Life is good on Wall Street.
Stocks in the major averages have been surging since the election of Donald Trump. And now, a once-hesitant Wall Street is reveling in excess.
That’s the conclusion of Turney Duff, a former trader at the hedge fund Galleon Group.
Duff is well-known for his book, "The Buy Side," where he chronicled the remarkable rise and fall of his career on Wall Street. He’s also a commentator on CNBC’s "Filthy Rich Guide," as well as a consultant on the Showtime program "Billions."
Writing in an op-ed for CNBC.com, Duff says that while "Wall Street wasn’t initially sold on President Trump," traders have "cheered Trump’s pro-business agenda."
We’ve been talking about that in this space for the past five months, and how its promise continues to drive markets higher. So, our regular readers won’t be surprised by that.
Yet the more provocative commentary in Duff’s piece has to do with the celebratory nature of the big players on Wall Street since the election. In the piece, he quotes a managing director at a bulge-bracket firm as saying:
"I’ve made a million dollars since the election. Our stock is up every day."
That’s a lot of money to make in just a few months. And with so much money comes a whole lot of outlandish spending.
According to Duff, when traders are making money, they’re also spending a lot of money.
There’s a direct correlation between finance professionals’ day-to-day business and their discretionary spending. Luxury or high-end items, such as automobiles and entertainment, usually get a boost when Wall Street is feeling good.
Bigger paychecks coupled with bigger spending shouldn’t come as much of a surprise to anyone. But what was somewhat surprising is that Duff found there has yet to be a really big pickup in spending on things like expensive cars and boats.
Although Duff did report about one Wall Streeter who had recently purchased a 2016 Aston Martin DB11 costing over $200,000, the really outrageous spending seems to be in the form of, well, vice.
You can get the details of this other, shall I say, unsavory spending here. But if you saw "Wolf of Wall Street," you get the idea.
But what I find noteworthy is, as Duff writes:
In the years following the financial crisis, Wall Streeters had to keep a low profile on spending and indulgence, lest they be chased by an angry mob. But, that’s starting to change.
Far be it for me to criticize what a person does with his/her own money. But just remember that if you are paying a Wall Street brokerage firm high fees for its services, you don’t get much say about where that money winds up.
Related story: ‘Hey Big Spender’
As for far-better places to put your money, let me give you some insight into my own strategy.
This week, I received an email from reader, I’ll call him "Dr. Z," with the following inquiry:
Dear Brad, I regularly read your articles. Very informative. I believe in keeping investable money in three things. 1/3rd cash, 1/3rd physical gold and 1/3rd real estate. What do you say about allocation of investable money?
First, thanks for the kind words. I further appreciate the interest in my thoughts on this matter.
I have actually written about this subject in the past, and it’s what I call my "bucket list."
I’m in the middle of my career with young children and a wife, so my particular circumstance might not apply to you. That said, here’s my approach.
My wife and I have agreed on a family budget. When I get a paycheck, we first pay all our normal bills: mortgage, medical, groceries, etc. Whatever amount is left goes into our savings plan.
I categorize our savings into "mental buckets." I was fortunate enough to learn this concept early in life, and it was reinforced years ago after reading a piece on savings buckets from the author of "Automatic Wealth," Mark Ford.
It simply means placing your savings in separate buckets for distinct purposes. In my family’s case, we have three buckets.
- Our short-term bucket is our "rainy day" fund. We use this money for unexpected bills or minor emergencies. Since we don’t know in advance when we will need it, this money needs to be quickly accessible. We keep it in cash or near-cash investment accounts.
- Our long-term bucket is for expenses we expect in the distant future: our kids’ college education, retirement and hopefully enough to help some worthy charities. In this bucket, we don’t need immediate liquidity. We’ve taken advantage of this by investing in real estate and related funds with excellent potential for long-term growth.
- Our mid-term bucket is between the other two. We use it to take advantage of current investment opportunities. We want to stay flexible in this bucket, so we don’t buy assets like real estate, which can take months to liquidate.
So, Dr. Z, that’s how I do it.
Aston Martin isn’t the only place that’s quietly benefiting from more spending on cars. Our small-cap mining expert Sean Brodrick has a unique place where you can start following the money on this front …
Mining for Money
Palladium Puts the Pedal to the Metal
By Sean Brodrick
Most eyes are on gold, oil and other more headline-grabbing commodities. Meanwhile, palladium quietly puts the pedal to the metal in its bull market.
Check out this chart of the ETFs Physical Palladium Shares (NYSE: PALL).
You can see that PALL was already trending higher. It recently broke out. Then it came down and retested that breakout before taking off again.
This breakout gives us a target of 104. That’s 33% higher than recent prices.
Palladium is mainly used in catalytic converters in automobiles. This next chart, from Macquarie, shows global car sales accelerated in 2016.
And the leader in global car sales was China. "China gained 13% and saw an additional 3.2 million vehicles sold," Macquarie said in a report.
In the most recent month, we saw car sales dip in the United States. The rest of the world doesn’t care.
In fact, Scotiabank reports that car sales in the developing world are accelerating. Rising at their fastest pace since 2013.
And that’s why palladium is breaking out. PALL is fine way to play this trend. Individual miners carry more upside potential, and also risk.
Palladium’s path higher is part of a broader bull market in all sorts of metals. These things are cyclical. And the road signs are all pointing "Up."
Now, seeking out the next big winners in the mining sector can be rewarding, and it can be hugely rewarding when you find a terrific pick in the junior-mining space. I plan on giving you about a dozen specific recommendations as we enter May.
The Dow surged 200 points … before closing 41 points lower (-0.2%) than yesterday. This is the biggest one-day reversal in 14 months. What happened? The March Fed minutes came out … along with hints of its plans to start unwinding its $4.5 trillion balance sheet before year-end. Not surprisingly, financials were the day’s worst performers, with the Financial SPDR (XLF) down 0.8%.
- Will real beef really be healthier? McDonald’s (MCD) will stop using frozen patties in its Quarter Pounders in the Lower 48 states by mid-2018. However, folks who live in Alaska and Hawaii and those who prefer Big Macs keep one big benefit. That is, the freezing process slows E. coli growth. (A problem that’s plagued Chipotle since 2015.) That also means a different cooking process that MCD will now have to train employees on.
- Thursday Night Football coming to Amazon (AMZN). Jeff Bezos’ company won the streaming rights for 10 games this year. But the honor doesn’t come cheap, as AMZN will pay $50 million. That’s five times more than Twitter (TWTR) shelled out last season. Amazon will be able to sell some advertising and use some of those slots to promote its own products.
- Streaming gains steam: Not only will the NFL deal be Amazon’s first venture into streaming, but the party is getting even more crowded. Verizon (VZ) has plans to join AT&T, Comcast and YouTube in launching its own online TV-streaming service.
- GE burns out on lightbulb business?: The company is reportedly talking with investment banks about a possible sale of its consumer-lighting division.
Good luck and happy investing,
Uncommon Wisdom Daily