As I promised last week, I am going to step aside from the interest-rate soap box that I’ve been standing on for the last six weeks or so in my Money and Markets articles.
That’s because in today’s column, I’m going to introduce you to a cutting-edge, functional and proprietary asset-allocation model that I created. I use it to help my ultra-wealthy clients navigate today’s uncharted economic landscape. And now, you can use it to protect and grow your wealth, too.
But first, let’s take a quick look at where we are in the overall macroeconomic environment.
I was spot-on with my prediction in my Money and Markets article on March 17 when I alerted you that intermediate- and long-term fixed-income yields were headed down despite the most recent increase in short-term interest rates by the Janet Yellen-led Fed.
Safeguard Your Assets From Creditors, Predators, and the IRS
Upon death, legal fees, income taxes, federal and state inheritance taxes, and other settlement costs often strip more than 70% of the assets intended for your family.
So it’s critical to know how to protect your assets and ensure that your family receives what you’ve worked so hard to earn.
In a new special report called, The 10 Most Common Estate Planning Mistakes and How to Avoid Them, 45-year estate planning expert David Phillips shares how to keep your estate where it belongs…in hands of their loved ones.
Indeed, since the Fed raised interest rates in March 2017, and before that in December 2016, the U.S. Treasury yield curve has become much flatter… resulting in an increase in the short-end of 0.5% since December.
But in response – despite what the popular financial press was telling you at the time — the long and intermediate portions of the yield curve, after rising for much of Trump post-election period, stagnated, and began to fall.
Here’s a chart that shows you how it’s all played out – just as I expected — on the interest-rate front.
|Click for larger version|
What’s more, I got it right when I told you that the current environment in U.S. stocks would follow long- and intermediate-term treasury yields lower.
In fact, just this past Wednesday, the popular blue-chip benchmark for U.S. stocks, the Dow Jones Industrial Average, fell 118.79 points to 20,404.49, marking its lowest close this year since February 10.
What’s more, if you had followed my advice and purchased the ETFs GLD and TLT as hedges for the growth component of your portfolio, you would be sitting on a nice profit – not enough to make you rich and fully fund your retirement plans, but a tidy profit nonetheless for taking minimal risk over the course of just five to six weeks.
And for Safe Money investors – after all, I’m the editor of Weiss’s leading publication for conservative investors, the Safe Money Report – that’s what it’s all about, grinding out and holding onto gains, while avoiding the big wipeout so the growth portion of your portfolio can make you wealthy over time.
For the more adventurous, had you purchased an inverse ETF such as SH or SDS on the U.S. stock market when I gave you the signal that interest rates and stock prices were headed lower, your profits would have been even greater because you would have leveraged your bet.
But now, it’s important to keep my promise of sharing with you my proprietary asset-allocation model that’s a perfect fit for the current financial environment.
|Geopolitical risk will make the markets very volatile … so keep your head when others are losing theirs.|
As profit-seeking investors, it’s important to understand and to accept the fact that we are operating in a new and unconventional investment world because of three primary factors:
First: We are in a slow-growth world because of massive global debt overhang. As a result, I expect real U.S. GDP growth – on the top end — of about 2 percent for 2017 and 2018 as the global economy continues to battle deflationary pressures. For more on the huge debt dilemma, click here.
Second: There is a ton of geopolitical risk currently in the system. And with an unconventional president running the show here in the U.S., there’s plenty of opportunity for a potential surprise. In the financial markets, surprises mean volatility. And currently, the chances for a downside surprise are high as we are operating in a rapidly changing world. For more on the upcoming geopolitical calendar, click here.
Third: For the foreseeable future, we’ll remain in a world of experimental central-bank monetary policy, meaning that Quantitative Easing – or whatever else anyone wants to call it – for a lot longer than the bankers, politicians or all shapes and sizes of government bureaucrats want to admit. For more on the Trump administration’s secret economic plan, click here.
Since Safe Money investing is about prudently allocating your precious investment capital to participate in market upswings while protecting the downside, you can’t apply traditional “deworsification” practices in today’s world.
So that’s why I developed the barbell strategy.
It helps you make certain that all your investment bases are covered with a prudent mix of safety and growth as shown in the barbell graphic below.
It’s important not to be “all in” on either side of the barbell and to always maintain some of your investment capital on both the safety and growth sides. If you review my previous Money and Markets articles, you’ll see that I’ve recently been recommending that you increase the market hedges in TLT and GLD for safety.
At the same time (on the growth side of the barbell), I’m still currently recommending buying starter positions in the world’s highest-quality companies, businesses that can grow their earnings in even the most difficult economic environments. These are select companies that have rare global distribution platforms and bullet-proof balance sheets.
In the Safe Money Report, you’ll find my Dependable Dozen that should form the core of the growth component of your portfolio. These companies are hidden in plain sight. But with my help, you’ll know where to look to find them.
In next week’s article, I’ll get into more detail on how to apply this powerful barbell strategy in today’s uniquely unusual environment.
Until then, keep an eye on the 10-year U.S. Treasury. It will tell you all you need to know about what’s happening in the financial markets.
P.S. In my newsletter, Safe Money Report, I provide you with crystal-clear views of the financial landscape and how it will impact your financial future. Specific guidance on “what,” “when,” and “how” to buy. Updates on all recommendations, including the go-ahead on precisely when to take profits while protecting your principal. Ratings and insights on the good, the bad, and the ugly in the banking, insurance, and brokerage businesses. Read more here…