I was recently asked some questions about Vanguard’s Wellesley Income Fund by a business associate. Below is a short summary of the questions and my answers. 

The first question was, “Who manages Wellesley Income Fund?”

The answer is Wellington Management Company, which I have had dealings with from my earliest days in the industry at Model Roland & Co. on Federal St. in Boston, where I began work in August of 1971. Wellington was founded in 1928 in Boston, and is one of America’s oldest institutional money managers. The two Wellington managers currently tasked with managing the Wellesley Income Fund are Loren L. Moran, who has been with the fund for six years, and Matthew C. Hand, who has worked on Wellesley for two years. 

The second question about the Wellesley Fund was about how the fund is organized and diversified.

The fund is organized into bond and stock components, with 60%-65% of the fund allocated to bonds, and 35%-40% allocated to stocks. Wellington invests the bond component in “short-, intermediate, and long-term investment-grade corporate bonds, while seeking to maintain an aggregate intermediate duration.” The stock component is invested in “large-company value stocks with above-average dividends and potential for income growth.” The portfolio usually holds fewer than 100 stocks.

The final question from my associate was about Morningstar’s rating for the Wellesley Income Fund.

Morningstar has assigned a rating of five stars to the Vanguard Wellesley Income Fund. That’s the highest rating Morningstar assigns to mutual funds. 

At the Cato Institute, Norbert Michel and Nicholas Anthony explain that a “CBDC (central bank digital currency) is not ‘just another form of money,’ as some of its supporters have claimed.” No other form of money gives governments the ability to control what you spend your money on, how much you spend, or even to take money back out of your account at a moment’s notice. Michel and Anthony slam the recent defense of CBDCs by Paul Krugman. They write:

This April Forbes column describes why central bank digital currencies (CBDCs) are a fundamental issue related to Americans’ freedom and much bigger than just politics. It argues that New York Times columnist Paul Krugman, famous for being wrong about the Internet, was wrong for claiming presidential hopeful Ron DeSantis was merely playing politics with CBDCs.

Nonetheless, Krugman has doubled down. As Crowdfund Insider explains, now he’s taken to Twitter to re‐​promote his original opinion piece and to liken DeSantis’s warnings about CBDCs to former presidential candidate Rick Santorum’s fight against the National Weather Service.

Contrary to Krugman’s framing, DeSantis’s claims about the risks of CBDCs have merit. As the Forbes piece demonstrated, proponents of CBDCs, even some government officials who would be in charge of implementing CBDCs, have openly discussed using CBDCs for exactly the purposes DeSantis claimed. (Nick and I have a longer list here.)

A CBDC is not “just another form of money,” as some of its supporters have claimed. A fully implemented CBDC is a complete government takeover of money and payments. As the experience in China and Nigeria have shown, the introduction of a CBDC comes with the removal of people’s freedom to choose their methods of payment.

CBDCs mark a fundamental threat to both economic and political freedom. But it should surprise no one that Krugman is wrong on this issue.

 

 

I wrote in the October 2015 issue of Intelligence Report:

As you know, I do not check the prices of my investments daily, weekly, or even monthly. I do an annual checkup only at tax time. When I make a significant investment, I have no intention of liquidation anytime soon. I am in for the long haul. Thus, short- or even medium-term volatility is of zero concern to me, beyond keeping an eye out for a name on my watch list that may have taken a temporary beating due to no particular fault of its own. So, then, successful investing is a mindset based upon a master plan that allows an investor to find comfort through thick or thin.

I designed the Retirement Compounders (RCs) using the dividend and interest model explained in Ben Graham’s books while still a student at Babson College. The RCs went on to form the basis of my two decades long Young’s World Money Forecast and Richard C. Young’s Intelligence Report. Using my research, I spoke around the country at investment management conferences. In 1978, in Newport, RI, I started what became the award-winning Richard C. Young & Co. Ltd. (Barron’s (2012-2022) and CNBC (2019-2022) Disclosure). My son Matt has now run our family business for nearly three decades, and Debbie’s and my daughter, Becky, is CFO.  

Our son-in-law, E.J. Smith, has become known in the investment community as Your Survival Guy and has staked out a position as our face with investing families and small business organizations around America. Debbie and I still research and write seven days a week for our clients and multiple websites, and this June, as I headed above, we will be concentrating on the dividends and interest-centric Retirement Compounders.    

Young Research’s Retirement Compounders^® Investment Program

When we developed Young Research’s Retirement Compounders® investment program, our goal was to help investors like you achieve investment success especially during bad times. Our strategy was to accept underperformance during speculative market runs, with the potential trade-off of better results during down markets.

The idea was never to beat the market over time or on a consistent basis. Rather, we fully expected the Retirement Compounders^® program (both price risk and business risk) to trail the major market averages.

Why would we design a program to underperform?

The ugly reality of investing that nobody likes to talk about is that the average equity investor vastly underperforms the market and the funds he invests in. This is true even for investors who own market-beating mutual funds.

Dalbar, an investment analytics firm, is the authority here. Dalbar’s data shows that the average equity investor regularly underperforms the S&P 500 by 3-5% over long periods of time.

Volatility and Emotionalism

High volatility and emotionalism are to blame. When stock market volatility rises, many investors panic and sell near the lows, only to add to their stock positions once again in the dying days of a bull market.

Young Research’s Retirement Compounders^® program is comprised of dividend paying common stocks selected from the over 40,000 global publicly traded companies. The Retirement Compounders^® program favors high dividend payers, those with a history of dividend payments, and companies with a long record of consecutive dividend increases.

Some of the companies included in Young Research’s Retirement Compounders^® program have paid a dividend every year for over a century. Others can boast a more than five decade record of annual dividend increases. The combination of high dividend payments today and dividend growth tomorrow can help you become a more confident, comfortable, successful long-term investor.

Retirement Compounders^® Investment Program Helps You Stay the Course

Young Research’s Retirement Compounders® seeks to help investors avoid the emotionally charged investment decisions that can sabotage returns. Investing in high-quality businesses with long records of regular dividend payments may  offer the comfort necessary to stay the course when financial and economic stress arise.

For investors looking to pass on the burden of daily portfolio management, Richard C. Young & Co., Ltd. crafts dividend-focused common stock portfolios that are based on Young Research’s Retirement Compounders^® program. You can sign up for Richard C. Young & Co., Ltd.’s monthly client letter (free, even for non-clients) here.

With air travel once again growing rapidly, air freight companies are looking to avoid clogged major airports by flying into smaller regional airports. Paul Berger reports for The Wall Street Journal:

Freight forwarders are increasingly looking to fly around America’s congested air hubs.

A combination of shifting manufacturing supply chains and bottlenecks at big airports is leading the freight middlemen to hire their own aircraft and seek alternative gateways, establishing operations that are boosting business at smaller, regional sites like Greenville-Spartanburg International Airport in South Carolina and Chicago Rockford International Airport. 

Forwarders say they can move cargo through the smaller airports more quickly, cheaply and reliably than they can through the big gateways that handle millions of tons of freight a year. 

To do so, the logistics operators are departing from their traditional strategy of booking space in the bellies of passenger planes or on scheduled freighters, and instead chartering aircraft to run routes through alternate sites, often on schedules that suit their customers. In some cases they bring in their own equipment and take control of loading and unloading operations that are usually managed by third-party ground handlers at major airports. 

Dave Edwards, the chief executive at Greenville-Spartanburg, said just over a decade ago his airport had no international air cargo operations. It spent about $1.5 million to install its own cargo-handling equipment and lured German luxury car maker BMW AG , which has a large plant nearby, as a first customer. 

BMW today accounts for about a quarter of Greenville-Spartanburg’s roughly 15 international cargo flights a week. Mr. Edwards said other companies such as Volvo Car AB, Volkswagen AG and Siemens AG , which also have plants within trucking distance, are regular users of the airport.

“The efficiency of the operation has really caught the attention of many freight forwarders, and some of the manufacturers as well who like the fact the product is coming into an airport nearby,” Mr. Edwards said.

Air cargo volumes fell through most of last year as manufacturers and retailers pulled back on orders because of slowing consumer spending. Falling freight demand doesn’t appear to be dampening enthusiasm for secondary hubs, said consultant Doug Bañez, managing director at Charlotte, N.C.-based Hubpoint Strategic Advisors.

Supply-chain disruptions during the pandemic led many companies “to consider alternatives and they learned that these alternatives work,” Mr. Bañez said.

Profits are rising at GE as demand for its jet engines and power equipment remain strong. The company’s CEO Larry Culp, has planned a number of spinoffs to what was once America’s most renowned conglomerate. Thomas Gryta reports in The Wall Street Journal:

General Electric Co. GE 0.52%increase; green up pointing triangle reported strong demand for its jet engines and power equipment in the fourth quarter, lifting the manufacturer to a quarterly profit and higher revenue than a year ago.

The final quarter of the year is typically the strongest for the company, which generated cash flow of $4.3 billion in the period, bringing its total to $4.8 billion for the year. The latest results include GE HealthCare Technologies Inc., GEHC 0.52%increase; green up pointing triangle which it spun off in early January.

The company had a fourth-quarter profit of $2.1 billion on a 7% increase in total revenue to $21.8 billion. The earnings results topped Wall Street’s expectations. GE forecast higher revenue for 2023 but set a cash flow target for the year below some expectations after the healthcare spinoff. GE shares ended Tuesday up 1.2% at $80.70.

Inflation continues to be a challenge across the businesses, Chief Executive Larry Culp said in an interview, and isn’t expected to go away in 2023. Pricing has caught up to cost increases, he said, and will be about neutral for the year. “That is more of a function of us doing a better job of combating it than inflation going away,” he said.

The company is laying off about 2,000 workers from its onshore wind business, it has previously said, but is hiring elsewhere in the company. The aerospace division cut 25% of its workforce in 2020 as pandemic lockdowns hit the aviation industry but is now searching for workers as growth increases.

“If you know any welders or machinists, send them my way,” said Mr. Culp, who is also the CEO of the aerospace division.

GE began the year by splitting off its healthcare unit, completing a key step in the breakup of the American icon which is now focused on GE Aerospace, its jet engine division, and a portfolio of energy businesses that will become a separate company called GE Vernova in 2024.

GE projected free cash flow between $3.4 billion to $4.2 billion for 2023, an estimate that may adjust over the year. In the middle of 2022, GE cut its projections by about $1 billion from the $5.5 billion to $6.5 billion it had previously predicted.

The company expects operating profit of $5.3 billion to $5.7 billion for GE Aerospace for the year and an operating loss of $600 million to $200 million for GE Vernova.

The spinoffs are designed to simplify GE’s operations and make the assets more attractive to investors. Mr. Culp has said the breakup will bring more focus and accountability to the business he has revamped since 2018.

Originally posted on May 13, 2021.

Back in February, I wrote to you about how I started in the institutional research and trading investment business at Model Roland & Co. on Federal St. in Boston in August 1971. Just up the street from Model were Fidelity Investments, and Wellington Management, both of whom I called on from my very first hours on the job.

Over five decades ago, Ned Johnson, aka “Mister Johnson,” ran the show at Fidelity. At Wellington, Jack Bogle, “Mr. Mutual Fund,” had not yet left Wellington to start Vanguard.   

My focus in the initial going was international research and trading, and remains so today all these decades later.  I still consider Fidelity and Wellington the industry leaders.

Both firms feature great cultures, industry-leading technology, well-rounded investment programs for individuals, families, and small businesses–the type of folk I hoped to be associated with throughout my investment career.     

Not a business day goes by that one of my associated companies is not involved with one or more of Fidelity or Wellington’s services.

I never would have expected, as I started out in August 1971, that I would be working with Fidelity and Wellington for over 50 years.

In Wellington’s case it, to this day, manages hundreds of billions of dollars in blue-chip, “prudent man rule” quality investment mutual funds. 

In the early ’90s, Wellington’s chief investor relations officer informed me that I directed more mutual fund assets Wellington’s way in a given year than did the rest of the combined American investment newsletter industry.

And now in 2021, with our little family investment management company requiring a cutting-edge custodian for our $1.3 billion-dollar conservative Boston-style management company we, not surprisingly, rely on Fidelity. 

Your Survival Guy, hard to believe, joined my family business over two decades ago. But before that, he was at Fidelity which he too recalls as being run like a family business. This week he explains Fidelity’s unique positioning during the pandemic.

In Rhode Island, you’ll find a company that embraced the suburbs long ago, Fidelity. The company maintains a sprawling campus in Smithfield, RI, and will soon be hiring many young Rhode Islanders to fill out an expansion. Rachel Nunes reports for Patch:

Fidelity currently employs 3,200 people in Rhode Island, and the new positions will add 500 over the coming fiscal quarters.

“Fidelity Investments is excited to grow our footprint and expand our existing regional site in Rhode Island,” said Mark Barlow, the company’s senior vice president of personal investing. “We’re increasing the number of client-facing associates to support not only unprecedented customer growth and engagement, but also our associates who work hard every day to help our clients. Expanding in Rhode Island gives us access to a talented and educated workforce in the Ocean State to fill these positions that are new to this market for us.”

Applicants to the new jobs will not need to be licensed financial professional, Fidelity said. Instead, the company is looking for candidates with “strong customer-service skills, including those working in industries like hospitality and retail that may have been hit hardest by the pandemic.”

That’s just a small part of why Fidelity is number one.

Action Line: If you haven’t already escaped the city, consider a trip to the country today to scope out your future.

P.S. Read more about how I got my start at Model Roland & Co. back in 1971, and gold’s 50-year price explosion.