You can feel rich and poor at the same time. Take the college student living large on Mom and Dad’s tab. He may be enjoying his last semester of college but could also have a knot in the pit of his stomach; come next month, he graduates with no job. The same up-and-down feeling might apply to the purchasing power of your dollar today. For example, you can feel rich by being a vulture investor in Florida and buying a condo at a deeply discounted price. But then you’ll feel poor driving south when your snowbird daydreams are abruptly interrupted by the sticker shock of filling up the … [Read more...]
An Ominous Sign for Profits
Corporate profits hit another record last quarter. In its final revision of fourth quarter GDP, the Bureau of Economic Analysis reported the after-tax corporate profits increased to a record $1.25 trillion. Year-over-year profit growth was 13.7% in the fourth quarter and 3.3% on an annualized quarter-to-quarter basis. The corporate sector is one of the few bright spots in what has been one of the most lackluster economic recoveries on record. Corporate profits carved out an unmistakable V-shaped recovery—bottoming in the fourth quarter of 2008 and reaching a new high by the first quarter of … [Read more...]
Serious Inflation Ahead
Here is yet another sign that inflation pressures are building. Wal-Mart, America’s largest and lowest cost retailer says U.S. consumers will face serious inflation for clothing, food, and other products in the months ahead. If the nation’s low cost leader is planning price hikes, there isn’t a business in America that isn’t going to raise prices. I know this kind of data point doesn’t fit into the Fed’s abstruse economic models, but if Ben B. wants any chance of salvaging the Fed’s waning inflation-fighting credibility, he’d better start paying attention to this type of anecdotal … [Read more...]
Capital Gains vs. Dividends: 10 Takeaways
In 2008, one-third of investors over 65 had reportable capital gains, and 40% of investors between the ages of 45 and 65 had reportable capital gains. Both facts were reported by the IRS and highlighted in a report by the Tax Foundation. Here are my takeaways: 1. Obviously both age groups headed for the exits too soon, selling in a year when the S&P 500 was down 37%. 2. But that’s what happens when stocks are too heavily relied upon, as they were by investors trying to make up for the devastating losses from the tech bubble in the early 2000s. 3. Yes, 2000–2010 may have been the lost … [Read more...]
In the Money
Are you impressed by the strength of the U.S. stock market? After a mini correction that took the S&P 500 down 7% from its recent high, stocks have almost recovered all of their losses. This, despite the ongoing turmoil in the Middle East, a still uncertain outcome to Japan’s nuclear tragedy, a flare-up in the European debt crisis, an unmistakable double-dip in U.S. housing, and surging food and energy prices. Yes, the strength of this market is impressive, but not at all surprising. As I’ve written previously, the market is focused almost exclusively on one variable, and that variable is … [Read more...]
Equity Bull or Currency Bear?
Is it an equity bull market or a currency bear market? In U.S. dollars, the S&P 500 is up an impressive 25% since August 31, 2010, but in terms of Swiss francs and gold, the S&P 500 is up only 12% and 9% respectively. Over half of the stock market rally since August can be attributed to dollar debasement. … [Read more...]
The Era of cheap China goods is over
The era of cheap China goods is over according to Li & Fung, a Hong Kong-based logistics company. This has broad implications on many fronts. In terms of monetary policy, China has moved from an exporter of deflation to an exporter of inflation. The tailwind of disinflation in Chinese import prices is likely gone for good. I hope Ben B. is paying attention here. Higher import prices from China could push up U.S inflation. And yes even for the folk at the Fed who apparently don’t eat or drive. Higher inflation in China also has implications for competing economies in Asia. Higher Chinese … [Read more...]
Who’s Looking Out for You?
Do you ever wonder why the guys on TV are selling you gold if it’s so valuable? Why don’t they just pocket it for themselves? Some pretty good money is being made in the transactions they’re promoting, don’t you think? With all that selling, there’s buying too. Like the bookie in Vegas, the gold guy is after the vig, or commission, from both sides of the transaction. He doesn’t really care if gold goes up or down. He just happens to be promoting the buy side on television. All the while, it’s quite possible he sees a line of sellers wrapped around the block outside his office. You don’t … [Read more...]
TIPS Yield: What You Should Know Today
With commodities prices surging and inflation pressures heating up in certain sectors of the economy, the financial press is loaded with articles offering advice on how to protect your portfolio from inflation. One of the more common recommendations is to buy Treasury inflation-protected securities (TIPS). This is a strategy we advise against. It isn’t that we are averse to TIPS. But the problem with buying TIPS today is that yields are far too low and durations on many TIPS and TIPS funds are too long. By example, the yield on the Vanguard Inflation-Protected Securities fund is only … [Read more...]
An 87% Win Rate
The bull market in stocks passed the two-year mark this week. From its low on March 9, 2009, the S&P 500 is up 100%—the fastest 100% gain since the 1930s. On a total-return basis, the S&P 500 is still 9% below its all-time high, but the index has just about recovered all of its losses since year-end 2007. How has your portfolio performed since year-end 2007? Are you back to even, or did the extreme volatility in stocks get the better of you? Having recently updated the performance data for Young Research’s Global Investment Strategy (GIS), I thought you may be interested to learn … [Read more...]
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