June 2018 Client Letter

In my January letter, I commented on how it would not be a surprise to see the Federal Reserve raise the Federal Funds rate four times in 2018. When the year started, the Fed indicated it would look to target a total of three hikes this year. In mid-June, as expected, the Fed raised rates for a second time in 2018, bringing the Fed Funds target rate up to 2%. The two additional rate hikes should come in September and December.

How many more times will the Fed raise interest rates before stopping? Many variables go into the Fed’s interest rate decisions; but, historically, short-term interest rates have been as much as 1.5 percentage points higher than the rate of inflation. With today’s Fed Funds rate at 2% and consumer prices rising annually at about 2.2% (as measured by core CPI), the Fed still has significant room to raise rates without overdoing it, even assuming moderate economic growth.

Read More

May 2018 Client Letter

The unemployment rate matched an almost five-decade low of 3.8% in May. The only other time in the last 48 years unemployment has been this low was at the height of the dotcom bubble. We are experiencing a best-of-the-best labor market. Economic growth remains strong as well. According to the Federal Reserve Bank of Atlanta, GDP is forecasted to rise more than 4% in the second quarter. Industrial production is again humming, and corporate earnings are booming. Bloomberg data shows that, with 97% of S&P 500 companies reporting, earnings are up over 23% from the first quarter of last year.

Read More

April 2018 Client Letter

Recently, I spoke to a long-time client who has been with Richard C. Young & Co., Ltd. since August 1995. When we have telephone conversations to review his portfolio, there is often no need for me to schedule the appointment on my calendar. That’s because for the past 12 years we’ve spoken on a Friday at 10:30 a.m. Naples, Florida, time and 7:30 a.m. Orange County, California, time. While our phone appointments are both predictable and consistent, the markets have been anything but.

Read More

March 2018 Client Letter

Did exchange-traded funds (ETFs) cause the February stock market correction? “Nonsense,” is the response of many experts to that question. ETFs, provide access to baskets of securities that mirror indexes and can be bought and sold throughout the day, just like stocks. “ETFs are the future of investing. Just ask anyone!”

Read More

February 2018 Client Letter

It’s wise to remember that investing in the stock market is not a strategy guaranteed to make you wealthy. In fact, the stock market at times can decrease your wealth. Twice over the last 19 years, once between 2000 and 2002 and again from 2007 to 2009, the stock market declined by more than 50%.

Read More

January 2018 Client Letter

History has a way of repeating itself. In early 1995 my dad wrote about a math professor named Tom Nicely, who worked at Lynchburg College. Nicely was examining prime numbers using a group of five personal computers. While four of the computers gave Nicely the correct answer to a problem, 1.2126596294086, the fifth turned up a slightly different answer, 1.212659624891157804.

Read More

December 2017 Client Letter

One of 2017’s surprising outcomes was the lack of stock market volatility. We are in the midst of the second-longest bull market on record and we haven’t seen as much as a 3% correction in the S&P 500 in over a year. That’s a record.

Read More

November 2017 Client Letter

From September 1985 through September 2017, my dad spent each and every month diligently researching, preparing, and writing his monthly investment newsletter, The Intelligence Report (IR).

Readers of IR are aware of the high regard my dad has for Ben Graham, the father of value investing and one of the most successful investors of all time. My dad believes Graham authored the only investment book most investors will ever need. “If you have read The Intelligent Investor cover to cover, you are head and shoulders above the vast majority of the investing public. To this day, the amount of investing insight and wisdom packed into this single volume remains unmatched.” Some of Graham’s most valuable advice was to the defensive investor. For example, Graham wrote, “One of the most persuasive tests of high quality is an uninterrupted record of dividend payments for the last 20 years or more. Indeed, the defensive investor might be justified in limiting his purchases to those meeting this test.”

Read More

September 2017 Client Letter

It’s unsettling when The Weather Channel and CNN camp out in your town to cover an incoming hurricane described as the biggest storm ever recorded in the Atlantic. Hurricane Irma was massive, with winds of at least tropical storm force covering 70,000 square miles—larger than Florida’s entire land area. Just several days prior to landing in Naples, it appeared Irma would track the east coast of Florida, more towards Miami, leaving our hometown in a much more desirable position.

Read More