September 2, 2019 BARRON’S 31
Mailbag
Mailbag
“Footballdiditright...baseballandbasketballmaybe
oversaturatingtheirmarkets.” JimKudlinski,OverlandPark,Kan.
SEND LETTERS TO:
publication,correspondencemustbearthe
writer’sname,address,andphonenumber.
Lettersaresubjecttoediting.
No Game Plan Needed
To the Editor:
Regarding “How Football Drives TV’s
Future” (Aug. 26), consider the major
differencebetweenbaseballandfootball
contractsforTV:Theformerdoessoby
team and the latter by league. Thus, in
baseball, the big-market teams have an
economic advantage over their smaller-
market competitors, as their TV reve-
nues are substantially greater, which is
ourprobleminKansasCity.IntheNFL,
each team gets its share of the league’s
total TV revenue, making for a much
more competitive arrangement. More-
over,a16-gameregularseasondoesnot
overfillyoulikebaseball’s162-gamereg-
ular-season schedule, and is far more
conducive to attracting viewers.
Footballdiditright,whereasbaseball
and basketball may be oversaturating
their markets.
JIMKUDLINSKI
Overland Park, Kan.
Good Citizens?
To the Editor:
That Altria Group, which makes Marl-
boro cigarettes, has the No. 14 rank on
CorporateResponsibilityMagazine’slist
of100BestCorporateCitizens,tellsyou
everything you need to know about the
“good citizenship” of U.S. Big Business
(“Welcome to the Ethical-Industrial
Complex,” Streetwise, Aug. 23).
GEORGEPOWELL
Carmel Valley, Calif.
Shades of Cormac McCarthy
To the Editor:
Regarding “Apocalypse Apartments for
the Wealthy and Pessimistic” (Aug. 23):
“The team members will also be able to
pick off marauders who may approach
the silo looking for food and shelter.”
Whynothelpotherslookingforfoodand
shelter?
ThisarticlemakesCormacMcCarthy’s
The Road look tame. The whole thing
reeksofselfishnessandcallousdisregard
forothers;itrepresentstheworstofwhat
capitalismhasledto.Itisamoraldisaster.
KENWIGHTMAN
On Barrons.com
Buybacks and Share Prices
To the Editor:
Edward Yardeni is a well-respected
analyst whom I enjoy reading when he
is quoted. But I highly question the cur-
rent article on share buybacks and the
timing of such an article (“Don’t Blame
Buybacks for Boosting Stock Prices—or
Promoting Inequality,” Other Voices,
Aug. 23).
Yardeni is making assumptions about
what S&P 500 companies are doing and
falsely states that buybacks have no
merit or value to shareholders who do
not sell shares. For example, I sub-
scribe to Value Line, which sends out a
promotional item in Barron’s, and any
basic perusal of every issue will see a
dramatic shrinkage of share counts on
most companies.
Anexample:McDonald’s,which had a
billion shares outstanding, on average,
for many years, has whittled that down
from 2012 to the present. It now has 740
million shares outstanding—way past
any share issuance for employee reten-
tion.
Additionally, our investor shining
light, Warren Buffett, explicitly stated
that he will be using share buybacks to
maintain price-to-value. Maintaining a
reliable share price is important for
holders, savers, and future purchasers.
AstrongstockmarkethelpstheU.S.,
from Jeff Bezos to my neighbor who is
retired.
ERICHARBOR
West Palm Beach, Fla.
INCOMEINVESTING n ByAlexandraScaggs
Where to Find Income
WithTreasuryyieldssolow,looktotheU.S.consumer
A 10-YEAR YIELD BELOW 1.5% ISN’T EXACTLY
a robust retirement-income generator.
Butasfarasrisk-freereturnsgo,that’s
about as good as it gets these days.
PitytheGermansavers,whohaveto
pay for their risk-free 10-year return.
Thecountry’sbenchmarkBundcurrently
yields -0.7%. In Japan, 10-year govern-
ment bonds yield -0.3%. The situation
isn’tmuchbetterinperipheralEuropean
countries. Even in Italy, where political
tumultjustcreatedascare,10-yeargov-
ernment bonds yield just 1% for Euro-
pean investors.
Thatdoesn’tmeanthatinvestorshave
tosettleforsuchmeaslyyields.Instead,
theyshouldavoidinvestmentsexposedto
thetradewarwithChina,andgravitate
toward the standout pocket of strength
in the U.S. economy—the consumer.
In theory, investors who are looking
foryieldhavetobuythebondsofriskier
companies with longer maturities. The
high-yieldbondmarket’syieldtoworstis
5.9%,accordingtoICEBofAMLIndices,
whilethe30-yearTreasuryyieldrecently
touched a record low of 1.9%.
Neither is particularly appealing,
however. The market’s most reliable re-
cession indicator—an inverted yield
curve—is warning of a slowdown ahead,
whichcouldcausejunkbondstoselloff.
Andthatselloffcouldbethestartofavi-
ciouscycleinwhichinvestors’riskaver-
sion hampers borrowers’ ability to refi-
nance or borrow more, which could
further hurt those companies’ financial
performance.
Long-dated Treasuries would be a
good bet in that situation, and not only
because investors tend to flock to them
ashavensinbadtimes.Foreigninvestors
have been shut out from much of the
marketduetothehighcostsofhedging
currencyfluctuations.IftheFederalRe-
servecutsinterestratesinSeptember,as
expected,thecostsofhedgingdollarex-
posure will decline, and could possibly
spur on additional flows into U.S. Trea-
suries.ButthosesameTreasuriescould
sell off in a “buy the rumor and sell the
news”reactiontoratecuts.Itisalsopos-
sible that global economic growth could
heatupandcauselong-termTreasuries
to sell off.
Income-seeking investors should
look to the U.S. consumer instead.
While the U.S. government and Ameri-
can corporations have loaded up on
debt, consumers are still in good shape.
U.S. consumers may get hurt during a
recession if one occurs, but unlike the
last recession, their financial position
looks strong compared with companies.
That makes residential mortgage-
backed securities that aren’t insured by
government agencies a good place to
find a solid yield for only a small
amount of additional risk. These securi-
ties offer yields of roughly 3% to 5%,
and can be found in mutual funds like
the Pimco Mortgage Opportunities
and Bond fund (ticker: PMZAX) and
the MetWest Unconstrained Bond
fund (MWCRX).
Investors should look at stocks for
income, as well. The S&P 500 index’s
implied dividend yield was 2.1% on
Thursday, higher even than 30-year
Treasury yields. But they should use
the same guiding principles as they
would in bonds.
That means focusing on consumer-
sensitive sectors that aren’t too exposed
to global trade or polit-
ical risk, and are also
not highly indebted
compared with histori-
cal averages.
Utilities may be a decent option, but
investors may want to avoid the most
indebted companies in the consumer-
staples sector, such as packaged-foods
companies, as well as the politically
riskier health-care stocks, like drug-
makers.
Or investors may want to look at
companies with a domestic consumer-
oriented focus, such as real estate in-
vestment trusts that own residential
buildings.
Two choices with strong balance
sheets include AvalonBay Communi-
ties (AVB) and Equity Residential
(EQR). Those REITs have dividend
yields of 2.9% and 2.7%, respectively.
These options do come with some
risk in a downturn, of course. But their
yields aren’t too bad compared with
what’s on offer in Europe.
Dividend
Payments,
pageM39