Here the Financial Times outlines the triple threat that a Trump administration poses to municipal bonds. Muni bonds aren't an area of focus for us at Young Research. In addition to the potential risks to munis outlined below, we have tended to eschew the asset class(except during periods of extreme opportunity) because much of the market is long-maturity, liquidity is spotty on many issues, timely financial disclosure is lacking, and as pointed out below, there is the ever lurking tail risk that a major tax reform bill could eliminate the tax-advantaged nature of muni bonds. The US … [Read more...]
2% Where Have You Been All These Years?
Yesterday was the first time since the Spring of 2011, that the yield on 5-year Treasury notes crossed 2%. What's so special about a 2% yield? Walter Bagehot of Lombard Street fame, opined many decades ago that "John Bull can stand many things, but he cannot stand two percent." That may still be true today, but after so many years of being deprived of safe interest income, a 2% yield doesn't look so bad. If you take the liberty of assuming that Yellen & Co., won't let the inflation genie out of the bottle, it is once again possible to invest in medium-maturity full-faith-and-credit … [Read more...]
Portfolio Strategy: The Surprising Truth about Most ETFs
As the popularity of ETFs grows, so too does the popularity of investing in market capitalization weighted indices. The largest ETFs with the most YTD inflows are the capitalization weighted SPDR S&P 500 ETF, the iShares Core S&P 500 ETF, and the Vanguard S&P 500 ETF. According to Bloomberg, YTD inflows are almost $50 billion at these three ETFs and assets under management amount to $375 billion. All three funds of course track the 500 stocks in the S&P 500. Most investors then logically assume that if they own an S&P 500 ETF, their assets are diversified across 500 … [Read more...]
This is the Bull Case for AT&T
AT&T is a stock we have long followed at Young Research. Here, Barron's outlines a bull case for the stock. You can read our latest thinking on AT&T in Intelligence Report. AT&T investors are getting the best of both worlds today. The stock’s 4.85% dividend yield is almost twice that of the 10-year Treasury and well above the 2% paid by the S&P 500. And with AT&T’s (ticker: T) stock trading at 13 times forward earnings, its valuation looks attractive. AT&T also offers growth potential. Under a President Trump, the telecom giant should benefit from a kinder … [Read more...]
Is This the Devastating End of Diesels For All Time?
UBS has forecast that the emergence of inexpensive electric vehicle technology and stricter regulations on the pollution created by burning diesel will make cars powered by the fuel a thing of the past. Peter Campbell writes in the Financial Times: The falling costs of electric and hybrid vehicles will strip the fuel of its once-competitive price advantage, while tighter emissions regulation and soured public sentiment towards the fuel in the wake of the Volkswagen scandal will see its global share of car sales fall from 13.5 per cent to just 4 per cent by 2025, the bank predicts. In … [Read more...]
The Best Performing Dow Stock Since the Election
This is disturbing. Since the surprise victory of Donald Trump, who of course ran as a populist, the best performing stock in the Dow is Goldman Sachs—the everyman New York investment bank. In the words of Matt Taibbi, Goldman is a “vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Let’s hope the recent price action in Goldman shares isn’t an indicator of the bank’s influence in Washington over the next four years. … [Read more...]
Have Small-Cap Stocks Gone too Far?
Small-cap stocks continue their end of the year tear. From their November low, small-caps are up over 17%. Small-caps have rallied this much this fast a few times over the last three and half decades, but it was most often following a big-sell off or bear market. Small-caps may be higher a year from now, but overbought is probably an understatement at these levels. Note the two horizontal lines on the chart represent plus and minus two standard deviations. … [Read more...]
This is How to Collect Special Dividends
Bank shares used to be a reliable source of dividends, but following the global financial crisis, the Fed and other bank regulators put the brakes on the payout ratio of America’s biggest banks. Today, the payout ratio on America’s big banks has a soft limit at 30%. To get around the 30% payout limit of regulators, the big banks are now considering paying special dividends. The Wall Street Journal has the story. Two of the nation’s most prominent bankers on Tuesday hinted at higher dividends in the future, especially if bank stocks keep rising. This is mostly welcome news for investors, … [Read more...]
Referendum Puts Italy’s Banks on the Ropes
The FT reports on the fallout in Italy's banking system from the Italian referendum. Bankers are running out of private-sector solutions for Monte dei Paschi di Siena and have told the Italian lender to prepare for a state bailout this weekend after prime minister Matteo Renzi was felled by a referendum defeat. While financial markets responded relatively calmly to the referendum result, people briefed on the situation said the political upheaval made it “more difficult” to secure a €1bn investment from Qatar on which Monte dei Paschi’s €5bn capital-raising plan hinges. Senior bankers fear … [Read more...]
Be Sure to Take Your MRD to Avoid Tax Penalties
Year-end is coming up fast. If you are over 70 and 1/2 years old, don't forget to take your minimum required distribution from your retirement accounts. Fidelity has the scoop on the MRD rules. Beginning when you turn 70½, IRS regulations generally require you to withdraw a minimum amount of money each year from your tax-deferred retirement accounts, like traditional IRAs and 401(k) plans, or pay penalties of 50% on missed MRD amounts. This is why it’s important that you understand how MRDs work, and the timing of distributions. How the amount is determined Minimum required distributions, … [Read more...]
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