this year. Employers aren’t reimbursing, and the value proposition is zero. Anyone can read CFA magazine articles online, most aren’t written by members. they articles are close to useless so no one is missing anything if they eventually get moved behind a pay wall.
Departing members can write on their resume that they passed the exams and were a member for n years… there is nothing the academics in Charlottesville can do about that statement.
Post your opinion or don’t. Now former members have voted with their feet
I will post — I’m a busy guy. My opinion will make no one happy. And typically I delete comments that question my integrity, but I will let this one stand for now.
@Mike the former…
You don’t need David’s approval to pause (or permanently end) your CFA membership. Just stop paying the dues and don’t use the designation. Problem solved, no fuss, no mess.
Back in 2011-2012, there were supposedly 120,000 members give or take (I think it was 125, but I’m rounding down). In the 7-8 years since, at least 100,000 people took the exams each year. Lets assume 5% passed level III — the pass rate is about 33%, but one has to factor the huge number of test takers in India and China who take the exams 10x or more (there are a LOT of repeats). The number of exam takers has been higher than 100,000 per year, but I’m still rounding down. If one wants to assume a greater number of test takers, or a higher pass rate, or a higher starting number of members — that only furthers the point.
Assuming a 5% pass rate, times 7 years, plus the 120,000 to start… one might expect 155,000 members by 2020. The actual number according to CFA Institute was 94,000 dues paying members (actually 93 and change) in 2019 — last year.
This means roughly 26,000 members stopped paying (more once new members are factored in). I deliberately rounded down in all my estimates above, I suspect the number of former members as of EOY2019 is actually much higher.
In 2020, Wall Street has been quietly laying off people all year… even more people will stop paying going forward.
My advice to you: ask your customers if they value continued membership. Ultimately that is who’s opinion really matters.
BTW, I was reminded that there is a counting problem with CFA membership numbers.
Margaret Franklin, in her first letter as CEO, claims CFA institute has 178,000 members. She doesn’t say how many are dues paying, nor does she say how many regularly attend society meetings or otherwise participate.
The two local societies near me say there are 88,000 or 94,000 CFA members paying dues… and significantly less than that who actively participate in their local society.
One former president of the nearest society points out that most articles in CFA magazine are written by non CFAs. He also pointed out that the CFA institute board votes are always x people running for x openings… so the winners are a foregone conclusion. It’s not really a vote.
Low participation in local societies, low participation in CFA magazine, and an insider clique board of trustees — all point to minimal member involvement. Hard to imagine these ghost members are dues paying.
I don’t want to speak for David… but it’s curious that he writes a blog, and realmoney and Wall Street all stars. He doesnt mention writing for CFA magazine, and neither do most CFA members (dues paying or not).
David, I am interested in your thoughts on parties. I would think some of the taxes that the democrat’s are proposing are not as business friendly as the republicans. I agree they are basically all the same in the end. In terms of investing right now is it best to just keep buying the dips as they occur between now and the new year or is there too many unknowns for you