My history with Wellington Management and the Vanguard group goes back decades. I started with Wellington over 40 years ago. The Wellington Fund was founded in 1929 by CPA Walter Morgan to provide investment counsel to his clients. Morgan had the foresight to load the Wellington Fund with fixed-income securities months before the 1929 stock market crash. That decision helped Wellington become the tenth largest in the industry by 1944. In 1951, Morgan hired John Bogle, who would eventually become the firm’s CEO. In 1974, Bogle left Wellington Management and founded the Vanguard Group, … [Read more...]
Archives for April 2018
Can OPEC Get it Right on Oil Production?
OPEC is targeting $80/barrel for oil, but will it be able to get there if it's not estimating the proper amount of non-cartel production? In The Wall Street Journal, Sarah McFarlane and Stephanie Yang report: While cuts from the Organization of the Petroleum Exporting Countries have helped eliminate oversupply of crude oil, the cartel said in its monthly market report that non-OPEC producers such as the U.S. are contributing to rising global supply. ”We still think that the cartel is underestimating non-OPEC supply growth,” said Capital Economics analysts, noting that higher prices will … [Read more...]
Yes, Vanguard is too Big
A gorgeous, sunny, good morning to you from Newport, RI. Isn’t it amazing what a little sun can do to one’s psyche? Last week I told you how my SEP-IRA contribution was incorrectly deposited to my traditional IRA by Vanguard. Lucky for me, I caught their mistake early and avoided a potential paperwork hassle come tax-time next year. I chalked the error up to the fact that Vanguard is in the transaction business and mistakes happen. But in thinking about the issue further, I probably caught their mistake because I do this for a living. Which makes me wonder: is the average investor paying … [Read more...]
Trump Pries Open China’s Financial Markets
After being threatened by the Trump administration with $150 billion in possible tariffs on China (excluding announced global steel and aluminum tariffs), the country's leaders have begun explaining how they will open their markets. Trump and China's President Xi Jinping have both softened their rhetoric this week, and with China coming to the table, markets are hopeful a trade war can be avoided. Tom Mitchell and Hudson Lockett explain China's latest overture in the Financial Times: Foreign financial groups will be allowed to take majority stakes in securities, fund management, futures and … [Read more...]
Is it Possible to Be Successful in Commodity-Index Investing?
The short answer to the question above is, probably not. Using an indexed based approach to commodity investing is futile. If you're investing in commodities, it's best done using an active approach. Simon Constable explains why in The Wall Street Journal writing: 1. Unlike for stocks, the influence of technology on commodities is deflationary. Consider the massive profits generated by tech companies like Facebook Inc. and Alphabet Inc. New technology has helped power big gains in those stocks. And technology has helped fuel gains in stocks outside the tech sector, as well, by improving … [Read more...]
This Book is a Fixture in My Office
“The more flippant the investing cliché, the more you should question it. Consider ‘the bigger they are, the harder they fall.’ At their lows this week, the technology shares that have until recently been the stock market’s darlings — Facebook, Amazon.com, Netflix, Google’s parent company Alphabet and other giants — had fallen more than 17% since March 13. Over the same period, U.S. stocks overall fell 8%,” writes Jason Zweig in his weekly column The Intelligent Investor. A fixture in my office is the book Security Analysis written in 1934 by Ben Graham and David Dodd. Zweig notes, “As the … [Read more...]
More Good News for the Economy
Missed in all the noise about trade-wars and congressional investigations over the last few days is that the market got an employment report on Friday. The jobs numbers came in light which may say more about today’s low unemployment rate (or statistical noise) than it does about the health of the job market. One of the bright spots in the report was the growth in weekly earnings. Earnings growth is rising at its fastest pace in seven years. The hourly wage numbers aren’t yet as impressive as the Labor Department’s estimate of hours worked is up, but Americans’ paychecks are getting … [Read more...]
Is $80/barrel Oil on the Horizon?
If the leaders of Saudi Arabia have their way, oil could be priced at $80/barrel once again soon. With economic activity picking up in America, and OPEC continuing its policy of production restriction, that target is closer than it's been for some time. Bloomberg's Javier Blas reports: Saudi Arabia wants to get oil prices near $80 a barrel to pay for the government’s crowded policy agenda and support the valuation of state energy giant Aramco before an initial public offering. In conversations with OPEC delegates and oil market participants, Saudi officials had been careful to avoid … [Read more...]
Surprise: Americans Still Love SUVs
The WSJ is reporting that Chevy is pulling the plug on the Chevy Sonic and Ford is doing the same with the Fiesta and Taurus. The Sonic and Fiesta compete with the Honda Civic. Both are small compact cars, whose popularity probably peaked when oil prices soared to over $140 per barrel in 2008. But with oil prices now in a modest range, car buyers have decided they actually prefer a roomier SUV/crossover or truck to the cramped compact car. The Taurus isn’t a compact car, but it has apparently fallen out of favor with car buyers. The Taurus has been in near continuous production since 1986, … [Read more...]
April 2018 RAGE Gauge Report
When you’re in the gun business is there a better salesman than former Supreme Court Justice John Paul Stevens? With Stevens talking about repealing the Second Amendment, it’s no surprise background checks, a precursor to gun sales are, are up. The risk trend in my RAGE Gauge analysis is up too across the board, except for one metric, unemployment. Thank you, Mr. Trump. Continue to invest with caution. By the way, did you see the unemployment rate numbers for Elkhart-Goshen, Indiana? It was 16.7% in October 2009 and is around 2.7% today. The RV business is humming. Originally … [Read more...]