Invest Wisdom

Lots of people who give out advice on investing and retirement (myself included) have been questioning their fundamental assumptions about risk and return over the last several months.

Recently, a company surveyed financial advisers about how the recession has affected their advice, and 77% said that they had altered their asset allocation strategy in reaction to the sell off. Thirty-six percent said that they felt less confident in their abilities to manage their clients’ assets. You can read more about the survey here.

I think it’s healthy to periodically check assumptions about something as important as asset allocation. It’s unfortunate that it has to happen after many soon-to-be retirees have lost more than 40% of their money. In the first story linked about the survey, a survey administrator said that the surveyed advisers have moved their clients’ money to more conservative investments like bonds and cash.

I don’t think such a shift is necessarily a bad move. Some of their clients might have discovered that they couldn’t handle the risk their previous portfolios entailed. But I hope advisers are accompanying that shift with a note to clients that they better save a higher percentage of their income to make up for the lower expected returns from their new portfolio. Moving to a conservative allocation simply because they don’t want to see their clients’ portfolios bounce around without compensating in some way could really hurt. Instead of having say, a 70% chance of retiring when they want in a traditional allocation (which I understand isn’t good), their clients might have a 0% chance of retiring when they want if they choose to go with the low guaranteed return of safe investments.

Again, I have no problem with going safe. There’s just some extra work involved if they do.

— Joe Light

To convert or not to convert?

That’s the question I’m facing now. Actually, I’m facing the question of whether to convert from a traditional IRA to a Roth for a second time. I converted the first time in February 2008. It was a rollover IRA from an old employer’s retirement plan, and I finally got around to turning it into a Roth. And then, along with the rest of the market, the account balance dropped by almost half. If I had kept it as a Roth, I would have had to pay income taxes on the high, February balance. So rather than take an unnecessary tax hit, I recharacterized it back into a traditional IRA.

Since then, and because of an extreme aversion to paperwork, I haven’t converted it back into a Roth. And now, of course, the market is up 30% from its low. I feel stupid for not converting it into a Roth again in March, when I would have paid the minimum in income taxes. But since that time has come and gone, should I wait? Or bite the bullet and convert now?

To answer this question, I turned to the fundamental source of my anxiety about re-converting. And that was: What if I’m wrong again and the market drops?

As I think the question through, holding out just in case the market retreats to new lows is a backhanded way of attempting to market time. If I really thought that the market was going to drop, I would move my IRA investments into a conservative bond fund or money market fund. I won’t do that, because I know that it’s just as likely, if not more likely, that the market will rise. So, the best time to convert from a traditional IRA to a Roth IRA is always going to be now, if I make the decision based solely on the direction of the market.

And what’s the worst that could happen? Well, I guess it’s that my account is worth less at the end of the year than it is now, in which case I simply recharacterize it all over again. I hate paperwork. But is a couple hours on the phone and in the post office worth several thousand dollars to me? Um, yes.

If you’re facing the same question I am, there are other things to consider. For example, your income tax bracket might change from year to year because you received a large bonus that didn’t come this year or vice versa. If you already have a lot of money in a Roth IRA but little in a traditional IRA or 401k, you might simply want to keep your tax-advantaged accounts diversified (that is, you might not want to commit fully to the idea that your taxes will be higher when you retire, which is what pre-paying taxes with a Roth does). But in my case, being unhappy in my market timing ability was no reason to delay.

A great source on IRA conversion and recharacterization rules is Fairmark.com. You can find their recharacterization literature here if you’re considering any of the same moves I am.

— Joe Light

I’ve written in the past about the price-to-earnings ratio and why it shouldn’t be your only measure of value. I’m about to not follow my own advice. Don’t kill me.

A few months ago, I wrote a story about how the market looked undervalued based on a very conservative use of the price-to-earnings ratio. Instead of dividing the market price by the current year estimated earnings or last year’s earnings, you divide it by the average of the market’s earnings for the last 10 years.

“Normalizing” the earnings in that way makes it so your P/E isn’t heavily influenced by earnings bubbles. Any “fake” growth or market cycles that might artificially inflate the earnings will be offset by earlier years of lower earnings. The P/E based on 10-year normalized earnings was made famous by Yale professor Robert Shiller in his book Irrational Exuberance, which accurately predicted the tech and real estate bubbles.

Back at the market low of 666, Shiller’s P/E stood at about 12, well below its historical average of 16. In other words, investors who bought at the low would earn about 8.3% per year (1 divided by 12) versus the 6.25% that they settled for in the past. Since then, the market has risen 30%. Would the same measurement say the market is a bargain now?

Right now, the S&P 500 stands at about 903. We don’t have the last few months of earnings data yet, but given that it’s a 10-year average, it shouldn’t make a huge difference. If we take 903 and divide it by our old earnings figure, we get a new P/E of 15.6. That is, investors by buying now would get a yield of 6.4% on their investment, right in line with the average. According to the chart we ran with my story a few months ago, investors who invested at P/Es in that range got 10-year annualized returns of about 5.7% on average.

In other words, based on Shiller’s P/E alone, it doesn’t look like the stock market is as much of a bargain as it was in March, though investors aren’t overpaying for stocks either. Shiller updates his P/E every month. You can find it in the Excel chart on this page.

I do these sorts of calculations frequently, but mostly as an academic exercise. Investors with a long time horizon would probably be better served by coming up with an appropriate asset allocation based on age, risk tolerance, savings and other factors and sticking to it, regardless of what the P/E says. This isn’t because Shiller’s P/E is wrong. It’s simply because tracking the P/E (and all the other measures of value) is hard and takes time. If you screw up even once, you could seriously harm your savings.

Back in the March story for Money, I wrote that someone wanting to take advantage of the low valuations might make a slight shift in their allocation—maybe you could put an extra 5% to 10% in the stock market while prices are low. I’d have to go back to my sources to see what they think, but it doesn’t look like the case for that kind of shift is as strong now.

— Joe Light

I purposely avoid TV news for business information. There’s too much there to provoke an emotional response and encourage frequent trading, which we all know is a bad idea. But one of the few general interest news programs I do watch is Meet The Press on Sunday mornings.

Has anyone else noticed that the press suffers from a bit of attention deficit disorder? For the fourth straight week, the economy wasn’t part of the newscast at all. This week, it made way for discussions about troubles in Afghanistan and Pakistan. Last week, it was the swine flu and Sen. Arlen Specter’s switch to the Democratic Party.

Those are all important topics, but it’s seeming more and more like the complete disintegration of our financial system has become yesterday’s news.

I suspect that’s because the stock market has risen more than 30% since the March low. But while the stock market is often the earliest barometer of which way the economy is headed, it’s worth pointing out that other economic indicators say we’re not out of the woods yet.

The June issue of Money Magazine (which isn’t online yet, unfortunately) explains three leading indicators that would point to an economic recovery.

1. Business sentiment goes up and stays up. The Institute for Supply Management’s non-manufacturing index (found here) measures how confident companies are about their growth prospects. The survey asks questions about business activity such as new orders, backlogs, and inventory changes to come up with an overall index.

For April, the index was at 43.7, a couple points above the March figure and much higher than the November low of 37.4. A score below 50 means that industries are contracting. A consistent rise in the index to a score above 50 would indicate that the recession is winding down.

2. Housing supply shrinks. According to the National Association of Realtors, the real estate market had nearly 10 months of supply in March (found here). A 10 month supply means that it would take about 10 months for home buyers to absorb all of the homes currently for sale. Since you generally don’t expect homes to be sold immediately, a “healthy” inventory isn’t 0 but closer to 6 months. Ten months is a bit below some of the highs last year, but not that much better.

3. The hiring of temp workers spikes. In the first stages of a recovery, companies tend to be cautious, preferring to hire temporary workers over full timers. But in the first few months of the year, temp staffing hasn’t risen or fallen (found here). You should see a consistent rise in temp hiring for a few months before being confident that the economy is growing again.

All in all, it doesn’t look like we’re quite on the precipice of an economic rebound—though that could be coming. This data doesn’t mean that you should avoid the stock market while waiting for the indicators to turn positive. On average, the stock market tends to bottom between four and five months before the end of a recession. These indicators, on the other hand, only turn positive 2 to 3 months beforehand.

By the time you see these “leading” indicators turn around. The best leading indicator out there — the stock market — might have already taken off.

– Joe Light

Just as a fun exercise, I took a look at some coincidences that signaled market rebounds in past recessions. They’re not tied to fundamentals (like unemployment or corporate earnings) in any way, but offer a window into the silly tendencies of book publishers, fund managers, and pretty much everyone else to mistime the market about as badly as possible.

The book How Harvard and Yale Beat the Market, for example, probably seemed like a surefire best seller back when the schools were posting double-digit returns. But unfortunately, the book came out just last month, soon after both schools’ endowments lost about a quarter of their value. I sympathize with publishers that have to try to guess what the economy will be like months beforehand.

A few books hitting my bookshelf, and another silly indicator, have given me reasons to feel pretty good. (Forgive me for not linking all these books. Some of them I’d rather not send the traffic.)

* The market is flooded with money “scare” books. This started in mid-to-late 2008 and continues now. In the past several months, I’ve received copies of Financial Shock, Game Over: How You can PROSPER in a Shattered Economy, and the Guide to the End of Wall Street as We Know It. More recently, it’s been The Ultimate Depression Survival Guide, Jim Cramer’s Real Money: Sane Investing in an Insane World, and The Great Depression Ahead.

By comparison, see the July 2006 classic How to Buy Real Estate Without a Down Payment in Any Market.

I’m not too familiar with the book industry, but the lead time on some of their books must be pretty long. In January, I bizarrly received a book titled Do-It-Yourself Hedge Funds, complete with a cigar-smoking cartoon character in a tophat on the front cover. As the lone Amazon reviewer of the book wrote, “I haven’t been this excited by a DIY book since ‘Do-It-Yourself Biohazardous Waste Disposal.’”

* A prominent value mutual fund manager is fired. We all know that we’re supposed to invest for the long run. But unfortunately for fund managers, their own industry doesn’t work that way. You see, it’s important for funds to post good returns every year. Otherwise, investors tend to leave the fund in droves. Although value managers are supposed to make money by being “contrarian”, that is, investing in companies that the market has shunned, in the shortterm that can lead to losses and put their jobs at risk before they have a chance to bounce back.

Last month, 72-year-old David Dreman was fired as the manager of the DWS High Return Equity Fund. Dreman had led the fund for two decades.

As this blog entry from Money notes, it was at the height of the tech bubble in 2000 when the last spate of value managers got canned. Their funds hadn’t kept up with peers loading up on tech stocks. You know what happened next.

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Unless I hear someone say something really interesting, this is about as far as I’m going to go in calling whether or not the March low was the bottom of this bear market. The real answer is “No one knows.” Yes, that’s a frustrating answer. But it’s the right one.

— Joe Light

The Federal Reserve released the results of the Supervisory Capital Assessment Program (a.k.a. the bank “stress tests”) this evening. The tests were designed to measure how well banks would hold up under two scenarios: 1. The “baseline” scenario, where the economy follows the trajectory currently forecast by economists and 2. The “more adverse” scenario, where the economy performs significantly worse than that.

The Fed had an inside look at banks’ assets and supposedly was able to determine whether banks had enough capital to survive should the economy worsen. It’s the same thing that banks are supposed to do on their own, but given the failure of many banks to do just that, the Fed thought it was in the best interest of the economy to do it for them and make it public.

The results weren’t all that surprising. The Fed wants the banks to raise about $75 billion in total. Banks that have to raise a lot include Bank of America and Wells Fargo. Banks that don’t have to raise anything include J.P. Morgan and Goldman Sachs.

But if you take a look at the actual report, there are a lot of interesting items that aren’t in most of the first blush news stories I’ve seen.

For example, take a look at this chart from the report. It shows which banks would lose the most if the Fed’s “more adverse” scenario took place.

As you can see (if you can squint and read the names), State Street’s assets are the most vulnerable to an economic downturn. Metlife is the least vulnerable. The chart doesn’t show who needs to raise more capital (GMAC would have low losses, for example, but it has no capital buffer), but it does show how stock investors should expect their companies will be affected if things get worse.

If you’re invested in any of the banks tested by the Fed, you owe it to yourself to flip to the end of the report where they detail possible losses in each asset class for each bank. I wouldn’t buy or sell a stock based on the information alone. After all, everybody has the report and much of it might be priced into the market already. But it will help you understand just what kinds of losses your companies are exposed to should the rosier forecasts that have driven the market upward don’t take place and the adverse scenario occurs. And it’s not every day that banks make that information public.

— Joe Light

If you’re coming from the Carnival of Personal Finance at Earn What You Spend, thanks for visiting! There are three legs to the “wealth” stool: making money, being frugal, and putting your money to work for you. Invest Wisdom is all about that third leg. Check out the links on the right to see what I’ve written about recently, and if you like what you see, subscribe here. Thanks so much for visiting.

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Zillow.com, which tracks home prices nationally, released a report today which concluded that 22% of all homes in America are “underwater”—that is, the homes’ owners owe more on their mortgages than they can sell their homes for.

I could go on and on about what trouble those homeowners are in. Even if they keep up with their mortgage payments, they basically can’t move without negotiating a short sale, putting up thousands of dollars at closing to make up the shortfall, or going into foreclosure.

A ways back, when I was a real estate reporter with the Florida Times-Union in Jacksonville, I remember talking to a homebuilder who made the case that a home was the best investment someone could make.

“In no other investment can people leverage their returns at such a low cost,” he said. (This was several years ago. I’m paraphrasing.)

“Just look at the math!”

Someone buys a $200,000 home with $20,000 down and a $180,000 loan. If the home price goes up 10% and the homeowner sells it for $220,000, he makes $40,000 on the deal. In other words, his return is 100%, even though the market’s return was only a tenth of that.

Sound familiar? It was nearly the same strategy Lehman Brothers used to generate its market beating returns for years.

According to a Bloomberg story written when Lehman went under, Lehman’s ratio of total assets to shareholder equity was 31. To put that in easier terms, it’s as if Lehman had bought a house and only put 3% down. (It’s just the inverse: 1 divided by 31)

Just a 3% drop in its investments completely wiped out Lehman’s equity.

According to Zillow, since last year, home prices have dropped 14%. That means, the average homeowner who put up to 14% down at this time last year has had more than a negative 100% return on his home “investment”. Even if the homebuyer was extremely frugal and put 30% down, his results would still be pretty terrible:

Let’s say he bought a $500,000 home and put $150,000 down. His home is now worth $430,000 after the 14% drop.

Unfortunately, the size of his mortgage didn’t change. But his equity dropped to $80,000. In other words, despite the 14% drop in home prices, his investment’s loss is 47%! (We’re not including monthly payments made between the purchase and the drop.)

That’s the kind of change we didn’t even bother to calculate in 2005, when a large drop in home prices wasn’t on the radar. Home buying is great as a forced savings vehicle. It also has tax benefits, and I’m sure it makes people happy to have a plot of land that can be called theirs. But an investment? To me, the leverage involved makes it one of the riskiest investments you can make.

And no—As a real estate reporter in 2006, I did not foresee that one day the American dream would put 22% of Americans in over their heads.

— Joe Light

Fidelity and Vanguard have long been the leaders in offering index funds with paltry fees. Vanguard’s S&P 500 fund has an expense ratio of 0.15%. Fidelity’s Spartan 500 index fund has only 0.10% in annual expenses. If you asked me yesterday what fund company I thought was going to take the axe to fees next, I would have probably guessed Vanguard, as the two fund giants continued to outdo each other.

But no, ladies and gentleman, we have a completely different company throwing down the gauntlet in the low fee battle. Charles Schwab, whose S&P 500 and Total Stock Market index funds had expenses ranging from 0.19% to 0.53% yesterday, now will offer both its S&P 500 Index fund and its Total Stock Market Index Fund at an expense ratio of only 0.09%, making it the new market leader. There will be only one, no-load share class for both funds (that is, there will be no upfront or backend fees for buying or selling), and the minimum investment for the mutual funds will only be $100.

The Schwab International Index Fund and Small-Cap Index Fund also had their fees reduced—-to 0.19%.

The guys representing Schwab at a press conference this morning said that the change is immediate and permanent, and that there are no catches. Even if you had only $100 to invest, $100 could go into the S&P 500 fund, and you’d only pay about 9 cents per year in expenses. No upfront fee, no backend fee, no nothing.

Schwab made the announcement today and is letting their advisors know about the change as I type. I wonder if Vanguard and Fidelity knew it was coming and are preparing similar moves. I’m not sure of the regulatory requirements in changing fees. So there’s a chance there was some sort of public indication that this was happening, and I missed it.

For investors, if there really is no catch, this is great news. In fact, in recent weeks, more of a focus has been on expense ratios going up as mutual funds lose assets. If you’re looking to simply track a stock index (there doesn’t appear to be any news on the bond front, unfortunately), Schwab has the most cost efficient way of doing it. In fact, its expense ratio is the same as that of the most popular market-tracking ETF (SPY). But whereas you’d have to pay a broker commission every time you bought the ETF, buying Schwab’s mutual fund has no fee associated with it.

Just how much does a 0.01% smaller fee help you? If you invested $100,000 in the Schwab fund and $100,000 in the Fidelity fund, the Schwab fund would be worth about $850 more after 20 years (A difference so small that I couldn’t even draw an effective chart). Not a huge amount. And probably not enough of a difference to get fee-conscious investors to change mutual fund companies. But it’s nothing to sniff at either. Let’s hope Vanguard and Fidelity don’t take this lying down. It’d be great to have a low fee battle on our hands.

This is where I typically offer a “but…”, and I don’t want to sound like a Schwab advertisement. They said a lot of other stuff at the meeting, like how they think their active mutual funds are going to outperform and how the recession might already be over that I’m extremely skeptical about (more on that later). On first take, though, I’m having trouble finding a bad angle on lower mutual fund fees. Let me know if you see something I don’t.

- Joe Light

After writing my summary of Berkshire Hathaway’s annual meeting, I realized that I didn’t really explain what Treasury Inflation-Protected Securities and Series I Bonds were, let alone which one is the better pick to battle inflation.

Both TIPS and I-Bonds are designed to do the same thing, though through different means.

When you buy TIPS:
– The principal (that is, the face value) of the bond is adjusted up with inflation or down with deflation.
– You receive a stated coupon rate, just like any other bond, but the interest payment is based on the adjusted principal, which means your payments can vary.

When you buy I-Bonds:
– The principal stays the same.
– The interest is a combination of the stated fixed rate and the inflation adjustment. In a deflationary period, the adjusted rate can go to 0%.

As luck would have it, the Treasury announced on Friday that Series I Bonds bought between now and Oct. 30 would return 0% — the first time a six-month period has had no return since the bonds were created in 1998.

That doesn’t mean the bonds aren’t working. It just means that right now, in the short term, we’re experience deflation. The Consumer Price Index, the government’s main measure of inflation, dropped at an annualized rate of 5.6% in the last six months.

If you’re deciding right now between I-Bonds and TIPS, and if you’re investing in a tax-deferred account, it’s best to go with TIPS. The easy reason is that TIPS are providing a real return (that is, a return after inflation) of 1.1% to 2.3% depending on the bond’s maturity date versus the 0% real return for I-Bonds. While the principal might get adjusted down in the shortterm, in the longterm, most investors and economists expect inflation to return with a vengeance, as the government pays for the stimulus program.

But if you’re investing in a taxable account, depending on tax considerations, you might want to stick with I-Bonds in the hope that their interest rate is adjusted up in November. As one of my colleagues at Money points out, while I-Bond interest is deferred for the life of the bond, the interest and principal growth of TIPS bonds are subject to federal tax, even if the bond hasn’t matured yet!

- Joe Light

If you’re not a regular at the Carnival of Personal Finance already, check it out. It’s a collection of some really great personal finance posts from many good blogs. It also features a post of mine from last week on value investing. If you’re new to Invest Wisdom, I hope you enjoy the site, and subscribe if you like it!

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Berkshire Hathaway’s annual meeting is always part-carnival, part-symposium for the world’s greatest investors. Several years ago, Warren Buffett, the company’s leader, dubbed it “our capitalist’s version of Woodstock”, and the name has stuck.

Thousands flock for the weekend near the company’s headquarters in Omaha, Nebraska, and Buffett talks on a wide range of subjects, pertaining to the company specifically and the economy as a whole. It’s easy to get lost in the round-the-clock coverage of the Oracle of Omaha’s yearly salon, but I’ve culled from various news reports five things that Buffett said that I think average investors should pay attention to.

1. Buffett thinks inflation will go up. To pay for the trillions of dollars in fiscal stimulus being pumped into the economy, the government will have two choices: raise taxes or print money (that is, let inflation rise). Because politicians loathe the backlash of tax hikes, Buffett thinks they’re likely to pay for their spending the backhanded way, by devaluing the dollar.

What to do: If you think Buffett’s right, the most traditional defenses against inflation are Treasury Inflation-Protected Securities (a.k.a. TIPS), I Bonds, and commodities like gold and oil. Stocks also aren’t a bad investment, since their earnings should reflect rising prices, but depending on the business, companies can have trouble passing costs through. I’d go with TIPS or I Bonds because they’re designed to protect against inflation. Commodities, on the other hand, can be extremely volatile, no matter what inflation is actually doing. If you do go the commodity route, stick with ETFs rather than buy the actual materials, which can be hard to buy and sell.

2. He still thinks his equity put options will make money. Don’t worry about the technicalities of an equity put option. Basically, Buffett insured some investors against the possibility that major stock indexes would be down when the contracts expire between 2019 and 2028. At the meeting, he expressed confidence that those contracts would be pure profit for Berkshire. In other words, he firmly believes the stock market will have moved up and past the insured values in the next 10 to 20 years.

What to do: Buffett has always been candid about his feelings, whether it be on his own company or on the market as a whole. In fact, Buffett mentioned that he thinks he’ll probably lose money in his credit default contracts that expire in the next five years. In other words, he thinks he underestimated how many companies would go bankrupt in the near term. But Buffett’s bullish on the longterm rise of the stock market. For you, that probably means you shouldn’t hunker down for another “lost decade” as we had in the last 10 years and avoid stocks. If he’s right, it could cost you bigtime.

3) Buffett’s not planning to buy back shares of his own company. And more important, he thinks that Berkshire Hathaway’s $92,500 share price is not “demonstrably below” a conservative estimate of the company’s value, despite being down about 30% from a year ago.

What to do: On its own, Buffett’s basically saying he can’t make the case that his company is at a bargain basement price. But we can extrapolate a little to determine what price-to-earnings ratio Buffett views as conservative. In the May issue of Money, I (along with an unnamed money manager very familiar with the company) came up with an estimate of about $103,600 for Berkshire’s intrinsic value. To do that, we looked at the earnings of the companies that Berkshire held and multiplied them by a P/E below the average P/E of the sector.

So, for example, Buffett’s utilities companies earned about $1,100 per share in 2008. The average P/E of a utilities company was 10. So to be conservative, we multiplied the earnings by a P/E of 8 to get an estimated value of $8,800 per share of Berkshire’s utilities companies.

The fact that our estimate ends up above Buffett’s “conservative” estimate for his own company means that his “conservative” P/Es must be below the ones we used, even after factoring in the 11% decline in earnings that Berkshire suffered in the first quarter.

That would mean, if you wanted to buy a company at a discount that Buffett considers to be very low you’d want utilities companies with P/Es below 8, and financials and retailers with P/Es below 10. That’s not a perfect guideline (another popular way of valuing financials is a price-to-book ratio, for example) but it is helpful for a general understanding of how conservative Buffett is being when building in a margin of safety for his stock purchases. And the answer is: very conservative.

4. He sold $5 million worth of Treasury bills for more than $5 million. In other words, whoever bought those Treasuries from Buffett (on Dec. 18, 2008) was willing to get a negative yield on those Treasury bills. For the record, he sold it for only $90.97 over $5 million, but it’s still extraordinary that investors fear risk so much that they’d take a negative yield in the only no-risk investment out there.

What to do: In his annual report, Buffett wrote this gem:

When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.

If you hold Treasury bonds directly, although they’re probably worth a lot right now, it would be difficult and costly to try to sell them to someone else unless you own a whole lot of them. On the other hand, if you have a lot of money tied up in long-term government bond mutual funds, now might be the time to get out of those and into something more fairly valued.

I’d personally invest it in a stock mutual fund, but if you want to stay with the risk-free route, TIPS or a mutual fund investing in them would seem to be a better deal. Even those with a regular old bond index fund should be wary. Vanguard’s Total Bond Index fund, for example, has 24% of its holdings in U.S. Treasuries. That doesn’t mean Vanguard’s doing something wrong; it’s just the nature of an index. But it’s one potential time bomb I’d keep your eye on.

5. Buffett wouldn’t buy U.S. newspapers at any price. He says he sees unending losses for the entire industry and no business model that could save them.

What to do: This probably doesn’t mean much to you (other than the death of your local newspaper). For me, a print journalist, it means I should be looking for a new job.

Thanks for reading.

- Joe Light