Two years ago I told readers the story of John Maynard Keynes’ lectures on compound interest in the late 20s. Keynes told the story then of Queen Elizabeth I and her impetuous and insightful use of compounding to build the British Empire. I wrote: Compound Interest, the Foundation of an Empire In a series of […]
“Meltdown? Absolutely baked into the cake as I write to you, and becoming more of a deep midterm concern for me as time passes,” wrote Dick Young in Intelligence Report back in July 2015. And here we are a short way into 2016 and the speculative NASDAQ index is down over 8%. As Dick notes, “In recent issues, my goal has been to work especially hard at providing you intelligence that will keep you safe and dividend-centric during what I consider the inevitable coming meltdown.”
Safe and dividend-centric—sort of has a ring to it, does it not? It does to me. Those words have been pounded into my head for all the years I’ve worked with my father-in-law, Dick Young, founder, and with my brother-in-law Matt Young, president and CEO of Richard C. Young & Co., Ltd. In addition to our family bond, the three of us studied, at different times, at our shared alma mater, Babson College. But it was Dick who studied charts (much to the dismay of his teachers, I’m guessing) as a student at Shaker Heights High School. As you can see, there’s a lot of history when Dick writes, “I have tweaked my original work on dividends and interest, along with my long-time interest in gold (I have held my original 1982 China Gold Pandas for decades) to produce what I call the ‘Maximizers’.”
The Maximizers is a diversified portfolio, a “Retirement Ark,” if you will, of dividend-paying and dividend-increasing (for 10-consecutive years or more) common stocks, high-grade bonds, and gold. A simple enough sounding strategy for sure, but a strategy that is difficult to follow, especially in times like these when legendary investor Jack Bogle would likely advise the twitching masses to “just don’t do something, stand there.”
And stand there should you, as Yoda might say. Because it is my belief that you might lose a couple battles here and there with a Maximizers styled approach, but you will win the war. An inside baseball look reveals that the speculative NASDAQ beat the Maximizers in 8 of 15 years this century, versus 7 outperformers for the Maximizers. A pitcher with a 7-and-8 Major League Baseball starting record would be banished to the bullpen. But despite a 7 and 8 record, the final results have been incredible over the complete 21st Century.
The Maximizers win by a long shot. At the same time, the Maximizers offer you the peace of mind and comfort you deserve. The maximum deviation between the best and worst year for the Maximizers is a tiny 10 percentage points. For the outgunned and outmanned NASDAQ, the deviation is an unsettling, if not breathtaking, 91 percentage points. And the bone-chilling NASDAQ record includes five down years, four of which were bruisers. No half-sensible retirement investor is going to sign on for that backbreaking volatility. Never forget Dick Young’s cardinal rule of portfolio crafting: Always analyze risk before worrying about potential returns.
As you know our concerns about Vanguard continue to mount. Yesterday, a reader wrote: “[Dick] used to be big on Wellington and Wellesley, given their longevity and resistance to tail risk over time. Also, it seemed to me that Wellington Management’s fixed income expertise would be an asset in this part of the cycle. I’m […]
Can You Afford a 50% Loss? That’s the question I asked readers in March 2014. I wrote: Can You Afford a 50% Loss? It’s impossible to have it all ways. In order to craft an investment portfolio that can act as an all-weather armadillo, you must be willing to forgo potentially substantial upside rewards to […]
Anyone who tells you politics has nothing to do with investing is simply not paying attention. In this winter of political polarization—a deep freeze—politics matter. Case in point. Look at Vanguard GNMA. For most of 2018, Vanguard GNMA has been sledding from a peak of $10.45 in January. Guess when the trough, or bottom was […]
Crisis at Vanguard Dear Friend, Hard as it is for me to believe, a massive hoard of over $600 billion (yes, with a B) is clogging Vanguard’s Total Stock Market Index Fund like a grease-trapped drain. What is most worrisome is what happens when public panic selling hits, kicking off a tsunami of sell orders […]
Back in May of 2002 I warned readers of the dangers of market timing, and of investing too much of their portfolio in equities. I wrote: Your Focus: Dividends & Interest In this issue, I re-emphasize why I think conservative investors must focus laser-like on fixed-income interest and dividends from common stocks. No matter what […]
Back in July 1994, I wrote: You Has It or You Don’t. Dressed in snakeskin, feathers, grease paint and radiant colors, New Orleans gris-gris musician, Dr. John, delivers his musical message. Funky, gumbo-tinged rhythms spiced with a Bayou flavor makes for a perennial Mardi Gras atmosphere when delivered by Crescent City favorites like Jessie Hill, […]
Your wealth manager should act as your fiduciary, plain and simple. Sounds easy. But in reality it’s not. Today, I want to help you overcome one of the more absurd obstacles you may face. It’s called environmental, social and governance investing, or ESG. Thousands of investment managers have pledged to follow ESG—a pledge to abide by […]
I have written in the past that politics can have a great effect on market performance. Today America is enduring one of the most contentious political climates in memory, and at the same time the stock market has become volatile. The best year in the four-year presidential election cycle is the year before the election. […]
Are your investments characterized by the flash and speed of a supercar, or the reliability and protection of a Brinks truck? There’s nothing wrong with a super powered automobile made to take on curves at maximum speed, but the power that makes those machines exciting, is also what breaks their parts. All that torque can […]