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The Two Words That Could Reprice This Stock |
Wall Street doesn't just value companies. |
It values labels. |
Right now, one little-known U.S. mining company is still being priced like a speculative developer—even after receiving approval for nearly $3 billion in federal financing. |
The mine won't change. |
The gold won't change. |
Only Wall Street's perception. |
That same project also contains one of America's most strategic mineral deposits at a time when China has restricted exports to the U.S. |
The company is worth roughly 1/50th the size of Newmont. |
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🌙 TONIGHT'S NUMBERS |
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Where the 10-year Treasury closed on Wednesday, August 5. |
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SCHD's yield on August 3, against a 3.47% five-year average. |
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Friday is a good day to think about sizing rather than picking. Not which holding is better, but how much of each, and for what job. The two numbers at the top of this memo make the case for the exercise on their own. A ten-year Treasury bought at Wednesday's close locks in 4.61% for a decade. SCHD, the broad dividend fund a lot of readers own, was yielding 3.12% on August 3. |
The Treasury figure is fixed and the fund's is not, and that difference carries most of the argument. A 4.61% coupon, meaning the fixed dollar interest the bond pays, hands over the same dollars in 2036 that it hands over today. A dividend fund's payout has generally grown year over year, which makes 3.12% a starting point rather than a ceiling. The number behind the headline is that growth rate, and it is the one almost nobody quotes. Neither instrument is better in the abstract. The one that fits depends on when you plan to spend the money. A portfolio funding withdrawals over the next three years has an obvious reason to want the fixed coupon. A portfolio funding withdrawals in 2036 has an equally obvious reason to accept the lower starting yield. |
The risk in the fixed number is the one almost nobody sizes for, which is reinvestment. In mid-2007 the ten-year Treasury yielded roughly 5% and money market funds paid over 4%. By December 2008 the Fed's target rate was effectively zero, and those payouts had disappeared inside about eighteen months. Anyone who had built an income plan around 2007 rates spent the following decade rebuilding it. Warren Buffett has held a large share of Berkshire's cash in short Treasury bills for years now, which is worth remembering mainly as a reminder that cash is a position and not a pause. So the practical move is a sizing decision: settle on what share of the next few years of spending you want locked at current rates, and let the rest keep compounding. It is too early to know whether 4.61% will look generous or ordinary five years from here. |
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ADVERTISEMENT · STOCKS TO TRADE |
A date Elon Musk put on the record |
Elon Musk has given a specific date for a milestone at one of his companies, in public and on the record. A research letter from Stocks To Trade walks through what he said, what has to happen before that date arrives, and which listed companies sit closest to the work. The write-up is free to read. |
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💵 INCOME WATCH |
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Caterpillar's raise to $1.63 a quarter from $1.51, declared June 10, is payable August 19. Clorox lifted its quarterly dividend to $1.25 from $1.24, payable August 28 to holders of record August 12. Clorox has raised every year since 1977. |
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Clorox's record date is Wednesday, August 12. Beyond that the next five trading days are thin on widely-held income names: Arrow Financial, Cheesecake Factory, PC Connection and Willis Lease go ex-dividend August 11, and Columbia Financial on August 12. A quiet stretch, and worth saying so plainly. |
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The 10-year Treasury closed Wednesday, August 5 at 4.61%. SCHD's yield stood at 3.12% on August 3, below its 3.47% five-year average. |
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📅 TOMORROW'S CALENDAR |
Markets are closed tomorrow, so what follows is the week ahead. July's Consumer Price Index arrives Wednesday, August 12 at 8:30 a.m. ET, and for income holders the line to find is shelter, the slowest-moving piece of the index. Wednesday is also Clorox's dividend record date, so holders on the books that day collect the new $1.25. The Producer Price Index follows Thursday, August 13 at 8:30 a.m. ET, and it often tells you what the consumer index will say a month or two later. |
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The Early Bird desk sends a short text when something genuinely matters, and Wednesday's inflation print is the next one worth a heads-up. Free, two to three texts a week, opt out anytime. Sign up here. |
When cash pays more than your dividend fund, do you move or sit still? Reply and tell me. |
— Randy Cole, Editor |
P.S. If you want our own rundown on where the AI buildout is actually spending its money, it lives here. (From The Money Memo) |
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