Young Research & Publishing Inc.

Investment Research Since 1978

Fed Delivers a Sucker Punch to Retired Investors

By

The Federal Reserve delivered a sucker punch to retired investors yesterday. The Fed managed to announce an even more dovish decision than Chairman Powell had hinted at in January. Powell took any additional rate increases off the table in 2019 and announced a much faster end to the roll-off of the Fed’s bloated balance sheet than expected. Bonds will stop rolling off the balance sheet in September, with a reduction in the pace of roll-off starting in May. The Fed increased the size of its balance sheet by $3.6 Trillion during the crisis, but it is only taking back about $750 billion of … [Read more...]

Is This a Generational Opportunity in Foreign Stocks?

By

The chart below shows the ratio of U.S. stocks to developed market foreign stocks. As anybody who takes a proper approach to crafting stock portfolios by diversifying globally can attest, U.S. stocks have carried the load in global equity portfolios for the last decade. But has Wall Street taken this trend too far? As things stand today, the ratio of U.S. stocks to foreign stocks sits nearly three standard deviations above its long-term mean. Assuming a normal distribution, a measure this extreme happens once every century. If global equity performance remains a cyclical business as … [Read more...]

Why the ETF Fee War is Misguided

By

The WSJ reports today that BlackRock is slashing fees on one of its index ETFs by almost 75%. An investor friendly move? Maybe, but we are talking a reduction from 4 one hundredths of a percent to 1.25 one hundredths of a percent. For every $1,000 invested, ETF holders save a whopping 25 cents. You probably tip the coffee girl more than that every morning. This race to the bottom in index-based ETFs is getting silly. Compound out the difference between 4 basis points and 1.25 basis points for 30 years and you’d barely have enough to take your wife to dinner. And let’s not forget … [Read more...]

Is Amazon’s Brand Power Wide but Shallow?

By

Amazon has stepped into many industries, not just e-commerce and online services, but actually producing its own line of Amazon branded products. There has been fear among branded consumer products companies that Amazon's efforts would severely hurt their business, but a study shows that might not be the case. Bloomberg's Spencer Soper reports: The explosion of Amazon.com Inc.’s private-label products -- batteries, baby wipes, jeans, tortilla chips, sofas -- has prompted concern that the world’s biggest online retailer could use its clout to promote these house brands at the expense of … [Read more...]

Facebook’s Talent Exodus is a Harbinger of Change, or Trouble

By

Executives are fleeing Facebook as the company comes under increased fire for privacy and anti-trust issues. Last week Facebook's chief product officer, Chris Cox, and vice president for WhatsApp, Chris Daniels, both departed the company. Facebook has announced changes in the direction of its product, perhaps making departures of personnel who no longer fit the mission inevitable. It could also be that these executives are tired of dealing with Facebook's many troubles and have decided to leave while they can. Bloomberg's Sarah Frier reports: Cox was well-liked internally, known for his … [Read more...]

The Real Reason Firms Buyback Stock

By

The pols are out trying to punish firms that buy back their own shares. The left wants to ban buybacks unless a company agrees to a litany of their demands. The right wants to put buybacks and dividends on equal footing by taxing buybacks. Neither approach is a good idea. If the government bans buybacks, acquisitions and conglomeration are likely to increase—both have a higher probability of destroying value. The politicians are attacking this from the wrong direction. As we have written in the past, buybacks started to soar in the 1990s after executive pay for public firms became … [Read more...]

Why Bill Gates Wants to Raise Your Taxes

By

Bloomberg reports that Bill Gates is out in favor of raising tax rates on capital gains to target America’s wealth. Raising the tax rate on capital gains in the name of generating more revenue or narrowing the wealth gap is a half-baked and incredibly lazy idea. It’s one thing for Senators Bernie Sanders or Liz Warren to propose soak-the-rich tax policies to rile up their base, but Mr. Gates should know better. A higher capital gains tax rate will do nothing to narrow the divide between rich and poor, nor will it generate higher tax revenue for the government. America’s richest … [Read more...]

Will the Fed ever Keep Bernanke’s Promise to Unwind?

By

Ten years after Ben Bernanke's famous 60 Minutes interview, the Fed is looking less likely than ever to unwind the unconventional monetary policies it used to fight the Financial Crisis. Danielle DiMartino-Booth writes for Bloomberg: If the primary goal was recovery without inflation, the Fed delivered. Since the onset of recovery in June 2009, the core personal consumption expenditures index, which measures the prices paid by consumers for goods and services net of food and energy prices that tend to be more volatile, has been above 2 percent in in just five months in 2018, four in 2012 and … [Read more...]

Bianco: Devaluation to Fund Government Has Never Worked

By

Writing at Bloomberg, Jim Bianco explains to readers that devaluing a currency to fund government has never worked. The Modern Monetary Theory, a current hot topic among the Socialist-leaning politicians and activists in Washington D.C. today, is very much the devaluation of money to fund government. Bianco writes: MMT is basically a sibling of quantitative easing. While QE allowed the Fed to print money to buy securities such as U.S. Treasuries, mortgage bonds and bad loans, MMT proposes printing money to fund the government. The Fed has hailed QE as a success, bringing the economy back from … [Read more...]

Grantham on Stocks: You Can’t Get Blood Out of a Stone

By

In a recent interview with CNBC, famed investor Jeremy Grantham explained that despite new stimulus from the ECB, and a halt on tightening measures by the Fed, he isn't optimistic that a boom in stock prices is forthcoming. Mark Decambre reports at MarketWatch: Jeremy Grantham, an investor credited with predicting the 2000 and 2008 downturns, told CNBC on Thursday that investors should get inured to lackluster returns in the stock market for the next two decades, after a century of handsome gains. “In the last 100 years, we’re used to delivering perhaps 6%,” but the U.S. market will be … [Read more...]