Hey Friends. I hope my post finds you well.
Never since I started investing in stocks has the market been more confusing and convoluted. Our financial foundations seem to be floating on air today. National debt was 122.9% of the nominal GDP for our nation as of September 2023.
If you’re wondering where we’d reach a point of no return (national irreversible default) and interested in reading more on the matter, go here and here.
I cannot overemphasize the importance of assessing the balance sheet of any type of investment you’re considering today in order to evaluate risk. It has always been essential in mitigating potential loss of invested money to spend the up-front time in carefully assessing risk. The risks today are more complex at many levels than any of us have observed previously, in my view. The balance sheet has never been more important across my investing tenure with stocks. My book is titled “Choose Stocks Wisely” because it focuses on how the balance sheet can be employed in risk assessment with regard to stock investing.
See you next time.
Paul, thanks very much for your comments and providing the links to excellent articles. You are in good company in sounding an alarm as this includes Jamie Dimon and Nassim Taleb most recently. Personally, I think we’ve long past the tipping point and it’s just a matter of time until the bond vigilantes require higher interest rates, as the articles point out. The facts are quite apparent to anyone who is paying attention. Most likely it will take a crisis of some proportion to force the Washington politicians to take corrective action. However, no one has even a good guess what that may be. John Mauldin has been writing about this topic for many years now. He calls it “the great reset” and has speculated on a range of likely options. This includes a partial default by the Treasury. The question for investors is how to protect our investments. If Treasury debt is likely to experience some type of default, what are the alternatives?
While gold might come to mind as a traditional safe haven, the bullion banks control the gold market now. The website for Bullion Star Gold University https://www.bullionstar.com/gold-university/london-gold-market-trading is highly recommended. I maintain that if you don’t understand the role and operations of bullion banks, you don’t understand the gold market.
David, first it is wonderful to get your comments and hear from you. You’ve come to mind often and I often pray for y’all. I hope you and your dear bride and family are all well!
You have so much knowledge to share; I appreciate your comments toward my post and especially for the added color, and the important link to bullionstar. There’s much more I want to learn with regard to the gold market and I’m sure that’s true for readers of our interaction here.
A good friend e-mailed me today, after reading this blog post, and shared a quote that surely befits the kind of thinking we need right now in government fiscal policy as well as across our society. “Watch your pennies, and your dollars will take care of themselves.”
Thank you!
Over and over I use the balance sheet recommendations in your book. When I do, I make wise investments with low volatility. When I don’t it’s at my own peril. Thanks so much.
Steve, I appreciate the comment; it encourages me much because that is truly the central goal of the book. When I was writing the book, I expressed to my reviewer that I didn’t want to talk about my personal performance; I wasn’t at ease with sharing it, much less the feeling like it was self-touting. I simply wanted to focus on the critical importance of the balance sheet and explain how it can be used to judge the financial health of a company at any given time. My reviewer correctly told me that not many would read unless I shared how my methodology had worked with regard to personal performance. I knew from my years of research and writing academic articles during my academic career that you “have to have a hook.” That was taught very early on in my graduate courses many years ago.
All this said to make the point that your comment is sincerely meaningful because it expresses that you’ve been helped in the way I was desiring most with regard to writing CSW. Default risk can destroy a portfolio entirely and is virtually avoidable (unless the books have been cooked, but even then the balance sheet can reveal red flags of playing with the numbers) but only through balance sheet assessment. And default risk is spreading across our market of enterprises at an alarming rate today as the carelessness of government fiscal stewardship trickles down into the habits of many who are running the businesses.
Thanks again, Steve, for your comment which is especially encouraging to me!