Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

Stock markets predicted the U.S. election

Posted By |

By Dale Roberts, Cutthecrapinvesting

Special to the Financial Independence Hub

What else could we write about? The news and stock market news and social media was just swamped with election fever and fervour. Yes the elections in the US stole the spotlight. There was not much light left for any other topic. And election predictions were everywhere. The predictions mostly got it right as they also got it wrong. The stock markets predicted the US election outcome. But there was certainly no massive Democratic (blue wave) as had been predicted by many pollsters.

Image by Tumisu from Pixabay

The US stock market has a very good record of predicting US presidential election outcomes. Since World War II, the stock market has predicted the outcome 88% of the time. That record just improved as US stocks (the S&P 500) predicted a Joe Biden victory.

As I had offered in my weekly MoneySense column …

… when the S&P 500 fell in the three months leading up to the November vote during a presidential election year, the incumbent president or party of the outgoing president has lost the election

As the political sayin’ goes …

It’s the economy stupid.

And in 2020 another global event played into that narrative …

It’s the pandemic stupid.

And certainly those two events are connected; the pandemic killed the economy.

Related post: How does the pandemic end? With a cold.

The stock markets also cheered the election

It appeared that the stock markets also found or looked for any reason to embrace the election, coming and going. The markets offered generous gains on Tuesday (election day) and then the gains continued throughout the week.

From this CNBC post …

Despite the uncertainty around the presidential vote, Wall Street notched its best weekly performance since April. The S&P 500 and Nasdaq jumped 7.3% and 9%, respectively, for the week. The Dow rose 6.9% this week. The S&P 500 also posted its biggest election week gain since 1932. Continue Reading…

The U.S. Presidential election, Economy and Gold: What’s Next

Posted By |

 

By Nick Barisheff

Special to the Financial Independence Hub

Global stock markets suffered the worst first quarter in their history in 2020, as the COVID-19 pandemic rattled markets. After slowing 5% in the first three months of 2020, the U.S. economy shrank by a whopping 33% in the second quarter. If you think these numbers are bad, it is only going to get worse. The second wave of the pandemic is forcing governments around the world to renew lockdown measures that will push the U.S. economy, and most western economies, to the brink.

Chaotic elections, a battered economy

This is all happening at a time when the U.S. just conducted the most chaotic presidential election in its history in November. Rioting and civil insurrection are occurring in U.S. cities, and crime is accelerating. Lawsuits over mail-in ballots have already started across the country. What’s more, the nomination of Amy Coney Barrett as successor to Ruth Bader Ginsburg promises to be hotly contested, as the choice of nominee will have huge implications following the election. If the election result is disputed [as it was within days of the November 3rd vote: editor] the U.S. Supreme Court may end up deciding whether Trump or Biden will be president for the next four years.

If the global pandemic, civil unrest in many U.S. cities, war looming in Armenia, thus pulling Russia, NATO and the European Union into a conflict were not enough, the U.S. economy, as well as most western economies — including Canada’s – are going to get a whole lot worse.

Overvalued markets, declining corporate profits

U.S. equity markets and corporate profits were already on a divergent path well before COVID-19 hit, and this trend will only continue – especially if the second wave forces more closures and lockdowns in the fall and winter. Restaurants, hotels, travel and tourism, airlines, and small businesses across the country are barely hanging on. Bankruptcies are set to skyrocket.

Coming defaults in the real estate sector

One of the biggest economic issues — one that hasn’t received a lot of attention — is the wave of defaults that will hit all areas of the real estate sector. Financial districts of major cities are ghost towns. It’s just a matter of time before large tenants terminate or default on their leases. Developers are stuck in a rut, as demand has collapsed.

Mortgage defaults and collapsing real estate markets will in turn lead to problems in the banking sector. In fact, mortgage delinquency rates in the U.S. climbed to 8.2% at the end of June – the highest level since 2011. More than 8% of all U.S. mortgages were past due or in foreclosure.

The U.S. Presidential Election, The Economy, and Gold | Nick Barisheff

To keep the economy from collapsing, the U.S. Federal Reserve and other western central banks are going to have to print even more money, which will only exacerbate the bubbles in the financial markets and margin debt levels. What’s most worrisome is that all these factors — declining markets, a shrinking economy, and the second wave of the pandemic — are morphing together just as the U.S. is about to face one of the most chaotic presidential elections in history.

How should investors proceed?

What are investors to do? If you listen to the media or those in the industry, the mantra is to stay invested for the long term. That strategy works well during long bull markets. However, this strategy doesn’t make sense when you’re standing on the edge of a precipice — which we are today. Continue Reading…

Q&A on the new Harvest global bond ETF

Posted By |

 

By Bradley Komenda

(Sponsor Content)

Harvest Portfolios Group launched a global bond ETF in January 2020 to complement its equity ETF offerings.

The  Harvest US Investment Grade Bond Plus ETF (HUIB:TSX) is managed by Boston-based Amundi Pioneer Asset Management, a subsidiary of Amundi Asset Management, a leading global manager based in France. In a Q&A, Bradley Komenda, the ETF’s portfolio manager, discusses how Amundi’s value investing approach helps guide its strategy. Mr. Komenda joined Amundi Pioneer in 2008 and is also Senior Vice President and Deputy Director of Investment Grade Corporates at the firm.

Financial Independence Hub: What is the demand for these bonds for the Canadian investor?

Bradley Komenda:  Canadian bond market opportunities are pretty narrow and heavily weighted towards energy and financials. Because there is a lot of demand for these bonds, yields are less attractive than in the US.

This bond ETF gives you breadth. It is Canadian dollar hedged, but with access to top quality US, European and Global issuers.  Expectations of further fiscal stimulus will all be supportive of the corporate bond market, so we think that this is where we want to be.

Q: What is Amundi Pioneer’s approach?

A: We are value investors. We invest in credits that we think over a one to three-year time horizon are going to generate a superior return. By value investing, I don’t mean buying the cheapest securities. It means trying to identify the securities that have the best risk adjusted return potential.

Q: How do you assess risk?

A: We look at risk in three ways. We look at nominal risk, which is how much we have invested in a single issuer. Then we look at the maturity of the bonds. We know that if we buy a one-year bond, it is a lot less risky than buying a 30-year. And then we look at duration times spread, (DTS) which is a way to measure the credit volatility of a bond.

Q: Where is the Harvest US Investment Grade Bond Plus ETF on the risk spectrum?

A: From an overall portfolio perspective, this bond ETF is rated low risk, and within the fixed income universe, I’d say it’s medium.

If you want lower risk, you can do a couple things. You can buy government bonds, but after inflation your purchasing power will be eroded even with longer duration bonds.

If you go for a short-term ETF, or cash, you’re going to struggle to get a yield similar to inflation. So, this ETF is for someone with patience, a one to three-year time horizon and a willingness to accept short-term volatility but with the expectation of attractive returns relative to risk-free or very short bonds.

Q: What about bond quality?

A: HUIB is concentrated in the Triple B space (BBB) or higher. The breakdown is roughly 60% BBB, 30% A or higher and 10% Non-rated.

Q: Who is the core investor for this bond ETF?

A: Anybody who wants exposure to fixed income. That’s because it has a negative correlation to stocks which means they move in different directions.  If you buy a high yield fund, you’re going to get more yield, but you’re going to have a positive correlation to stock market movements.

 

Q: Investors worry about liquidity. How easy is this ETF to sell?

A: It’s highly liquid. We had a liquidity crisis in the corporate bond market in March of this year. The Fed stepped in and now is backstopping things by purchasing bonds as needed. It means the draw down we saw in March and early April is unlikely to occur again.

Q: What is the relative advantage of this ETF?  

A: This ETF is part of our investment grade corporate bond strategy. Continue Reading…

Fundamental Digital Marketing practices for 2020

Posted By |

By Mike Khorev

Special to the Financial Independence Hub

It’s no secret that the world of digital marketing is continually changing, and every individual marketing channel in it is also rapidly changing all the time. Meaning, if you want to utilize digital marketing to grow your business effectively, you’ll need to stay up-to-date with the current trends. 

Although some digital marketing parts stay relatively the same, like how search engine optimization works and the importance of email marketing, there are also significant changes and even brand new channels that can significantly change the game. 

In creating any digital marketing strategy, however, it is essential to focus on creating a strong fundamental that you can easily expand to other digital marketing tactics; these fundamental tactics can act as a vital building block for your business, so even when you’d need to adopt a new trend, you can easily integrate it with this existing fundamental.

That said, here are the fundamental digital marketing practices in 2020 and onwards:

1.) Content Marketing and SEO

In this age of social media, content is king. 

Whether you can be successful in your digital marketing or not would ultimately depend on whether you can attract and engage enough audience through your content:  

  • You generate leads by attracting prospects with valuable content.
  • You nurture leads by using content to educate your prospects about your product/service and establish your credibility via consistent content quality.
  • You convert leads into customers by using content to convince people to buy 

So, content should be the backbone of your overall digital marketing strategy, and SEO (Search Engine Optimization) would be the primary way for people to find your B2B brand. 

However, since more businesses are now focusing on content marketing, the competition in attracting the audience’s attention with content is now much tighter. Simple and informative, educational content that worked in 2017 simply won’t cut it anymore these days, as readers now expect the highest quality of information and authoritative data. 

Also, consumers now expect various forms of content in textual blog posts and white papers and videos, podcasts, infographics, and other mediums. Diversifying your content is very important and offers more personalized and interactive content for each audience, which will bring us to the next point below. 

2.) Conversational and Personalized Marketing

 The rise of various AI and machine learning technologies has provided us with more ways to implement highly-customized and conversational marketing tailored for each prospect. 

One of such technologies is the chatbot, which has been popular among many businesses in recent years. A 2017 survey by Gartner has predicted that 47% of organizations will implement chatbots for customer service in the years to come. 

Chatbots can allow businesses to implement personalized marketing with different implementations. For example, in a sales inquiry conversation,  the chatbot can ask for preliminary questions about the prospect’s preferences, available budget, and so on, so when the chatbot finally passes this prospect to a human sales rep, the process would be much more seamless for both the sales rep and the prospect. 

According to Fractional CMO Mark Evans, conversational and personalized marketing channels can help marketers create highly-targeted marketing campaigns and gather more information about your prospects and customers. 

3.) Video Marketing

Video is technically a part of content marketing, which we have discussed above. Still, in the past half-decade, video marketing has grown to be a powerful digital marketing channel that deserves its attention.  Continue Reading…

Bullshift Culprits 1 and 2: FOMO and TINA

Posted By |

By John De Goey, CFP, CIM

Special to the Financial Independence Hub

Bullshift Culprit #1 FOMO (Fear of Missing Out)

For anyone who has been out of the loop, there are a number of acronyms and memes that have popped up over the past decade that help commentators to capture contemporary zeitgeist.  One of the most popular is FOMO – the Fear Of Missing Out.  The basic idea here is that other people are doing something (having fun, getting rich, cheating the tax man) that others want to get in on.

Getting in on things is all fine and well, provided they are legal.  Many aspects of FOMO are indeed legal and it should be obvious that there are social risks associated with wanting to do things that are not.  The thing to note is that there’s strong social pressure to participate – largely because there is some form of social proof that makes it seem as though everyone else is doing it, too (and getting away with it). If there’s one thing that upwardly-mobile people hate, it’s the notion that they are not ‘keeping up with the Joneses’ when they quite easily could be – if they only did whatever it was the Joneses are doing to give them the status / income / happiness edge they have in the first place.

Of all the possible examples of FOMO, getting rich by playing the stock market may well be the most insidious and the most common.  Anyone with seed money can do it.  No matter how rich or poor you are, if there’s a sense that you can make (say) an “easy 15%” on your money by investing in security X or product Y and that Betty and Bob in marketing both did it (and showed you their quarter end statements to prove it), the pull is often irresistible.  This can sometimes be fodder for something called “greater fool theory.”

Most real investors say “buy low; sell high,” but it needs to be noted that there is a segment of the population that makes money by using the principle of “buy higher; sell higher.” As long as there’s a ‘greater fool’ out there who is prepared to pay even more than the outrageous price you paid for something, you can make money by paying an outrageously high price to begin with.  This is a bit like a game of chicken or musical chairs.  At some point, the market runs out of ‘fools’.  In finance lingo, that’s when the bubble bursts. Continue Reading…