Updated: Jun 4
In this weeks Refocus we examine how and why the media presents information and why we should all be skeptical about their motivations and incentives.
As a bonus, we look at over 60 years of interest rates and what it could mean for your retirement.
Last week, we looked at a variety of issues with Wall Street. This week, I've got an example of how difficult it is to use information the media provides.
Here's an article by marketwatch, which provides a platform for the opinions of Rich Dad Poor Dad author Robert Kiyosaki, where he shares his strong views on the economy, the Fed and safe haven assets such as gold and Bitcoin. First, the picture choice of Mr. Kiyosaki and President Trump is an interesting one, as it lends credibility, and likely catches the attention of a demographic predisposed to agree with his views.
The next element here is a reference to a notable hedge fund manager. Most people aren't familiar with hedge funds and their various strategy types. Paul Tudor Jones happens to be known for a strategy called global macro, which makes discretionary bets on a very broad set of investment types. This context is Important as Mr. Jones is in the business of making these types of bets, and the media is using his prominence in the fact that he happens to share a similar view, to put additional credibility behind Mr. Kiyosaki his views. The practical reality is you could likely find an equally prominent asset manager to take the opposite view here.
Next, it's worth highlighting what Mr. Kiyosaki does to make money. He doesn't manage other people's money, and at first glance, he doesn't even manage his own money. As an author, his incentives to take a view and a position on an investment are likely influenced based on the books he sells.
Making discretionary bets on investments like gold and Bitcoin is an incredibly difficult endeavor. Well, I can support the investments from a diversification perspective, the way in which the media is presenting this information is far more likely to cause you to make poor investment decisions than to help you.
As we return our attention to the long run, I've decided to shift gears a bit to look at interest rates. Interest rates influence many things. One important element, especially for those at or near retirement, and looking for stability in their portfolio is the rate in which our fixed income investments pay us. This graph shows the level of the 10 year Treasury yield, going back to the late 50s.
And also the real yield, which is the actual or nominal yield minus inflation. investors have been looking at graphs like this for at least a decade, using it as the basis to predict that rates will rise. I believe interest rates, like all things are not forecastable in the long run, and one shouldn't try. I share this graph because as you go through the process of how to allocate invested capital, and you look to rationalize valuations, or those buying stocks today, one important thing to think about is your relative choices.
As an investor today being in cash is painful as there is no return. And those that are willing to endure 10 years of maturity risk in a 10 year Treasury are not receiving a lot of additional compensation for that risk as the 10 year yield was at just point six 8%. Thinking about relative values and relative risks is a key part about how I approach building portfolios for clients. low yields are an important consideration as we think ahead on how to allocate our investable assets.