Did you know the 5 biggest stocks in the S&P 500 accounting for 22% of the index offer investors an average dividend yield of 0.44%? Only two of the five even pay a dividend. S&P puts them in different buckets, but all five are technology businesses. To meet the SEC’s diversification definition, a fund cannot hold more than 5% of its assets in any one issuer. The two largest stocks in the S&P 500 now account for more than 5% of the index. The index doesn’t even qualify as a diversified fund according to the SEC’s definition. Does that sound like a benchmark anybody in or … [Read more...]
Will Investor Bailouts Lead to Higher Taxes?
The Fed has gotten praise from both sides of the aisle for acting quickly and boldly in recent weeks. Who doesn’t like a bailout when it stops their portfolio value from cascading? Well…cascading if you consider a rise in investment-grade corporate bond yields from 2% to 4.5% during what is likely the greatest and most abrupt halting of economic activity in modern history. For some perspective, we’ve included the chart on the Bloomberg Barclay’s Investment Grade Corporate bond index below. During the pandemic, yields rose a little higher than their year-end 2018 level and they were half of … [Read more...]
Governors Gone Wild Protect the Rich
Coronavirus Infects Stock Market: Part XXXIX You’re seeing up close how blue state governors love states’ rights only when they’re in charge and what a mess it creates when different rules apply across state lines. Take a look at Rhode Island and Massachusetts, for example. Rhode Island has shelter in place until next Monday, May 9, while in Massachusetts the end date is May 18. Yet, Rhode Island is more strict, prohibiting groups larger than five while Massachusetts allows ten. My parents and my sister’s family live in Massachusetts. When we gather, we make a group of ten. That’s … [Read more...]
The View from a Bear
Has the market bottomed, or will we retest the lows? As much as most of us want to believe there is an expert with the answer, the truth is nobody knows for certain whether we are going to retest the lows or sail to new highs. Savvy investors recognize good investing isn’t about picking the right outcome. Good investing is assessing the probability of a range of outcomes and factoring in an adequate margin of safety for the times you are wrong. Gary Shilling offers a pretty negative scenario below. Even if you don’t agree with Shilling’s views, the probability of that scenario isn’t … [Read more...]
New Investors Treating the Stock Market Like a Casino
This is a troubling trend. Many of you have been around the block and have seen the mistakes day traders and speculators made during the dotcom bubble. Based on Bloomberg’s reporting, it sounds like a new crop of investors is likely to learn that when you treat the stock market like a casino, the house usually wins. Sarah Ponczek writes: Back on March 23, it seemed like stocks would never stop falling. Congress was struggling to pass stimulus, coronavirus cases were climbing, futures were pinned to their bottommost tick and $10 trillion in value had vanished. Meanwhile in Northern … [Read more...]
Cure is Worse than Disease as Government Loses It’s Way Back Home
Coronavirus Infects Stock Market: Part XXXV You feel it in your gut: The cure is worse than the disease. The numbers don’t support a stay-at-home, out-of-work policy for an entire country, never mind most of the world. Turns out Sweden was right from the beginning as was President Trump, who explained that America is not meant to be closed for business. Business, not the government, is our country’s lifeblood. Don’t tell that to the blue states though, as they demand bailout checks for pensions—math that even a first-grader knows doesn’t work. Remember the Golden Rule muni bondholders: He … [Read more...]
The Unintended Consequences of Governors Gone Wild
Coronavirus Infects Stock Market: Part XXXIII As some states inch their way back to a soft-open, there will be plenty of losers, many of whom have done nothing wrong and who are healthy. Think about Rhode Island Gov. Gina Raimondo’s comments yesterday telling businesses they’ll have to allow employees 60 and older to work from home, or offer more paid sick leave. At the outset, most businesses will comply, but what if this type of thinking becomes law? Why would businesses pay more to hire older workers or keep them on staff? Do these governors ever think about small business owners and … [Read more...]
Your Poor Man’s Coronavirus Defense
Coronavirus Infects Stock Market: Part XXXII Do you have a vitamin routine? There’s a bottle of Dr. Joseph Mercola’s liposomal C sitting on my desk. A doctor client of mine swears by his C, not quite Linus Pauling levels, but a significant dosage nonetheless. Dr. Mercola writes about zinc as a “Poor Man’s Coronavirus Defense,” and refers to the yeoman’s work of investigative reporter Bill Sardi. (Mercola had me hooked at Poor Man’s). In closing, Sardi proposes imitating Zelenko’s COVID-19 protocol using natural remedies if you have symptoms of SARS-CoV-2 infection and cannot obtain a … [Read more...]
After the Coronavirus: Successful Investing and Good Health
Coronavirus Infects Stock Market: Part XXXI Let’s get this out of the way: There is no magic bullet to successful investing or to good health. Both are a culmination of decisions leaving you with a body (of work) to show for it. Is there any doubt those most susceptible to COVID-19 have a weakened immune system? Is there any doubt those most susceptible to investing mistakes take risks? What’s scary is, both groups oftentimes don’t even realize their precarious state. They don’t see the risks staring back at them in the mirror. They believe, for example that passive index funds … [Read more...]
Investing After the Coronavirus
Coronavirus Infects Stock Market: Part XXIX Imagine falling 200 feet while descending Mount Washington, slamming into a pile of rocks that prevents you from going over the edge—and needing a rescue. That’s the scary scenario one hiker found herself in recently. “It was these rocks that ultimately saved her from plunging into the ravine, a fall that would have likely proved fatal,” said Fish and Game Lt. Mark Ober Jr. in a statement. “Her companion was able to descend to her position, place a call for help and keep her warm with a space blanket until rescuers arrived.” The hikers were … [Read more...]
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