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Investment Research Since 1978

Archives for November 2016

This State is Open for Business, Here’s Why

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You shouldn’t have to join a union if you don’t want to. But that’s exactly what happens to teachers in states that don’t have right-to-work laws. A friend on mine who is a history teacher in non-right-to-work Boston, Massachusetts complains about the dues automatically deducted from his paycheck. He has stood up in meetings to complain about the lack of freedom. When Becky and I see him and his wife on Friday in Boston, I’ll tell him that there’s still hope. Teachers in Wisconsin, thanks to Governor Scott Walker’s reforms, have a choice whether to join or not. They have voted with their … [Read more...]

It is Time to Scale Back Trade with China

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The Financial Times explains why the West should take a close look at its trading relationship with China. Free trade tends to be a net positive over the long-run when both parties play by the same rules, and both parties run free-market economies. Does China play by the same rules? Does China run a free-market economy? As the FT explains in detail here the answer to both questions is a resounding no. China is in fact moving further away from a free-market system. At the Chinese Communist party plenum three years ago, party leaders pledged to support private entrepreneurs and break down the … [Read more...]

Consumer Spending Fuels Excellent 3rd Q U.S. Expansion

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The Wall Street Journal provides an in depth peek at a first rate-third quarter. Corporate profits continued to rebound last quarter alongside solid growth in the broader U.S. economy. A key measure of after-tax earnings across U.S. corporations rose 5.2% in the third quarter from a year earlier, the Commerce Department reported Tuesday. That was the first annual increase since late 2014 and the strongest year-over-year growth since the fourth quarter of 2012. Profit gains were reflected among large U.S. companies in most industry sectors as healthy consumer spending and other forces … [Read more...]

Portfolio Strategy: This is What Happens When You Try to Pick up Nickels in Front of a Steam Roller

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After enduring years of the Federal Reserve’s zero percent interest rates and trillions worth of long-term bond purchases meant to drive widows and orphans into riskier assets, many investors capitulated, reaching for yield in long bonds and other risky assets. You can see the tracks of this behavior in the stock market as well as the bond market. In the bond market, the reach for yield may have climaxed over the summer. The 30-year bond yield hit a low of 2.11% on July 8th. That is lower than the lowest-low during the height of the financial crisis. What were these investors thinking … [Read more...]

Sharp Gains in Shipping Stocks Follow China Moves and Election

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The Wall Street Journal reports that after the election on November 8, dry bulk shipping companies have seen a surge in share prices. The gains have outpaced expectations, and have left most analysts on Wall St. puzzled. These wild gains have left analysts scrambling for explanations. It has been a dismal year for dry-bulk shippers, which transport commodities like iron ore across the globe. But the industries woes may have hit bottom. The Baltic Dry Index, a global measure of shipping prices for commodities, has been ticking higher in recent weeks, largely as China stepped up its imports for … [Read more...]

Annuities Hammered by Conflict of Interest Rules (Finally)

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Variable annuity sales have been hammered this year. A new report from Cerulli Associates projects that sales will continue to fall at an annualized rate of 10% through 2017 and 2018. The decline in sales results from a new rule from the Department of Labor that regulates conflicts of interest. Variable annuities don’t belong in most portfolios to begin with. The DOL Fiduciary Rule is a little late to the party. John Sullivan reports for 401kSpecialist Magazine: Calling it the “primary issue facing the VA industry is the DOL Conflict of Interest Rule,” Cerulli notes the rule extends … [Read more...]

Is Cyber Monday Infected with More Unscrupulous Fakes?

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Today is “Cyber Monday.” It’s the Internet’s response to Small Business Saturday, in which people are encouraged to shop online. Every year people are doing more of their shopping online, with an increase in online shopping in 2015 of 14.6%, online purchases made up over 10% of retail sales (excluding items like gasoline and automobiles). America’s e-commerce surge is led, not surprisingly, by Amazon, which processed over $79 billion in online sales last year. Next come Wal-Mart, with $13 billion, and Apple with $12 billion. But is there trouble brewing in Amazon’s e-commerce … [Read more...]

Is Your 401(k) Plan Cutting Your Retirement Short?

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A study by the GAO says that 401(k) plans with outdated rules about when employees become eligible to participate and how they receive matching funds could be shortchanging participants by over $400,000 during their retirement. Bloomberg reports: A number of longtime 401(k) plan designs fail to reflect a new, more mobile workforce, hurting employees’ ability to save, according to the report (PDF). Among the arguably outmoded practices: a requirement at some plans that workers be 21 before becoming eligible to join a 401(k), that employees finish one year of service before being eligible to … [Read more...]

The Cuba Trade

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Here MarketWatch reports that Fidel Castro’s death is causing the shares of a Cuba related mutual fund to soar. Investors in a fund with the ticker symbol “CUBA” cheered Monday, as the share price surged in active trade in the wake of Fidel Castro’s death over the weekend. The Herzfeld Caribbean Basin Fund Inc. doesn’t directly invest in Cuban businesses, but it could if that becomes possible. In the meantime, it invests in companies that are likely to benefit from “economic, political, structural and technological developments” in the Caribbean Basin, according to the fund … [Read more...]