In this episode of Retirement News Online, Zach Abraham of Bulwark Capital Management in Seattle Washington discusses inflation and what it means for you.
Zach Abraham, Chief Investment Officer and founder of Bulwark Capital Management, recently appeared on Fox News to discuss the recent stock market furor over Reddit retail investors.
Here is a brief summary of some of Zach Abraham’s comments:
Hedge funds have been making money for 20 years by betting on potential stock market losses. Now retail investors—like the recent Reddit investors in GameStop—have the same capability.
Zach encouraged Schwab, TD Ameritrade and the SEC to step away and let the market work itself out. “It will build more faith in the markets,” he said.
Watch the segment—Zach starts at 1:53 minutes:
Silver rallied by as much as 13% on Monday, February 1st to their highest intraday level since 2013, as a buying frenzy attributed to a post on Reddit last week suggesting a short squeeze on the precious and industrial metal continued. Silver futures for March delivery climbed to as high as $30.35 an ounce on Comex.
MarketWatch covered the rally on silver in a story that was also picked up by Morningstar. They spoke with Zach Abraham and several others familiar with what was taking place. Here are Zach’s comments:
The moves for the metal are “incredibly unusual — fair to say it’s unprecedented,” Zach Abraham, chief investment officer at Bulwark Capital Management, told MarketWatch.
“But we need to see if it can be done again. Remember, GME [GameStop] was a deeply undervalued and unique situation,” he said.
So far, what’s happened to silver in the last few days is “not even close” to what happened with the Hunt brothers, said Bulwark Capital’s Abraham, referring to the brothers who famously tried to corner the silver market four decades ago. During the Hunt brothers’ accumulation of the silver, prices of silver bullion rose from $11 an ounce in September 1979 to $49.45 an ounce in January 1980.
“In addition, they don’t control anything,” he said, referring to the Reddit crowd. “I think for this reason alone, going after a commodity like silver is futile.”
Still, many analysts had already been touting upbeat prospects for silver even before the Reddit-induced frenzy.
Abraham said his company invested in silver on expectations that a short squeeze in silver would occur, and didn’t take the Reddit WallStreetBets forum into consideration when investing.
“Silver is still cheap. Not a bad idea to buy some for the long haul,” he said. “Might make sense to buy silver miners as well. Just know both can be extremely volatile.”
He believes that $100 silver prices aren’t out of the question during the next run for the metal. “Silver is horrifically undervalued, on a historical basis, compared to financial assets.”
Original article links:
Headlines recently exploded on the topic of hedge funds and stock trading, as a group of day traders on the social media platform called “reddit” drove up stock prices for GameStop, Bed Bath & Beyond, AMC, Nokia and other historically-unloved stocks. GameStop gained as much as 1,000% in just two weeks. The volatile market action resulted in massive losses for some hedge funds.
Brokerages, including Robinhood, Interactive Brokers, TD Ameritrade and others, reacted by restricting users’ ability to trade certain stocks on Thursday amid the extreme volatility.
This caused public outrage, especially toward Robinhood, an online brokerage app named after a folk hero who steals from the rich to give to the poor and whose mission is to “democratize finance for all.”
Zach Abraham Comments
In an article titled, “Critics view Robinhood restricting GameStop trades as ‘an absolute travesty’,” featured on several news sites (including CNBC and MSN), Zach Abraham is featured prominently.
“Robinhood’s decision underscores some people’s belief that the deck is stacked against them,” says Zach Abraham, founder and chief investment officer of Bulwark Capital Management, where he advises retail investors.
Abraham characterizes platforms restricting trades for retail investors as “an absolute travesty,” noting that many of the Redditors’ moves weren’t just some “troll,” but calculated based on their own research. The hedge funds made “bad calls,” he says, and retail investors caught them on it.
“This is only going to perpetuate the wealth gap, and that the rich play by different rules,” says Abraham, whose firm sold its positions in GameStop last week. “If the roles were reversed, nobody would be saying a thing.”
At the same time, the situation has morphed into a dangerous game for other retail investors who read into the recent hype but don’t understand the risks involved in trading, Abraham says.
The stocks are currently “way over-priced,” says Abraham. Getting in now on the news-making names of the past few days would be akin to gambling.
“I could not emphasize more clearly for retail investors: Take those names off your screen and look elsewhere,” Abraham says. He predicts GameStop and other stocks will “blow up” in the coming days. “You just don’t want to be messing around with these names today.”
Original story links:
Watch Zach’s Appearance on Cheddar, a video news website covering Wall Street issues:
“In our view, they’re delivering a shot of democracy to the markets.” – Zach Abraham
In an article published on January 19th, 2021 in Newsweek, “Stock Market on Best Election Day to Inauguration Run Since World War II,” Bulwark Capital Management Chief Investment Officer, Zach Abraham, gave his insights into the Biden presidency along with the Federal Reserve’s policies and their potential future effect on the stock market.
He was featured along with analysts from Goldman Sachs, the chief investment strategist at CFRA in New York, and the U.S. Chief Economist at S&P Global Ratings.
Here are Zach’s comments:
“I think the stock market will continue to go higher, perhaps much higher.”
“The only two times we’ve had valuations anywhere close to this were in 1929, when the markets dropped 85% over the next two years, and 1999, when the Nasdaq dropped 85% over the next two years,” he said. “I don’t think a selloff that dramatic is going to happen again because of the underwriting by the Fed and the US government.”
Last year, the Fed’s action and stimulus spending approved by Congress injected about $8 trillion into the economy,” Abraham said. “The amount of cash that’s been poured into this market is mind-boggling.”
But to be clear, it’s the Fed that’s driving the market, he said.
“If the Fed continues to do that, stocks will keep going up. If it stops doing that, they won’t,” Abraham said. ” All that money injected into the system last year had to go somewhere. Part of it ran headlong into a stock mania that had been 13 years in the making, since the financial crisis of 2007-2008. It’s just gone ballistic.”
Read the full article here:
Fixed-income investors looking for yield are struggling in the near-zero interest rate environment in the United States. According to Zach Abraham and other financial industry experts interviewed in US News & World Report yesterday, there may be opportunities in European equities.
When considering European stocks that pay dividends, it’s important for fixed-income investors seeking an income stream to remember that many European companies pay out their dividends only twice a year, instead of quarterly as many American companies do. Also, the fluctuating exchange rates between countries can impact dividends for American investors.
To decide whether any dividend-paying stock is a good investment, it’s important to analyze the business and make sure it has a reasonable valuation. “For dividend-paying stocks, the best place to start is looking at a company’s balance sheet to see if the company can sustain the dividend,” says Zach Abraham, principal and chief investment officer at Bulwark Capital Management in Tacoma, Washington, just outside Seattle.
Zach says that when comparing European companies’ valuations versus those in America, here “we have record valuations, record corporate debt levels, yet you have valuations in the stock market that suggest to you that everything is humming along,” Zach says. In the U.S. in particular, corporate debt levels are rising, and Zach Abraham recommends looking at a company’s debt obligations when evaluating them. “The higher the debt on a company’s balance sheet, the more likely that company is to cut back or suspend that dividend,” he says.
He warns investors that there’s never been a period in America where stock market valuations have been this detached from the underlying economic fundamentals. “In the U.S., the Nasdaq is up in a year where we’ve sustained the biggest economic shock in our history.”
European markets have also been hit by the pandemic; however, Abraham says that “they’re far from trading at record high valuations. Due to the damage the valuation spread has done to the economy, European equity prices are attractive with more upside,” Zach says.
Read the whole story here:
The article also appeared on WTOP News.