Author Archive: Michael Foster

Warren Buffett’s done it again.

Don’t look now, but year-to-date, Berkshire Hathaway (BRK.A, BRK.B) stock is up 25% and is actually outperforming the incredible 20% a year, on average, it’s returned since 1964.

A Chart Any Investor Would Love

In a moment, I’ll show you an overlooked investment that lets you duplicate the moves of the world’s smartest investor—and you won’t have to buy a single share of Berkshire Hathaway to do it.

In fact, you’ll be able to pick up Berkshire and the companies it invests in for 19% less than you’d pay on the open market!

A Banking Boost

Berkshire’s year-to-date gain has come, in part, thanks to the financial industry’s recovery post-election.… Read more

Few people know it, but you don’t have to buy a stock for the price you see on Yahoo Finance.

The truth is, you can buy some of the best large cap dividend payers for cheaper: and I don’t mean a little cheaper. I’m talking a 16% discount.

How?

Through a closed-end fund (CEF) that’s trading at a ridiculously high discount to its net asset value (NAV). That’s despite a strong track record, low expenses and an attractive 4.4% dividend yield.

Let’s break each of those things down one at a time, starting with the name of this unheralded investment.

It’s called Tri-Continental Corporation (TY), and it holds some of America’s safest and highest-quality stocks.… Read more

It’s as close to a sure thing as you can get: interest rates are headed higher.

The futures market tells the tale. Right now, it pegs the odds of a hike at the Federal Reserve’s December 14 meeting at near 100%:

Everyone Agrees: Rates to Rise

What’s more, futures markets expect interest rates to go up again in 2017. So if you invest in bonds in a market like this, you need to consider how you can protect yourself from higher rates.

I’ll show you a one-buy option that will do just that—and hand you a nice 6.9% yield in the process—in just a moment.… Read more

You can take it to the bank: interest rates are going up.

Everyone from Janet Yellen to Donald Trump says it needs to happen. Traders betting through the Fed futures markets agree, pegging the odds of a quarter-point rate hike at the Fed’s December 14 meeting at 94.9%:

More hikes seem likely next year, if oil prices keep rising, taking inflation along with them.

Since higher rates are bad for high-yield assets, does this mean it’s time to give up and accept that 2% dividends are the only income you can expect in this market?

No way.

Because there’s an easy way we can protect ourselves from higher rates and still collect a nice 6.8% dividend yield.… Read more

On the lookout for safe dividends? (Who isn’t, right?)

These days, you generally have three options: large-cap stocks with long dividend histories, municipal bonds and US Treasuries.

Treasuries are considered the safest of that group, and large-cap stocks the riskiest, but they’re still much safer than plenty of other investments, such as small caps and junk bonds.

I’ll show you two low-risk investments that are great buys now in a moment. But first, I want to tell you why recent events have called the safety of some of the options I just named into question.

Let’s start by looking at the following chart:

“Safe” Assets Turn Volatile

First, note how the iShares S&P National AMT-Free Municipal Bond Fund (MUB), a good proxy for municipal bonds as a whole, is the least volatile of the three funds shown above.… Read more

There’s no doubt Donald Trump’s election win has been great for stocks.

Municipal bonds? Not so much.

In the last month alone, “munis” have lost over 3% of their value—a huge decline for an asset class that’s supposed to be safe and stable.

So is it time to sell your munis, give up on safe income and try to ride the Trump rally in stocks?

No way. In fact, if you’re just thinking of doing that now, you’re probably too late.

The Trump rally reversed course after Thanksgiving, with a down day that threw a damper on the stock market’s post-election euphoria.… Read more

It’s a classic death spiral.

I’m talking about the flight to dividend-paying—and dividend-growing—stocks in the past eight years.

It’s easy to see what triggered it: US Treasuries don’t offer pay enough to cover inflation, and despite President-Elect Trump’s inflationary policies—more on those below—that won’t change anytime soon.

That’s prompted income-starved investors to pile into higher-yielding options, like municipal bonds, utility stocks, corporate bonds and dividend-growth stocks. These are all good choices, of course.

But here’s where the death spiral comes in: the rush into these investments has dragged down their dividend yields (because you calculate yield by dividing the annual dividend by the current share price), sending investors into even riskier areas of the market.… Read more

If you’ve invested in municipal bonds lately, you may be coming down with a serious case of buyer’s remorse.

But you shouldn’t, as I’ll explain in a moment. In fact, now is the perfect time to double down and buy more of these high-yielding, ultra-stable investments.

First, let’s look at why “munis” have fallen off a cliff, setting up an excellent buying opportunity for you and me.

“Off a cliff” is no exaggeration. Take a look at what’s happened to the five biggest muni-bond ETFs in the past month:

Muni Bonds Tank

When investments as stable as these put on a drop like that, you’d expect, say, a looming global financial crisis.… Read more

Donald Trump’s win has done something extraordinary to the financial sector. Just look at this one-month chart for the Financial Select Sector SPDR ETF (XLF):

Banks Love Trump

This is unexpected on two levels.

First, of course, Trump’s very election came as a shock to many. Second, there was no shortage of people saying stocks would tank if the real estate mogul won. Meantime, not only has the market reached new heights since November 9 but financials have gone from one of the worst-performing sectors to one of the best—almost overnight.

The reasons are simple. First, Trump has promised to repeal the financial reforms brought in under the 2010 Dodd-Frank Act, which have limited banks’ activities, and their growth potential along with them.… Read more

You’ve probably been told you can’t have high yields and high growth in the same investment.

If you want growth, the traditional thinking goes, you need to accept little or no dividend income. And if you want high dividends, you can forget about growth.

Today I’m going to show you two investments that turn this outdated thinking on its head. They’re closed-end funds (CEFs) that hold convertible bonds, a powerful asset class most investors ignore.

More on these two funds in a moment.

First, let’s take a quick look at how convertible bonds work, and why so many investors are making a big mistake by not including them in their portfolios.… Read more