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Choose Your Hathaway: Berkshire or Anne

We’ve always admired Berkshire Hathaway Chairman Warren Buffett. He is, after all, the most successful investor in history and a legend in his own time. Mr. Buffett’s annual reports are fountains of investment wisdom that should be required reading in business schools and for everyone in the money management profession.

We’ve also had an admiration for the Hollywood actress Anne Hathaway for many years, though we know nothing of her investment acumen. Male readers of the Sizemore Investment Letter might be interested to know that the 28-year-old Ms. Hathaway will be starring in next year’s Batman movie, The Dark Knight Rises, as the Catwoman. Berkshire Hathaway shareholders had better hope that her performance generates its share of press. Their investment returns might depend on it.
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Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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3 Myths That Will Pop the Gold Bubble

Gold prices topped $1,500 per ounce yesterday, just days after Standard & Poor’s roiled the equity and bond markets by lowering its outlook on the AAA credit rating of the U.S. government. After a decade in which stocks went nowhere and the U.S. dollar lost value to every world currency except the Zimbabwean dollar, many Americans are ready to give up on the entire system. Quite a few already have.

After watching gold more than quadruple in value, investors might be tempted to wash their hands of financial assets altogether, convert their savings to gold bars, and bury it in their backyards. But frankly, I cannot fathom a worse idea.

Gold today is as risky as tech stock in 1999 and Miami condos in 2005, and the arguments supporting its rise are every bit as flimsy. Let’s take a look at some of these arguments and how they stand up to a brief reality check.
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Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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How to Choose the Right Dividend ETF

The stock market hasn’t returned a single red cent in over twelve years, as measured by the S&P 500. Twelve years is a long time to go without earning a return on your investment, particularly if you are close to retirement.

With the boom years of the 1980s and 1990s now a distant memory, it is not shocking to see investors losing faith in the cult of capital gains and gravitating instead to dividend-paying stocks and ETFs. In a world in which paper gains can be ephemeral, it’s good to be paid in cold, hard cash.

In many ways, this is simply a return to the basics of investing. Historically, before federal capital gains taxes and Modern Portfolio Theory shifted the industry to a focus on growth, dividends were the primary source of investor returns (see Figure 1), and over the past twelve years dividends have been the only source of investor returns.
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Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Gold: A Bad Investment and Getting Worse

If there is one asset class best avoided in 2011, it’s gold. At the expense of sounding overly dramatic, gold is an investment whose fundamentals are rotting from within, and you do not want to be anywhere near it when the bottom falls out.

In late November, I wrote a short piece for Seeking Alpha in which I added a few more jabs at the barbarous relic. For my efforts, I received over 200 comments, most of which were hate mail.

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Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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There is NOT a Bond Bubble — at Least Not Yet

I’m going to start this month with a prediction that might surprise you. I do not think that bonds are in imminent danger of a crash.

I do agree with the growing legion of investors—including the legendary Warren Buffett himself—who believe that the bond market is in a “bubble” of sorts. And I would certainly agree that at current yields, bonds have much greater downside potential than upside, making them quite risky. Nominal bond yields can’t fall below zero, after all, but they can rise significantly from here.

That said, I think this bubble might have a little longer to run, and this is good news for us. Even though we have no exposure to bonds in the Sizemore Investment Letter, we benefit from low yields as they make our income-oriented investments more attractive by comparison. Of course, I would expect the SIL’s recommendations to do at least relatively well in almost any interest rate environment, as most pay dividends that are both high and growing. Still, all else equal, I am quite happy to see rates stay low, and I think it is highly likely that they will.

Here’s why: Bubbles practically never crash when they are widely expected to. And right now, if there is one consensus in the world of investing, it is that the bond bull market is over. Take a look at the chart below. Fully 95% of money managers interviewed by Barron’s are either bearish or neutral on Treasuries! Continue Reading →

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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