At The Wall Street Journal, Charley Grant warns investors that Tesla is just as risky to own as it is to bet against. He writes: After a recent pullback, its market capitalization now merely hovers around $90 billion, about the combined value of Ford and General Motors. Projections of Tesla’s future market dominance in China have eclipsed the 8% decline in total revenue that it reported for the third quarter. Analysts expect a second consecutive quarterly profit when Tesla unveils full-year results and another stock surge is certainly possible if that proves correct. But such exuberance … [Read more...]
Archives for January 2020
Should You Take the Dividend Blood Oath?
I have always been passionate about dividends, and if you learn to understand their power, you will be too. I even told readers in 2002 to take a blood oath to buy only dividend payers. Alarmed? While I was joking about the blood oath, I was very serious about the power of dividends in an investment portfolio, and I still am. Here’s what I wrote: As to dividends, not long ago, Fortune ran a nice piece, “Reap the Dividends.” Fortune wrote, “According to Ibbotson Associates (I love their work), if you had invested $100 in the S&P 500 in 1926 and continually reinvested the dividends, … [Read more...]
These Stocks Just Crossed an Ominous Threshold: Your Neighbor Probably Owns Them
You read here about the late Jack Bogle’s concerns with index funds. Now they’ve crossed an ominous threshold: the market cap of the top five companies in the S&P 500 index represent 18% of the total index capitalization, higher than any time on record, including the Tech Bubble. Those five companies include Apple, Microsoft, Alphabet (Google), Amazon, and Facebook. When mutual funds and ETFs have a mandate to buy an index of stocks, like those in the S&P 500, research and analysis go out the door—there’s zero analysis—because the purchases are required. In replicating an index, the … [Read more...]
Is the Fed Boosting Risk? An Insider Says Yes
Federal Reserve Bank of Dallas President Robert Kaplan is raising alarm bells over the Fed's recent injections of liquidity into financial markets. Kaplan said recently that it is wise to acknowledge that “Many market participants believe that growth in the Fed balance sheet is supportive of higher valuations and risk assets." The Wall Street Journal's Michael S. Derby reports: “Many market participants believe that growth in the Fed balance sheet is supportive of higher valuations and risk assets,” Mr. Kaplan told reporters after an appearance at the Economic Club of New York. When it … [Read more...]
You’ll Love This if You’re Dreaming of an Active Retirement Life
My clients are ski bums. Well, not exactly, considering they own their own place in the Tetons. But rising before dawn, queuing up for the first tram, especially on powder days, is a ski bum’s life. That’s why it was no surprise to receive this email: Hi EJ! Snow over a hundred inches so far in 2020! Every day a powder day! Several more days for this storm cycle! We have been very happy with your care of our financials. Skiing has been fabulous. More powder tomorrow! Will give you a call when we come up for air! When they get home in the spring, to Lake Champlain, they … [Read more...]
Could Gold Rally to Record High in Response to Stimulus?
Could the price of gold rally to a record high of over $2,000 as central bankers print more money? According to Greg Jenson of Bridgewater Associates, the answer is yes. Jennifer Ablan reports Jenson's prediction in The Financial Times: Mr Jensen, who helps oversee more than $160bn at the Connecticut-based group, told the Financial Times he believed the Federal Reserve, in particular, would let inflation run hot for a while and “there will no longer be an attempt by any of the developed world’s major central banks to normalise interest rates. That’s a big deal”. At the same time, … [Read more...]
What You Need to Know about the Secure Act and Your RMD
You no doubt heard about the Secure Act, an unpleasant piece of legislation passed by Congress on their way out the door before Christmas break. The law became effective on January 1, 2020. What this means to you is that if you didn’t turn 70 ½ before Jan 1, then you don’t have to take your required minimum distribution (RMD) from your IRA until you turn 72. Understand, if you’ve already begun taking your RMD prior to Jan 1, and are under age 72, you still need to keep taking it. Also note, qualified charitable distributions (QCDs) from IRAs can still be made if you’re 70 ½ (up to … [Read more...]
You Want to Hire Who as Your Financial Advisor?
The Financial Times reports that Vanguard’s assets under management have surged past $6 trillion for the first time. In the investment business, the biggest rarely means the best. Big funds and big investment managers have fewer opportunities to choose from, and bigger funds are harder to maneuver. Do You Think Your Business Really Matters to Vanguard? Even if you have a $1 million portfolio with Vanguard, your business means almost nothing to the firm. They have $6 trillion under management. There are 5,999,999 other $1 millions in $6 trillion. Think about that the … [Read more...]
See the Truth About Who You Really Are as an Investor
You know how powerful the mind is—the power of mind over matter. That’s why I revisited this article in the New York Times: “Mind May Trump DNA in Exercise and Eating Habits:” If you tell people they have a genetic predisposition to a low capacity for exercise or a tendency to overeat, explains the article, their bodies respond accordingly. When it comes to investing, your mind makes you feel certain ways about the stock market which can lead to some big mistakes in your asset allocation. If you take the time to understand how you felt in brutal markets like those of 2000 and 2008, … [Read more...]
Is This the Last Dance for Glamour Stocks?
Great piece by Jason Zwieg in this weekend’s WSJ. Zwieg offers some solace to investors who still think financials and fundamentals are a more meaningful indicator of corporate performance than fantasies and fairytales about the future. Emphasis is ours. Pop quiz: Name the giant store whose customers scoff at whatever goes on sale, but flock to buy whatever costs the most. It isn’t a supermarket. It’s the stock market—especially over the past decade, when value stocks have moldered in the bargain bin. Such companies, trading at low prices relative to their earnings, net assets or other … [Read more...]