Young Research & Publishing Inc.

Investment Research Since 1978

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A New All-Time High

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A $1 trillion dollar bailout of overly indebted euro-area governments has helped push gold to a new all-time high. The bailout in Europe greatly diminishes the credibility of the European Central Bank and the euro. Investors are rightfully fed up with paper money. The only credible alternative to paper money is of course gold. How much gold do you own? … [Read more...]

A Wake-up Call for Investors

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The Dow Jones Industrial Average fell more than 5% this week. Up until this past week, U.S. stocks marched higher despite the increasing risks of a government debt crisis in Europe. This week’s sell-off indicates investors may finally be waking up to the significant headwinds the global economy still faces. If the debt crisis in Greece spreads to other Euro-zone countries, it would wreak havoc on the Euro-zone economy and neighboring countries as well. The global economy would also be impacted. The Euro-zone economy is almost the same size as the U.S. economy. If Europe dips back into a … [Read more...]

A Ticking Bomb

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On Monday morning while driving to Boston for a meeting, I was listening to the news while waiting for the start of the award-winning Helen Glover Show. Helen came on at 7:00 a.m. sharp, and even though she greeted listeners with the same energy as always, you could immediately sense that something was different this morning. Her opening emotions made listeners sit up and pay attention to what had happened to her over the weekend, which she spent in New York City at the Marriott in Times Square, right across the street from the failed Faisal Shahzad van bomb. We learned how, just like that, a … [Read more...]

Are Small Stocks Safer Than Large Stocks?

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A recent study in Financial Analysts Journal (FAJ) found that a portfolio of small-capitalization stocks is no more risky than a portfolio of large-capitalization stocks. And if the number of stocks in a small-cap portfolio exceeds 25 or so, that portfolio may be less risky than a large-cap portfolio. The authors compare volatility in two time periods, 1963 to 1984 and 1985 to 2008. In the earlier period, a portfolio of small-cap stocks was found to be significantly more volatile than the market, even for a portfolio of 50 equally weighted names, but in the more recent period, once a small-cap … [Read more...]

If Greece Fails, is Portugal Next?

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Greek government bond yields have surged to over 16% in recent days. If Germany doesn’t step into to save the Greeks, a default is not out of the question. But the larger problems for Europe are the risk of contagion. Bond yields on other overly indebted euro-area countries are now surging. Portugal is the market’s next target. Yields on short government debt have surged 230 basis points in a matter of weeks. … [Read more...]

Beat the S&P 500 by 2 to 1

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My chart shows the long-term performance of $1 invested in the consumer non-durables sector in June of 1926 to $1 invested in the S&P 500 at the same time. The consumer non-durables industry includes companies that make and sell everyday items. Demand for non-durables, or what are more commonly referred to as consumer staples, is not heavily influenced by the business cycle. You don’t stop eating or brushing your teeth just because the economy is in recession. The consistency and stability of consumer staples companies definitely appeals to investors in or nearing retirement, but all … [Read more...]

The #1 Investment Book

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You may be surprised to hear that Moneyball by Michael Lewis is my #1 investment book, given that it’s about baseball, not Wall Street or the stock market. Moneyball is a story about how one of the poorest teams in baseball, the Oakland A’s, and their GM, Billy Beane, built a roster chock full of talent and won 103 games. Beane did it by discovering hidden value through faith in his convictions and obscure stats, like a hitter’s pitches per plate appearance—helpful in tiring out a pitcher and getting on base. He drafted baseball players who were overlooked by other GMs blinded by their … [Read more...]

Emerging Market Stocks Up Over 110%

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Emerging market stocks are up over 110% since hitting lows in March of last year. Net flows into foreign stock funds, much of it into emerging market funds, have been positive for 11 months in a row while U.S. stock funds have seen outflows in six of the last seven months. Those investors liquidating U.S. stocks and piling into emerging market stocks could be disappointed over coming quarters. Our relative strength chart shows that emerging market stocks have a very toppy look vs. U.S. stocks. Individual country and issue selection in emerging markets is now more important than ever. … [Read more...]

Stay Defensive

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Confidence in the economic recovery is improving, and retail investors are moving back into equities. Here are four reasons to remain defensive in the face of this renewed optimism: Stocks are now discounting a sustained and robust economic recovery. A second contraction in economic output is no longer priced into the market. If the economy contracts or comes up short of expectations, stocks could be in for a significant correction. Taxes on income, capital, and possibly even consumption are going up. Higher taxes resulting from Obama’s health-care boondoggle are only the tip of the … [Read more...]