If even Larry Summers thinks the current stimulus being poured on America's economy is "substantially excessive," you can bet it's way more than necessary. Here are some of Summers's comments from a recent interview with FT's Martin Wolf: If you look at the economy at the beginning of this year, prevailing forecasts were that Covid would reduce wages and salaries to American households by $20bn-$30bn a month, with that figure declining over the year. So, that would be a $250bn-$300bn hole in wages and salaries over the course of the year. So, I look at this hole and then I see $900bn of … [Read more...]
Archives for April 2021
It’s as Simple as 4%? No, Not Anymore
In my conversation with you this week, we talked about the appropriate draw rate from your portfolio. We discussed how the days of a four percent draw are history. With interest rates nailed to the floor, you need to adjust accordingly. Thankfully, most of you have, I hope. Take a look at Dick Young’s investment North Star. That, in a nutshell, is how savers are penalized by Washington. Now, look at the dividend yield on the Dow Jones Industrial Average. Do the math. A simple back of the napkin calculation of a 50/50 portfolio yields a fraction of what it used to. These are not easy … [Read more...]
Wall Street’s New Sub-Prime Borrower
Zero percent interest rates create many distortions that today’s central bankers seem to ignore. Ben Bernanke’s successful campaign to shift the blame from the Fed to Wall Street for the last financial crisis has emboldened his successors. A careful study of financial history shows that almost every mania has been enabled by a flood of liquidity. The problem as was identified over 100 years ago by Walter Bagehot is that “John Bull can stand many things, but he cannot stand two percent.” Wall Street has found a way to fill that need. As the WSJ reports here, Wall Street is now selling new … [Read more...]
One Word Explains the Worth of Your Neighbors’ House
In my conversations with you, you’re telling me home prices are crazy. It really doesn’t matter where you live. Take, for example, a realtor and prospective client I was talking with yesterday. He operates in the mountain west and said he has tons of buyers, just no homes to sell. No supply. And that’s residential real estate today in a nutshell—supply. On a recent trip to Key West, we talked with a realtor getting ready to show a house as we were walking by. Curious, we asked if we could take a quick look. This tastefully done home was a perfect, cozy, old town Key West conch retreat. The … [Read more...]
Is Inflation Imminent? Prepare Now
At FT, Pascal Blanque, explains that inflation is imminent and that investors must prepare themselves for what's to come. He writes: A change in market regime often occurs with a change in the mandate of central banks. The central focus on inflation targeting that started with the arrival of Paul Volcker at the helm of the Fed in 1979 is fading. This much is clear from the new priorities recently adopted by two central banks: achieving full and inclusive employment by the Fed and reducing global warming by the Bank of England. For investors, this means the rise in bond yields might not be … [Read more...]
Amazon Sneaking Up on Google and Facebook Ad Share
Amazon has grown into the third-largest seller of web ad space, sneaking up on Google and Facebook in the race for market share. Alexandra Bruell reports for the WSJ: Amazon. com Inc.’s share of the U.S. digital ad market grew to 10.3% last year from 7.8% in 2019, according to a new report from research firm eMarketer. The report predicts that Amazon will continue to inch up on market leaders Google, part of Alphabet Inc., and Facebook Inc., a sign brands are increasingly turning to the e-commerce giant to help them reach an expanding base of online shoppers. Amazon’s U.S. ad revenue … [Read more...]
Your Survival Guy Stock: Witness This Dividend Miracle
Sometimes it’s hard to talk politics. So let’s talk about religion. Because when it comes to kneeling down in front of the stock altar, IBM has got some religion. I’m talking about DIVIDEND RELIGION—paying one since 1916. Can I get an AMEN! Look at the chart for my Survival Guy Stock above and consider life back in 1986 for a moment. Tom Cruise was lighting it up on the big screen with Top Gun. IBM? Not so much. (Talk about needing to put out a fire.) But it still paid a dividend that year. Sometimes setting it and forgetting it works wonders. What were you doing in 1986? Me? I was 14 … [Read more...]
Trains: A Big Deal, and the Economic Future of America
The recent deal by Canadian Pacific Railroad to acquire Kansas City Southern is reigniting railroad stocks in a way not seen since Warren Buffett's Berkshire Hathaway purchased Burlington Northern Sante Fe. But as Spencer Jakab writes in The Wall Street Journal, even without a deal there are reasons to like railroads: A successful deal could bode well for other players if it unlocks further consolidation. Analyst Bascome Majors of Susquehanna Financial Group notes that more deals could follow after 2022 if the official attitude toward consolidation has improved. But even if the deal is … [Read more...]
Your Survival Guy Stock: A Picture’s Worth a Thousand Words
Originally posted on Your Survival Guy. … [Read more...]
Which Industries Are the Biggest Losers From a Biden Global Minimum Tax?
President Joe Biden and Treasury Secretary Janet Yellen are proposing a "global minimum tax" of 21%, and a major increase in the corporate tax in the United States to 28%. The tax increases are expected to "knock 9 per cent off earnings per share for companies in the S&P 500 next year," according to calculations by Goldman Sachs. Hit especially hard will be communications services and tech, aka the FAANG companies that have been driving growth in the stock market. Aziza Kasmov writes in FT: Communication services and information technology are likely to be among the biggest losers from … [Read more...]
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