💡(11 Executive Strategies) What Strategies Will Work Best? 👇
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💡(11 Executive Strategies)
What Strategies Will Work Best? 👇
1. “Sell off the big stocks, the small stocks, the value stocks, the growth stocks, the U.S. stocks, and the foreign stocks.”
2. “Sell the private equity along with the public equity, the real estate, the hedge funds, and the venture capital. Sell it all and put the proceeds into high yield bonds at 9%.”
3. “The Standard & Poor’s 500 Index has returned just over 10% per year for almost a century, and everyone’s very happy (10% a year for 100 years turns $1 into almost $14,000).
4. “Nowadays, the ICE BofA U.S. High Yield Constrained Index offers a yield of over 8.5%, the CS Leveraged Loan Index offers roughly 10.0%, and private loans offer considerably more.”
5. “In other words, expected pre-tax yields from non-investment grade debt investments now approach or exceed the historical returns from equity.”
It seems obvious that if certain strategies were the best performers in a period with a given set of characteristics, it must be true that a starkly different environment will produce a dramatically altered list of winners.
6. “The 40 years of low and declining interest rates were hugely beneficial for asset owners. Declining discount rates and the associated reduction in the competitiveness of bond returns led to substantial asset appreciation.”
7. “Thus, asset ownership - whether related to companies, pieces of companies (equities), or properties – was the place to be.”
8. “Falling interest rates brought down the cost of capital for borrowers. As this occurred, any borrowing automatically became more successful than originally contemplated.”
9. “Investors who profited in this period from asset ownership and levered investment strategies may overlook the salutary effect of interest rates on asset values and borrowing costs and instead think the profits stemmed from the inherent merit of their strategies, perhaps with some help from their own skill and wisdom.”
10. “That is, they may have violated a basic rule in investing: (Never confuse brains and a bull market)”
11. “Given the benefits of being on the (moving walkway) during this period, it seems to me it would have required really bad decision-making or really bad luck for a purchase of assets made with borrowed money to have been unsuccessful.”
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Disclosure
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.