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Invest in the USA

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bondsquadwebbannerInstead of reaching for yield in aggressive foreign asset classes, investors should understand that there is no better place to invest than the U.S. and no better economy (structurally and fundamentally). Wages, inflation and economic growth are all relative things. Is 3.00% growth good? Not if you are a dynamic emerging economy. However, if you are mature and developed economy, it is darn good. Look around the world at developed economies. The only ones with economic conditions similar to our own are the UK, Canada and Australia. This is not a coincidence. The economic facts are pointing to the following:

  • Japan is what a developed economy looks like when population growth is in decline and banks were allowed to become zombies (two decades are go).
  • Europe is Japan 14 years ago. The Eurozone will slowly become the Japan of the west, unless it either becomes more like the developed English-speaking economies or breaks apart.
  • China is well into developing mode. Expect U.S.-like economic growth within a decade and possibly Eurozone-style growth within two decades (China too has declining population growth).

U.S. GDP of 3.00% is average historically, but when viewed versus global realities it is darn good. We must think of all data on a relative basis. Savers bemoan low interest rates. However, would they be happy if they were getting 3.00% 6-month CDs if inflation was 5.00% or 6.00%? 4.00% wage growth is nice, but not in the face of 4.00%+ inflation. The problem is that investors were able to lock in rates and benefitted as rates and inflation fell. This is in the past, done, kaput!

To see a list of high yielding CDs go here.

Steve Liesman from CNBC (very optimistic and a noted Keynesian) pointed to research which suggests that today’s low interest rates are structural, rather than cyclical. He mentioned studies which detailed the strong global demand for income that does not appear to be waning (nor should it wane). He also mentioned research which shows the average return on investment for the past 250 years to be about 3.00%. We have mentioned similar data in the past.

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We are not in a cyclical low-rate environment. It is very structural and economics-based. We are not in a cyclical low-wage environment. It is very structural. We are not in a cyclical moderate growth environment. On a relative basis our economy is roaring. Remember, to win any race one does not need to achieve any certain speed or lap the course in a specified time. One need only beat one’s competitors. In sports, a 1-0 victory is every bit as good as a 10-9 or 10-8 victory.

 Bond Squad’s thesis is to underweight foreign (developed and EM), barbell (or bias ladders to the 2-3 and 10-20 year areas) and move up in quality across the board. The Fed is not yet your enemy, but it is no longer your friend. Aggressive assets have been priced to perfection IF we were to have “traditional” global growth. Fewer and fewer experts believe this will happen. Bond Squad never did.

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By Thomas Byrne – Director of Fixed Income – Investment Consultant

thomas bryneThomas Byrne brings 26 years of financial services experience to Wealth Strategies & Management LLC. He spent the last 23 years as Director of Taxable Fixed Income for Citigroup, Inc. and predecessor firms in New York, NY. During the course of his long fixed income career, Mr. Byrne was responsible for trading preferred stock, corporate bonds, mortgage backed securities, government debt, international debt and convertible bonds. Mr. Byrne was also responsible for marketing, sales, strategy and market commentary within the taxable fixed income markets.

Employment

  • November 2012 – Present, Wealth Strategies & Management LLC, Stroudsburg PA
  • December 2011 – November 2012 – Bond Squad, Kunkletown, PA
  • April 1988 – December 2011, Citigroup and predecessor firms, New York, NY
  • June 1986 – March 1988 – E.F. Hutton, New York, NY

Thomas Byrne
Director of Fixed Income
Wealth Strategies & Management LLC
570-424-1555 Office
570-234-6350 Cell

Twitter: @Bond_Squad

 

Views expressed are those of the writers only. Past performance is no guarantee of future results. Trading comes with severe risk. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
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Thomas Byrne

Thomas Byrne serves ad the Director of Fixed Income for Wealth Strategies Management LLC. Thomas brings 26 years of financial services experience to Wealth Strategies & Management LLC. He spent the last 23 years as Director of Taxable Fixed Income for Citigroup, Inc. and predecessor firms in New York, NY. During the course of his long fixed income career, Mr. Byrne was responsible for trading preferred stock, corporate bonds, mortgage backed securities, government debt, international debt and convertible bonds. Mr. Byrne was also responsible for marketing, sales, strategy and market commentary within the taxable fixed income markets. High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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