You’re right if you guessed that the largest stock fund is an exchange-traded fund (ETF), a fact I always find somewhat surprising when studying the list of the largest stock funds in The WSJ’s monthly fund report. The one at the top of the list is the SPDR S&P 500 ETF (SPY), with $91.11 billion in assets. When I first started working in this industry, back in 1995, Fidelity Magellan was the largest stock fund. It was an actively managed fund, so it was a big deal when it was surpassed by Vanguard’s Index 500, a passive index fund. With the index fund, investors knew what they owned, … [Read more...]
Gold, Silver, and Currencies
Young Research & Publishing has been providing research and insights on precious metals and currency markets to institutional investors, corporate financial officers, business owners, and individual investors for over four decades. Richard C. Young started Young Research & Publishing in the 70s to publish the authoritative Young's World Money Forecast, a 50-page monthly investment report on the precious metals and currency markets. Today, our research on gold, silver, and currencies is geared toward investors in or nearing retirement who are looking to preserve and protect wealth.
A Threat to Global Economic and Financial Stability
January 29, 2010 There is an emerging real-estate bubble in China. Ultra-loose monetary policy in the U.S. and an over-the-top stimulus plan in China, coupled with a pegged yuan, have created optimal bubble conditions. BusinessWeek reports that in Beijing's Chaoyang district, a typical 1,000-square-foot apartment sells for 80X the income of the average resident. Sound troubling? The Chinese leadership is concerned. Monetary policy is being tightened, and the government is reimposing a tax on home sales. A hard landing for the Chinese real-estate market is a real risk to global economic and … [Read more...]
Investment of the Decade
Trust has been kicked to the curb by Washington and Wall Street. Not a smart move, as the former prepares for mid-term elections and the latter feels the effects of investors voting with their feet. Many clients and brokers have fled the big Wall Street firms for independent advisors. Washington and Wall Street may realize too late that trust is a terrible thing to waste. The bailout of Bear Stearns, Lehman's bankruptcy, the controversial merger between Merrill Lynch and Bank of America, and Citigroup's near collapse had little to do with their client brokerage accounts. In fact, brokerage … [Read more...]
Blowing Asset Bubbles
At the Fed's last meeting, Bernanke and company decided to keep the monetary throttle pegged. Apparently, the massive real-estate bubble inflated by an ultra-loose monetary policy that almost caused a collapse of the global financial system hasn't changed the Fed's view on asset price inflation. The Fed continues to cite subdued inflation and low rates of resource utilization as reasons to maintain its ultra-loose monetary policy. Bernanke and company are, of course, completely ignoring asset prices. Gold is at a new all-time high, oil is up 155% from its low, the S&P 500 is up 57% from … [Read more...]
Peculiar Divergences
What worries me most about the stock market rally are the peculiar divergences we are seeing. What do I mean? Let's look at some charts. My first chart shows that gold is breaking out to the upside on heavy volume. SPDR Gold Trust Gold is an inflation hedge, a currency hedge, and a safe-haven asset. When gold rises, other financial assets are often falling. But my stock market chart shows that the S&P 500 has rallied virtually uninterrupted since bottoming in March. S&P 500 Oddly, though, volume is falling while prices are rising. A divergence in price and volume … [Read more...]
Telling Stories
Last week, I wrote about a possible bubble developing in the Chinese stock market. If you missed it (we experienced some technical difficulties) you can read it here. Every great bubble is accompanied by a great story. In the dot-com stock bubble, investors were mesmerized by the awe-inspiring potential of the Internet. Consumers were expected to do all of their shopping online. Bricks-and-mortar retailers were considered outdated and obsolete. Dot-com start-ups and telecom equipment stocks were what investors bought for growth. And the growth was expected to compound at exceptional rates for … [Read more...]
A 0.01% Money Market Yield
July 3, 2009 I just checked the yield on my money market fund. How does 0.01% sound to you? Sounds to me like the mid term GPA average for the Delta House gang back at Dean Wormer’s fictional Faber College. You’re getting less than 0.5% from 3 and 6 month treasuries and bank CDs. And you know that it is my forecast that the U.S. dollar is going to crater versus the Swiss franc and the Canadian dollar. Moreover, the yield on the Dow is less than 3.5% isn’t it? Savers are in a darn tough spot. And conditions will worsen due to ongoing mismanagement at the White House, Treasury and Fed. And now … [Read more...]
The Blue-Chip Triad
June 25, 2009 The Dow Utilities are down 5.0% YTD. The Dow Industrials are down 5.4%. And the cherry on the cake of the 2009 bear market in blue chip stocks is the 11.7% decline in the Dow Transports. The blue-chip triad reflects a number of serious concerns: (1) complete and total incompetence in Washington; (2) the worst world wide economy since the 30’s depression; (3) North Korea, Iran, Afghanistan, Iraq; (4) the prelude to a nasty run up in U.S. interest rates and inflation; (5) at a 3.4% yield (Dow 30) blue chip stocks simply do not offer compelling value. Gold is up YTD, reflecting the … [Read more...]
A Saucer-Like Bottom in Housing
June 16, 2009 As an inference reading based futurist, my goal is to target unfolding trends and the catalysts to effect change. Areas of interest include terrorism, politics, currencies, government, world financial markets, and economies. Most immediately, I think the 17% jump in May housing construction in concert with May’s increase in building permits augers well for a saucer-like bottom in housing. Home builders were definitely less confident in June than they were in the spring. Mortgage rates have been rising and there remains a nasty overhang of unsold homes. As such, the U.S. has now … [Read more...]
Crumbling Pillars
The pillars of support preventing the overvalued euro from depreciating versus the U.S. dollar are quickly crumbling. On a purchasing power parity basis, our favored approach to estimating long-term currency values, the euro is deeply overvalued and has been for some time (Chart 1). The euro has been supported by a positive and rising interest rate differential between euro interest rates and U.S. interest rates. Chart 2 shows the interest rate differential between 2-year government bonds in the Euro-Zone and the U.S. The widening interest rate differential was caused by … [Read more...]
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