It seemed appropriate to use Dan Aykroyd’s line from Ghostbusters just before he and the other Busters got slimed to say that nothing sounds or smells right in the economy or markets right now.
Another hotter-than-expected inflation report hit the markets Wednesday, confirming what big investors have been warning for months: Persistent price pressures are becoming a big threat to asset prices.
The consumer price index surged 6.2% from a year ago in October, the most since December 1990, the Labor Department reported. The reading surpassed the 5.9% Dow Jones estimate.
The data comes after a slew of big-name investors repeatedly denounced the notion from the Federal Reserve that the current price pressures are “transitory” or temporary. Escalating inflation could cause the central bank to tighten monetary policy more aggressively than it has indicated, which many fear would not bode well for stocks.
Paul Tudor Jones, Chief Investment Officer of Tudor Investment, recently said that inflation will be much worse than expected, and he believes the trillions of dollars in Covid-19 stimulus in the system are to blame for the persistent inflation. Tudor called inflation the “No. 1 issue facing Main Street investors” and said it’s the single biggest threat to financial markets and society in general. The longtime trader said it’s time to double down on inflation hedges, including commodities and Treasury inflation-protected securities, known as TIPS. And there it is…the part that just doesn’t pass the smell test.
Wall Street reaches into the same old bag of tricks when markets rollover. The tricks, however, are not designed to preserve your principal in tough times as advertised, but to keep you fully invested and generate a quarterly fee for the advisor. How many times has your guy called you and said, “I don’t like what I’m seeing…It’s time to cut our exposure and raise cash?”
The role Senior Life Settlements play in the alternative investment landscape is to provide you with an option that’s not available to you through your traditional financial advisor. Settlements earn a known profit margin because they are priced at a discount to their face amount. Life settlements are non-correlated to all the cyclical, volatile asset classes Wall Street needs you to buy. True diversification and asset differentiation only happen when you construct a portfolio that works when the markets don’t.
That smell you’re hearing is a set of economic circumstances bubbling up that could mean big trouble in the months ahead for investors. Strap on your Proton Pack…It’s gonna get sporty.