Greek stocks surged on Monday after an unexpectedly easy victory for the ruling conservative party.
The Greek Athex Composite GD, +6.09%
jumped 7%, following the landslide victory of the conservative party led by Prime Minister Kyriakos Mitsotakis. The U.S.-listed Global X MSCI Greece ETF GREK, +7.50%
rose 6% in premarket action.
Mitsotakis’s New Democracy was leading the left-leaning Syriza party by more than 20 percentage points. Even so, it doesn’t look like it will have an outright majority, though the winning party under Greek rules gets bonus seats in a second round, which is likely to be held in either late June or early July.
The victory was unexpectedly large following a railway disaster and a wiretap scandal.
The yield on the 10-year Greek government bond TMBMKGR-10Y, 3.876%
fell 20 basis points to 3.81%.
Greece is on the verge of obtaining an investment-grade rating and achieved a positive primary balance — that is, a budget minus interest costs — last year.
Thanks to the financial assistance it’s received, the weighted average maturity of Greek debt was 17.5 years, according to Greece’s public-debt management agency, making it less susceptible to the rise in European Central Bank interest rates than other countries.
According to Goldman Sachs, the Greek debt-to-GDP ratio will fall by almost 10 percentage points in the next three years.
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Got a question about the mechanics of investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write me at beth.pinsker@marketwatch.com.
Dear Fix My Portfolio,
I think I have an uncommon problem. I’m a 65-year-old recently retired education administrator. I think I…
Long-term investors who can manage a 10-fund equity portfolio, as I described last week, have what I consider the absolute best shot at attractive returns no matter what happens in the stock market.
This time, in Part 2 of a series for do-it-yourself investors, I’ll tell you how to get much of that benefit with fewer funds.
The Merriman Financial Education Foundation has created seven additional equity portfolios that handily outperformed the S&P 500 over the past 53 calendar years, from 1970 through 2022.
Each requires only one to five funds. If you’re looking for action without too much angst, one of these seven could be for you.
First, let’s get the baseline comparison on the table.
From 1970 through 2022, $10,000 invested in the S&P 500 SPX, -0.60%
would have grown to $1.89 million. In the same period, a portfolio made up of equal parts of that index and nine other U.S. and international asset classes would have grown to $3.74 million.
Those additional asset classes made a mighty big difference.
The other asset classes are U.S. large-cap value stocks (US LCV), U.S. small-cap blend stocks (including both value and growth) (US SCB), U.S. small-cap value stocks (US SCV), real-estate investment trusts (REIT), international large-cap blend stocks (Intl LCB), international large-cap value stocks (Intl LCV), international small-cap blend stocks (Intl SCB), international small-cap value stocks (Intl SCV), and emerging markets stocks (Em Mrkt).
That’s a lot to keep track of, more than most people are willing to do.
A few years ago, I challenged Chris Pedersen, research director of our foundation, to find a way to achieve similar returns with no more than four funds.
Here are seven additional portfolios. In this table below (and available on my foundation’s website), you can see the breakdown of each fund and the asset classes that make up each one.
1. Chris came through, creating what we call the Worldwide Four-Fund portfolio. From 1970 through 2022, $10,000 would have grown to $3.92 million.
2. Of course, many people are skittish about owning funds with companies based outside the United States. For them, we created the U.S. Four-Fund combo. In this one, $10,000 grew to $4.09 million from 1970 through 2022.
If you’re wondering where these higher returns come from, the answer is simple: value stocks.
3. In our five-fund Worldwide All Value portfolio, $10,000 invested in 1970 would have grown to $5.34 million, nearly three times as much as the same investment in the S&P 500 alone.
4. For investors who want to stick with U.S. companies, there’s the U.S. All Value portfolio. In this simple but powerful combination, $10,000 would have grown to $6.43 million.
Compared with just the S&P 500, that seems pretty astounding. But hang onto your hat for a moment.
5. Both internationally and in the United States, small-cap value stocks have been the most productive of these asset classes. In our two-fund Worldwide All Small-Cap Value portfolio, $10,000 would have grown to an astonishing $9.14 million from 1970 through 2022.
That’s $7.25 million more than the S&P 500 alone.
6. The all-U.S. variation is the ultrasimple U.S. All Small-Cap Value portfolio. The 1970-2022 growth of $10,000 in this one-fund variation would have been $8.65 million.
U.S. small-cap value stocks have such a highly productive track record that they are part of every single suggested portfolio except the S&P 500 by itself.
By now, you might be thinking you’d like some of that small-cap value horsepower, but also some of the “safety” and familiarity of the good old S&P 500. That seems reasonable.
7. To meet that need, we created the U.S. Two Fund portfolio: equal parts of the S&P 500 and U.S. small-cap value stocks. From 1970 through 2022, an initial $10,000 would have grown to $4.48 million, more than twice as much as the S&P 500 by itself.
In Table 1, you can find these variations along with their 1970-2022 results.
Table 1
The far-right column, standard deviation, represent a common measure of risk. But in this case, I don’t think they are the best indicator. For many investors, a better measure involves the number of years in which they lose money.
Table 2
As you can see, the numbers in the far-right column aren’t that different from one another.
If you could accept a worst year of 36.8% (as in the bottom two rows), you could perhaps also live with a one-year loss of 42.2%, especially since it came bundled with the fewest losing years.
Of these alternative portfolios, the U.S. Two-Fund might be the most intriguing:
It taps into the power of U.S. small-cap value stocks, and can easily be modified.
You can substitute a target-date retirement fund or a balanced fund for the S&P 500.
During a period of high interest rates, it might be more difficult to impress investors with dividend stocks. But the stocks can have an important advantage over the long term. The dividend payouts can increase over the years, helping to push share prices higher over time.
When considering stocks for dividend income, yield shouldn’t be the only thing you consider. If a stock’s price has tumbled because investors are worried about the company’s business prospects, the dividend yield might be very high. A double-digit yield might mean investors expect to see a cut to the dividend soon.
There are many ways to look at companies’ expected ability to maintain or raise their dividend payouts. But one can also take a simple approach to begin researching stock choices.
For investors who would rather aim for long-term growth to go along with dividend income, or take a relatively conservative approach to growth while reinvesting dividends, a screen of stocks in the S&P 500 SPX, +0.33%
produces only 10 stocks with dividend yields of 4.5% or higher with majority “buy” or equivalent ratings among analysts polled by FactSet. Here they are, sorted by dividend yield:
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
The dividend yields for this group of 10 companies are based on current annual regular payout rates, with all paying quarterly except for Realty Income Corp. O, +1.30%,
which pays monthly.
These two oil and natural gas producers would have passed the above screen based on their most recent dividend payments and analysts’ sentiment, however, they pay a combined fixed-plus-variable dividend every quarter, with the fixed portion relatively low:
Shares of Pioneer Natural Resources Co. PXD, -0.77%
closed at $230 on April 14. Among analysts polled by FactSet, 59% rate the stock a “buy” or the equivalent, and the consensus price target is $257.42. The company pays a fixed quarterly dividend of $1.10 a share, which would make for a dividend yield of only 1.91%. However, the most recent variable quarterly dividend was $4.48 a share, for a combined quarterly dividend of $5.58, which would translate to an annualized dividend yield of 9.70%. The consensus estimate for dividends in 2025 is $4.63 — the analysts are only estimating the fixed portion of the dividend. Pioneer has held preliminary merger discussions with Exxon Corp. XOM, -1.16%,
according to a Wall Street Journal report.
Devon Energy Corp.’s DVN, -0.72%
stock closed at $55.70 on April 14. The shares are rated “buy” or the equivalent by 55% of analysts and the consensus price target is $67.66. The fixed portion of Devon’s quarterly dividend is 20 cents a share, for an annualized dividend yield of 1.44%. The variable portion of the most recent quarterly dividend was 69 cents a share. The total payout of 89 cents would make for an annual dividend yield of 6.39%. Analysts expect the fixed portion of annual dividends to total $3.61 in 2025, according to FactSet.
Democrats largely have closed ranks behind President Joe Biden ahead of next year’s election, but he isn’t completely without challengers for the party’s nomination.
Author and activist Marianne Williamson has thrown her hat in the ring, pursuing a longshot bid that comes after her 2020 presidential campaign fizzled out before the Iowa caucuses.
Why isn’t she falling in line and supporting her party’s incumbent president? What’s her pitch to people who think she’s not a serious candidate? What are her top economic proposals?
Williamson, 70, tackled those questions and more in a phone interview earlier this week.
Our Q&A with the Democratic presidential hopeful has been edited for clarity and length.
MarketWatch: In a nutshell, could you explain why you’re running for president?
Williamson: I’m running for president because I believe that some things need to be said and some changes need to be made, in order to repair some serious damage that’s been done to our democracy, to our country, to our people and to our environment over the last 50 years.
MarketWatch: You’ve talked about running to address “systemic economic injustices endured by millions of Americans” because of the “undue influence of corporate money on our political system.” What do you see as the top examples of that?
Williamson: During the 1970s, the average American worker had decent benefits, could afford a home, could afford a yearly vacation, could afford a car and could afford to send their child to college. In the last 48 years, there has been a $50 trillion transfer of wealth from the bottom 90% to the top 1% of Americans. That transfer has decimated our middle class. We are now at a point where if you are among 20% of Americans, then the economy’s doing pretty well for you. But, unfortunately, that 20% is surrounded by a vast sea of economic despair. We have 60,000 people in the United States who die every year because they can’t afford healthcare XLV, -1.11%,
one in four Americans living with a medical debt, and 18 million Americans unable to fill the prescriptions that their doctors give to them.
If you are in the club in America, if you are making it in America — and I have sold some books, so I understand the high side of the free market and have benefited, and I’m grateful for that — but no conscious persons wants to feel that they create wealth at the expense of other people having a chance. That is not American. It’s not what the American Dream is supposed to be.
I’m not trying to whitewash and romanticize American capitalism before this era. I’m not saying we were ever perfect, but it does seem to me that when I was growing up, the social consensus is that we were supposed to try. We knew that the higher good was that there would be this balance between individual liberty, including economic liberty, and a concern for the common good. But today concern for the common good has become almost derided as some quaint notion, and that we shouldn’t really give much more than lip service to it. And that’s a lot of human suffering that occurs because of that change in the social contract.
MarketWatch: Here’s kind of a two-part question. What would be your top economic priorities, and how in particular would you address high inflation and the recent banking KBE, -1.65% crisis?
Williamson: I’d like to see universal healthcare. I want to see tuition-free college at state colleges and universities, which is what we had in this country until the 1960s. There should be free childcare. There should be paid family leave. There should be guaranteed sick pay and a livable wage. And I think Americans are waking up to the fact that those things that I just mentioned are considered moderate issues in every other advanced democracy. They should not be considered left-wing fringe issues. They are granted to the citizens of every other advanced democracy.
That was your first question. The second has to do with high inflation. A lot of that high inflation has to do with price gouging by huge corporations, whether it has to do with food companies, transportation companies and so forth. All of those CEOs should testify before Congress and talk about the ways that they have — for the sake of their own profits — gouged the American people, particularly at such a time as this. And this is what happens when we normalize such a lack of conscience and such a lack of ethics within our system.
In terms of what happened with the bank in Silicon Valley SIVBQ, -3.39%,
which is what your third question was, right? I think the depositors should be made whole, but the bank executives who were taking multimillion-dollar bonuses for themselves, both before and right after the crash, they certainly should not get those bonuses. And also it’s concerning that some of the tech investors that would benefit the most from those deposits were the ones who caused the run on the bank. I don’t think that they should receive the benefit of what happens when those deposits are made whole. But the average depositor absolutely should be made whole in such cases.
MarketWatch: You mentioned free tuition and child care. Where would the funding for that come from?
Williamson: The funding should come, first of all, from taxation. The 2017 tax cut in this country was a $2 trillion tax cut, and 83 cents of every dollar went to the highest-earning corporations and individuals. Now that tax cut also included the middle-class tax cut, and the middle-class tax cut was good.
That tax cut for the highest earners should be repealed, but the middle-class tax cut should be put back in immediately.
Secondly, we should stop all the corporate subsidies. Why are we giving subsidies to these companies that are already making multibillions of dollars in profit and often then price gouging the American people?
Third, I believe there should be a wealth tax. If somebody has $50 million, I don’t have any problem with their paying an extra 2% tax. And if they have $1 billion, let them pay another 1%. Somebody with a $50 million portfolio, much less $1 billion in assets, would not even feel that change, but the changes in people’s lives that would be created by those shifts would be huge.
MarketWatch: Your campaign often gets described as a real longshot bid. Why are you running when so many people say you have a low chance for success?
Williamson: Well, certainly Donald Trump was considered a longshot. For that matter, when he began Barack Obama was considered a longshot. Surely we remember when Hillary Clinton was considered a shoo-in.
MarketWatch: A recent Monmouth University poll of Democratic voters found 11% had a favorable view of you, 16% had an unfavorable view, 21% had no opinion, and 52% had not heard of you. How do you win over those voters who have an unfavorable view, and how do you reach the folks who haven’t heard of you?
Williamson: Well, there was a poll that came out last week that put me at 10%, including 18% with independents and 21% with people under 30.
It’s very difficult for someone like myself to get the message out when you have such institutional resistance to my even being in the conversation, and that is displayed in various ways. But there is independent media today. God knows there’s TikTok, where my information seems to be doing quite well.
This early, no candidate should be allowing the polls to determine their path forward. I didn’t go into this expecting the approval of institutional forces. And I, as a matter of fact, expected the kind of resistance that I’ve received, but that doesn’t matter. What matters is that a certain agenda be placed before the American people, and I am providing that option — the option of that alternative agenda.
I believe that agenda is the way for the Democrats to win in 2024. But even more importantly, I think it’s the agenda that will lead to the repair of this country.
MarketWatch: You mentioned TikTok, and that has been a hot topic in Washington, D.C., in recent weeks. Do you have a view on the Democratic and Republican proposals to ban TikTok in the U.S.?
Williamson: I think the United States government does need to be concerned with tech XLK, -1.00%
surveillance, but I wish they were as concerned when it comes to American-run companies as when it comes to Chinese. It’s a serious issue, it’s a valid issue — the whole issue of surveillance. But it’s a gnarly issue as well, and rushing to shut something down, which is so obviously a platform depended on by millions and millions of Americans for information sharing, is never something that should be done lightly.
MarketWatch: Some Americans may know you only for your spiritual work, and these folks may not think you’re a serious presidential candidate. The White House press secretary indicated she’s in that camp. What’s your message to win those folks over?
Williamson: First of all, I don’t think of my campaign as quote-unquote trying to win anyone over. There’s something that I read years ago that has always guided my work: “If there’s something you genuinely need to say, there’s someone out there who genuinely needs to hear it.” I am speaking to people who I know agree with me. I wouldn’t be doing this if I weren’t aware that millions of people agree with me.
I think it’s very sad that the president would allow a presidential press podium to be used to mock a political opponent, and I think that many people were and are offended by that. This is a democracy. We should have as many voices out there as possible. We should have as many people running in an election as feel moved. Nobody has a monopoly on good ideas. There are ideas on the left and ideas on the right. There are ideas all across the spectrum, and this is a point in American history where we as Americans should hear them all.
MarketWatch: What do you think are some of the main things that President Biden has gotten right, and in what areas has he gone wrong?
Williamson: Well, the first thing he did right was he defeated Donald Trump. The president has taken an incremental approach to America’s problems, and I believe that he does wish to alleviate the suffering of many people whose lives are affected by some deeply unjust systems. But I don’t think that the alleviation of stress is enough right now. We need fundamental economic reform.
We also need a serious answer to climate change, and the president’s approval of the Willow project is not that. The president has said that he recognizes that climate change is an existential crisis, and yet he has given more oil CL00, +0.34%
permits than even Donald Trump did, and he has approved the Willow project.
The Democratic House and Senate — they did cut child poverty in half with the child tax credit, but then, when that expired six months later, they didn’t bother to permanentize it.
These are the kinds of half-measures and incremental measures which are not enough to change the fundamental economic patterns in this country that lead to so much chronic economic anxiety and despair.
Joe Biden is shown in conversation in August 2019 with Marianne Williamson during an event for Democratic presidential candidates in Clear Lake, Iowa.
AFP via Getty Images
MarketWatch: One thing that comes up often with President Biden is his age, which is 80, while you’re 70. Do you think his age should be a concern, or is it ageism to bring it up?
Williamson: I think the individual has to consider this themselves. I have a problem, of course, contributing to the conversation because of the issue of ageism. But on the other hand, everybody can see for themselves what they can see for themselves.
I can only say if I were 80, I wouldn’t be running. But you know, I will not take potshots at the president, and I think that veers into potshots.
MarketWatch: Let’s talk about taking on Donald Trump, Ron DeSantis or whomever the Republican nominee ends up being. Why do you think you’re the Democrat who could end up beating one of them?
Williamson: Republicans are going to throw some big lies at the Democrats in 2024, and the only way that we’re going to defeat them, in my opinion, is to tell some big truths. Franklin Roosevelt said we would not have to worry about a fascist takeover in this country as long as democracy delivered on its promises. Democracy has not delivered on its promises. The only way to beat Donald Trump or Ron DeSantis in 2024 is to propose an agenda in which democracy once again delivers on its promises to the majority of the American people. And that would mean the issues I mentioned before: universal healthcare, tuition-free college, free child care, a guaranteed livable wage and paid family leave. Those are given to the citizens in every other advanced democracy, and there is no good reason whatsoever why they are not delivered to the average citizen in the United States.
MarketWatch: There are Democrats who could be challenging President Biden for the party’s 2024 nomination, but they aren’t and instead they’re supporting him. Why aren’t there more efforts in the party to get people to run for president?
Williamson: Well, you’d have to ask them why they’re not running. But there’s clearly a trope that the field should clear, and everybody should simply get in line with the opinion of the Democratic establishment that Biden is the man because they have decided so. I don’t see it that way. I believe the Democratic primary voters — and independent voters and anyone else, if it’s an open primary — they should decide who the Democratic candidate is. To me, that’s what democracy is. That’s what elections are about.
MarketWatch: The Democratic Party is not expected to hold presidential primary debates for 2024. What can you do to change that and get some time on a debate stage?
Williamson: Well, I hope to have a successful campaign. I hope to have high poll numbers. I hope to have a lot of people in those primary states yelling foul. It’s a government of the people, by the people, for the people. The American people should hear what their options are, and that’s what a debate would be. If enough people realize that and believe it and make laws about it, then that is what will happen.
I think sometimes there’s a kind of learned powerlessness on the part of the American people today. We forget the radicalism of the American experiment, which is that the governance of this country is supposed to be in our hands. But the American people have been trained to expect too little and almost trained to give up the power of independent thought. I hope that my campaign and other things that occur in this campaign season will awaken people, and I think a certain kind of awakening is happening already.
MarketWatch: We’re a financially focused publication, so here’s a question along those lines. I looked at your financial disclosure from your 2020 presidential run. It showed some investments in big public companies like Apple AAPL, -0.58%
and Mastercard MA, +0.27%
…
Williamson: Wait, what are you talking about?
MarketWatch: That’s from your 2019 executive-branch personnel public financial disclosure report. It shows investments in various stocks and funds. The question — for our readers who are investors or people saving for retirement — is could you describe your own approach to investing and preparing for retirement?
Williamson: Socially responsible investing, and that’s why I said, “Whoa, what?” Because I believe in investing in socially responsible companies.
MarketWatch: One last question: What else would you like people to know?
Williamson: America has some serious problems, but we have infinite potential to solve those problems. We need to revisit our first principles, as John Adams said, and find that place in our hearts where, as Americans, as adults in this generation, we recognize that this profound idea of American democracy is put in our hands for safekeeping. And that doesn’t just give us rights; it gives us responsibilities. The political system in the United States speaks to us too often like we’re children, like we’re seventh-graders. Our public dialogue is too often on this kind of seventh-grade level. This is not a time to be an immature thinker, and it’s not a time to get into mean-spiritedness or cynicism either. If we allow ourselves to rise to the occasion, no matter what our politics are, we’re going to repair what has been broken, and we are going to initiate a new beginning. I think that’s possible. Other generations have done it, and we can do it, too.
MarketWatch: Thank you for being available to chat.
If you invest in dividend stocks, you are probably looking for long-term growth to go with the income. Otherwise you might be content to hold one-month U.S. Treasury bills, which yield 4.5% or park your money in an online savings account for a yield close to 4%.
Below is screen of stocks with current dividend yields ranging from 4.14% to 8.46%. What sets these apart from other stocks with high dividend yields is that their payout increases are expected to accelerate in 2023 and 2024 from those in 2022.
On Tuesday, S&P Dow Jones Indices said in a press release that it expected dividend payments by publicly traded U.S. companies to continue to hit record levels in 2023. But Howard Silverblatt, a senior index analyst with the firm, said that the pace of dividend increases in the first quarter had slowed and that he expected this year’s increases to be “at half the pace of the double-digit 2022 growth.”
Silverblatt also said current events in the banking industry were “expected to negatively impact future spending from both consumers and companies, which in turn may curtail corporate dividend growth.”
For many banks, there’s another big item on the table. A focus on share buybacks in recent years is very likely to end — this is a use of cash that can raise earnings per share if the share count is reduced, but there can be consequences, especially after a year of rising interest rates that pushed down the market value of banks’ investments in bonds.
In a note to clients on March 16, Dick Bove, a senior research analyst with Odeon Capital, predicted that stock repurchases in the banking industry would be “meaningfully cut back if not flat out eliminated.” He made three general points about buybacks in the banking industry:
Buybacks remove working capital that would otherwise provide returns to a bank.
Buybacks mean a bank’s board of directors is “in favor of flat-out giving capital away to investors that want nothing to do with the bank — they are selling its stock.”
Buybacks do “nothing to increase bank stock prices – many bank stocks are selling at below their prices of five years ago.”
A company might find it much easier to curtail or stop buying back shares to preserve cash than it is to cut regular dividends. Preserving and increasing the dividend over time has been correlated with good performance for stocks over time. These articles provide examples of how dividend compounding is correlated with long-term growth as income streams build up:
The S&P Dow Jones Indices report raises the question of which stocks might buck the trend.
Starting with the S&P 500 SPX, -0.50%,
there are 71 companies stocks with current dividend yields of at least 4.00% indicated by annual payout rates. Among these companies, 68 increased dividends during 2022, according to data provided by FactSet.
Then we looked at the pace of dividend increases in 2022 and the consensus estimates for dividends paid during 2023 and 2024, among analysts polled by FactSet. Among the remaining 68 companies, there are 29 for which the estimated 2023 dividend increase is higher than the 2022 dividend increase. Narrowing further, there are 14 for which the estimated 2024 dividend increases are higher than the estimated 2023 dividend increases.
Here are the 14 stocks that passed the screen, sorted by current dividend yield:
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Any stock screen is limited, but can be useful as a starting point or supplement to your own research. If you see any companies of interest, do some research to form your own opinion of how likely they are to remain competitive over the next decade, at least.
It should be noted that Deutsche Bank’s 5-year credit-default swap, which was 215 on Friday, is nowhere near the peak for Credit Suisse, which was 1,194, according to S&P Global data. The higher the value of the CDS, the more likely the market sees the issuer defaulting.
Deutsche Bank’s AT1 bonds have tumbled in value after Switzerland wiped out Credit Suisse’s CSGN, -5.19%
securities in the deal for it to be taken over by UBS UBSG, -3.55%.
The Invesco AT1 Capital Bond UCITS ETF AT1, -1.97%,
which invests in these convertible bonds, has dropped 18% this month as investors lose faith in the securities. European and other banking regulators across the globe have insisted they will not follow Switzerland’s precedent, and first let bank equity fall to zero before wiping out the convertible securities in the event of a failure.
“It is doubtful that banks will be able to issue new AT1 anytime soon, increasing the likelihood of outstanding AT1 notes being extended. We consider that the recent events in the banking sector have resulted in substantially increased uncertainty, which is likely to continue to be reflected as substantial short-term volatility in credit markets,” said analysts at ING.
UBS UBS, -0.94%
also is feeling the stress in a deal that the banks say might not complete this year. UBS shares dropped 6%.
Analysts also noted that a foreign institution tapped a Fed facility for $60 billion, according to data released by the U.S. central bank on Thursday. The Fed does not identify the counterparties. Major central banks do have access to swap lines for dollar borrowing from the Fed, meaning that either it was an institution that does not have that capability, or it was one that wanted to do so anonymously.
Norway’s sovereign wealth fund had a 1.49% stake in Credit Suisse Group AG at the end of 2022 and a 3.31% stake in UBS Group AG, holdings that remain “approximately unchanged,” it said Monday.
UBS yesterday agreed to take over Swiss rival Credit Suisse for more than $3 billion as regulators pushed for the deal in an effort to calm declining confidence in the global banking system.
Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares held, but holders of around $17.3 billion of additional tier 1 bonds, or AT1s, will receive nothing.
Norges Bank Investment Management, the arm of Norway’s central bank that manages the sovereign-wealth fund, commonly known as the oil fund, said that it doesn’t hold any Credit Suisse AT1 bonds.
Write to Dominic Chopping at dominic.chopping@wsj.com
Shares of regional banks posted big gains on Tuesday as they regained their footing after huge losses in the previous session, but volatility continued in the sector following the demise of Silicon Valley Bank, Signature Bank and Silvergate Capital in the past week.
While the rise in some cases is eye-popping, most stocks have yet to recover fully from losses in the past few days. Most stocks are trading well below their levels from a week ago, even with Tuesday’s gains.
Hedge funds are offering to buy startup deposits at Silicon Valley Bank (SVB) for as little as 60 cents on the dollar, Semafor reported on Saturday, citing people familiar with the matter.
Bids range from 60 to 80 cents on the dollar, the report said adding that the range reflects expectations for how much of the uninsured deposits will be eventually recovered once the bank’s assets are sold or wound down.
Firms like Oaktree which are known for investing in distressed debt are contacting startup businesses after SVB’s SIVB, -60.41%
seizure by the Federal Deposit Insurance Corp (FDIC), the report said.
Traders from investment bank Jefferies are also contacting startup founders with deposits at the bank, offering to buy their deposit claims at a discount, The Information reported separately.
Jefferies is offering at least 70 cents on the dollar for deposit claims, the report said, citing several people with direct knowledge of the matter.
Oaktree declined to comment on the reports. Jefferies could not be immediately reached for comment.
Silicon Valley Bank was taken over by the U.S. Federal Deposit Insurance Corporation on Friday after depositors, concerned about the lender’s financial health, rushed to withdraw their their deposits. The two-day run on the bank stunned markets, wiping out more than $100 billion in market value for U.S. banks.
David Rosenberg, the former chief North American economist at Merrill Lynch, has been saying for almost a year that the Fed means business and investors should take the U.S. central bank’s effort to fight inflation both seriously and literally.
Rosenberg, now president of Toronto-based Rosenberg Research & Associates Inc., expects investors will face more pain in financial markets in the months to come.
“The recession’s just starting,” Rosenberg said in an interview with MarketWatch. “The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle.” Investors can expect to endure more uncertainty leading up to the time — and it will come — when the Fed first pauses its current run of interest rate hikes and then begins to cut.
Fortunately for investors, the Fed’s pause and perhaps even cuts will come in 2023, Rosenberg predicts. Unfortunately, he added, the S&P 500 SPX, -0.61%
could drop 30% from its current level before that happens. Said Rosenberg: “You’re left with the S&P 500 bottoming out somewhere close to 2,900.”
At that point, Rosenberg added, stocks will look attractive again. But that’s a story for 2024.
In this recent interview, which has been edited for length and clarity, Rosenberg offered a playbook for investors to follow this year and to prepare for a more bullish 2024. Meanwhile, he said, as they wait for the much-anticipated Fed pivot, investors should make their own pivot to defensive sectors of the financial markets — including bonds, gold and dividend-paying stocks.
MarketWatch: So many people out there are expecting a recession. But stocks have performed well to start the year. Are investors and Wall Street out of touch?
Rosenberg: Investor sentiment is out of line; the household sector is still enormously overweight equities. There is a disconnect between how investors feel about the outlook and how they’re actually positioned. They feel bearish but they’re still positioned bullishly, and that is a classic case of cognitive dissonance. We also have a situation where there is a lot of talk about recession and about how this is the most widely expected recession of all time, and yet the analyst community is still expecting corporate earnings growth to be positive in 2023.
In a plain-vanilla recession, earnings go down 20%. We’ve never had a recession where earnings were up at all. The consensus is that we are going to see corporate earnings expand in 2023. So there’s another glaring anomaly. We are being told this is a widely expected recession, and yet it’s not reflected in earnings estimates – at least not yet.
There’s nothing right now in my collection of metrics telling me that we’re anywhere close to a bottom. 2022 was the year where the Fed tightened policy aggressively and that showed up in the marketplace in a compression in the price-earnings multiple from roughly 22 to around 17. The story in 2022 was about what the rate hikes did to the market multiple; 2023 will be about what those rate hikes do to corporate earnings.
“ You’re left with the S&P 500 bottoming out somewhere close to 2,900. ”
When you’re attempting to be reasonable and come up with a sensible multiple for this market, given where the risk-free interest rate is now, and we can generously assume a roughly 15 price-earnings multiple. Then you slap that on a recession earning environment, and you’re left with the S&P 500 bottoming out somewhere close to 2900.
This is just pure mathematics. All the stock market is at any point is earnings multiplied by the multiple you want to apply to that earnings stream. That multiple is sensitive to interest rates. All we’ve seen is Act I — multiple compression. We haven’t yet seen the market multiple dip below the long-run mean, which is closer to 16. You’ve never had a bear market bottom with the multiple above the long-run average. That just doesn’t happen.
David Rosenberg: ‘You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios.’
Rosenberg Research
MarketWatch: The market wants a “Powell put” to rescue stocks, but may have to settle for a “Powell pause.” When the Fed finally pauses its rate hikes, is that a signal to turn bullish?
Rosenberg: The stock market bottoms 70% of the way into a recession and 70% of the way into the easing cycle. What’s more important is that the Fed will pause, and then will pivot. That is going to be a 2023 story.
The Fed will shift its views as circumstances change. The S&P 500 low will be south of 3000 and then it’s a matter of time. The Fed will pause, the markets will have a knee-jerk positive reaction you can trade. Then the Fed will start to cut interest rates, and that usually takes place six months after the pause. Then there will be a lot of giddiness in the market for a short time. When the market bottoms, it’s the mirror image of when it peaks. The market peaks when it starts to see the recession coming. The next bull market will start once investors begin to see the recovery.
But the recession’s just starting. The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle when the central bank has cut interest rates enough to push the yield curve back to a positive slope. That is many months away. We have to wait for the pause, the pivot, and for rate cuts to steepen the yield curve. That will be a late 2023, early 2024 story.
MarketWatch: How concerned are you about corporate and household debt? Are there echoes of the 2008-09 Great Recession?
Rosenberg: There’s not going to be a replay of 2008-09. It doesn’t mean there won’t be a major financial spasm. That always happens after a Fed tightening cycle. The excesses are exposed, and expunged. I look at it more as it could be a replay of what happened with nonbank financials in the 1980s, early 1990s, that engulfed the savings and loan industry. I am concerned about the banks in the sense that they have a tremendous amount of commercial real estate exposure on their balance sheets. I do think the banks will be compelled to bolster their loan-loss reserves, and that will come out of their earnings performance. That’s not the same as incurring capitalization problems, so I don’t see any major banks defaulting or being at risk of default.
But I’m concerned about other pockets of the financial sector. The banks are actually less important to the overall credit market than they’ve been in the past. This is not a repeat of 2008-09 but we do have to focus on where the extreme leverage is centered.
It’s not necessarily in the banks this time; it is in other sources such as private equity, private debt, and they have yet to fully mark-to-market their assets. That’s an area of concern. The parts of the market that cater directly to the consumer, like credit cards, we’re already starting to see signs of stress in terms of the rise in 30-day late-payment rates. Early stage arrears are surfacing in credit cards, auto loans and even some elements of the mortgage market. The big risk to me is not so much the banks, but the nonbank financials that cater to credit cards, auto loans, and private equity and private debt.
MarketWatch: Why should individuals care about trouble in private equity and private debt? That’s for the wealthy and the big institutions.
Rosenberg: Unless private investment firms gate their assets, you’re going to end up getting a flood of redemptions and asset sales, and that affects all markets. Markets are intertwined. Redemptions and forced asset sales will affect market valuations in general. We’re seeing deflation in the equity market and now in a much more important market for individuals, which is residential real estate. One of the reasons why so many people have delayed their return to the labor market is they looked at their wealth, principally equities and real estate, and thought they could retire early based on this massive wealth creation that took place through 2020 and 2021.
Now people are having to recalculate their ability to retire early and fund a comfortable retirement lifestyle. They will be forced back into the labor market. And the problem with a recession of course is that there are going to be fewer job openings, which means the unemployment rate is going to rise. The Fed is already telling us we’re going to 4.6%, which itself is a recession call; we’re going to blow through that number. All this plays out in the labor market not necessarily through job loss, but it’s going to force people to go back and look for a job. The unemployment rate goes up — that has a lag impact on nominal wages and that is going to be another factor that will curtail consumer spending, which is 70% of the economy.
“ My strongest conviction is the 30-year Treasury bond. ”
At some point, we’re going to have to have some sort of positive shock that will arrest the decline. The cycle is the cycle and what dominates the cycle are interest rates. At some point we get the recessionary pressures, inflation melts, the Fed will have successfully reset asset values to more normal levels, and we will be in a different monetary policy cycle by the second half of 2024 that will breathe life into the economy and we’ll be off to a recovery phase, which the market will start to discount later in 2023. Nothing here is permanent. It’s about interest rates, liquidity and the yield curve that has played out before.
MarketWatch: Where do you advise investors to put their money now, and why?
Rosenberg: My strongest conviction is the 30-year Treasury bond TMUBMUSD30Y, 3.674%.
The Fed will cut rates and you’ll get the biggest decline in yields at the short end. But in terms of bond prices and the total return potential, it’s at the long end of the curve. Bond yields always go down in a recession. Inflation is going to fall more quickly than is generally anticipated. Recession and disinflation are powerful forces for the long end of the Treasury curve.
As the Fed pauses and then pivots — and this Volcker-like tightening is not permanent — other central banks around the world are going to play catch up, and that is going to undercut the U.S. dollar DXY, +0.70%.
There are few better hedges against a U.S. dollar reversal than gold. On top of that, cryptocurrency has been exposed as being far too volatile to be part of any asset mix. It’s fun to trade, but crypto is not an investment. The crypto craze — fund flows directed to bitcoin BTCUSD, +0.35%
and the like — drained the gold price by more than $200 an ounce.
“ Buy companies that provide the goods and services that people need – not what they want. ”
I’m bullish on gold GC00, +0.22%
– physical gold — bullish on bonds, and within the stock market, under the proviso that we have a recession, you want to ensure you are invested in sectors with the lowest possible correlation to GDP growth.
Invest in 2023 the same way you’re going to be living life — in a period of frugality. Buy companies that provide the goods and services that people need – not what they want. Consumer staples, not consumer cyclicals. Utilities. Health care. I look at Apple as a cyclical consumer products company, but Microsoft is a defensive growth technology company.
You want to be buying essentials, staples, things you need. When I look at Microsoft MSFT, -0.61%,
Alphabet GOOGL, -1.79%,
Amazon AMZN, -1.17%,
they are what I would consider to be defensive growth stocks and at some point this year, they will deserve to be garnering a very strong look for the next cycle.
You also want to invest in areas with a secular growth tailwind. For example, military budgets are rising in every part of the world and that plays right into defense/aerospace stocks. Food security, whether it’s food producers, anything related to agriculture, is an area you ought to be invested in.
You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios. If you follow that you’ll do just fine. I just think you’ll do far better if you have a healthy allocation to long-term bonds and gold. Gold finished 2022 unchanged, in a year when flat was the new up.
In terms of the relative weighting, that’s a personal choice but I would say to focus on defensive sectors with zero or low correlation to GDP, a laddered bond portfolio if you want to play it safe, or just the long bond, and physical gold. Also, the Dogs of the Dow fits the screening for strong balance sheets, strong dividend payout ratios and a nice starting yield. The Dogs outperformed in 2022, and 2023 will be much the same. That’s the strategy for 2023.
Turkey’s lira hit a record low and its stock market tumbled on Monday after a major earthquake killed nearly 1,500 people and wounded thousands of others in the country, piling on further economic hardship in a region already grappling with economic instability and geopolitical turmoil. Another 700 deaths have been reported in Syria, according to Reuters.
The Turkish lira USDTRY, +0.05%
fell to a record low of 18.83 against a strong dollar on Monday, while the country’s major stock index, the Turkey ISE National 100 XU100, -1.35%
— which tracks the performance of 100 companies selected from the National Market, real estate investment trusts and venture capital investment trusts listed on the Istanbul Stock Exchange — tumbled 1.4%.
The iShares MSCI Turkey ETF TUR, -1.88%,
which tracks several dozen Turkish equities, slumped 1.9%.
At least 1,498 people were killed and 8,533 people were injured in Turkey when a magnitude 7.8 earthquake struck central Turkey and northwest Syria early Monday morning, followed by another large quake in the afternoon, according to Yunus Sezer, the head of Turkey’s Disaster and Emergency Management Agency.
The U.S. Geological Survey estimated on Monday that there was a high probability that the economic losses from the initial earthquake could top $1 billion.
The ICE U.S. Dollar Index DXY, +0.72%,
a measure of the currency against a basket of six major rivals, jumped 0.7% on Monday.
Oil futures traded lower as of Monday morning despite news reports that Turkey has halted crude-oil flows to its export terminal in Ceyhan. Turkish pipeline operator BOTAS said there was no damage on main pipelines which carry crude oil from Iraq and Azerbaijan to Turkey, according to Reuters.
Iraq’s semi-autonomous Kurdistan Regional Government has stopped shipments through the pipeline which runs from Iraq’s northern Kirkuk fields to Ceyhan, the region’s ministry of natural resources said on Monday.
“‘Cash used to be trashy. Cash is pretty attractive now. It’s attractive in relation to bonds. It’s actually attractive in relation to stocks.’”
Bridgewater Associates founder Ray Dalio no longer thinks “cash is trash.” In fact, just the opposite.
Over the past year, cash has become “pretty attractive” relative to both stocks and bonds, the famed hedge-fund manager said during a Thursday interview with CNBC.
While bonds might offer investors a higher yield, swollen public-sector debts in the U.S., Europe and Japan and negative real yields have made debt securities less appealing, Dalio said.
That’s a notable shift from last May, when Dalio said that cash was still “trash” but that stocks were “trashier” as the 2022 market meltdown got underway. Dalio offered an update in October, when he tweeted that he had changed his mind about cash and now viewed it as “about neutral.”
Dalio has become closely associated with the “cash is trash” line after using it in several interviews dating back to at least 2019. Back then, rock-bottom interest rates were bolstering valuations of both stocks and bonds.
During the cable-news interview, Dalio offered some criticisms of bitcoin BTCUSD, +0.56%,
which, like stocks, has rebounded since the start of the year.
“I think you’re going to see the development of coins that you haven’t seen that will be attractive, viable coins … [but] I don’t think bitcoin is it,” he said.
The billionaire recently stepped back from day-to-day management at Bridgewater Associates, the pioneering hedge fund that he built into the world’s largest in terms of assets under management.
Bridgewater announced on Thursday that the firm had promoted Karen Karniol-Tambour to the position of co–chief investment officer alongside Bob Prince and Greg Jensen.
These are tricky times in the stock market, so it pays to look to the best stock-fund managers for guidance on how to behave now. Veteran value investor Bill Nygren belongs in this camp, because the Oakmark Fund OAKMX he co-manages consistently and substantially outperforms its peers.
That isn’t easy, considering how many fund managers fail to do so. Nygren’s fund beats its Morningstar large-cap value index and category by more than four percentage points annualized over the past three years. It also outperforms at five and…
Elon Musk testified Monday he believed he had funding secured to take Tesla Inc. private, both from a Saudi Arabia investment fund and from his stake in SpaceX.
The Tesla chief executive resumed testimony in a federal trial in San Francisco over investor losses allegedly caused by tweets he fired off in 2018, including his “funding secured” tweet.
Representatives of Saudi Arabia’s investment fund “were unequivocal about moving forward,” Musk said. He also mentioned his large stake in privately held aerospace company SpaceX, and that “alone meant funding was secured.”
Tesla TSLA, +8.48%
stock added to gains as Musk’s testimony got underway, and at last check was up nearly 8% and far outperforming the broader equity indexes.
The stock traded as high as $143.50, its highest intraday since Dec. 20, and was on pace to close at its best since that date.
The CEO told the court that the $420-a-share price on the deal “was a coincidence” as it was roughly a 20% premium over Tesla’s stock price at the time, and “not a joke.”
In certain circles, the number 420 refers to marijuana use.
Lead defense lawyer Nicholas Porritt also asked several questions that led Musk to say he hadn’t talked to major Tesla shareholders such as Baillie Gifford and T. Rowe Price about possibly taking Tesla private. Musk also said he couldn’t recall specifics around speaking with the board about the plan.
Firing off the now famous “funding secured” was a way to stay ahead of a soon-to-be-run Financial Times story about the Saudi fund taking a large stake at Tesla and as a way to keep all Tesla investors informed, Musk said. Moreover, he tweeted that he was “considering” the move, “not saying that it would be done,” Musk told the court.
Musk gave brief testimony Friday before the court adjourned for the day, taking pains to make clear that his tweets are not always taken to the letter. The trial started last week and it is expected to go into February.
“Just because I tweet something, it does not mean people believe it, or act accordingly,” Musk said on Friday to a defense attorney.
The trial revolves around Musk’s tweets from August 2018, including one where he told his millions of Twitter followers he was “considering taking Tesla private at $420” and then added “funding secured.” The plan later fizzled out.
Investor Glen Littleton, the lead plaintiff in the case, alleges he lost money due to the false tweets and is seeking damages.
U.S. District Judge Edward Chen already has ruled that Musk’s tweets about taking Tesla private were not true and that Musk acted with recklessness.
It is still up to jurors to decide, however, if the tweets were material to investors and if the falsehoods caused investor losses.
The CEO and Tesla each were fined $20 million in September 2018 to settle civil charges around the “funding secured” tweets and Musk was stripped of his chairman role at Tesla.
Musk and Tesla agreed to settle the charges against them without admitting to nor denying the SEC’s allegations.
Many people are good at saving up money for retirement. They manage expenses and build up their nest eggs steadily. But when it comes time to begin drawing income from an investment portfolio, they might feel overwhelmed with so many choices.
Some income-seeking investors might want to dig deeply into individual bonds or dividend stocks. But others will want to keep things simple. One of the easiest ways to begin switching to an income focus is to use exchange-traded funds. Below are examples of income-oriented exchange-traded funds (ETFs) with related definitions further down.
First, the inverse relationship
Before looking at income-producing ETFs, there is one concept we will have to get out of the way — the relationship between interest rates and bond prices.
Stocks represent ownership units in companies. Bonds are debt instruments. A government, company or other entity borrows money from investors and issues bonds that mature on a certain date, when the issuer redeems them for the face amount. Most bonds issued in the U.S. have fixed interest rates and pay interest every six months.
Investors can sell their bonds to other investors at any time. But if interest rates in the market have changed, the market value of the bonds will move in the opposite direction. Last year, when interest rates rose, the value of bonds declined, so that their yields would match the interest rates of newly issued bonds of the same credit quality.
It was difficult to watch bond values decline last year, but investors who didn’t sell their bonds continued to receive their interest. The same could be said for stocks. The benchmark S&P 500 SPX, -0.20%
fell 19.4% during 2022, with 72% of its stocks declining. But few companies cut dividends, just as few companies defaulted on their bond payments.
One retired couple that I know saw their income-oriented brokerage account value decline by about 20% last year, but their investment income increased — not only did the dividend income continue to flow, they were able to invest a bit more because their income exceeded their expenses. They “bought more income.”
The longer the maturity of a bond, the greater its price volatility. Depending on the economic environment, you might find that a shorter-term bond portfolio offers a “sweet spot” factoring in price volatility and income.
And here’s a silver lining — if you are thinking of switching your portfolio to an income orientation now, the decline in bond prices means yields are much more attractive than they were a year ago. The same can be said for many stocks’ dividend yields.
Downside protection
What lies ahead for interest rates? With the Federal Reserve continuing its efforts to fight inflation, interest rates may continue to rise through 2023. This can put more pressure on bond and stock prices.
Ken Roberts, an investment adviser with Four Star Wealth Management in Reno, Nev., emphasizes the “downside protection” provided by dividend income in his discussions with clients.
“Diversification is the best risk-management tool there is,” he said during an interview. He also advised novice investors — even those seeking income rather than growth — to consider total returns, which combine the income and price appreciation over the long term.
An ETF that holds bonds is designed to provide income in a steady stream. Some pay dividends quarterly and some pay monthly. An ETF that holds dividend-paying stocks is also an income vehicle; it may pay dividends that are lower than bond-fund payouts and it will also take greater risk of stock-market price fluctuation. But investors taking this approach are hoping for higher total returns over the long term as the stock market rises.
“With an ETF, your funds are diversified. And when the market goes through periods of volatility, you continue to enjoy the income, even if your principal balance declines temporarily,” Roberts said.
If you sell your investments into a declining market, you know you will lose money — that is, you will sell for less than your investments were worth previously. If you are enjoying a stream of income from your portfolio, it might be easier for you to wait through a down market. If we look back over the past 20 calendar years — arbitrary periods — the S&P 500 increased during 15 of those years. But its average annual price increase was 9.1% and its average annual total return, with dividends reinvested, was 9.8%, according to FactSet.
In any given year, there can be tremendous price swings. For example, during 2020, the early phase of the Covid-19 pandemic pushed the S&P 500 down 31% through March 23, but the index ended the year with a 16% gain.
Two ETFs with broad approaches to dividend stocks
Invesco Head of Factor and Core Strategies Nick Kalivas believes investors should “explore higher-yielding stocks as a way to generate income and hedge against inflation.”
He cautioned during an interview that selecting a stock based only on a high dividend yield could place an investor in “a dividend trap.” That is, a high yield might indicate that professional investors in the stock market believe a company might be forced to cut its dividend. The stock price has probably already declined, to send the dividend yield down further. And if the company cuts the dividend, the shares will probably fall even further.
Here are two ways Invesco filters broad groups of stocks to those with higher yields and some degree of safety:
The Invesco S&P 500 High Dividend Low Volatility ETF SPHD, -0.33%
holds shares of 50 companies with high dividend yields that have also shown low price volatility over the previous 12 months. The portfolio is weighted toward the highest-yielding stocks that meet the criteria, with limits on exposure to individual stocks or sectors. It is reconstituted twice a year in January and July. Its 30-day SEC yield is 4.92%.
The Invesco High Yield Equity Dividend Achievers ETF PEY, -0.70%
follows a different screening approach for quality. It begins with the components of the Nasdaq Composite Index COMP, +1.39%,
then narrows the list to 50 companies that have raised dividend payouts for at least 10 consecutive years, whose stocks have the highest dividend yields. It excludes real-estate investment trusts and is weighted toward higher-yielding stocks meeting the criteria. Its 30-day yield is 4.08%.
The 30-day yields give you an idea of how much income to expect. Both of these ETFs pay monthly. Now see how they performed in 2022, compared with the S&P 500 and the Nasdaq, all with dividends reinvested:
Both ETFs had positive returns during 2022, when rising interest rates pressured the broad indexes.
8 more ETFs for income (and some for growth too)
A mutual fund is a pooling of many investors’ money to pursue a particular goal or set of goals. You can buy or sell shares of most mutual funds once a day, at the market close. An ETF can be bought or sold at any time during stock-market trading hours. ETFs can have lower expenses than mutual funds, especially ETFs that are passively managed to track indexes.
You should learn about the expenses before making a purchase. If you are working with an investment adviser, ask about fees — depending on the relationship between the adviser and a fund manager, you might get a discount on combined fees. You should also discuss volatility risk with your adviser, to establish a comfort level and to try to match your income investment choices to your risk tolerance.
Here are eight more ETFs designed to provide income or a combination of income and growth:
Company
Ticker
30-day SEC yield
Concentration
2022 total return
iShares iBoxx $ Investment Grade Corporate Bond ETF
The following definitions can help you gain a better understanding of how the ETFs listed above work:
30-day SEC yield — A standardized calculation that factors in a fund’s income and expenses. For most funds, this yield gives a good indication of how much income a new investor can be expected to receive on an annualized basis. But the 30-day yields don’t always tell the whole story. For example, a covered-call ETF with a low 30-day yield may be making regular dividend distributions (quarterly or monthly) that are considerably higher, since the 30-day yield can exclude covered-call option income. See the issuer’s website for more information about any ETF that may be of interest.
Taxable-equivalent yield — A taxable yield that would compare with interest earned from municipal bonds that are exempt from federal income taxes. Leaving state or local income taxes aside, you can calculate the taxable-equivalent yield by dividing your tax exempt yield by 1 less your highest graduated federal income tax bracket.
Bond ratings — Grades for credit risk, as determined by ratings agencies. Bonds are generally considered Investment-grade if they are rated BBB- or higher by Standard & Poor’s and Fitch, and Baa3 or higher by Moody’s. Fidelity breaks down the credit agencies’ ratings hierarchy. Bonds with below-investment-grade ratings have higher risk of default and higher interest rates than investment-grade bonds. They are known as high-yield or “junk” bonds.
Call option — A contract that allows an investor to buy a security at a particular price (called the strike price) until the option expires. A put option is the opposite, allowing the purchaser to sell a security at a specified price until the option expires.
Covered call option — A call option an investor writes when they already own a security. The strategy is used by stock investors to increase income and provide some downside protection.
Preferred stock — A stock issued with a stated dividend yield. This type of stock has preference in the event a company is liquidated. Unlike common shareholders, preferred shareholders don’t have voting rights.
These articles dig deeper into the types of securities mentioned above and related definitions:
Nearly two years after biotechnology stocks began to tumble, executives at small and midsize companies in the space are finally accepting that share prices aren’t bouncing back anytime soon.
With reality setting in, it’s a buyer’s market for companies looking for acquisitions and partnerships, according to many of the pharmaceutical and medical technology executives who gathered at this year’s
J.P. Morgan
healthcare investor conference, which wrapped up in San Francisco on Thursday.
