Tag Archives: financial advisor

Fundamental Truths

profit-loss-riskMy Comments: If you have money invested somewhere you may be  wondering how the next several months are going to unfold. We’re in the sixth year of a bull market and that’s a historically long time without a serious correction. This commentary by a very knowledgeable person may give you some insights worth having.

Commentary by Scott Minerd August 17, 2015

Markets that are in the midst of transition do not behave according to script, despite the best efforts of policymakers to script them. Last week, China loosened control of its currency, resulting in its biggest one-day loss in two decades, compounded by additional losses over the following days. As of this writing, the renminbi (RMB) has depreciated by close to 3 percent since the start of last week. This “surprise” move roiled markets and triggered concern that other central banks would follow suit, but the reality is that the fundamentals were so overwhelming that the People’s Bank of China’s (PBoC) action was practically unavoidable, as I wrote on July 31.

Central banks and policymakers often perpetuate confidence-inspiring narratives in the face of contradictory fundamentals. In this instance, Yi Gang, a vice governor at China’s central bank, told investors at a May 22 meeting that given the size of China’s trade surpluses, further currency devaluation would not be necessary. Unfortunately, Mr. Yi’s statement turned out to hold as much water as when then-U.S. Federal Reserve Chairman Ben Bernanke told us in the spring of 2007 that the subprime crisis was a contained and limited event. After allowing the RMB to weaken, the PBoC made the unusual move of hosting a press conference last Thursday to defend its actions and to reiterate that the RMB has made sufficient valuation adjustment that it would not devalue further.

We should know by now that the reality of a situation can be very different to how policymakers package it for public consumption. The problem is they often say exactly what the market wants to hear, not what it needs to know. The lesson to be learned is to trust the fundamental underlying data. In the case of China, the latest weakness in trade data—China’s July exports declined by 8.3 percent year over year, much worse than the 1.5 percent decline expected by the market—would suggest the RMB faces more downward pressure. When policymakers are telling you one thing and the data are telling you something different, heed the data.

Right now, the Fed is telling us that it is going to raise rates soon. I don’t know what the definition of “soon” is, but most players in the market think that soon means sometime this year. Of course, the Fed is conspicuously retaining its data-dependency clause, affording it the privilege to change its mind. Unlike in China, the economic data in the United States is much more aligned with and supportive of policymaker guidance. We are on course for a Fed rate increase this year. Whether the Fed acts or doesn’t act in September or December doesn’t matter—we know it is coming. For investors, there are more pressing matters at hand in almost every other major global market. On top of a slowdown in consumer activity, Europe faces the prospect of a slowing economy due to export demand falling off in China and the uncertainty created by Greece, which probably means that rates in Europe will go lower. Similarly, Japan’s economy will suffer as China, its largest trading partner, loses steam and the devaluation of RMB makes Japanese exports less competitive. The depreciation of the RMB will put more downward pressure on commodity prices, so we are not at the end of the road for industrial metals or energy price declines. Regardless of a Fed rate hike, demand for safe-haven U.S. Treasuries as a result of all this global turmoil could push yields meaningfully lower, even as low as 1 percent. While the data on the U.S. economy is clearly showing softness, which seems to correlate with a drop off in exports of capital equipment to Europe and China, the U.S. economy is nowhere near recession territory.

Uncertainty eventually yields to opportunity, and while it would probably be premature to jump in today, there are places in the world where things are getting cheap enough that they deserve a look. The bottom line is we are now into the dog days of summer. Markets have little new information upon which to act. Given the light volumes and lack of new buyers, risk assets will continue to languish. Risks remain to the downside (lower prices) as new data, especially from overseas, seem more likely to disappoint than to support improvement in economic activity. Negative surprises like the sudden decline in the Malaysian ringgit will continue to put downward pressure on commodity prices, which will probably spill over into both stocks and corporate debt, especially those of commodity companies like energy and mining. We are likely to see credit spreads widen (ground zero will continue to be in the energy sector), stock prices decline, and long-term interest rates rally.

I do not believe the swirling uncertainty portends a giant bear market for risk assets, but we have not had a U.S. equity market correction in over four years—it has been 1,471 days since the last correction started, more than double the historical average since 1928 of 706 days—so we are well overdue. In short, I doubt we have seen the worst. We should not be surprised at this seasonally challenging time to see a meaningful selloff in equities. I would expect that the current downward pressure on risk assets will abate sometime in late September or early October. Until then, the environment should be supportive for longer duration U.S. Treasury notes and bonds. Caution is the watchword.

The Next Bear Market?

financial freedomMy Thoughts: Like a broken clock that is right twice a day, my talking about the coming market crash will be seen as truth. Some, including me, think the downturn has already started. Something will trigger a free fall, and then it’ll start going back up. There are strategies that will help you survive and thrive and they are alluded to here.

Jesse Felder, TheFelderReport.com – Jul. 30, 2015

Yesterday I found myself reading GMO’s latest quarterly letter and thinking, ‘Wow, I’m fairly bearish but Jeremy Grantham just sounds like a grumpy old man!’ Until I came upon this passage:

“…you may think that I am particularly pessimistic. It is not true: It is all of you who are optimistic! Not only does our species have a strong predisposition to be optimistic (or bullish) – it is probably a useful survival characteristic – but we are particularly good at listening to agreeable data and avoiding unpleasant data that does not jibe with our beliefs or philosophies.

Facts, whether backed by 97% of scientists as is the case with man-made climate change, or 99.9% as is the case with evolution, do not count for nearly as much as we used to believe. For that matter, we do a terrible job of planning for the long term, particularly in postponing gratification, and we are wickedly bad at dealing with the implications of compound math. All of this makes it easy for us to forget about the previously painful market busts; facilitates our pushing stocks and markets on occasion to levels that make no mathematical sense; and allows us, regrettably, to ignore the logic of finite resources and a deteriorating climate until the consequences are pushed up our short-term noses.”

We are only a few years removed from one of the worst financial crashes in our history and investors have already put it out of their minds. Most importantly they have forgotten perhaps the greatest lesson of that time: overpay for a security and you are essentially taking much greater risk with the prospect of much reduced reward.

Right now, stocks as a whole present very little in the way of potential reward. According to Grantham’s firm, investors should probably expect to lose money over the coming seven years in real terms (after inflation). Other measures (explained below), very highly correlated to future 10-year returns for stocks, suggest investors are likely to earn very little or no compensation at all over the coming decade for the risk they are assuming in owning stocks.

In trying to quantify that risk, Grantham’s firm suggests that investors are now risking about a 40% drawdown in order to earn less than the risk-free rate of return. I have also demonstrated recently that margin debt in relation to GDP has been highly correlated to future 3-year returns in stocks for some time now. The message we can glean from record high margin debt levels is that a 60% decline over the next three years is a real possibility. Know that I’m not predicting this outcome; I’m just sharing what the statistics say is a likely outcome based on this one measure.

This horrible risk/reward equation is simply a function of extremely high valuations. As Warren Buffett likes to say, “the price you pay determines your rate of return.” Pay a high price and get a low return and vice versa. Additionally, if you can manage to buy something cheap enough to build in a “margin of safety,” your downside is limited. However, when you pay a high price you leave yourself open to a large potential downside.

Speaking of Buffett, his valuation yardstick (Market Cap-to-GNP) shows stocks are currently valued just as high as they were back in November 1999, just a few months shy of the very top of the dotcom bubble. Investors should look at this chart and remember what the risk/reward equation back then meant for the coming decade. For those that don’t remember, it meant a couple of massive drawdowns on your way to earning very close to no return at all. (Specifically, this measure now forecasts a -1% return per year over the coming decade.)

Instead, investors today choose to hide behind an “eminence front.” They ignore these facts simply because they are unpleasant to think about. Despite the horrible risk/reward prospects of owning equities today, they have now put nearly as much money to work in the market as they did back in 1999. (This measure is even more highly correlated to future 10-year returns. It now forecasts about a 2.5% return per year over the coming decade.)

It’s truly an astounding phenomenon that investors, after experiencing the very painful consequences of buying high – not just once but twice over the past 15 years, can once again be so enamored with paying such high prices yet again. Amazingly, they are as eager as ever to take on incredible risk with very little possibility of reward. It proves that “rational expectations” are merely the imaginings of academics and have no place in real world money management. It also validates Grantham’s view that it’s not him who is pessimistic; it’s investors who are too optimistic.

Is it 1929, 1987 or Something Else?

money mazeMy Comments: Those of us with money we plan to use in retirement have to pay attention to what is happening to the stock and bond market. If nothing else it helps us decide if we want to manage it ourselves or get someone to help us.

I think we’re due for a correction. I’ve alluded to this several times over the past many months and here, once again, are comments from someone far more in touch with reality than am I. Regardless of your circumstances, if you are expecting to live a while, you will need money. If any of it is coming from investments, then this might help maintain your sanity. Or not.

July 31, 2015 by Scott Minerd

Having spent the summer ruminating over the macro events in Europe, my focus has now turned to the U.S. stock market crashes of 1929 and 1987. Why, you might ask? The answer lies in China, where policy interventions in the face of a steep selloff are quickly becoming the first blemish on Xi Jinping’s leadership record.

Whether the current period becomes known as China’s version of 1929’s Black Thursday in the United States or a much healthier scenario analogous to 1987’s Black Monday, now depends very much on the strategy its policymakers adopt over the next few months. For China’s sake, I hope it is the latter, but at this point investors should take note that the world’s second-largest economy could just as likely find itself at the epicenter of this century’s greatest equity market correction.

Fueled by demand from Chinese retail investors, the Shanghai Composite Index soared by more than 150 percent from mid-2014 and early June 2015. In the same period, the Shenzhen Composite Index rose by more than 200 percent. Such exuberance has come to a violent end, with indices down almost a third from their June 12 peak of more than $10 trillion in market capitalization.

Despite the recent selloff, the Chinese stock market is still grossly overvalued, with the median price-to-earnings (P/E) ratio* for the Shanghai Composite Index hovering around 40, more than double the median P/E ratio of the S&P 500. By another valuation measurement, the market-capitalization-to-gross-domestic product (GDP) ratio for China is currently above 60 percent, well above its average of 40 percent over the past 10 years.

From here, the best case for Chinese equity markets may be a scenario similar to what happened in 1987 in the United States, when, after a huge selloff in October, the market retraced, then reversed, but ultimately established a base that began a rally that lasted until 1989.

The alternative scenario to 1987 is 1929, the course upon which China currently seems set.

Chinese policymakers’ unorthodox attempts to bridle the runaway market resemble the policy response of the United States in 1929, which basically relied on investor groups to purchase large blocks of stock in the hope of propping up equity markets. As in 1929, this type of market intervention will do nothing to solve the fundamental problem in China’s equity markets today. The unresolved issue is that prices have detached from fundamental value due to a wave of debt-fueled retail investor mania.

This too is analogous with 1929. China’s sky-high margin-debt-to-total-market-capitalization ratio is estimated to be near 10 percent. In reality, it is likely even higher when you factor in margin lending by China’s shadow banking system. By comparison, U.S. margin debt is currently less than 3 percent of total market cap, but in 1929, margin debt in the United States reached a high of 12 percent of total market capitalization prior to the stock market’s collapse.

The clear answer at this point is not for China to endeavor to apply splints to its broken market, but instead for the People’s Bank of China (PBOC) to flush the system with cash and allow the renminbi (RMB) to depreciate significantly. Unfortunately, this may not be palatable. Chinese policymakers will do anything they can to avoid devaluation ahead of the International Monetary Fund’s November decision on the RMB’s special drawing rights (SDR) status. China may not have that long to act if it is to avoid a full-blown disaster. In the meantime, my best estimate is that the PBOC will be forced to increase sales of Treasury securities to prop up the RMB as more capital flows out of China. I would expect up to $300–500 million of Treasury liquidation may be necessary to hold the line on RMB depreciation in the coming months.

If China’s crisis does turn into a 1929 scenario—which would be devastating for China and would have broad implications for the rest of the world—one takeaway for investors is that the United States is likely to remain at least somewhat insulated. A Chinese slowdown will put energy and commodity prices under pressure, which will benefit U.S. consumers and U.S. manufacturers as input prices fall, and should help support earnings in the near term.

The transitory period that lies ahead, however, promises to be rocky for all global markets. Consider how much Greece’s $300 billion debt crisis roiled investors (a figure dwarfed by the $3 trillion lost by Chinese equities markets since June). Under any circumstances investors should expect to see increased market volatility with a growing safe-haven bid for Treasury securities, which I expect will push the U.S. 10-year note to 2 percent or lower in the near term. Renewed downward pressure on interest rates will increase market volatility and is likely to adversely affect credit spreads. On a positive note, lower interest rates, along with declining energy prices, should spur U.S. housing activity, and assuage any lingering concern caused by last week’s disappointing new home sales data, which fell 6.8 percent to 482,000 homes sold in June.

For China, the outcome to this crisis is still far from a foregone conclusion. There is still time for its policymakers to refocus. The best path would be to further loosen monetary policy and inject as much liquidity as possible into its markets—even if this forces the party to relax its control of the RMB and put some strategic political objectives on the back burner. If it doesn’t adopt this strategy, China may learn the painful and lasting lessons taught by the calamitous market collapse in the United States in 1929.

Retirees Contending With Mortgage Debt

home mortgageMy Comments: Most of you know that my wife and I recently downsized (we now have 60% of what we used to have!) to a new house in a nearby neighborhood. I never knew how much stuff we had. Deciding what to keep and find room for is truly an ordeal.

Financially, we accomplished this with what is known as a reverse purchase. From inception the plan was to use our money for some of the purchase and someone elses for the rest. The ‘someone else’ is a lender willing to advance about 53% of the price with the expectation of getting their money back at some point in the future when the last one of us leaves. There’s an insurance policy in the background that guarantees our heirs will not bear any financial burden if the loan exceeds the value of the house in the future.

As someone versed in financial planning for almost 40 years, I’ve decided to become a local expert in reverse mortgages, which includes reverse purchases. The idea is to help others avoid the need to make mortgage payments in a world of rising interest rates. Email me if you have questions.

By Michael K. Stanley

Millions of Americans are dragging their mortgage debt with them into retirement according to recent research from LIMRA and an AARP Public Policy Institute Study.

The added burden of a mortgage further complicates an already treacherous retirement environment for many due to the reverberating consequences of the global financial crisis.

LIMRA found that in 1989 the prevalence of mortgage debt for Americans age 65 to 74 was 22 percent. By 2010, that figure nearly doubled to 41 percent. And, due to depressed (albeit slowly rebounding home values) the amount of debt Americans hold on their homes has also grown.

LIMRA concluded that the median value of mortgage debt for people ages 65 to 74 was $70,000 in 2010 compared to $15,000 in 1989.

Although rising property taxes have also contributed to the debt, besides the financial crisis or perhaps more aptly, because of the financial crisis, many Americans are using home equity loans to fund health care and other expenses.

Although, traditionally, many older Americans downsize and sell their home in retirement, recent studies show that many older Americans are using home equity loans to fund expenses in retirement. And with declining home values, equity becomes reduced and seniors have trouble funding their emergency needs.

Although holding a mortgage allows for interest rate tax deduction, the portion of the mortgage payment that is applied to interest declines as the final payment approaches.

A Century of Defense Spending In The United States

USA EconomyMy Comments:  With deal with Iran now in play, the focus is increasingly on the choice between war and peace. We either come to terms with some kind of negotiated settlement, or we accept the idea of sending young men and women off to die once again.

I read recently that of the 239 years since 1776, the US has been involved in an armed conflict during 222 of those years. Yes, some of those have been to protect our friends, but too many happened with no direct physical threat to the homeland. So with all the money spend on defense, are we actually safer for it?

The chance that Iran, in and of itself, can mount an attack on the territorial integrity of the US is very remote. Israel is another question, but they have atomic weapons of their own and there are those in charge who are prepared to use them. In my judgement, that alone greatly diminishes any threat from Iran. But it does explain to some extent why Iran would like to have their own weapons.

by Genevieve LeFranc,  July 22, 2015


“Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes… known instruments for bringing the many under the domination of the few… No nation could preserve its freedom in the midst of continual warfare.”
—James Madison, Political Observations, 1795

The U.S. military accounts for a staggering 40% of global military spending, but this isn’t anything new, folks. The United States has been experiencing a century of extreme defense spending, and if we don’t slow down soon, this military spending could prove to be our country’s downfall.

The World Bank defines military expenditure as:

…All current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are judged to be trained and equipped for military operations; and military space activities.

Such expenditures include military and civil personnel, including retirement pensions of military personnel and social services for personnel; operation and maintenance; procurement; military research and development; and military aid.

So it’s pretty clear military expenses cover quite a wide range of stuff. But just how much has our country spent on defense over the last 100 years?

Before WWII, and in times of peace, the U.S. government really didn’t spend that much on defense — only about 1% of GDP.

After the war, America found itself smack-dab in the middle of a global fight against Communism, and defense spending was more than 41% of GDP.

Since then, defense spending has never returned to anything less than 3.6% of GDP.

There have been four major spikes in U.S. defense spending since the 1970s. USgovernmentspending.com reports:

It spiked at nearly 12 percent of GDP in the Civil War of the 1860s (not including spending by the rebels). It spiked at 22 percent in World War I. It spiked at 41 percent in World War II, and again at nearly 15 percent of GDP during the Korean War.

Defense spending exceeded 10 percent of GDP for one year in the 19th century and 19 years in the 20th century. The last year in which defense spending hit 10 percent of GDP was 1968 at the height of the Vietnam War.

The peak of defense spending during the Iraq conflict was 5.66 percent GDP in 2010.


Polls Show Most Americans Favor Pathway To Citizenship

flag USMy Comments: I’ve mentioned before that as an immigrant myself, I have a strong interest in this issue. I find it distasteful that children brought here by their parents are forced to leave because their parents arrived here without proper papers. Mindful there is no best solution, I welcome a dialog and changes to the system that will allow these people to earn their citizenship and join the rest of us in paying taxes and contributing to society.

Cynthia Tucker, March 2, 2015

With all the high drama in Washington over immigration, you’d think the fate of undocumented workers represented a cataclysmic political divide — an ever-widening chasm that cannot be bridged. But it doesn’t.

Polls have long shown that a majority of Americans favor a pathway to citizenship for those residents who entered the country illegally. But new data show that isn’t a matter of blue states overwhelming red ones. In fact, there isn’t a state in the union, from the bluest to the reddest, where a majority opposes a path to citizenship, provided certain criteria are met, for those without papers, according to the Public Religion Research Institute.

The PRRI has used its data to create an American Values Atlas that shows the political inclinations of voters in each state. Unsurprisingly, some states are more immigrant friendly than others. In California, for example, 66 percent support a path to citizenship for the undocumented. In crimson-red Alabama, that drops to 56 percent. But that’s still a majority.

Yet, that very pathway is the mechanism that congressional Republicans have denounced as “amnesty” and refused to support. House Speaker John Boehner’s caucus has declined even to hold a vote on a proposal for comprehensive immigration reform.

Last fall, when President Obama took action through executive orders to grant temporary papers to as many as 4 million immigrants who met certain criteria, Republicans were apoplectic, claiming he was violating the Constitution and behaving like a despot. They have used every instrument at their disposal, from lawsuits to a pitched battle over funding for the Department of Homeland Security, to overturn the president’s orders.

Yet even the president’s executive action on immigration is not as unpopular as you might think. While his decision to use executive powers does not draw universal support, the aim of his action does. Three-quarters of Americans favor his policy of granting temporary documents to certain groups of immigrants. Said Robert Jones, CEO of the institute, “In today’s polarized politics, there are few major issues that attract this kind of bipartisan and cross-religious agreement.”

It makes you wonder: Who are those congressional Republicans listening to? Why are they opposing a policy with widespread support, even among GOP voters? (While more Democrats — 70 percent, according to the PRRI — support a path to citizenship, 51 percent of Republicans do, as well.)

The answer is depressing, if not surprising: The Republican Party continues to be held hostage by an aging and nativist minority of Tea Partiers who cannot stomach the idea of a browning America. (It isn’t considered polite to point this out, but more Tea Partiers hold views that show racial resentment than the public at large. As just one example, a 2010 New York Times poll showed Tea Partiers are “more likely than the general public, and Republicans, to say that too much has been made of the problems facing black people.”)

Among those who identify with the Tea Party, only 37 percent support a pathway to citizenship, according to the PRRI poll. Twenty-three percent would give them legal residency, while 37 percent want to deport each and every one of them, the poll said. (Never mind the logistical and financial nightmare that trying to round up every undocumented resident would represent.)

This is a huge problem for the GOP, as its strategists have pointed out for years. The party cannot afford to alienate Latinos, a growing bloc, as they have alienated black voters with their resistance to civil rights measures.

So rather than pander to an ultraconservative and xenophobic minority, the Republican Party’s leaders ought to educate them about the need for comprehensive immigration reform. As a practical matter, demographic change is already preordained: By the year 2042, according to the U.S. Census, whites will no longer constitute a majority, no matter what happens to undocumented immigrants. The GOP needs the allegiance of more voters of color if it is to regain the Oval Office.

But there is more at stake here than the survival of a political party. The nation also needs those immigrants; it needs their energy, their youth, their hopes and dreams. We ought to welcome them with open arms.

Cynthia Tucker won a Pulitzer Prize for commentary in 2007. She can be reached at cynthia@cynthiatucker.com

Rates Must Rise To Avert The Next Crisis

200+year interest ratesMy Comments: Interest rates are the price paid for using money owned by someone else. The rise and fall of that price, which we call interest, is a critical element when it comes to deciding how your money should be invested. For over 30 years they have been trending down and you will soon see that trend reversed. Being prepared will result in greater financial freedom for you.

By Scott Minerd, Chairman of Investments, Guggenheim Partners
As appeared in the Financial Times global print edition, July 16, 2015

In 1898, Swedish economist Knut Wicksell argued that there existed a “natural” rate of interest that balanced the supply and demand of credit, assuring the appropriate allocation of saving and investment.

Should market interest rates remain below the natural rate for an extended period, investors will borrow excessively, allocating capital into less productive investments, and ultimately into purely speculative ones.

This is what the US economy faces today after years of meagre borrowing costs. Policymakers have created a Wicksellian dilemma where investment spurred by low interest rates is driving economic growth, but these inefficient investments support growth at the expense of lower productivity in the economy.

In recent years, this investment has flowed into housing, commercial real estate, and equities, driving asset prices higher, exactly the goal of the Federal Reserve in the wake of the financial crisis. But as the recovery in real estate and equities matures, a darker side of this imbalance between natural and market rates is beginning to emerge. Many investments today using artificially cheap capital are not increasing productivity – they are being made, because money is cheap and the profit motive is strong.

Consider the evidence. This year likely will witness record US stock buybacks; the second biggest year for mergers and acquisitions; the highest percentage of non-investment grade borrowers among new issuers of corporate debt; and a record for covenant-light loan issuance.

In the midst of all this, stock prices are appreciating at the slowest pace since the financial crisis. Why? Because top-line growth is low and productive investments in core businesses are wanton.

Over time, the natural rate of interest should roughly equate to the average return on new capital investment. Distortions in economic activity begin to occur when the natural rate varies materially from the market rate.

The aftermath of the current period of corporate borrowing and splurging will be nasty. Consider that the majority of defaults of US high-yield bonds during 2008 and 2009 were loans originated between 2005 and 2007 – the final three years of the last credit cycle when M&A and leveraged buyouts peaked. Similar to today, credit remained cheap and the Fed was slow to raise interest rates.

We are not back in the frothy days of 2007, but we are leaving the realm of smart investment decisions and moving into the “silly season” when investors become convinced that recession is nowhere on the horizon and market downside is limited.

It is a world where asset prices continue to appreciate and confidence remains strong, while capital chases a shrinking pool of productive investment opportunities. Similar to the run-up to 2007, rising asset prices and malinvestments today may be sowing the seeds of the next financial crisis.

The harsh reality is extended periods of malinvestment result in declining productivity growth, lower potential output, and slower increases in living standards. A failure to normalize market interest rates soon will result in more capital plowed into investments that are less productive and more speculative.

As productivity declines, long-term growth will be stunted. Eventually, inflationary pressures will build, forcing market interest rates to rise. The longer market rates remain below the natural rate the greater the purge will be once higher rates induce a recession, causing a sharp rise in defaults among malinvestments made during the period of cheap credit.

Today looks a lot like 2004 or 2005, when investors were blissfully ignorant of what awaited. It is still early, but I get increasingly concerned the longer I see undisciplined investors clamoring for bonds with suspect credit worthiness at ludicrously low yields. Higher rates, higher prices, or both are on the horizon. Before long, some of those bonds may become toxic waste.

The good news is there remains time to take action. Policymakers can still make adjustments to avoid the worst phase of the credit cycle. To reduce the continued accommodation of these marginal investments, the US central bank should normalize rates soon. For investors, the time has come to consider opportunities to book gains in assets that in the reasonable light of day a prudent investor would never buy.