WEALTHTRACK

Have you noticed how rampant speculation is? Random investors seem to be making money hand over fist in numerous assets: disruptive companies like Tesla, whose stock has soared 600% in the last 12 months. Old economy stocks like video retailer GameStop up nearly 6,000% propelled by traders on commission-free trading platforms like Robinhood.  These are not isolated events. The zeitgeist is becoming very bullish. Do you feel like you are missing out? Has the world moved on?  No, it has not according to this week’s guest. In part 2 of our interview with financial thought leader, Richard Bernstein he makes a compelling case for long-term fundamental investing.  Bernstein is Chief Executive and Chief Investment Officer of Richard Bernstein Advisors. Rich has also been a regular since WEALTHTRACK’s launch in 2005.  We’ve weathered our share of booms and busts over the years. He will discuss some time-tested strategies to invest successfully through both conditions.    WEALTHTRACK #1741 broadcast on April 9, 2021 More info and the “Boomer knows best” - RBA Insights, March 2021” available here: https://wealthtrack.com/time-tested-strategies-for-successful-investing-with-hall-of-fame-strategist-richard-bernstein/ Navigate the Noise: Investing in the New Age of Media and Hype: https://amzn.to/2Rrfm5f

We have been living through an extraordinary period. It was a year ago that COVID was recognized as a global pandemic and since then over 100 million people have been stricken and more than 2 million have died.  Economies were locked down causing severe recessions. Central banks and governments responded with unprecedented amounts of monetary and fiscal stimulus. A worldwide effort by pharmaceutical companies to develop effective vaccines did so in record time. Millions are now in the process of being vaccinated. Global economies are now recovering with China and the U.S. recovering at a rapid pace.  Is the worst behind us? Are world economies and markets on a sustained path of recovery as many believe or are there serious hidden risks?  Risks are the concern of this week’s guest whose top priority as a money manager is capital preservation. He is Matthew McLennan, Head of the Global Value team at First Eagle Investment Managemen. Long before the pandemic, McLennan had been monitoring emerging geopolitical and financial risks globally, which he says were exacerbated by COVID. He’ll discuss specifics and how he is protecting his portfolios while still participating in aspects of the bull market. WEALTHTRACK #1740 broadcast on April 2, 2021 More info: https://wealthtrack.com/preparing-for-the-next-correction-while-participating-in-the-bull-market-with-matthew-mcclennan/

When a fringe economic theory goes mainstream and is actually implemented by policymakers you better pay attention. The once-fringe theory in question is called Modern Monetary Theory, or MMT for short.  The assumption behind MMT is that massive government spending helps the economy grow to its full potential, including full employment, and also finance major programs like universal healthcare, free college tuition, and green energy initiatives. Sound familiar?  What about the burgeoning federal debt? Not an issue according to Federal Reserve Chairman Jerome Powell. In an interview on National Public Radio this week Powell   said: “Given the low level of interest rates, there’s no issue about the United States being able to service its debt at this time or in the foreseeable future.”  Enter today’s guest, Paul McCulley, who wrote an academic paperback in 2013 titled: “Helicopter Money, Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation.”    McCulley is currently an adjunct professor at Georgetown business school where he teaches a very timely multi-disciplinary course combining law, economics, monetary policy, global finance, and behavioral finance.   I asked McCulley to explain why he believes helicopter money and the unprecedented fiscal and monetary cooperation we are seeing today is so essential, and not an issue.    WEALTHTRACK # 1739 broadcast on March 26, 2021 More info: https://wealthtrack.com/financial-though…ey-are-essential/ “Helicopter Money, Or How I Stopped Worrying and Love Fiscal-Monetary Cooperation” available https://www.interdependence.org/wp-content/uploads/2013/01/Helicopter_Money_Final1.pdf

It doesn’t take a rocket scientist to figure out that 2021 is a year of significant political and macroeconomic change. Meanwhile, the rollout of COVID vaccines is starting to unleash a year’s worth of pent-up consumer and business demand.  That demand is also putting upward pressure on prices and inflation expectations. Those pressures are showing up in the bond market where yields on long-term bonds, the most sensitive to rising inflation expectations are rising. The price of 30-year Treasurys has fallen 15.6% in just three months.  This is a huge change and could signal the end of the 40-year bull market in bonds that many Wall Street pros have been predicting for years. Perhaps they will now be proven right.  This week’s guest has been telling clients that inflation will probably be higher than many believe, that a significant cyclical recovery is in the works and is bringing with it a major change in market leadership.    He is a noted investment strategist known for his macro analysis and thematic investing. He is Richard Bernstein, Chief Executive and Chief Investment Officer of Richard Bernstein Advisors,  Bernstein explains why the shift in market leadership from stable growth stocks to cyclical value ones is normal and durable, and how to participate.  WEALTHTRACK #1738 broadcast on March 19, 2021 More Info: https://wealthtrack.com/richard-bernstei…tocks-is-durable/ In this week’s WEB EXTRA feature, Bernstein reflects on how the COVID experience has changed his professional and personal life.    https://wealthtrack.com/bernstein-pandemic-effect/

Part 2 of 2 John Rekenthaler has been tracking mutual funds at Morningstar since 1988.  He correctly predicted early on that index funds would surpass actively managed funds. Now he sees a similar trend for ETFs as they attract record amounts of cash and mutual funds suffer outflows.  WEALTHTRACK #1737 published on March 11, 2021 More info: https://wealthtrack.com/morningstars-john-rekenthaler-explains-why-etfs-will-surpass-mutual-funds-as-the-industry-standard/

John Rekenthaler, Vice President of Research at Morningstar and author of the twice-weekly “Rekenthaler Report” analyzes the influence of the online investment communities that have driven GameStop’s meteoric rise and stunning declines. Rekenthaler says their influence is here to stay, at least until regulators get involved.  WEALTHTRACK #1736 published on March 05, 2021 More info: https://wealthtrack.com/the-manipulation-of-stocks-by-social-media-investors-is-the-focus-of-morningstars-john-rekenthaler/

The balance sheet of the Federal Reserve continues to surge at an unprecedented rate, up 83% y/y to a historic level, $7.59 trillion at the latest count. According to our WEALTHTRACK podcast guest, financial historian, and long-time market observer James Grant, interest rates, the “central pricing mechanism for financial markets” have been pushed to artificially low levels by the Fed’s policies which have created numerous market bubbles. He cites Bitcoin as one of the most extreme examples. WEALTHTRACK #1735 published on February 26, 2021 More info: https://wealthtrack.com/bitcoin-is-one-of-many-bubbles-of-historic-proportions-today-says-financial-historian-james-grant/ Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth: https://amzn.to/3sxkIJm

Part 2 of 2 Old fashioned asset allocation used to be a fairly simple exercise: 60% individual stocks, usually U.S. large-caps and 40% bonds, mostly investment-grade corporates, some Treasury securities for liquidity, and a smattering of municipal bonds for higher tax bracket individuals.    Today it's a whole different ball game, juggling multiple global asset classes, using complex computer modeling, algorithms, pricing formulas, and intensive analysis.   This is the realm of Sébastien Page, head of T. Rowe Price’s Global Multi-Asset division where he oversees $350 billion in assets. Last week on WEALTHTRACK we discussed the concepts in his new book, Beyond Diversification: What Every Investor Needs to Know About Asset Allocation.   This week we will address the current investment environment and how he and his team are positioning clients’ portfolios. What does Page think of these alternative asset classes? We’ll find out.  WEALTHTRACK Episode #1734 broadcast on February 19, 2021 More info: https://wealthtrack.com/which-investments-are-poised-to-do-well-in-2021-strategy-advice-from-an-asset-allocation-pro/ AGAINST THE GODS: THE REMARKABLE STORY OF RISK: https://amzn.to/3dB4smt Beyond Diversification: What Every Investor Needs to Know About Asset Allocation: https://amzn.to/3u2Syrg

Part 1 of 2:  Talk to most investment professionals and they will tell you that portfolio diversification is the key to successful investing and that asset allocation among multiple asset classes, not individual security selection, accounts for as much as 100% of investment returns. Being broadly diversified among different asset classes is supposed to give you strong exposure to market rallies and protection in down markets as non-correlated assets zig when others zag and soften the downside impact. However, there are times when diversification doesn’t seem to work. Take the huge sell-off in the spring of 2020, the shortest bear market in history when asset classes plunged pretty much across the board, even gold and Treasuries took a hit.  What are the lessons to be learned about the usefulness of diversification from 2020’s experience? Is there a better way?  Our guest today is a financial thought leader in asset allocation at T. Rowe Price. Sébastien Page, Head of Global Multi-Asset at the firm. Page is also the author of a new book titled Beyond Diversification: What Every Investor Needs to Know About Asset Allocation. Page says diversification did fail in 2020’s bear market but that shouldn't surprise us, and yes, there is a better diversification strategy. We’ll find out what it is.  WEALTHTRACK #1733 broadcast on February 12, 2021 More info: https://wealthtrack.com/portfolio-diversifications-failure-to-protect-in-bear-markets-calls-for-a-new-strategy/   Beyond Diversification: What Every Investor Needs to Know About Asset Allocation: https://amzn.to/3u2Syrg

One of the most notable characteristics of the last decade was the wide divergence in market performance. We have reported many times on the narrow group of superstars, mainly large-cap U.S. tech stocks and the much wider universe of laggards, value and small-cap stocks in particular.  In 2020 that divergence blew up.  Small-cap went from worst to first. The year began disastrously.   Small-caps ended the year with their best quarterly gain ever, a stunning 31% advance in the index, handily beating large-caps for the quarter.  When it was all over the Russell 2000 had gained 101.3% from its March 18th low to year-end, although it lagged large-cap and tech for the entire year.   We have a WEALTHTRACK exclusive this week with an investment legend whose specialty is in-depth financial analysis in the small-cap universe. He is Charlie Dreifus, lead portfolio manager of the Royce Special Equity Fund  Before delving into small-caps I asked Dreifus to share his perspective on current market conditions based on his half-century of managing money. A hint: he told me “I've seen this movie before, and it doesn't end well.”      WEALTHTRACK #1732 broadcast on February 05, 2021 More info: https://wealthtrack.com/royce-special-equity-funds-legendary-charlie-dreifus-explains-his-winning-by-losing-less-strategy/