ARM Holdings: Learning From My Mistakes [View article]
A few of the short calls that are incorrect are failing to see the fact some large investors actually want to own these companies.
The basic metrics, such as P/E are fine guidelines; however you can not totally account for those buyers who want to have control, with less regard for the cost. It only applies to a few companies, though if you're basing a continuous stream of criticism against it; it is sort of like the person outside of the auction house saying "Picasso, I wouldn't pay $1 for that garbage," while people are inside bidding millions.
Perhaps IBM was removed because they were deeply involved in Germany, through Dehomag (their German subsidiary.) AT&T may have seemed like a good substitute because of its accomplishment in digital computing, compared to IBMs punch card system... though I'm just speculating on that.
A Closer Look Into Buffett's Bond Comments [View article]
Thanks for commenting Jonathan, I believe 5% allocated to university bonds is acceptable (I'd only allocate 1% to century bonds, cumulatively) -- though I'd not jump in all at once, especially since rates can go up.
I understand & appreciate your point of view, if you have time you might be able to clarify, are you in interest rate swap investments, or I would presume not CDs. I do like some bank loan funds, though I keep them to a minimum.
My opinion is, the aforementioned schools have such low acceptance rates, that there is no shortage of students willing to apply, and work to pay tuition. Though, personally I believe a stronger system would allow the best schools to educate more students and reduce the costs. Still, Cooper Union just stated they will begin to charge tuition: http://nyti.ms/17OBvc4 so, anything can happen.
I have my eye on the Stanford 2042 bonds (cusip: 854403AD4) 4% coupon, though just a 3.6% yield currently -- again total allocation to all university bonds would not exceed 5%, which is fairly conservative in my opinion. I like to see the income roll in, and I've found it can support more speculative investments. I agree, the for-profit education field is no-man's land though -- they simply are not being managed effectively.
A Closer Look Into Buffett's Bond Comments [View article]
Great insight as always southgent.
I agree with Warren Buffet on the two points: "if stocks go down 20% in the next month they are not going to be bothered… I would have them having enough cash on hand so they feel comfortable"
I also agree with him, you and Tim, on a certain level of understanding and caution. I also agree with Buffett not to have a set 30% or 40% in bonds. Though I believe bonds do have a place, and again whether the consumer price index exceeds the 4.69% coupon or not, it does not matter, because of the allocation; that is my opinion.
Going to Tim's remark about forbidding 100 years from now; the fact is if anyone allocates to such a long-term bond, it obviously is not about the face value in 2112. It is about a small amount of income, as part of a larger picture.
Say a $100M portfolio got 10 or 20 of the bonds, and someone said, 'oh my gosh, no way, $20,000 in 2112 won't even buy you a keg of whatever people are drinking a hundred years from now...'
Well, I hope you see the point, such a minimal allocation is just a drop. What you do with the buckets of capital is obviously a different story. I believe some to quality mutual funds that include equity, fixed income and a mix are ok.
I hope to buy more bonds and more stocks, every year. So when rates go up, I hope to get those also. That's just my perspective on it. It is all about allocation, the points about rates going up are very important, again very important, I've heard them from wall street managers for years, and they've been wrong.
At some point rates will likely go up -- though, by the time they do I believe proper, conservative allocation to the mix can be helpful. When rates go up, of course the prices will go down, however as I said in the article, given the allocation, I'd want to buy more of the mutual fund, presuming it is still well rated, still holds bonds I like, etc. Because I'd hope those managers will go with the flow, use income generated to buy the new higher yield, higher rated bonds, as I intend to do with funds allocated to bonds; as I intend to do with funds allocated to stocks.
A Closer Look Into Buffett's Bond Comments [View article]
"A 3.5% yield with 2% inflation gives you a 1.5% real rate of return."
It depends on what you do with the income. If you use it to attempt to increase overall yield, you may be able to do better than that.
"If that beats stocks over the long-term than we will have serious problems in this country."
If you use the income to go into some high-yield, and some equity, you will gain more exposure to stocks, over time. I reinvest dividends, most often, I use fixed-income to go into high yield, and I want to use high yield income to go into stocks.
"I would sell all the bonds I possibly could at that rate and on those terms, and I think that the logic behind buying them is highly flawed."
You are not accepting some of the points I have tried to explain to you. What would you do, once you've sold all your bonds? Throw those funds into stocks? I work from the point of view that the market can go up, it can go down. I believe in balanced exposure, and proper allocation, I believe 0% to fixed income makes very little sense. Though I do not prescribe to 30%, 40% to bonds either.
"... the logic in ignoring the time value of money and interest rate risks will likely lead market participants to huge losses"
Huge losses are only 'huge' if you put more into an investment than you care to lose. I like stocks and bonds, Tim, I hold more stocks by far -- I like streams of income from long-term and short-term bonds. I like using the income to go into more stocks and more bonds. If I pulled out of all my bonds, I would not be able to continue to use that income for this purpose.
Additionally, by the way I appreciate your thoughts, though I believe you are missing some of the points, I calculate precisely whether a certain investment in a bond is acceptable. I hope everyone does that, and I write that it is important to consult financial advisers, because it is, obviously; the point is, if you A: calculate if a bond's income & maturity are acceptable and B: consider the fact that the issuer, could in a worst case scenario, default -- then allocate properly -- and have a strategy (notice that word is in bold in the article, because it is 'what matters most') then I believe you will do ok.
Tim, think of it this way, some towns and some people, have hardly anything, unfortunately. Some towns and some people are in debt up to their hats. If they had some bonds generating cash, that would actually not be so terrible. I think you're distressed because you may be overlooking my points on 'strategy' & 'allocation.'
In deed, you can lose on stocks as well. For instance you wrote about Citi (C) ... at one point some owners who got in at the wrong time were down over 90%. Counting for the reverse split, and price since 2000, many investors are down well over $200 a share on it. So it's great the market is skyrocketing, though I maintain bonds have a place. I do not believe they are necessarily 'terrible' if they are part of a layered portfolio. They can generate funds than can be used to go into higher yield / quality corp. bonds or treasuries when rates do go up, in addition to stocks or ETFs or whatever investors want.
A Closer Look Into Buffett's Bond Comments [View article]
Got to say I like the monthly coupon and the yield. I also respect the fact that they did not sink to the bottom of the ocean like some businesses did a few years ago. Though I'd emphasize, allocation in amounts that would not sink a portfolio if they do get hit hard -- I also like to balance their newer monthly coupon, call protected bonds with their subordinate debt, which yields more.
A Closer Look Into Buffett's Bond Comments [View article]
Tim,
re: "... virtually assures you of taking large losses..."
Actually if you are comfortable with the amount you are investing in a given bond; it is doubtful you will sustain "large losses." That bond could go down 99.9% and be worth one penny and I would not be taking a very large loss on it.
The mutual fund I got, could go down 99.9%, I'd not be taking a large loss on it. Because it is allocated to properly. No one position or one sector's demise will sink a diversified portfolio.
re: "I have no idea why someone would feel compelled to invest in those bonds.."
It is because they are rated well, I like the institution and I want income from them every 6 months for the next 99 years.
A Closer Look Into Buffett's Bond Comments [View article]
Thanks for the comment southgent. I just picked up a couple Goldman Sachs 2025 5.1% monthly coupon bonds today (yield is 4.2%,) and of course the issue is, though Goldman appears strong, anything could happen.
I like the fact that schools like Bowdoin, Harvard, Princeton, Brown, MIT, Tufts, GW and few others I invest in, have been around for a long time. I also like the fact they are removed from the climate surrounding U.S. businesses, which I have exposure to. The fact these schools have been around for a long time, and will supposedly be around for longer makes them appealing to me. Simply put, Bowdoin would not have issued these bonds if interest rates hadn't gone so low. If a school issues muni bonds there is most often a 5 bond limit which is usually $5,000 (I don't see many schools issuing zero coupons.)
I was not looking to put $5,000 into fixed-income. I realize, theoretically I could have made more going into a higher yield, near-term bond, however I wanted something more 'permanent.' Something about the thought that, that small amount will, hopefully be around for a long time; the result of the work it took to make the money will hopefully continue to yield for 99 years is a novelty. That sums it up, and that is all it is; again I would not allocate more than 1% of a portfolio to such novelties, though if the yield on those goes up a lot I'd certainly consider more (still not more than 1% of a portfolio.) Keep in mind, I have BRKB stock too, I hope it does well -- though I purposefully allocate to non Berkshire investments, in order to diversify. Regards.
How To Screen Stocks Based On 'Dividend Cultures' [View article]
What about using a brokerage where dividend reinvestment is free?
I see what you are saying though, I've never used a DRIP automatically, through Compushare or whatever... I just checked DPS on Morningstar: http://bit.ly/15IfoGD Vanguard Wellington has $15M of their corp. bonds... I think the fund is only open to Vanguard clients currently... their institutional shares were closed in February, to new investors... I like Coke & Pepsi... I'm going to look into DPS more, though like exposure through Wellington (and Vanguard Wellesley.) Not that those funds are immune to downfalls of course, I'm just liking balanced funds currently given the market is very high and unpredictable.
A Closer Look Into Buffett's Bond Comments [View article]
geneh,
Mr. Siegel is certainly optimistic -- though I put far more faith in great investor's thoughts, like Berkshire's. I do not know Mr. Siegel's track record, I believe his description of the bond bubble may not fully be taking into account inflation, and he may be guessing the rates will rise sooner than some analysts.
I agree with the sentiments that bond investors should be cautious, though, I believe a certain allocation to bonds (that represent quality and yield, possibly Berkshire for quality and (GS) monthly coupons for yield, for example) can be used to allocate to these 'newer higher coupon' bonds in the future, when rates go up. Though, the closer we get to rates going up -- obviously less should be allocated to this sort of strategy, just my opinion.
A Closer Look Into Buffett's Bond Comments [View article]
Thanks User11610601, I try to consider the pros and cons. For instance those who weighed Charlie Munger's anti gold stance may have avoided the recent downfall.
Based on my own views and Munger's statements I thought to invest in companies that make jewelry; they take precious metals and make them more valuable. That turned out well -- I picked up gold, silver and platinum though when they took their nosedive recently. So, I believe Berkshire's views are helpful -- though I may do something different; their comments certainly help me choose proper allocations (ie: closer to the minimum in bond funds currently, rather than larger allocations -- larger amounts to businesses like (TIF) last year, followed by small allocations to precious metals upon major declines.)
A Look At My Investing Mistakes With Dividend Stocks [View article]
I was speaking to the article PendragonY and Mercury Value.
"Coca-Cola had gone up a couple bucks per share relatively quickly after my purchase, and thinking that the company had become slightly overvalued, I sold out to buy JP Morgan."
I bought Coke in 93' sold it in 97' ... now I hold it, profit take on it here and there; however I want permanent exposure to it. I hold two Coke century bonds the KO 96' and CCE 93' ... though I like to see it in funds, like Wellington (big holder of their bonds), etc.
Can you believe that? Just set dividends to pay to cash -- and you'd think they'd have been golden... have to wonder if they are kicking themselves right now?
Apple Solved Its First Problem [View article]
Do you really think a company that announces it plans to return $100B to shareholders is in trouble? http://bit.ly/17gGOk8
ARM Holdings: Learning From My Mistakes [View article]
The basic metrics, such as P/E are fine guidelines; however you can not totally account for those buyers who want to have control, with less regard for the cost. It only applies to a few companies, though if you're basing a continuous stream of criticism against it; it is sort of like the person outside of the auction house saying "Picasso, I wouldn't pay $1 for that garbage," while people are inside bidding millions.
Why Passive Index Investing Is Merely An Illusion [View article]
http://soc.att.com/10A...
Perhaps IBM was removed because they were deeply involved in Germany, through Dehomag (their German subsidiary.) AT&T may have seemed like a good substitute because of its accomplishment in digital computing, compared to IBMs punch card system... though I'm just speculating on that.
A Closer Look Into Buffett's Bond Comments [View article]
A Closer Look Into Buffett's Bond Comments [View article]
I understand & appreciate your point of view, if you have time you might be able to clarify, are you in interest rate swap investments, or I would presume not CDs. I do like some bank loan funds, though I keep them to a minimum.
My opinion is, the aforementioned schools have such low acceptance rates, that there is no shortage of students willing to apply, and work to pay tuition. Though, personally I believe a stronger system would allow the best schools to educate more students and reduce the costs. Still, Cooper Union just stated they will begin to charge tuition: http://nyti.ms/17OBvc4 so, anything can happen.
I have my eye on the Stanford 2042 bonds (cusip: 854403AD4) 4% coupon, though just a 3.6% yield currently -- again total allocation to all university bonds would not exceed 5%, which is fairly conservative in my opinion. I like to see the income roll in, and I've found it can support more speculative investments. I agree, the for-profit education field is no-man's land though -- they simply are not being managed effectively.
A Closer Look Into Buffett's Bond Comments [View article]
I agree with Warren Buffet on the two points: "if stocks go down 20% in the next month they are not going to be bothered… I would have them having enough cash on hand so they feel comfortable"
I also agree with him, you and Tim, on a certain level of understanding and caution. I also agree with Buffett not to have a set 30% or 40% in bonds. Though I believe bonds do have a place, and again whether the consumer price index exceeds the 4.69% coupon or not, it does not matter, because of the allocation; that is my opinion.
Going to Tim's remark about forbidding 100 years from now; the fact is if anyone allocates to such a long-term bond, it obviously is not about the face value in 2112. It is about a small amount of income, as part of a larger picture.
Say a $100M portfolio got 10 or 20 of the bonds, and someone said, 'oh my gosh, no way, $20,000 in 2112 won't even buy you a keg of whatever people are drinking a hundred years from now...'
Well, I hope you see the point, such a minimal allocation is just a drop. What you do with the buckets of capital is obviously a different story. I believe some to quality mutual funds that include equity, fixed income and a mix are ok.
I hope to buy more bonds and more stocks, every year. So when rates go up, I hope to get those also. That's just my perspective on it. It is all about allocation, the points about rates going up are very important, again very important, I've heard them from wall street managers for years, and they've been wrong.
At some point rates will likely go up -- though, by the time they do I believe proper, conservative allocation to the mix can be helpful. When rates go up, of course the prices will go down, however as I said in the article, given the allocation, I'd want to buy more of the mutual fund, presuming it is still well rated, still holds bonds I like, etc. Because I'd hope those managers will go with the flow, use income generated to buy the new higher yield, higher rated bonds, as I intend to do with funds allocated to bonds; as I intend to do with funds allocated to stocks.
A Closer Look Into Buffett's Bond Comments [View article]
It depends on what you do with the income. If you use it to attempt to increase overall yield, you may be able to do better than that.
"If that beats stocks over the long-term than we will have serious problems in this country."
If you use the income to go into some high-yield, and some equity, you will gain more exposure to stocks, over time. I reinvest dividends, most often, I use fixed-income to go into high yield, and I want to use high yield income to go into stocks.
"I would sell all the bonds I possibly could at that rate and on those terms, and I think that the logic behind buying them is highly flawed."
You are not accepting some of the points I have tried to explain to you. What would you do, once you've sold all your bonds? Throw those funds into stocks? I work from the point of view that the market can go up, it can go down. I believe in balanced exposure, and proper allocation, I believe 0% to fixed income makes very little sense. Though I do not prescribe to 30%, 40% to bonds either.
"... the logic in ignoring the time value of money and interest rate risks will likely lead market participants to huge losses"
Huge losses are only 'huge' if you put more into an investment than you care to lose. I like stocks and bonds, Tim, I hold more stocks by far -- I like streams of income from long-term and short-term bonds. I like using the income to go into more stocks and more bonds. If I pulled out of all my bonds, I would not be able to continue to use that income for this purpose.
Additionally, by the way I appreciate your thoughts, though I believe you are missing some of the points, I calculate precisely whether a certain investment in a bond is acceptable. I hope everyone does that, and I write that it is important to consult financial advisers, because it is, obviously; the point is, if you A: calculate if a bond's income & maturity are acceptable and B: consider the fact that the issuer, could in a worst case scenario, default -- then allocate properly -- and have a strategy (notice that word is in bold in the article, because it is 'what matters most') then I believe you will do ok.
Tim, think of it this way, some towns and some people, have hardly anything, unfortunately. Some towns and some people are in debt up to their hats. If they had some bonds generating cash, that would actually not be so terrible. I think you're distressed because you may be overlooking my points on 'strategy' & 'allocation.'
In deed, you can lose on stocks as well. For instance you wrote about Citi (C) ... at one point some owners who got in at the wrong time were down over 90%. Counting for the reverse split, and price since 2000, many investors are down well over $200 a share on it. So it's great the market is skyrocketing, though I maintain bonds have a place. I do not believe they are necessarily 'terrible' if they are part of a layered portfolio. They can generate funds than can be used to go into higher yield / quality corp. bonds or treasuries when rates do go up, in addition to stocks or ETFs or whatever investors want.
A Closer Look Into Buffett's Bond Comments [View article]
A Closer Look Into Buffett's Bond Comments [View article]
re: "... virtually assures you of taking large losses..."
Actually if you are comfortable with the amount you are investing in a given bond; it is doubtful you will sustain "large losses." That bond could go down 99.9% and be worth one penny and I would not be taking a very large loss on it.
The mutual fund I got, could go down 99.9%, I'd not be taking a large loss on it. Because it is allocated to properly. No one position or one sector's demise will sink a diversified portfolio.
re: "I have no idea why someone would feel compelled to invest in those bonds.."
It is because they are rated well, I like the institution and I want income from them every 6 months for the next 99 years.
A Closer Look Into Buffett's Bond Comments [View article]
I like the fact that schools like Bowdoin, Harvard, Princeton, Brown, MIT, Tufts, GW and few others I invest in, have been around for a long time. I also like the fact they are removed from the climate surrounding U.S. businesses, which I have exposure to. The fact these schools have been around for a long time, and will supposedly be around for longer makes them appealing to me. Simply put, Bowdoin would not have issued these bonds if interest rates hadn't gone so low. If a school issues muni bonds there is most often a 5 bond limit which is usually $5,000 (I don't see many schools issuing zero coupons.)
I was not looking to put $5,000 into fixed-income. I realize, theoretically I could have made more going into a higher yield, near-term bond, however I wanted something more 'permanent.' Something about the thought that, that small amount will, hopefully be around for a long time; the result of the work it took to make the money will hopefully continue to yield for 99 years is a novelty. That sums it up, and that is all it is; again I would not allocate more than 1% of a portfolio to such novelties, though if the yield on those goes up a lot I'd certainly consider more (still not more than 1% of a portfolio.) Keep in mind, I have BRKB stock too, I hope it does well -- though I purposefully allocate to non Berkshire investments, in order to diversify. Regards.
How To Screen Stocks Based On 'Dividend Cultures' [View article]
I see what you are saying though, I've never used a DRIP automatically, through Compushare or whatever... I just checked DPS on Morningstar: http://bit.ly/15IfoGD Vanguard Wellington has $15M of their corp. bonds... I think the fund is only open to Vanguard clients currently... their institutional shares were closed in February, to new investors... I like Coke & Pepsi... I'm going to look into DPS more, though like exposure through Wellington (and Vanguard Wellesley.) Not that those funds are immune to downfalls of course, I'm just liking balanced funds currently given the market is very high and unpredictable.
A Closer Look Into Buffett's Bond Comments [View article]
Mr. Siegel is certainly optimistic -- though I put far more faith in great investor's thoughts, like Berkshire's. I do not know Mr. Siegel's track record, I believe his description of the bond bubble may not fully be taking into account inflation, and he may be guessing the rates will rise sooner than some analysts.
I agree with the sentiments that bond investors should be cautious, though, I believe a certain allocation to bonds (that represent quality and yield, possibly Berkshire for quality and (GS) monthly coupons for yield, for example) can be used to allocate to these 'newer higher coupon' bonds in the future, when rates go up. Though, the closer we get to rates going up -- obviously less should be allocated to this sort of strategy, just my opinion.
How To Screen Stocks Based On 'Dividend Cultures' [View article]
A Closer Look Into Buffett's Bond Comments [View article]
Based on my own views and Munger's statements I thought to invest in companies that make jewelry; they take precious metals and make them more valuable. That turned out well -- I picked up gold, silver and platinum though when they took their nosedive recently. So, I believe Berkshire's views are helpful -- though I may do something different; their comments certainly help me choose proper allocations (ie: closer to the minimum in bond funds currently, rather than larger allocations -- larger amounts to businesses like (TIF) last year, followed by small allocations to precious metals upon major declines.)
A Look At My Investing Mistakes With Dividend Stocks [View article]
"Coca-Cola had gone up a couple bucks per share relatively quickly after my purchase, and thinking that the company had become slightly overvalued, I sold out to buy JP Morgan."
I bought Coke in 93' sold it in 97' ... now I hold it, profit take on it here and there; however I want permanent exposure to it. I hold two Coke century bonds the KO 96' and CCE 93' ... though I like to see it in funds, like Wellington (big holder of their bonds), etc.
Look at what SunTrust just did: http://bloom.bg/124oRmT
Can you believe that? Just set dividends to pay to cash -- and you'd think they'd have been golden... have to wonder if they are kicking themselves right now?