When you own an income-producing asset, you’re immediately in a position to harness the power of compound interest. Too often, investors get caught up in the ups and downs of the market rather than the flow of cash into their pockets. The basic premise behind selling at higher prices means you need to get rid of your asset, your golden goose, to make money. I don’t like that game for you. For you, I want steady income. Take care of the income, mix in some time, and the price will follow. I like this wonderful piece written at Vanguard that lays it all out. The more time you have, the … [Read more...]
Archives for June 2020
The Electric Vehicle Bubble
If you needed any confirmation that the speculative fervor ignited by trillions of dollars of money printing and government handouts has gone to extremes not seen since the height of the dotcom bubble, look no further than Nikola. Nikola is an electric truck startup with no revenue that now has a market value greater than Ford Motor company. The WSJ has the story. The market value of Nikola Corp., NKLA -8.03% a little-known electric-truck startup that went public last week, has surged past that of Ford F -4.14% Motor Co. and other car companies in recent days, as investors continue to bet on … [Read more...]
How Valuable is Thirty-Thousand?
You want some ugly math? Look at public pensions. They assume an expected rate of return above seven percent. What if that’s not met? In the real world, there are consequences. Take, for example, a million-dollar portfolio. If you “need” a return of seventy thousand, or seven percent, what happens if you don’t get it? You’re underfunded. A more reasonable expectation would be, say, four percent, or forty thousand. Pensions are invested in a mix of bonds and stocks, so getting stock market returns is basically impossible. In the above example, an actual return of four percent leaves a … [Read more...]
Retail Investors Are Invading the Stock Market
Bloomberg's Sarah Ponczek reports on the surge of retail investing in stock markets. She writes: Everyone knows retail investors dived back into the market as stocks rebounded. Now, evidence is starting to build that their buying has become a key driver of the beaten-down shares that are dominating the rally. Companies that have been soaring are in many cases the same firms that have seen skyrocketing interest at brokerages popular with individual investors. Turnover is surging: average daily volume for these stocks has occasionally been 30 times what it was in 2019. Maybe small-time … [Read more...]
Americans Don’t Want Chinese Jeans Anymore
Sourcing Journal reports on the deep dive in imports of denim from China, and on which countries are picking up the business. Arthur Friedman writes: Imports from China declined a staggering 67.54 percent year to date through April to $74.3 million, bringing the once-dominant country down to a third-place, 15.55 percent market share after a 41.88 percent decline over the 12 months. Imports from China have been in a long-term downward spiral since the trade war with the U.S. brought on significant tariffs and uncertainty, and caused many companies to shift production out of the … [Read more...]
Trump Cavalcade Drives America Back to Business
Debbie and I have traveled up the East Coast countless times over the last many decades. On every trip, we take inventory of the health of America's small-town Main Streets, pedestrian activity in towns, and truck activity on the highways, among many other inference reading signals. Last Friday we were traveling again. That day, news dropped of the record-setting job gains in May. The stock market soared, with the Dow Jones Industrial Average closing up 829.16 points. While liberal economists like Paul Krugman wrote the report off as a conspiracy theory, the evidence of America's jobs … [Read more...]
Larry Kudlow: Director of the White House National Economic Council
Your Survival Guy is a big fan of Larry Kudlow, director of the White House National Economic Council. This week, the WSJ’s Andy Kessler writes: “In the grip of the world-wide recession, we must all stick to anti-inflationary, high-productivity policies that adapt new technology, retrain workers, and increase efficiency.” Who said that? Donald Trump? Angela Merkel? Emmanuel Macron? Nope, that was Ronald Reagan in May 1983, speaking on the eve of the Williamsburg Economic Summit of Industrialized Nations. Now, the off-again, on-again Group of Seven meeting scheduled for June is off until … [Read more...]
Do Stocks Always Beat Bonds Over the Long Run?
The WSJ reports on new work that shows historically investment-grade bonds have beaten stocks in 40% of ten year periods. What’s more, in many 10-year periods the return on bonds is only about a percentage point less than the return on stocks. With Treasury bond yields nearing rock bottom levels, it would seem to be a cinch for stocks to beat Treasuries over the coming decade, but today’s historically lofty stock valuations make the calculus more complicated. And if you are willing to venture beyond the safety of Treasuries, the return opportunities in corporate bonds aren’t as depressed as … [Read more...]
Your Retirement Life: Run from Shiny Happy People
Let’s start with our bank of bad habits, shall we? The most common one I see is the annuity. How do they even get into a portfolio? I’ll tell you. “Well,” a prospective client might say, “I had a cousin who told me about that one.” Or, “It was sold to me years ago by some guy. I don’t remember his name.” Or, “My employer brought in this company to give us a presentation.” You get the idea. When investors are young and start making a little scratch, they don’t spend time researching investments. They’re too tired. They don’t have time. They trust who they’re talking with. Plus, the kids are … [Read more...]
The #1 Reason to Oppose Bailouts
Bill Dudley, the former President of the Federal Reserve Bank of New York is out with an op-ed in Bloomberg expanding on what the Fed’s bailouts mean going forward. Dudley points out the problems with bailouts. His solution is unfortunately the very reason bailouts must be opposed in the first place. It won’t be long before the likes of Liz Warren and her allies seek retribution for the bailouts in the form of higher corporate taxes, tighter regulation, and outright bans on certain activities. And to be honest, its hard to argue that leveraged hedge funds and leveraged mortgage REITs are … [Read more...]