Well its been a long time since I wrote anything, but given the state of the markets and now that I have a social life again, I thought this would be a perfect time to comment on what has been going on.
Well very few people out there who thought the market conditions would get this bad! We have a complete credit freeze in the commercial bond markets, commodity prices have collapased from being overvalued, a recession beginning in North America and Europe, slower growth in Asia and major U.S. and European banks needing government assistance because some math egg heads concocted financial instruments that no one can understand, but all the major pension/stock brokers managers bought alot of them for their client's portfolio (not my stock broker). Since we all know the obvious since its on every headline on every major newspaper, lets not re-state it anymore and focus on what to do.
The are only a few things to do, sit tight on your stock positions (I am assuming they are solid companies with good cash flows and credit ratings) and start buying!.Yes folks, if Warren Buffet, the worlds largest investor thinks it a good time to deploy cash, then so should you. No one every made any money when they purchase stocks when the market is going higher, and then sell when a Bear market hits. Unfortunately, so many people are doing that right now, and that is called Herd mentality. Its never easy going against the grain, but those that do coupled with making smart investment decisions always are ahead of the game.
So what is it that that everyone seems to be avoiding the most? Well commercial bonds, preferred shares, and financial companies. This is the stuff you should be BUYING!! Like most people, I have taken a hit on my bank and financial stocks, but neverthless, you should be good quality firms in this sector. Because eventually, markets world wide will stabilize. This part of the economic cycle is normal after a period having being in an excessive and speculative growth phase. Ignore all this depression talk. In the 1930's, we had unemployment at 25%, trade barriers, no type of welfare system as a back up and a no regulation. We will have a recession, but depression?? I wouldn't bet on it.
I just bought some shares in Ishares U.S Preferred Index (symbol PFF-NYSE) at around $26 and it yielded at the time 10%. Now its even lower at $25. The reason I like this stock is because it owns a lot of different preferred shares isssued by mainly financial companies and so the risk is spread out. (Preferred shares are stocks issued by firms that pay higher dividends than the common stock)Right now this index is down close to 50% from its highs and you are getting a nice fat yield while you wait.
I bought some shares of American Express (AXP-NYSE). This 52 week of this company is $63 and I bought it at $35, now its around $27 and it is paying a 3% dividend yield. This company is also partly owned by Warren Buffet. American Express has been hit by the financial crisis like everyone else, but the difference with them is they have more conservative lending standards, a wealthier client base, a global brand name and very good management. Could this stock go lower? Sure it could, but your downside risk is a lot less at these levels and they are still making money.
I also like a Farmer's & Merchant Bank (FMBL-OTCC. The stock trades around $4550 (yes that's four thousand) and is incredible well run. They have the label of being the safest bank in California where they are based and they are very well capitalized with hard cash. All banks are supposed to have a 4% minimum of cash on their books to deal with potential losses, the FDIC in the U.S. considers any bank that is above 8% to be well protected. Farmer's has 26%!!!! This means they have lots of cash on hand to deal with potential losses and make acquisitions. They have a very good management team and the shares are down a lot less than most other banks. They pay a 2.4% dividend yield, that is very safe and have very conservative lending standards, which has proven to be an excellent strategy. Yes, the stock is expensive, but investing is about what your percentage of return is going to be, not the price of a stock.
I also really like Commercial bonds issued by companies like J.P Morgan, General Electric and any other solid company with an investment grade status. Folks, no one wants to touch these bonds, thats why you should own them. Inflation is coming down which means your real return is going to be higher, the bonds are trading at a discount, solid blue chips companies with good balance sheets are not going to go under and bond holders get paid first before anyone else. You can buy these commerical bonds either through index funds or individually. At the yield these bonds and preferred shares are paying out, are just too tempting to avoid.
Market conditions will not be like this 5 years from now, stock prices barring anything catastophice like nuclear war will more than likely be higher, credit will return as central banks are pumping money into the markets like never before, goverments are under pressure to help out and interest rates are low. We are in a a crisis, but this does not mean the end of capitalism.
All the stocks I have previously reccomended in my other blogs are solid firms, and I have been buying more when I can of the same stocks.
Don't be part of the herd, be a wolf and take advantage of the volatility by pouncing on good names. You will be a lot richer for it.
Wednesday, October 8, 2008
Saturday, January 19, 2008
When there is Blood on the Streets...BUY!BUY!
As Charles Dickens once wrote, there was the best of times and there were the worst of times. Right now, it is not the worst,but most investors are certainly not feeling like its the best either. However moments of distress create windows of buying opportunities. Famous banker, JP Morgan once said "Buy when there is blood on the streets.".
Those words should be written on a plaque and hung on a wall for every investor that wonders when is it a good time to buy when markets are falling. One of the most successful investors of all time, Warren Buffet, stated that the most money he ever made were in stocks that he picked up in bear markets. Bear markets are not a bad thing,they clean the speculative froth, return a sense of normalcy by reminding and by reminding investors that there is always risk when buying equities.
Bear markets can overshoot on the selling side, and they do throw the baby out with the bathwater. You can buy specific, well balanced sheet companies that whose share prices are falling because companies in the same sector made bad decisions and so all the share prices in the same industry get hit, and hit hard.
For example, one bank stock that I recently purchased shares in is City National Bank (CYN-NYSE). City National is called the "bank of the stars". Their clients must have $1 million in assests to open an account and they did specifically with clients who have between $1 million and $250 miilion. They have a long list of Holllywood clients as well as entrepeneurs. They are based in California, Nevada, and New York. They have also acquired numerous smaller banks over the years as well.
This bank, unlike its bigger rivals such as Citigroup, Bank of America, Wells Fargo and other large investment firms, did not participate in any of the subprime mortgage and collaterilazed debt obligations mess. They have not needed any outside cash infusion to improve their cash position and they have had no loan losses for 16 quarters (3.5 years). Yes, zero, nada, nothing. City's share price had hit a 52 week high of $78U.S. and I picked up these shares lst month at $59.84. The shares traded as low as $49.75 during the last downdraft, but have rebounded back to where I bought them.
Sure City Bank might not make as much money as they did in previous years,no bank will as the U.S. economy slows. But financial stocks are in a bear market and they got lumped in with the banks that deserved to get hit. City at this price, pays a 3.0% dividend yield, which is secure, they have no writedowns to make, an excellent management team and a very wealthy customer base that is not affected by the credit crunch as the other banks are. Its a steal at this price, and its definitly on my buy list.
Another stock is TD Bank (TD-TSX), it is another bank that has no subprime exposure, a good balance sheet, a secure dividend and they own 40% of TD Ameritrade (a discount broker) that is reporting stellar earnings.
I am not saying that any of the big investment banks are going to go under, and now might be a good opportunity to pick some of them up. However, why not buy the banks who don't need cash infusions,and most likely will grow their dividends quicker than the banks who have have recently cut them. TD's yield is close to 3.5%
In the insurance field, I would be a buyer of Travelers Group $46.74(TRV-NYSE). This is one of the largest property & casualty insurers in the U.S. They have no subprime exposure,they beat the latest earnings estimates, their commercial debt is on watch by credit agencies to have their debt ratings UPGRADED and they have historically been quite opportunistic in tough financial times and they come out of it making a killing. Travelers pays a 2.4% yield.
As for stocks that I previously recommended. Buy more General Electric $36(GE-NYSE). They are now paying a higher dividend from when I recommended it, they are making more money and their shares are at a slightly lower price when I first put them on the buy list. GE has no cash flow problems, its diversified conglomerate, it has a Triple AAA rating on its bonds (the highest rating you can get)and it all of its divisions are growing.
JP Morgan (JPM-NYSE)is another good one to keep buying, as well as Oracle (ORCL-NASDAQ)and Berkshire Hathaway (BRK.B-NYSE). Berkshire has $40 billion in cash, no debt and has more than enough money to make smart acquisitions.
Folks, markets go up, they go down and they can be very volatile. But what you own is just as important as how your shares are doing. If you own dividend paying stocks, with stable earnings, and a good future ahead of it, you you will always come out ahead in the game. Maybe not right away, but you will in the long term.
Don't get lost in the day to day hype of volatile markets, own solid companies that you understand, and take advantage when everyone is selling. Sometimes your portfolio might take a hit when markets go bad (mine did), but that is no reason to make foolish mistakes. It just represents a potential opportunity to make more money in the long term.
Those words should be written on a plaque and hung on a wall for every investor that wonders when is it a good time to buy when markets are falling. One of the most successful investors of all time, Warren Buffet, stated that the most money he ever made were in stocks that he picked up in bear markets. Bear markets are not a bad thing,they clean the speculative froth, return a sense of normalcy by reminding and by reminding investors that there is always risk when buying equities.
Bear markets can overshoot on the selling side, and they do throw the baby out with the bathwater. You can buy specific, well balanced sheet companies that whose share prices are falling because companies in the same sector made bad decisions and so all the share prices in the same industry get hit, and hit hard.
For example, one bank stock that I recently purchased shares in is City National Bank (CYN-NYSE). City National is called the "bank of the stars". Their clients must have $1 million in assests to open an account and they did specifically with clients who have between $1 million and $250 miilion. They have a long list of Holllywood clients as well as entrepeneurs. They are based in California, Nevada, and New York. They have also acquired numerous smaller banks over the years as well.
This bank, unlike its bigger rivals such as Citigroup, Bank of America, Wells Fargo and other large investment firms, did not participate in any of the subprime mortgage and collaterilazed debt obligations mess. They have not needed any outside cash infusion to improve their cash position and they have had no loan losses for 16 quarters (3.5 years). Yes, zero, nada, nothing. City's share price had hit a 52 week high of $78U.S. and I picked up these shares lst month at $59.84. The shares traded as low as $49.75 during the last downdraft, but have rebounded back to where I bought them.
Sure City Bank might not make as much money as they did in previous years,no bank will as the U.S. economy slows. But financial stocks are in a bear market and they got lumped in with the banks that deserved to get hit. City at this price, pays a 3.0% dividend yield, which is secure, they have no writedowns to make, an excellent management team and a very wealthy customer base that is not affected by the credit crunch as the other banks are. Its a steal at this price, and its definitly on my buy list.
Another stock is TD Bank (TD-TSX), it is another bank that has no subprime exposure, a good balance sheet, a secure dividend and they own 40% of TD Ameritrade (a discount broker) that is reporting stellar earnings.
I am not saying that any of the big investment banks are going to go under, and now might be a good opportunity to pick some of them up. However, why not buy the banks who don't need cash infusions,and most likely will grow their dividends quicker than the banks who have have recently cut them. TD's yield is close to 3.5%
In the insurance field, I would be a buyer of Travelers Group $46.74(TRV-NYSE). This is one of the largest property & casualty insurers in the U.S. They have no subprime exposure,they beat the latest earnings estimates, their commercial debt is on watch by credit agencies to have their debt ratings UPGRADED and they have historically been quite opportunistic in tough financial times and they come out of it making a killing. Travelers pays a 2.4% yield.
As for stocks that I previously recommended. Buy more General Electric $36(GE-NYSE). They are now paying a higher dividend from when I recommended it, they are making more money and their shares are at a slightly lower price when I first put them on the buy list. GE has no cash flow problems, its diversified conglomerate, it has a Triple AAA rating on its bonds (the highest rating you can get)and it all of its divisions are growing.
JP Morgan (JPM-NYSE)is another good one to keep buying, as well as Oracle (ORCL-NASDAQ)and Berkshire Hathaway (BRK.B-NYSE). Berkshire has $40 billion in cash, no debt and has more than enough money to make smart acquisitions.
Folks, markets go up, they go down and they can be very volatile. But what you own is just as important as how your shares are doing. If you own dividend paying stocks, with stable earnings, and a good future ahead of it, you you will always come out ahead in the game. Maybe not right away, but you will in the long term.
Don't get lost in the day to day hype of volatile markets, own solid companies that you understand, and take advantage when everyone is selling. Sometimes your portfolio might take a hit when markets go bad (mine did), but that is no reason to make foolish mistakes. It just represents a potential opportunity to make more money in the long term.
Friday, November 2, 2007
Distress brings opportunities
Right now, we are in the midst of a financial mess, U.S. banks are bleeding red ink from the subprime mortgage loans they bought or loans they made to unworthy credit customers, the U.S. dollar is falling, the consumer is slowing, bankruptcies are rising, credit card delinquincies are up, commercial borrowers are having a harder time raising money,China's stock market is in a major bubble, and U.S. real estate prices have fallen sharply. Even the European banks are reeling from what is happening in the U.S.
So are we in a financial crisis? No, well not yet anyways. Unemployment is still falling, businesses are investing in new technologies which makes them more productive and profitable down the road, technology stocks earnings are rising, the weak U.S. dollar has helped those U.S. internationally based companies become more profitable and the U.S. deficit is falling.Now to mention,the Dow Jones has bounced back from its August.
Don't get me wrong, investors still need to be wary of the risks the markets worldwide are facing. However, times of distress also present excellent opportunities to buy. You just have to have the patience and stomach for it.I have always said its harder to buy when the markets are hurting than when they are rising and heading towards being overvalued. A number of big banks such Goldman Sachs,and J.P. Morgan & Chase have already raised funds that buy into securities that are in distress. So if they can do it, so can you and I (on a much smaller scale of course).
Believe it or not, its actually safer to buy certain types of stocks when they have been hammered and the market has a lot of risks. Why? Because much of the negative news is already priced into the stock. So if and when the overall market gets hit with a correction, then your stocks will more than likely go down less. Plus its pays better in the long run when you go against the herd mentality.
The financials are starting to look appealing,although there could be further hits on bank shares, especially with Citi Bank having to deal with further mortgage writedowns. I would not go and put all my money into the sector, but I still like JP Morgan & Chase. Merill Lynch has been beaten up hard, but I still would shy away from the brokers.
Lets look at some of the stocks I have previously recommended
1)Microsoft's share (MSFT-Nasdaq) have really taken a spike upwards, when I last recommended Microsoft, the shares were at $31, now there just over $37. They had good earnings and revenue growth. If you own it, don't sell the shares, if you don't, I would still be a buyer. Return since I put it as a buy since Dec/06....19%. Not including dividends.
2)Good old Berkshire Hathaway (BRK/B-NYSE), this stoggy old company still chuggs along, making tons of cash from its various business and investments. When I put it as a buy, it was $3675, now its $4437, return is 20%.Berkshire does not pay dividends. They do however have close to $40 billion in cash with no debt. They are are not going broke anytime soon.
3)Oracle software (ORCL-NASDAQ), has been showing great revenue and earnings growth. All their software lines have been growing nicely, it has a great management team and is buying out the right companies. I put it in as a buy at $19. now is its just over $22. Return has been 15%.Oracle does not pay dividends.
4)Pfizer (PFE-NYSE), one of the worlds largest drug makes, has not done anything too exciting this year, but they have not done anything stupid either. They are still sitting on a ton of cash ($15 billion), and I look for them to make some acquitsitions this year.When I placed them as a buy, the stock was at $25.57,now its $23.67. If you count the 5% dividend it pays, you have basically come out even.
5)General Electric(GE-NYSE). The is best run conglomerate in the world in my opinion.It is into everything, tv studios, environmental technologies, turbine engies, trains, defense contracting, financing, to light bulbs. They always make good money, very efficient and must stock to own.I put it as a buy at $36, and it had at the time, a yield of 3.1%...Total return has been 11%, including dividends,14%.
6)Altria (MO-NYSE), the owner of Phillp Morriss cigarettes. What can I say about this stalwart, has lots of cash and very shareholder friendly with an expanding international presence. They spun off Kraft shares to its shareholders and everyone has done well. Altria had a price of $85 when I had it has a buy, now its $73, but u have to factor in the Kraft shares which were spun off to you and Kraft (KFT-NYSE) is now at $33 a share. Keep your shares in both companies.
7) Verizon (VZ-NYSE) one of the largest telephone companies in the U.S.Has a growing customer base, expanding its wireless operation, generates lots of cash, and is coming out with new products. Its a great company. I had it as a buy at $36.62, and at at the time, the yield was 4.2%. Now its at $43.87 so a return of 19% not including dividends, with dividends its closer to 23%.
Time Warner (TWX-TWX), another big diversified media conglomerate.Time generates a ton of cash, has prized assests, like Time Magazine and CNN, its also into making movies and books. They are spending up to $5 billion to buy back its stock. I put it as a buy at a price of $20.66, now its at $17.87.Total return is a negative 9.7%. Don't worry, keep these shares. They have a new CEO coming in, and there is nothing worng with this company.
Overall, you would have done quite well following my stock recommendations. Not to mention you would have ridden out the credit crunch up and downs of the market, without losing sleep. These firms are boring and very profitable, just the kind of stocks that you want to retire on. That is not to say that something down the road might not change for the worse, but if/when that time comes, you do some analysis on why its down, and if necessary, sell it or buy even more. But until then, you hold it, collect the dividends and continue to watch the stocks go up.
So are we in a financial crisis? No, well not yet anyways. Unemployment is still falling, businesses are investing in new technologies which makes them more productive and profitable down the road, technology stocks earnings are rising, the weak U.S. dollar has helped those U.S. internationally based companies become more profitable and the U.S. deficit is falling.Now to mention,the Dow Jones has bounced back from its August.
Don't get me wrong, investors still need to be wary of the risks the markets worldwide are facing. However, times of distress also present excellent opportunities to buy. You just have to have the patience and stomach for it.I have always said its harder to buy when the markets are hurting than when they are rising and heading towards being overvalued. A number of big banks such Goldman Sachs,and J.P. Morgan & Chase have already raised funds that buy into securities that are in distress. So if they can do it, so can you and I (on a much smaller scale of course).
Believe it or not, its actually safer to buy certain types of stocks when they have been hammered and the market has a lot of risks. Why? Because much of the negative news is already priced into the stock. So if and when the overall market gets hit with a correction, then your stocks will more than likely go down less. Plus its pays better in the long run when you go against the herd mentality.
The financials are starting to look appealing,although there could be further hits on bank shares, especially with Citi Bank having to deal with further mortgage writedowns. I would not go and put all my money into the sector, but I still like JP Morgan & Chase. Merill Lynch has been beaten up hard, but I still would shy away from the brokers.
Lets look at some of the stocks I have previously recommended
1)Microsoft's share (MSFT-Nasdaq) have really taken a spike upwards, when I last recommended Microsoft, the shares were at $31, now there just over $37. They had good earnings and revenue growth. If you own it, don't sell the shares, if you don't, I would still be a buyer. Return since I put it as a buy since Dec/06....19%. Not including dividends.
2)Good old Berkshire Hathaway (BRK/B-NYSE), this stoggy old company still chuggs along, making tons of cash from its various business and investments. When I put it as a buy, it was $3675, now its $4437, return is 20%.Berkshire does not pay dividends. They do however have close to $40 billion in cash with no debt. They are are not going broke anytime soon.
3)Oracle software (ORCL-NASDAQ), has been showing great revenue and earnings growth. All their software lines have been growing nicely, it has a great management team and is buying out the right companies. I put it in as a buy at $19. now is its just over $22. Return has been 15%.Oracle does not pay dividends.
4)Pfizer (PFE-NYSE), one of the worlds largest drug makes, has not done anything too exciting this year, but they have not done anything stupid either. They are still sitting on a ton of cash ($15 billion), and I look for them to make some acquitsitions this year.When I placed them as a buy, the stock was at $25.57,now its $23.67. If you count the 5% dividend it pays, you have basically come out even.
5)General Electric(GE-NYSE). The is best run conglomerate in the world in my opinion.It is into everything, tv studios, environmental technologies, turbine engies, trains, defense contracting, financing, to light bulbs. They always make good money, very efficient and must stock to own.I put it as a buy at $36, and it had at the time, a yield of 3.1%...Total return has been 11%, including dividends,14%.
6)Altria (MO-NYSE), the owner of Phillp Morriss cigarettes. What can I say about this stalwart, has lots of cash and very shareholder friendly with an expanding international presence. They spun off Kraft shares to its shareholders and everyone has done well. Altria had a price of $85 when I had it has a buy, now its $73, but u have to factor in the Kraft shares which were spun off to you and Kraft (KFT-NYSE) is now at $33 a share. Keep your shares in both companies.
7) Verizon (VZ-NYSE) one of the largest telephone companies in the U.S.Has a growing customer base, expanding its wireless operation, generates lots of cash, and is coming out with new products. Its a great company. I had it as a buy at $36.62, and at at the time, the yield was 4.2%. Now its at $43.87 so a return of 19% not including dividends, with dividends its closer to 23%.
Time Warner (TWX-TWX), another big diversified media conglomerate.Time generates a ton of cash, has prized assests, like Time Magazine and CNN, its also into making movies and books. They are spending up to $5 billion to buy back its stock. I put it as a buy at a price of $20.66, now its at $17.87.Total return is a negative 9.7%. Don't worry, keep these shares. They have a new CEO coming in, and there is nothing worng with this company.
Overall, you would have done quite well following my stock recommendations. Not to mention you would have ridden out the credit crunch up and downs of the market, without losing sleep. These firms are boring and very profitable, just the kind of stocks that you want to retire on. That is not to say that something down the road might not change for the worse, but if/when that time comes, you do some analysis on why its down, and if necessary, sell it or buy even more. But until then, you hold it, collect the dividends and continue to watch the stocks go up.
Monday, September 10, 2007
The Big Banks Screwed Up (again)
All the talk now in the media is the "Subprime Collapse" or the "Housing Crisis" and how the real estate slowdown is going to send the stock market to spiral down the toilet. Once again, when you go through the hype, and look at the the numbers, the Dow Jones Composite is still up around 5% for the year, and the now forgotten tech ladden Nasdaq market is still up around 6%. Some market collapse. Having said that, there are plenty of stocks in the S&P 500 that are down 20%, and some even more. But that represents a good buying opportunity for quality stocks.
Now that is not too say that the housing market is not in a dire situation. It is, but that is not a bad thing. What's bad is that the big large U.S. banks lent out a ton of money to people who could not afford mortgages and then they bought derivates and now not even a guy with 2 degrees in Phd mathematics can figure out how to value this stuff on these banks balance sheets. I am lucky to know the mulitiplication table so I won't even try. In layman's terms, the Big Banks got greedy again and have no idea how much this is going to cost them.
In the 1990's, the banks in the U.S. got involved in junk bonds, which is basically another sub prime market for corporations. The Savings and Loans Banks collapsed and the Big Banks lost a ton of money. It was happy times for everyone, especially shareholders. The U.S. Federal Reserve came in and lowered interest rates and flushed the stock market with a ton of liquidity (printed money) and once again, helped the same Big Banks from themselves.
Whola, here we go again. However, I am not so sure the Federal Reserve is going to lower the Prime Rate right away, they still have a worry about inflation and to them, 3 months of statistics doesn't signal a pattern.Plus interest rates, are still relatively low, and the Big Banks are not near the verge of collapse as they were 16 years ago. Although the highly leveraged hedge funds managers are going through migraine headaches right now, because so many of them are about to collapse. But the U.S. Federal Reserve doesn't really care about them. My guess is the U.S. Federal Reserve will hold off on lowering interest rates for at least 6 months, but they will still pump the market with a ton of money.
What does this all mean for you? A good buying opportunity. You can buy great stocks at better prices, and you want to own companies that have a good cash flow and aren't as affected by the commercial bond market as the highly leveraged ones.
You want to stick with companies like Time Warner (TWX-NYSE) which I bought at $20.66 and is now $18.37. Time Warner makes a ton of money, people are still watching CNN, going to movies and reading Time Magazine. Not to mention Time Warner is buying back $5 billion of their stock.
A second good one is Berkshire Hathaway Class B (BRK/B-NYSE).I own it as well. I recommended those shares some time ago at $3600, now they are almost at $4000 a share. Legendary Investor Warren Buffet runs this company has a burning $40 billion pocket, no debt and is buying companies on the cheap. He actually buys and holds quality companies. What a concept most hedge managers and stock brokers have forgotten about.
I also like the beverage and food stocks, Kraft (KFT-NYSE) which I own, Pepsi (PEP-NYSE), Budweiser (BUD-NYSE) and Coke ) (KO-NYSE). Although they are not considered commodity stocks, I like to think they are. They hold the ingredients to something that people are always wanting to consume. I think Coke is a safer bet in the long term than gold.
Also look at TD AMERITRADE (AMTD-NYSE). This company has no exposure whatsoever to the Sub Prime Market, is a leader among the online investors, is 40% owned by TD bank, is very well managed, and is down from $21 to $17.77, I bought this company at just above $16 dollars. Not so long ago it was considered a prime target for a takeover, now its been forgotten.
As for the financials, I like the insurance companies more than the banks, but there are still some good banks that are attractive and that did not expose themselves to the sub prime market or have very little of it. You just have to do your homework on them.
Some closed end funds are good buys. These are basically closed off mutual funds and they trade as regular shares and do not have to worry about redemptions. I like AllianceBernstien Income Fund (ACG-NYSE) and it pays out just over 7.5% in U.S. dollars. They mainky hold U.S. Bonds issued by the U.S. Government and other debt the U.S. Government guarantee. I also started to look at a (gasp) a mortage fund. It is called Hyperion Strategic Mortgage Income Fund. My brilliant broker Vas, is going to have a heart attack if he knew that.
Why HSM? The fund has still maintained it's dividend payout and they seem to have purchased good mortagages. They issued a press releases that the net asset value of the fund has decreased because the market has lowered the value of all mortgages, but they have not suffered any credit problems in their fund. And as the usual saying going, disasters create opportunity. I am not saying put all your money into it, but start nibbling. It pays a yield of 9.55% in U.S. dollars, yes, there are some people still making their mortgage payments on time (Thank God). It also trades at about a 20% discount to its net assest value. So if theu liquidated the whole fund right now, you would get a 20% return.
Ok folks, don't be scared off by the business media. This type of business credit crunch always happens, but the sky is not following and think with your hear and not your emotions. Remember, investing is for wealth accumulators, trading is for gamblers.
Now that is not too say that the housing market is not in a dire situation. It is, but that is not a bad thing. What's bad is that the big large U.S. banks lent out a ton of money to people who could not afford mortgages and then they bought derivates and now not even a guy with 2 degrees in Phd mathematics can figure out how to value this stuff on these banks balance sheets. I am lucky to know the mulitiplication table so I won't even try. In layman's terms, the Big Banks got greedy again and have no idea how much this is going to cost them.
In the 1990's, the banks in the U.S. got involved in junk bonds, which is basically another sub prime market for corporations. The Savings and Loans Banks collapsed and the Big Banks lost a ton of money. It was happy times for everyone, especially shareholders. The U.S. Federal Reserve came in and lowered interest rates and flushed the stock market with a ton of liquidity (printed money) and once again, helped the same Big Banks from themselves.
Whola, here we go again. However, I am not so sure the Federal Reserve is going to lower the Prime Rate right away, they still have a worry about inflation and to them, 3 months of statistics doesn't signal a pattern.Plus interest rates, are still relatively low, and the Big Banks are not near the verge of collapse as they were 16 years ago. Although the highly leveraged hedge funds managers are going through migraine headaches right now, because so many of them are about to collapse. But the U.S. Federal Reserve doesn't really care about them. My guess is the U.S. Federal Reserve will hold off on lowering interest rates for at least 6 months, but they will still pump the market with a ton of money.
What does this all mean for you? A good buying opportunity. You can buy great stocks at better prices, and you want to own companies that have a good cash flow and aren't as affected by the commercial bond market as the highly leveraged ones.
You want to stick with companies like Time Warner (TWX-NYSE) which I bought at $20.66 and is now $18.37. Time Warner makes a ton of money, people are still watching CNN, going to movies and reading Time Magazine. Not to mention Time Warner is buying back $5 billion of their stock.
A second good one is Berkshire Hathaway Class B (BRK/B-NYSE).I own it as well. I recommended those shares some time ago at $3600, now they are almost at $4000 a share. Legendary Investor Warren Buffet runs this company has a burning $40 billion pocket, no debt and is buying companies on the cheap. He actually buys and holds quality companies. What a concept most hedge managers and stock brokers have forgotten about.
I also like the beverage and food stocks, Kraft (KFT-NYSE) which I own, Pepsi (PEP-NYSE), Budweiser (BUD-NYSE) and Coke ) (KO-NYSE). Although they are not considered commodity stocks, I like to think they are. They hold the ingredients to something that people are always wanting to consume. I think Coke is a safer bet in the long term than gold.
Also look at TD AMERITRADE (AMTD-NYSE). This company has no exposure whatsoever to the Sub Prime Market, is a leader among the online investors, is 40% owned by TD bank, is very well managed, and is down from $21 to $17.77, I bought this company at just above $16 dollars. Not so long ago it was considered a prime target for a takeover, now its been forgotten.
As for the financials, I like the insurance companies more than the banks, but there are still some good banks that are attractive and that did not expose themselves to the sub prime market or have very little of it. You just have to do your homework on them.
Some closed end funds are good buys. These are basically closed off mutual funds and they trade as regular shares and do not have to worry about redemptions. I like AllianceBernstien Income Fund (ACG-NYSE) and it pays out just over 7.5% in U.S. dollars. They mainky hold U.S. Bonds issued by the U.S. Government and other debt the U.S. Government guarantee. I also started to look at a (gasp) a mortage fund. It is called Hyperion Strategic Mortgage Income Fund. My brilliant broker Vas, is going to have a heart attack if he knew that.
Why HSM? The fund has still maintained it's dividend payout and they seem to have purchased good mortagages. They issued a press releases that the net asset value of the fund has decreased because the market has lowered the value of all mortgages, but they have not suffered any credit problems in their fund. And as the usual saying going, disasters create opportunity. I am not saying put all your money into it, but start nibbling. It pays a yield of 9.55% in U.S. dollars, yes, there are some people still making their mortgage payments on time (Thank God). It also trades at about a 20% discount to its net assest value. So if theu liquidated the whole fund right now, you would get a 20% return.
Ok folks, don't be scared off by the business media. This type of business credit crunch always happens, but the sky is not following and think with your hear and not your emotions. Remember, investing is for wealth accumulators, trading is for gamblers.
Monday, August 13, 2007
The World is NOT Coming to an End
The reason for the title, is because if you watch MSNBC, you would think that your RRSP's are going down the toilet and you will be working until 85 yrs old. That might happen if you have all your money in high risk hedge funds, or financial derivatives that even Eienstien would have a hard time deciphering what they are.
All that is happening now, is that the U.S. markets are starting to sober up from too much money lent out to people who could not afford their houses that they had purchased. Most of these borrowers did not have too show any income statements or pay stubs and were given low teaser rates to entice them into buying. Both the lenders and the borrowers got greedy, and now the chickens have come home to roost.
But lets take a broader look. Interest rates are still very low globally, the Central Banks are pumping billions of dollars into the financial markets, unemployment is low and the U.S. Dow has gone up 2000 point in the last two years and has given back only 900 of those point. As a matter of fact, the Dow Average is still UP for the year!!!
Large blue chips stocks like GE, Microsoft and Coca Cola have huge sums of cash and no one has stopped buying there bonds. Its the U.S. mortgage industry that is taking the hit, sure it will have broader implications for the world economy, but its impact will be less severe than in years past. Is there a chance of a recession?
Other economies likw China and India are still growing, and most U.S. corporate firms are benefitting tremendously from that growth and a cheaper U.S. dollar.
Is there a credit crunch in the U.S. markets? No, but there is a tightening, which is a good thing. Yes, some corporate bind deals have been postponed, but they will come back. Why? Because markets need to lend money in order to run efficiently and to make money. Corrections are normal and healthy, even harsh ones.Its like a cleansing and only the good ones survive and their share prices eventually come roaring back.
So what am I buying?I recently just purchased shares in Time Warner (TWX-NYSE) at $20.66 U.S. a share. I bought this compaay because I believe the compnay is worth more than the share price reflects. They have a wonderful cash cow in Time Warner cable, AOL, and golden assests in CNN and in their fim and video libraries. Time is spending $5 billion in buying back their own shares and there is an enormous amount of pressure on Management to get this share price up. Folks, this used to be a $60 stock in the tech boom era, now its around $19. Management has already stated they will spin off the cable assets to shareholders in 5 years. In my estimate, Time Warner's share price will be alot higher in 5 years.
This company is not going to skyrocket anytime soon, but over time and with patience, shareholders will do well. Its a boring stock, has are all my stock holding. Boring makes money, I have enough excitement in my life as a Police Officer, I don't need that in my investments.
Other stocks I like are Budweiser (BUD-NYSE), Coca Cola (KO-NYSE) and Yellow Pages Income Fund (YLO.UN-TSX). I don't own these, but eventually I am hoping too. I only have so much money (sigh). I still like all the other blue chips stocks I recommended before as well. Especially General Electric (GE-NYSE).
If you own good blue chips stocks, this market volatility is a hiccup. If you own crap, start over and buy quality companies. Trading is for gamblers and losers. Investing is for wealth accumulators and winners.
All that is happening now, is that the U.S. markets are starting to sober up from too much money lent out to people who could not afford their houses that they had purchased. Most of these borrowers did not have too show any income statements or pay stubs and were given low teaser rates to entice them into buying. Both the lenders and the borrowers got greedy, and now the chickens have come home to roost.
But lets take a broader look. Interest rates are still very low globally, the Central Banks are pumping billions of dollars into the financial markets, unemployment is low and the U.S. Dow has gone up 2000 point in the last two years and has given back only 900 of those point. As a matter of fact, the Dow Average is still UP for the year!!!
Large blue chips stocks like GE, Microsoft and Coca Cola have huge sums of cash and no one has stopped buying there bonds. Its the U.S. mortgage industry that is taking the hit, sure it will have broader implications for the world economy, but its impact will be less severe than in years past. Is there a chance of a recession?
Other economies likw China and India are still growing, and most U.S. corporate firms are benefitting tremendously from that growth and a cheaper U.S. dollar.
Is there a credit crunch in the U.S. markets? No, but there is a tightening, which is a good thing. Yes, some corporate bind deals have been postponed, but they will come back. Why? Because markets need to lend money in order to run efficiently and to make money. Corrections are normal and healthy, even harsh ones.Its like a cleansing and only the good ones survive and their share prices eventually come roaring back.
So what am I buying?I recently just purchased shares in Time Warner (TWX-NYSE) at $20.66 U.S. a share. I bought this compaay because I believe the compnay is worth more than the share price reflects. They have a wonderful cash cow in Time Warner cable, AOL, and golden assests in CNN and in their fim and video libraries. Time is spending $5 billion in buying back their own shares and there is an enormous amount of pressure on Management to get this share price up. Folks, this used to be a $60 stock in the tech boom era, now its around $19. Management has already stated they will spin off the cable assets to shareholders in 5 years. In my estimate, Time Warner's share price will be alot higher in 5 years.
This company is not going to skyrocket anytime soon, but over time and with patience, shareholders will do well. Its a boring stock, has are all my stock holding. Boring makes money, I have enough excitement in my life as a Police Officer, I don't need that in my investments.
Other stocks I like are Budweiser (BUD-NYSE), Coca Cola (KO-NYSE) and Yellow Pages Income Fund (YLO.UN-TSX). I don't own these, but eventually I am hoping too. I only have so much money (sigh). I still like all the other blue chips stocks I recommended before as well. Especially General Electric (GE-NYSE).
If you own good blue chips stocks, this market volatility is a hiccup. If you own crap, start over and buy quality companies. Trading is for gamblers and losers. Investing is for wealth accumulators and winners.
Tuesday, February 27, 2007
Is the Bear back?
When I walked into my loft this afternoon, I turned on CNBC and I saw the Dow Jones Industrial Average was down 416 points, about 3.5%, and you know what the expression on my face was? A big smile, now you might think that is a bit of an odd reaction, considering the stocks I own were got caught in the downward spiral, but corrections are healthy, as they help to slice off the frothiness in the market and as it cleans out the overpriced shares caught in the downdraft. But the reason I was smiling was because I thought "ITS ABOUT TIME". There was too much speculative junk out there.
Now if your watching CNBC, you thought the end of the earth was near and you would have to postpone your retirement for another five years. Maybe this is the beginning of a Bear market, but I doubt it. I started looking at the stocks I like and if they were at attractive prices to buy, and most were. JP MORGAN & CHASE is one of the oldest banks in the U.S. and I think they have a great management team and they have not been affected by the Subprime lending collapse that is affecting the U.S. housing market. Only 0.1% of their mortgages were written to Subprime Customers compared to alot of the other U.S. banks, including HSBC bank which has a very large exposure. Morgan Chase has a decent yield of 2.8%, a reasonable P/E ratio of less than 13, and there loans are made to people who can afford them. So if the U.S. economy does go sour, they will hold up better than alot of other financial institutions.
Another great compnay to buy is VERIZON COMMUNICATIONS (VZ-NYSE, $36.66). This is a large U.S. telephone company that is spending billions on adding to their already extesive infrastructure that will payoff for them in spades down the road. They have a juicy 4.2% yield and a growing wireless customer base As a matter of fact, I am adding that stock tommorow to my CommonLaws portfolio tommorow.
So what directions are the U.S. markets heading now? Probably downward and they will stabilize once they find a bottom. But whatever you do don't panic, look at it as a buying opportunity, because the times to buy is when the markets are going down. If you hold good quality shares YOUR GOING TO BE FINE. Every one of my shares took a hit, but those same shares are represented by companies with strong cas flows, shareholder friendly management and were not trading at lofty prices. The market has to have a breather, its been on one of the longest positive streaks in decades and they got ahead of themselves. But borrowing costs are still cheap, central banks are not tightening money supply and the foreign central banks that have are raising rates very slowly. Also unemployment is low, and consumers are still spending. Recessions do happen, and we might have one next year, but right now things still look good and corporate profits still look strong.
So kick back, enjoy the show, pick up some good qualites companies like the ones I have recommeded in my previous blogs at cheaper prices than when I bought them at and have a big smile.
See you next month
Marko Duran
trader7230@hotmail.com
Now if your watching CNBC, you thought the end of the earth was near and you would have to postpone your retirement for another five years. Maybe this is the beginning of a Bear market, but I doubt it. I started looking at the stocks I like and if they were at attractive prices to buy, and most were. JP MORGAN & CHASE is one of the oldest banks in the U.S. and I think they have a great management team and they have not been affected by the Subprime lending collapse that is affecting the U.S. housing market. Only 0.1% of their mortgages were written to Subprime Customers compared to alot of the other U.S. banks, including HSBC bank which has a very large exposure. Morgan Chase has a decent yield of 2.8%, a reasonable P/E ratio of less than 13, and there loans are made to people who can afford them. So if the U.S. economy does go sour, they will hold up better than alot of other financial institutions.
Another great compnay to buy is VERIZON COMMUNICATIONS (VZ-NYSE, $36.66). This is a large U.S. telephone company that is spending billions on adding to their already extesive infrastructure that will payoff for them in spades down the road. They have a juicy 4.2% yield and a growing wireless customer base As a matter of fact, I am adding that stock tommorow to my CommonLaws portfolio tommorow.
So what directions are the U.S. markets heading now? Probably downward and they will stabilize once they find a bottom. But whatever you do don't panic, look at it as a buying opportunity, because the times to buy is when the markets are going down. If you hold good quality shares YOUR GOING TO BE FINE. Every one of my shares took a hit, but those same shares are represented by companies with strong cas flows, shareholder friendly management and were not trading at lofty prices. The market has to have a breather, its been on one of the longest positive streaks in decades and they got ahead of themselves. But borrowing costs are still cheap, central banks are not tightening money supply and the foreign central banks that have are raising rates very slowly. Also unemployment is low, and consumers are still spending. Recessions do happen, and we might have one next year, but right now things still look good and corporate profits still look strong.
So kick back, enjoy the show, pick up some good qualites companies like the ones I have recommeded in my previous blogs at cheaper prices than when I bought them at and have a big smile.
See you next month
Marko Duran
trader7230@hotmail.com
Tuesday, January 16, 2007
Jan/16/2006
Well folks, its been a month since my last newsletter. What has happened since then? Well for one the Oil market is sinking, althought not crashing, but it is down to $51-$52 a barrel, which is quite a drop from $78 that it was in the summer time. Why? Well the U.S. economy is definetly slowing down, oil inventories are down, warmer weather and China and India are trying to slow their economies. But even a bigger reason, is simply the big hedge funds and speculators are pulling out of the oil market futures.
OIL MARKET
These traders who control billions of dollars, bet on the way up when oil was climbing in 2006. Now a lot of them have taken profits and are getting out. This in turn is causing oil prices to recede. So will we see oil stability in 2007? Personally I don't think oil is going to going down much further than $45 a barrel, but I don't think we will see $78 a barrel anytime soon, barring any major political events. Shares of companies involved in the oil industry are still going to correct, and earnings of these companies are already being downgraded by many analysts. But remember, these companies made money at $20 a barrel, and there still going to make a ton at $45-$55. I would stick with blue chips names like Exxon Oil, Chevorn, and Connocco Philiips, all of which trade on the New York Stock Exchange.
U.S. ECONOMY
The U.S. economy is still holding up well, considering the housing market is is continuing to lose steam. Just a few weeks, I was reading that a lot of "financial experts" had thought that U.S. housing market was close to a bottom. I wonder what planet they live on? Mortgage bankruptcies are up considerably and a lot of these loans that were given by lenders who did no background checks on the buyers are now coming home to roost. Alot of loans were "interest only "and others were "partial interest payments". Too many people bought houses they could only afford when interest rates were super low, now with rates having gone up, they simply just walk away. Every homebuilder that I have seen so far, has been reporting lower earnings or losses and they can't move their inventory. Believe me, were still a long way from the bottom. Everything is cyclical, but the housing industry has a lot against it right now. An aging population, low immigrations levels, high inventories and less buyers than before. When House building stocks go down another 30%-50% from present levels, there will be some good opportunies to buy.
Having said all that, I think the U.S. economy will continue to do well. Employment is low, consumers are still spending money, interest rates are still low by historical standards, and there is a lot of liquidity out there. Notice all the private equity buyouts of late? Well that will continue, and as these companies get bought out, there will be less stock out there, There is actually 5% less stock on the market than there was last year. But the S&P 500 is trading at 16 times earnings, which is right in line with its historical average, eventually it will start to trade at a premium, so there is still good buying opportunites. Lower Oil prices will also help the economy, as consumers will have more discretionary money to spend.
Alot of the money managers like technology stocks and the large caps. I like them too, but only select ones. I would still stick with the names that I mentioned in my December column. This month I am adding MICROSOFT (MSFT-NASDAQ) to the list at $31.50 a share as of January 15/2007. That stock was a steal at $25,, and its still a good buy at $31. Why? I like companies that dominate in their industry, and they lead the pack. They have no debt, great management and a ton of cash. There is pent up demand for their new VISTA operating system and with capital spending likely to be up this year, MICROSOFT should do well, My pick of ORACLE (ORCL-NASDAQ) has seemed to have taken a pause at around the $17,but longer term, this company offers a lot of potential for share appreciation.
As for Value stocks, well I just bought 1 share of BERKSHIRE HATHAWAY (BRK.B-NYSE) today at around $3625 U.S., well now I am officiall broke! It was either that or a Jeep Grand Cherokee that has 420 horsepower that I wanted to buy that is around $52,000. But my common law just about had a heart attack when I mentioned it, so I bought BERKSHIRE instead. Retierment! Retierement! Retierment! That is what I keep thinking. A nice house on the beach, well more likely a condo. But I better get something with a view of the ocean for all this delayed gratification lol.
STOCK UPDATE
Well since I put together that portfolio last month, one of the names (PFIZER) in it has gone up and had some positive news too boot. PFIZER announced that they are going to spend $10 billion on buying back there stock in 2007, and they also had raised there dividend from $0.96 U.S. a share to $1.16 a share. The stock reacted nicely by moving to the upside, and I think we could see $30 ouf this stock by year end. Right now its giving a dividend yield of around 4.5%. Although its bond rating got downgraded one notch, it is not going to have a huge impact.
Well folks, that's it for now. Buy SMART, Buy what you UNDERSTAND, Buy with CONFIDENCE, Buy with PATIENCE, and Buy based on quality RESEARCH that YOU DO. Remember that, and you will do well.
OIL MARKET
These traders who control billions of dollars, bet on the way up when oil was climbing in 2006. Now a lot of them have taken profits and are getting out. This in turn is causing oil prices to recede. So will we see oil stability in 2007? Personally I don't think oil is going to going down much further than $45 a barrel, but I don't think we will see $78 a barrel anytime soon, barring any major political events. Shares of companies involved in the oil industry are still going to correct, and earnings of these companies are already being downgraded by many analysts. But remember, these companies made money at $20 a barrel, and there still going to make a ton at $45-$55. I would stick with blue chips names like Exxon Oil, Chevorn, and Connocco Philiips, all of which trade on the New York Stock Exchange.
U.S. ECONOMY
The U.S. economy is still holding up well, considering the housing market is is continuing to lose steam. Just a few weeks, I was reading that a lot of "financial experts" had thought that U.S. housing market was close to a bottom. I wonder what planet they live on? Mortgage bankruptcies are up considerably and a lot of these loans that were given by lenders who did no background checks on the buyers are now coming home to roost. Alot of loans were "interest only "and others were "partial interest payments". Too many people bought houses they could only afford when interest rates were super low, now with rates having gone up, they simply just walk away. Every homebuilder that I have seen so far, has been reporting lower earnings or losses and they can't move their inventory. Believe me, were still a long way from the bottom. Everything is cyclical, but the housing industry has a lot against it right now. An aging population, low immigrations levels, high inventories and less buyers than before. When House building stocks go down another 30%-50% from present levels, there will be some good opportunies to buy.
Having said all that, I think the U.S. economy will continue to do well. Employment is low, consumers are still spending money, interest rates are still low by historical standards, and there is a lot of liquidity out there. Notice all the private equity buyouts of late? Well that will continue, and as these companies get bought out, there will be less stock out there, There is actually 5% less stock on the market than there was last year. But the S&P 500 is trading at 16 times earnings, which is right in line with its historical average, eventually it will start to trade at a premium, so there is still good buying opportunites. Lower Oil prices will also help the economy, as consumers will have more discretionary money to spend.
Alot of the money managers like technology stocks and the large caps. I like them too, but only select ones. I would still stick with the names that I mentioned in my December column. This month I am adding MICROSOFT (MSFT-NASDAQ) to the list at $31.50 a share as of January 15/2007. That stock was a steal at $25,, and its still a good buy at $31. Why? I like companies that dominate in their industry, and they lead the pack. They have no debt, great management and a ton of cash. There is pent up demand for their new VISTA operating system and with capital spending likely to be up this year, MICROSOFT should do well, My pick of ORACLE (ORCL-NASDAQ) has seemed to have taken a pause at around the $17,but longer term, this company offers a lot of potential for share appreciation.
As for Value stocks, well I just bought 1 share of BERKSHIRE HATHAWAY (BRK.B-NYSE) today at around $3625 U.S., well now I am officiall broke! It was either that or a Jeep Grand Cherokee that has 420 horsepower that I wanted to buy that is around $52,000. But my common law just about had a heart attack when I mentioned it, so I bought BERKSHIRE instead. Retierment! Retierement! Retierment! That is what I keep thinking. A nice house on the beach, well more likely a condo. But I better get something with a view of the ocean for all this delayed gratification lol.
STOCK UPDATE
Well since I put together that portfolio last month, one of the names (PFIZER) in it has gone up and had some positive news too boot. PFIZER announced that they are going to spend $10 billion on buying back there stock in 2007, and they also had raised there dividend from $0.96 U.S. a share to $1.16 a share. The stock reacted nicely by moving to the upside, and I think we could see $30 ouf this stock by year end. Right now its giving a dividend yield of around 4.5%. Although its bond rating got downgraded one notch, it is not going to have a huge impact.
Well folks, that's it for now. Buy SMART, Buy what you UNDERSTAND, Buy with CONFIDENCE, Buy with PATIENCE, and Buy based on quality RESEARCH that YOU DO. Remember that, and you will do well.
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