On August 1, Fidelity took direct aim at index fund competitors Vanguard, Blackrock’s iShares ...
An Alternative to Money Market Funds
04/05/2016 6:00 am EST
March was a very active month for the market as we saw oil come off of its 2016 lows, a terrorist attack in Brussels, and a rally by precious metals; after this wild month, Don Ames, CEO of Ames Capital Management, highlights alternative investments to money market funds.
March is behind us. What a month it was! Crude oil prices rallied above the $40 per barrel level amid reports that the major OPEC and non OPEC oil producers will meet April 17 in Qatar. The meeting is being called as the major producers seek to stabilize the oversupplied global market. Sadly, the ISIS attacks in Brussels prior to Easter served as another reminder that acts of terror can occur anywhere and anytime. Over 30 people were killed in the Brussels attacks.
At the conclusion of the Federal Reserve's two-day meeting on March 16, Fed Chair Janet Yellen made clear the Fed will not be as aggressive as originally feared in raising rates. It now appears the Fed will limit the planned increases to at most two increases. Many economists feel the Fed will only raise rates once in 2016. The Fed will next meet April 26-27 and it is expected the Fed will stand pat here as it did at the March meeting.
Shareholder activism made headlines last month as well. The Starboard Value hedge fund has launched a proxy fight to replace Yahoo’s entire Board of Directors at its annual meeting later this year. Starboard stands an excellent chance of succeeding here.
Yahoo’s Board of Directors is elected annually so a simple majority of the Yahoo shareholders is all that is needed to replace each Board member. Yahoo’s Officers and Directors own less than 10% of the outstanding shares while Institutions own over 70% of Yahoo’s shares. There is only one class of Yahoo stock outstanding and Yahoo is incorporated in Delaware. Chances are very high that Yahoo’s beleaguered CEO Marissa Mayer will be ousted at some point this year.
Meanwhile, the SEC rejected Exxon’s bid to block a shareholder proposal that would require Exxon to disclose in its 2016 Proxy Statement how its business and profits will be impacted by climate change. This proposal will be voted on at Exxon’s annual meeting in late May. Exxon will report its quarterly earnings April 29 and will also host a conference call later that day.
Also this month, Exxon, Southern Co. and Procter & Gamble are expected to raise their quarterly dividends. For Southern Co., this would mark the 15th straight year it has increased its dividend while for Procter & Gamble, the increase would be its 60th consecutive increase and for Exxon, the 34th straight year.
These firms offer generous dividend yields and the potential for large capital gains over the next year. If an investor holds the shares for at least 61 days, all of the dividends will be taxed at the favorable 15-20% tax rate, depending on the investor’s tax bracket.
My weekly radio show on WWPR 1490 AM airs at 2pm each Friday. The show can also be heard live on the station’s website (www.1490wwpr.com). My prior radio shows and news columns are available on my firm’s website (www.amescapmgmt.com).
If you are unhappy with the returns now offered by money market funds, feel free to contact us.
By Don Ames, CEO of Ames Capital Management
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