Historically dividends make-up about 2/3rds of stock returns. The S&P 500 has a miniscule dividend yield of 1.95%. That’s not saying much for future stock returns. That’s why we continue to pound the pavement for yields twice that. More on dividends in The WSJ: Ultimately, dividends drive long-term shareholder performance. From 1970 to 2012, the dividend yield accounted for about two-thirds of real stock-market returns in major markets, Credit Suisse notes. Sometimes the market appears to forget that in its enthusiasm for the latest fad offering the prospect of large price … [Read more...]
His $3.5 Billion Haul
Hedge fund managers aren't getting the job done–losing money for investors in back-to-back months for the first time in two years. Last year when the S&P 500 was up over 30%, the average hedge fund made only 9.5%. But don't worry, the hedge fund managers are just fine. The billions of dollars they've pocketed in fees won't have them dining on canned tuna. Let’s not forget that investors pay hedge fund managers a derivative of "2 and 20"–2% on your assets under management and 20% on your profits. That’s 20% on profits that were off by more than 20% relative to the S&P 500. To add insult … [Read more...]
Sell in May
It’s been a great year for dividend paying stocks. Not so much for emerging markets. It would be a shame to sell dividend payers in May to miss a Summer of payments. Here’s a snapshot of utilities and emerging markets YTD. What’s not to like? … [Read more...]
(E)State Planning
Rhode Island is a great place to visit but a rotten place to die. The top inheritance tax rate is 16% on estates more than $921,655. Compare that to “The Live Free or Die State” of New Hampshire which has no estate tax. It’s an island among the tax happy states of the northeast. “Have your cake and eat it too” in NH or “Live Free then Die Free”, could work for you if you live in NH. I like this illustration in Forbes: … [Read more...]
Good ‘Ole Warren Buffett
Warren Buffett has pulled the wool over the eyes of so many with his “aw shucks” mid-western persona. But in reality he’s a self-preserving stock salesman just as comfortable playing inside Wall Street boardrooms as he is inside the D.C. beltway. On the tax front he’s been of no help to successful Americans trying to keep more of their hard-earned money. He’s all for higher taxes. That is unless it’s his taxes. Then it’s all about his bottom line. The WSJ’s Review & Outlook has more on good ‘Ole Warren here: So it was fascinating to hear Mr. Buffett explain that his real tax rule is to … [Read more...]
We’ve Seen this Movie
Retirement investors are piling back into stocks, a bit late I’d point out. Stocks accounted for 67% of employees’ new contributions into retirement portfolios in March according to Aon Hewitt. Let’s not forget that we’ve seen this movie before, as the WSJ points out here: Individual investors, notorious for mistiming the market, didn't fare well in the financial downturn. At the stock market's peak in October 2007, investors put 69% of new 401(k) contributions into stocks, according to Aon Hewitt. The S&P 500 went on to lose 57% of its value by March 2009. Some financial advisers now … [Read more...]
What’s Going on Here?
Here’s what former Fed Chair Ben Bernanke said in July 2007 prior to the housing bust and the recession that began later that year: Overall, the U.S. economy appears likely to expand at a moderate pace over the second half of 2007 with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend. Such an assessment was made around the time of the June meeting of the Federal Open Market Committee… The central tendency of the growth forecast… is for real GDP to expand roughly 2.25% to 2.5% this year and 2.5% to 2.75% in 2008. ….The unemployment rate is anticipated … [Read more...]
Silver Cheap Relative to Gold
I like having some gold and silver in portfolios. In terms of how many silver ounces it takes to buy one ounce of gold, the historical mean has been 50 ounces. Today it takes about 67 ounces of silver to buy one ounce of gold. Silver may be the value play, but keep in mind that the chart tells us nothing about the short-term. It’s simply a nice historical snapshot. … [Read more...]
Invest in Texas
I've been keenly interested in the investment theme surrounding vigorous competition between states. But when I look at Rhode Island and compare it to Texas or North Dakota, I ask is it even a competition? It's not even close. The WSJ ran a piece yesterday discussing the pressures put on the infrastructure in Texas from the inflow of new residents. Sounds like a business opportunity to me rather than a problem. Which states attract new residents and businesses? It makes sense to partner up with them. Americans have flocked to Texas in search of a piece of the state's booming economy as much … [Read more...]
Billionaire Larry Ellison’s $10.5 Million Newport, RI Beechwood Mansion
In 2010, Larry Ellison paid $10.5 million for the Astors' Beechwood mansion on Bellevue Ave in Newport, RI not far from my office. And based on all of the heavy duty staging, Ford F-150s, and workers (that I can see) $10.5 mil is simply the price for admission. Larry’s going deep on this one. Meanwhile, homes in Newport have a median price of $421,000 according to Trulia.com. Who needs the Fed? Newport and other desirable markets like Manhattan are fine without the Fed. That raises the question; how much has the Fed really helped less desirable markets with all of its money printing? The … [Read more...]
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