Saturday, August 30, 2014

Yield Shark Review

Yield Shark Finds Income Without High Risk

yield-shark-review-mauldin-economics

Portfolio Income With Reasonable Risk

Yield Shark from (John) Mauldin Economics debuted at a perfect time for us personally and is filling a need that has been desperately wanting to be filled ever since Ben Bernanke and the Federal Reserve decided to “fix” the economy by stealing from savers.

Low and becoming lower interest rates on CD’s (Bank Certificates of Deposit) have encouraged retirees and anyone else hoping to get a return on their money without undue risk to search for other ways of increasing yield.

Unfortunately, increasing yield on your investments almost always entails a climb up the RISK side of the equation.

And in the current economic environment, few professionals are really qualified to fully evaluate the risk of any particular investment, let alone the average investor or saver.

As a result, portfolios are encountering a negative “real” rate of return (yield minus inflation).

The more people start to realize this negative real rate of return, combined with a lack of income (perhaps to live off of) the greater the need for a set of true professionals to find investments for them that have a reasonable yield WITHOUT taking excessive risk.

What Yield Shark Is

Yield Shark is the brain child of John Mauldin, an economist and writer out of Dallas, Texas. John has been offering his free e-newsletter for over a decade now. He is also the author of a couple of very timely and successful books:

Up until now John has not offered specific investment advice, opting instead to provide economic research and analysis available at no charge along with his thoughts of where things might go.

But this extended Zero Interest Rate Policy (ZIRP) of the Federal Reserve created just too much demand for a product like Yield Shark and John finally “yielded” to his friends and readers requests for just such a service.

So with the help of some top people in his inner circle, he created Yield Shark to help the average investor navigate the dangerous economic waters to find investments where income can be culled without taking too much risk.

Yield Shark is now a monthly investment newsletter for income oriented investors that gives you background as to what is going on in the financial space and a few investment recommendations that you can immediately add to your portfolio.

Each recommendation comes with a synopsis of why they like it, what your expected return will be and a time frame that they foresee the investment will continue on its current path.

They appear to be trying to also determine a stop loss point for each stock pick also; a price at which something has gone terribly wrong and you need to exit the position, likely at a loss, in order to protect yourself from additional loss.

For each recommendation, a purchase quantity is suggested based on a portfolio value of $100,000. If the income oriented portion of your portfolio is larger or smaller than that, simply adjust accordingly.

What Yield Shark Newsletter Offers You

While anyone can find some high dividend paying stocks with a stock screening program or even over at ZeroHedge website, the Yield Shark professionals give you the peace of mind of not only knowing who you are dealing with (many if not most writers at ZeroHedge and other websites are anonymous) but also the confidence that these are the same people who predicted the economic malaise the world currently finds itself in.

The is not to just find a high paying income investment but to analyze what the chances are that the income stream will not only dry up but consequently take the value of the investment down the drain with it.

Yield Shark not only finds the income investment for you but also seeks to determine the probability of getting your money back besides!

A quote that I think is attributed to Will Rogers pertains today more than ever:  “I’m not only worried about getting a return ON my investment but a return OF my investment!”

Many high paying dividend stocks, for instance, are high yielding based on an unsustainable (maybe even PAST) dividend divided by a low or falling stock price. Often something that looks too good to be true really is, though other times it could be an opportunity.

The pros at Yield Shark are not only good at making that distinction but probably a lot better at it than you or I am. And for the very inexpensive cost of subscribing to this investment newsletter, avoiding one mistake would likely pay it back 10 times over.

Who Is Yield Shark Written For?

Just because an investment newsletter is well researched, well written and timely doesn’t mean that it is for everyone.

So who is Yield Shark written for, or in other words, who will profit from subscribing to Yield Shark?

In a nutshell, a person who:

  • Has $100,000 or more to invest in income producing assets that have at least some level of risk associated with them (no FDIC insurance here, values can go down). While $100,000 is by no means a minimum, the recommendations are offered based on a portfolio of that size.
  • Relies on their investment income to live off of.
  • Is tired of seeing a money market statement with $1.00 of income on a $100,000 account over a 3 month period of time!
  • Realizes that return goes up (typically) with an increase in risk and who wants someone else to help them evaluate that risk.

Yield Shark is not for everyone. If you have always put your money in the bank because you want FDIC insurance (which, by the way, would likely fail in a large scale financial debacle) and never want to see the value of your account go down then this is not for you. Perhaps an annuity product with a solid (good luck determining that) insurance company is the way to go for you.

But if you are open to owning dividend paying stocks that will fluctuate in value as well as other similar types of investments then perhaps you should give Yield Shark a try, it’s not expensive ($199/year as of this writing).

With all of that being said, Yield Shark is not perfect. Some of these minor shortcomings will likely be corrected as time moves forward. Only the inaugural issue and two subsequent monthly issues have been issued to date.

Will Yield Shark Review Tax Free Bonds or Bond Funds?

Yield Shark is not going to review or include in the portfolio any tax free bonds or tax free bond funds.

Why not?

A large portion of Yield Shark subscribers purchase the investment recommendations in retirement accounts like IRAs and SEP accounts, and it makes no sense to put tax-free investments into tax-deferred accounts.

Their goal is to provide investment advice that everyone can use, so this service will focus on higher yielding taxable investments only.

Shortcomings of Yield Shark

There are a couple of improvements that I would like to see in Yield Shark, and keep in mind that some of these may already be in the works. I have contacted John with these suggestions – and since I am one of his 1 million closest friends – they may be done by the time you read this!

  • Some recommendations may be Master Limited Partnerships (MLP’s), Real Estate Investment Trusts (REIT’s) or Exchange Traded Funds (ETF’s) with tax consequences that may “complicate” your tax return, such as by sending you a K-1 – late in March or even early April – that ruins your ability to be an early filer and probably requiring you seek professional help to complete your tax return besides. This is currently not being disclosed at the time of recommendation. [Edit: January 2013 Issue they are starting to mention these issues!] In their defense, no other investment newsletter reliably does this either, but I wish they would.
  • Some recommendations so far have moved up in price, some significantly, from the time of the research and yield calculation to the time when a subscriber would first be able to buy the stock. The reco’s so far simply say “buy at market”, where I would rather a “buy up to $$” guidance so you don’t overpay and not achieve the expected yield. At some point, as Yield Shark subscribers increase it is possible for there to be a “Yield Shark” jump in price on thinly traded securities. We have since written about “The Yield Shark Effect”
  • As of the most recent July 2012 newsletter, there is one stock that is listed as part of the portfolio but it was not actually described and recommended in any of the 3 issues released so far.

Yield Shark Review Summary

All in all, though, Yield Shark promises to be exactly what income oriented investors, retirees and others seeking a reasonable-risk return on their portfolio have been clamoring for the last couple of years as Money Markets all but the longest term CD’s pay pennies on large cash balances.

Learn more about Yield Shark from Mauldin Economics

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{ 2 comments… read them below or add one }

Bonnie Ember February 14, 2013 at 5:18 pm

Hello Roger,

I got your post on stock gumshoe.

I bought Poosf, this week on their earnings. The stock took about a 73% haircut, after they announced that they were off about the same on their earnings. It started the day at $.20

Do the Share Holders have a right to demand a stock repurchase?

Regards

Bonnie

Roger February 14, 2013 at 5:22 pm

I spoke with investor relations today and from what I can tell it’s probably best at this point to let the special committee finish their investigation.

The company is still operating, but it will be some time before we have any reliable data to base earnings on and forecast a reasonable stock price.

My presumption is that there will be a class action lawsuit, and if appropriate, indictments.

Best,
Roger