Fed Slashes Rates Like It Is 2007
/Hi everyone,
Click below to watch this week’s blog. Enjoy.
Have a great week!
Brian E Betz, CFP®
Principal
Hi everyone,
Click below to watch this week’s blog. Enjoy.
Weekly Blog - 09-20-19 from Brian Betz on Vimeo.
Have a great week!
Brian E Betz, CFP®
Principal
Every so often someone asks me about gold and whether they should own it. Here is a look at the price of gold over the past 10 years:
You will notice a big run-up in the price of gold post-recession, from 2008 to 2011. Then the price fell -40% over the following years and has floundered around since then. Beyond the fact that we do not invest in currencies or precious metals (at least yet), gold lacks the one thing that matters most to us, which is a rising trend. The price of gold has been a mess for nearly 7 years.
So then why do people want gold?
Many consider gold to be a hedge against inflation. As prices rise throughout the economy (inflation) the theory is that the U.S. dollar becomes less valuable. If the dollar is less valuable, that means it requires more dollars to buy the same goods and services than it did in the past. This is what it means to lose "purchasing power".
This is where gold comes in.
The perception is that buying gold hedges against this risk that the dollar will become less valuable. Because gold is a hard asset and the oldest form of currency, it is believed to have a more stable value than the dollar, which fluctuates based on a variety of factors like stock market conditions, international trade and Federal Reserve actions. Using this logic, the "hedge" is that when the prices of all these other things in the economy eventually peak and reverse lower, gold will thrive.
In reality, it is really just a hedge against how we think others will react in times of economic fear.
The fear starts with feeling that real estate values and stock market prices will fall (for whatever reason). This stems to fear that the economy will fall into recession. Finally, because the U.S. Dollar is intrinsically linked to the economy, there is fear that the dollar will collapse. This all leads to the notion that buying gold might be a good idea because if the dollar dissolves the nation will be left with gold as its currency.
That entire thought process is flawed because the reality is that gold is an asset, not a currency. No one buys gold with the intent of transacting goods and services. They buy it because they think it will become more valuable should everything else they own plummet in value. The entire essence of thinking something will rise in value is based on believing that someone else will want it and be willing to pay you more for it. To that end, those who own gold are doing so as an investment, not as a means for bartering the exchange of goods and services.
If you consider buying gold at any point, ask yourself why...
I realize I sound somewhat negative when it comes to gold, but I am more so annoyed about the misconceptions that exist.
The S&P 500 lost -0.2% this past week. Let's look under the hood:
Last week's loss snaps the 5-week winning streak for the S&P 500, which had gained +4.6% over that span. Most sectors were negative as the overall market struggles to eclipse the previous S&P 500 record high from January.
This comes as no surprise. I felt the market would run into some headwinds right now, as I wrote about in recent weeks. We sold our Health Care sector position (XLV) last week, as it appeared to be sharing in the struggle to get above its previous peak. Take a look:
The risk/reward slanted in the favor of selling this fund and capturing the nice gain we had earned in the prior weeks. The price ran back up to the previous high just as we anticipated it might. But it appeared to lose a bit of momentum when it got there, so we felt it was wise to sell and reinvest the proceeds into another area of the market that might have more upside. I normally do not go into too much detail recapping these types of decisions, but because most accounts owned this Health Care fund it is worthwhile to share our thought process.
I posted another short video on our "Video Q&A" page, which discusses our investment beliefs. Take a look:
Investing Beliefs from Brian Betz on Vimeo.
Have a great week!
Brian E Betz, CFP®
Principal
PERCENSION WEALTH ADVISORS, LLC IS A REGISTERED INVESTMENT ADVISOR FIRM (RIA). ANY MATERIAL PRESENTED ON THIS SITE IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER FOR THE PURCHASE OR SALE OF ANY SPECIFIC SECURITIES INVESTMENT, PRODUCT, SERVICE OR STRATEGY. IT DOES NOT REPRESENT FINANCIAL ADVICE. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. CONSULT A QUALIFIED FINANCIAL ADVISER, TAX PROFESSIONAL, INSURANCE AGENT, LOAN OFFICER OR LICENSED ATTORNEY BEFORE IMPLEMENTING ANYTHING DISCUSSED HEREIN. ANY REFERENCES TO PERCENSION WEALTH ADVISORS, LLC AND ITS MEMBERS THROUGH SOCIAL MEDIA ARE NOT TESTIMONIALS AND SHOULD NOT BE REPRESENTED AS SUCH.
PERCENSION® is a registered trademark of Percension Wealth Advisors, LLC.