UPDATE: The words I wrote in this post from August 27, 2010 are as sound today as they were back then. The basic principles of good investing just never change. This is how we operate at Richard C. Young & Co., Ltd. Do you know the difference between total return and investor return? Most investors are familiar with the concept of total return. The total return of a fund is simply the sum of the capital and income return of a fund over a certain holding period. The total return of a fund of course assumes a buy-and-hold strategy. Investor return (a Morningstar term) is a measure of … [Read more...]
Archives for August 2017
Are you Brave Enough to Bet Against the FANGs?
The FANG stocks are some of the hottest stocks in the market YTD. The Young Research Bubble Basket which includes the FANGs plus Tesla is up 39% in 2017. Here, Bloomberg points out that even though the FANGs are widely recognized as a crowded trade and overpriced segment of the market, short interest is unusually low. When it comes to calling the FANG stocks a bubble, few are willing to put their money where their mouth is. A number of people have pointed out that shares of some of the most dominant technology companies, including Facebook Inc., Apple Inc., Amazon.com Inc., Netflix Inc. … [Read more...]
Is There a Defense Against My ‘Bezos Law’?
If you're a regular reader, you are familiar with my Bezos Law. The law states that for every industry Jeff Bezos enters, costs go down. Now a Morgan Stanley analyst named Brian Nowak has outlined what it takes to protect a business from the type of disruption caused by the Bezos Law. Nowak theorizes that a set of factors he calls BRIAN, can protect a business from being overtaken and disrupted by Amazon. The factors are listed here by Business Insider: Bespoke products that are unique and require lots of customization. Examples of industries include luxury goods and intimates. Morgan … [Read more...]
Can ExxonMobil Get Cellulosic Biofuel Right?
ExxonMobil is teaming up with the University of Wisconsin to solve one of the toughest problems in biofuels; how to produce affordable energy by turning cellulosic biomass into fuel. ExxonMobil's Energy Factor reports: Work is underway to study the conversion of cellulosic biomass such as corncobs, switchgrass and wood chips into diesel and jet fuel. It sounds like a witch’s brew, but it’s true—researchers are working on a cheaper and faster way to convert cellulosic biomass into biofuels, a critical first step toward possibly scaling biofuel production for commercial use. So what is … [Read more...]
The Odd Outcomes of Monetary Manipulation
After a years long campaign of managing the value of the franc, Swiss national bankers are wondering what to do with the hoard of assets they have accumulated in their efforts to keep the currency's value low. Today the Swiss National Bank holds over $750 billion in assets, and the Swiss are beginning to ask how this money could be used, and by whom. Monetary policy around the world is in uncharted territory, and sorting out the details will take time. Brian Blackstone writes: Thanks to its efforts to weaken the franc, the Swiss central bank has amassed $750 billion in stocks, bonds … [Read more...]
Can GOP Succeed on Tax Cuts?
After the GOP's epic Obamacare repeal failure, Americans are wondering if the party can fulfill its other big promise to voters, tax cuts. Specifically the GOP has focused on cutting America's corporate tax rate, the highest in the developed world. The high rate harms American businesses, especially small businesses that can't afford to navigate through tax code loopholes to lower their rates. Today on Bloomberg, Sahil Kapur details the movement in Washington around a potential tax bill. Kapur writes: The House GOP tax blueprint backed by Ryan calls for a 20 percent corporate rate, … [Read more...]
Can You Drive a Car With Only One Pedal?
With more big auto companies announcing each week that their future production will be all electric, it's a good bet you'll own an electric vehicle someday. But there are inherent differences in electric vehicles when compared to vehicles running internal combustion engines. You don't really need a break pedal on an electric vehicle (EV). Most EVs employ regenerative breaking, so when you take your foot off the accelerator, the car dumps its excess energy into regenerating electricity for future use. At WIRED, Jack Stewart explains the one-pedal future. To get the maximum benefit out … [Read more...]
Can Tesla Endure ‘Manufacturing Hell’ To Achieve Goals?
With the roll-out of the new Tesla Model 3 now underway, CEO Elon Musk is attempting to ramp up production. The company has received over 500,000 reservations for the Model 3. People reserving Model 3s today will receive them sometime late next year according to Musk. Musk says that the company will go through "at least six months of manufacturing hell," before being able to ramp up production to the target of 10,000 cars a week. Tim Higgins reports for the Wall Street Journal: He stressed that any trouble with getting parts from suppliers could delay his plans. Tesla has a history of … [Read more...]
Are Index Based ETF Investors Making a Mistake?
Barron’s interviewed James Montier of Jeremy Grantham’s GMO over the weekend. Montier is a member of the GMO asset allocation team. Below are the highlights. Barron’s: Bonds are expensive, stocks are expensive. What’s an asset allocator to do? Montier: Things just don’t add up. One group has thrown in the towel and says, “If you can’t beat them, join them. I’m just going passive and be damned.” [Passive investing] is a very strange thing to do at this particular point in time. The U.S. market is at its second or third most expensive point in history. So people are saying, “I either … [Read more...]
Does the Trump Administration Really Want to Raise Taxes on the Wealthy?
In a piece on the Cato Institute website, my friend and Cato Institute director of tax policy, Chris Edwards says the president's instincts about lowering the corporate tax rate are spot on. However, noises being made in the administration, even by the president himself, about raising taxes on high income earners are not a good sign. Chris explains what could happen if high income earners are hit with even more taxation. Trump went on to say, “I have wealthy friends that say to me, ‘I don’t mind paying more tax.’” His implication is that tax hikes on high earners would not be damaging because … [Read more...]
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