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CHAT CALLVISITSeptember2,20 19 BARRON’S 31
Mailbag
Mailbag
“Football did it right...baseball and basketball may be
oversaturating their markets.” JimKudlinski, OverlandPark,Kan.
SENDLETTERSTO:
[email protected] considered for
publication, correspondence must bear the
writer’sname, address, and phone number.
Letters are subject to editing.
No Game Plan Needed
To the Editor:
Regarding“HowFootball Drives TV’s
Future” (Aug. 26), consider the major
difference between baseball and football
contractsfor TV:The former does so by
team and the latter by league. Thus, in
baseball, the big-market teams have an
economic advantage over their smaller-
market competitors, as theirTVreve-
nues are substantially greater, which is
our problem inKansas City.Inthe NFL,
each team gets its share of the league’s
total TV revenue, making foramuch
more competitivearrangement. More-
over,a16-game regular season does not
overfill you like baseball’s162-game reg-
ular-season schedule, and is far more
conducive to attracting viewers.
Football did it right, whereas baseball
and basketball may be oversaturating
their markets.
JIMKUDLINSKI
OverlandPark,Kan.
Good Citizens?
To the Editor:
That Altria Group, whichmakes Marl-
boro cigarettes, has theNo. 14rank on
Corporate Responsibility Magazine’slist
of100Best Corporate Citizens, tells you
everything you need to know about the
“good citizenship” of U.S. Big Business
(“Welcome to the Ethical-Industrial
Complex,” Streetwise, Aug. 23).
GEORGEPOWELL
CarmelValley, Calif.
Shades of Cormac McCarthy
To the Editor:
Regarding“A pocalypse Apartments for
theWealthy andPessimistic” (Aug. 23):
“The team members will also be able to
pick offmarauders who may approach
thesilo looking for food and shelter.”
Why not help others looking for food and
shelter?
This article makes Cormac McCarthy’s
TheRoad look tame. The whole thing
reeks of selfishness and callous disregard
for others; it represents the worst of what
capitalism has led to. It isamoral disaster.
KENWIGHTMAN
On Barrons.com
Buybacks and Share Prices
To the Editor:
Edward Yardeni is awell-respected
analyst whomIenjoy reading when he
is quoted. ButIhighly 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,” OtherVoices,
Aug. 23).
Ya rdeni 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.Forexample,Isub-
scribe toValue Line, which sends out a
promotional item in Barron’s, and any
basicperusal of every issue will see a
dramatic shrinkageofshare counts on
most companies.
An example: McDonald’s,which had a
billion shares outstanding, on average,
for many years, has whittled that down
from 2012tothe 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.
Astrong stock market helps the U.S.,
fromJeff Bezos to my neighbor who is
retired.
ERICHARBOR
WestPalm Beach, Fla.
INCOME INVESTING n By Alexandra Scaggs
WheretoFindIncome
WithTreasury yields so low, look to the U.S. consumer
A10-YEAR YIELD BELOW 1.5% ISN’T EXACTLY
arobust retirement-income generator.
But as far as risk-free returns go, that’s
about as good as it gets these days.
Pity theGerman savers, who have to
pay for their risk-free10-year return.
The country’sbenchmark Bund currently
yields -0.7%. InJapan,10-year govern-
ment bondsyield -0.3%. The situation
isn’t much better in peripheral European
countries. Even in Italy,where political
tumult just createdascare,10-year gov-
ernment bonds yield just 1% for Euro-
pean investors.
That doesn’t mean that investors have
to settle for such measly yields. Instead,
they should avoid investments exposed to
the trade war with China, and gravitate
toward the standout pocket of strength
in the U.S. economy—the consumer.
In theory,investors who are looking
for yield have to buy the bonds of riskier
companies with longer maturities. The
high-yield bond market’syield to worst is
5.9%,according to ICE BofAML Indices,
whilethe 30-yearTreasury yield recently
touchedarecord low of 1.9%.
Neither is particularly appealing,
however.The market’smost reliable re-
cession indicator—an inverted yield
curve—is warning ofaslowdown ahead,
which could cause junk bonds to sell off.
And that selloff could be the start ofavi-
cious cycle in which investors’risk aver-
sion hampers borrowers’ability to refi-
nance or borrow more, which could
further hurt those companies’financial
performance.
Long-datedTreasuries would be a
good bet in that situation, and not only
because investors tend to flock to them
as havens in bad times.Foreign investors
have been shut out from much of the
market due to the high costs of hedging
currency fluctuations. If theFederal Re-
serve cuts interest rates in September,as
expected, the costs of hedging dollar ex-
posure will decline, and could possibly
spur on additional flowsinto U.S.Trea-
suries.But those sameTreasuries could
sell offina“buy the rumor and sell the
news” reaction to rate cuts. It is also pos-
sible that global economic growth could
heat up and cause long-termTreasuries
to sell off.
Income-seeking investors should
look to theU.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, theirfinancial position
looks strong compared with companies.
That makes residential mortgage-
backed securities that aren’t insured by
government agenciesagood place to
find asolid yield for only asmall
amount of additional risk. These securi-
ties offer yields of roughly 3% to 5%,
and can be found in mutual funds like
the PimcoMortgageOpportunities
andBond fund (ticker: PMZAX) and
the MetWestUnconstrainedBond
fund (MWCRX).
Investorsshould 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
thesame guiding principles as they
would in bonds.
That meansfocusing on consumer-
sensitive sectors that aren’t too exposed
to global tradeorpolit-
ical risk, and are also
not highly indebted
compared with histori-
cal averages.
Utilities may beadecent option, but
investors may want to avoid the most
indebted companies in the consumer-
staplessector,such as packaged-foods
companies, as well as the politically
riskierhealth-care stocks, like drug-
makers.
Or investorsmay want to look at
companieswithadomestic consumer-
oriented focus, such as real estate in-
vestment trusts that ownresidential
buildings.
Twochoices with strong balance
sheets include AvalonBayCommuni-
ties (AVB) and EquityResidential
(EQR). Those REITshave dividend
yields of 2.9% and 2.7%, respectively.
These options do come with some
risk inadownturn, of course. But their
yields aren’t too bad compared with
what’sonoffer in Europe.
Dividend
Payments,
page M
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