Can The Spread Between Safe and Unsafe Corporate Bonds Predict Stock Returns?

We got an interesting question about our last piece on high yield corporate bonds, asking whether a widening spread had any predictive power for returns.  As the spread between highly rated AAA corporate bonds and below investment grade bonds has recently widened, that sort of information would be worth keeping in your back pocket as you lay out … [Read more...]

High Yield Bond Spreads: A Rocket Ship to Safety

Back in December, we penned a brief piece on the rapid rise of low-quality bond yields - the price was dropping out of the things, and it made a very impressive rocket-ship looking graph. Turns out, we were early on that trend - the last 6 weeks have seen the spread move further up and to the right.  To wit, here's the Bank of America Merrill … [Read more...]

2015 NASDAQ Dividend Reinvested Return

Many other sites report that the NASDAQ returned +5.19% in 2015.  On the contrary: with dividends included and reinvested, the NASDAQ returned +6.40% in 2015. Although including dividend reinvestment didn't switch a supposed loss into a gain (like it did with the S&P 500's 2015 return and the Dow Jones's 2015 return), it does show a nice … [Read more...]

Updated: The Shanghai Composite Versus the Bubble-Era NASDAQ of 2000

A few months back we posted our last update on a curious trend: the old being new again, and Shanghai Composite looking a little too much like the 2000-era NASDAQ post- Technology Bubble. At first, the comparison held up well.  Now, we have to admit - the NASDAQ's fall was tame compared to what's happened in the Shanghai Composite so far (so far … [Read more...]

2015 Dow Jones Industrial Average Return

The Dow Jones Industrial Average did not return -2.23% in 2015, although that is the number you see reported in the media.  Adjusted for dividend reinvestment, the Dow Jones Industrial Average actually returned +0.19% in 2015 - a narrow gain instead of a headline loss. You Need to Factor In Dividend Reinvestment As we pointed out in our similar … [Read more...]

Stock Picks for 2016!

One of our annual traditions is to enter into Financial Uproar's Annual Stock Picking contest - and this year is a special one.  We're the defending champion! Let's launch into the picks: NeuStar Inc. (NYSE:NSR) Cal-Marine Foods (NASDAQ:CALM) Tesoro Corp (NYSE:TSO) Honda Motor (NYSE:HMC) NeuStar Inc Neustar is an information … [Read more...]

2015 S&P 500 Return

Although many sources will report that the S&P 500 returned -0.73% in 2015... if you include dividend reinvestment, the S&P 500 actually returned 1.19% in 2015. Including dividends is the difference between reporting a negative return and a positive one. Dividend Reinvested Returns are Key! As we point out every year, most financial … [Read more...]

You Should Max Out Your Retirement Accounts As Early and Often as Possible

We came across a piece in Bloomberg claiming the 401(k) "crisis" is getting worse.  To wit: Tim Egan has been working since he was 14. He’s now 56 and has spent most of his career as a restaurant manager. He has virtually nothing saved for retirement and, until last month, never had a 401(k) account. It's true: 401(k)s aren't a universal option … [Read more...]

Are Tax-Advantaged Funds Actually Better For Your Taxable Account?

The number of types and styles of mutual funds and ETFs has expanded to a point where no one person can keep track of all of the options out there. There are, to use a technical term, 'a ton' of funds and fund types out there competing for your hard earned dollars. One of the more popular fund styles is the so-called tax-advantaged fund. Folks … [Read more...]

Riding the Market Weather

June 29th, 2006. It was an innocuous day as the stock market was booming in the post-9/11 recovery. The economy was torrid and the unemployment rate was 4.6% in the USA. That fall, I opened up my checking account with Charles Schwab with their floating-rate free checking account (with no minimums or ATM fees) was paying 4.50% interest. That … [Read more...]

Under 30? Here’s Why You Should Invest in the Stock Market

Gallup releases a semi-regular poll on the state of stock ownership - and it is one of the more depressing poll reads you can find out there in the world.  To wit: only a little more than half of Americans have any investments in the stock market, at least self-reported: We haven't even touched our previous peak right before the housing (and, … [Read more...]

Did Donald Trump Beat the S&P 500 With His Career Net Worth Increases?

I'll give a short answer, then back it up with a longer article: Trump's net worth increases probably beat investing in the S&P 500, depending on where you start the counter. (1974 - yes, 1982 - maybe, 1988 - no... but why 1982 and 1988?). However, it's really a silly question, for reasons I'll get to in this piece.  Here's the real … [Read more...]

CCC (and Below) Rated Corporate Bond Total Return Calculator

This article includes a calculator which lets you compute the total realized returns of CCC and below rated corporate debt, as tracked by the Bank of America Merrill Lynch US Corporate Master Index.  This index tracks speculative corporate debt, debt which is recognized to be more risky than the AAA, AA, and A debt tracked in our first calculator … [Read more...]

Maybe The Market Doesn’t Know Where Inflation is Headed

One of the topics we like to revisit time and time again is our calculation of the inflation, measured in CPI, that the market is expecting over various timeframes.  We most recently looked at inflation expectations at the end of August, and noted a recent uptick.  In fact, you don't even have to wait for our updates to get a quick gauge of the … [Read more...]

BBB, BB, and B Rated Corporate Bond Total Return Calculator

The following is a calculator which allows you to compute the total return of corporate bonds rated BBB, BB, or B, including allowances for inflation measured by the Consumer Price Index. It is based on the Bank of America Merrill Lynch US Corporate Master Index, split to only return corporate debt in the B to BBB range.  This can be considered … [Read more...]