Chicago, IL, July 21, 2017 --(PR.com
)-- The following has been excerpted from the forthcoming book referenced above.
The stock and bond markets’ seeming strength provides a narrative that all is well, the S&P and global stock markets just closed at record highs - and most busy Americans are ill-prepared to argue otherwise, especially in the face of a mainstream media continually touting the benefits of jumping into what is an alarmingly overvalued market. To wit, a July 18, 2017 story in Bloomberg hyped opportunities for investment gains thru investing $10,000 in global equity and bond markets. However, the authors’ tenure as an asset manager has shown that every time financial markets were characterized by similar levels of disconnection from fundamentals, whenever enthusiasm’s substituted for analysis and a general sense of euphoria’s held sway, market crashes and loss of wealth have ensued. Her experience has shown that contrary to being times to follow the herd, these have instead been opportunities to pivot from financial into real assets.
Unfortunately, most people never seriously consider buying an undervalued investment or any asset outside the mainstream because they’ve been conditioned to believe in markets’ unequalled ability to generate wealth enhancing returns. Legions in the middle class have relinquished their power to a financial elite with dual loyalties, in the false belief that markets will never correct. Here’s the thing - the metrics of the stock market, including revenue and earnings growth, earnings quality, and leverage levels have not satisfied the conditions for the market’s continuing to he held for quite some time.
“TANGIBLE: How Physical Assets Can Protect You from the Coming Stock Meltdown and the Decline of the Middle Class” will explore the intersection of the decline of middle-income Americans and impending financial implosion, and puts forth a solution for the truly perilous state of financial insecurity in which the American middle class finds itself.
From one perspective, the current valuations of the equity and bond markets when juxtaposed against the state of underlying fundamentals fit the classic definition of a confidence game. Having reduced interest rates to historic lows, the idea behind the Fed’s quantitative easing programs was that investors would have no choice but to jump into equities, no matter the valuation, as returns on investment grade bond yields fail to satisfy. The resulting asset bubbles promoted a wealth effect and the ‘feeling’ among investors that all was well, and, ultimately, the general dismissal by most of pesky fundamentals. To wit, when former Federal Reserve Chair Alan Greenspan was queried regarding the goals of QE on CNBC in April 2016, he replied that the program had in fact done what monetary authorities intended, “What ultimately determines whether or not you're getting an effect from the QEs are what has happened to the price/earnings ratio, and that obviously has done what you'd expect it to do. You bring long-term rates down, and the price/earnings ratios in the equity markets go up, which is exactly what they planned to do and it's happened that way."
However, the frequency of financial black swans has dramatically increased with two major implosions in the last seventeen years. Clearly, financial assets alone aren’t getting it done.
Many have opined that the events of 2008 and the subsequent losses, including jobs and income, were unpredictable. That’s nonsense. There were a myriad of red flags at the time, just as had existed prior to the dotcom bust of 2000, and, just as exist today. The problem was that no one paid attention, and certainly, no one urged investors to alter their behavior with a view toward self-preservation via assets with the characteristic of being a store-of-value.
Failing to act in the face of such a disconnect is to speculate, and speculation is a clear invitation to risk - by understanding financial markets’ current risk configurations and sub-optimal return characteristics, along with the demonstrated and long-standing safe haven status of tangibles, investors will be empowered to look beyond the financial assets which have been positioned as the only game in town, and motivated to pivot into real assets.
The book, by a former small cap value portfolio manager and expert on alternative assets, is written from the perspective of an investment manager who recognizes the imbalances in today’s financial asset markets.The author, Cappy Price, is a consultant on alternative assets and a veteran portfolio manager who specialized in small cap value stocks, ultimately spearheading William Blair & Co’s development of a value franchise for institutional and mutual fund investors. Her career has centered around identifying material disparities between price and intrinsic value.
Most recently, Ms. Price was heard in a series of interviews on NPR’s Morning Edition with Uri Berliner discussing alternative assets.