John Wasik

Investing in the New China Syndrome

Dec 6, 2012 20:17 UTC

CHICAGO, Dec 6 (Reuters) – One of the ways to globalize your
portfolio and to tap growth in emerging markets is to recognize
the new China Syndrome. The world’s most populous country is
becoming a primary buyer for resources and technologies for its
growing population.

China’s growing demand will continue to boost prices on
everything from farmland to oil. The country now consumes more
than 40 percent of the world’s base metals, 23 percent of major
agricultural commodities and 20 percent of non-renewable energy
resources, according to a recent report by the International
Monetary Fund. Those figures are up from single-digit levels in
2000, in terms of net imports as a percentage of world imports.

There are a number of ways to invest in this trend through
exchange-traded funds, but first you need to understand the
breadth of its global implications.

In the view of economist Dambisa Moyo, author of “Winner
Take All,” China’s voracious appetite for everything from
aluminum to water will change geopolitics and drive commodities
prices higher over time.

The Zambian-born, Oxford- and Harvard-educated Moyo visited
22 countries to detail China’s influence in her research for the
book. She says China has been aggressively cutting deals on
every continent to acquire the resources it needs to feed its
people, build infrastructure and make consumer goods. In effect,
China has become a “monopsomist,” a single buyer that will
outbid all other parties to acquire what it needs.

Why you need to sidestep Apple stock in tech investing

Dec 3, 2012 19:34 UTC

CHICAGO, Dec 3 (Reuters) – It’s easy to believe in
technology stocks again.

After a dismal recession and sluggish recovery, the sector
is up 13.3 percent this year through Nov. 30, according to
Standard & Poor’s, slightly ahead of the broader S&P 500 Index.
Expect that run to continue, since gadget-buying will be strong
this holiday season and may continue into next year.

Yet the question for tech investors is whether Apple Inc
should remain a key holding. The stock already
dominates most tech portfolios because of its mammoth market
capitalization, making it one of the most valuable companies on
the planet. Apple is still the largest holding in the S&P 500
and peaked above $700 a share back in September. It’s been
trading below $600 since late October.

Four reasons dividends won’t fall off ‘fiscal cliff’

Nov 30, 2012 16:58 UTC

CHICAGO, Nov 30 (Reuters) – With a tax increase on dividends
and capital gains looming, high-dividend paying stocks may hold
up well – even if investment income rates climb on Jan. 1.

Unless Congress acts by the end of the year, taxes on
dividends will automatically rise from the current 15 percent to
as high as 39.6 percent. While that sounds like a draconian
increase, it should not discourage investors from owning
high-dividend paying stocks nor should it trigger a lasting
market decline.

You can blame inertia, but individual investors are likely
to stick with their dividend stocks anyway. And those who do may
even be rewarded for the fear factor of higher rates. Companies
like Wal-Mart have moved up dividend payments to
December. Others like Costco, Wynn Resorts and
Tyson Foods are declaring special dividends, some of
them quite substantial.

Nervous Nellies take safe road to capital preservation

Nov 26, 2012 16:56 UTC

CHICAGO, Nov 26 (Reuters) – Nervous Nellies can’t stand
losing money, so they typically hedge their portfolios with
investments seeking to preserve capital. With the fiscal cliff
looming, there are a lot more of these worriers out there who
are (temporarily) looking to put together worst-case scenario

Whether you think that the fiscal cliff crisis won’t be
resolved by the end of the year or fear inflation, a
calamity-proof portfolio can hedge against any number of perils.
This would be a prudent approach for anyone primarily focused on
capital preservation or a subset — possibly 40 percent — of a
larger portfolio in which you need to temper stock-market risk.
You can create it yourself or buy it off the shelf in the form
of a mutual fund.

When looking to safeguard your money, keep in mind that this
is not an aggressive or moderate growth portfolio. If you’re
young, can afford to take some risk or have a solid guaranteed
pension waiting for you, this is not an ideal strategy for you.

Community loan funds mix charity with social capitalism

Nov 23, 2012 16:13 UTC

CHICAGO, November 23 (Reuters) – When you are deciding how
to allocate your charity dollars before the end of this year,
you might want to consider investing in a community development
financial institution (CDFI).

There are nearly 1,000 private-sector community development
financial institutions that operate in all 50 states, according
to the CDFI Coalition. They range from local credit unions to
community loan funds and they perform a variety of roles from
providing venture capital to funding affordable housing.

What’s compelling about CDFIs is that they can combine
innovative social missions with service to low-income
communities. They are community partners that provide financing
for projects that have social value or may be neglected by
larger institutions. They can target underserved neighborhoods
and even develop sub-specialties such as sustainable development
and green businesses that have environmental missions.

Wealth effect will drive retail stocks

Nov 19, 2012 20:13 UTC

CHICAGO (Reuters) – This holiday season may prove to be a bell-ringer for stores and producers of consumer goods and services, despite disappointing recent retail sales reports.

The 0.3 percent drop in October sales the Commerce Department reported after a three-month increase was likely due to the impact of Superstorm Sandy. Sales should pick up in coming months. In fact, there are enough positive converging trends that stocks in this sector — especially for retailers and manufacturers of consumer durable and discretionary goods — will rise well into next year.

A continued economic recovery will amplify retail spending in 2013 — what economists call a multiplier effect. Increased discretionary spending flows throughout the economy, creating even more jobs and buying more goods and services.

Picking satellites to revolve around your core

Nov 16, 2012 14:38 UTC

CHICAGO, Nov 16 (Reuters) – The “core and satellite”
strategy for portfolio management is an elegant and simple
approach that will not only help you diversify but allow you to
reduce your country and political risk.

Your core consists of broad indexes of stocks and bonds with
exchange-traded funds like the Vanguard Total World Stock Index
ETF and the Schwab U.S. Aggregate Bond ETF.

Then you can have some fun by working on satellite holdings
that include emerging markets, specialized themes and dividend
payers. These are more specialized investments that focus on
long-term global growth and help distance you from increasing
volatility and the slow-growth economies of the U.S. and Europe.

Do a portfolio risk profile to prepare for fiscal cliff

Nov 12, 2012 22:59 UTC

CHICAGO (Reuters) – If the fiscal cliff triggers an economic slowdown, you need to prepare your portfolio by lowering its risk profile. Even if you think you’re prepared, it’s good to take a detailed look at what you own.

Classic modern portfolio theory holds that diversification among stocks, bonds, real estate and other asset classes will balance the tenuous relationship between risk and return.

When the stock market tumbles 2 percent in a single day – as it did on November 7 – many pundits say that’s a sign of things to come if Congress doesn’t resolve the mother of all tax hikes by the end of the year.

Hope for unloved U.S. financial services stocks

Nov 9, 2012 17:20 UTC

CHICAGO, Nov 9 (Reuters) – U.S. financial services stocks
may be the most unloved sector in recent memory, but they may
end up prospering in the coming year.

Individual investors have had solid reasons to be sour on
financials since 2008. Earlier this year, JPMorgan Chase & Co
disclosed a $6.2 billion loss in trading as part of its
“London Whale” scandal. Bank of America Corp and
Citigroup Inc continue to struggle, and all of the
megabanks were involved in a legal settlement over the troubling
“robo-signing” of mortgage documents.

The balance sheets of the megabanks are still bruised and
hiding untold woes of bad debts; their share prices have largely
reflected uncertainty since 2008.

Running the numbers on your college education ROI

Nov 5, 2012 22:42 UTC

CHICAGO, Nov 5 (Reuters) – Despite the sourness of the
recent job market, a college degree is still a good investment.
But picking your major is akin to assembling the right portfolio
– you have to be selective to maximize your returns.

Recent studies back this up: the Hamilton Project of the
Brookings Institution shows that a college degree can yield a
more than 15-percent return. That’s better than double the
average annual return of stocks over the last 60 years (6.8
percent), and five times the return of corporate bonds through
2010 (2.9 percent).

Even a hot investment like gold has only managed a 2 percent
average return over that period.