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May 2017

My Biggest Move in Years

A recent asset sale has put me in the rare position of needing to make an oversized investment in my portfolio all at once. This gives me an ideal opportunity to go over with you my complete foundation—how I do things for me personally, and my thought process backing client investments at Richard C. Young & Co., Ltd. As I have often repeated, the two are really one and the same thing. And while I do not make moves for myself far afield from what I advise for clients, first this caveat: I am almost certainly more conservative than are most of you. Perhaps it’s because I have been doing the investing thing for nearly five decades and have too often witnessed much misery and pain for those who chose to adopt a more risk-laden path, usually driven by greed.

Protect Principal and Purchasing Power

From the top, as I’ve explained often in these strategy reports, I do not focus on potential returns. I invest to protect principal and purchasing power—period. This P&P combo is the driving force behind the development of the Dynamic Maximizers Portfolio (DMP).

Maximizers—No Down Year

The Dynamic Maximizers display below lays out the performance of the DMP for the twenty-first century. See any downswings? Not one. Despite the multi-year dotcom trashing and the horrific 2008 financial panic meltdown, there has not been a single down year for the DMP this century.

Thanks to the Bank Credit Analyst

In the display, I’ve also laid out for comparison the course of the non-investment-grade NASDAQ, not because I measure the DMP against the NASDAQ (or any other benchmark), as I do not. I have never found a use for a benchmark-measuring proxy. Benchmarks have a nasty way of changing components in midstream. No thanks for the robotic benchmarks concept. Instead, I measure strictly against my own preset targets. I set targets not on hope, as hope is not a strategy I embrace. Rather, I use the current conditions on the ground matched to the repetitive waves and cycles of history. Sound complicated? Indeed, it is complicated, unless you have been plowing the same ground, as I have, since the early sixties. You see, decades ago I began studying the groundbreaking cycles work of the Bank Credit Analyst, as well as the research of Richard Russell and Franz Pick, to honor early favorites. To this day, I still focus on the research conducted by these pioneers, and, through the decades, I have found no reason to deviate from the course I first laid out, with their guidance, back in the Sixties. 

My Big Move

All of which brings you and me to today and to my personal need to make a significant move. With cycles and waves in mind, I draw your attention to three displays found below: (1) corporate domestic profits, (2) market value price/GDP and (3) the price-to-sales ratio of the S&P 500.

1) Corporate profits as a percentage of domestic income have peaked for the cycle.

2) Valuations are at peaks levels. Check out the air pocket next to the probable cycle low. Makes one sweat.

3) Price to sales—not a great look, and it’s hard to imagine much higher valuations.

Draw your own line for the next probable cycle low. Suffice it to say, we are looking at a price level far below that of today.

The Power of 1% Increase

Finally, how about dividend yields? You don’t have to be a quant to comprehend that yields are historically low, but let me expand the negative condition for you. If an investor retires today with a $5 million portfolio, for example, with a 2% yield, that’s an annual draw of $100,000. By comparison, tick up to a 3% environment. The mini 1% increase in yield produces an annual retirement draw of $150,000, or a 50% increase. A second 1% uptick to the historic average yield of 4% increases the investor’s annual draw to $200,000. That is a stunning 100% increase in retirement purchasing power with only two mini 1% increases in interest rates. Show this math around a little at the “home.” One of many lessons here is to never discount the power of 1%, especially when interest rates are involved. 

Wellington Is the One

Given this analysis, I have selected the most conservative option in my standard arsenal, an investment in my Dynamic Maximizers Portfolio (located at the top of my Mutual Funds & ETFs supplement). Of the six unequally weighted components, five are Vanguard contributions, with two of the actively managed components—Dividend Growth (VDIGX) and Vanguard GNMA (VFIIX)—overseen by Wellington Management, my oldest long time institutional client favorite from the early 1970s. I first called on Wellington in my institutional research and trading days in the summer of ‘71. And here, 46 years later, I am as impressed with Wellington as ever. That’s quite a history and background, is it not? More on this below.

6% Average Return Is the Goal

My goal is preservation of capital and purchasing power. In other words, were I to lock away this investment (mid six figures) for two decades, by example, I would expect to be able to return and purchase an equal given basket of goods at the same relative price as is available today. The history of the Dynamic Maximizers allows the potential for an average annual total return as high as perhaps 6%. Some years will be better; others not as good. And while I would not anticipate any harsh annual declines along the way, a modest single-digit annual decline at some point along the route should not be ruled out.

I expect to pass the upcoming years with the comfort that my carefully drawn list is doing its quiet, steady job with a minimum of angst for me, and I trust for all of you who join me on a similarly productive and comforting course of action.

The Other Thing That Happened in 1929

Among investors, the year 1929 is known for one thing: The September market crash and what would become the beginning of the Great Depression. But the year was a big one for many reasons. Technology was advancing. The first Technicolor movie was shown in Rochester, New York, by George Eastman. Scientists discovered how to transmit television pictures, and the first telephone was installed in the White House. The U.S. ratified the Kellogg-Briand pact, renouncing war alongside most of the world. Across the sea the Germans refused to continue paying their debts from WWI, and Anne Frank was born. In sports, Babe Ruth hit his 500th major league home run and pilots like Charles Lindbergh and Bobbi Trout were setting flying records.

Another “first” came in July, when Walter Morgan began operations of the Industrial & Power Securities Company. Morgan, a native of Wilkes-Barre, Pennsylvania, was a young accountant during the roaring ‘20s and could see that the market was getting riskier. Morgan was the youngest certified public accountant in Pennsylvania, but was working for peanuts, so he left to prepare taxes for wealthy clients. In that new job, he realized the wealthy people he was working for needed investment advice. So he began his fund and cobbled together investments that would be less risky than those owned by his competitors. In a 1997 Vanguard newsletter interview, Morgan said of the market in 1929 that “there was so much speculation, and stocks were just too high.” In light of what he considered high valuations for stocks, Morgan decided, “we should have ‘an anchor to windward’ in the form of a large position in fixed-income securities.” The fund became the first mutual fund ever to include both equities and fixed income securities. In 1935, Morgan renamed the fund after the Duke of Wellington, and the Wellington Fund (VWELX) was born.

Rapid Growth, Bogle and Vanguard

By 1944 Wellington was the tenth largest fund in the industry, with assets under management of almost $25 million. In 1951, Morgan hired John Bogle, who would eventually inherit the Wellington Fund and go on to found the Vanguard Group in 1974, bringing Wellington along with him. As I mentioned earlier, in 1971, just before Vanguard was created to manage the trusteeship of Wellington and its sister funds, I began my relationship with the Wellington Fund. I was drawn to the fund by its three-prong objective. In a 2004 letter celebrating 75 years of the Wellington Fund, Bogle would explain that objective: “From the very outset, Wellington’s three-fold objective has remained constant: (1) Conservation of Capital, (2) Reasonable Current Income, and (3) Profits Without Undue Risk.” I think long-time readers of this report will immediately see how these principles line up well with a Dick Young investment strategy.

If you need more proof of the soundness of that strategy, take a look at my chart of Wellington’s annual returns (#28 in your Economic Analysis Supplement). After riding out some rough sledding through the Great Depression, the Wellington Fund has generated sustained success, building an impressive 8.27% average annual return since inception. Not bad for a fund holding about a third of its assets in bonds.

The Wellington Fund offers income as well as capital gains without taking undue risk. The fund’s asset mix is ideal for investors nearing retirement, but not yet there. For investors who haven’t yet accumulated the assets needed to craft a portfolio made up of individual stocks and bonds (my preferred choice for you), Wellington is a worthy substitute.

Analog Devices Buys Linear Technologies

Analog Devices, Inc. (NASDAQ: ADI) completed its acquisition of Linear Technologies Corp. (NASDAQ: LLTC) in March. Both firms are in the analog chip business. As such, I am replacing Linear Technologies on my Retirement Compounders List with Analog Devices. Like Linear, Analog Devices has a strong record of making regular annual dividend increases. ADI has increased its dividend every year for 13 years. The acquisition was a cash and stock deal. You’ve made nearly 50% on your Linear shares since I first added the company to my Retirement Compounders Master list. Analog is a buy this month.

UFO Strategy

Last December I introduced you to the UFO (Unloved, Forlorn, and Out-of-favor) strategy that is part of my new Intelligence Report portfolio management program. My UFO strategy advises out-of-favor stocks that offer compelling long-term opportunities, but may be difficult to own over the near term. UFO companies are not for the fair-weather investor. This is a contrary strategy. Volatility should be anticipated and used to your advantage to build larger positions in the companies I advise.

Leader in Orthopedic Reconstruction

My next UFO pick for you is Zimmer Biomet (NYSE: ZBH). Zimmer Biomet is a global leader in musculoskeletal healthcare with market share leading positions in hips and knees. Zimmer designs, manufactures, and markets orthopedic reconstructive products, sports medicine, biologics, extremities and trauma products, spine, bone healing, dental implants and related surgical products, among others.

ZBH was formed in June of 2015 when Zimmer Holdings purchased Biomet in a cash and stock deal valued at $13.3 billion. Zimmer itself was spun off by Bristol-Myers Squibb in August 2001, but the company traces its roots all the way back to 1927, when Zimmer Manufacturing was founded in Warsaw, Indiana.

Demographic Tailwind

The markets that Zimmer operates in offer an attractive growth profile that should keep demand for the company’s products strong for decades. Demographics are a big factor for Zimmer. Knee and hip problems occur more frequently in older populations. And it is older populations that are expected to see the fastest rate of growth over coming decades. From 2010 to 2030 it is estimated that, globally, the number of people aged 65 and older will increase at a compounded annual rate of 3.1% compared to 1% for the entire population. Rising obesity levels also lead to greater knee and hip problems. From 1990 to 2015 the average percentage of obese adults in the U.S. increased to 29.3% from 11.1%. Zimmer is well positioned to benefit from both of these trends.

With an attractive growth backdrop, why are Zimmer shares out of favor? The debt Zimmer took on to fund the Biomet acquisition, along with the disclosure of various supply chain issues, resulted in a 20%-plus selloff in the stock last fall.  The supply chain issues were caused by several factors, including snags in implementing operational process improvements, problems with the integration of supply chain systems, and FDA red flags at a legacy Biomet facility. The disclosure spooked Wall Street and has weighed on the shares.

All of the bad news on Zimmer’s supply chain problems may not be out, but the issues the company is working through all appear short-term in nature. On a three-to-five-year time horizon, today’s issues are likely to look like a blip. Zimmer operates in an attractive market with a locked-in growth trend, and it trades at a deep discount to the value of the broader market and at a discount to its peers. Buy.

The Future or The Past

Below is an example of why I concentrate on inference reading, or reading between the lines, to bring a somewhat arcane subject into Dick-and-Jane focus. Shocking but true: 2015 turned out to be the second consecutive year that vinyl (you know, your dusty old 45s and 78s) revenues ended higher than industry revenue generated from the billions of streams of on-demand services such as YouTube and other ad-supported services.

A Rotten Business Model

Ad-supported streaming music produced about $385 million in revenues; meanwhile, vinyl sales (17 million albums) generated $416.2 million. The message here? (1) Vinyl sales will continue to explode. (2) Music streaming has been a rotten-to-the-core financial model from the start.

And this is before wading into the matter of sound quality. For my money, there is no audiophile-quality sound to be heard from streaming. As is often the case, the public has been hoodwinked. Want to hear real sound, all the highs and lows? You will require a physical music system designed to produce the broad spectrum of recorded music. And the physical source of choice for recorded sound mavens is, as it has been for decades, vinyl.

Think McIntosh

I’ll bring more on this subject dear to all music fans next month, but I wanted to quickly lay out part of my complex thesis that new technology is not always the panacea held out by the digital revolution. In the case of recorded music, boring old analogue still wins the day, including an emphasis on age-old electron-tube amplifiers (i.e., McIntosh) as opposed to solid state.

Norway Killing Off Fossil Fuel

Solar has long been integral to my overall futuristic road map, leading directly to sustainable, security-focused self-reliant communities, states or countries. For example, Norway is on the way. Within a decade, I project that Norway (a huge oil producer) will totally cease sales of fossil fuel ground transportation. Last year, battery-powered and plug-in hybrids accounted for nearly 30% of new car sales in Norway.

#1—Burlington, Vermont

Back in the states, the city of Burlington, VT (pop. 42,000) has become America's first all-renewable-energy city, according to POLITICO magazine. The combination of wood chips (completely sustainable pine), hydro, wind and solar (not exactly Arizona in terms of sunny days) combine to make Burlington the first American city that generates 100% of its power from renewable resources. And Burlington's municipal government led the way. Simultaneously, Burlington, as a leader in the local-community grown, organic food movement, is also an American leader in innovative solutions on the food front.

The entire self-sufficiency market will soon benefit from the introduction of Tesla/Solar City's brand new solar shingles (made of glass) and Powerwall 2 batteries.

No More Sand Dune Police

These are but a few tidbits I have been looking into in terms of the enormous opportunities opening up in an America fueled by energy innovation and total self-reliance away from, for example, Middle East sources. America will be able to bid “vaya con Dios” to the Middle East’s petro tyrants, dictators and incubators of radical Islam. America, it is hoped, will no longer serve as the “sand dune police.” Talk about a crowd with a fast-emerging world-class security problem.

Issue text continues after Top 10 Common Stocks Countdown and historical tables.

1) General Dynamics (NYSE: GD): In a March 31 meeting, Secretary of State Rex Tillerson gave NATO leaders a May 2017 deadline for developing plans to meet the 2% of GDP spending goals their countries all agreed to in 2014. Allies immediately pushed back, with Germany’s foreign minister giving a particularly thorny response, calling it “totally unrealistic.” But he also noted that they are trying to spend more. On the same day, Secretary of Defense James Mattis met with U.K. Secretary of State for Defence Sir Michael Fallon to shame NATO members who aren’t pulling their weight.

Tillerson’s deadline will probably be ignored by most of the NATO members, but the new administration’s focus on the issue has already spurred many members to demonstrate how they are spending more on defense. Some have even pledged higher spending. Increased defense spending is a win for General Dynamics. The contractor recently announced it signed a $140 million deal with NATO to bring the alliance’s computing to the cloud

My chart shows a powerful five-year relative bull market for General Dynamics shares that is likely to continue as our NATO allies open the spigots on military spending. Buy.

2) BB&T Corp. (NYSE: BBT): Along with being one of the “World’s Strongest Banks,” BB&T is also one of America’s largest financial services holding companies. The bank operates 2,196 financial centers in 15 states and the District of Columbia. BB&T offers consumer and commercial banking, brokerage, asset management, mortgages, insurance and other services. My relative strength chart shows BB&T shares’ market-beating trend. Buy.

3) International Business Machines (NYSE: IBM): Do you slam your brakes just as you reach a stop light, or feather them as you coast smoothly up to the line? New IBM technology being developed for vehicles that switch between autonomous and manual operation will study your driving style and adapt to work best with you. Along with its Smarter Cities and Watson Artificial Intelligence efforts, IBM is developing ways to make humans’ lives easier with technology. IBM shares offer a 3.25% yield today. Buy.

4) PNC Financial Services (NYSE: PNC): For every year since the end of the Civil War in 1865, PNC and its predecessor banks have paid a dividend to shareholders. PNC has a long and time-tested history of dividend commitment. My price chart shows a strong post-election surge in PNC shares. The recent pull back you see on the chart should be viewed as a buying opportunity.

5) Tiffany & Co. (NYSE: TIF): In a massive new ad campaign, Tiffany & Co. is spotlighting Stefani Germanotta, a.k.a. Lady Gaga, who just performed at the Super Bowl LI halftime show. The pitch from Tiffany: Women can buy high priced jewelry for themselves. In an interview pushing the campaign Germanotta said “And it is a misconception that a man, or your lover, has to buy you jewelry. I think a woman can buy herself jewelry and put it on with dignity.” In nearly 50% of American homes today, a woman is the primary breadwinner. Targeting women directly rather than circuitously opens up a whole new market for Tiffany. You are up 15% on Tiffany shares since I last advised them for you in February. The shares still offer opportunity. Buy.

6) Donaldson Co. (NYSE: DCI): With over a century of world leadership in building filtration solutions, Donaldson is a unique American manufacturer with most of its sales coming from outside the country. My relative strength chart shows steady outperformance of the market for Donaldson shares. Buy.

7) Cummins Inc. (NYSE: CMI): The ports of Los Angeles and Long Beach are the busiest in America. A massive fleet of trucks services the incoming and outgoing cargoes at the ports, but California has some of the strictest emissions standards in the country. The state makes up for its rules by subsidizing trucks with near-zero emissions of smog causing pollutants. Regulators have approved Cummins’ Westport ISL G Near Zero NOx natural gas engines for the program, and Total Transportation Services, one of the largest trucking companies working at the ports, will begin adding trucks built with those engines to its fleet. The Cummins engine runs so efficiently that it’s even cleaner than electric-powered engines charged from the grid. You’ve made 37% in Cummins shares since I added the stock to my Retirement Compounders Master List last year. Buy.

8) MSA Safety Inc. (NYSE: MSA): Imagine firefighters seeing right through the smoke to find people stuck inside burning buildings. MSA has developed a reliable thermal imaging camera allowing them to do just that. The new system is less bulky and easier to keep charged than older systems. This is the type of innovative technology that makes MSA a leader in the field of safety. My chart shows MSA’s shares gaining steam compared to the S&P 500. Buy.

9) Illinois Tool Works (NYSE: ITW): I’ve recommended ITW in eight of the last 10 months. The company’s strong commitment to dividend increases and its focus on profitable businesses give the shares appeal. The strategy has helped the stock gain 40% over the last 24 months.  Buy.

10) Harris Corp. (NYSE: HRS): The F-35 program is ramping up, and Harris Corp is a major supplier of parts for the new stealth jet. So far, Harris has delivered over 780,000 items with 99.8% on-time accuracy to the fighter program. According to Avionics magazine, the systems Harris is providing for the jets include, “vibration isolated and liquid cooled avionics racks and power supplies for all the aircraft mission systems; network interface units that enable fiber optic data communication between mission subsystems throughout the aircraft; phased array antennas and datalinks that ensure encrypted and secure communication between aircraft[…]” and more. Buy this under-the-radar defense powerhouse.  

  April 2017   March 2017   February 2017
1 United Technologies Corp. 1 Parker-Hannifin Corp. 1 Tiffany & Co.
2 Holly Energy Partners 2 Alliance Holdings GP L.P. 2 Harris Corp.
3 Illinois Tool Works Inc. 3 AT&T 3 Target Corp.
4 State Street 4 Cummins Inc. 4 Cummins Inc.
5 International Business Machines 5 Chevron 5 Emerson Electric Co.
6 BB&T 6 Donaldson Co. 6 Plains All-American Pipeline
7 Parker-Hannifin Corp. 7 Graco Inc. 7 Illinois Tool Works Inc.
8 General Dynamics 8 United Technologies 8 Pioneer Natural Resources Co.
9 Graco Inc. 9 Automatic Data Processing 9 Texas Instruments
10 Texas Instruments 10 Bank of New York Mellon 10 ABM Industries

 

 

The Dow and the S&P 500 were both up more than 6% in the first quarter, but the best-performing major index in the U.S. YTD is the speculative NASDAQ Composite, up 10.5% on the year. The Trump victory has ignited animal spirits among the public that have been lacking for years. You can see it in business, consumer, and investor sentiment surveys, and of course across asset markets. As with the NASDAQ in the major indices, the more speculative tech sector is leading the way among sectors in the S&P 500. Young Research’s Bubble Basket, an index of some of the most richly priced stocks in the market, had a stellar first quarter. One look at that index tells you hope is back in favor, and apparently it’s now an investment strategy for many. Energy and telecom shares are lagging after a strong 2016 for both sectors. Bond market performance has been okay, with intermediate-term investment-grade bonds rising 1.5%. The surprise winner for many on my Up & Down list is gold. The SPDR Gold Trust is up 8.4% YTD following last year’s 8% rally. Wasn’t this supposed to be the year the dollar soared and rising interest rates took down gold? Is gold trying to tell us something about the economic and financial outlook that the rest of the market is missing?

What's Up & What's Down
Total Returns
2000 2001 2002 2003 2004 2005 2006 2007 2008
Dow Jones 30 Ind. (4.7) (5.4) (15.0) 28.3 5.3 1.7 19.0 8.9 (31.9)
Dow Jones 15 Ut. 51.1 (26.2) (23.4) 29.3 30.2 25.1 16.6 20.1 (27.8)
Dow Jones Transportation 0.4 (9.3) (11.5) 31.8 27.7 11.7 9.8 1.4 (21.4)
NASDAQ Composite (39.2) (20.8) (31.2) 50.8 10.3 2.1 10.9 10.7 (40.0)
Dynamic Maximizers Mix 15.1 3.5 8.0 8.6 5.7 4.0 8.3 9.7 5.1
Young Research's RCs 19.8 9.0 22.0 7.1 (28.9)
Wellesley Income 16.2 7.4 4.6 9.7 7.6 3.5 11.2 5.7 (9.8)
Wellington 10.4 4.2 (6.9) 20.7 11.2 6.8 14.9 8.4 (22.3)
Vanguard Consumer Stap.* 17.0 (6.4) (4.2) 11.6 8.2 3.8 15.9 12.7 (16.6)
Vanguard High Div Yield Idx.               1.4 7.0
Vanguard Dividend Growth 18.8 (19.4) (23.2) 29.2 11.0 4.2 19.6 7.0 (25.6)
iShares Canada 8.2 (20.0) (10.8) 53.2 22.8 27.5 16.9 28.4 (44.5)
iShares Switzerland 6.1 (24.8) (11.2) 33.2 17.3 13.0 30.0 5.5 (27.2)
Vanguard Materials* (15.7) 3.4 (5.5) 38.2 13.2 3.4 19.5 26.6 (46.5)
PwrShrs High Div. Achievers
(51.0)
T. Rowe Price New Era 20.4 (4.4) (6.3) 33.2 30.1 29.9 17.0 40.7 (51.0)
SPDR Gold Trust (5.5) 2.5 24.8 19.4 5.5 17.8 22.5 30.5 4.9
CurrShares Swiss Franc* (1.3) (3.0) 20.0 11.7 8.8 (13.2) 7.7 9.0 (16.4)
CurrShares Canadian $* (3.5) (5.9) 1.4 21.2 7.9 3.4 (0.3) 21.7 (16.4)
American Century 2025 32.1 (3.2) 17.6 (3.9) 12.3 18.3 (1.2) 15.2 31.9
VG ST Investment-Grade 8.2 8.1 5.2 4.2 2.1 2.2 5.0 5.9 (4.7)
Vanguard GNMA 11.2 7.9 9.7 2.5 4.1 3.3 4.3 7.0 7.2
S&P 500 Sector Indices
Composite (9.1) (11.9) (22.1) 28.7 10.9 4.9 15.8 5.6 (37.0)
Con. Discretionary (20.0) 2.8 (23.8) 37.4 13.2 (6.4) 18.6 (13.2) (33.5)
Consumer Staples 17.0 (6.4) (4.2) 11.6 8.2 3.6 14.4 14.2 (15.2)
Energy 15.7 (10.5) (11.2) 25.6 31.5 31.4 24.2 35.3 (34.9)
Financials 25.7 (8.9) (14.6) 31.0 10.9 6.5 19.2 (18.6) (55.3)
Healthcare 37.1 (12.0) (18.8) 15.1 1.7 6.5 7.5 7.1 (22.8)
Industrials 5.9 (5.7) (26.4) 32.2 18.0 2.3 13.2 12.0 (39.9)
Info. Technology (40.9) (25.9) (37.4) 47.2 2.5 1.0 8.4 16.3 (43.1)
Materials (15.7) 3.4 (5.5) 38.2 13.2 4.4 18.2 22.4 (45.7)
Telecommunications (38.8) (12.2) (34.1) 6.8 19.8 (5.6) 36.8 11.9 (30.5)
Utilities 57.2 (30.4) (30.0) 26.2 24.3 16.8 21.0 19.4 (29.0)
*An appropriate benchmark is used prior to fund inception.

What's Up & What's Down
Total Returns
2009 2010 2011 2012 2013 2014 2015 2016 YTD
Dow Jones 30 Ind. 22.7 14.1 8.4 10.2 29.7 10.0 0.2 16.5 6.2
Dow Jones 15 Ut. 12.5 6.5 19.7 1.6 12.7 30.7 (3.1) 18.2 7.5
Dow Jones Trans. 18.6 26.7 0.0 7.5 41.4 25.1 (16.8) 22.3 1.7
NASDAQ Comp. 45.3 18.1 (0.8) 17.7 40.2 14.8 7.1 9.0 10.5
Dynamic Maximizers 9.7 9.5 10.9 4.2 5.9 9.2 1.5 6.1 2.5
Young Research's RCs 30.0 15.6 10.0 9.9 21.2 7.1 (2.5) 15.1 3.9
Wellesley Income 16.0 10.6 9.6 10.1 9.2 8.1 1.3 8.1 2.3
Wellington 22.2 10.9 3.9 12.6 19.7 9.8 0.1 11.0 3.5
VG Consumer Stap.* 16.6 14.6 13.6 11.0 28.0 16.0 5.8 6.3 6.1
VG High Div Yield 17.2 14.2 10.5 12.7 30.1 13.5 0.3 17.0 3.9
VG Dividend Growth 21.7 11.4 9.4 10.4 31.5 11.8 2.7 7.5 5.6
iShares Canada 53.1 19.8 (12.4) 9.1 5.3 1.1 (23.9) 23.8 3.3
iShares Switzerland 22.1 14.4 (7.9) 21.9 25.7 (1.7) 0.3 (2.5) 8.4
Vanguard Materials* 51.4 24.5 (9.5) 17.3 24.9 5.9 (10.2) 21.5 6.9
PwrShrs High Div. Achievers
3.6 20.9 8.6 6.3 30.5 18.0 2.4 31.4 2.0
TRP New Era 49.4 21.0 (15.1) 4.0 15.7 (7.8) (18.8) 25.0 (0.6)
SPDR Gold Trust 24.0 29.3 9.6 6.6 (28.3) (2.2) (10.7) 8.0 6.5
CurrShares CHF* 2.2 10.5 (1.1) 2.2 2.2 (10.6) (1.8) (2.7) 0.4
CurrShares CAD* 15.2 5.0 (1.8) 2.7 (6.3) (8.4) (16.2) 2.7 0.1
Amer. Century 2025 (10.7) 14.7 30.1 5.2 (12.0) 16.5 0.9 1.3 0.3
VG ST Inv-Grade 14.0 5.2 1.9 4.5 1.0 1.8 1.0 2.7 0.4
Vanguard GNMA 5.3 7.0 7.7 2.3 (2.2) 6.7 1.3 1.8 (0.2)
VG IT Inv-Grade 14.0 5.2 1.9 4.5 1.0 1.8 1.0 2.7 0.7
S&P 500 Sector Indices
Composite 26.4 15.1 2.1 16.0 32.4 13.7 1.4 12.0 6.5
Con. Discretionary 41.3 27.7 6.1 23.9 43.1 9.7 10.1 6.0 6.6
Consumer Staples 14.9 14.1 14.0 10.8 26.1 16.0 6.6 5.4 6.3
Energy 13.8 20.4 4.7 4.6 25.0 (7.8) (21.1) 27.4 (4.7)
Financials 17.1 12.1 (17.1) 28.7 35.6 15.2 (1.6) 22.7 6.7
Healthcare 19.7 2.9 12.7 17.9 41.5 25.3 6.9 (2.7) 9.7
Industrials 20.9 26.7 (0.6) 15.3 40.6 9.8 (2.6) 18.8 5.7
Info. Technology 61.7 10.2 2.4 14.8 28.4 20.1 5.9 13.8 10.7
Materials 48.6 22.2 (9.8) 15.0 25.6 6.9 (8.4) 16.7 5.4
Telecommunications 8.9 19.0 6.3 18.3 11.5 3.0 3.4 23.5 (2.5)
Utilities 11.9 5.5 19.9 1.3 13.2 29.0 (4.8) 16.3 5.8
*An appropriate benchmark is used prior to fund inception.

Obama Administration "Manufacturing Opinion"

Continuing on the international front, I support Weekly Standard Senior Editor Christopher Caldwell’s recent writings in Hillsdale College’s Imprimis. According to Mr. Caldwell, Vladimir Putin is “a hero to populist conservatives around the world and anathema to progressives.” Opining on the international campaign against Putin, Caldwell looks at “the attempt by the outgoing Obama administration to cast doubt on the legitimacy of last November’s presidential election by implying that the Russian government somehow ‘hacked’ it’.” This is an “extraordinary episode in the history of manufacturing opinion,” writes Caldwell.  

Schumer, McCain, Ryan—All Misfired

Washington’s Schumer (D)/McCain (R) crowd is set on making life ugly for Vladimir Putin, as well as for Donald Trump. And obviously Trump cannot count on much support from the likes of misfiring House GOP leader Paul Ryan, who after seven years could not even muster up a plausible health care alternative to the travesty that is ObamaCare.

Invest with Dick Young

Earlier, I explained in detail my first meaningful investment of the Trump era, and I will add pieces to my plan as the year unfolds. You can get off to a perfect start by investing right along with me today, as well as by employing either of my approved custodians, Vanguard or Fidelity, to safeguard your own personal fortune. Make it a good month.

Warm regards,

Signature

P.S. Did you know the cost of photovoltaic solar has dropped by over 80% since 2008? Is solar now cost-effective for you? Google’s Project Sunroof can help you decide. Project Sunroof has built 3-D models of rooftops in all 50 states, looked at the trees around people’s homes, considered local weather, and has calculated how much energy each house or building can generate if its owners buy solar panels. Google found nearly 80% of all buildings it has modeled are viable for solar panels. Maybe your home is, too. You can check to see what Google thinks of your solar prospects by entering your address on its Project Sunroof website at www.google.com/sunroof (not all locations are covered).

P.P.S. In March, Harley-Davidson unveiled the new Street Rod, a bike aimed at younger riders in urban areas. The Street Rod sports a new High Output Revolution X 750 engine, with loads of power between 3,000 and 5,000 rpm. I love the bike’s look. It’s styled without much chrome, and a lot of black. Debbie and I have travelled over 120,000 miles on our Harleys, gathering on-the-ground intelligence in small towns and big cities across America. In the nineties, Harley-Davidson was Young Research’s “Stock of the Decade.” A $10,000 investment in Harley shares at year-end 1986 turned into over $1.6 million at year-end 2001. We visited dealerships across the country to build our knowledge of the brand and the business. Unfortunately, we won’t be heading out on our Harleys anymore, but Debbie and I have expanded our information-gathering reach with regular trips to Europe. Paris is our base of operations. We will be supplementing information gathered in Western Europe with a trek to Russia this summer to gain a firsthand perspective of the country at the center of today’s media dialogue.

P.P.P.S. In an international survey by the Wharton School, Switzerland was chosen as “The Best Country in the World.” This was the first year Switzerland was included in the survey. High scores for respecting property rights, being “open for business,” economic stability, safety, a well-developed legal system, an educated population, easy access to capital, prestige, and trustworthiness pushed Switzerland to the top spot. Wealthy émigrés from all over the world are flocking to the Alpine haven to enjoy the peace and economic freedom Switzerland provides. I visited Switzerland back in 2011 on one of my European fact-finding journeys. I have long been positive on Switzerland and have regularly advised the iShares MSCI Switzerland Capped ETF (NYSE: EWL). Read more about The Swiss Way at richardcyoung.com.

P.P.P.P.S I wrote the following a number of years ago: “The stock market, as measured by the Dow (ex dividends), was down for the 1965–1981 period. That’s half a working lifetime for many and most of a retirement for many more. This was a period of great inflation, as gold and oil broke away from long fixed prices. Inflation-hedge stocks, including energy stocks, were the place to be.” I advised then that “You can protect yourself from the potential of a similar occurrence by owning a mix of intrinsic value-oriented equities and equity mutual funds.” In a frightening similarity, the average daily movement in stocks during the first quarter of 2017 was the lowest since 1965. Low yields certainly feel 1965-ish or worse, and they make one wonder: Is this the beginning of a new stock market Polar Night?

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