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  • Why I Will Start Social Security At Age 62 [View article]
    Kevin, I think the younger one is, the more valid your skepticism is. The government has been very slow to make necessary changes, and when adjustments have been made (such as raising the age for full benefits), they have been made gradually with a very long lead time for phasing in the changes. The people I'm concerned about are my children and subsequent generations. I believe they will be the ones to see the most changes. The good news for you is that you do not need to make this decision at age 55. Right now, 15 years may seem like a long time to trust that any existing government policy will still be intact. In seven years, when you are 62, you will have a clearer idea of what things will be like when you reach eligibility for full benefits a few years later. One key factor will be inflation. Governments like moderate inflation because they can pay the bills they've incurred with less valuable dollars, so IMO the younger one is the more one should be preparing for higher inflation. I agree with you 100% that changes are necessary to keep the system viable. The changes I see coming include government action to encourage moderate inflation, raising contributions to the system, and gradually raising the age of eligibility for benefits, etc. When the eligibility date was raised for my age cohort (to 66), I remember wondering why the government didn't raise it more, and more quickly, considering the relative improvements in health and lifespan. I'm in no way defending either the status quo or the changes I anticipate. I'm just saying that while it is prudent to develop a plan, you are not required to press the "start" button until age 62. I've decided to delay pressing "start" and to review it on a year by year and month by month basis. (I will be 64 in a few months and I'm still working and enjoying my "second career" job.)
    Sep 1, 2014. 09:14 PM | 2 Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Thanks, HVAC. I was just having some fun with you. I agree with your perspective completely about the fees vis-a-vis NAV. We'll watch together!
    Sep 1, 2014. 08:53 PM | 1 Like Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Brian, thanks for your comment. I congratulate you for starting early as an investor. I trust you are well-diversified and do not have too many of your eggs in the risky BDC sector, particularly with a company like PSEC that (as BDC Buzz says) "pushes the envelope."

    I would encourage any young investor to first build a portfolio of solid, blue chip Champions using David Fish's list as a starting point--then add a small percentage of speculative or higher-risk, higher-yielding stocks. Adequate diversification is your friend. As a young investor you may not have yet had an opportunity to invest in very many stocks. I think one of the greatest risks a young investor faces is making an early "big bet" on a stock that goes badly and thus become discouraged from investing in the stock market.

    If you are willing to risk a 30% dividend cut, then you obviously have some risk tolerance. I trust BDC Buzz's judgment about whether a cut (or "reset") is likely and how severe it might be. I encourage you to follow him and read everything he has to say about PSEC or any BDC you are considering.

    No one in the comment stream has suggested that PSEC might go under completely. I don't think that is likely. My question to you as a young investor who is in the process of building a portfolio is this: With all the great companies out there, why invest in a company about which you have to ask such a question?

    No one is asking that question about PG, JNJ, KO, MMM, EMR, GPC, etc. I just want to make sure you have a healthy exposure that that type of company as well as a "cowboy" (another BDC Buzz term) like PSEC.

    All the best to you!
    Sep 1, 2014. 09:25 AM | 4 Likes Like |Link to Comment
  • Realty Income: A Textbook Study Of Opportunity Cost And Patient Income Investing [View article]
    Adam, thank you for your good article. The beta of both O and WPC has always seemed unusually high to me. I hold both as core positions. I've identified a minimum and maximum percentage of the portfolio for each. I have been significantly overweight both because I thought they were both undervalued--particularly WPC.
    In April, I bought more shares of WPC at $59.44. In August, I sold a few shares at $68.45 to bring it down from very overweight to moderately overweight. In my mind, that's a lot of beta for a stock that has been a pristine, steady performer for so many years.
    I added shares of O from August '13 through April '14 from $37.98 to $40.34. I saw other opportunities that looked better in August, so I sold some shares of O at $45.39 to bring it down to a full, but not overweight position.
    I view these price swings as opportunities to occasionally add to some very good stocks. You've rightly identified that in the space of six months, the price of Realty Income ranged from $36.58 (12/5/13) to $55.25 (5/21/13), representing a range of roughly a 4% yield to a roughly a 6% yield. You helpfully pointed out that right now, "at $45, shares trade almost smack dab in the middle of that range, at a yield of 5 percent."
    I agree completely with your assessment: "Insofar as Realty Income is concerned, as I opined last year, the 40-44 price point seems like 'fair value' to me .... When the stock dropped below $40 last year, I became bullish for the first time, but at these levels I no longer consider O cheap."
    O is currently 3.0% of my retirement income portfolio, slightly above my target allocation of 2.5.% I'm happy to hold O in that range when it is at fair value--which IMO is its current status. If the overall market maintains its present level, I would add some shares of O below $40 and I would bring it down a bit if it returned to the mid-$50s.
    Adam, I think you nailed this one and you've provided a frame of reference for a great long term holding. You've given us some targets for how to "trade around a core position."
    Sep 1, 2014. 07:05 AM | 2 Likes Like |Link to Comment
  • Realty Income: A Textbook Study Of Opportunity Cost And Patient Income Investing [View article]
    Sep 1, 2014. 07:02 AM | Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Thanks, RLP. This is helpful dialogue.
    Aug 31, 2014. 10:41 PM | Likes Like |Link to Comment
  • Why I Will Start Social Security At Age 62 [View article]
    RAS, thanks for a great article. I'm filing this to give to friends when this question comes up. Your view is different from mine and I always like to help folks look at this issue from all angles.

    I'm closing in on 64 and I haven't yet applied for benefits, largely because of the tax "penalty" for earnings over the $15,480 maximum. I plan to apply for benefits when I need the income.

    As long as I'm healthy and enjoying working, it is an easy decision for me not to apply for benefits before age 66, when I will be eligible for full benefits and no longer subject to the "give back" rule. If work become not fun, if I have a health issue, or if there is a family caregiving need that arises, I'll pull the ripcord at any point. As for now, it is a year-by-year and month-by-month decision.

    In the meantime, my mind asks:

    1) What can I do to safely maximize the monthly dividend income from my retirement income portfolio? (This is where I exercise most of my brain cells.)

    2) What can I do to maximize the monthly income from Social Security?

    My eye was drawn to your chart's Age 62 Income column and the Age 70 Income column. I randomly chose to compare three years:

    Age 73 $30.8K vs. $45.0K
    Age 80 $36.6K vs. $53.4K
    Age 85 $41.3K vs. $60.3K.

    I believe--for me, at least--the greatest value of Social Security is the annuity income it provides for the "out years." I see it as income protection for "old, old" age. The more wealth one has, the more options one can consider--such as applying for early benefits and using that income to purchase an annuity that "kicks in" at age 85 or so.

    I think delaying the benefits ALAP makes sense for someone who does not have a great deal of accumulated assets but has enough to live comfortably with income from IRA, 401k, Pension, work (full or part-time), etc., and who is looking for a way to provide protection for the later years of retirement. That's the situation I find myself in.

    I believe it is prudent to plan to live a long time. A corollary to "If I had known I was going to live this long, I would have taken better care of myself" is "If I had known I was going to live this long, I would have structured my retirement income to maximize protection for old, old age."

    I have a good friend in his mid-70s who is scurrying around trying to maximize his income because he structured the retirement income flow with the assumption that he would die by age 70. He retired in his 50s and he's had a blast. Unfortunately, the remainder of his retirement years are now looking economically challenging to him, and he may be looking at a long runway. To use stock-picking language, he's left himself no "margin for error."
    Aug 31, 2014. 10:16 PM | 4 Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    JRP, thanks for your response. I had not caught the info about the 50 million shares. Very insightful! All the best.
    Aug 31, 2014. 09:27 PM | Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Well, HVAC, even when it comes to simple things the sad truth is that not everyone has as much genius as you and I do, nor as much humility. :-)
    Aug 31, 2014. 06:17 PM | 3 Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Thanks for your kind words, Peter. All the best to you and your country. Thanks also for making your first comment on SA. Please don't make it your last!
    Aug 31, 2014. 06:15 PM | Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    I agree with your philosophy, RLP. I think diversification is crucial and there is a place in my portfolio for high-yield stocks. For me, it's not JNJ vs. PSEC, but a basket of JNJ-like Champions and PSEC-like high yielders.
    Aug 31, 2014. 06:14 PM | Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Thanks, Surfgeezer. For me, the optimal portfolio has a blend of Champions and higher-yielding stocks. It's not either/or, but both/and.

    I have a friend who hopes to get a "feel good" feeling each month when the monthly brokerage account report arrives. His eyes go first to the "bottom line," the market value of the portfolio at the end of the month.

    He is considering replacing his balanced mutual funds with a basket of dividend-paying stocks. I suggested he maintain his present portfolio rather than investing in dividend-paying stocks because I don't think he is prepared for the market price fluctuations that come with individual stock ownership. Everyone has to discern his or her temperament and risk tolerance.

    My focus is not on the market value of my portfolio, which fluctuates. My focus, like a laser, is on my average monthly dividend income. I get small (sometimes nice) annual increases from each company and I get my "feel good" sense when one of the portfolio companies announces a dividend hike and I adjust the average monthly income on my spread sheet.

    This keeps my mind off the market price, and I must say this really came in handy in the fall of 2008 and the spring of 2009. Mr. Market controls the market price and I don't want to surrender my "feel good" to something so fickle. The companies are more in control of their dividends than their share price.

    If the average monthly income trend is up, I'm not concerned about the market value of the portfolio. Some people "get it" and this is a huge relief to them in market downturns. Other people can't "get it" and continue to worry about price declines. This has been a tremendous source of peace of mind for me. If you can focus on dividend income rather than market price, dips, corrections and bear markets are less disturbing. I fully expect a portfolio decline of 8-10% at any moment, triggered by something unexpected. I fully expect periodic declines of 20-25%. We may have another 30-50% decline like '08-'09 in the next decade. I hope not, but it would not be an anomaly. In fact, I would welcome a 10% broad market correction as a long-term positive.

    I try to buy stocks I have confidence in their ability to raise dividends regularly through thick and thin. For me, the best way to own common stocks is to focus on rising dividend income rather than market price. As long as the business model is intact, price declines are buying opportunities.

    I agree with Boone Pickens, who says if a company consistently increases their dividend (assuming the underlying earnings or NII are there to support it, of course), over time the price will "catch up" with the dividend.

    Aug 31, 2014. 06:12 PM | 2 Likes Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Thanks for your reply, Misscbd. I didn't realize it until after the interview, but the fact that I had written and submitted the questions made it easier for me to write the article. All I had to do was cut-and-paste that part of it.

    For further clarification, I asked Grier Eliasek additional questions that were not submitted. Some pertained to the earnings call which occurred after the questions were submitted. The submitted questions provided the framework but I interjected questions for clarification and elaboration. It was more casual and less scripted than it may have appeared. He wanted to know about my life and work and about my interest in BDCs.

    As I've pondered this, it has occurred to me that from his perspective I am a non-professional, grass-roots individual investor. (That's my perspective, too!) He may have simply wanted to make sure that I would submit some substantive questions rather than asking him what color carpet they have in the office.

    One reason I was okay with submitting the questions beforehand was because I knew I had "the power of the pen" to write the article as I saw fit.

    Thank you for making this thread richer by your comments.
    Aug 31, 2014. 05:47 PM | 1 Like Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Thanks for sharing your insights with us, JMK. I'm pulling for the outcome you are projecting. All the best!
    Aug 31, 2014. 05:38 PM | 1 Like Like |Link to Comment
  • A Conversation With Prospect's Grier Eliasek [View article]
    Thanks for sharing this, 1416. Seeing how some of the other externally-managed BDCs operate is one reason I've decided not to close out the possibility of an investment. It just means a little more due diligence.
    Aug 31, 2014. 12:07 AM | Likes Like |Link to Comment