It’s Episode 119 and economic growth continues, much to the chagrin of many Wall Street strategists. The economy continued to grow in the first quarter. Earnings season is upon us and earnings have been pretty good. Technology has been leading the way. Markets are going higher and the French stock market is leading all markets. So it’s crazy out there. We’re going to break it down for you today.
On The Tipping Point, we’re going to talk about variables that you need to factor in when it comes to you becoming financially independent.
Even Jamie Dimon had it wrong on the economy
In the last 12-18 months, all the pundits, pessimists, and permabears were telling us that we would be in a severe recession right now.
- GDP came in at 1.1% positive. Below what the estimates were but not as dire as predicted
- The employment market just doesn’t seem to be cooling off
- People’s wages are going up
- If we look at inflation, it’s been a slow drag, but it is starting to come down
- And by the end of the year, the other big factor could be productivity as more return to the office
A hurricane on the horizon?
When you look at when these forecasts were made, even Jamie Dimon, arguably the greatest CEO in the banking industry. He runs one of the most productive, largest banks and just made a phenomenal acquisition of First Republic Bank said that there was a hurricane on the horizon.
- He made that statement when the market was making its low last June.
- It just goes to show you that no matter how intelligent or no matter how much information you have, investing is emotional.
- So when things are really dire and the market’s down, you know, people project the future based on the most recent experience.
Investors forget we’re in a global economy
- Ryan and Chris talked to a client from India who saw a Louis Vuitton store with a line around the block in New Delhi
- LVMH is the number one stock in the French stock market
- France is benefiting from emerging markets where the middle class is expanding at a huge rate
The population on the planet keeps growing and they want goods and services
- It’s kind of a simple equation, actually. When Bob started in the business, there were about 4 billion people on the planet, and now there are over 8 billion
- The markets have always gone up over time because populations have increased
- It’s incredible how capitalism has spread around the globe and there’s less poverty than ever in the history of the planet
That’s why you want to have a global, diversified portfolio
We see probably about 50 portfolios a month. It’s amazing just how underinvested investors are right now in the global economy.
Everyone wants to game the market.
Everyone wants to predict what’s going to happen next.
- Who would have guessed this year, the French stock market was going to be the number one market in the world out of developed nations?
- And technology, which got hammered last year, would be leading the way here in the U.S.
- Expect the unexpected. Don’t predicate your portfolio or your financial plan based on thinking you can predict what’s going to happen year over year in the stock market.
- You can’t beat the market. Don’t beat it, join it, and be smart.
”When you tell anyone the French stock market is leading the way they think you're making it up.Bob Payne
The Tipping Point
Variables You Need to Plan For in Your Portfolio
There are variables and uncertainties you need to factor into your portfolio to stay on your path to financial independence.
Variable 1: Longevity
- Life expectancy has increased to 77
- We’re living longer and you’ve got to plan for that
- Plan for healthcare costs either self-insured or a long-term care policy
”You don't want to outlast your money. You want your money to outlast you.Chris Payne
Variable 2: Interest Rate Changes
- Investors are making a mistake playing the short game as interest rates have recently come up
- Lock into higher rates for a longer period of time
”There's nothing I can remember that's more damaging than becoming enamored with short term interest rates.Bob Payne
Variable 3: Taxes
- It’s the simple tweaks you can make to your portfolio that have the biggest impact
- Most investors miss tax advantages every year
- We focus on tax-efficient portfolios
- It makes a huge difference over a lifetime to your portfolio
”Most of you are not taking advantage of huge tax benefits.Ryan Payne
Hidden Facts of Finance
The Japanese stock market is still down from its 52-week high from last summer, but still nearly 30% below where it was in 1989
Josh Harris bought the Washington Commanders for $6 billion, the highest price ever for an NFL franchise.
Gold’s current price is at a near-record high only in nominal terms. In real terms, adjusted for inflation, gold is a long way off. Back in 1980, gold peaked at an inflation-adjusted price of more than $3,000 in today’s dollars. That was a decade after the US left the gold standard at a time of rising inflation and recession.
There is a boom in Brazilian agriculture that should continue. The world population is projected to reach 10 billion by 2050. Food production is going to have to increase by another 50% by that time. And much of that new production is going to come out of Brazil through opening up arable land.