Biden Says Hes Never Acted Inappropriately After Unwanted Kiss Allegation

Former Vice President Joe Biden has responded to allegations that he displayed inappropriate affection toward a former Nevada assemblywoman, saying that in his years as a public figure, “not once ― never ― did I believe I acted inappropriately.”

“If it is suggested I did so, I will listen respectfully. But it was never my intention,” he said in a statement on Sunday.

Biden’s response follows Lucy Flores accusing him of touching and kissing the back of her head without her consent in 2014 during an appearance he made with her to aid her unsuccessful campaign for Nevada lieutenant governor. She recounted the alleged incident in a story in New York Magazine’s The Cut on Friday.

Former Vice President Joe Biden, seen last week in New York, has said that he does not believe that he ever "acted inappropri

Former Vice President Joe Biden, seen last week in New York, has said that he does not believe that he ever “acted inappropriately” toward others.

Biden said he’s offered “countless handshakes, hugs, expressions of affection, support and comfort” over his “many years on the campaign trail and in public life.”

As he said he did not believe those actions were inappropriate, he added that he remains “the strongest advocate I can be for the rights of women.”

Flores, appearing on CNN on Sunday, said she’s glad that Biden is willing to listen but that he appears to have a “disconnect” if he believes his behavior was not inappropriate.

“Frankly, my point was never about his intentions, and it shouldn’t be about his intentions. It should be about the women on the receiving end of that behavior, and … it wasn’t the only incident where he was acting inappropriately with women,” she said. 

Biden, 76, has faced previous concerns about inappropriate touching during his decades-long public career. Photos and videos have shown him kissing a senator’s wife on the lips, whispering into a girl’s ear and then kissing her cheek as she appears to pull away, and squeezing the shoulders and whispering into the ear of the wife of former Defense Secretary Ash Carter as he was sworn into that post during President Barack Obama’s administration.

Frankly, my point was never about his intentions and it shouldn’t be about his intentions, it should be about the women on the receiving end of that behavior.
Lucy Flores

Flores said she decided to come forward with her experience because of previous incidents that, in her opinion, “were not being taken very seriously.”

“They were not being considered from the perspective of the woman on the other side of that power dynamic, on the other side, of the receiving end,” she said.

The allegation against Biden surfaced as he’s expected to enter the 2020 presidential race. Among his fellow Democrats who have already declared their White House candidacies, Sen. Elizabeth Warren (D-Mass.) and former San Antonio, Texas, Mayor Julián Castro have spoken out in support of Flores.

Sen. Bernie Sanders (I-Vt.) said Sunday he has “no reason not to believe” Flores when asked about the matter on CBS’ “Face the Nation.” Sanders also said he will leave it to Biden to decide whether the Flores complaint should nix a White House bid by the former vice president.

“I think that’s a decision for the vice president to make,” Sanders said. “I’m not sure that one incident alone disqualifies anybody, but (Flores’) her point is absolutely right.”

This story has been updated with comment from Flores and Sen. Sanders.

Why Financial Security is a More Worthwhile Pursuit than Independence

My friend Christopher Ng tried to scope the problem that Financial Independence is trying to solve. 

Without a monster, there is no use for a powerful sword. So we need to find that monster.

And he framed the problem this way:

  1. the emergence of the gig economy
  2. retrenchments are affecting younger workers compared to the past
  3. your salary will become lumpy as work becomes projectised
  4. you will come under pressure to retrain and it would be a fight for survival
  5. life gets better for a while, then it starts to suck

I look at the problem and its not something that our previous generation have not faced before. His emphasis is that they happened younger, and each stable job cycle becomes shorter. 

If I were to describe, it is as if that white collar workers are going to suffer from the job uncertainty that plague blue collar workers in the past. 

Since I have been reading and writing on this topic for some time, I would like to chip in what I think. 

I think deep down, we are trying to find a utility, or a function for the money we saved. 

It is just that we failed to articulate what it is. 

You either Spend Money Now or You Spend Money Later

To a certain extent, money at its core does nothing. 

Money has some meaning when you exchange it for something. It becomes useful when you spend it now. 

But why would we not spend it?

Quite possibly you value what you will spend on later to be higher than what you will spend on today. 

This is why we saved up for marriage, for a car, for a down payment.

However, I see many of us just save and save. When you ask them what they are saving for, they do not have a good answer for you. 

The Ghost of Financial Insecurity

I see 2 reason why folks would put away a lot of money and not spend it today.

The first reason is that they do not have a lot of things to buy today, so they are accumulating for the time when they have something they need. 

The second reason is something they find it difficult to articulate out. 

And it is likely that they have this haunting feeling that if they spend it all today, they are ill preparing themselves for an unknown future where the money might saved them

Why they will get this feeling is because they suffered from some financial trauma in the past. 

They get so scarred that they want to fortified themselves from it. 

Financial trauma can be a lot of things but some could be:

  1. You grow up in a poor environment, there were times when you cannot have what others have. You feel ridiculous because you are so out of place versus your classmates
  2. There was some point in the past where money was scarce that you don’t have enough meals, the power gets cut off until your parents can pay the bills
  3. You are thrown a spanner when you got divorced and have to find a place for you to stay and you have nothing with you

A lot of the trauma that affects us happens in our childhood. 

So those who grow up in poorer environment would feel it more.

Those with more comfortable financial background would get haunted when they see some close friends going through these problems. This left a lasting impression in their mind, lasting enough that it made them cautious as well. 

If you think about it, the first reason might also be a manifestation of this second reason. 

This is financial insecurity. It varies from person to person. 

And I think that is the main monster that financial independence is trying to solve. Some monster that is in the mind. 

The solution is not so much of financial independence, but converting to solve this financial insecurity. 

There is a Spectrum of Financial Insecurity. You will belong somewhere

So to solve this financial insecurity, to gain more security, we put away more money instead of spending it. 

And like many things there is a spectrum of financial insecurity. In the diagram above, to the right it is someone who have zero anxiety about their financial situation. They are 100% risk seeking in how they carry out their life. On the left side, it is someone who cannot stand any financial trauma to their lives. They are 100% risk adverse.

Depending on your risk adverse nature, you would find yourself somewhere along the line. The more risk adverse the more you moved on to the left side. 

I have put out various wealth saving milestones that a person would venture to save, depending on their level of risk adverse nature. 

Those that feel so financially secure, would not save any money today. They probably have not suffer much financial trauma in their lives, or that they have so much supply of money that they see no reason to save.

You remember about the Emergency Fund we talked about. 

It is a progression in your journey to fortify against financial insecurities. In a way to build up resilience as well. 

We hear this question a lot: is 6 months of emergency fund enough? We don’t know your situation, your level of financial security you need. If you are not comfortable, put away more!

As you progress further you put away more lump sum. 

Then the wealth you put away is so much that, you can get a recurring cash flow from it. This cash flow might be large enough to provide part or all your annual expenses. 

Your wealth might not last if you withdraw an initial amount of 5-6% of your wealth (for subsequent years, you increase that amount by the inflation rate). 

So you save more so that, the initial amount you withdraw in the first year is 4%. Then 3.5%. Then 3.0%

For those that wants absolute security, or have the most financial insecurity, they would put away so much that they only withdraw 1-2% of their wealth in the initial year.

For those that is ultimate, even if they have that, they would still continue to work!

I just read an interview with documentary maker Abigail Disney. She also happens to be the grand daughter of the co founder of Walt Disney. The whole piece is about her growing up with money, the pitfalls, her insecurities, and why she gave away so much money. 

At the tail end of the article, she mention a survey done long time ago by the Chronicle of Philanthropy:

They asked people who inherited money, “What amount of money would you need to feel totally secure?” And every single one of them, no matter what they had, named a number that was roughly twice what they inherited. So that’s what you need to know about money, right? If that is your primary measure of success or value in life, then good luck with that, because it will never feel good.

So it turns out that it is not so easy to reach a state of financial security. 

Maslow’s Hierarchy and how Financial Security / Independence can Address our Fears

Maslow created this famous hierarchy of needs that sought to explain our deficiency and how we sought to address our deficiencies. We are motivated to achieve certain needs and that some needs take precedence over others.

Those at the bottom are what is more important to us as human beings. We sought to address our physiological deficiencies, before the safety. These are the basic.

Then we address the areas that give us more purpose in life, Love and Belonging, and Esteem.

If we look at financial security and independence, financial independence is more worth while as it creates the platform for us to build relationships and pursue the career and life goals.

The problem with that is that we do not know whether we need to accumulate so much money, just so that we can build strong relationships, have a good career and live a rich life. There is a lot of subjectivity there as you go higher up the pyramid.

However, those areas closer to the base of the pyramid, safety and physiological, you can see where your wealth can give them more predictability.

A lot of our insecurities when we are poor, stems from the uncertainty of whether we can have food, water, a place to live and whether we can keep the family intact. 

Thus, the pursuit of financial security can address this.

It allows you to ascend up the Maslow Hierarchy of Needs.

What Constitute the Areas that we need to Secure Financially?

Financial Security is to have a cash flow to secure our Essential Annual Expenses

So what are our essential expenses? 

We can argue till cow comes home on this but I think Maslow give us a good idea what should consider essential. A lot of what is deemed essential is for us to address our basic survival needs. 

Here are the category of expenses which I think are essential:

  1. Food. Food that can keep us functioning, satiated. For children it is so that they can continue their growth. Does not include food that are fancy, for entertainment purposes
  2. Transportation. This is to move around, primarily to get food, administration and to work
  3. Mortgage/Rent. Expenses spent so that you have a dwelling, roof over your head to protect against the harsh weather or dangerous people
  4. Utilities. Personal and household utilities to keep the lights on, to communicate with others
  5. Insurance. The bare minimum insurance to hedge the risk of low probability but high cost events. I would include some disability income insurance, hospital and surgical insurance
  6. Medical. Some allocation in case the family need to seek medical help
  7. School fees & pocket money. To keep kids in school and for them to carry on with their school life

We take a look at 3 different profile: the single lady, the married with no kids and married with 2 kids.

Based on these categories, and we are stringent about it, the annual expense would be lesser than your current expenses. 

As you have more members in the household, your expenses is more. 

Paying off the Mortgage for Security Purpose

I also put out what would the expenses be like, if the three profile of people do not have a mortgage, or do not need rent. The single will live with the parents, the married couple have paid of their mortgage.

I think for some people, their anxiety comes from remembering how tough it was for their parents during the Asian financial crisis, when they do not have a job and need to find money to pay off their mortgage. 

There are financial reasons to prolong a mortgage, but it definitely provides financial security if you would just pay off your mortgage. 

How to Build Wealth for Financial Security – Accumulate a Wealth Machine that can Cash Flow to Meet your Essential Expenses

The way to look at your wealth is that you are trying to build up a personal insurance against any cash flow volatility that might impact your essential expenses

  1. You gotten retrench. Or you felt that this job is not workable and you with to try something new. You wanted to do full time studies again. There is an appealing job opportunity but you do not know how it will turned out
  2. Compute your current Annual Essential Expenses for yourself and your family
  3. Check to see how conservative can your wealth insure you in case your plan does not work out. For the retrenched, put your retrenchment war-gamed plan into action, cut your expenses to the essentials, and activate your wealth to cash flow for your essential expenses
  4. Make your decision

This personal insurance prevents you from being put in the streets, not begging others for money to put food on the table and so that your kids can continue to study. It is also reduces the stress levels in the family.

But I think most of the time, it is to prevent you from freezing up mentally, so that you can make the important decisions that has got less to do with money.

How much wealth do you need? 

That will depend on your level of financial security needed.  This is correlated to your insecurity. 

I picked out 2 examples from the 6 monthly essential expenses example, the single lady who who rents a home, and the married couple with kids, but paid off their mortgage.

You can look at this as the milestones for your wealth accumulation. Aim for the first one then upon reaching, hit the next one.

Each milestone is useful.

The first one allows you to survive for 6 months should you get unemployed. You would eventually accumulate enough such that by withdrawing a conservative amount from your wealth, your wealth can last you for a long time. The cash flow is enough for you to keep tapping it, should you need it. 

In most cases, your financial ordeal would last you 6 months, 1 year or 2 years. 

You would eventually find employment. 

So some milestones, such as a 5% initial withdrawal rate may be rather risk seeking or not conservative for retirement. However, if you are not going to consistently tap your wealth for annual cash flow, then perhaps 5% withdrawal rate is rather conservative in this use case.

The more wealth you accumulate, the more conservative your financial security you get.

I tend to think that if you reach a 3% initial wealth withdrawal rate, you have a quite a conservative sum of money that can consistently produce a recurring cash flow to pay for your essential expenses. (the way to look at the withdrawal rate is that the lower it is, relative to your wealth’s average expected rate of return, the more likely your money will last for a longer time)

The table above shows the wealth that you need to accumulate if you are married with 2 kids but paid off your mortgage. The sum of money is bigger. 

However, if you determine that your essential expense is lower than $30,000/yr then your conservative financial security amount might be lesser!

My Personal Case Study

For about the past 5 years, I have been publishing my annual expenses. You would notice that based on the expenses, I do constantly project how my annual expenses will look like for financial security and financial independence. 

How much you need, is very much linked to the line items of your expenses, and how much they add up. 

And I do have a fair share of financial insecurities to keep tabulating stuff like this. 

If I take my annual survival expenses listed in the 2018 expense report, which are my essential expenses I believe i need in case things go wrong, it comes up to $11,880.

I could work out my wealth accumulation ladder like the one presented previously.

I do feel strongly that this annual essential expense is the bare minimum expense that i need to keep life going, and therefore it has to be conservative as possible.

So what I aimed for is somewhere close to a 3% initial wealth withdrawal rate

Given that my stock portfolio should be able to generate an expected return of around 7%, it should be rather conservative to take out an initial sum of 3% of the portfolio, and for subsequent years, the cash flow to be adjusted for inflation.

In all honesty, unless I retire, it is not likely I will need the cash flow consistently for years.

But this is for me, and your mileage might vary due to your lifestyle, and the level of financial security you require.

If You do not Tap Upon your Wealth for Essential Expenses, what you built up go Towards your Financial Independence

The elegant thing is your pursuit to address your financial security is a milestone in your bigger picture to retire early or for your retirement. 

If you do not use too much of it as an insurance policy against volatile cash inflow, then your accumulation would go towards the funding of your official retirement.

Your Best Work is Done when You are Free from Distractions

Ramit Sethi did some research some time ago, when he tried to find out why does people want to earn $1000 on the side. 

He found out that the folks are likely not looking to quit their job. 

Rather, it is so that they can have optionality in life. 

My opinion is that we are suppose to be meant to do something. The question is whether we are paid for it or not. When we are free from worry about putting food on the table, it might allow us to focus and do our best work yet. 

This might invariably improve our chances to get a better compensation at work.


You can say that the rise of the gig economy makes financial independence necessary, or that it becomes very easy in this age for your skill to be outdated. You could also make a case that work pressures are greater, and workers have to do much more, to the point it borders on being severely underpaid.

That does not get to the root of the issue:

  1. We could not stand volatility in our cash inflows
  2. Our lives are poorer when we felt jailed into our current job or boss and we are not confident we can walk away without our lives suffering

These are financial insecurities, and this is the monster that we are trying to frame

And why we felt that the pursuit of accumulating wealth is worth while.

Ultimately, we cannot deny that the pursuit of financial independence are likely to encourage actions that might lead to depressive behaviors

Perhaps the best podcast to explain what financial independence sought to address, on a deeper level, is this Afford Anything podcast interview with Emma Pattee:


I picked out the best part, and sped up the podcast in the clip above for you to listen to (which might make it sound weird). The host and Emma both achieved financial independence before they turned 30 years old. 

Both are still working. And they reviewed their lives and their pursuit of financial independence to identify what made them pursue wealth accumulation and what they missed out on.

And a lot of the reasons are financial anxiety.

Worse, many reached the point of financial independence, and they asked what’s next? This gives us an idea, they do not know what kind of life they are saving for.

When we started that financial independence pursuit, we might not know how much our philosophy of life will change 5, 10, 20 years later. The person that plan to pursue financial independence is a different person than the person that reached financial independence. 

And this might be the reason there is a mismatched in expectations. It is like one person is planning something for another person’s life. That might not always end well. 

For a lot of people, there is utility in providing a stable cash flow to insure against volatile salary affecting your family’s ability to function at the most fundamental level. 

Did you think I have identified the “monster” well? What is your take on this (or the figures presented)? Let me know.

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often.

Here are My Topical Resources on:

  1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
  2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
  3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
  4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
  5. Free Stock Portfolio Tracking Google Sheets that many love
  6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

Will Israel Be The Promised Land For Boeing's F-15X Or Lockheed's F-35?

Israel will be the scene of the latest F-35 vs. F-15 battle as the Lockheed Martin (LMT)-Boeing (BA) dogfight for orders extends to a key U.S. ally that faces advanced Russian air defenses in Syria.


The Israeli Air Force is weighing an order for additional Lockheed F-35 stealth fighters against an upgraded but non-stealth Boeing F-15 dubbed the F-15X. A decision on the F-35 vs. F-15 is expected in the next few months.

A win would provide a big lift for Boeing or Lockheed, which are already jockeying for Pentagon budget dollars on Capitol Hill.

An order from Israel would especially stand out for a few reasons. For one, the country already has 50 F-35s on order and has firsthand experience flying the jet in combat. (The Israeli Air Force gave its F-35As the moniker Adir, which means “Mighty One” but also translates to “awesome” or “cool” in modern Hebrew.)

Boeing’s F-15 fighter. (VanderWolf Images —

Also, Israel regularly conducts airstrikes in Syria, where Russia has based its S-400 air-defense system. The S-400 represents a unique threat to the U.S. and Israel because of its ability to detect a fourth-generation fighter — like Boeing’s F-15 — before the fighter’s radar can pick up the air-defense system.

Additionally, the U.S. is committed to maintaining Israel’s military superiority in the region.

Lockheed shares closed up 1.5% at 300.16 on the stock market today. Northrop Grumman (NOC), a major F-35 subcontractor, rose 1%, and United Technologies (UTX), which makes the F-35’s engines, gained 1.3%. Boeing climbed 1.9% to 381.42.

Who Will Win The F-35 vs. F-15 Contest?

The contest between the Lockheed and Boeing fighters is evenly split, said Richard Aboulafia, a Teal Group aerospace consultant.

Israel may want the F-15X to strike targets that are farther away with more bombs. But Russia’s involvement in Syria favors the F-35, even though its stealthy profile limits how many munitions it can carry.

“There seems to be some sort of internal debate on the nature of air combat and threats Israel faces,” he told IBD.

A new twist that could factor into Israel’s decision-making is the U.S. Air Force’s plan to buy the F-15X. That extends the production line further into the future, giving Israel more time to choose instead of forcing a now-or-never decision, Aboulafia said.

Pentagon Debates F-35 vs. F-15

The Pentagon submitted a budget request to Congress earlier this month in which the Air Force would buy 80 F-15X jets over the next five years, while purchases of the F-35 would drop to 48 from an earlier plan for 54.

Lockheed Martin F-35
Operating costs for the F-35 top $1.4 trillion over the fleet’s service life. (Lockheed Martin)

Costs have been a major issue for the $400 billion F-35 program. While the cost to procure each F-35 has been coming down, Joint Chiefs Chairman Gen. Joseph Dunford said its operating costs, which top $1.4 trillion over the fleet’s service life, must improve.

“There is not much difference in the procurement costs but there is about a 50% difference in the operations and sustainment costs between the F-15 and the F-35,” he said during a hearing on the budget before the House Armed Services Committee Tuesday. “The F-15 also has a pretty significant shelf life available as well.”

But the Center for Strategic and Budgetary Assessments recently warned Congress that the revamped fourth-generation Boeing F-15X wouldn’t survive against future threats, according to Defense News, and recommended expediting purchases of the F-35.


What Is The F-35 Fighter And How Much Does It Cost?

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How to approach tech investing?

Tech stocks have been on a tear this year. The rally may have legs, we believe. Disruptive innovations have long been driving tech companies’ performance, and are likely to continue to provide support. Yet tectonic shifts in technology are creating uneven benefits within the sector – and beyond. We advocate a selective approach to tech investing.


Disruptive innovations have fueled strong demand for tech companies’ products and services–underpinning the sector’s sustained out-performance. We compare some key metrics in tech stocks versus the broader global market: Tech companies have posted higher profit margins and stronger sales growth over the past five years, with vastly lower corporate leverage. Yet they trade on average at only a modest valuation premium. See the chart above. More tech disruptions are on the way, powered by fifth generation (5G) wireless technology and artificial intelligence (AI). These technologies are still in their early days, but the race among companies across industries to tap their potential should underpin future tech revenues and earnings. We see current valuations as fair on average. The sector is trading at a modest 5% premium to its five-year average, measured by forward price-to-earnings ratios – well below the 20% premium seen in June 2017.

icon-pointer.svgRead more in our Weekly commentary

5G, AI and beyond

High-speed 5G mobile technology is a step-change from the previous four generations. Greater bandwidths and faster Internet speeds are just the start. The key attributes of 5G–massive data capacity and ultra-fast speeds–could empower and accelerate the application of AI across industries, enabling advances in areas from driver-less cars to smart cities and tele-medicine. 5G trials have started, but wider deployment is unlikely until the early 2020s. Wireless carriers looking to gain a first-mover advantage are already deploying the pricey infrastructure backbone, to achieve a boost to existing 4G offerings while setting up to transition to 5G.

Semiconductor suppliers are potential early winners from this ongoing shift. They are set to benefit from a significant increase in demand for the data and infrastructure required to handle the network traffic. Fiber and testing companies also stand to benefit as 5G infrastructure is built out and new 5G applications are tested. The implications of tech innovation go beyond the narrowly defined tech sector. Think of the potential for autonomous and electric vehicles to disrupt the auto sector and related supply chains over time. Self-driving vehicles combined with greater prevalence of ride sharing could translate to fewer cars on the road. Such a scenario could also hurt the value of businesses such as parking infrastructure.

Within tech, we like semiconductor firms, thanks to a potential earnings turnaround this quarter. We prefer exposure to both U.S. and Chinese tech. The two countries are ramping up efforts to be the first to deploy 5G and set global standards, as part of their competition for global technological leadership. The tech sector faces its share of risks. A downturn in economic activity could temporarily hurt demand for technology products. Data privacy rules and anti-trust measures pose risks to popular tech companies that are now in the communication and consumer sectors. And we are mindful of crowded positioning as investors chase scarce areas of growth.

Bottom line

We do not expect the strong first-quarter performance of tech shares to be sustained, but see selected opportunities in the sector as disruptive innovations create growth opportunities.

Richard Turnill is BlackRock’s global chief investment strategist. He is a regular contributor to The Blog.

Investing involves risks, including possible loss of principal.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of March 2019 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

©2018 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.


Mortgage rates plummet at the fastest pace in 10 years on economic growth fears

From Andrea Riquier: Rates for home loans tumbled, as investors snatched up safe assets in the wake of a Federal Reserve policy announcement that took markets by surprise.

The 30-year fixed-rate mortgage averaged 4.06% in the March 28 week, mortgage guarantor Freddie Mac said Thursday. That was a 14-month low, and 22-basis point slide was the biggest weekly decline since June 2009. The popular product has managed a weekly gain only twice during 2019.

The 15-year adjustable-rate mortgage averaged 3.57%, down from 3.71%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.75%, down nine basis points.

Fixed-rate mortgages take their cue from the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.58%  , which has slumped to 15-month lows as investors grow increasingly itchy about the prospect of slowing global growth.

Lower borrowing costs are obviously good for would-be homebuyers. But rates aren’t the housing market’s only headwind. There’s still very little inventory of homes in the areas where people want to live, in the price ranges they can afford. And mortgage lending remains tighter than before the housing crisis, even as Americans have accumulated more student debt and lower down payments.

The housing industry is, slowly, adapting. One example: home builders are increasingly constructing houses for rent, rather than for purchase by owner-occupants. The data in the chart above comes from economists at the National Association of Home Builders, who have tracked the trend across several decades.

Even with the increase, the share of single-family homes constructed for rentals purposes is only 5%, well below the share of all rental units that happen to be single-family homes. NAHB Chief Economist Rob Dietz pointed out in a research post on the topic that “as homes age, they are more likely to be rented.”

The median age of existing homes is now 37, NAHB calculated last summer. That suggests the supply of homes that could be converted to rentals remains elevated, although they’re more likely to require remodeling to keep them energy-efficient and habitable.

The iShares U.S. Home Construction ETF (ITB) was unchanged in after-hours trading Friday. Year-to-date, ITB has declined -19.30%, versus a 6.28% rise in the benchmark S&P 500 index during the same period.

ITB currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #27 of 33 ETFs in the Industrials Equities ETFs category.

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Build Your Real Estate Portfolio with the BRRRR Method

The White Coat Investor Network[Editor’s Note: The following article is shared today from WCI Network partner, Passive Income MD and is about using leverage to grow a real estate portfolio.]

Physicians are huge fans of using acronyms – SOB, CHF, CABG, COPD, PE . . . these are just a few off the top of my head. In these cases, they stand for conditions none of us would like to have.

Of course, acronyms run rampant in other industries as well. There are tons of them in the real estate investing world, for example, and I’ve talked about some of them before, like CoC. One of my favorite acronyms, however, is BRRRR. It’s a real estate investment strategy that people love to use, and here’s what it stands for:

Buy – Rehab – Rent – Refinance – Repeat

I’ll cut to the chase. The point of this strategy is to help you acquire and build a portfolio of cash-flowing properties with little or no additional capital after purchasing the first investment property.

What does that mean? Well, let’s say you’ve diligently saved up for a rental property and maybe it’s taken you a while to accumulate the amount for a down payment. You know you want to purchase a second property but saving up from scratch again will likely take you a while. However, what if you were able to acquire that next property without having to save up all those funds again? That’s the point of the BRRRR method.

No, it’s not a get-rich-quick scheme, but it is a strategy that many people have used to build up a nice passive income portfolio without having to save a ton for a down payment each investment.

Many physicians ask how to go about acquiring rental real estate, especially early in their career when additional capital is difficult to come by. If you’ve wondered this as well, then join me as we go a little deeper into what this method is all about.


An old proverb of real estate investing is that you make money when you buy. Find a good deal and you’ll set yourself up for future financial success. Buy poorly, and actually making money becomes a long, difficult road.

This is true, but don’t get so caught up trying to find the perfect investment that you never end up buying anything (analysis paralysis). Yes, good investments can be difficult to discern, but that’s why it’s important to learn how to evaluate properties and work with real estate numbers. Your first buy will be the hardest, as they say, but afterward, you’ll have the experience and confidence to make further wise investments.

What is the goal of this purchase? It’s to buy a property that you think ultimately has some upside potential or is undervalued – it could use a little fixing up, or is in an improving area. Just so you know, the goal isn’t to flip the property, which I don’t do. In fact, the plan should be to hold onto it indefinitely (or at least for a while). The buy and hold mindset is absolutely different than someone looking to flip a house quickly.

You’re most likely going to use financing for this purchase. For an investment property, lenders will typically want you to put down at least 20-25%. You’re going to want to make sure you at least have that amount in cash as well as some extra to cover closing costs and reserves for this first property.



The idea is simple – after purchasing the investment property, fix it up in a way that makes it livable and increases the value. Of course, you probably won’t want to get a home that requires the amount of rehab you see on those home-flipping shows on HGTV, but maybe a property that could use a little freshening up.

Examples of rehabs that add value include fixing the kitchen with reasonably priced additions, paint, changing out the carpet for hardwood floors, fixing up the bathrooms. It also needs to be doable in a way that doesn’t consume all of your time for the foreseeable future.

Knowing where to get the most bang for your buck in terms of rehab is something that comes with experience and having a good contractor.


In order to refinance a rental property (this step comes next), banks will want to see that it is producing income. So you’re going to want to fill it with good tenants after you rehabbed the property.

How do you find good tenants? Well, there are no guarantees, but it’s important to screen diligently and be strict about it. I’ve learned the hard way with my apartment building. Relax your standards, like credit score, or be lazy about calling references, and you can get burned pretty badly.

Then there’s the question of hiring a property manager. Whether you should or shouldn’t is a personal decision. Most of the time, I think it’s in your best interest. Sure, you’d be saving some money and increase your cash flow, but your time as a busy professional is worth something, in fact, it’s worth quite a lot.

People say you average about five to ten hours a month managing a property. That doesn’t seem like much, but for high-income professionals, those hours can be worth quite a bit. Especially if the alternative is doing something that you love, like spending time with your family.

So find good tenants, make appropriate assumptions about expenses and hopefully, it’ll cash flow for you.


The next step involves refinancing the property, and there are a few things to consider.

First, the seasoning period. Before they’ll refinance the property on the appraised value, banks will look at how long you’ve owned the property, as well as how long it’s been rented out. At a certain point, the bank considers the property “stabilized.” But what is that point?

Some banks are apparently willing to refinance immediately after rehabbing and renting out the property and base the loan on the appraised value. However, for the most part, a typical seasoning period is at least one year of ownership.
real estate investing
Once you’ve reached that point, how do you find a good bank? Most of us only think of the large national chains that are sitting on the major street corners. However, there are so many different smaller and local banks looking to fund investors–if the deal makes sense. You should ask around on forums, and frequent real estate investor meetings to find out.

Lenders will typically loan up to 75% of the appraised value of the property. For example, if the property appraises for $160,000, they will let you refinance and take out a $120,000 loan.


By now, you should’ve received some cash from the refinance after taking a loan for 75% of the appraised value and after paying off the original loan. This helps free up capital, which enables you to go and purchase another property. It’s one way to help you grow and build a portfolio of rental properties without having to continually save up a large amount of capital.

Just repeat the cycle to continually purchase and recycle capital. People use this strategy with all types of rental properties, from single family homes to duplexes, to quads, and even apartment buildings.

Example of the BRRRR Method

Here’s an example of what some of the numbers may look like using this method. Disclaimer, this is a very simplified model. (Did not include fees, taxes, mortgage pay down, etc for simplicity.)

  • BUY a property for $100,000
  • Down Payment of $25,000
  • Take out a loan for $75,000
  • REHAB property with $20,000

Total Investment of $45,000 (Down payment + Rehab Costs)

  • RENT out the property for $1200/month.
  • REFINANCE the property for an appraised value of $160,000 a year later.
  • The bank allows you to take out a loan for 75% of the appraised value ($160,000 x .75  = $120,000).
  • Take the $120,000, pay off the original loan for $75,000 and that leaves you with $45,000 in cash (the same as your initial investment) to go out, REPEAT and find another property.
  • In the meanwhile, you have one property under your belt that is cash-flowing already.

This is an example using a smaller property, but people buy multifamily properties all the time with this method using large numbers, cash out refinance, and use the funds to purchase the next property.

In fact, this is the strategy my partner and I are considering for purchasing another multifamily property in the future.

Pros and Cons of the BRRRR Method

As with anything, there are some upsides and downsides to the BRRRR method.


  • Don’t have to wait to save up the down payment and repair capital for each property. You can save up for it for the first property and use the money from the refinance for future purchases.
  • Helps you to build a nice real estate portfolio relatively quickly depending on how soon your refinance
  • Build and force equity


  • If the property doesn’t appraise well, it could be an issue refinancing and getting anything back
  • Tough in a down market
  • Have to deal with the hassle of rehab
  • With each refinance, you strip the equity down to 25% so all your properties will stay relatively highly leveraged


The BRRRR method is a powerful way to grow a portfolio. Normally if you want to buy multiple properties, you have to save up each time for the down payment as well as any money for the rehab. If they’re smaller purchases like those in my example of Buy a Property a Year and Retire Early, you’ll likely be able to save up for the down payment each year.

It just goes to shows that with real estate, there are multiple ways to be clever using leverage and strategy. But of course, you have to be smart and plan for contingencies just like with any other investment.

Have you used the BRRRR method? Does it sound like a good way to build a real estate portfolio?

The post Build Your Real Estate Portfolio with the BRRRR Method appeared first on The White Coat Investor – Investing & Personal Finance for Doctors.

A roadmap for defensive investing

While the 2019 market rebound has undone much of the damage from 2018’s year-end drubbing, the brutal selloff offers a key reminder for investors about portfolio management, specifically the importance of having defensive exposures.

The selloff from October 3rd to December 24th dragged the S&P 500 Index down by 20% and the Russell Small-cap index more than 24% (Source: Bloomberg). This was driven primarily by fears of continued rate hikes by the Federal Reserve, valuation concerns and worries about a global growth slowdown.

These large draw-downs are a far cry from the relatively quiet markets seen in recent years, which drove investors to seek exposures to pro-cyclical market areas such as momentum stocks or high yield credit. As investors adjust to a lower growth paradigm, investors may want to consider exposures that either offer limited downside protection such as minimum volatility strategies or that move less in sync with equity and bonds such as in commodities

Indeed, investors are taking notice of the importance of defensive positioning. Even with the rebound in stocks this year, our research shows that flows into defensive exchange traded products are outpacing flows into all products as a percentage of assets under management (see Figure 1).  U.S. listed fixed income ETFs have garnered nearly twice as much as equity flows year to date. Minimum volatility strategies are attracting the biggest flows this year among factors, gaining $5.78 billion, while momentum has seen nearly $0.6 billion in outflows (Source of flow data: Markit, BlackRock as of March 14, 2019.)

Looking for defense: US listed exchange traded product flows

Building a buffer

Here are a few ways investors can add targeted defensives exposures to their portfolios.

1. Equities

Minimum volatility strategies historically have reduced risk in down markets compared to the broader market and Q4 2018 was no exception. The MSCI USA Minimum Volatility Index outperformed the S&P 500 Index by more than 600 basis points (bps, or 6%) in the fourth quarter of 2018. Min vol also worked well in other regions: The MSCI Emerging Markets Minimum Volatility Index outperformed the MSCI Emerging Markets Index by more than 900 bps in 2018.[1] It is worth noting that minimum volatility strategies historically have tended to perform well both in growth slowdowns and in outright recessionary market conditions. Investors may also want to consider high quality dividend paying stocks, which can offer potential income as well as some resilience in down markets as well as adding so-called “safe haven” countries such as Switzerland and Japan.

2. Fixed Income

The Federal Reserve has raised interest rates nine times since the tightening cycle began 2015. Investors, who were looking to take advantage of those hikes added exposures to short-term fixed income assets. However, with the market expecting just one more rate hike 2019, investors concerned with slowing growth or geopolitical turmoil may want to consider longer duration Treasurys (ten years or longer). Historically, these have offered some buffer for portfolios in serious market downturns, as well as a chance to potentially pick up some extra yield.

3. Commodities

Historically, commodities have tended to provide meaningful diversification and inflation hedging benefits.

For example, from April 1991 to March 2019, the annual returns of the S&P GSCI Index have had just a -0.13 correlation to the US Treasury 10 year benchmark index and a 0.25 correlation to the S&P 500 Index.[2]

correlations of commodities with stocks, bonds and inflation (1991-2019)

In addition, many commodity assets, such as gold, are priced in dollars, and historically have performed in line with an increase in inflation expectations. Therefore, they may serve as an inflation hedge in a portfolio. In the current environment we don’t expect a major increase in inflation, but holding inflation hedges.

Some may question where cash fits into a defensive portfolio: While investors generally hold relatively high levels of cash, as the BlackRock Investor Pulse survey has shown, this buffer is increasingly being reallocated to other high quality fixed income options such as U.S. Treasuries as a way to earn incrementally higher yield.

Let’s be clear: Seeing your portfolio decline in value is never fun, and losing less money than the market at large offers little solace. But over the long term, creating a buffer from the downswings – known as “downside protection” can add value to a portfolio.

There’s an old saying, “You should fix your roof when the sun shines.” We don’t expect a recession in 2019, we still believe stocks will continue to climb and we prefer them over bonds. But the kind of volatility we saw in the fourth quarter could reappear, the result of any number of unforeseen events. When or if that occurs, it would be wise to ready.

Related iShares funds

(USMV) iShares Edge MSCI Min Vol USA ETF

(EEMV) iShares Edge MSCI Min Vol Emerging Markets ETF

(HDV) iShares Core High Dividend ETF

(EWJ) iShares MSCI Japan ETF

(EWL) iShares MSCI Switzerland ETF

(SHY) iShares 1-3 Year Treasury Bond ETF

(FLOT) iShares Floating Rate Bond ETF

(TLT) iShares 20+ Year Treasury Bond ETF

(COMT) iShares Commodities Select Strategy ETF

(CMDY) iShares Bloomberg Roll Select Commodity Strategy ETF

(IAUF) iShares Gold Strategy ETF

(SLV) iShares Silver Trust

Chris Dhanraj is the Head of the iShares Investment Strategy team and a regular contributor to The Blog.

[1] Source: Bloomberg, as of 12/31/18.

[2] Correlation measures how two securities move in relation to each other. Correlation ranges between +1 and -1. A correlation of +1 indicates returns moved in tandem, -1 indicates returns moved in opposite directions, and 0 indicates no correlation.

Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses or, if available, the summary prospectuses which may be obtained by visiting or Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets and in concentrations of single countries.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes than the general securities market. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.

Investing in commodity-linked derivatives and commodity-related companies may increase volatility. Price movements are outside of the fund’s control and may be influenced by weather and climate conditions, livestock disease, war, terrorism, political conflicts and economic events, interest rates, currency and exchange rates, government regulation and taxation.

A fund’s use of derivatives may reduce a fund’s returns and/or increase volatility and subject the fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. A fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited.  There can be no assurance that any fund’s hedging transactions will be effective.

Diversification and asset allocation may not protect against market risk or loss of principal. The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.  The information presented does not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy or investment decision.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

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The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

©2019 BlackRock. iSHARES and BLACKROCK are registered trademarks of BlackRock. All other marks are the property of their respective owners.


The Stock Market Has Its Best Quarter Since 2009

From Sam Bourgi: By CCN: The Dow and broader U.S. stock market rallied on Friday, capping off the best quarter since the financial crisis and reaffirming that the bull market has yet to run its course.


The Dow Jones Industrial Average climbed triple digits, building off a triumphant start to the trading session for U.S. stock futures. The blue-chip index climbed 140.52 points, or 0.6%, to reach 25,857.98. Caterpillar Inc. (CAT) and Boeing Co (BA) were the Dow’s top performers.

dow jones industrial average, djia

The Dow is minutes away from closing its best quarter in 10 years. | Source: Yahoo Finance

The broad S&P 500 Index of large-cap stocks gained 0.4% to 2,828.15. Nine of 11 primary sectors reported gains, with health care stocks climbing 1% on average. Industrials and information technology shares also outperformed the benchmark.

Meanwhile, the technology focused Nasdaq Composite Index climbed 0.6% to settle at 7,717.13.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.05 (+0.02%) in after-hours trading Friday. Year-to-date, DIA has gained 5.62%, versus a 6.28% rise in the benchmark S&P 500 index during the same period.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 82 ETFs in the Large Cap Value ETFs category.

This article is brought to you courtesy of CCN.

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What stocks may need: a bit of inflation

Back in February I highlighted the interesting–read: troubling–divergence between stock prices and bond yields. Bonds were signaling an economic slowdown while persistent equity gains suggested a near perfect balance between growth and low inflation. Since then the divergence has only widened.

Equities hit a five-month high late last week, while bond yields fell to their lowest level since January of 2018. To be sure, much of the recent drop in interest rates reflects a rapid shift in Federal Reserve policy, one that suggests an abrupt end to the Fed’s tightening cycle. That said, with a dovish Fed already reflected in both bond and equity markets, can this divergence continue?

In answering the question, it is helpful to focus on one particular aspect of interest rates: inflation expectations. Nominal interest rates can be broken down into a real, or after-inflation component, and inflation expectations, captured by the break-even (BE) rate in Treasury Inflation Protected Securities (TIPS).

In the post-crisis environment long-term BE rates (derived from the 10-Year TIP) and U.S. equities have been closely correlated. Weekly changes in 10 Yr. BE’s have explained nearly 30% of the variation in S&P 500 returns (see Chart). To my mind this makes sense. In the post-crisis environment investors have constantly been worried about too little growth. In this context a positive relationship between inflation expectations, which are driven by growth, and stocks is intuitive.

S&P 500 Weekly Returns vs. Change 10-Year BE

However, since late November there has been a pretty significant divergence between stocks and BE rates. While inflation expectations have recovered from the December bottom, the 10-year BE is basically flat compared to where it was around Thanksgiving. During the same period, however, the S&P 500 has gained roughly 8.5%. Most of this divergence occurred in the immediate aftermath of the December low, but in recent weeks it has re-emerged. Inflation expectations have been flat during the past month while the S&P 500 has rallied another 2.5%.

A little inflation can be a good thing

Going forward, to the extent break-evens are flat-to-lower this calls the longevity of the rally into question. Why should this be the case? In one word: margins. Historically, higher inflation expectations have been associated with higher profit margins. This is because companies can enjoy better pricing power, and better margins, when inflation expectations are higher. This relationship is evident in the data.

During the past 20 years profit margins have averaged 6.5% in periods of below-average inflation expectations, defined as less than 2%. However, in periods when inflation expectations have been above average profit margins have averaged over 8%.

To the extent higher inflation expectations are associated with higher pricing power and better margins, a drop in inflation expectations would be another data point suggesting that the divergence between rates and stocks cannot go on forever. Either bond yields are too low or investors should be more nervous about earnings than they seem to be.

Russ Koesterich, CFA, is Portfolio Manager for BlackRock’s Global Allocation team and is a regular contributor to The Blog.

Investing involves risks, including possible loss of principal.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of March 2019 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

©2019 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.


Oil prices move higher to a 4-month high after news of Russian production cuts

From Ben Foldy: Oil rose to a four-month high as news of Russian production cuts helped crude continue toward its best first quarter in seventeen years.

Futures rose as much as 2.4 percent in New York on Friday before paring some of those gains. Russia deepened its output cuts and Energy Minister Alexander Novak said he will discuss their extension a day after it was reported Russia had been considering letting them lapse in September. Meanwhile, demand fears eased somewhat on the resumption of trade talks between China and the U.S. and predictions of continuing growth this year by two Federal Reserve presidents.

“The Russia situation seemed a bit wobbly yesterday with some of the statements that were coming out of OPEC and Russia,” said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. This morning’s chatter reassured the market’s optimism for the cuts, he said.

Oil has gained 32 percent to start the year as Saudi Arabia leads the Organization of the Petroleum Exporting Countries and its allies in squeezing supplies to prevent a glut. Whether the U.S. will extend waiversallowing some countries to keep buying Iranian oil is shaping up as a key supply risk, while slowing global economic growth is capping further gains.

WTI poised for best quarter in almost a decade

“The energy complex has put in a stellar price performance in the first three months of this year,” PVM Oil Associates analyst Stephen Brennock wrote in a report. “The fundamental backdrop is poised to tighten in the coming quarter.”

West Texas Intermediate for May delivery rose 70 cents to $60.00 a barrel on the New York Mercantile Exchange as of 10:27 a.m. local time. The contract is on pace to rise for the fourth week in a row, and its biggest quarterly gain since June 2009.

Brent for May settlement, which expires Friday, climbed 49 cents to $68.31 a barrel on the London-based ICE Futures Europe exchange. It’s risen 27 percent this quarter. The global benchmark crude was at a premium of $8.23 to WTI.

Trade Talks

New York Fed chief John Williams’ comments boosted sentiment as the U.S. and China resumed trade talks. The Trump administration is prepared to keep negotiating for weeks or even months to reach a deal that will ensure China improves market access and intellectual-property policies for U.S. companies, White House economic adviser Larry Kudlow said in a speech in Washington.

A lack of clarity on the Iran waiver extensions is generating uncertainty on the supply side. While South Korea requested “maximum flexibility” in renewing the waivers that lapse in early May, the U.S. has reaffirmed its original stance to further strengthen pressure and sanctions against Iran. Refiners in Japan, which resumed oil purchases from Iran in February, are still not certain about buying crude from there after next month.

The United States Oil Fund LP (USO) was trading at $12.47 per share on Friday afternoon, up $0.12 (+0.97%). Year-to-date, USO has gained 3.83%, versus a 6.12% rise in the benchmark S&P 500 index during the same period.

USO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 108 ETFs in the Commodity ETFs category.

This article is brought to you courtesy of Bloomberg.

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