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Technical Indicators - Bollinger Bands

This week, we are going to continue with our "key technical indicators" series for stocks or any publicly traded instrument for that matter. Today, we are going to explore "Bollinger Bands".

Bollinger bands are a volatility indicator that depict two deviations from a moving average in the price trend of a stock, commodity, fund etc. This is depicted as two lines on either side of a moving average indicator which represent the outer (upper and lower) bands from the moving average. When a stock, on the upside, rises above the outermost upper band as in the chart on the left this can indicate the stock is over bought and may be an opportune moment to sell. Likewise, if the price trend falls below the outermost lower band, it can indicate the stock is over-sold and may be an opportune moment to buy.

As with any technical indicator, these can be used over different trading timelines whether this is intra day, daily, weekly, monthly or any timeframe you may choose. Their relative significance will also vary by the timeline you choose and as always are useful to use in combination with other technical indicators and values.

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China Issues Digital Currency - The Big News That is Not Being Covered with Giant Implications

China has issued a digital Yuan and it's got governments around the world scared and in catch-up mode. So what's the big deal? The world is moving at breakneck pace to a digital based currency system. Cash is being phased out. Consumers around the world are paying increasingly with debit and credit cards. Cash is being used less and less and this trend has only accellerated since the advent of COVID. It only makes sense in a predominantly digital commerce world that this would be accompanied by government issued digital currencies.

When Facebook announced its intentions to launch Libra, the world took notice and action. When a public company with 2 billion users starts issuing its own currency the financial elite start to panic. Just imagine how much power would shift to Facebook. It could become one of the largest financial payment networks in the world overnight. As if it did not have enough power and influence right now, a move to digital banking would tip the balance of power even further to the digital elite. Mark Zuckerberg's argument was simple. "If we do not do it, someone else will" and that is exactly what is happening with China announcing the launch of its digital currency. However, the implications of China announcing a digital currency are just as far reaching as Facebook's announcement.

From a Geo political and economic standpoint, China's launch into the digital world is a significant threat to the dollars global dominance. A digital currency means the ability to bypass US oversight allowing countries that the US is looking to penalize with sanctions, for example, to bypass international payment networks such as SWIFT (which the US monitors closely) and exchange funds anonymously. China's game plan to weaken US dominance in the world is not exactly a secret. As we have written in previous articles, there is a global economic fight for dominance going on between China, US and the EU (less so). One of the last significant bastions of US power in the world is the dominance of the US dollar as the global reserve currency. Almost 80% of all global trade is done in dollars. China is going to keep doing everything it can to disrupt the last bastion of US power.

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Part 2 - Bubbles, Bonds & The Allocation Dilemma

As we mentioned in part one of this article last week, wealth management firms are managing a cross-section of economic conditions and asset classes that each carry comparative risk. We define comparative risk as the "opportunity cost" of asset allocation in which "yield" is the primary measure by clients.

How much "risk on" or "risk off" is the asset allocation question in the midst of what are inevitably "unknown timeframes" and economic conditions that can outlast any rational mind.

In this article we will talk about some other dilemna's facing wealth management firms and their clients:-

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Bubbles, Bonds & The Allocation Dilemma - Part 1

In the last months we have written about bubbles, bonds and the shifting balanced portfolio model in an inflation prone environment. We have a unique mix of variables in play today unlike any other time in history. Zero to 1.6 percent bond yields that are unlikely to cover the rate of inflation, so in essence, negative yielding. There is little to no room for bond prices to rise so the next logical question is: What's the economic rationale for holding bonds? For most institutions, at this juncture and in a climate of forseable low interest rates per the Federal Reserve, bonds are looking increasingly like a losing proposition.

As Christina Lagarde, the head of the ECB (European Central Bank) recently commented "Higher market interest rates pose a significant risk to financing conditions (e.g. a recovery). Rising bond yileds could lead to premature lightening" of credit conditions which of course would hamper yes, you guessed it, a recovery. COVID has walloped the Global Economy, created sky high unemployment and generated a bigger wealth divide. The answer per the Federal Reserve and ECB is continued stimulus and low, exceedingly low, rates.

The Bond Dilemma unless you are Microstrategy

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The Bond Crisis Part 2 - Challenging The Traditional Asset Allocation Model

In the first part of this article we looked at why the Bond market is in crisis. In this second part we will look at what happened in the bond marketi n 2020 and 2021 to date and what the elite investors are saying about it.

Challenges for the Bond Market in 2020 and 2021

The last year has been challenging. Bonds rallied as equities started to fall in February 2020, but when equity markets collapsed in March 2020 so did bonds.When equity markets bounced back, bonds did not. As a result, the long held assumption about the protection you get from holding bonds which is that bond prices rise when yields fall or the economy slumps has come into question. 

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