I spent a few minutes yesterday with Larry Kudlow discussing the importance of adding "hard assets" to your overall portfolio. While Larry initially made me out to be an "doomsdayer" the reality is that real assets should be a part of any well diversified portfolio. In a severe market correction these assets will store a real value and in many cases produce income above market rates of return.
Oil and gas, real estate, precious metals are the most obvious but also private equity investments play well in this area. However, as I said, this should not be all of your portfolio but just one part. Fixed income that protects principal and delivers an income stream, equity related investments to help adjust for inflationary pressures and provide liquidity and non-US currency are all part of a good long term portfolio mix.
This past Friday I visited with Bill Griffith, Maria Bartiromo and Rick Santelli on CNBC to discuss my views on the latest employment report. My take is somewhat basic in regards to the data - on a macro level the jobs that are being created are temporary, low paying, jobs that do not create long term sustainabilty for economic growth.
This problem with part-time employment is that it does not increase economic prosperity. Part-time employment, as discussed in the "Labor Hoarding Effect," has been an aggressively used tool by corporations to suppress wage growth, reduce overhead costs and increase profitability. The problem is that with the Affordable Care Act gearing up to start in 2014 even more businesses will resort to part-time employment to reduce the increased health care tax burden. I stated that:
"The issue of 'labor hoarding' is an important phenomenon that is likely obscuring the real weakness in the underlying economy. Without an increase in the demand part of the equation businesses are likely to continue resorting to further productivity increases to stretch the current labor force farther to protect profitability. However, as we may currently be witnessing, businesses may be reaching the limits of what they can do to continue increasing profits at the bottom line while revenue declines at the top. The implications for the financial markets going forward are clearly negative."
There has been little improvement in the number of people working part-time for economic reasons. However, as I stated, such weak employment leads to dependence of government subsidies which explains the rise in disability claims and food stamp participation as individuals seek to make ends meet.
I also discuss my views on the market and where to invest.
