November 2015 Client Letter

Despite modest gains in the U.S. stock market this year, most U.S. stocks are down year-to-date. Outside of a handful of names, it has been a challenging year for equities and most especially for global equities. In the chart below we compare the performance of big U.S. stocks to small U.S. stocks, foreign developed market stocks, and emerging market stocks. The only group that has managed to stay out of the red YTD is big U.S. stocks. How have the big-cap U.S. stocks managed to stay in positive territory when most companies in these indices are down on the year? Fewer and fewer big stocks are responsible for the gains. Analysts call it a lack of breadth. A recent USA Today piece explains.

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October 2015 Client Letter

In July 1989, just four months before Richard C. Young & Co., Ltd., was incorporated, my dad was interviewed by The Providence Journal Bulletin. In that article, titled “Dividends the Key Element to Investing,” my dad provided the following stock advice:

1. The smart individual investor will tie down yield first and let capital gain come as it may.
2. Bet on stocks that have dividend momentum.
3. Pay no attention to companies that cut or don’t pay dividends.
4. Ride out core positions through thick and thin.
5. Assemble a portfolio of stocks that has a yield higher than the Dow’s yield and a growth rate in dividends that outstrips the Dow’s growth rate.

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September 2015 Client Letter

From its March 2009 low, the S&P 500 is up 230%, including dividends. That is an impressive return and has been cited regularly by pundits and promoters as a reason to buy more stocks. But it is important to remember that few investors earned 230%.

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August 2015 Client Letter

In August, a five-day financial markets rout saw the Dow Jones Industrial Average, the S&P 500, and the Nasdaq each decline over 10%, serving as a reminder that markets do indeed go down. The negative backdrop to the five-day mini-crash was evidently initiated by worries over China’s slowing economy, currency devaluation, and a drop-off in commodity prices.

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May 2015 Client Letter

William McChesney Martin, the longest-serving chairman of the Federal Reserve, once said it is the Fed’s job to “take away the punch bowl just as the party gets going.”

Despite such sage advice, few have accused the Fed of being ahead of the curve when it comes to the removal of party refreshments in the modern era. In cycle after cycle, many argue, the Fed has been slow to recognize when the economy is running too hot and when it is cooling. “Better late than never” is perhaps a more fitting slogan for today’s central bank.

It would also appear to be a fitting description of the Fed’s asset-bubble radar. You may recall it was former Fed chairman Ben Bernanke who told the public in October of 2005, only months prior to the national housing bust, that soaring home prices reflected strong economic fundamentals. There was no mention of an easy-money-fueled housing bubble from Dr. B.

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