Below is a chart of the Federal Reserve’s balance sheet. The Fed has gone into money-printing overdrive. Over the last month, the central bank has conjured over $1 trillion out of thin air to buy Treasury bonds and mortgage-backed securities. The Fed is printing at a pace of up to $125 billion per day. Once the stimulus passes, the Fed will be given about $500 billion in capital that can be leveraged up to 10X to buy more assets. The source of that leverage is newly printed money. We are talking about an additional $4.5 trillion. Meanwhile, the Federal Government is likely to run a … [Read more...]
Archives for March 2020
Richard C. Young Explains: How to Invest Like Einstein
Originally posted October 23, 2018. When asked to name the greatest invention in history, Albert Einstein responded, compound interest. Over three decades ago I started our family investment counsel firm focusing on the miracle of compound interest to help retired and soon to be retired investors just like you. My short and quick goal was, as it remains today, safety of principal and a consistent flow of income through investors’ long and peaceful retirements. In J.R.R. Tolkien’s The Hobbit, when the wizard Gandalf asked Bilbo Baggins to take part in an adventure, the Hobbit told … [Read more...]
Work to Make Money/Invest to Save Money
Originally posted October 17, 2017. With the exception of the large sums of money that I invested in zero-coupon treasuries (Benham Target Funds) in the 1980s and 1990s, I have never invested based on how much money I expected to make. I work to make money. And I save to keep every dime of the money I have worked a lifetime to earn. There was a day when I had darn few of those dimes. Those days made an indelible impression on me, and will so forever. I invest with a rolling 10-year average annual return portfolio target of a balanced 4+%. This modest target is based on the normalized … [Read more...]
Coronavirus Infects Stock Market: Part XIX
You have spoken and I have listened. Here’s what you told me: How much you miss Richard C. Young’s Intelligence Report, especially if you’re not a client. I’m not saying that to rub anything in, this is not the reason for writing this. I just want you to know that you’re not alone and your words are not forgotten. This is my message to you today from one client: “E.J., times like these are why I’m with you guys. I’m good. Thanks for the call.” Originally posted on Your Survival Guy. … [Read more...]
Coronavirus Snapped the Cord on the Market Elevator
For the past ten years, the stock market has been an elevator that has only gone up. Now the cord has snapped. What floor are you falling from? Here’s how I explained what I call “elevator investing” some years back. I wrote: Elevator Investing Where do you want to be when the cord snaps? I often think of risk management with a simple elevator analogy. In the investment process, I quantify risk first. Then I evaluate potential gains. Just envision, if you were in an elevator and the cord snapped, where would you be better off? Dropping from the second floor or the 10th floor? Makes your … [Read more...]
Coronavirus Infects Stock Market: Part XVIII
Before you hear about my conversations with successful Americans like yourself, let's take a quick step back and look at where the market has been over the last 20-years and consider that if you're receiving dividends they help you dollar cost average through thick and thin. Every day during this crisis, I'm hearing about what you're doing to survive and thrive, and thanks to you, I've gained some valuable on the ground intelligence. Here's an email I received after a relaxed morning call with a client who is certainly prepared to live off the grid: One thing I didn't mention... It … [Read more...]
Excessive Buybacks Come Back to Bite
The buyback game may finally be coming to an end. One can hope at least. Over the last decade, many U.S. companies levered up their balance sheets to repurchase shares. Why did they do it? For starters, it drives share prices, and in turn the value of executive stock options, much higher. Why finance the buybacks with debt? Look to Mr. Powell and Mrs. Yellen and Mr. Bernanke at the Fed for keeping interest rates at ultra-low levels for an entire decade. The Fed will, of course, escape any blame for this debacle as it did the Financial Crisis, but the evidence should be clear as day for … [Read more...]
Coronavirus Stats Update: What’s the Latest?
By Jozsef Bagota @ Shutterstock.com Below are updated coronavirus stats through yesterday. The good news is, South Korea has continued to keep new case growth at a manageable level and there are signs Italy’s lockdown has slowed the growth in new cases. There is also reporting that Italy may only be testing the sickest patients which is good and bad. Bad because the growth numbers may be skewed, but good because it means the fatality rate of the virus in Italy would be much, much lower than is being reported. The other potentially good news in Italy is that recovered patients should … [Read more...]
Facebook Still an Ad Business
Facebook usage and traffic is soaring, but the company warned business may not be booming. At its core, Facebook (and Google) is still in the advertising business. If small and large businesses are drawing down credit lines and conserving cash, the ad budget is one of the first items that will be cut. Eric Savitz reports for Barron's: In the latest indication that the market for digital advertising is struggling in the face of the rapidly spreading coronavirus pandemic, Facebook disclosed in a blog post that the social network has “seen a weakening in our ads business in countries taking … [Read more...]
Coronavirus Infects Stock Market: Part XVII
“Don’t let the cure be worse than the problem,” a thoughtful, and weary President Trump explained last night to America in a tone that was right on the money for the situation at hand. President Trump explained how we all need to do our part and that America was not built to be shut down and out of business. We need to flatten this curve and be open for business (my emphasis) because that’s what America does best. Let’s lead by example. Now that America is in day nine of self-isolation we’ve learned quite a bit about our politicians and how many are looking at this as an … [Read more...]
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