 Mark Twain famously wrote, "A man who carries a cat by the tail learns something he can learn in no other way." Some lessons, particularly the painful ones, only come through direct often uncomfortable experience...in today's environment, it could be like trying to make sense of the current economic landscape. If it makes you feel any better, economists struggle to understand too. Below are six quotes to keep in mind the next time you hear an economic forecast. "The only function of economic forecasting is to make astrology look respectable." - John Kenneth Galbraith "Economics is extremely useful as a form of employment for economists." - John Kenneth Galbraith An economist is someone who sees something working in practice and wonders if it will work in theory." - Ronald Reagan "Economists have predicted nine out of the last five recessions." - Paul Samuelson "If all the economists in the world were laid end to end, they still wouldn’t reach a conclusion." - George Bernard Shaw "An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." - Laurence Peter - Paul R. Rossi, CFA
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 It's hard to admit sometimes...but it's us. We can be our own worst enemy. Sabotaging ourselves. It's not what the price of Amazon, JPMorgan, or Costco stock are doing on any particular day, week, or month that will impact your investment success. It's what you will do or do not do that will determine your success. Case in point, Amazon, my most accounts is one of the most successful businesses in the world, literally changing the way consumers shop.
How do lose money in a stock that turns $10,000 into $20,300,000? Panic selling is how. It's what you will do or not do that will determine if you are successful or not. Stare fear right in the face and sternly proclaim, "Not today, you will not scare me today." -Paul R. Rossi, CFA  The phrase "Myopic Thinking is the Biggest Killer of Success" captures a profound truth: an obsession with short-term gains, immediate gratification, or fear of the near-term often blinds us from the much bigger picture. Myopia, in this sense, isn’t just a visual limitation but a physical one, a failure to see beyond the present moment causing action that is self-defeating. Success, whether in your career, your health, or your personal finances demands patience, foresight, and a willingness to endure temporary challenges for greater rewards. Let’s explore this idea through three examples: the journey to becoming a doctor, the pursuit of long-term health, and the volatility of investing. Consider the path to becoming a doctor. Aspiring physicians face a grueling decade or more of education—challenging undergraduate studies, medical school, residency— all before the hard work begins to pay off. The short-term costs are steep: years of student debt, countless examinations, sleepless nights, and delayed financial independence. A myopic thinker might balk at this, opting instead for a quicker, less demanding career path with immediate payoffs. Yet, those who endure the long haul emerge with not only a lucrative profession but also the fulfillment of helping people and mastering a complex craft. The myopic choice sacrifices a lifetime of impact for fleeting comfort, proving that success hinges on seeing beyond the present struggle. Myopic thinking can often sabotage our well-being. Weight loss and fitness require sacrificing short-term pleasures, like eating less and skipping desserts while at the same time enduring consistent workouts. A myopic mindset might prioritize the instant joy of a late-night snack over the goal of a healthier body. In contrast, those who embrace delayed gratification find themselves shedding pounds, boosted energy, and reduced disease risk. The trade-off is clear: momentary indulgence pales against years of a healthy body. Here, success isn’t just a number on a scale but a sustained quality of life, won through far-sighted discipline. Your financial well-being is no different. There are countless examples to choose from, where myopic thinking can spell financial ruin. Take Facebook (Meta), one of the "Magnificent Seven" tech giants, in 2023, Meta's stock plummeted over 76% with a tremendous amount of bad news swirling around the company. A short-sighted investor, gripped by panic, might have sold at the bottom, locking in losses. But those with a longer view held firm, recognizing Meta's innovation and market dominance, and by end of 2024, the stock was up over 700% in just 24 months from its bottom. Myopic selling ignores the cycles of growth and recovery, while strategic vision capitalizes on them, illustrating how success in investing demands a steady gaze past temporary dips. In each case, medicine, health, and the markets, myopic thinking kills success by fixating on the now at the expense of the later. True achievement requires lifting our eyes to the horizon, weathering short-term storms, and trusting in the payoff of persistence. The road to triumph is rarely quick or easy, but it’s always worth the journey. -Paul R. Rossi, CFA  Understanding Investor Sentiment and the Dow Jones Industrial Average: A Guide for Savvy Investors There are bull markets and there are bear markets. The chart plots two key metrics: U.S. investor sentiment (measured as the %Bull-Bear Spread, in red) and the Dow Jones Industrial Average (DJIA, in deep blue). Together, they offer valuable insights into market dynamics and potential timing of investments. The chart reveals a fascinating interplay between investor sentiment and the DJIA. The red line, representing investor sentiment, fluctuates sharply, oscillating between bullish (positive percentages) and bearish (negative percentages) periods. The blue line, tracking the DJIA, shows the broader market trend over time, with notable peaks and troughs corresponding to economic events like the COVID-19 pandemic in 2020 and subsequent recoveries. During periods of extreme bullish sentiment (e.g., 2021, where the Bull-Bear Spread was near 40%), the DJIA continued to climb, suggesting that overly optimistic sentiment can precede sustained market growth. Conversely, during bearish periods (e.g., early 2020 or late 2022, with sentiment dipping below -20%), the DJIA often experiences sharp declines, reflecting market uncertainty or panic. However, the relationship isn’t perfectly linear. There are moments where high bullish sentiment coincides with market stagnation or even decline, indicating potential overconfidence or bubbles. Similarly, bearish sentiment doesn’t always lead to immediate drops in the DJIA, as markets can defy pessimism due to fundamental economic strength or external catalysts. So, how can investors use this information? For those considering buying, periods of extreme bearish sentiment (e.g., sentiment below -20%) might signal undervalued opportunities, as fear can drive prices below their intrinsic (true) value. This contrarian approach—buying when others are selling—can be rewarding if paired with thorough research into company fundamentals. For example, the bearish sentiment in early 2020, driven by the pandemic, was followed by a robust recovery in the DJIA, rewarding those who were willing to step into the market. On the flip side, investors contemplating selling might watch for extreme bullish sentiment (e.g., above 40%), which could indicate an overheated market ripe for a modest correction or large draw-down. The chart shows that such peaks in optimism, like those in 2021, often precede volatility or declines, offering a signal to lock in gains or rebalance portfolios. Of course, investor sentiment is just one piece of the puzzle. It should be combined with other indicators—such as economic data, interest rates, and corporate earnings—to form a comprehensive strategy. By understanding the nuanced relationship between sentiment and market performance, investors can make more informed decisions, balancing risk and reward. When putting money to work, its important to understand the current market sentiment as measured by the "%Bull-Bear Spread." -Paul R. Rossi, CFA 
As of early 2025, the United States maintains a significant position in the global economy across several key metrics. Gross Domestic Product (GDP) Total GDP: The U.S. boasts the world's largest economy, with a GDP exceeding $25 trillion. Inflation Rate Inflation has been a focal point for policymakers. Recent data indicates that inflation is gradually nearing target levels, reflecting the impact of monetary policies implemented to stabilize prices. Unemployment Rate The U.S. labor market remains robust, with the unemployment rate consistently below 4% since January 2022. As of January 2025, the rate stands at 4.0%, indicating a strong employment landscape. Population The United States has a population of approximately 337 million people. While growth has been modest, recent years have seen an uptick compared to earlier in the decade. Global Comparison GDP The U.S. economy remains the largest globally, surpassing other major economies such as China and Japan. GDP Growth While the U.S. experienced steady growth in 2024, other economies have shown varied performance. For instance, the Eurozone has faced slower growth due to various economic challenges. Inflation Inflation rates have been a concern worldwide, with many countries experiencing higher rates due to supply chain disruptions and energy prices. The U.S. has implemented measures to bring inflation closer to target levels. Unemployment The U.S. unemployment rate is relatively low compared to many advanced economies. For example, the Eurozone's unemployment rate was at a record low of 6.4% in August 2024, still higher than that of the U.S. Population In terms of population, the U.S. ranks third globally, behind China and India. However, its population growth rate is slower compared to some developing nations. The United States continues to lead in economic output, growth, and generally maintains favorable metrics compared to countries around the world. While the future is certainly not guaranteed, we are still the world's number #1. -Paul R. Rossi, CFA  The United States remains the world’s most resilient and dynamic economy, and there are plenty of reasons to stay bullish on our future compared to the rest of the world. Here are just a few reasons why you should feel good too: 1. Unmatched Innovation & Entrepreneurship The U.S. leads the world in technology, with companies like Apple, Microsoft, NVidia, Google, Tesla, and Meta that are wildly successful. The culture of risk-taking and venture capital funding fuels an endless stream of new startups, many of which become industry leaders. No other country comes close to matching our innovation ecosystem. We celebrate people who go out and make things happen. 2. Strongest Capital Markets The U.S. has the deepest and most liquid financial markets in the world. The S&P 500 and Nasdaq attract global capital because of strong corporate governance, transparency, and investor protections. When international investors seek safety and returns, they turn to U.S. equities and bonds. The United States has no equal in terms of the depth and breathe of our financial system. 3. Energy Independence & Natural Resources Unlike Europe, which is heavily reliant on imported energy, the U.S. is a net energy exporter, thanks to advancements in shale oil and natural gas. This gives the country a strategic advantage in controlling energy costs and maintaining economic stability. 4. World’s Reserve Currency The U.S. dollar remains the dominant global currency, used in over 80% of global trade transactions. This gives America unique financial flexibility, allowing it to fund deficits, maintain strong capital flows, and borrow at lower rates than other nations. 5. Best Higher Education & Talent Pool Our American universities continue to attract the brightest minds globally, young people from all over the world want to come here to get their education. Many of the world’s top engineers, scientists, and business leaders are trained in the U.S. When was the last time you heard of someone wanting to go overseas for their education? 6. Military & Geopolitical Strength The U.S. has the world’s most powerful military, and global alliances with NATO help with geopolitical stability. While other regions struggle with instability (Europe with Russia, China with Taiwan, the Middle East’s ongoing tensions), the U.S. generally benefits from geographic security and our strong military. 7. Consumer Spending & Economic Flexibility The U.S. economy is 70% driven by consumer spending, which keeps growth strong even in downturns. Additionally, the country’s flexible labor market allows businesses to adapt, compared to heavily regulated economies in Europe. While the United States has its challenges (along with every other country), we have a lot going in the right direction. It's easy to get caught in the day-to-day back and forth we hear about in the news. I would argue that we are still the shinning city on the hill that others look toward. -Paul R. Rossi, CFA  Timing, and the Sequence of Returns Risk is real. What is it? When taking withdrawals from an investment account, the sequence of returns have real impacts to the long-term value of an investment portfolio. Meaning, when a newly retired person starts taking money out of their account to fund their retirement, the long-term impact of their portfolio is affected as to when the returns are achieved.  When you take the money out and when you achieve those returns matter. Conversely, the sequence of returns is NOT impacted when there are NO withdrawals taken from the account. For example, the math works the same if you get a 15% return, then a 5%, and then finally a -10% return. This return sequence is equal to getting a -10% return, a 5% return and then a 15% return. The years just before and just after retirement are critical to portfolio management. -Paul R. Rossi, CFA  Mark Cuban, the billionaire entrepreneur and prominent investor on the television show "Shark Tank," has candidly acknowledged the challenges inherent in startup investing. Despite investing nearly $20 million in approximately 85 startups through the show over the course of over a decade, Cuban admitted that he is currently at a net loss across these investments. He stated, "I've gotten beat," which highlights even with his prior business experience, his capital, his connections, all the time he spent analyzing and helping to build these companies, he’s gotten it wrong. Not just on a deal or two but over the course of a decade plus. The good news is, you don’t need to be a billionaire or have billionaire connections to be an extremely successful investor. In fact, it can often work against you. The investment arena is littered with wealthy people who have lost a ton of money because their ego got in the way. Charlie Munger said, “Smart people aren’t exempt from professional disaster from overconfidence. Often, they’re the victims of it.” Munger has often emphasized that success in investing (and life) doesn’t require genius-level intelligence but rather discipline, humility, and the ability to recognize and stay within one’s "circle of competence." His partner, Warren Buffett, famously echoed this sentiment, saying, “You don’t need a stratospheric IQ to succeed. A temperament that avoids big mistakes and an ability to stay calm under pressure are far more important.” In 2019 he stated that he would prefer to hire someone with, "an IQ of 130 who believes it's 120, rather than someone with an IQ of 150 who thinks it's 170." This perspective emphasizes the value of humility and self-awareness in assessing one's capabilities. Munger’s wisdom points to the idea that having a high IQ can actually become a liability if it leads to arrogance or overconfidence. When someone believes their intelligence is higher than it actually is—or even if it is high but they over-rely on it—they may ignore critical risks, dismiss other perspectives, or take unnecessary gambles. Ultimately, Munger reminds us that self-awareness, a grounded ego, and a willingness to learn are far more valuable than raw intelligence. Recognizing the limits of one’s abilities is critical for sound decision-making, whether in investing or any other pursuit. What might the World’s Most Interesting Man have to say about all of this? He might say something like this, "I don’t always know everything, but when I don’t, I make sure to learn. Stay curious, stay humble, and never let your ego do the thinking." -Paul R. Rossi, CFA  Why Credit Risk in Bonds May Not Be Worth It Right Now. The chart above, says it all. Investors are often drawn to corporate bonds or high-yield bonds, which typically offer higher yields in exchange for taking on credit risk. However, in the current market environment, this strategy no longer is as attractive as it seems. Credit spreads, the difference in yield between corporate bonds and risk-free government securities—have narrowed significantly, eroding the potential reward for taking on additional risk. The chart above shows 1.03% of additional yield on a bond that is barely above what the market calls "junk" status. Credit spreads are meant to compensate investors for the risk of default and economic uncertainty. When these spreads are wide, corporate bonds (triple BBB rated and above) and high-yield bonds (BB rated and below) may offer a compelling risk-reward tradeoff. However, when spreads tighten to historic lows, as they now, investors earn only a marginally higher return for taking on significantly greater risk. This narrow-spread environment reflects a market priced for perfection, with investors seemingly confident in low default rates and stable economic conditions. But any signs of trouble in the form of:
Any of these, could quickly destabilize credit markets and therefore negatively impact corporate and high-yield bonds. In such a scenario, the meager extra yield would hardly compensate for the risk of capital loss. Instead of reaching for yield in credit markets, investors should consider higher-quality government bonds or other assets with more attractive risk-adjusted returns. With spreads this tight, the math just doesn’t add up for taking credit risk. It’s a time to prioritize safety over greed. -Paul R. Rossi, CFA  It's been said that a picture is worth a thousand words. What's a chart worth? I think this chart is worth a lot more than a thousand words, especially if you're an investor. What does this chart tell you? -Paul R. Rossi, CFA Not Every Company Can Weather the Test of Time Not every company proves to be a good investment, in fact, many make horrible investments. The chart below is just a small fraction of companies that have not come back from their highs. Many well-known companies that we all use every day have not fared well, companies like Boeing, Citigroup, Zoom, Perrigo, & Intel just to name a few. Fallen Stocks Will Not Always Bounce Back 
Boeing has struggled for 10 years to get back to its all-time high, Citigroup has been challenged for over 15 years, and Intel for 25+ years. Boeing is off almost -60% from its high, Citigroup is down -87% and Intel is off -73%. Newer companies like Zoom and Peloton are off -85% and -94% respectively. Why is this? The business world is hyper competitive. Companies face unique challenges, things like disruptive competition, mismanagement, changing consumer preferences, or technological obsolescence that can permanently diminish a company’s value. Do you remember Kodak or Blockbuster, they famously failed to adapt and subsequently failed. What about Lehman Brothers and Bear Sterns during the financial crisis, or the fraudulent company Enron? The list is long. The cemetery is filled with companies that didn't make it. Investors must recognize that holding onto a struggling company with the hope that it’s stock will rebound can lead to even further loses and lost opportunities. The market rewards adaptability, innovation, and growth...and not every company can or will be able to achieve this. Avoid companies that are not able to adapt, innovate, and grow. No company is immune from deterioration or even extinction. "Fallen Stocks Will Not Always Bounce Back." The Risk is Real. -Paul R. Rossi  Pullbacks, or temporary declines in the stock market, are often viewed with trepidation, but they play an essential role in healthy market cycles. A pullback typically involves a drop of 5-10% from recent highs is quite normal, and common, happening several times a year on average. And the best part, it many times offers great opportunities. Why Pullbacks Are Important and Necessary
When the Inevitable Happens, What Should You Do? Instead of fearing pullbacks, savvy investors think about and use them as opportunities.
Pullbacks can become a powerful ally in building wealth. As the saying goes, "The best time to buy is when there’s fear in the market." -Paul R. Rossi, CFA If you want to purchase real estate and have an investment portfolio...you have options.
Very good options. Before getting a traditional mortgage, the cost on using your investment portfolio as collateral is less expensive, easier, and quicker than using the real estate property as collateral (traditional mortgage). And there are several advantages over a traditional mortgage:
-Paul R. Rossi, CFA 2024 was an anomaly. 2024 was an abnormally low year in terms of volatility (see the red box in the 10- year chart below). There were only two drawdowns of 5% or more which is far below the long-run average of 4.6 times per year the market experiences these types of events. While I don't purport to have a crystal ball, we should expect the stock market in 2025 to experience increased volatility, especially since 2024 was relatively calm by historical standards. 
In 2024 markets benefited from a combination of easing inflation, a steady interest rate environment, and strong corporate earnings. These factors helped suppress volatility, making it one of the least turbulent years in the last decade. However, this calm could set the stage for a rockier 2025 due to several possible risks. Potential Catalysts for 2025 Volatility
While market volatility can be unnerving, it also creates opportunities for investors to capitalize on mispriced and/or underpriced assets. The bottom line: Investors should expect increased volatility - which could mean a significant draw down of MORE than 5%. It can be helpful to mentally prepare for such increased volatility so if and when it comes, we are not surprised by it and have already thought through what we may or may not do. As with so many other areas of life, being mentally prepared is a substantial part of being successful. -Paul R. Rossi, CFA Population growth plays a significant role in economic power which drives stock market returns. A larger population translates to a bigger labor force, which is essential for producing goods and services, driving innovation, and supporting industries. Additionally, a higher population means more consumers, which fuels domestic demand and economic growth. This relationship is particularly evident in GDP, as it is fundamentally tied to the size of a country's labor force and productivity. Population Growth and GDP Population growth contributes to GDP growth in two main ways:
When population growth slows or declines, as seen in many countries around the world, especially in aging nations like Japan, economic growth stagnates, unless it's more than offset by substantial productivity gains which is extremely difficult to do. Population and Stock Market Performance Population growth also influences stock market performance. How?
 Countries like the U.S., with steady population growth and high productivity, have experienced strong GDP growth and therefore stock market success, reinforcing the importance of demographics in economic power. Many other countries haven't fared nearly as well, Germany, Italy, Japan, and Poland just to name a few. Their populations have generally stagnated over the last 30 years, and in the case of Japan and Poland have actually shrunk. Not surprisingly their markets haven't performed nearly as well as the United States (see chart below). The United States population has grown nearly 3x that of the European Union. Which is a contributing factor to the U.S. stock market outperforming the E.U. by over 3.5x over the last 10 years. 
A larger, growing population supports corporate revenues through robust consumption and workforce-driven production. Over time, this contributes to stronger earnings growth for companies, which is a key driver of stock market valuations Is population growth the only factor that drives economic growth and stock market returns? No, of course not, but it's an important driver. There are other factors, but don't underestimate the power of population growth. -Paul R. Rossi, CFA  Look in the mirror...you, me, and everyone else in the United States holds the vast majority of the United States massive debt. And as the largest holders of our countries debt, it's in our best interest to make sure our government can pay its bills and is a good steward of our money. -Paul R. Rossi, CFA  Thanksgiving’s here, it’s time to reflect, On family, friends, and your portfolio’s trek. The market’s a turkey, it squawks, and it dives, But smart, steady planning keeps your dreams alive. The gravy boat flows, like compound returns, Patience is key—it's the lesson that burns. If inflation’s the stuffing, bloated and dense, A diversified plate just makes more sense. The cranberry sauce may be bitter or sweet, Much like the risks we strategically meet. The feast takes some planning, with balance and care, So too does your future—we’ll always prepare. With gratitude flowing like fine cabernet, I’m thankful for trust you’ve shown every day. As you carve through life’s choices, both simple and tough, You are the reason I can’t thank you enough. So, here’s to your health, your wealth, and your cheer, May this Thanksgiving bring joy year to year. Let’s toast to the journey, through markets and strife, You are building a wonderful prosperous life! I hope you enjoyed my Thanksgiving Ode from Me, and a little help from ChatGPT. -Paul R. Rossi, CFA  The Dow Jones Industrial Average (DJIA), a cornerstone of U.S. equity markets, may reach the milestone of 100,000 points sooner than many might think. Although such a leap might seem daunting, historical data and realistic growth rates suggest it’s achievable within the foreseeable future. Scenario 1: 3% Annual Returns Even with abnormally low annual growth rate of 3%, substantially below the historical returns for the DJIA, the index would cross 100,000 in 2052 (about 27 years) from its current level of roughly 44,000. Scenario 2: 5% Annual Returns At 5%, the Dow would hit 100,000 in 2042 (just under 17 years). This scenario reflects balanced market conditions with modest corporate earnings and moderate interest rates. Scenario 3: 9% Annual Returns And if the Dow achieves a strong average growth rate of 9%, which would be driven by strong economic expansion, the index could reach 100,000 in 2035 (9.5 years). However, this path aligns with previous periods of rapid growth, such as the 1990s tech boom. Drivers of Growth Several factors could fuel these scenarios:
While reaching 100,000 might seem overly optimistic, the compounding effect of even moderate growth rates demonstrates how this milestone could become reality within a generation. Investors should stay focused on having a well-thought-out plan to capture these opportunities. -Paul R. Rossi, CFA  I don't typically make predictions, but... The S&P 500 Earnings Per Share (EPS) metric has seen significant fluctuations over the years, reflecting periods of growth, periods of modest growth, slowdowns, and more severe recession-induced downturns. Over the past three and a half decades, EPS growth has been largely positive, driven by corporate expansion, technological advances, and economic growth. However, several downturns have periodically interrupted this trend, some being triggered by economic recessions, financial crises, or global events.
Historically, it's taken the S&P 500 four to five years for quarterly EPS to recover from previous peak levels following significant downturns. However, this recovery time varies, depending on the nature and severity of the downturn, as well as the economic conditions and policy responses that follow. Despite these cycles, long-term EPS growth has been positive, with historical growth rates averaging over 6% per year, which in turn, has contributed to strong stock market performance. This trend of economic growth underlines the importance of staying focused on the long-term benefits of riding the wave of growth. Market prediction:
Bonus Prediction:
Why do I make this prediction and why is it important?
Understanding the hard truths might help make enduring the lumpy times ahead just a bit easier. -Paul R. Rossi, CFA P.S. *Ignore anyone that claims they can predict the short-term.  The challenge for investors is trying to come up with a reasonable value for a company that is growing fast but also is considered expensive when compared to other companies or the overall market. There is a solution. One idea to help investors understand some of the risks in valuation, is looking at current P/E (price/earnings) vs. future P/E ratios and then this relationship to future growth rates. Examples tend to help illustrate the thought process around this idea. Let's use an example to help us understand the concept. A company that has been growing it's EPS (earnings per share) on average by 25% for the last several years and the market has been valuing the company with a P/E of ratio of 45. In this example, we are comfortable with the future EPS growth rate of 25%, as we expect growth this to continue for some time. However, we are concerned that the P/E multiple might come down from its current 45 and be repriced with a more inline market multiple of 25. If the market reprices this company, how long will it take the companies EPS to justify a P/E of 25? Let's calculate. Current Valuation: The initial P/E is 45, so the P (Price) = 45 * EPS (Earnings Per Share) Target Condition (the risk): The company P/E will now be 25 without changing the price, so we'll need the EPS to grow until the stock price dividend by the EPS equals 25. (P / Future EPS) = 25 Growth in EPS: Future EPS = E * (1 + .250) ^ n Setting up and solving the equation: P/E * EPS = Future P/E * Future EPS
So this tells us that a company that is expecting to grow at 25% would take approximately 2 years and 8 months to support a P/E ratio of 25. If an investor is comfortable with this assumption of growth and possible P/E compression, then if could make sense to buy a company that is trading at what would initially look like a very lofty valuation in relationship to the market averages. We can also run various "what-if" scenarios, like reducing the growth rate from 25% to 20%. How much does this impact the number of years to support a P/E ratio of 25? In this case, it would take 3.22 years. Additionally, if you purchased a security, this process can be used to help determine if you "over paid," and if so, how long will it take for the company's earnings to catch up with its valuation. Like personal growth, strong company growth can help overcome a lot, even if your initial starting point was less than ideal. -Paul R. Rossi, CFA  What might (sort of) look like an EKG (Electrocardiogram) chart which measures the electrical activity of the heart, it's actually the CBOE (Chicago Board of Options Exchange) Put/Call Ratio. For savvy investors, the CBOE Put/Call Ratio can be used to help gauge market sentiment by comparing the number of traded Put options as compared to the number of traded Call options. What are Put and Call options? They are collectively part of a group of securities called derivative instruments. Put options give the holder the right to sell an asset at a specific price within a certain timeframe. Investors often buy puts when they believe the market, or a specific stock is going to decline. Put options are also used as a hedging tool. Call options give the holder the right to buy an asset at a specific price. Investors purchase calls when they expect the market or a stock to rise. The put-call ratio shows how many puts are being traded relative to calls. A ratio of 1 means an equal number of puts and calls are being traded. Interpreting the Put/Call Ratio High Put/Call Ratio (>1): A higher ratio indicates that more investors are buying puts, expecting a market decline. For example, if the ratio reaches 1.3, this means 1.3 puts are being traded for every call, suggesting investors are largely bearish and putting hedges in place. Extremely high levels can sometimes be seen as a contrarian signal. When too many investors expect a downturn, it can indicate a market bottom, where prices could stabilize or even rise. Low Put/Call Ratio (<1): A lower ratio can suggest more calls are being bought, reflecting optimism in the market. For instance, a ratio of 0.6 means more calls are being traded, signaling that investors are bullish. Again, extremely low levels could be a contrarian signal, suggesting the market is overly optimistic and may be ripe for a correction. For example, imagine the stock market has been declining for several weeks, and investors become increasingly pessimistic. The CBOE Put/Call ratio rises to 1.8, indicating that far more puts are being bought than calls. This heightened bearish sentiment might suggest that investors are hedging or speculating on further declines. However, such a high ratio could also be seen as a contrarian indicator, implying that too many investors are expecting bad news and that the market might be nearing a bottom. If the ratio starts falling, signaling more calls being bought, it could suggest a change in sentiment and the potential for a market rebound. In this way, the Put/Call Ratio offers a window into investor sentiment, and when used in conjunction with other market data, it can provide valuable insights for timing market turns. -Paul R. Rossi, CFA  Although markets have performed well this year, some investors may be nervous about upcoming events such as the presidential election, the Fed’s next rate decision, and the state of the economy. Along with the uncertainty of the past few years, it’s no wonder that gold prices have also risen to record levels above $2,600 per ounce. While gold can serve a purpose, some investors may focus on it as a standalone investment rather than as a component of a well-constructed portfolio. In today’s market environment, what role should gold play in long-term investment and financial plans? There are many reasons investors might be drawn to gold.
The case for gold really depends on the portfolio objective. Across economic environments, gold can serve at least two investment purposes. 1. First, as a precious metal with consumer and industrial uses, the value of gold can rise over time due to limited supply and steadily increasing demand. This is in addition to demand for gold as a luxury good. As a result, it can serve as a store of value when the world is uncertain and can also protect against inflation as the economy heats up or as central banks increase stimulus, as they have done this year. It's also clear that many investors flock to gold for safety when markets get choppy. In many ways, this is no different from how some investor's view cash or bonds - as a tool to protect their portfolio from short-term market swings. Unlike cash and other safe-haven assets, however, gold does not generate any portfolio income. Thus, it's important to distinguish between gold as a one-off investment and as a part of a portfolio tailored to achieve financial goals. 2. The second and more important consideration is whether gold can help diversify portfolios. Much like bonds, gold tends to perform differently to stocks. The relationship between gold and the stock market since 2008, shown in the accompanying chart, makes this clear. Although gold outperformed stocks during the global financial crisis, it fell in value and flat-lined for years while the stock market climbed to new record highs. Gold also jumped in value during the pandemic, and again more recently as the Fed began to cut rates. 
What may be surprising is that gold was relatively flat during the recent inflationary period that began in 2021. This is partly because the Fed raised rates rapidly in 2022, increasing the attractiveness of cash and other short-term assets. This reveals that understanding the underlying drivers of gold price movements and Fed policy is important when it comes to making portfolio decisions. It’s also important to note that over this full period, the stock market outperformed gold, just as it has against most other asset classes. Of course, constructing a portfolio is not just about investing in the best performing asset – it’s about diversifying to reduce risk and help smooth the ride and to meet financial objectives. While gold may be attractive to investors for a variety of reasons, it’s always important to view it with respect to other asset classes, including stocks, bonds, cash, alternative investments, and real estate. Why Have Gold Prices Risen Recently? Gold often performs well when interest rates decline, as lower rates make non-yielding assets like gold more attractive. The Federal Reserve typically cuts rates to boost economic growth, which can signal an economic slowdown or rising inflation—both positive for gold as a hedge against rising prices. However, falling rates also benefit stocks and bonds. A "soft landing," where inflation slows and rates fall, can create a favorable environment for the stock market and boost bonds, as higher-yielding bonds become more valuable. Recently, though, market-based rates have risen, with the 10-year Treasury yield nearing 4.1%. Like all investments, gold is best (if used) as part of a diversified portfolio. Various asset classes, such as international stocks and small caps, have contributed to market performance this year. Rather than focusing on a single asset, building a resilient portfolio to weather changing market conditions is key. Geopolitics and other concerns will continue to impact markets, the principles of a well-designed portfolio remain steady. What’s the bottom line? Gold’s recent rally can be attributed to Fed rate cuts, geopolitical tension, and fiscal concerns. Investing in gold or any investment should always be considered in the context of a designed investment strategy rather than as a standalone investment. As Led Zepplin so aptly sang: And as we wind on down the road Our shadows taller than our soul There walks a lady we all know Who shines white light and wants to show How everything still turns to gold And if you listen very hard The tune will come to you at last When all are one, and one is all, yeah To be a rock and not to roll -Paul R. Rossi, CFA  Chances are you are not a billionaire, and chances are you will not become a billionaire. But you can ensure your great-great-grandchildren are. We’ll call this the Billion-Dollar Family Portfolio. Let’s describe it and how to do it. Starting with a $100,000, it's possible to build a $1 Billion Dollar Family Portfolio It might seem like an impossible goal, but with discipline and the power of time, it can be achieved over multiple generations. Assuming a 9% annual return (below the stock market's historical average) this ambitious target can become a reality by maximizing time and reinvesting returns. Let’s break down how you can create a lasting financial legacy for your family. The Power of Time Let’s use the sage ideas of Warren Buffett, “Time is the friend of a wonderful company and the enemy of a bad one.” A growth portfolio can be thought of similarly, a well-designed portfolio can grow to become something of wonder given enough time. Compound interest is one of the most powerful tools in wealth creation. By reinvesting your returns year after year (not spending it), you create a snowball effect where your money starts to generate more money on its own. The key to growing a $100,000 portfolio into $1 billion is to give your investments enough time to grow through compounding. At a 9% annual return, your portfolio will double approximately every 8 years. Let’s see how your $100,000 would grow over time: - After 8 years: $100,000 becomes $200,000 - After 16 years: $200,000 becomes $400,000 - After 24 years: $400,000 becomes $800,000 (8x original investment) - After 32 years: $800,000 becomes $1.6 million - After 40 years: $1.6 million becomes $3.2 million - After 48 years: $3.2 million becomes $6.4 million - After 56 years: $6.4 million becomes $12.8 million (128x original investment) - After 64 years: $12.8 million becomes $25.6 million - After 72 years: $25.6 million becomes $51.2 million - After 80 years: $51.2 million becomes $102.4 million - After 88 years: $102.4 million becomes $204.8 million - After 96 years: $204.8 million becomes $409.6 million - After 104 years: $409.6 million becomes $819.2 million (8,192x original investment) After just over a century—potentially spanning four generations—the portfolio would approach $1 billion. While this is a long journey, it illustrates the power of compound interest and disciplined investing over time. You’ll notice after the first 50 years it doesn’t seem like the portfolio will get anywhere near the $1 billion mark, however it’s the second 50 years where the “magic” happens. This is where the power of time really starts to have an unbelievable effect on the dollar value of the portfolio. Creating a Multi-Generational Legacy Building a billion-dollar portfolio requires more than just time and returns, it requires passing on sound financial principles to future generations. Over the course of a 3-4 generations, the family wealth could grow exponentially, providing financial security for future heirs. Consider the example of the Rothschild family, who amassed significant wealth in the 18th and 19th centuries...and still continues to this day. Some estimates have the vast family's wealth approaching a trillion dollars. By employing a long-term strategy and ensuring that future generations followed similar investment principles, they were able to sustain and grow their wealth. Today, the Rothschilds remain one of the wealthiest families in the world, thanks to the power of multi-generational investing. Doing What Most Won’t Do Most people are drawn to short-term gains and quick wins, which is why building a $1 billion portfolio is hard and requires the discipline to avoid instant gratification. Warren Buffett, famously said, “The stock market is a device for transferring money from the impatient to the patient.” Those who are patient, disciplined, and willing to stay the course reap the greatest rewards. The Biggest Challenge The difficulty lies in maintaining this discipline through difficult market cycles over generations. Tough times lie ahead, they always do. You can be virtually certain that over the next 100 years there will be many panics, wars, and countless scary times that will need to be endured to build the Billion Dollar Family Portfolio. Think about building this portfolio in 1900 and what happened over the next 100 years: 2 world wars, a great depression, countless recessions, stagflation, many smaller wars, a presidential assassination, and several government shutdowns. The key to building long-term generational life changing wealth is sticking to a consistent investment strategy over many decades, even when the vast majority will be tempted to deviate. How To
Achieving a $1 billion portfolio from $100,000 requires time, patience, and discipline, but it’s possible to achieve across a few generations. By ignoring the noise, and focusing on a long-term growth portfolio, and passing down sound financial principles, you can build a lasting legacy that ensures your family’s financial security for generations to come. While the journey may be long, the results will speak for themselves. -Paul R. Rossi, CFA P.S. Some interesting facts about the starting value. If you start with $10,000 instead of $100,000, you can factor that it will take an additional 25 years or so to get to a billion dollars. What if you start with $1 million dollars? It will take 20 years less, so the Billion Dollar Family Portfolio will be achieved in about 80 years. *The statistics show that 0.00022% of Americans are billionaires.  What are Alternative investments? They are financial assets outside of traditional stocks, bonds, and cash. They often include private equity, private credit, hedge funds, real estate, direct start-up investing, commodities, and venture capital. While they can potentially offer higher returns, they also carry unique risks. Investors commonly use alternative investments to enhance portfolio diversification, hedge against market volatility, or seek long-term growth opportunities in niche markets. These assets, often unlisted on traditional stock exchanges, promise unique opportunities and the potential for significant returns and the allure of alternative investments can be irresistible. However, while getting into these investments is easier than ever, a crucial question often goes unasked: How will you get out? Let's take a look at some of the positives and the potential drawbacks of investing in the alternative investment space. But keep in mind there are unique and sometimes stark differences between the various types of alternative investments and even within the same asset category. Positives of Alternative Investments 1. Diversification Benefits Alternative investments, such as hedge funds, private equity, and real assets (e.g., real estate, commodities), often have low correlation with the traditional stocks and bond market. This helps reduce overall portfolio risk by spreading exposure across different asset classes. 2. Higher Potential Returns These investments can offer the potential for higher returns compared to traditional investments. For instance, the top private equity firms and venture capital funds have historically provided substantial gains for investors willing to accept the risks and long holding periods. The big differential between the top tier funds and the rest is quite large, so having access to top firms is extremely important. 3. Access to Unique Opportunities Alternative investments provide exposure to opportunities unavailable in public markets, such as direct investments in startups, private real estate, or infrastructure. This can lead to enhanced portfolio customization and risk-adjusted returns. 4. Tax Efficiency Some alternatives, like real estate, offer tax advantages. Real estate investments allow for depreciation deductions, which can reduce taxable income. Additionally, gains in private equity and venture capital are often taxed as long-term capital gains, which have lower rates than ordinary income tax. Negatives of Alternative Investments 1. Illiquidity Many alternative investments are not easily tradable, which can make it difficult to access capital once you've invested. Investments in private equity or real estate funds often have long lock-up periods, many for up to 10 years or more. Always ask yourself, how will I get out? Selling these assets can be complex and expensive. Since there's no active market for these investments, you may have to sell at a deep discount, often far below their reported value. How deep is the discount? When exiting these investments, you may face a discount of 20% or more. And in a downturn, the lack of demand can make selling even harder, increasing your potential losses. 2. High Fees Alternatives typically come with higher fees than traditional assets. For example, private equity funds charge both a management fee (often 2%) and a performance fee (usually 20% of profits), which can eat into net returns. These fees dramatically impact what the investor actually make. 3. Complexity and Lack of Transparency These investments are often more complex, requiring a deeper understanding of the asset class and specific strategies. Additionally, most of the time they lack the same level of transparency as publicly traded assets, making it difficult to the management teams, assessing risks, or performance in real-time. Many times, these investments are a black box, you don't really know what's inside. 4. Potential Tax Disadvantages Certain alternative investments, such as hedge funds or limited partnerships, may generate taxable events such as unrelated business taxable income (UBTI) or require investors to file complex tax forms like K-1s. These tax issues can add complexity and add the additional need for professional tax help which reduces net returns. While alternative investments can provide diversification and higher returns, they come with real risks such as illiquidity, complexity, and tax implications. Investors need to weigh these factors carefully to ensure alignment with their financial goals and risk tolerance. -Paul R. Rossi, CFA  When the Federal Reserve cuts interest rates last week, it impacts consumers and investors alike. The recent 50 basis point cut (0.50%) affects borrowing, investing, and saving in both the short and medium term. Implications for Consumers Short-Term (3 months)
Medium-Term (12 months)
Implications for Stock Market Investors Short-Term (3 months)
Medium-Term (12 months)
Implications for Bond Market Investors Short-Term (3 months)
Medium-Term (12 months)
Important Considerations The Fed's decision to cut rates by 50 bps is an important piece of information, but it should not be the sole driver of your investment decisions. While rate cuts can influence market conditions, they are just one part of a complex economic and investment landscape. Investors should use the rate cut as a signal to review their portfolios and strategies but make decisions based on a comprehensive assessment of market conditions, risk tolerance, and long-term objectives rather than reacting solely to changes in interest rates. -Paul R. Rossi, CFA |