Is gold a currency? “Yes. Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it,” responds former Federal Reserve Chairman, Alan Greenspan. … [Read more...]
Archives for November 2014
The Monday Melee: Taxes, Japan, and Princess Football
Abenomics Fails In the third quarter GDP sank for the second time in a row in Japan. It turns out printing money and raising taxes is just as bad for the economy as it ever was. Princess Football We're avid football fans here at Youngresearch.com, and this past week's SNL featured this skit with Woody Harrelson that perfectly explained what we think of the new rules in the league. What We're Reading: A perplexing rally (Gavekal Capital Blog) How to Distort Income Inequality (The Wall Street Journal) "Tax Fact of the Day" (Greg Mankiw's Blog) Sterling Hits 14-Month Low Against … [Read more...]
2% Yields: It Could be Worse
If you thought you had it bad with 10-year Treasury yields at 2.3%, take a gander across the pond. In Germany, 10-year government bonds yield only 0.80%. It would take 87 years to double your money at a 0.80% return. That is more than a life-time for many. The comparable number for the 2.3% return available on 10-year Treasuries is about 30 years. Still not great, but it could be worse. It could be worse for the Germans too. In Japan, the ten-year government bond yields only 0.48%. At 0.48% you would need two life-times to double your money. … [Read more...]
Free Lunch Alert
The Wall Street Journal did a piece on troubled stockbrokers this week. It shows how certain areas of the country are loaded with brokers that prey on the elderly. They offer a free lunch or dinner followed by a high pressured sales pitch. Most often these charlatans are pushing annuities. A couple I know were hounded for months following the dinner they attended. They also had to endure a follow-up meeting at their home. The stockbrokers in my example were friendly and seemed nice to my friends. They mailed me the stockbrokers' proposal. After I dissected the 1,000 page prospectus, I let … [Read more...]
Where do Stocks go from Here?
As measured by the Dow Jones Industrial Average, the current bull market is over 2,000 days old—2,074 to be exact. That is the fourth longest bull market in the last century. How have stocks fared once they have reached the age of 2,074? In terms of duration, every bull market that has lasted for 2,074 days, went on to last at least another two years. And the subsequent gains for the three bull markets that lasted longer than 2,074 days were all substantial. That’s the good news. The bad news is that the performance of stocks from day 2,074 of a bull market to the subsequent stock market … [Read more...]
The Power of a Strong Dollar
With dollar strength comes low oil prices and low inflation, spurring what could become a strong consumer spending season this winter (ex. fuels). Gasoline prices have dropped considerably and Americans are already enjoying lower prices at the pump. Across the South, Americans are enjoying prices in the $2.55/gallon range, with more expensive, but still falling, prices on the coasts. … [Read more...]
The Monday Melee: To Russia With Love
Ruble Crashing: Low Risk/High Risk Back in March the World Bank predicted two scenarios for Russia's GDP in 2014/2015 given different levels of risk stemming from Russia's annexation of Crimea. Russia's Central Bank has now predicted growth in 2015 markedly lower than even the low-growth scenario predicted by the World Bank earlier this year and predicted higher inflation. The central bank cut the growth forecast in its main outlook for 2015 to zero and pushed back its estimate for meeting an inflation target of 4 percent by one year from 2016, according to the revisions published … [Read more...]
Robbing Peter to Employ Paul
The October jobs report was released today. The headline payroll employment number came in at 214,000, slightly below economist expectations, but a good number nonetheless. The prior two months of non-farm payrolls were revised up by a total of 31,000. Over the last six months payroll employment growth in the U.S. has averaged a healthy 235,000. The unemployment rate also came down. Using the Bureau of Labor Statistics (BLS) headline number, the unemployment rate ticked down a tenth of a point, but when you take the data out another decimal point, you find that the unemployment rate fell … [Read more...]
Jack Bogle on Advisors
There’s a big difference between a broker/advisor and a registered investment advisor. An investment advisor must follow a strict fiduciary standard for his clients, whereas a broker/advisor follows a suitability standard (whatever that means). According to Vanguard Group founder Jack Bogle, “A fiduciary to me is anybody that handles somebody else's money, if you're a broker, you've got to be very careful how you handle it," he says. If you’re considering working with an advisor, make sure he’s a registered investment advisor because there’s a huge difference between suitability and … [Read more...]
Currency Wars Continue
The global central banks regularly deny that they are engaged in competitive currency devaluations, but actions speak louder than words. Last week the Bank of Japan ramped up their quantitative easing program by taking advantage of falling oil prices to further debase the yen. A falling yen raises the price of gasoline for Japanese consumers so there had been some backlash against the BOJ’s quantitative easing program. With oil prices falling, the BOJ saw an opportunity to further debase the yen without causing more voter discontent and they took it. The lower yen is a boon for Japanese … [Read more...]