Young Research & Publishing Inc.

Investment Research Since 1978

Archives for September 2010

Bernanke’s Biggest Fear

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The Fed created an uproar on Wall Street this week by changing the language in its post-meeting Federal Open Market Committee (FOMC) statement. The FOMC is, of course, the committee that sets monetary policy at the Federal Reserve. The new language that excited investors was the following: Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation … [Read more...]

Stocks with the Highest Prospective Returns

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For decades, I have advised my monthly strategy report subscribers to invest in stable companies with entrenched competitive positions, strong balance sheets, and a history of paying dividends. Many of the stocks I advise are considered high-quality stocks. What is a high-quality stock? There are varying definitions of quality. Standard and Poor’s generates quality rankings for stocks based on the growth and stability of earnings and dividends. Others include measures of debt and returns on capital. Most investors would consider stocks with consistent earnings growth, strong balance sheets, … [Read more...]

Auto Loans Getting Longer

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Here is an interesting chart. This shows the length of new car loans in months. Some car buyers are now financing auto loans for up to six years. The average, according to the below chart is 64 months. Either cars are lasting longer or buyers are reaching to buy more car than they can afford. … [Read more...]

Don’t Miss This Opportunity

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Long-term interest rates are at their lowest level in over four decades. Today, the Treasury can borrow money for 30 years at an interest rate of less than 4%. Adjusted for trend inflation, Uncle Sam is looking at a rate below 1%. Long rates of less than 4% are even more surprising given the sorry state of public finances and the vast supply of high-powered money sitting on bank balance sheets. The prospect of an oversupply of treasury issuance or rising inflation could send interest rates soaring. Long bonds would get crushed in such a scenario. Today’s ultralow long bond rates are a grave … [Read more...]

The Record High Price of Gold: A Currency Story

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Gold reached a record high on Tuesday, closing at $1,271.70 per troy ounce. It is up over 15% this year. That’s great for gold investors, but what does it mean for the currency in which it’s being quoted, the U.S. dollar? Relative to gold, the dollar, as shown in the chart below, is worth only two-thirds what it was worth at the beginning of 2008, just after the start of the market crash. The euro has maintained 60% of its value compared to gold, and the Swiss franc has retained a more impressive 75% of its value. Gold has had a tremendous run relative to all three currencies. This is not … [Read more...]

China’s Real Inflation Rate

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What's China's Real Inflation Rate? by Dexter Roberts, Bloomberg Businessweek "There has been a jump in prices that isn't reflected in the numbers," says Chinese Academy of Social Sciences economist Yu Yongding, who formerly served as an adviser to China's central bank…Another sign of rising prices: Multinationals in China expect to hike wages an average of 8.4 percent this year, according to human resources consultant Hewitt Associates (HEW). Ordinary Chinese, meanwhile don't see the steep jumps in their housing, education, and medical expenses reflected in the official stats. "Inflation … [Read more...]

3 Reasons to Invest with Caution

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At Young Research we maintain three cyclical stock price indexes—an early cyclical index, a late cyclical index, and a stable growth index. When evaluated together, the relative performance of these indexes versus the S&P 500 serves as a useful real-time indicator of the economy. The benefits of using asset prices as one gauge of the strength of the economy are that they are not subject to reporting lags, data is not revised, and there is no chance of modeling error. Asset prices are determined daily by the collective wisdom of millions of well-informed investors. These investors have … [Read more...]

From Alan Abelson’s Always Informative Barron’s Column:

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Let's Hear It for Bad Estimates – Alan Abelson, Barron’s "China, it turns out, doesn't report gross-domestic-product data as most everyone else does. It announces a growth rate, but neglects to supply a quarterly breakdown of real demand. Absent such vital information, it's tough to get a grip on whether growth is healthily widespread or dependent on a handful of sectors...As Ben (we trust Mr. Simpfendorfer won't mind the informality) notes, "in the case of China, there is risk the country is spending too much on building highways and factories, resulting in overcapacity and bad … [Read more...]