I have known Phil DeMuth for a number of years and I admire his common sense and views on many topics. Phil authored the recently-published book The Affluent Investor that fills a need in the crowded shelves of investment books. As a financial advisor to high-net-worth families, Phil brings valuable perspective to investors who have built substantial portfolios and seek to protect and grow their wealth effectively. Continue Reading »
Posted in Wealth, Mutual Funds, Investors, Income Investing, ETFs, Dividends, Financial Advisors, Asset Allocation, book review | Tagged phil demuth, The Affluent Investor, high-net-worth families, lifecycle investing, high beta rich, affluent investors, investment portfolios | Leave a Comment »
One of the most important economic trends to emerge in recent years is that gains in corporate profitability are not translating to wage increases or more hiring. The New York Times just published an article on this disconnect, but it’s nothing new. The basic story is simple. Even as corporate profits have increased at a healthy clip, there has not been a similar gain for workers in terms of new hiring or increased compensation for current employees. Continue Reading »
Posted in Uncategorized | Tagged corporate earnings, corporate profitability, disposable income, economic power, employers, globalization, hiring, household income, stagnant incomes | Leave a Comment »
Harvard Business School professor Michael Porter is a familiar name to almost anyone who has graduated from business school in the last twenty years or so. He recently gave an interview on CNBC in which he shares his analysis of the U.S. economy. Porter is best known for his work in competitive strategy, a field in which he is considered the preeminent expert, so his views of what ails the U.S. economy and how we can get back on track are of considerable interest. He has analyzed the forces that provide one country or region with relative competitive advantages vs. others and he applies this perspective in his commentary. Continue Reading »
Posted in Commodities, Real Estate, Wealth | Tagged economic growth, economy, energy independence, entitlement programs, falling incomes, Michael Porter, middle class, natural gas, public education, skill development, stagnant incomes, technology | 2 Comments »
I am now at an age at which many of my friends have kids preparing for, or going to, college. I have a few more years to figure out the details, but this is an issue that I have followed for a long time. My local in-state university, the University of Colorado at Boulder (CU), estimates the all-in cost of attendance at $26,000 per year. This varies a bit, based on which program you choose. Tuition, fees, and books cost about $14,000 per year (though this varies by program) and the estimated cost of room and board is about $12,000 per year. Continue Reading »
Posted in College Savings, debt, financial planning | Tagged college affordability, cost of college, economy, higher education, recent graduates, unemployment | 2 Comments »
The financial media loves a catch phrase and, with the apparent emotional hook of the ‘fiscal cliff’ diminished, we needed a new one. The current best candidate is the so-called ‘Great Rotation.’ The idea here is that investors, finally and completely fed up with the dismal returns from bonds, are going to move heavily back into equities. This is the ‘Great Rotation.’ When I Google the term, there are 820,000 search results. Not bad for a phrase that was invented in October 2012 (in a research note from Bank of America, apparently). Continue Reading »
Posted in Asset Allocation, Bonds, Stock Investing, Tid Bit | Tagged equities, fixed income, IPOs, re-allocate, stock rally, Tech bubble, The Great Rotation, trends | Leave a Comment »
Jason Zweig at the Wall Street Journal published a disturbing article that deserves more attention. The basic story is this. A number of banks sold a complex financial product to retail investors who have subsequently lost quite a bit of money. Here is the basic pitch that was apparently made to individual investors in 2012. You are going to buy an investment product that is currently invested in bonds and is producing 8% in income per year. The performance of this product is tied to the stock price of Apple, however. In exchange for the high income, you take on the risk of a decline in Apple’s stock price. These products were sold when Apple stock was soaring, so a fair number of people apparently saw this as a favorable bet. With the stock down more than 30% from its peak, many of these investors have lost a considerable amount of money. Read Zweig’s piece for more details. These products have a number of variations and he discusses one specific structure. Here is another. The title of Zweig’s article, How Apple Bit Bondholders, Too, gives the impression that bonds were responsible for these losses. This is not the case, but the title serves to illustrate the subtlety of the problem. Continue Reading »
Posted in Bonds, Investors, Risk, Scams, Volatility | Tagged Apple, Apple structured notes, CDs, derivative instrument, Jason Zweig, reverse convertible bond, structured products | Leave a Comment »
I have been struggling to understand a problem that I am going to refer to as the ‘yield paradox.’ Yields for individual asset classes look low. The 10-year Treasury bond is yielding about 1.9%, and 30-year Treasury bonds are yielding a similarly paltry 3%. The S&P 500 is yielding 2.1%, which is very low by comparison to historical levels. Investment-grade corporate bond indexes are yielding less than 4% (see LQD, for example, at 3.8%). Given that the official rate of inflation for 2012 was 1.7%, these yields mean that investors are getting very little yield net of inflation. The very low yields on bonds and on stock indexes is a direct result of the Fed’s actions in holding interest rates at historical lows via Quantitative Easing. We have not yet gotten to the paradox. Continue Reading »
Posted in Asset Allocation, Bonds, Dividends, Risk, Stock Investing | Tagged Corporate Bonds, junk bonds, Master Limited Partnerships, MLPs, Monte Carlo Simulation, mortgage reits, Municipal Bonds, Quantitative Easing, Treasury bonds, yield paradox | 2 Comments »
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