As most readers know, I have been calling for a reduction in the Federal Reserve’s quantitative easing (QE) program for some time. My worry has been that the current level of quantitative easing is not doing much to help Main Street, and it is building potentially dangerous risks to our economy over the long term.
I’m worried about the future of this country, and yes, even my investments. I don’t want my hard-earned wealth to disappear due to mistakes made by the Federal Reserve in continuing to pump quantitative easing.
And I’m obviously not alone in this sentiment, as recently the CEO of BlackRock, Inc. (NYSE/BLK), Laurence Fink, stated that the Federal Reserve’s current quantitative easing policy is creating bubbles in various markets. (Source: Bloomberg, October 29, 2013.)
Fink’s opinion that the Federal Reserve should begin tapering quantitative easing immediately comes from the long-term viewpoint of the overall economy and the damage that is being done. Even though money managers like Fink might benefit from quantitative easing over the short term from the boost in asset prices, if bubbles get bigger, the damage over the long term could be extremely serious.
This has been my viewpoint for some time. Sure, it’s great that the market has gone up recently, but if it’s not sustainable, what’s the point?
Much like real estate a decade ago, we all enjoyed the party on the way up, but the hangover has taken years to work off.
Because the Federal Reserve has been so aggressive in its quantitative easing policy, it’s not just the stock market that is going up. Investors who are desperate for … Read More
With practically every central bank around the world having the throttle fully open when it comes to monetary policy, investors with extra cash just lying around need to do something with it. While you could put this cash in a government bond or simply keep it in cash, these options aren’t going to help you beat the rate of inflation. Instead, investors should take a cue from the superrich and consider an investment strategy that includes hard assets.
As you may already know, an investment strategy that comprises hard assets includes traditional stores of wealth (such as gold and silver) and commodities (such as oil), as well as artwork and even cars.
While I advocate the traditional investment strategy of becoming a part owner in companies through equities, there are growing signs that even the superrich are becoming increasingly worried about having cash sitting idle and are looking at hard assets as part of their portfolio.
Just recently, a 1963 Ferrari “250 GTO” sold for $52.0 million! I like a nice car as much the next guy, but $52.0 million is a lot for one vehicle.
Obviously, the person buying it is not using it just to go grocery shopping; rather, it’s likely that the new owner is incorporating this item as part of their investment strategy to include hard assets (in this case, collectible cars).
To show you just how strong the market is for alternative hard assets by the extremely wealthy, a similar Ferrari 250 GTO sold last year for $35.0 million, which means this year’s sale is a 49% increase in price.
Of course, price appreciation in … Read More