Young Research & Publishing Inc.

Investment Research Since 1978

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You’re right if you guessed that the largest stock fund is an exchange-traded fund (ETF), a fact I always find somewhat surprising when studying the list of the largest stock funds in The WSJ’s monthly fund report. The one at the top of the list is the SPDR S&P 500 ETF (SPY), with $91.11 billion in assets. When I first started working in this industry, back in 1995, Fidelity Magellan was the largest stock fund. It was an actively managed fund, so it was a big deal when it was surpassed by Vanguard’s Index 500, a passive index fund. With the index fund, investors knew what they owned, … [Read more...]

Productivity Growth

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Here is why the U.S. will lead the Euro Area in an economic recovery. Higher productivity growth in the U.S. will allow American firms to ramp up employment sooner than their European counterparts. … [Read more...]

Is this Round Two?

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February 5, 2010 Global equity markets have sold off sharply to start 2010. The risk trade that worked so well last year is getting creamed. A flight to quality is underway. Investors are concerned over the sustainability of mounting debt and deficits of weaker Euro member states. I am talking about Portugal, Ireland, Italy, Greece, and Spain here-better known as the PIIGS. Today, Greece is in the crosshairs of global bond market investors. Greece’s debt and deficits are unsustainable, but there is opposition to a plan to rein in debt. Investors smell blood and have bid up yields on Greek … [Read more...]

A Threat to Global Economic and Financial Stability

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January 29, 2010 There is an emerging real-estate bubble in China. Ultra-loose monetary policy in the U.S. and an over-the-top stimulus plan in China, coupled with a pegged yuan, have created optimal bubble conditions. BusinessWeek reports that in Beijing's Chaoyang district, a typical 1,000-square-foot apartment sells for 80X the income of the average resident. Sound troubling? The Chinese leadership is concerned. Monetary policy is being tightened, and the government is reimposing a tax on home sales. A hard landing for the Chinese real-estate market is a real risk to global economic and … [Read more...]

A Guide to 2010 Investment Returns

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In 2010, the monetary policies of the world's three largest central banks are likely to play a big role in the performance of global equity markets. The vast majority of the world's wealth—close to 80%, by some estimates—is concentrated in the U.S., Japan, and the euro area. My chart shows that the GDP-weighted risk-free rate in these three economies is only 0.14%. A 0.14% T-bill rate would not be a concern if the global economy were still in free fall, but it isn't. The global economy bottomed in the second quarter of 2009. The IMF projects that the global economy will grow by 4% in 2010. … [Read more...]

How to Boost the Yield on Your Portfolio

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January 22, 2010 Punishing yields of 0.05% on three-month T-bills and .85% on short-term Treasury notes are devastating to the millions of investors who rely on income from their portfolios to fund living expenses. The temptation for many of these investors is to reach for yield. Some investors are loading up on long bonds. You can pick up an additional 3% in yield by moving into long bonds, but you also add an extraordinary amount of risk. If rates move up, investors in long bonds will get creamed. I’m talking about losses that dwarf what many investors experienced in the recent bear market … [Read more...]

The World’s Most Profitable Trade

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January 15, 2010 In 2009, one investor earned more than the combined profits of Exxon Mobil, Microsoft, and Wal-Mart by employing a common Wall Street trading strategy-the carry trade. The carry trade is a strategy where an investor borrows money at a low rate and invests the proceeds at a higher rate. To make substantial profits from the carry trade, you have to use gobs of leverage. The investor I am talking about used leverage of more than 40 to 1-enough to make even Goldman Sachs blush. What investor in his right mind would use leverage of 40 to 1 so soon after the worst credit crisis in … [Read more...]

Pull Your Head Out of the Sand

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In a recent speech to the American Economic Association, Fed Chairman Bernanke offered his explanation of the causes of the housing bubble. Mr. Bernanke contends that easy money in the early years of this decade did not cause or even significantly contribute to the housing bubble. He also contends that the housing bubble was caused by a global savings glut and the growth in non-traditional mortgage products-option ARMs, Alt-A mortgages, and negative amortization loans. Mr. Bernanke ran through simulations and mortgage statistics, and he even broke out fancy equations. His explanation was very … [Read more...]

Harry Reid’s Resignation?

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January 8, 2010 While today it appears probable that Senate majority leader Harry Reid (D-NV) will be defeated in his 2010 bid for reelection, an increasing number of Americans must in fact want to see Senator Reid resign. The Senate health-care bill transfers massive regulatory power to the federal government, erects massive federal controls over private health insurance, dictates the content of insurance benefits packages, reduces many seniors’ access to Medicare benefits and services, provides federal funding for abortion, and increases the Medicare payroll tax for individuals making … [Read more...]