You may not like PM Stephen Harper’s politics but you should love his new policy on increasing TFSAs. Yes the Liberals and NDP say it makes the rich richer, but in fact it also helps the middle class dramatically.

The fact is this new policy provides a better return on your investment (after tax) than sinking money into your RRSPs. In fact, if you only have the ability to choose between one or the other, you should seriously choose TFSAs. With the new increase from $5,500 to $10,000 per year (to a max of $41,000), this allows you to start to put aside some serious money for you and your spouse. The Liberals say it will cost billions to government coffers which means they are upset that you get to keep more of your money instead of giving it to them to manage.

If you read this recent article in the Financial Post by Ted Rechtshaffen (CLICK HERE), you’ll see the benefit of adding more of your money into TFSAs.

Increase your wealth by placing Private Equity into your TFSAs

So what should you invest in your TFSA? If you’re not investing in private and alternative (P&A) investments, you are missing the boat. It’s that simple. The P&A market is hitting record highs. According to McKinsey & Co, it’s more than doubled since 2005 – hitting a record high of $7.2 TRILLION! The problem is most Canadians are unaware of this new sector and continue to miss out on opportunity to grow their wealth and provide non correlating assets into their portfolio. If you only use the stock market, you have to buy stocks that do not correlate with each other. For example, buying energy stocks and buying airline stock to hedge on the price of oil. By adding private equity and alternative investments to your portfolio, you don’t have to add the known losers to hedge your bet. You can buy something that does not care what the price of oil is nor if people will fly this year.

Heck, even our CPP (Canada Pension Plan) almost contains 20% of non-traditional assets. As a general rule of thumb, we recommend the new 80 / 20 Rule for investing. Gone are the days of the old 60 / 40 standard of equity and bonds. The new standard should be 80 / 20 of public / private asset mix. The National Post has a great article on alternative investments by John Shmuel (CLICK HERE).

At TriView, we’re private equity specialists that promote the idea of a diversified portfolio has private and alternative investments. We want to educate our clients on how to maximize the diversity in their portfolios while making capital preservation our main goal. We can provide yield and capital growth through private real estate opportunities and alternative investments. To learn more, visit our website at www.triviewcapital.com.

Craig Burrows

Just like in the world of fashion, economic terminologies come in and out of vogue. One such economic term trending recently is Secular Stagnation. First proposed by Keynesian economist Alvin Hansen back in the 1930s, Secular Stagnation was coined to explain America’s dismal economic performance — in which sluggish growth and employment levels were well below potential.

The term is now back in style thanks to the likes of the contemporary heroes of Keynesian economics, like Larry Summers and Paul Krugman; and is based on the notion that a chronic savings glut has resulted in the economy operating well below potential. The notion that the developed world is trapped in some type of stagnation is something I can agree with.

However, the reasoning offered for this stagnation completely dismisses the role of central banks and assumes low growth and interest rates are instead being driven by those pesky savers. This theory is not only philosophically and economically bankrupt, it also dismisses all of the factual evidence about the actual decline in worldwide savings rates.

What Krugman and Summers fail to realize is; when interest rates are high, people are compelled to save more. And on the other hand, when interest rates are low they tend to save less. Supporting this theory, in the 1970s when interest rates neared 20%, the US savings rate hit an all-time high of 14.6%; today it averages closer to 5%.

Not surprisingly, Japan, the poster child for secular stagnation, has seen a shocking drop in household savings. Savings rates that averaged as much as 20% in the 1980’s, hit a negative 1.3% in March of 2014. It’s no coincidence that this negative savings rater concurred with its 0.3% 10-Year Note yield and highly-negative real interest rates.

Savings in the European Union has also fallen along with lower interest rates manufactured by the ECB. Household savings was at 13.3% in 2009, but fell to 10.5% by the first quarter of 2014. The truth is despite Summers and Krugman’s desire to lay the “blame” with savers, there is no proof of a world-wide savings glut. These Keynesians never seek to explain who or what would have caused global consumers to undergo such a mass hypnosis into the propensity to increase savings.

This is because no such increase in savings rates exists. In fact, 28 percent of current U.S. workers have less than $1,000 in savings that could be applied toward their retirement, according to a new Employee Benefit Research Institute and Greenwald and Associates survey. And, 57 percent of consumers say they have less than $25,000 in total retirement savings. Indeed, the so-called “savings” referred to by these market manipulators is really just central bank credit masquerading as savings. And this investment capital should only have become manifest through productivity growth and deferred consumption — not by central bank fiat.

The Real Cause of Secular Stagnation

Over the past seven years the Federal Reserve printed $3.7 trillion with the hopes of spurring economic growth. But ask yourself, who did this money actually go to?

At the onset of the financial crisis Ben Bernanke didn’t run around America like Ed McCann–knocking on doors and handing people checks to pay off their underwater mortgages. On the contrary, the first tranche of money in the form of TARP and the AIG bailout went to banks in order to allow them to remain solvent.

Then, three rounds of QE bought distressed assets on the books of banks with hopes this would allow them to make new, less questionable, loans. But, who were the banks supposed to lend to? Consumers were already loaded with debt because they didn’t get a Fed bailout.

Adding to this condition of excess reserves piling up in the private banking system were new and more onerous regulations. Dodd/Frank legislation encouraged banks to park new money with the U.S. Treasury. And the leftover money more easily found its way into the stock market than it did in the pockets of consumers. Thus, creating the massive bubbles that now exist in bonds and equites and also greatly exacerbating the trenchant wealth gap between the rich and the poor.

But, ironically Krugman and Summers acknowledge these Fed-induced asset bubbles and see them as our only hope. In fact, Summers argued in a speech delivered to the IMF that today’s world needs bubbles just to achieve anything close to full employment. New York Times columnist Paul Krugman doubled down on that specious reasoning in his blog stating; “Bubbles may be necessary to make up for insufficient demand, high unemployment, and sluggish growth.”

Instead of allowing the economy to work through a short-term painful deleveraging in order to clear mal-investments, pay down debt and pave the way to real sustainable growth, Messrs. Summers and Krugman would rather cheerlead the economy through a series of never-ending booms and busts that is causing the global middle class to become a passing fad. It appears Keynesians, that dominate global politics and central banks, have completely lost faith in economies to rebound and for markets to clear. They have acquiesced to a command and control economy built on phony central bank interest rates and credit.

The truth is real savings and real investment do not cause secular stagnation, but are rather the very foundations of productivity and growth. However, the develop world’s current condition of secular stagnation is brought on by central bank debt monetization; which leads to asset bubbles, debt saturations and the desolation of middle classes. In reality, the economy is mostly suffering from the stagnating brains of those who control governments and banks. And it is this blatant form of secular stagnation that will soon bring down the entire global economy.

Do you believe in God?

Whoa, wait a minute, this is an investment newsletter, right?

Stay with me.

I’m an armchair philosopher, and I’ve always wished I’d had the opportunity to be a philosophy major, because I can navel gaze with the best of them. But since then, I’ve come to know some actual philosophy professors, and as it turns out, they tend to not get along with other philosophy professors, which makes departmental politics a little toxic.

I can’t remember exactly when it was that I learned about Pascal’s Wager. 17^th-century French philosopher Blaise Pascal postulated that it is rational behavior to believe in God.

Why believe in something for which there is no evidence? The answer lies in decision theory.

If you believe in God and you’re right, you go to heaven. Let’s call this “infinite gain.”

If you believe in God and you’re wrong, the only thing you lose is whatever time you spent in church and/or money you donated. It’s a finite loss.

If you don’t believe in God and you’re right, there is no God, you get to be smug. That is a finite gain.

If you don’t believe in God and you’re wrong, you go to hell. Let’s call this infinite loss.

Here it is in table format:

I think most people who understand decision theory will recognize this immediately. So yes, it is indeed rational—meaning in our best interest—to believe in God.

As it turns out, Pascal’s Wager is all over the place in markets.

Best example: Japan in 2012.

There’s this new prime minister, Abe, and this new Bank of Japan governor, Kuroda. They’re going to do this thing called Abenomics. They say they want to print trillions of yen to buy all kinds of assets, which is going to reflate the markets and devalue the currency.

Now ever since the crash of the early 1990s, Japan has had numerous plans to get out of deflation. Japan being Japan, not much changes there, and they end up just getting bogged down in bureaucracy. This has happened at least a dozen times in the last 20 years. So why believe them this time?

Table again:

Boy, did some people have to learn this the hard way. For the record, I’m still long the WisdomTree Japan Hedged Equity Fund (DXJ) and short the yen (JPY) 2.5 years later. I’m still in the trade because it’s the only trade in the markets that literally has infinite upside.

The people who were yelling at me that Japan was going to zero have a lot in common with the very vocal atheists you see on Facebook. They have an overwhelming desire to be right all the time. I don’t care if I’m right—I just want to make money!

The Nikkei went from 40,000 to 8,000. If it goes from 8,000 to 7,000, I make 12.5%. If it goes from 8,000 to 20,000 (which it just did), that’s a 150% gain. But some people like to say, “I told you so.” It’s worth more to them than money.

I will also point out that if you’re short, the most you can make is 100%, but if you’re long, there’s no limit to how much you can make. It’s hard work being a short investor. I wouldn’t run a dedicated short fund no matter how much you paid me. I’d rather pump gas.

Belief and the Black Box

I don’t think anybody really understands China. I think even the people who say they understand China don’t understand China.

How can you understand China? It’s a black box spitting out bogus economic statistics. 7% GDP? We all know they were in recession.

Two things you need to know about China:

1. They are very capitalist. Way more than us. It’s the new land of opportunity. There are surveys showing this.
    
2. They really want someone to organize society. The Chinese people just aren’t into spontaneous order.

This is a new thing in the 21^st century. We’re learning that it’s possible to be capitalist in the context of a command-and-control government.

Now, as recently as 2008, I believed this would never work. Capitalism, I thought, was incompatible with planning. The Chinese went and borrowed a ton of money to build ghost cities they plan to move 300 million people into. If we tried this here in America, it would be a disaster. We can’t even build a subway line on Second Avenue.

So back in March 2013, that 60 Minutes piece on China’s ghost cities got investors really nervous—and ever since then, people have been waiting for the debt bomb to blow up.

But as I said, it’s a black box.

Everyone knows what happened next: the fake economic data started getting worse, commodities markets crashed, and people were speculating that China pulled forward demand for things like steel and iron ore 50 years.

But then, abruptly:

The market went up 20% in a matter of weeks. And then, in unison, the financial media said: It’s a bubble!

I found that odd. Usually when something goes up 20%, it’s not a bubble, especially in the context of the longer-term chart.

So remember, nobody understands China. It’s a black box. There’s no way to tell if it’s a bubble or not.

Pascal’s Wager again:

Needless to say, I’m long China A-shares, through the Market Vectors ChinaAMC A-Share ETF (PEK).

In general, there is more money to be made believing in things than not believing in things.

But aren’t we taught to be skeptical? What about Enron? Or Lehman?

There’s a time for that too, but trades like that always seem to happen in bear markets (because in bull markets, nobody asks the hard questions). So it’s situational.

I hate China. Absolutely hate it. I think it’s smoke and mirrors. It’s all going to blow up someday. But I look at the chart, and I change my mind.

China is fixed.

They’re going to pull it off.

Bull market again.

I love China.

I will believe pretty much whatever you want me to believe as long as I think I can make money off it.

Jared Dillian
Editor, The 10th Man

Jared’s premium investment service, Bull’s Eye Investor, is available now. Click here for our introductory offer. For Jared, no asset class or type of investment is off limits. From an iconic sports outfitter to a particularly liquid frontier-market ETF—Jared picks the best vehicles for his subscribers to profit from tomorrow’s trends today. Put Jared’s ingenious mix of market analysis and trader’s intuition to work in your portfolio today. Follow Jared on Twitter at @dailydirtnap.

Judging from Western media, one might think nothing much is happening in Ukraine. Facts are wildly different as we will discuss momentarily.

Rush to Judgment

As a prelude to current events, please recall the hype when Russian opposition leader Boris Nemtsov was gunned down in March. Western media rushed to judgment. Heck, even friends who should know better rushed to judgment.

Every Western news agency, even some I would have expected better of, was quick to point the finger at Putin.

I commented on Boris Nemtsov on March 6 in Rush to Judgment and Extremely Inaccurate Reporting.

With that backdrop, let’s turn our attention to some recent events.

Death Squads Kill Four News Reporters in Ukraine

On April 17, Death Squads Killed Four News Reporters in Ukraine in 24 Hours.

Over the last two days in Ukraine, there have been four prominent killings. On Wednesday, it was former

member of Parliament from the Regions Party, leader of the All-Ukrainian Officers’ Union, and one of the founders of the AntiMaidan, Oleg Kalashnikov. On Thursday, it was journalist Sergei Sukhobok, one of the founders of the ProUA and Obkom websites. That same day, former editor of the major newspaper Segodnia, well-known journalist Oles’ Buzina, was shot dead in his own backyard; and the body of editor-in-chief of the Netishinskii Herald, Olga Moroz, was found dead in her apartment, bearing signs of a violent death.

 

Three journalists in one day. Four political figures in 24 hours. Where is the human rights crowd? Where is the international community? Where are the declarations of Merkel, Obama, Cameron, etc.? Where is the wave of indignation from the Western press? Where?

What did those journalists have in common? They were all against the war effort or considered “pro-Russian”.

Had four anti-Putin journalists bit the dust in Russia, this would have been front page news for six straight days.

The New York Times devoted exactly one paragraph to the Ukraine killings on page A18 of the Friday, April 17th edition.

A Ukrainian journalist with a vocal pro-Russian stance was killed in Kiev, the capital, by unidentified gunmen on Thursday, a day after a pro-Russian lawmaker was killed in a similar attack. The journalist, Oles Buzina, 45, publicly opposed the protests that led to the ouster of President Viktor F. Yanukovych in 2014. The current president, Petro O. Poroshenko, called for a swift investigation and declared that the recent killings were “conscious provocations” intended to “destabilize domestic politics in Ukraine.” President Vladimir V. Putin of Russia said Ukraine’s government was allowing a campaign of political violence against supporters of the previous government.

Note the slant by Poroshenko. Supposedly Putin is killing pro-Russia supporters!

This is what constitutes “reporting” in the US.

Wakeup Call From Poland

Please consider Polish General ‘Calls Back Support’ of Ukraine over Nationalist Glorification

Retired General Waldemar Skrzypczak, an influential figure in the Polish military, says he withdraws all words of support for Ukraine due to the country’s sliding towards nationalism. Earlier he advocated supplying heavy weapons to Kiev.

The angry U-turn in attitudes towards the Ukrainian government was published on Friday in the Gazeta Prawna newspaper. Skrzypczak said he is outraged with a law that the Ukrainian parliament passed hours after Polish President Bronis?aw Komorowski spoke before the MPs to express support for Ukraine.

The law gave benefits to all people who fought for Ukraine’s independence throughput history. Those include fighters of the Ukrainian Insurgent Army, or UPA, which was responsible for mass killings of Polish citizens in 1943-44. The tragic events are known as Volhynian slaughter in Poland.

“I wonder on what foundation is Ukrainian President Poroshenko building the future of Ukraine. Bloodthirsty nationalism? It’s frightening. I have long been telling that Ukrainians must get rid of nationalism, because otherwise cooperation with Poland would be very difficult if possible at all,” he said.

As early as January, Skrzypczak was calling on the Polish government to send some armor from its reserves to Ukraine to help its government ‘fight against Russia.’

Sanitized US News

The above was from RT, but the translation would be the same from any source. Don’t like RT? How about Newsweek?

Please note that Newsweek (Polish Edition) reports Poland Claims US Is Responsible for Destabilization in Ukraine.

This is an English translation courtesy of Watching America Published in Newsweek (Poland) on 16 March 2015 by Marta Ciastoch Translated from Polish by Justyna Demuth.

“The U.S. has spent $5 billion on the Ukrainian revolution, the snipers who shot Euromaidan protesters came from the West, the annexation of Crimea was a justified action, and Nemtsov was killed by Americans,” claims Janusz Korwin-Mikke, a Polish member of the European Union, in the interview for a Ukrainian TV program “Shuster Live.”

“Most citizens of Crimea were, by their own democratic choice, in favor of joining Russia,” argued the Polish KORWIN party leader. He emphasized that the existence of an independent Ukraine is critical for Poland, but whether Crimea remains a part of Ukraine or not, does not really matter. “Ukraine could exist without Crimea, and would, had not the U.S. invested $5 billion to destabilize it,” says Mr. Korwin-Mikke, adding that Ukraine’s loss of Crimea, followed by the loss of Donetsk and Luhansk, is a result of U.S. actions. Mr. Korwin-Mikke appealed to Ukrainians in order to make them realize the true intentions of the USA, which pretends to be allied with Ukraine, but, in fact, uses it against its own conflict with Russia.

The US is supporting neo-Nazis and murderous thugs in Ukraine because we prefer those thugs over Russia.

Martin here with an update on global markets. So far this year, while U.S. stocks have flat-lined …

Mumbai has surged …

Hong Kong and Shanghai have gone through the roof, and …

Despite all its troubles, Moscow has rocketed like a Topol-M intercontinental ballistic missile.

They’re what I call “blast-off markets.” And they’re proving how quickly things can change.

Late last year, for example, if some analyst told you to buy China or India, you’d say he’s nuts.

And if someone tried to pitch Russia, you’d throw him out on his rear end.

The overseas news was so outrageously shocking, it would have felt like volunteering for duty in Dante’s inferno.

But now, suddenly, the small handful of investors who risked those hellish fires are making money hand over fist.

Or look back a half century, and you’ll see an even more radical kind of change.

I know. Because I was there. In 1958, my father’s office was on Broad Street, next door to the New York Stock Exchange. That’s where I used to spend my days off from school, helping him dig through company reports or plot his stock charts.

And even before I was born, emerging markets were his favorite place to explore — for both lifestyle and investments.

But if you think investing in emerging markets is risky now, imagine back then! It wasn’t just risky. It was virtually impossible — even for sophisticated investors.

Yet, strange as it may seem to most people today, that’s precisely what my family did — starting in pre-Castro Cuba, Costa Rica and Brazil.

We were virtually the only ones — and the reason was obvious.

To properly invest in those countries, we had to travel there in person, exchange our dollars into local currency, set down roots, open up local accounts, and only then start thinking about buying something.

Agricultural land and enterprises were at the top of my parents’ list.

If that meant my mother had to get her feet muddy and try plowing the soil with a couple of oxen, that was all part of the due diligence.

Today, you don’t have to leave your home. You don’t need a phone or even a computer. All you have to do is whip out your iPad, open your online brokerage app, press a couple of buttons, and …

Presto! You can instantly own the most widely traded, highest quality companies in the biggest blast-off markets of the world.

Don’t get me wrong. I’m not telling you to do that today. Rather, my task today is strictly to provide some facts, disclose the risks, and give us — both you and me — some more time to think about it.

The Facts

From the beginning of the year through the closing prices this past Friday, the ETF that tracks the S&P 500 (SPY) is up 2.4%. Not much.

Meanwhile, though …

INDY, the main India ETF, is up 8.4% — over three times more …

FXI, the big-cap China ETF, is up 23.4% — nearly ten times more, and …

RSX, the primary Russia ETF is up 40% — a shocking 17 times more!

The Risks

Many investors won’t touch these markets with a ten-foot-pole, essentially for two reasons.

The first reason is risk and angst.

China, they say, is slowing down and vulnerable to a housing bust. I’ve been all over China. So I know what they’re talking about.

But I’ve also seen a side of China, especially in the dynamics of its population, that tell a very different story.

Brazil, they point out, is mired in a massive corruption scandal that has practically sunk its biggest oil conglomerate and gutted its political leadership. And they’re not wrong about that either. I first went to Brazil when I was six and was also there last month. I’ve seen the mess the country is in, first hand. But I’ve also seen the amazing potential that Brazil still has.

Russia, as everyone knows, is wallowing in the cesspool of a broken currency, a broken economy and more widespread corruption than Brazil or China combined. I mostly agree. I’ve traveled to Russia’s biggest cities and its smallest villages.

But I’ve also seen another side of Russia, which I’ll tell you more about another day.

The $64,000 question: Is all the bad news mostly old news that’s already reflected in their stock values, already battered severely last year? Or are there entirely new, hidden dangers still to be revealed?

The second reason investors shy away is resentment and anger.

China, they argue, is attacking us in cyber space and conquering disputed areas in the South China Sea.

Russia is effectively waging war against the West — with support for rebels in Ukraine, with embargos, and with the harshest anti-American rhetoric since the Cold War.

How can we turn a blind eye and effectively reward them for their bad behavior?

Good question. Suffice it to say that you have two choices:

 You can base your investment decisions mostly on philosophy and politics. Or …

 You can base them mostly on where you can find the best return with relative safety.

Either path can be justified. Both have risks. But I feel you do have to make a choice. You can’t invest for profits one day and for ethics the next day. You can’t combine these two fundamentally different approaches in one magical brew.

My recommendation: Follow the path that’s the most likely to succeed. Use the strategy that can do the best job of building your retirement nest egg with safety. And then, if you have some money left over, you will always have the freedom to support the cause that can make a difference.

That’s what I’m doing. And in the weeks ahead, I’ll give you more details about precisely where and how.

Good luck and God bless!

Martin