Nature's supply of the element thorium is virtually unlimited. This silvery-white metal is mildly radioactive and wouldn't do you much harm if you carried a piece around in your glove compartment. A recent well-done technical paper in Wired estimates that a liquid fluoride thorium (LFT) reactor uses only one ton of raw thorium per gigawatt output. For a uranium-fueled light water reactor, 250 tons of raw uranium are required. The annual fuel cost for a LFT 1-gigawatt reactor is estimated at $10,000 versus $50 million to $60 million for uranium. The proliferation potential for LFT reactor … [Read more...]
Mutual Fund Cash
Cash levels as a percentage of total assets in stock mutual funds is bordering on an all-time low. When was that low hit? It was July 2007 – three months prior to the last bull market high. The dry powder in stock mutual funds that helped fuel a 72% rise in the S&P 500 from the March 2009 lows is spent. Individual investors still have dry powder, but they’re flocking to bonds and hoarding cash. Two vicious bear markets in 10 years’ time will do that. Stocks could move higher if individuals move aggressively back into the market, but if you are forming a long-term investment plan on the … [Read more...]
Commodities Investment
Since 2005, investment in commodities futures funds has increased over 200% to an estimated $250 billion. Some of the biggest inflows to commodities futures funds have been from institutional investors—pensions, endowments, and foundations. Not by mistake, the institutional crowd moved into commodities futures just as a powerful bull market was getting under way. Institutional investors are just as susceptible to performance chasing as the average investor, but they would never admit it. The institutional crowd will instead tell you that they are investing in commodities futures funds for … [Read more...]
A Proposal 83% of Americans Support
March 11, 2010 Caroline Baum writes that 83% of Americans would support term limits in the House and Senate. Senator Jim DeMint of South Carolina has introduced a “Term Limits for All” constitutional amendment. His amendment would limit every House member to three terms and every senator to two.www.ustl.org. The reelection rate in the House is close to 95%, and in the Senate it is 88%. The advantage of incumbency and the rigging of congressional districts has created the “career politician.” Our Founding Fathers wouldn’t approve. Career congressmen and senators wield too much influence … [Read more...]
Truly Astonishing Debt Accumulation
Federal spending is at the highest level since WII. In five years, the national debt has soared to $11.9 trillion from $7.3 trillion, an increase that equals all the debt accumulated between President George Washington and President Clinton. … [Read more...]
Wall Street’s Dirty Secret
March 5, 2010 The New York Times ran a must-read article this week on the important differences between brokers and investment advisors. As I have written in the past, the difference between brokers, or self-labeled “financial advisors” who work for big brokerage houses, and registered investment advisors is stark. Brokers are held to a suitability standard whereas investment advisors are held to a fiduciary standard. The suitability standard is the great enabler of Wall Street. Securities distribution is the primary motivation of the brokerage industry. Brokers don’t get paid for … [Read more...]
The Recovery’s Winners
The Young Research Affluence Index has outperformed the Young Research Discount Goods Index by 100% since the economic recovery began. Our chart indicates that the economic recovery has still not reached low and middle income consumers. Quite shocking considering the populist majorities in both branches of government. … [Read more...]
A Must Own Asset Class
If the last decade has taught investors anything, it is that taking greater risk does not always result in greater return. An investor who put his entire portfolio in a basket of developed-world equity markets at year-end 1999 would have earned all of 2.34% over 10 years. And to earn that 2%, this investor would have endured two of the worst bear markets in history, with peak-to-trough declines of 45% and 53%. What's more, an investment in conservative full-faith-and-credit-pledge short-term U.S. Treasuries was up 55% over the last 10 years. The 2000s were without a doubt a dismal decade … [Read more...]
Avoid These Securities
February 26, 2010 One sector of the financial markets that is greatly underpricing risk today is municipal bonds. State and local governments are facing extraordinary budget pressure. The recession has eviscerated tax revenues, but spending requirements have not dropped. During the last fiscal year, some state and local governments relied on federal stimulus money to balance their budgets. But federal handouts cannot be relied upon indefinitely. The federal government has funding problems of its own. And tax increases aren’t always an option. To deal with extraordinary budget pressure, … [Read more...]
The Real POP in Investment Returns
Putnam Investments’ full-page colored advertisement in this week’s WSJ was hard to miss—the Putnam marketing team made sure of that. In the ad, they tout their suite of Absolute Return Funds, which seek to do well in any type of market environment, up or down. As is often the case, and certainly is here, if it sounds too good to be true, it is. The funds have outperformed their laughable benchmarks, but have failed every one of mine. It used to be a well-known fact at Proctor & Gamble that the smart people worked in engineering and the really smart ones worked in marketing. I’ve been … [Read more...]
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