The lead story last week was all about the European Central Bank (ECB) embarking on its own version of quantitative easing (QE), announcing that it will purchase sovereign government bonds as part of a more than $1 trillion asset purchase program centered on various classes of bonds. After several months of jawboning his intent to enact QE, ECB President Mario Draghi didn't disappoint the markets, saying that the central bank's plan is to buy roughly 60 billion euros of bonds each month going out to September 2016.
Setting a long-term date up front demonstrates the ECB's commitment to tackling a stagnant eurozone economy while at the same time pushing against the deflationary forces that are endemic to that region. The U.S. template for QE has proved a worthy model for stimulating economic growth; that growth may be uneven for some sectors of the economy, but couple central-bank intervention with cheap energy prices and the odds favor a resumption of GDP growth north of 2% going forward. Foreign markets are applauding the ECB's actions as well. Shanghai and Mumbai led the gains overnight in Asia with moves of about 1%.Read
Investors are always looking for 'the next big thing' to not just validate recent market gains, but also fortify the bullish view as to why the major averages (and, for our purposes, high-yield asset valuations) should stand to gain. After a very back-and-forth year for the stock averages for much of 2014, the market got into gear in mid-October and managed to return roughly 8%–10% to index investors after the dust settled on Dec. 31. It wasn't pretty, but a positive year was in the record books.
The fundamental case for higher domestic equity valuations has been, and still is, relatively simple to comprehend. It's simply an incredible time in financial history. Inflation, for all its toxic historical reputation of killing off economic recoveries, is essentially absent from the U.S. recovery. For the most part, the costs of energy, raw materials and finished goods remain soft and are getting softer. Wage inflation is moving up primarily at the low end of the labor curve, only because the federal government is mandating higher minimum wages.Read
The compare and contrast feature includes a table of guaranteed yields reflecting current yields as a way to compare risk-free investments versus recommendations within the Cash Machine service. Having a handle on what Jumbo Certificates of Deposit, Treasury Bills, Treasury Notes, Ginnie Maes and Money Markets are paying provides important reference points for investors stepping outside these traditional and ultra-safe investments.
Yields determined as of 1/12/15.
I'm always looking for new investment opportunities to add to our portfolios. Here's what I'm researching right now. I'll let you know if any of these companies meet my buy criteria.
For almost a decade, Bryan has brought his expertise on high-yielding investments to the Cash Machine service. His main goal is to help income investors craft a portfolio that will pay a reliable income even during the worst of times. Read
Bryan Perry discusses four stocks with great potential during an inflationary environment with Liz Claman and David Asman, anchors of Fox Business' After the Bell TV segment.