Best of Caller Questions - Labor Day Edition

SPEAKER_1 (0:00)

This is a Best of InvestTalk episode from KPP Financial. Listener questions will be answered and commentary provided by Justin Klein and Luke Guerrero.

Justin Klein (0:16)

Let's go take a YouTube comment question, and Selena Marie says, what are your thoughts on Forex trading? I understand it can be quite risky, yet the US dollar is forecast to go down, and the currencies like the euro and yen are strongly forecast to go up. I don't hear many people talking about it. Well, first off, you're correct. It is very risky, and this is because the general trend of the dollar over the coming years will likely be down. It doesn't mean it's going to be down every year, and it depends on what currency you are talking about. Frankly, if you're going to short any currency, it would just be fiat currencies and buying hard assets, and I think that's a better way to go.

You mentioned two currencies, euro and the yen. Well, the euro is strong against the dollar, but the yen remains relatively weak against the dollar. So you really need to understand those dynamics, and trading Forex is really a lot about technicals, it's a lot about understanding flows, currency flows, trade flows, all of that. And so for the novice investor, I highly advise against it. Nine out of 10 currency traders blow themselves up, and they lose a bunch of money. So I would not do it.

Luke Guerrero (1:20)

James from New York, he had a question about gold.

James (1:23)

Yes, I do. Thanks for taking my call. Sure, how can I help you?

So I wanted to know after today's speech at Jackson Hole, could we expect maybe a pullback in gold in general, particularly in the mining companies? And if looking at the mining companies, would there be a good entry point if gold does pull back just at 5%, is 10% even realistic in some of the miners?

Luke Guerrero (1:47)

Sure, great question. I mean, you know, you I'm sure understand and all of our listeners understand because we talk about it a lot, that gold miners are essentially just a leverage bet on gold. So any gold move, gold being an inherently volatile commodity is going to be accentuated in any of these miners. So a 10, 15% pullback in these miners is absolutely possible. Now, this is just a speech from a Fed chair who in one breath has seemingly said, we're not going to do forecasting and then does some forecasting. You know, this is a daily move that you can't really extrapolate onto a larger trend. I think when you're thinking about your gold allocations, the reason why we have been a net buyer in these dips is because the factors that are driving gold higher, i.e. fiscal deficits, the interest we're paying exploding on our debt, foreign governments wanting to move away from US dollar denominated assets and more importantly, kind of whittle away the US's ability to do financial sanctions. None of that is changing. You're seeing countries that haven't bought gold in a while continue to buy gold. So yes, we could see a bit of a pullback. Am I going to extrapolate a trend from one speech in Jackson Hole from a guy that says he doesn't want to forecast? Probably not. Either way, we think gold should be a meaningful portion of your portfolio, given the overall macro trends.

Thanks for the call.

Have a great day.

SPEAKER_5 (3:12)

Hey, good evening, guys.

SPEAKER_6 (3:13)

Long time listener. Again, thank you for everything that you do.

I'm calling with regard to allocation in my 401k.

I have recently taken a position over the last three months in VEMax. Victor Echo Max represents about 50% of my 401k portfolio. And my question is, with the current state of the market and the probability likely high of interest rate hikes, do you think I should take this opportunity to rebalance my 401k? Or do you think I should stay with the course and stay within VEMax at about 50% of my current 401k portfolio? Looking forward to the answer. Appreciate everything that you do, guys. Enjoy the rest of your stay.

Justin Klein (4:07)

All right, VEMax, this is the Vanguard Emerging Market Stock Index. 50%, it's a little high, to be honest with you, of just one fund, especially emerging market funds, even though I like emerging markets. But as the dollar strengthens a little bit based on what's going on with the Fed rate path, that's going to be an issue for emerging markets. I don't know what the rest of your portfolio looks like in your 401k. I don't know what your options are within your 401k. But here's what I would do for everybody if you have a 401k. As I talked about many times so far this hour, which is this looks like a very important market inflection point that could end up being like 2022 A big warning for the past couple of months, that yeah, the AI hype is great and its momentum feels good. But we know that these trends end at some point and there is a trigger and the trigger is likely Hawker's policy. So everyone out there should be taking this time to reassess their portfolio.