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Imagine someone looking into their crystal ball and telling you at the beginning of October that the coming September CPI data would be higher than expected, and producer prices (PPI) would rise 1.3% for the month, well above the 0.5% forecast. On top of the bad inflation news, they also said more inflation pressure was […]
Real Investment Advice is the editorial home of RIA Advisors — a registered investment advisory firm managing client portfolios through every cycle since 1995. We publish what we actually do: the analysis driving real portfolio decisions for real money.
No consensus narratives. No paid placements. No catastrophist click bait. Just disciplined, evidence-driven commentary on markets, the economy, and the policy machinery that moves both — written by the portfolio managers who own the calls.
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Imagine someone looking into their crystal ball and telling you at the beginning of October that the coming September CPI data would be higher than expected, and producer prices (PPI) would rise 1.3% for the month, well above the 0.5% forecast. On top of the bad inflation news, they also said more inflation pressure was […]
Daily Market Commentary
Elice Group went public on South Korea’s Kosdaq exchange yesterday and fell roughly 30%. A week earlier, Nvidia-backed Firmus shelved a planned $5 billion IPO. In the same vein, as we discussed in CoreWeave Shares Tumble As Its Debt Flounders, CoreWeave’s 2032 debt now yields near 15%, up from below 10% a week earlier. To […]
Daily Market Commentary
The technology sector (XLK) fell 5.3% over the past two weeks, but that figure is misleading. Two of its largest members, Apple and Microsoft, rose by 2%+ over the period, and Google and Meta kept pace with the S&P 500’s 1.5% decline. The damage in the technology sector was mainly in semiconductors, with the SOX […]
Daily Market Commentary
Kevin Warsh spoke Friday at the IMF annual meetings in Bangkok. He gave little indication of whether the Fed would hold rates or increase them at the coming meeting on October 28. To that end, he said: “I don’t prejudge meetings,” noting at the September meeting the Committee “made very clear that we would deliver […]
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Lance Roberts is the Chief Investment Strategist at RIA Advisors and the lead voice behind Real Investment Advice. For more than 30 years he has written about equity markets, Federal Reserve policy, macroeconomic trends, and the behavior that drives investor decisions. He writes the weekly Bull Bear Report and hosts The Real Investment Show, broadcast live weekday mornings. His commentary appears regularly on CNBC, Fox Business and Bloomberg, and he has been cited by the Wall Street Journal, Business Insider and MarketWatch.
His approach starts with managing risk, because the math of loss is unforgiving. Every answer on this page comes from his published research.
Over long periods, yes. Over short periods, no. Measures like the Shiller CAPE ratio and market cap to GDP have a strong inverse relationship with the returns of the following decade. High starting valuations have historically led to weak ten-year returns, and low starting valuations to strong ones.
Valuations tell you what you are likely to earn, not when the market will turn. They reflect investor psychology at the moment you buy, which is why they work as a gauge of future returns and fail as a timing tool.
Gains and losses are not mirror images. A 50% decline requires a 100% gain just to get back to even. A 10% gain followed by a 10% loss still leaves you behind where you started. That “volatility drag” compounds quietly over time.
Timing makes it worse. A large loss early in retirement leaves less capital to recover with, no matter what the long-term average says. Avoiding the big loss does more for long-term wealth than capturing every gain.
Bob Farrell, the longtime chief market analyst at Merrill Lynch, distilled decades of market history into ten rules. Markets return to the mean. Excesses in one direction lead to excesses in the other. There are no “new eras.” Parabolic moves go further than expected but do not correct by going sideways. The public buys the most at the top and the least at the bottom. Fear and greed beat long-term resolve. Markets are strongest when broad and weakest when narrow. Bear markets have three stages. When all the experts agree, something else tends to happen. Bull markets are more fun than bear markets.
The rules endure because human behavior never changes. Rule #9 is the one to remember when the consensus is loudest.
Read: The Rules Of Bob Farrell, An Updated Illustrated Guide
Over time, the 10-year Treasury yield tracks the economy. It roughly equals real economic growth plus inflation, a relationship that has held for decades. When growth and inflation run hot, yields rise. When they slow, yields fall.
The popular claim that rising federal debt forces rates higher does not hold up against the data. Japan carries far more debt than the U.S. at far lower yields. Rates follow growth and inflation, not the size of the debt.
read: Rising Interest Rates: Why The Narrative Fails Against The Data
Not in the way the “doom crowd” suggests. A government that borrows in its own currency cannot be forced into default like a household, or like Weimar Germany paying debts in foreign currency. Every dollar of government debt is also a dollar of private-sector savings.
The real cost is slower. Rising interest payments and unproductive spending crowd out private investment and weigh on economic growth. The risk is not collapse. It is a long, slow drag on growth. Such is the true price of debt.
The “money printing” story misreads how money is created. In the modern banking system, loans create deposits, so the money supply largely grows with economic activity. Inflation depends on how fast money moves through the economy, its velocity, as much as on how much of it exists.
Money supply growth alone does not cause inflation. That is why deficits by themselves are a poor reason to abandon productive assets for gold or bitcoin. Hard assets can diversify a portfolio, but their prices hinge on the dollar and real interest rates.
The biggest gap between market returns and investor returns is behavior. Confirmation bias, herd behavior, anchoring to past events, and chasing recent winners lead investors to buy after big gains and sell after big losses.
Most investors do not lose to the market. They lose to themselves. A written plan and clear rules for managing risk do more to close that gap than finding the next hot stock.
Read: Behavioral Traits That Are Killing Your Portfolio Returns
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