Young Research & Publishing Inc.

Investment Research Since 1978

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The Energy Evolution

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The "Estimated Energy Costs per Million BTUs" chart from Young Research & Publishing gives you a quick comparison of oil, natural gas, coal, and uranium. As you can see, natural gas offers good value compared to oil. Over time good ideas will find their way in the marketplace at the right price and tend to evolve over time rather than an overnight revolution. Cheap natural gas will find a home. Kinder Morgan is expanding its pipelines into Mexico. Don't speculate on short-term natural gas prices but do understand the unique long-term value it offers today to companies that move it. … [Read more...]

Fed President Proves Common Sense Innate

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Trying to prove that common sense and good judgment must be innate, Narayana Kocherlakota, the President of the Federal Reserve Bank of Minneapolis and graduate of the venerable Princeton University at the age of 19 is out with a speech on monetary policy that makes Argentina’s central bank sound credible. For those of you who don’t follow this stuff regularly (something you can give thanks for on Turkey Day), Kocherlakota is the Fed president who 12 months ago flip-flopped from hawk to uber-dove. In a speech yesterday, displaying more than a touch of hubris, Kocherlakota, likens today’s … [Read more...]

Household Balance Sheets Send Ominous Signal

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The Federal Reserve released its quarterly flow of funds data yesterday. One of the key items in the Fed’s quarterly report is the net worth of households.  The good news from the report is that household net worth increased in the second quarter. The bad news is that growth in household net worth once again outpaced growth in disposable income. Since the value of an asset is determined by the income that asset can be expected to generate, there should be some relationship between household net worth (assets minus liabilities) and income. That is to say that asset prices should be bounded by … [Read more...]

Bernanke’s Jobs Farce

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Matthew Klein at Bloomberg is out with an insightful piece on the folly of the Bernanke Fed’s obsession with “the data.” As we’ve pointed out regularly on this site and in our monthly strategy reports, the Fed is implementing emergency monetary policy using signals from economic data that is 1.) a poor predictor of future economic growth and 2.) regularly revised. Klein summaries a new paper that lays out in detail large distortions in the monthly jobs data. This is silly, but it wouldn't matter except for two recent developments. First, the Fed has become hypersensitive to monthly jobs data. … [Read more...]

Should the Market Believe the Fed?

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After this week’s about face from the Federal Reserve, market participants couldn't be blamed for not wanting to rely too heavily on smoke signals from the Fed. After signaling that the central bank would taper its purchases of bonds for months, Ben Bernanke and friends have come out saying they’ll hold off. Caroline Baum at Bloomberg quotes UBS economists calling Bernanke & Co., “The Fed Who Cried Wolf.” "The Fed Who Cried Wolf" was the title of a commentary by UBS economists (in a research paper to clients, so no link). "The Federal Reserve passed on an unusual opportunity: to begin the … [Read more...]

7 Fed Meeting Takeaways for Investors

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Below are some thoughts on the implications of the Fed’s dovish surprise at yesterday’s FOMC meeting. The actual economic impact of the Fed’s decision not to taper its money printing campaign isn't all that significant. What is significant and more meaningful is the signal the Fed sent, and the implications that signal may have for future policy and investment strategy. 1.)    The probability of a late-1990s style stock market bubble-and-bust just increased measurably. The U.S. stock market is already at one of its most richly valued levels in history. The Fed’s dovish posture at the latest … [Read more...]

Janet Yellen: Investing in the Dark

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My thoughts on Janet Yellen from May of this year. You can be sure there’ll be a price to pay for Federal Reserve Chairman Ben Bernanke’s easy-money policies. Retirees are already feeling the hurt with his 0% interest rates. There was a time, not too long ago, when savers and retirees could depend on Treasury bonds. Not anymore. Not only is the Fed keeping rates on Treasuries near zero, it’s also creating a false sense of demand with the $1.8 trillion it’s hoarding on its books. Simply put, the higher the demand for Treasuries, the higher the price, which for bonds means the lower the … [Read more...]

How Vanguard Wellesley Won the War

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You want to keep this chart on your refrigerator because there's been a lot of talk in the press lately about 2008. Looking back five years later is always easier than living through it. What the press fails to explain is the emotional and financial toll 2008 leveled on so many retirees. There's a breaking point for every investor. For those (there's more than you think) that had too much in the stock market that point was clearly met five years ago this month. Too many sold at or near the bottom and have never fully recovered. I have a feeling those that got out are now back at it again, … [Read more...]

Janet Yellen: How Well Do You Know Her?

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With Larry Summers’ withdrawal from consideration for Fed chairman, Janet Yellen could wind up leading the board. How well do you know Janet Yellen? Here are some quotes that will give you an idea of her take on monetary policy. The first is from the John Hussman in his Weekly Market Comment, and the second is from Young Research at Global Investment Strategy. Hussman on Janet Yellen: We now face the prospect of Janet Yellen, who in October 2005, at the height of the housing bubble, delivered a speech effectively proposing that monetary policy could mitigate any negative economic … [Read more...]

Utilities Investing: A Compelling Long-Term Opportunity

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In our view, investing in utilities offers a compelling opportunity to long-term investors. Utilities are regulated monopolies that sell some of modern life’s most basic necessities—electricity and water. Utilities’ monopoly status gives them the opportunity to earn guaranteed returns that are set by local regulators. As a result, utilities are one of the most stable and enduring businesses in America. And they offer some of the market’s highest dividend yields to boot. Interesting Facts For Utilities Investing In 2011 there were 144.5 million electrical customers in the United States. — … [Read more...]