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Strong GDP Set to Accelerate in the Second Quarter

April 30, 2021 By Richard Young

First-quarter GDP estimates came in at a robust 6.4%, with growth likely to accelerate to more than 8% next quarter. Over the coming weeks, economic activity in the U.S. will surpass its pre-pandemic high. With the Fed pumping over a trillion dollars of liquidity into financial markets annually and the Six Trillion Dollar Man (Joe Biden) proposing new schemes to run up the deficit, GDP is poised to increase at its fastest rate in decades this year. Josh Mitchell reports:

A burst of growth put the U.S. economy just a shave below its pre-pandemic size in the first quarter, extending what is shaping up to be a rapid, consumer-driven recovery this year.

Gross domestic product, the broadest measure of goods and services made in the U.S., grew at a 6.4% seasonally adjusted annual rate in January through March, the Commerce Department said Thursday. That left the world’s largest economy within 1% of its peak, reached in late 2019, just before the coronavirus pandemic reached the U.S.

Households, many of them vaccinated and armed with hundreds of billions of dollars in federal stimulus money, drove the first-quarter surge in output by shelling out more for cars, bicycles, furniture and other big-ticket goods. The federal government also stepped up spending—on vaccines and aid to businesses.

“If you had asked me a year ago where we would be today I certainly would not have said we would have recouped the pre-pandemic levels of economic activity,” said Gregory Daco, chief U.S. economist at Oxford Economics. “Everything about this crisis has been unique. The speed and the magnitude of the contraction in economic activity was unprecedented. The amount of policy support put in place was extremely rapid.”

Filed Under: Investing Strategies

Pandemic Spending Pushes Amazon Profits to Record

April 30, 2021 By Richard Young

The pandemic created a perfect storm for Amazon. With more people shopping, and more people working from home using cloud services, Amazon’s profits have soared. Sebastian Herrera reports for The Wall Street Journal (abridged):

Amazon. AMZN 0.37% com Inc. reported record quarterly profit as demand remained robust for its deliveries, cloud-computing and advertising businesses, capping a blockbuster earnings season for the world’s largest technology companies.

The Seattle company’s profits in the year since the pandemic started exceeded $26 billion, more than the previous three years combined. Net income from January to March more than tripled to $8.1 billion, and revenue of $108 billion far exceeded the average of analyst predictions on FactSet.

The tech giant’s success in the past year has catapulted the company to new heights, after consumers flocked to online shopping during pandemic lockdowns. Amazon’s dominant grip over e-commerce and continued expansion into new industries have strengthened its power, although the company continues to face challenges from regulators and some employees.

Amazon’s first quarter is typically slower than its preceding end-of-year results, which are aided by holiday shopping sales. Yet the company has exceeded expectations in recent quarters. It shattered sales records last year as homebound Americans turned to its delivery services. The company’s stock price rose 76% in 2020.

Amazon’s achievements have come as regulators increasingly scrutinize the company’s market power. Congress has considered changes to antitrust laws that could make it easier for the government to challenge certain business strategies and practices or force tech giants to separate certain units. Last year, a congressional panel found Amazon had amassed “monopoly power” over sellers on its site, bullied retail partners and improperly used seller data to compete with rivals.

In a response to its critics, Amazon is raising pay for many of its employees. Herrera reports elsewhere in the Journal:

Amazon. AMZN 0.37% com Inc. is raising wages for its hourly employees after a majority of workers at one of the e-commerce giant’s warehouses voted not to unionize.

The company said Wednesday that more than 500,000 of its employees would see pay increases of between 50 cents and $3 an hour. Amazon, which offers a starting wage of $15 an hour and employs roughly 950,000 people in the U.S., said the raises represented an investment of more than $1 billion.

The pay increase covers a variety of workers and schedules, but averaged over the total number of employees Amazon said would be affected, it would amount to about $40 a week per worker.

Amazon said its starting wage is still $15 an hour. The company declined to say what the average raise will be for workers and said that depends on factors such as how long an employee has been at the company.

A company spokeswoman said Amazon decided to pull forward its pay review from the fall to increase wages now. She declined to say if the raises were tied to the union election in Bessemer, Ala., but said they are related to hiring and maintaining competitiveness for workers. Amazon said it is now hiring for tens of thousands of jobs across the U.S.

Filed Under: Investing Strategies

Thanks to the Pandemic by 2025, America’s Biggest Retailer May Be Online

April 29, 2021 By Richard Young

According to a report by Edge by Ascential, which claims to deliver “one of the industry’s most accurate and actionable sales-driving data, insights and advisory solution sets,” by 2025, Amazon.com will outpace Walmart in retail sales. Bloomberg‘s Spencer Soper reports:

Amazon.com Inc. will supplant Walmart Inc. as the biggest U.S. retailer by 2025, according to a new report, suggesting the e-commerce giant has too much momentum for Walmart to stop despite big investments in its own e-commerce offerings.

By 2025, U.S. shoppers will buy US$632 billion worth of products at Amazon and retail afflilites including Whole Foods Market, surpassing Walmart’s US$523 billion, according to the report by Edge by Ascential, which measured the value of all goods sold by each company online and in stores with the exception of gasoline. Edge by Ascential helps brands sell products online and in stores.

To assess the relative size of Amazon and Walmart, Edge used gross merchandise volume, which measures how much money shoppers spend at each company. Traditionally company size is measured by comparing revenue, but doing so in this case doesn’t capture the full picture because the two companies have different models.

Amazon generates most of its sales from the approximately two million third-party merchants on its site, charging these sellers a commission that is typically 15 per cent of a given product’s price. What the merchants collect doesn’t show up on Amazon’s income statement.

While Walmart has a growing online operation and third-party marketplace, it remains mostly a traditional retailer, buying products from wholesalers and marking them up. Most products Walmart sells show up as revenue, so by that measure Walmart will outstrip Amazon for several years.

The report doesn’t include revenue from Amazon’s cloud computing division or advertising sales. It includes sales from both retailer’s affiliates, including Whole Foods for Amazon and Sam’s Club for Walmart, but doesn’t include fees for subscriptions like Amazon Prime or Sam’s Club.

“The pandemic has permanently shifted consumer habits from in-store to e-commerce,” said Deren Baker, CEO of Edge by Ascential. The main beneficiary is Amazon because Walmart is still playing catch-up even though it’s been spending to add features to its online store, including launching a Prime-style subscription service last year. Amazon, meanwhile, continues to build fulfillment centers around the country in an attempt to speed up delivery and erase the advantage Walmart enjoys with curbside pickup at its more than 5,000 locations.

Filed Under: Investing Strategies

Dick Young’s Safe America Chapter III, Part I.

April 28, 2021 By Richard Young

The People’s Chemist writes, “State -of -the art science methods prove masks fail to block viral spread. Viruses are everywhere – so tiny a grain of salt is 1,000 times larger.” The medical journal Influenza and Other Respiratory Viruses showed “no relationship between mask/respirator and protection against influenza protection.”

The People’s Chemist concludes, “We can rest easy knowing that the best way to avoid illness is to protect and bolster the immune system.”

Over the past two years, I have assembled a package of trusted supplements that appear to be useful in bolstering the immune system.

Originally posted February 1, 2021.

Filed Under: Investing Strategies Tagged With: safe

The Vanguard Wellesley Way

April 16, 2021 By Richard Young

Vanguard Wellesley is a fund we have long admired at Young Research. It was once a go-to fund for clients, readers, close friends, and even dear family members.

What gave Vanguard Wellesley Income so much appeal?

Wellesley is the more conservative and younger cousin of the Vanguard Wellington Fund—the nation’s oldest balanced mutual fund.

Over its almost 51-year history, Wellesley has invested an average of 65% in bonds and 35% in stocks. The bonds are primarily intermediate-term investment-grade corporates; the stocks are dividend-paying blue-chip names.

Wellesley’s Baptism by Fire

Wellesley was started in July of 1970. Not great timing for a fund with a bond-heavy allocation. Over the first 11 years of Wellesley’s life, interest rates more than doubled. Remember, when interest rates rise, bond prices fall.

How did Wellesley do during one of the worst onslaughts on record for bond investors?

It performed like a champ.

Wellesley was down only twice during that 11-year period—a loss of 3.5% and 6.4%.

Wellesley is still managed by Wellington Management, but as the fund has gained heft, its universe of opportunities has dwindled to levels we no longer find appealing.

The Vanguard Wellesley Way of investing in a mix of investment-grade corporate bonds and dividend-paying stocks remains, however a winning strategy. Wellesley’s 65-35 allocation has offered consistency and relative stability for conservative investors, especially those investors in the later stages of retirement.

Vanguard Wellesley Income this Century

The chart below highlights the performance of Vanguard Wellesley’s 65-35 mix so far this century. With two of the worst bear markets on record, one of which saw the over-hyped Nasdaq composite fall by over 80% from its high, Wellesley marched higher with much shallower corrections.

An Open Market Alternative to Wellesley

For clients of our investment counsel firm, we have taken what Wellesley (and Wellington) pioneered and improved upon it (in our humble opinion of course).

We focus not only on blue-chip dividend payers, but also smaller high-quality dividend payers and we especially like companies that have a record of making regular annual dividend increases. We have greatly expanded our universe of available common stocks by investing in both U.S. and international dividend payers. Foreign markets are loaded with higher-yielding names.

Long-time followers and readers of Richard C. Young’s Intelligence Report will know this common stock strategy as Young Research’s Retirement Compounders® strategy.

Protection from U.S. Dollar Debasement

We have further improved on the Wellesley Way in our managed portfolios by building on my over five decades of experience following and analyzing global currency and precious metals markets.

Why? With deficits now measured in the trillions, who wouldn’t want at least some protection from the ever-rising risk of U.S. dollar debasement?

Bond Investing: Opportunity and Flexibility

Our bond strategy is where you may find the most value. Buying individual bonds is not the province of individual investors. Individual investors are left out of the primary market, where new issues can come to market at deep discounts to bonds already trading on the secondary market. We participate in the new issue market on behalf of our investment counsel clients.

Importantly though, we aren’t so big that we are effectively forced to build bond portfolios for clients that mirror an index. We also have free reign to invest across the fixed income markets. If long-bonds look risky or don’t offer enough return, we can favor short-term bonds. If low-grade bonds are being given away, we have the ability to take them. Vanguard Wellesley maintains about the same maturity and quality portfolio regardless of how the fixed income landscape evolves.

Filed Under: Investing Strategies Tagged With: comp

My Key West Garden Office

March 29, 2021 By Richard Young

The view of the garden from my office.

Hard to believe it has been nearly 30 years since I walked away from dealing with investing clients, prospects, or the financial media. I also stopped speaking at capacity-filled investment conferences around the world from New Orleans to Switzerland to Hong Kong.

About that same time, Debbie and I bought two Harley-Davidson motorcycles along with a little pink Conch cottage in Key West, Florida. In the following decades, we racked-up 125,000 miles on the bikes with not a single mishap (or road beer) along the way.

Today, dodging road obstacles and traffic or riding through passing thunderstorms is not as attractive as it once was, so we have put the bikes away. Now that we aren’t riding bikes, we have morphed into more age-appropriate travel especially to Paris and our friend’s hotel/Bistro in Beaune, Burgundy.

When not traveling, I read, research, and post from my garden desk in Key West (just 90 miles from Cuba) or in Newport.

If you have followed me over the many decades, you know how conservative I am. My original Ben Graham focus on dividends, interest, and compounding has not changed a lick since I started Young Research in 1978 in a small 2nd-floor office on Thames Street in Newport, Rhode Island.

Our family was raised in Newport. Matt and Beck graduated from Rogers High School in the 80s (as did Debbie in the 1960s). Today Matt is CEO of Richard C. Young & Co., Ltd., and Becky is CFO and president of Young Research.

Debbie and I still live in Newport during warmer NE months, three blocks from where Debbie grew up. Becky and E.J. (The Survival Guy) with two of our grandchildren, Isabella and Owen, live just a couple of blocks away.

Matt and Allison (Allison also grew up on Aquidneck Island) and our three Naples grandchildren, Emma, Rick, and Jack, spend summers in the next town over.

So as you can see, we haven’t gone far! There has been no need. It is for this reason that I am shocked that a quite modest family business with a small town leafy side street main office (with no sign) can for nine consecutive years make the roster of Barron’s Top 100 (Financial Advisors) (2012-2020) And even named in the top 10 of CNBC‘s Financial Advisor 100 (2019 and 2020). How? It could be as simple as really trying to do what is right every time for conservative thinkers, just like us. I hope so. Disclosure

We think of ourselves as small town, Main Street conservatives who don’t believe in the welfare/warfare state. We are promoters of the Swiss Way. Each member of our family is a gun owner and is properly trained in the use of firearms of all varieties. For our go-to for home protection, our family all own the Henry Repeating Arms Survival Rifle.

Debbie and I feel fortunate to have been able to spend three decades in the privacy of working from home, reading, and researching in Key West and in Newport.

Filed Under: Investing Strategies Tagged With: comp

Richard Young Reports: 50+ Years with Fidelity and Wellington

February 23, 2021 By Richard Young

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. He writes:

When I joined the family business [Fidelity], I was Fidelity employee number twenty-something-thousand. I helped customers/participants of Fortune 500 companies manage their money in this fairly new savings vehicle known by its IRS code: 401(k). It turned out to be a thing. I’ll always remember how CEO Ned Johnson III ran the firm like the family business that it was.

In memos to employees, Mr. Johnson wrote to you as if you were seated around him at the dinner table. Business first, then, after some red wine and dessert (and maybe a piece of dark chocolate for digestion; because he was into taking care of one’s health) he’d leave you with something to think about—like his favored Japanese philosophy Kaizen, meaning constant improvement. Reading his memo in my little cubicle, not at his dinner table, I truly believed that through small steps—like compound interest—I could become the best version of myself. Then it was back to stuffing checks into envelopes.

We need to be reminded of this in times like these. Because when a video game company you typically see at the Mall can stop the market in its tracks, you need to figure out if you’re doing everything you can to protect your money. Are you with an investment company that treats you like a family member? Take a look at the brokerage firms selling their clients’ (I hope not yours) trading patterns to their other customers—these are household names that may (or may not) surprise you. Pay attention.

Action Line: Get your money with a firm that treats you like family. Too many investment firms are profiting from you, for example, with your information without you even knowing it. And don’t get me started on how they use your cash to lend out to others and pocket the profit.

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

Filed Under: Investing Strategies

Gold’s 50-Year Price Explosion

February 23, 2021 By Richard Young

Originally posted on July 27, 2020.

Part I

I was there from the start.  In early August 1971, I had just joined internationally focused research and trading firm Model Roland & Co.

On 15 August 1971, President Nixon shocked the world by announcing that the U. S. would no longer officially trade dollars for gold. At that time, gold’s fixed price was $35/oz.

By 1980, gold would hit an astronomical $800/oz.

OK then, back to Model and the firm’s wonderful head partner Leo Model. From my first day onboard at Model, I started covering a bevy of major Boston institutional accounts.  I was 30 years old, and I would become friends with analysts, portfolio managers and traders at Wellington Management, Fidelity Investments, First National Bank of Boston, State Street Bank, State Street Research, Endowment Management, Studley Shupert, and Keystone Management through my entire investment career on Federal Street in Boston.

I immediately realized that international trading (including gold shares and arbitrage), as well as monetary strategy and world currencies, was going to be my focus from August 1971 onward.

Five decades later, these subjects remain today my daily focus. I have been a buyer of gold, silver, and Swiss francs for decades, and I have never sold a single one of my positions.

By 1972 I was off to London on a mission for Leo Model. My job was to produce a strategy report for Model, Roland & Co on the international gold shares market. It took eight days in London to meet all the insiders with whom Mr. Model had arranged visits. Except for a single, most unpleasant glitch, (understatement) all went well.

I went on to submit a 25-page strategy report to Mr. Model. Shortly thereafter I was informed that Mr. Model had sent my report along to the firm’s chief monetary guru, one Edward M. Bernstein, one of the architects of the Bretton Woods monetary agreement.

Remember, I was 31 years old, and quite terrified to hear that EMB had been brought into the loop.

On 7 August 1972,  I received the surprise of my young life: EMB wrote  back on his corporate letterhead:

I think the collection of papers on gold is excellent. It seems objective and pointed. I have no suggestions. Put me on the list to get what you put out on gold.

Sincerely,

Edward M. Bernstein

Although I did not know it at the time, a year later, I would no longer be at Model, Roland.

Check back in with richardcyoung.com for my introduction Part II and the kickoff of our industry-leading precious metals, currencies, monetary madness, fed maleficence and dollar destruction weekly update.

Warm regards,

Dick

 

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Filed Under: Investing Strategies Tagged With: precious

Every Investor Must Have a 5/10% Gold Hedge

February 23, 2021 By Richard Young

Originally posted August 11, 2020.

Jeff Deist of LewRockwell.com writes abridged:

Fed Bugs are people with a faith-based belief in the power of central banks (and central bankers) to engineer economic growth using “monetary policy, “despite decades of history and current evidence to the contrary. They believe tinkering with inputs and rates and velocity and flows somehow makes us richer in terms of productivity, goods, and services. They believe in financial alchemy, as economist Nomi Prins puts it, rather than precious metals.

They believe paper has value so long as government issues it and legislates its use.

Central bankers almost by definition are Fed Bugs, but so are most monetary economists, financial journalists, and politicians. And they all hate gold with a passion.

The reasons why are multifarious, but ultimately flow from their fundamental resentment of any money they do not control and cannot design. Central planning requires central money, and gold stands apart by it very decentralized nature. It is indifferent to human conceptions, and can be discovered and summoned from the earth only with tremendous risk and effort. It cannot easily be manipulated or destroyed, and its value cannot be decreed (though they try mightily). It is unchanging, unyielding, and stubbornly at odds with the political visions of Fed Bugs.
And so they hate it.

Gold quietly serves as a lingering rebuke of the entire political fiat money project—even as central banks are forced by circumstances to buy and hold it as collateral, as the ultimate hard currency and liquid asset for their balance sheets. In fact, central banks steadily bought or repatriated huge amounts of physical gold in recent years, despite the supposedly strong world economy prior to the Covid crisis.

Nixon eliminated the right of foreign governments to redeem US dollars for gold in 1971.

Jeff Deist is president of the Mises Institute, a tax attorney, and a former staffer for Ron Paul.

Filed Under: Investing Strategies Tagged With: precious

Dick Young’s Safe America: Chapter II, Part I

January 25, 2021 By Richard Young

After the inauguration of Joe Biden, and the loss of Senate control to Democrats, Republicans may feel like the end has come. It hasn’t.

Politics is cyclical. A party gets elected in a wave of support, it becomes complacent, ignores its mandate, and is replaced by another party that has impressed the people with its promises. Over, and over again.

Not so long ago the GOP was in much worse straits. In 2008, after the election of President Barack Obama and Democrats’ landslide victories in the House and Senate, pundits were saying that the GOP was over for good, and that the party would never win control of anything ever again.

After a short time living under the Obama administration, Americans began to regret their votes of 2008.

As early as 2009 Democrats’ popularity began to crack. A group called the TEA Party was forming all over the nation, and in early 2010 their energy coalesced when Scott Brown, a Republican, won a special election for the Senate seat vacated by the death of Ted Kennedy, in the deep blue state of Massachusetts.

That election was the first of many that would bring Republicans complete control of the government by 2016.

Compared to 2009 when Democrats controlled so many seats, today’s picture is nowhere near as precarious for Republicans. Take a look at the table below comparing the peak of Democrat control during the 111th Congress to the balance of power during today’s 117th Congress.

*Counting swing vote Justice Anthony Kennedy as half Dem half GOP in 2008, and Chief Justice John Roberts as half and half in 2021. Copyright 2021: Young Research & Publishing

Today the GOP owns more legislatures, more governorships, more congressional seats in both houses, and has placed more Supreme Court* picks than in 2008 by far.

The truth is, once Americans see what Democrats have to offer in real life, they no longer want it.

Read Chapter 1 Part I, Part II, Part III, and Part IV.

Filed Under: Investing Strategies Tagged With: safe

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