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Are You Saving Enough for Retirement?

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A basic rule of thumb in retirement investing is that you should save at least 25X your desired retirement income. Using the rule of 25, an investor who needs $100,000 in income from her portfolio must save $2.5 million to retire without the threat of running out of money. Younger investors will need to account for inflation in this calculation. Assuming a 3% inflation rate, an investor planning to retire in 30 years will need $243,000 to buy what $100,000 buys today. That means instead of saving $2.5 million to retire, this younger investor must save $6.1 million. Calculating how … [Read more...]

Here’s How Not to Invest

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In Chasing Yield, Investors Plow Into Riskier Bonds, Tom Lauricella and Katy Burne of The Wall Street Journal highlight the dangers of the current investing environment in one succinct opening paragraph. To wit: “Large investors are rushing into the riskiest corporate bonds, frustrated by low interest rates on safer investments and convinced that even companies with shaky finances are in little danger of default.” At Young Research we regularly council investors to keep emotions out of their investment decisions, never to reach for yield, and to demand a margin of safety. If this Wall … [Read more...]

This is Criminal

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Reuters is reporting that former Fed Chairman Ben Bernanke is holding $250,000 speaking “dinners” where he gives hedge fund managers (and others willing to pay), the inside track on the Fed’s plan for interest rates. It was only a couple of months ago that Bernanke was the Chairman of the world’s most powerful central bank. He undoubtedly has some insight on the Fed’s future plans and thinking on interest rates that hasn’t yet been shared with the public. How can the regulators allow this? If Bernanke was a recently retired CEO he would have been locked up months ago for passing insider … [Read more...]

Feldstein Dismantles Piketty’s Socialist Tome

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In yesterday's Wall Street Journal Martin Feldstein elegantly dismantles Thomas Piketty’s Das Kapital for the 21st century. Piketty is a French economist whose book “Capital in the Twenty-First Century” has made the NY Times best seller list. In it, Piketty highlights growing income inequality in America and offers as a solution, confiscatory taxes. Piketty has long advocated for an 80% marginal tax rate and a tax on wealth. Feldstein calls out Piketty for “a flawed interpretation of U.S. income-tax data, and a misunderstanding of the current nature of household wealth.” Mr. Piketty's … [Read more...]

Wall Street Research or Paid Advertising?

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Most seasoned investors have long suspected that Wall Street research is compromised. Wall Street is not in the research business. Wall Street’s big banks are in the business of distributing securities. The “research” departments at banks are best viewed as branches of their marketing departments. Sell recommendations are rare from the big brokerage houses because they are bad for business. Corporations don’t hire banks to issue stock or bonds if the bank has a sell rating on the company’s shares. If you are still relying on Wall Street’s buy and sell recommendations to manage your … [Read more...]

Housing Slowdown: The Explanation You Haven’t Heard

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There have been many explanations of the apparent slowdown in the housing market over recent months. If you haven’t been following the news on housing, new home sales fell 14% last month and have stagnated since early 2013. Existing home sales also dipped in March and on a seasonally adjusted basis they are down nearly 15% since July of last year. The Federal Reserve says it must be higher mortgage rates that have dented housing demand. Others attribute the softness in housing to demographic factors. And some think falling demand can be explained by harsh winter weather. While … [Read more...]

Smart Money Signals Trouble Ahead

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The Dow Jones Industrial Average is bordering on a new all-time high, but the Smart Money Flow Index is cratering. The divergence between the Smart Money Flow Index and the Industrials puts the sustainability of any new high in the Dow into question. Stay cautious here. Smart Money Flow Index (source: Bloomberg) The Smart Money Flow Index is calculated by taking the action of the Dow in two time periods: the first 30 minutes and the close. The first 30 minutes represent emotional buying, driven by greed and fear of the crowd based on good and bad news. There is also a lot of buying … [Read more...]

A Surprising Inflation Forecast

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In a speech at the New York Economics club on Wednesday, Fed Chairwoman Janet Yellen gave a speech on monetary policy that signaled her easy money bias is alive and well. After six years of zero percent interest rates and with trillions sloshing around the financial system, Mrs. Yellen handicaps the chances of too high inflation as significantly below the chances of persistently low inflation. Mrs. Yellen’s comments echoed the comments of another economist that is ostensibly in the know, Christine Lagarde, the managing director of the International Monetary Fund (IMF). At the IMF’s spring … [Read more...]

This Can’t End Well

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Empty Chinese city. Bob Davis and Esther Fung report on the worrying glut of vacant property in China’s third and fourth tier cities. In big international cities like Beijing and Shanghai, prices continue to rise. But evidence is mounting that in dozens of third- and fourth-tier Chinese cities rarely visited by foreigners, overbuilding is out of control and a major property-market slowdown is now under way. The 200 or so Chinese cities with populations ranging from 500,000 to several million account for 70% of the country's residential-property sales. In many of these cities, developers … [Read more...]

Top Gold Mining Stocks for Long-term Profit

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Although the stock market is basically flat YTD, there is rampant speculation bubbling under the surface. The bubble conditions in the stock market are evident in the flood of junk IPOs the investment banks are unloading on the public, the ridiculous valuations of the social networking stocks, the bidding wars for start-ups without a viable business plan, and the massive buildup in margin debt. The speculative conditions in the market are best captured by the ratio of the NASDAQ to the blue-chip Dow Jones Industrial Average. When NASDAQ stocks are beating the blue-chips by such a large … [Read more...]