Investor Insights

I know everyone, at the moment, is focused on the Middle East, oil prices and inflation, and some are also considering the second and third-order effects on, for example, plastic and food supply chains.

I was fascinated by this morning’s Australian Financial Review (AFR) article, which pointed out markets appear to be disconnected from reality in the Middle East.

When investors are confident, greater risk is taken, greater debt levels are serviced, and greater liquidity is prevalent. And the opposite is also true.   The response to a loss of confidence is to reduce risk, pay down debt, and “batten down the hatches”. Liquidity can quickly get tight.

I realise the war in the Middle East and fuel prices are dominating headlines and investors’ current concerns, however, there will come a time when markets and conversation will return to those topics that made headlines before Trump triggered the latest conflict in the Middle East.

Throughout history, there’s been a tidal quality to the flow of capital because there is a tidal quality to the human condition. Every new technology, after welding on its inventors, attracts its devotees who, believing – often correctly – the tech will change the world, become the pied pipers for many more investors.

In a fascinating Wall Street Journal (WSJ) article, published this week, the U. S. state of Wyoming reportedly bought 2,312 ounces of gold in December after passing a law requiring the state’s investment portfolio to add precious metals as a hedge against economic turmoil.

With the International Energy Agency’s 32 member countries agreeing to release 400 million barrels of oil, the largest ever since its creation in the 1970s, to lower crude prices from the war with Iran, it might inspire some investors to believe the threat to markets has been assuaged.

The Trump administration’s decision to initiate a wide-scale military campaign against Iran, recently coined Operation Epic Fury, can be viewed through a number of lenses.   Some might say the strikes have been framed by Washington as a multifaceted necessity for global and domestic security. Others may simply say, the justifications for the strikes keep changing.

The traditional 60/40 portfolio approach is proving less effective at balancing risk and return in today’s environment, particularly as the historical relationship between equities and bonds has shifted. Where bonds once tended to rise when equities fell, both asset classes have at times moved in the same direction during periods of persistent inflation and policy uncertainty, weakening diversification benefits.

I have often joked that billionaire Ray Dalio, the founder of hedge fund Bridgewater, has predicted 15 of the last 3 recessions. In other words, far more than transpired. It’s worth remembering the late Charlie Munger’s observation about forecasts: The only thing one needs to do to be a successful forecaster is to forecast often.

How to maximise your savings with higher-yield funds with competitive returns and risk. Looking to make your money work harder this year? Whether you’re looking to fund a better lifestyle, build your nest egg or simply grow some savings, you may want to read this article.

I recently wrote an article for The Australian, titled, How AI boom and a liquidity crisis are threatening to upend markets. It garnered quite a few comments highlighting a range of opinions about where artificial intelligence (AI) is headed and where it might be taking humanity.