Young Research & Publishing Inc.

Investment Research Since 1978

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Blowing Asset Bubbles

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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...]

Class A American Fund Nightmare

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My mother is always finding things because she pays attention. And she's passing that skill along to my kids. After a recent walk, they came back cheering about finding $2. It may as well have been $2,000. You too may be a person who knows how it pays to pay attention, and if so, you've probably taught that lesson to someone you love. Here's another lesson for you to teach, from a box titled "How the Largest Mutual Funds Did" in The WSJ's "Money and Investing" section. The box illustrates how most investors are sold what they own, how little attention they pay to fees, and how a ratings … [Read more...]

Top 10 Mistakes #2

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October 30, 2009 The #2 item on my list of the ten most common mistakes investors make is discounting the importance of compound interest. Albert Einstein described compound interest as the greatest mathematical discovery of all time. Charlie Munger, Warren Buffett’s longtime partner, said: “Understanding the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things.” My son, Matthew Young, puts it this way: “Compound interest is your silent warrior for long-term investing.” The key to compound interest is not interest, but interest on … [Read more...]

Top 10 Mistakes #3

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October 23, 2009 Number three on my list of the top 10 mistakes that investors make is performance chasing. The quickest way to make a million investing in mutual funds is to invest two million in yesterday’s winners. No matter how often investors are warned not to select funds on the basis of past performance, they do just that-often with devastating consequences. The problem here is that success attracts inflows, which tends to limit both the agility and opportunity set of portfolio managers. When assets under management become bloated, portfolio managers often do one of two things: they … [Read more...]

Learn an Investment Lesson from an Ivy League’s Mistakes

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Your debt load in retirement will determine who's in control, you or someone else. My father taught us that lesson. I remember when he brought my sister and me as kids to the bank to set up a savings account. The teller politely counted our money and printed the sum on the first page of the passbook. It wasn't much, of course, but it was a beginning, and that was what was important to my dad. Through the years, we continued to save, and over time the numbers began to add up. This was in the late '70s, so interest rates were much higher than they are today. By adding up all the interest lines, … [Read more...]

Top 10 Mistakes #4

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October 16, 2009 Mistake #4 on my list of the top 10 mistakes investors make is ignoring cost. Cost is a vital determinant of investment performance. Reams of academic and professional research show that no-load funds with  low expense ratios and no 12b-1 fees consistently outperform their high-cost cousins. There is absolutely no good reason to invest in any fund with a sales load or a 12b-1 marketing scab. These fees are simply kickbacks that fund companies pay brokers for hawking their funds. See the conflict here? Brokers aren’t interested in finding the best funds for you; they’re … [Read more...]

The Bull Market in Corporate Bonds

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According to Bloomberg, YTD net inflows into mutual funds that focus on corporates, bank loans, and munis are $295 billion, compared to net outflows of $31 billion in equity funds. The flood of money moving into the corporate bond market has driven down yields and compressed credit spreads in some sectors to levels last seen in 2007. For investors who initiated positions in corporates early this year, the rally has been breathtaking. Short-term investment-grade bonds are up double digits in an environment where short-term Treasuries yield less than 1%. For savers, retired investors, and those … [Read more...]

Top 10 Mistakes #5

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October 9, 2009 Entry #5 on my list of the 10 biggest mistakes that investors make is focusing on potential return before risk. I have been in the investment business for over four decades and I can tell you that the most successful investors are those who evaluate risk ahead of return. The first question I ask before I make any investment is how much can I lose? I advise the same strategy for you. Those investors putting prospective returns ahead of risk most often make emotionally charged decisions that lead to investment ruin. Make risk your primary focus. Only then should you consider … [Read more...]

Only One Way to Go

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October 2, 2009 The investment environment looks (a) great or (b) grim? Here is my answer. The yield on fed funds is basically zero. Money market yields are averaging 1%. A five-year CD will get you only 2.7%. The yield on the blue-chip Dow Industrials is a dangerously low 2.9%, and the yield on the NASDAQ is a miniscule 0.6%. See anything that appeals to you here? I sure don’t. When yields are historically low, they have only one way to go-and that, of course, is up. And when the yield on any investment rises, unless there has been a dollar change in the payout, the price of the asset will … [Read more...]

Empty Storefronts

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September 25, 2009 Anecdotal evidence offers serious reason for concern about the economy! I just returned from a 2,000-mile Harley trip from Newport, RI, to Blowing Rock, NC, and back. Do you know what struck me the most, aside from the beauty of our country? Empty store fronts from one town to the next. We spend little time on the interstates. Most of our riding is through small towns of 25,000 people or fewer. We noticed the problem in Carlisle, PA, a beautiful little college town that I have ridden through a dozen times or more. I was also shocked by the empty store fronts in Newport’s … [Read more...]