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Investment Research Since 1978

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Prepare Your Portfolio For More Money Printing

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That didn’t last long. The post-meeting euphoria from the 20th summit to once and for all put an end to the euro-area debt crisis has officially ended. Spanish 10-year bond yields are back above pre-summit levels and at one point today they crossed 7%. Yields on Italian bonds have also risen in recent days, but not to the extent of Spanish bonds. It seems investors are losing patience with euro-area policymakers. Following each meeting, policymakers have announced plans to make a plan to announce a lasting solution to the debt crisis. Yet, after 20 iterations, the euro-area debt crisis rolls … [Read more...]

How to Get Rich

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I suspect that not many investors would own variable annuities if they knew more about them. But learning the ins and outs of variable annuities is like watching sausage being made. Don’t bother. You don’t want to get sick. Believe me when I tell you there are much more suitable investments for you to own. Yes, I know the arguments that are made for owning variable annuities in substantial portfolios, but come on, they’re like numbers 98 and 99 on a list of 100 things to do first with your money. A variable annuity is a salesman’s dream. The commission is hefty, and the sales pitch of … [Read more...]

Northern Lights: Investing in the Nordics

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Citizens in the four largest Nordic countries enjoy peaceful, happy lives. The U.N.'s World Happiness Report ranks Denmark as the happiest nation in the world, followed by Finland and Norway. Sweden comes in close behind at seventh happiest. The Nordics have a strong rule of law. All four are among the six least corrupt countries, according to Transparency International. IMD ranks the four major Nordic economies among the world's 20 most competitive. The World Economic Forum's Global Competitiveness Index also ranks them in its top 20, with Sweden and Finland ranking third and fourth, … [Read more...]

Housing Market: Looking for a Direction

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Housing market data released this week revealed a mixed bag. Home prices measured by FHFA were up 0.8% compared to the month before and the number of permits to build new homes increased more than expected. Meanwhile the number of housing starts was lower than expected. The volatile MBA Composite Applications index fell slightly, pulled in either direction by higher numbers of refinancing applications and lower numbers of applications for new home purchases. Monday’s survey of homebuilders recorded a slight improvement in their sentiment. The housing market appears to be stuck in neutral. … [Read more...]

Stand Down Dr. Bernanke

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Yesterday, as was widely expected (yet somehow still disappointing to Wall Street) Dr. Bernanke unveiled the Fed’s latest installment of market manipulation. The Fed announced plans to expand Operation Twist by $267 billion over six months. Apparently, record low interest rates for corporate, mortgage, treasury, and almost any other debt you can think of simply aren’t low enough to promote recovery. Since the crisis began, the Fed has held interest rates at zero, engaged in not one, but two rounds of money printing, promised to keep rates at zero through 2014, extended the maturity of its … [Read more...]

Housing Market Shows Slight Improvement

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The Housing Market Index (HMI) survey of homebuilders conducted by NAHB indicated a slight improvement in homebuilder sentiment in June compared to May. The index continues to rebound from historic lows recorded through much of the last six years. NAHB Chief Economist David Crowe said “While the June HMI is in keeping with our forecast for gradually improving single-family home sales this year, recent economic reports that have shown some weakening in the pace of recovery likely factored into the marginal gain. In addition, builders across the country continue to report that overly tight … [Read more...]

Taxpayers on the Hook for Risky Student Loan Bet

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In early 2010 at the urging of the Obama administration, Congress forced the private sector out of the student loan business. Two-and-a-half years later the Department of Education owns the majority of the student loan market, and America’s taxpayers own the accompanying risk. Josh Mitchell writes in the Wall Street Journal: The federal government now provides the bulk of student loans. Federal loans accounted for more than 90% of all student borrowing in the 2010-2011 academic year, according to the College Board. Nonfederal loans—including those issued by states, banks and credit … [Read more...]

Euro-area Black Magic

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From the lead article in this morning’s Wall Street Journal: “With foreign investors almost completely absent from Spanish bond markets for months, Spanish banks have propped up the government, which is now forced to turn to Europe for help propping up the weaker banks. Meanwhile, the stronger banks are shying away from buying government bonds—for fear they would be dragged down, too.” Just so this is clear, the Spanish government whose only source of funding is Spanish banks, just bailed out those same banks by taking on an additional $125 billion in debt. Problem solved? Global equity … [Read more...]

Recession Pending? This Indicator Says Yes

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One economic indicator we’ve been watching at Young Research is the Ceridian-UCLA Pulse of Commerce Index. The Index is a leading indicator compiled using real-time data measuring the quantity of fuel being purchased for over the road trucking around the country. The more the economy accelerates, the more goods will need to be moved from production facilities and warehouses to retail outlets and final consumers. Measuring truck fuel consumption can provide analysts with a sneak-peak at demand trends throughout the economy. So what is the index saying? You can see on our first chart that the … [Read more...]

#1a and #1b Investment Firms

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Who wants to partner with Wall Street banks? You have JP Morgan tangled up with a recent trading loss of $2 billion and counting. Then there’s Morgan Stanley and the disastrous Facebook IPO. And not to be outdone was the 2008 bailout of Wall Street banks with taxpayer (your) money. What you’re seeing now is a market that never found a true bottom back in 2008. For my money, Fidelity and Vanguard are at the top of the hill of investment firms, with all the others a distant—and I mean real distant—second, third, etc. When it comes to choosing a custodian for your money, there should be no … [Read more...]