Young Research & Publishing Inc.

Investment Research Since 1978

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A Treasured State

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You want to stretch your dollars like silly putty when you’re retired. It’s the name of the game. And you want to be able to have some fun while you’re at it. One place where you can do both is Montana. SmartMoney’s “Retire Here, Not There: Montana” gives you a good starter on the state. Here’s an excerpt on Bozeman (read the whole article here): The first thing Bozeman has going for it: Its proximity to Yellowstone, only 90 miles to the South. (In sparse Montana, 90 miles is considered “down the road.”) But there are many other, more local charms. The town, which sits in the Gallatin … [Read more...]

A Forgotten Truth about Money

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In a scene from the movie Moneyball, Scott Hatteberg is asked to play first base for the Oakland A’s and responds, “I’ve only ever played catcher.” GM Billy Beane (Brad Pitt) tells him, “It’s not that hard, Scott. Tell him, Wash.” Ron Washington responds, “It’s incredibly hard.” Saving money and investing are incredibly hard. You have to save until it hurts. Then you need to contribute to your IRA. But the more money you save, the more money you have to compound—which can be a lot of fun. So keep saving. The grim reality is that we have a nation of non-savers. The savings rate is … [Read more...]

50% Tax on Dividends

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Determining your income needs for retirement is no easy task. In terms of enjoyment, it is right up there with getting a root canal and filing your taxes. And at least with tax returns, there’s hope of a refund when you’re done. Not so with retirement budgeting. Once you have some figures laid out on paper, you get to present the budget to your spouse. That’s when you realize she actually was paying attention to you—and whatever toys you bought last year. So you work through all that—the credit card bills and bank statements are marked and dog-eared—and it’s time to move forward. But … [Read more...]

Real Estate’s Rising Interest Rates

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You might want to take another look at refinancing your home before interest rates go higher. Bailouts and fees may put an end to the record-low interest rates we’re seeing today. The warning signs are flashing. One closely watched metric is the spread, or difference, between what banks are charging for mortgages and what investors receive on mortgage-backed securities or bonds. Usually it’s a difference of about 0.5%. The spread has widened to 1% or about double its 30-year average. This means homebuyers are being charged higher interest rates while bond investors receive lower rates. Not … [Read more...]

Poison Annuities on Your Retirement Fund Menu?

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The Executive Office of the President’s Council of Economic Advisers wants you to buy annuities in your retirement account. The proposal, released this month, “Supporting Retirement for American Families,” should be titled “American Families Supporting Insurance Companies.” At the heart of the proposal is a plan to allow participants in defined-benefit pension plans, 401(k)s and other defined contribution plans, and IRAs the choice of using a portion of their money to purchase an annuity. It’s being sold as an immediate annuity. But it may open the door to the world of government-sponsored … [Read more...]

Outliving Your Money

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In this 0%-interest-rate environment, public pensions like Rhode Island’s are using an assumed rate of return of 7.5%. If and when that estimate goes unmet, it’s up to taxpayers to make up the difference. It’s preposterous that public pensions are assuming a 7.5% rate of return. The only way they’ll meet their mark is to take on more risk. That’s a bad four-letter word for any investor—never mind retirees. Money managers will attempt to meet their hurdle with other people’s money. But they have no skin in the game, so why not swing for the fences? In the private sector, the idea of … [Read more...]

Who’s Custodian for Your Money?

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You can see the hubris. As the bankruptcy of MF Global unfolds, customers are still looking for their money. That money should have been segregated and not part of the bets the firm was making with its own money. So far, $1.2 billion in client funds is missing. Where did it go? From Vanity Fair’s “Jon Corzine’s Riskiest Business”: That’s what U.S. congressmen mainly wanted to know when Corzine testified before the House Agriculture Committee on December 8. An informal survey of customers suggests that most think Corzine belongs in jail. Those who know him well, on the other hand, still … [Read more...]

The Dollar Game Is Rigged

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You’re getting less than $0.20 on a 1971 dollar. You can see the decline in my chart. And based on the Fed’s rock-bottom interest-rate policy, there’s no reason to believe it’s getting any better. That’s why you want to study the Wall Street Journal op-ed by David Malpass. He writes: Wednesday's meeting result could have been worse. The Fed might have announced more purchases of U.S. Treasurys and mortgage securities. It already owns nearly $2 trillion worth and has no limit on its expenditures, which fall completely outside the federal budget. Bond traders have been pleading with the … [Read more...]

Future Dividends, Coupons, and Principal

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Your purchasing power is your lifeblood in retirement. On my office credenza is The Theory of Investment Value by John Burr Williams, first published in 1937. Chapter five is titled “Evaluation by the Rule of Present Worth, Section I. Future Dividends, Coupons, and Principal.” Burr writes: [D]ividends, or coupons and principal, must be adjusted for expected changes in the purchasing power of money. The purchase of a stock or bond, like other transactions which give rise to the phenomenon of interest, represents the exchange of present goods for future goods—dividends, or coupons and … [Read more...]

Owning the Best Performers

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In its quarterly funds report printed on January 9, The Wall Street Journal lists the 45 largest stock and balanced funds by assets. The best performers of this group for 2011 were a gold ETF, SPDR Gold (GLD), up 11.2%, and a balanced fund, the Vanguard Wellesley Admiral shares (VWIAX), up 9.7%. The worst performers of the group of 45 were both emerging market funds, each down about 19%. On average, U.S. stock funds were down 2.9% and U.S. taxable-bond funds were up 4.6% last year. The two best five-year average returns on the list were, once again, SPDR Gold and Vanguard Wellesley Admiral … [Read more...]