As equities continue to ride high investors are seeking aggressive ways to amplify their earnings. However, beneath the euphoria of today’s bull market are risks that hide in the shadows. Here, we take a look at three things that might give investors the creeps.

BATs and FANGs

No, I’m not talking about Dracula. In recent months investors have flocked to this core of outperforming stocks. BATs consist of Baidu, Alibaba, and Tencent. Each are major players in the Chinese economy and have posted strong gains. Meanwhile, FANGs are more recognizable to U.S. investors. That group includes Facebook, Amazon, Netflix, and Google. Profits have been substantial here also. Lured by performance, many investors fail to notice the high costs of some of these holdings. Consider, for example that today Baidu trades for 44 times earnings. Alibaba is trading at a whopping 59 times earnings and Tencent at 53. Not cheap. These high prices mean each will need to generate major revenue to support the heavy expectations. Facebook, Amazon, Netflix, and Google are all pricey as well at 39, 280, 242 and 37 respectively. These high costs are representative of the stock market as a whole.

Interest Rates are Back from the Dead

Federal Reserve Chairwoman Janet Yellen has made clear her willingness to keep the option open for another rate rise before the year ends. Moreover, three additional rate increases are expected in 2017. What does this mean for exuberant equity investors? It means the surge in stock prices will face pressure in the coming months because as Russell Investments has reported “On average, U.S. equities perform somewhat worse in rising interest rate periods than in falling rate environment.” Even the Wall Street Journal has reported in recent weeks that “The stock rally could stall if the Fed moves to normalize monetary policy faster than expected, investors and analysts say.” Investors should take caution but few are allowing this reality to temper expectations.

The Man in the CAPE

Nobel Laureate Robert Shiller is the man in the CAPE. The specter of his cyclically adjusted price-earnings ratio (CAPE) looms large. This valuation measurement is at a near historic high. In fact, it has only been higher in 1929 and 2000, periods of catastrophic decline in the stock market. “We are at a high level, and it’s concerning,” he remarked in June of this year. This lofty figure has prompted some to warn that valuations are running too high and that a correction is due. Of course no one can (or should) attempt to time the market, however, when a measurement like this is at its second highest level since the late 1800s it’s time to consider how risks are growing.

Is doom around the corner? Likely not. But, investors would be wise to reevaluate their diversification strategy with commodities like precious metals. Gold and silver help spread out risk. Also, the same research cited from Russell Investments above noted that commodities “showed superior returns rising vs falling rate periods.” Sometimes the scariest things are those we don’t see until it’s too late.

You’ve surely heard the saying: “A picture is worth 1,000 words.” We found five charts that show why gold is a smart investment for everyone.

Chart 1: Currency in Circulation

The amount of currency in circulation continues to rise and is at an all-time high. This is paper currency, not backed by a hard asset. The printing presses remain in high gear.

Chart 2: Total U.S. Debt at $20 Trillion

Total U.S. debt continues to rise. The price of big wars, tax cuts and economic stimulus packages have boosted debt levels over the years. Is the problem getting better or worse? Will policymakers ever be able to right the debt ship? If not that leaves Americans vulnerable to higher interest rates and eroded purchasing power with paper money in the years ahead.

Chart 3: Long-Term CD Rates

You may remember several decades back when CD rates were at double digits. Many retirees used CDs as a safe way to generate income on their savings. Today, you are lucky if you can generate 1.00% on a savings account. There is no return on paper money and your purchasing power with paper money continues to decline (see chart 4).

Chart 4: Purchasing Power of the Dollar

The purchasing power of your dollar continues to decline. It’s been a steady erosion since the Great Depression ended. While you may amass more dollars through your income, or capital gains in the stock market, what is that dollar really worth?

Chart 5: Long-Term Gold Chart

In 1973, an ounce of gold was worth $100. In 2011, an ounce of gold traded over $1,800 an ounce. The long-term trend remains up. Well-known forecasters predict the price of gold will surge as high as $2,000 an ounce by 2020. For investors who are keen on protecting the true value of their assets, gold is a vehicle that preserves and protects your future purchasing power.

Wall Street money managers are now recommending diversification up to 30% in physical gold. How confident are you in your current investment plans? Contact a Blanchard portfolio manager today at 1-800-880-4653 for a confidential, personalized evaluation of your individual financial goals and learn how tangible assets can help you achieve the financial freedom and security you desire.

Move on over gold and silver. There’s a new American Eagle coin on the block.

For the first time, the United States Mint began offering a one-ounce American Eagle Palladium bullion coin in late September. The new coin is designed to offer investors an easy and cost-effective way to invest and hold physical palladium.

Those investing in precious metals are well aware of the value and properties around gold, silver and maybe even platinum. But, palladium? What is this under the radar metal?

Here are 3 things you might not have known about palladium:

1. Palladium is a precious metal and industrial metal.

Palladium is used widely in pollution control devices for gasoline powered cars and trucks. That makes the new American Eagle a great diversification tool in the precious metals arena.

2. Palladium is the biggest gainer in the commodity universe in 2017.

The price of palladium surged an incredible 34% (through Oct. 7) since the start of the year. That’s more than double the return of the S&P 500 this year. Palladium demand is forecast to rise to 10.13 million ounces in 2017, surpassing the 10 million ounce mark for the first time since 2014. That means the new one-ounce palladium American Eagle arrived at the right time. There is huge interest in palladium investment.

3. The price of palladium scooted past platinum recently for the first time since 2001.

Last week, spot palladium hit a high at $946.00 an ounce. That compares to $921.00 an ounce for spot platinum. Demand has been rising for palladium, while demand for platinum (jewelry and components for diesel powered vehicles) has slid. See current spot prices here. That means current prices of the new palladium American Eagle coin could be a bit rich.

Investing Moves

Should you snap up this new palladium coin? From a diversification perspective, palladium investment is a smart move. Just as you diversify your equity portfolio from large cap stocks to international stocks, with a few value stocks and dividend stocks thrown in the mix. The broader diversification you have in the physical precious metals arena, the better.

Patience could be a virtue. For coin investors who’d like to add palladium to their portfolio, consider this. Sometimes when a market rallies excessively, it becomes overstretched, overvalued and vulnerable to a snap-back correction. That could be the case now for palladium, according to well-respected metals consultancy CPM Group.

• “Platinum near rock bottom, palladium on the edge of a cliff,” the CPM Group report said.

“Quite often the prices of these metals run ahead of their fundamentals and that could be the case with palladium. If there is a decline in prices the fall could be sharp be-cause of the nearly unilateral fashion in which this market has performed in recent years. There have been a lot of

new investors that have entered this market, attracted by the healthy and sustained rise in prices. . . Many of these investors are likely to leave the palladium market just as quickly as they got into the market,” the report said.

Platinum Buy Spot

In the meantime, current levels may offer one of the best buying opportunities in platinum seen in years.

Platinum is another precious metal that benefits from both industrial demand and investment demand, and also has a long history of being used in coins for currency. Platinum and palladium are widely used in industrial applications including automobile manufacturing.  Both of these metals exhibit qualities, such as durability, resistance to corrosion and catalytic properties that make them heavily used in industry.

Learn more the benefits of investing in physical platinum here.

Investors can and should diversify their tangible assets portfolio through diversification across metal types by purchasing of a mix of silver, platinum, palladium, and gold coins and bars. Right now, platinum, may offer an excellent long-term buying opportunity. Platinum bullion U.S. Eagles, produced by the U.S. Mint, are minted in a variety of denominations.

Contact Blanchard today at 1-800-880-4653 and a portfolio manager can identify investments that are the best fit for you.

Today, more than ever before, we value technology. The more advanced and sophisticated a piece of technology is, the more we respect it. In his book Technopoly: The Surrender of Culture to Technology, author Neil Postman writes that we live in “a peek-a-boo world, where now this event, now that, pops into view for a moment, then vanishes again. It is an improbable world.” He continues that “it is only now beginning to be understood that cultures may also suffer grievously from information glut, information without meaning.” Though penned a quarter-century ago, these worlds hold particular relevance today as people navigate an ever-expanding labyrinth of investment products like cryptocurrency, ETFs and other digital offerings. His ideas prompt new questions for today’s investor; Does the novelty of an investment’s technology drive real or perceived value?

Many investors pursue outsized gains by seeking early investment trends. As a result, many investment products leverage their unique technological characteristics to position themselves as an emerging trend. When these products market themselves as bold, new alternative investments, people become transfixed by the notion that they’re standing at the doorway of “the next big thing.” In reality, however, the value will ultimately be determined by the underlying methodologies which are often as hollow as the investor’s misplaced value in the technology.

A study of fund returns and total net assets of more than 7,000 mutual funds from 1993 to 2014 illustrates the faultiness of placing value on the technological underpinnings of trendy investments. Researchers Jason Greene and Jeffrey Stark separated the collection of funds by sifting out those that included trendy terms. What did they find? As one journalist explained, “As you might expect, they found that mutual fund families attempt to attract assets by launching ‘trendy’ funds.” The biggest problem, however, is the performance.

The “trendy” funds “under-perform over their first five years compared to non-trendy funds, with the trendiest startup funds underperforming the least trendy startup funds by an average of 1.03 percent per year on a risk-adjusted basis.” Adding to this problem are larger fees (expense ratios). The “trendy” funds had a fees that were, approximately 0.20 percent higher than their non-trendy counterparts on average.

Meanwhile, investments like gold bullion, have enjoyed regular price appreciation over the decades because they exemplify the timelessness of an asset that doesn’t need to leverage an emerging technology as a selling feature. Rater, gold, in all its simplicity, is in stark contrast to tech-heavy products like P2P funds, cryptocurrencies, and smart beta ETFs. Demand for gold is not subject to the whims of technology or fads that inevitably fade. Instead, gold is a global currency that has roots which run deeper than the hot trend.

It’s ironic that the trendiness which propels an investment product is also often the agent of its demise. The reason for this dynamic is simple: a new, flashier trend takes the place of the last one. This phenomenon is in keeping with Postman’s assertion that unquestioned trust in technology serves “to make people believe that technological innovation is synonymous with human progress.” Question the trend.

Americans rack up highest debt levels in history

Debt levels are rising. Not only at the government level, but the personal level too.

American consumers recently hit an alarming milestone.

Even though the economy is growing, the labor market is supposedly strong, cash-strapped Americans are taking on more debt than ever.

• Americans now have $1.021 trillion in outstanding revolving credit debt (mostly credit cards), according to the latest report by the Federal Reserve.

That is the largest amount of debt in history.

Meanwhile, the U.S. government sailed past the $20 trillion mark with our federal debt. Right now, policymakers in Washington D.C. are busy proposing legislation that would remove the debt ceiling limit for Congress.

In essence, that would give Congress an ultimate blank check, or a credit card with no credit limit.

Why all this debt is so scary

1. This debt is slowing us down
2. Higher interest rates will eventually mean the U.S. government must spend more on interest payments and less on services for its citizens

Even if Americans or the government never pay off their debt, they still have to pay the interest on that debt each month.

Are You Prepared For Tomorrow’s Debt Problem?

Even though the Federal Reserve has edged interest rates slightly higher over the past couple of years, they are still very low. Low rates benefit anyone who is paying off debt. But, once interest rates go higher, that means interest on your debt goes higher too.

Why does this matter? At some points interest rates will go up, and perhaps significantly.

Higher rates mean a larger portion of the government’s outlays must go toward debt repayment. That means less for the Social Security and Medicare payments, military, roads, education, and whatever other services the government spends money on.

How low is low?

• Right now, the federal funds rates stands at 1.00-1.25%
• That compares to a “normal” rate of around 4%.

Looking at the U.S. 10-year Treasury yield (the rate most mortgages are based off), before the 2008 global financial crisis, yields were much higher.

• Right now: U.S. Treasury yields 2.26%
• In June 2007, the 10-year yield stood at 5.31%.
• In January 2000, the 10-year yield stood at 6.82%.
• In July 1996, 10-year yields registered a 7.09% reading
• In November 1994 a high was seen at 8.16%.

Debt to GDP ratio

Once government debt levels climb above 90% —that, in and of itself, weighs on economic growth prospects, according to Carmen Reinhart, a professor at Harvard Kennedy School and Kenneth Rogoff, an economist at Harvard University.

The U.S. has already blown past that mark. Debt to GDP ratio stands at 103.1 as of the second quarter, according to the St. Louis Fed.

The U.S. (and other major advanced economies) are already struggling with slow growth for a multitude of reasons. The debt only compounds the problem.

What this means for you

Gold can’t be devalued like paper currency. The Fed can’t “print” more gold any time it’s looking to juice up the economy. Gold is a true, time-honored store of value recognized in every country around the world. There’s many reasons to own gold, and high and rising debt levels may just be another one.

 What do you think about the debt problem? We’d like to hear your thoughts.