Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

Sage Advice

By

I recently came across an article by Arthur Zeikel in the March/April 1995 edition of the Financial Analysts Journal (FAJ). Zeikel was the head of Merrill Lynch Asset Management at the time. The article was written in the format of a letter to his daughter. The title is “Managing Your Own Portfolio.”  I’ve included a few excerpts from the letter below. In the current environment with risk-free interest rates near zero and the stock market performing like it’s a riskless bet, the pressure to make emotionally charged investment decisions is immense. You start thinking you don’t want to miss … [Read more...]

This Stock Is Dead on Arrival

By

You would be smart to avoid getting involved in the walking zombie that is HCA, Inc., if and when there’s an initial public offering (IPO). You may recall that back in 2006, Merrill Lynch, Kohlberg Kravis Roberts & Co., and Bain Capital Partners brought the enormous hospital chain private in a $33-billion leveraged buyout (LBO). It was a trophy deal at a time when the smoke of “greed is good” still permeated big Wall Street boardrooms. But this transaction symbolized the last puff, so to speak, before the LBO business and all of finance turned to ashes. The air has cleared, and Merrill … [Read more...]

The Day One Rally

By

Did you notice that stocks rallied strongly yesterday? The S&P 500 was up 1.67%. Do you know why the market was up? It may have been the strong manufacturing data reported by the Institute of Supply Management (ISM). The ISM numbers beat expectations. But stocks may have risen for another reason. Yesterday was the first trading day of the month. Since August 1 of last year, the first trading day of the month has accounted for a disproportionate share of stock-market gains. In the 128 trading days between July 31, 2010, and February 1, 2011, the S&P 500 gained 206 points. Of those … [Read more...]

A Low-Risk Inflation Hedge

By

The conventional wisdom is that bonds are a terrible investment when inflation accelerates. The theory is that rising inflation causes interest rates to rise and bond prices to plummet. The financial media has been pounding the table on this thesis for months. Check out “Stop Gobbling Up Bonds—They’re Risky!” in Fortune’s Investor’s Guide 2011. If inflation is your concern, the pundits will advise you to dump your bonds.  They advise you to load up instead on stocks, gold, and other hard assets. Gold and hard assets are certainly an inflation hedge. All investors should own at least some … [Read more...]

Global Inflation Heating Up

By

Inflation is heating around the globe. China is tightening policy to combat inflation, Brazil is raising rates, the U.K. is talking tough on inflation and despite the euro-area’s government debt problems, so is the European Central Bank. It seems the U.S. is the only country ignoring the rising risks of inflation. … [Read more...]

A Caution Signal

By

Young Research’s Moving the Goods Index is looking toppy relative to the S&P 500. Our Moving the Goods Index is a market-cap weighted index of non-airline transportation companies. The relative performance of transportation stocks can signal economic strength or weakness. The recent stalling in the relative performance of the Moving the Goods Index warrants close attention. A break below the trend-line in my chart may signal that economic momentum is slowing. An unexpected slowdown in growth won’t sit well with stock market bulls. … [Read more...]

Debunking the China Story

By

Invest in China, you are told. China’s economy is booming. GDP growth is among the fastest in the world. Since China is growing faster than the rest of the world, it must follow that Chinese stocks are a good buy. That’s the pitch the pundits and promoters continue to make, but is it true?  Just this week China reported GDP numbers for 2010. Yes, somehow China, a country with a per capita income that is a fraction of U.S. per capita income manages to report GDP figures before us. Makes one wonder, but that’s a topic for another day. China’s real GDP growth came in at 10.3%—exceeding … [Read more...]

Your Dollar’s Silent Decline

By

According to AAA, the average price per gallon of regular gasoline is $3.12, up 14% from a year ago. But another way of viewing the price change is as a decrease in the value of your dollar. And a weaker dollar eventually leads to a lower standard of living, since your quantity of dollars isn’t limitless. When government controls the money supply, its quantity of dollars is limitless. And the government’s ability to print more dollars may be the force most destructive to your personal wealth—and even to your well-being in your lifetime. In When Money Dies: The Nightmare of the Weimar … [Read more...]

Know Your Limits

By

Charles Plosser, the President of the Philadelphia Federal Reserve Bank gave a speech in Chile over the weekend titled The Scope and Responsibilities of Monetary Policy. Mr. Plosser is one of the few Federal Reserve Board members that seems to understand or at least acknowledge that monetary policy has limits. Below are some highlights from the Speech. The emphasis is mine. You can read the entire speech here.  …I would like to begin with a quote that some of you may recognize.  “...we are in danger of assigning to monetary policy a larger role than it can perform, in danger of asking it to … [Read more...]