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Interesting Times
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I could put on this bio my education, work experience, investment strategy, and a nice thin (if I can find one) picture of me in a suit looking *smart*. Sorry but that's not my intent here. Sure I invest, help family make financial decisions, and make a ton of mistakes along the way. But my time... More
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Interesting Times For All Commodities And Investments!! CHAPTER 4......
  • Interesting Times For All Commodities And Investments!! Chapter 10............ 182 comments
    Jun 17, 2013 12:35 PM | about stocks: SCJ, MO, PM, TNH, COP, GIS, KMP, GGN, MDLZ, MUX, VYM, VXF, PLG, KKD, DBC, MORT, PFL, PHD, VVR, JRO, MTGE, NRF, RAS, PMM, MHI, NMA, KCAP, CHI, NCV, SAN, BBVA, VE, VGR, AWP, IGR, GPL, AUY, LYSCF, PSEC, PSLV, REMX, SLV, GNT, RAD, GDXJ, LMNX, NEM, AB

     

    I am going to be the first one to admit that I haven't a clue when or if Gold and Silver will ever take off in price. I expect they will though. Additionally I don't see much coverage or articles pertaining to the other commodities. So I would like to start up a blog where every commodity, and every investment is on the table for discussion. Even political questions. I only ask that you be courteous!!

    Someone posted the difference between being smart, foolish, and a moron. Well I have been all of the above and I will "man up" and admit it! However I came away from those experiences with both battle scars and knowledge.

    For years I have been reading basically any day now Gold and Silver will explode. Yet somehow the can gets kicked down the road and I live to learn another lesson. Then Sprott's ETF'S are talked about as being safer then others. (NYSEARCA:PSLV) is the silver ETF.

    With all the QE'S basically not creating any new jobs what will be the consequences in the future?. Will we be "CYPRUSED "?, are we in a serious stock market bubble? Obviously we read daily about these concerns but what about other commodities? Here is where most of us are uninformed and relish an education.

    Stocks are fine to discuss as well. All of us know that commodities should only be a % of your portfolio. I owned (NASDAQ:PSEC) and liked the dividend. Others may not ! So please feel free to entertain your picks and why!

    REE'S have been an interest for a few of us over the last couple of years. I had exposure to Lynas (OTCPK:LYSCF). Some posters might have questions about this group as well.

    If you disagree with a post please bring proof and display your argument. If you agree with a post, find one interesting, or have questions please feel free to respond. We must remember were all in this together. So if you want to talk (NYSEARCA:GLD) or (NYSEARCA:SLV) that is fine.

    Now if some have an opinion on Copper, Zinc, Palladium, etc. Do not hesitate to post that. Most of us might not understand the post but I am sure well be open to learning. Lumber might interest someone and I would like to learn why I should invest in it. PLEASE bracket any symbol you use so that I can include that in the topic forum. It also allows a reader to click on it and get some data as well.

    My part time job is a college and high school official so I can sit here and referee all day long. I honestly hope that ALL will be professional with their comments. So lets see who comes on board. Looking forward to what can become a nicely knit group of diversified investors.

    I have invited a few Authors whose work I admire to bring their expertise to the forum here as well. Tom, Eric, Hebba, Doug, Chris, Focal Point, Tack, to name a few in no particular order. I am sure they will drop in once in a while to voice their opinions. Please feel free to ask your favorite Authors to join in the discussion as well.

    These are highly recommended people that I suggest you follow as well. I have learned a ton from them and find their work both challenging and engaging. Two areas that I hope inspire people who normally don't post to now feel free to do so !!

    Now I also feel compelled to encourage the use of the like button. It is human nature that once someone posts and see the like button add up they will feel they made a valid point. Upon that feeling they will post again! So if you do like what someone posted, either a question or an answer PLEASE use it ! It might help our core grow exponentially as well.

    As you see I have stopped adding any new symbols as they were growing way too fast for me to keep up !!

    We are living in some very INTERESTING TIMES !!

     

    Where do commodities go from here, are stocks and bonds still sound investments? Oil. Etf's Physical metals..

    Folks.. we are growing and posters like it. If you are new to investing then this site is for you.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: VBR, SCJ, MO, PM, TNH, COP, GIS, KMP, GGN, MDLZ, MUX, VYM, VXF, PLG, KKD, DBC, MORT, PFL, PHD, VVR, JRO, MTGE, NRF, RAS, PMM, MHI, NMA, KCAP, CHI, NCV, SAN, BBVA, VE, VGR, AWP, IGR, GPL, AUY, LYSCF.PK, PSEC, PSLV, REMX, SLV, GNT, RAD, GDXJ, LMNX, NEM, ABX

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Comments (182)
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  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » Would everyone be so kind to answer my questions here???
    17 Jun 2013, 12:37 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    IT,

     

    no opinion , so I would defer to southgent and his remarks on (PSEC).
    17 Jun 2013, 03:59 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    InterestingTimes: As you know, I am long PSEC but have a number of negative opinions about BDCs in general and this one in particular. I have discussed many of those concerns in my blog, including the last post where I discussed adding 50 shares at $10.15, and in a prior comment to you responding to my take on a recent press release.

     

    I just left another comment about PSEC to a SA article in response to a comment left by "Factoid" who may be the AX here at SA on BDCs:

     

    http://seekingalpha.co...
    17 Jun 2013, 01:15 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    This is unrelated but (XIDE) suged today on this rumor... http://bit.ly/1amdJ9w .. I don't see how it changes things much do you?
    17 Jun 2013, 05:52 PM Reply Like
  • tampat
    , contributor
    Comments (995) | Send Message
     
    Apparently it didnt change things at all. Looks like it closed down 7% for the day. It surged up then it surged down. Guess it was a surging kinda day.
    17 Jun 2013, 06:41 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Bd4: If Exide is allowed to open the Vernon plant due to a favorable decision by the ALJ or a settlement with the state, that would be a favorable development for the owners of the 2018 senior secured bond, which popped today to close at 69, up from 62.875 last Friday and 56.876 last Thursday.

     

    I do not believe that any such development would have any impact on the value of the common shares in a BK reorganization.

     

    Most likely, those shares will be cancelled as noted by this columnist (not "likely to be one of the few cases that's an exception to the rule that equity loses all")

     

    http://bit.ly/11V43PD

     

    I see no reason to disagree with that person's assessment.

     

    I believe the common shares were cancelled the last time Exide emerged from BK, a normal result, as noted in this article:

     

    http://bit.ly/11V43PF

     

    In that last BK filed back in 2002, Exide went into BK with $2.5B in debt.
    17 Jun 2013, 07:08 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Yes, it was a crazy funny day. Unless you were one of the people who were buying bankrupt stocks:

     

    http://seekingalpha.co...
    17 Jun 2013, 08:49 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    Thanks for the opinion and the link... quite a fall from grace $32.11 to zero or should I say .20 in 5 years. This doesn't look like a good long term hold as far as stocks go. I wonder what the new stock price out of bankruptcy will be.
    It's an interesting company. I traded it a few times got burnt mostly. Two bankruptcies in so short of a period. They need a change at the top?
    17 Jun 2013, 10:06 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I have a stupid question... Hypothetical, if I have a 1,000,000 dollars in Hmmm let's say (VOO) and the value goes down 100,000 and I sell for 900,000 does the 100,000 decrease the money supply 100,000? Say the opposite happens and it increases 100,000 and I sell does it Increase the supply?
    17 Jun 2013, 02:50 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @bd4

     

    If you sell & lose, then someone else gains. So it's zero-sum, no change in totally dollars. Does that make sense?

     

    Of course if the person who gained, was a bank that bought the shares with newly printed money, i.e. Fed buying bonds with non-existent money... that's where the cycle of money "launderying (essentially) begins.
    18 Jun 2013, 01:21 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    How does that buyer gained? They just bought it at 900,000 but it is only worth 900,000. If they hold it and it goes to 850,000 have they still gained?
    18 Jun 2013, 04:32 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @BD4

     

    You pay 1M for your house. You get offered 900k & sell it for 900k. Money isn't made or lost from the treasury count in the process.

     

    There's 100 shares. When you buy, you're willing to pay 1M for them. If the company had only 100 shares total, then those shares would now be priced at 1M/100. If someone pays you 900k for those 100 shares, they are now each worth 900k/100. The 900k guy hasn't actually pocketed any money. He's bought all the stakes in a company for less than you paid for them.

     

    The original 1M you paid, if during an IPO, goes to the company. So that 100k isn't lost from the money system. It's just lost from you. The new buyer now owns the same stocks you owned for less.

     

    If a company issues an IPO & gains 3M by offering shares worth $100 each... then those shares go down to 90 each...the company keeps that 3M. The lose & gain are now between the buyers & sellers of those stakes in the company. The company is out of the process.

     

    The same way that if you bought furniture from a company for 3M, then sold it to someone for 2M... no money was lost from the money system. It's that the company has 1M of your money, & you got 2M back from your buyer.
    18 Jun 2013, 04:52 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    " So that 100k isn't lost from the money system. It's just lost from you. The new buyer now owns the same stocks you owned for less."
    Isn't the money system a total of all the money we all have? Don't I have 100,000 less? If the person who bought were to sell for 900,000 then wouldn't the system have 100,000 less in it?
    18 Jun 2013, 05:10 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I have another dumb question.. If the bank who holds your credit card expands your credit limit does that expand the money supply? How about if the bank who owns your house or the county that assesses your house at a higher value so you can take equity out of it. Does that increase the money supply?
    18 Jun 2013, 07:36 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @bd4

     

    No money is lost. Think in terms of something concrete instead of stocks or credit cards.

     

    So the bearded man (now known as BM) makes a tarp. Sells it for $10 to red-shirted man (RS). Now RS sells it to a small turtle (ST) on the side of the road for $9. The money is:
    BM $10 ......sells for $10 so he ends with $10
    RS (-$ 1) ......buys for $10, sells for $9 so he ends with -$1
    ST (-$ 9) .....buys for $9, so he ends with -$9.

     

    RS's minus 1 is what your wondering if it reduces money supply. It doesn't. BM has the full amount. ST & RS together have paid the balance of BM's profit. It's the split that had you pondering.

     

    Now also, ST also has a tarp. BM used some natural resources to make the tarp. So the natural resources still exist but in a new form (now a tarp).

     

    Money-wise RS got his original $10 from whoever makes money. Originally in exchange for the natural resource salt, later for gold. Now it's for a promise by some central bank that the rectangular cloth bit with someone's picture is worth something.

     

    What's a tarp & turtle got to do with it? I have no idea. I was doing random word association.
    18 Jun 2013, 11:31 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    But what if the bank says the tarp is worth $20 and he borrows $20? Isn't there $10 more out there?
    19 Jun 2013, 12:23 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » Do I have to play my Abbot and Costello piece again. To me this sounds like a three card monty happening.

     

    My father in law can hand you a $20, confuse the hell out of you by asking for change, and end up with the change and the $20 back !!
    19 Jun 2013, 12:28 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    BD4
    Who does he give the $20 to?
    If he buys the tarp with it, then BM has $20.
    If he puts it in his mattress, he has $20.
    Someone gave the bank $20, that's where it came from.
    19 Jun 2013, 12:35 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Apparently I can't escape Abbot & Costello. Bring them on!
    19 Jun 2013, 12:35 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @CURLS

     

    You asked for it !!!!

     

    http://bit.ly/11mUQ2U

     

    It never gets old...In fact this is what tomorrow might be like as well..
    19 Jun 2013, 12:44 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    The original owner borrows and because he does he doesn't have to sell the tarp. That would be BM now he has the tarp and 20 bucks. The other two have to find some one else. Instead of a tarp let's say BM built a house instead.
    19 Jun 2013, 05:38 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    So instead of buying it for $9, the bank says it's worth $20. The -money- doesn't multiply. The value of the object relative to money changes. So no money is created or lost.

     

    NOW.... if that value increases because of inflation because "more money" appeared out of nowhere & everyone has more, then each little bit of paper is worth less to everyone.

     

    Whether it's inflation can't be determined from whether the price when up or down. Price can go up & down because of supply & demand on the object. The other bearded guy who made tarps retired. The money is the same, but but everyone's willing to pay more of that money for the last tarps available.

     

    Price change, i.e. price value of an object (such as credit line increase or house loan) doesn't change the amount of money at all. It's whoever's creating the bills & makes more of them & everyone believes they all have value, that's when money appears or disappears.

     

    In all your examples, you're asking if price changes make money appear. They don't.

     

    It's a separate event behind the scenes that makes inflation happen & everyone believe that prices need to change. It's -after- money's appeared/disappeared that effects prices. (The aftereffect of money appearing changes prices.) It's not the price changes itself that creates & uncreates the money.

     

    @ IT
    So Albot is coming in handy!!
    19 Jun 2013, 06:48 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    The bank reassessing the value upward is inflation or a result of inflation. Inflation = too many dollars chasing too few goods.

     

    If the government borrows money doesn't that increase the amount of money? When the government borrows it is borrowing money in our names. We the people. Is there a difference if I borrow money in my own name? If the bank thinks that my credit limit is too low and it raises it and I borrow up to that amount. Isn't that creating money out of thin air?
    19 Jun 2013, 08:50 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    IT,

     

    Here's a suggestion for your 50k investor , 2- 3 yr. timeframe..,
    Buy
    150 (UBSI) @ 25.40 - paid div for 39 yrs.. 4.9% yield
    100 (T) @ 35.75 - paid div for 29 yrs -- 5% yield
    50 (QCOM) @ 62 - 2.5% yield - plenty of room for div growth
    and I believe has 25-30 % upside from here in 2 yrs or so..

     

    Invest approx. $10,500 , yield 4.2% with potential for growth.

     

    Good starting point , Adjust # of shares if desired. Plenty of cash left to add other names ..

     

    I own all 3 , I rarely ask a client to invest in something I don't own,,
    Not that I'm a genius , its all a matter of trust and accountability.
    17 Jun 2013, 05:52 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » GUYS

     

    Thanks for the input!!

     

    If you find time look at the recent followers I have. Notice most are newbies?? Think why they are here? It is the answers most of you give. It has to sometimes be simple.

     

    I have no problem with the upper level talk you guys have as we have those followers too. But I always think back to my parents and how they knew nothing !

     

    Me, I still have a lot to learn and I feed off what you guys talk about, but like I stated some if it goes over my head as well. Which is fine!!! I just want to have a beginners, intermediate, senior, and advanced sector cooking all the time. I know it can be frustrating to some but ask yourselves why is this blog growing??

     

    INFORMATION FOR ALL !!

     

    Now wait until CURLS adds her thoughts . Me thinks my guy got her laptop this time :)
    17 Jun 2013, 07:19 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    If I had to recommend something for someone who had no idea how to invest and had no interest in learning it would have to be the Vanguard Wellington Fund (VWELX)
    Info here: http://yhoo.it/11LgFWu

     

    The investment seeks to provide long-term capital appreciation and reasonable current income. The fund invests 60% to 70% of its assets in dividend-paying and, to a lesser extent, non-dividend-paying common stocks of established large and mid-size companies. The advisor seeks those that appear to be undervalued but have prospects for improvement. The remaining 30% to 40% of the assets are invested mainly in fixed income securities that the advisor believes will generate a reasonable level of current income. These securities include investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, and mortgage-backed securities.

     

    The fund has been around since 1929, The net expense is .27%.
    I have two neighbors that are just like the lady with $50K.
    17 Jun 2013, 09:12 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @NOT

     

    I agree as that was one of MY funds many moons ago. Extremely conservative if I remember correctly however I thought that was closed to new investors years ago. I guess either they reopened it or I was wrong..

     

    Honestly I completely forgot about that one , great choice..

     

    Thanks !!
    17 Jun 2013, 09:27 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    I have been able to buy it through my broker Schwab for my IRA account using the symbol VWELX. I have not tried to buy it directly from Vanguard???
    17 Jun 2013, 09:40 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    NoTrub: Did you have to pay a $76 transaction fee buying that fund from Schwab? One is being charged now for a purchase.

     

    http://bit.ly/17UsuB9

     

    Mutual fund symbols will be the same irrespective of where the investor buys the fund.

     

    Anyone desiring to buy Vanguard mutual funds or Vanguard ETFs would be well advised to just open an account at Vanguard.

     

    Through a Vanguard brokerage account, the investor can buy their lost cost ETFs commission free.

     

    It is not necessary to open a brokerage account to buy a mutual fund and the investor could avoid those broker transaction fees.

     

    I own several Vanguard mutual funds including Wellington which an investor can buy now with a minimum $3,000 purchase.

     

    I also own the Vanguard Equity Income and the Vanguard Health funds.

     

    Another choice is the Vanguard Star fund which I also own. It is a low cost balanced fund that owns other Vanguard bond and stock funds. I bought $4500 in June-July 2009 and another $1500 in late 2009 and into 2010 (3 $500 increments), have reinvested the dividends and have not sold any shares. The position as of today's close is worth $10,182.54. This fund is not going to shoot the lights out but my $6,000 investment has gained $4,182.52 through dividends and an unrealized $2,893.46 gain on the shares as of today's close.

     

    I took a snapshot of my Vanguard Star position in my recent post on my stock funds:

     

    Updated Stock Fund Table as of 6/6/2013
    http://bit.ly/11zov4i

     

    Vanguard does not charge a fee over and above the acquired fund fees which is unique for a fund of funds. The total expense ratio is currently .34% which is good. That fund can be purchased with a minimum $1,000 deposit which makes it friendly for those starting out.

     

    Vanguard Website
    Vanguard STAR Fund (VGSTX)
    http://bit.ly/VozgD6

     

    The average ten year annualized return is 8.43% through 3/31/13 and 9.69% since inception in 1985.

     

    Composition as of 5/31/13:

     

    1 Vanguard Windsor II Fund Investor Shares 14.2%
    2 Vanguard GNMA Fund Investor Shares 12.5%
    3 Vanguard Short-Term Investment Grade Fund Investor Shares 12.5%
    4 Vanguard Long-Term Investment-Grade Fund Investor Shares 12.4%
    5 Vanguard International Growth Fund Investor Shares 9.3%
    6 Vanguard International Value Fund 9.2%
    7 Vanguard Windsor Fund 7.8%
    8 Vanguard PRIMECAP Fund Investor Shares 6.1%
    9 Vanguard Morgan Growth Fund 6.1%
    10 Vanguard U.S. Growth Fund 6.1%
    11 Vanguard Explorer Fund 3.8%
    Total — 100.0%

     

    I will also buy Vanguard ETFs commission free using my Vanguard brokerage account. If I wanted to buy 1 share of VIG, I could so without incurring a brokerage fee.

     

    Treasuries can also be bought commission free, either at auction or seasoned issues. Thus, I can avoid reactivating my Treasury Direct account to buy at auction. I was not charged anything last year when I sold my ten year TIPs bought at a treasury auction back in 2009.

     

    An investor with less than $50,000 also has the opportunity to buy individual bonds at a $2 per bond commission.

     

    Vanguard Brokerage Services® commission and fee schedules
    http://bit.ly/RyKlXB
    17 Jun 2013, 10:26 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Thanks for the info SG.
    Yes, I have to pay a commision to Schwab of 8.95 every time I have made a purchase.
    17 Jun 2013, 10:52 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @SOUTH

     

    I think either it was a typo or I read a $76 dollar transaction fee ?

     

    Really?
    17 Jun 2013, 10:54 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Yes, I just went and checked my Schwab account and got this:
    Schwab's short-term redemption fee of $49.95 will be charged on redemption of funds purchased through Schwab's Mutual Fund OneSource® service (and certain other funds with no transaction fee) and held for 90 days or less. Schwab reserves the right to exempt certain funds from this fee, including Schwab Funds®, which may charge a separate redemption fee, and funds that accommodate short-term trading. For each of these trade orders placed through a broker, a $25 service charge applies. Funds are also subject to management fees and expenses.

     

    Guess I will be opening a Vanguard account for my taxable investing.
    17 Jun 2013, 11:13 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » I also have Schwab and knew they hit you with a fee for a trade less then 90 days for some mutual Funds. But that fee is crazy.

     

    Glad you let us know this !
    17 Jun 2013, 11:24 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    IT: Yes, that is correct. Notrub may want to look at this confirmation to see what he paid.

     

    That is a relatively standard fee charged by brokers for mutual fund purchases that are not included in a No Transaction Fee-NTF-program. If I bought a Vanguard mutual fund at Schwab tommorow, I would have to pay a $76 commission, about the same at Fidelity too.

     

    An investor can check out which brokers offer Vanguard Wellington on a NTF basis by going to MSN Money. Only a small number of brokers offer that fund without charging a brokerage commission.

     

    The Schwab link that I gave above shows that there is $76 transaction fee for Wellington:

     

    http://on-msn.com/1anpoVG
    17 Jun 2013, 11:31 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Notrub: You need to go back and find your confirmation of your original purchase. I suspect that you paid a commission unless Schwab was then offering Vanguard mutual funds on a NTF basis. I do not remember them ever doing that however. I bet you paid $76 or something close to it when you made your original purchase.
    17 Jun 2013, 11:34 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Thanks again SG.

     

    I know you said you don't do options. But, do you know if Vanguard offers options on their brokerage accounts? All I do is sell covered options on the stocks I hold to generate more income from them.
    ----------------------...
    For those unfamiliar with the practice. Basically you must own 100 shares of a stock. Then you can sell a call option against those shares (this is known as selling a covered call because you own the shares and are not using any leverage in the transaction). When you sell the option you collect a premium. If the option is exercise, the person who bought the option actually wants the stock at the price you decided to set for selling it (known as the strike price).

     

    As an example I own 100 shares of Intel which I purchased at $24.25. I look up the available options for Intel and found one that has a call strike price of 25.00 for July 20, 2013. My premium for selling the option was $79. As of today the market price closed at 25.10 so the buyer of the option could exercise his option and buy my 100 shares for $2500. If the buyer decides to do that any time between now and 20 July I would 2579 for the whole transaction for a profit of $154. If the buyer does not exercise and buy my 100 shares by 20 July I pocket the $79 and the option closes out.

     

    I only sell covered calls on stocks I already have a profit in. So I don't really care if they are bought or not. If they are bought I lock in my profit plus premium. If they are not bought I still have the 100 share to do another covered call with. I always do covered calls for 1 month or less durations so that I can maximise the income I get from premiums.

     

    Hope that helps???
    18 Jun 2013, 12:08 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @NOTRUB

     

    Did that help?

     

    You just gave a ton of people an example and explanation on how a covered call works.

     

    Thank you for taking the time to explain how and why you do it. This , to me , was extremely valuable information for sure.

     

    To think you did not want to post because you thought your comments were boring? If you don't get the most likes from our lurkers I would be surprised ..

     

    THANKS!!!!
    18 Jun 2013, 12:18 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @ IT

     

    Yep, a long day. I'm added a few comments but mostly will have to read more carefully tomorrow. There's SO much in here to learn from!
    18 Jun 2013, 01:22 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    On fees for no-load mutual funds - I read a list recently. Some brokerages do it free but then charge it was $20 at two places (fidelity was one?) if you sell within xx days. $76 is crazy high these days.

     

    Many brokerages have a list of no-loads they sell without commission. Which company's noloads varies. From personal experience, Scottrade has some Vanguard funds.

     

    I wish I can find the article. It went thru each brokerage & listed their policies. Maybe with google?
    18 Jun 2013, 01:42 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Notrub

     

    Thanks! I've been hearing about this technique & wanting to figure out how it works!

     

    Of course there's an issue that you have to buy low, & be willing to "stop" out of the position, rather than be able to hold long term. But sounds right up my alley, slow but steady style.
    18 Jun 2013, 01:44 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    On fee purchases of no-load mutual funds:

     

    A summary of six brokerages, what fund familes they offer, & their no-fee policies!

     

    http://bit.ly/11VZW5P

     

    Excellent article - lots of clear details.
    18 Jun 2013, 03:58 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @ Notrub

     

    So if you buy the stock at $24. Set a strike price (call price) of $26. If the stock goes up during the month to $27, then you may be called out, having to sell your shares now worth $27 for $26. Do you still collect the premium? So you lose on the upward climb of the stock. Is this a downside?
    18 Jun 2013, 04:12 AM Reply Like
  • tampat
    , contributor
    Comments (995) | Send Message
     
    Notrub,

     

    Yes, you can trade options through Vanguard.

     

    I agree that the Vanguard Wellington Fund or the Star Fund mentioned by southgent would be good choices for the person trying to figure out what to do with $50k.
    18 Jun 2013, 06:52 AM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Curls: That link of yours is for no commission purchases of ETFs, not mutual funds: "Six Popular Commission-Free ETF Trading Platforms"

     

    Yesterday, I was referencing a transaction fee for the purchase of a mutual fund at Schwab.

     

    Broker NTF programs for mutual fund purchases are available for online purchases rather than broker assisted trades.

     

    Fidelity charges a $75 flat fee for purchasing a mutual fund online that is not part of its NTF program:

     

    "FundsNetwork Transaction Fee funds $75 flat fee"
    http://bit.ly/15fHvXM

     

    Schwab charges a $76 flat fee for purchasing a mutual fund that is not part of its NTF Program when the purchase is made online and $49.95 for broker assisted trades"

     

    Fees and Commissions:
    http://bit.ly/15fHvXS

     

    That is where Notrub got the $49.95 number for broker assisted transaction fees for non-NTF purchases.

     

    However, if you click the PDF "Charles Schwab Pricing Guide", then I see a $76 fee when a customer buys online without a broker's assistance, which is what I saw last night checking for an online purchase of Vanguard Wellington at Schwab. This document then creates confusion as to what is actually charged for a broker assisted purchase of a non-NTF mutual fund.

     

    Scottrade charges $17 for funds not in its NTF mutual fund program.

     

    http://bit.ly/15fHvap

     

    Etrade charges $19.99 for transaction fee purchases of mutual funds

     

    http://bit.ly/LQMbwR

     

    Based on looking at the MSN money page on broker availability of the Vanguard Wellington fund, Vanguard appears to be the only place to buy a Vanguard mutual fund on a NTF basis.

     

    http://bit.ly/1anpoVG

     

    In that listing, only Vanguard has the "NTF" designation.

     

    If you look at the MSN broker availability page for the Permanent Portfolio, which I bought online on a NTF basis, it is offered by a number of brokerage firms on a NTF basis for online purchases, including Schwab and Scottrade:

     

    http://bit.ly/15fHy5U

     

    All of the mutual funds that I own now, bought through a broker, were offered by that broker online on a NTF basis. If I wanted to buy one that required a fee, I would just open an account directly with the sponsor such as Vanguard.
    18 Jun 2013, 08:17 AM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Correct. You only get the price you selected as a strike price plus your premium. No matter what, with a covered call you always keep the premium.

     

    So in your example say the premium was $18 after commissions. You would be getting 26.18 per share for your 100 shares. The buyer could turn around and sell his shares for $27.

     

    And, as you stated in your other post now you have to repurchase the shares or buy the shares of another company with your proceeds. Some people use covered calls to try and get out of the hole on stocks by setting a strike above there purchase price. But, it usually works out that eventually the premium won't even cover the commissions with this strategy.

     

    Using your example. Your 100 shares got bought out at $26. The buyer buys them when the price is $27. So you turn around and buy another 100 shares for $27. Say the price drops back to $26.50. As the price falls the premiums will also fall. So I go to look up the options available and find that the premium for a strike price of $28 is $8. I pay $8.95 per round trade (the complete cycle of the option). Say by the expiration date the price only goes back to $27. I have lost 95 cents on the trade. This is why I only do covered calls on stocks which I already have a profit in.
    18 Jun 2013, 08:54 AM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Oh I forgot. Here is how to read an options table. Here is Intel (INTC) the stock I used in my example on Yahoo Finance:
    http://yhoo.it/11ln26n

     

    The listing for the option I sold on my shares is under the July 13 tab. At the 25.00 strike it shows:

     

    INTC130720C00025000
    This means Symbol INTC=Intel Year 2013 Month 07 Day 20 C=Call option and all the rest is the strike price 25.00. So that option is for a Call contract on 100 shares of Intel to expire 20JUL2013 at a strike price of $25.00

     

    The next column shows the current premium which right now is 81 cents per share, so 100 shares is $81.00.

     

    The rest of the columns just show the current days market snapshot. As how much the option premium has changed, volume sold, and number of contracts outstanding.
    18 Jun 2013, 09:43 AM Reply Like
  • Eric Parnell, CFA
    , contributor
    Comments (2228) | Send Message
     
    Hello F&GT,

     

    Some great recommendations here. In particular, T just had a nice bounce off of its 200-day M.A. and QCOM also just responded well to support at $61 per share. And I agree that both set up well from a recurring revenue and dividend growth standpoint.

     

    Excellent points.
    18 Jun 2013, 09:46 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Vanguard's trading platform is less fancy than Scottrades (which I'm coming to understand is less fancy than Schwabs.) So you can trade futures at Vang... put for instance there is no trailing stop. There are limit stops, but not trailing. I think if you go to their brokerage trading page, you can check out their platform.
    18 Jun 2013, 09:48 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Notrub,
    One of my favorite strategies to add income.
    Like you I sell calls on stocks that I have profit in and believe they are "stretched". But will also employ the strategy as my comments here from June 5th indicate.

     

    " (EBAY) is my latest covered call play. Bot EBAY 6/5 @ 52.15 , Sold the July 52.50 calls for $2.16.. If EBAY is above 52.50 on July 20 ( expiration day) , the yield is 4.7% for holding the stock for 6 weeks . If it is below 52.50 my yield is 3.8% for the same 6 weeks, and I own the stock at an effective price of $49.90. "

     

    One caveat, Its not for everybody, On the one hand you have to "Like" the stock , as in my EBAY example, BUT you can't be disappointed when the stock is called away.. Have to leave emotions out of this process.

     

    IMHO , never , ever buy a stock to write an option just because the premium for the call is high.. You have to be comfortable with owning the stock if the market turns and you are "stuck" with the stock.

     

    I have seen countless people , get caught with positions in companies when the market turned and now have a portfolio of losers.

     

    As you, mentioned you only sell calls on positions you own and have a profit in and that is an excellent way to play this strategy..

     

    Good advice..
    18 Jun 2013, 09:48 AM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Notrub: I appreciate the discussion on options.

     

    At some point I may take a week off and learn about how to use them.

     

    For now, my portfolio is plenty complicated without adding more things to monitor and it becomes worse when I add family members, including my 90 year old mother and my late father's testamentary trust, to the mix. The total number of existing positions is somewhere near 1000 but another huge number of securities is being monitored for potential purchases. So, this Old Geezer would blow a fuse if anything was added to that mix.

     

    I would be reluctant to use a buy-write position on long term positions anyway. For example, I own Intel shares at an average cost of around $17.8, all of which were bought after the Lehman failure and most were bought between 10/1/2008 and 3/1/2009. I am content with the dividend yield at my cost. If I had wrote an option at $23 when the price was $20, and the option is about to expire just as an example, wouldn't I then have to tender the shares at $23 now or buy back the option at a loss?
    18 Jun 2013, 09:52 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @ SG

     

    No wonder I couldn't find it when searched my past pages for "mutual funds", lol.

     

    Still from there one can surmise what mutual funds each firm is likely to deal free or low cost in, and then check out the ones of interest. If you like a particular fund family, it's an easier way to figure out who offers it than starting by checking each brokerage individually.

     

    While it's nice to go directly to the mutual fund firm to buy & hold, I find it helpful to have my money in one place (or less places) when possible so these programs help for me.

     

    The article doesn't address costs of non-included efts, nor non-online transactions. It's not confusing article. But if you're outside the article's scope, you'd have to check that price out separately. It may be quite different.

     

    I wasn't questioning that the $76 transaction existed. Only that it's crazy high considering there are many ways to buy for less these days.
    18 Jun 2013, 10:04 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Eric,

     

    Nice to see you here, Thanks for your thoughts, I especially like (QCOM) at theses levels, they appear to have nice growth ahead..
    18 Jun 2013, 10:11 AM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Just to show the mental process I go through doing these covered calls. I previously held a 7JUN2013 contract for INTC at 25.50.for a $49 premium. The price of Intel went from 24.25 to 25.60. But, my contract never got exercised by 7JUN. A rule of thumb I use when selecting an option to do a covered call with is taking the strike price (in this case 25.50) and adding the premium to it (in this case .49) this gives me a ball park of the price at which the buyer will exercise the contract, in this case 25.99. It is also the lock in price I would get if the shares end up being sold. So 2599-2425=$174 profit.

     

    On the 10th of June I had no option on Intel. All options contracts go away on Saturday. So the first day I could sell another covered call on my 100 Intel shares would be Monday the 10th of June. So over the weekend, usually Sunday I scan through the available options to see what best meets my criteria. I am not greedy about the whole thing. I just want the extra income stream on the shares I hold to maximize profits. So I am looking for the shortest time span under one month that will generate a premium over my commision costs. I went through all of the June 2013 contracts and none of the premiums would be for a profit. So I went to the July contracts. There were several that would make a profit, but the best was the $25 strike price. I waited till the first hour of trading was over Monday morning while I watched the options available. Nothing changed so I sold the call at the $25 strike for $79. The stock price at the time I sold the contract was 24.59. And, there were no contacts available at the 25.50 strike I used in June.

     

    Long story short my 100 shares of Intel has generated $49 + $79= $128 for two months of options income over and above what I also received in dividends or appreciation in the price of the stock. If you aren't greedy about it you can easily get 12 months worth of income from the same 100 shares of a stock. I some times sell a weekly options contract for $5-$6 profit. It just takes time to find the best contracts on the stock you own for the shortest time frame to generate the most income.

     

    Volatility and the number of shares traded daily and the time before expiration has a big impact on the premium paid. For example the best I could do for my Coke (KO) stock was a Jun22 contract at a $42 strike for a $4.29 premium profit after commissions. Since most of my holding have a BETA under 1 they are a lot less volatile than the stock market as a whole. So the monthly premiums I can get usually run in the $5 to $18 range after commissions. That's fine with me, like I said I am not greedy about it.$5 times 12 months gives me another $60 for the year I would not have realized other wise.
    18 Jun 2013, 10:28 AM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Curls: As I become older, and a few more billion brain cells go back to their maker, I do have a tendency to lose track of what I own and where I own it. I would add that this problem does not seem to be getting any better with the passage of time.

     

    So there is something to be said about owning fewer positions, as in far less than 400, and owning those positions in a smaller number of accounts.

     

    Many of my brokerage accounts were opened for a variety of reasons over the years.

     

    For example, I had for many years an account at Vanguard for its mutual funds funded by the Vanguard Prime Money Market fund which was in turned funded by a bank checking account. When that firm started offering Vanguard ETFs on a no fee basis, I opened a taxable Vanguard brokerage account. And then when Fidelity started to place restrictions on what securities customers could buy, I had to move my ROTH IRA from Fidelity to Vanguard since those restrictions prevented the purchase of securities that had been important to the performance of that account, including exchange traded principal protected notes, synthetic floaters, and several exchange traded baby bonds and some other securities including, just as an example, the Aegon hybrid AEB and the floating rate equity preferred stock HBAPRF.

     

    I opened another brokerage account with a firm where I had only an online savings account used to purchase CDs. When those CDs started to mature in 2009, I refused to roll them over at ridiculously low rates and opened a brokerage account at that firm using the savings account as the funding source and started to buy dividend growth stocks. When rates normalize, I will start buying CDs again.

     

    I may now open yet another one to get a lower commission on foreign securities and a better foreign currency conversion rate than offered to me now by Fidelity.
    18 Jun 2013, 10:34 AM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    F&G: One caveat, Its not for everybody, On the one hand you have to "Like" the stock , as in my EBAY example, BUT you can't be disappointed when the stock is called away.. Have to leave emotions out of this process.

     

    F&G,
    Exactly. Taking the "emotions" out of my investing is the BIG plus for me. I know a lot of people don't like using the covered options strategy because they feel like they left money on the table if the price goes way beyond there strike price. Like I said I am not greedy about it. I like taking uncertainty out of the picture. I don't have to worry about what the stock might do because I have decided already what profit I can live with when I sell the option. My emotions never enter into the picture. I have developed a system that works for me, so I just go through the motions doing what i do and living with the profits I make. And, that is pretty much why I consider it "boring" investing. I am not really risking anything. I have a watchlist of stocks I consider values. So if one of my holdings get sold I just go to the list and determine the best current value. If it is the same stock I buy it. If not, it is still on my watch list and gets considered every time I have more funds to invest. The bottom line is every stock in my portfolio and on my watch list is one I would have no problem holding for life. In a perfect world with unlimited funds i would own them all. In reality I just do what i can do with what I have.
    18 Jun 2013, 11:18 AM Reply Like
  • Rinascimento
    , contributor
    Comments (1029) | Send Message
     
    NOTRUB

     

    Thank you the explanation on selling calls; I have always wanted to get into this to generate income but I don't want to use any of my dividend retirement stocks but for stocks like (MUX) and (PWE) I don't care if people call them
    18 Jun 2013, 07:31 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Notrub,
    You have an excellent approach, I can also say that while it may be boring, it produces nice returns. Slow and steady wins a lot of races..
    18 Jun 2013, 07:36 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Notrub - thanks!

     

    So to get started, you look for a value stock that's taken a hit for some not-a-huge-deal reason. Wait for it to rise a little. That seems to be the slight catch.

     

    Sounds like if done conservatively, you can often hold onto the stock & repeat. Does it work for you in downward bear markets? (When I finally get my head around this, I'll be able to answer for myself.) Is the key finding a strike above your purchase price? Is that hard in overall bear markets?

     

    In bull markets you'll keep getting stopped out, but no biggy, buy again & wait a month for it to go up enough to start again.

     

    So the work is in hunting for the right option offer?

     

    If it's a big bull, you'll leave a lot on the table. Have you compared to if you'd just held? Of course with holding for bull profits - you have to time when to get out! And can't get right back in!

     

    I think SA author George Aces does this too.

     

    I think I'm asking what you've already explained. Just making sure I understand.
    18 Jun 2013, 08:33 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    First, I do my screenings for stocks to buy or place on my watchlist without consideration of the options available on them. Mainly because it would shift me to more higher volatility stocks instead of holding stocks that don't rise or fall as fast as the overall market. Put simply it would cause me to take on unnecessary risk. As I explained I am it for the long haul. Which means the companies I choose will be more geared in providing income in good times and bad. All of my long term holdings are conglomerates, because the spread the risk of one or a few countries having recessions. Stocks like Frontier Communications (FTR) are not long term holdings. To be honest they are dinosaurs living off what remains of the old Baby Bell wired telephone networks. But, I got 300 shares at a firesale price and they have consistently paid around 10% annually. This is one stock I keep wishing someone would exercise on, lol.

     

    Anyway, I am rambling. New terms: In the money, At The Money, Out of the money. In the money means the stock price is above the strike price, at the money means the stock price is at the strike price, and out of the money means the stock price is below the strike price. So now, with that info, I always try and place my sells strike price slightly out of the money while making sure that the strike price is a profit to the cost of my underlying stocks. Once I look for those two things all that is left is finding the best premium I can get.

     

    I have been doing this strategy since I started doing my own stock investing in Jan 2012. So far I haven't had one exercised. But, it looks like my Intel postion could go any time now??? But, I also thought that last month with my 25.50 option, lol.

     

    I wasn't using this strategy in 2008-2009 so I would be lying no matter what I said about using it in an extended bear market. Maybe F&G could share some light??? And, now that I sit here and think about it I do not think I would be doing very many options mainly because I would be spending more time looking for deals when the prices finally bottom. I have a rule of thumb to sell (without a stop) any stock that loses 10% and just sit on the money until I can use it meeting the criteria I have already described.

     

    I don't understand the "stopped out" part? Maybe I am taking it out of context?? I don't use stops???? A lesson I learned from trading currencies. Fortunately with this type of investing I don't have to be at my computer from midnight to 8AM every day watching charts making sure the big money doesn't run over me...:o)

     

    Actually, once you get used to the tables and do a couple to see how they work you'll be able to find the best premium that fits that stock in 5 minutes or less. I spend a lot more time doing DD trying to find stocks for my watch list.

     

    I have read all of Mr Acs articles. But, I do not use his strategy of using options as the price falls to recover losses.

     

    Basically with me as long as I can get a strike price above my purchase price with a profitable premium after commissions I will sell the covered call option. When the options available do not meet that criteria I won't do the covered call sell. Right now I have covered calls on (KO), (INTC), (MO), (GE), (ORI) and (FTR). I do not have options on any of my other holdings.
    18 Jun 2013, 09:23 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Notrub,

     

    I didn't sell calls during the '08- 09 period, like most I was trying to survive.. When the trend is decidedly down as in that period , it wasn't wise to try and add positions to sell calls on.
    You could sell calls on existing positions but the way prices were falling , you would find yourself boxed into things that had to be sold. So I found it best to leave that strategy alone.

     

    Call writing works best in a sideways market.. allows you to keep selling calls, collect premiums and still hold onto positions..

     

    It works well in an upward trending market like we've had here to the extent you don't mind losing the stock. You have the right mental outlook - no emotion.. The negative is that this strategy can take you out of some big winners, but if you are comfortable with grinding out profits slow & steady it works well.

     

    Like you most of my calls are on positions that show a nice profit and I feel are 'extended" .. Currently (BBBY) , (COH) , (CXO), fit into that category.. I may lose BBBY this week As I sold the June 70 calls , stock is at 71.90. My cost basis is 55 so if it goes , it goes.

     

    I usually don't sell calls on my div payers, at least not now , just a preference. But if the timing is right nothing is sacred.

     

    My (EBAY) position was set up just to get the premium for the month.. Hopefully Buy , sell call, stock is called away , pocket 5% in 6 weeks.
    Like you I will go out only a month or two, to keep cash flowing.
    18 Jun 2013, 09:56 PM Reply Like
  • Tack
    , contributor
    Comments (12721) | Send Message
     
    F&G:

     

    Regarding selling calls on dividend payers, one of the biggest problems is that because American options can be exercised at any time, unlike European options which are only able to be exercised at expiration, one can get called out of the position and lose any intervening dividend, as well.

     

    In fact, selling calls is a mildly bearish strategy, although often promoted as a return enhancer. If one is holding a dividend payer that one wishes not to lose, then it's better to consider selling OTM puts to enhance returns. Of course, for non-dividend payers that one feels are near their sell targets, selling OTM calls is almost risk free.
    18 Jun 2013, 10:51 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Thank you Notrub & F&G

     

    This is making me wish I hadn't sold my IBM & taken the big tax hit. I could have done this!

     

    I'll definitely be trying this out as soon as I get a chance. It makes sense it's works particularly best in a sideaways market. In a raging bull, no need for calls when everything goes up!

     

    I was using "stopped out" to mean "called away" or whatever the term is for being forced to sell the stock. I'll stop "misusing" the term :).

     

    Possibly George Ace's method works for bear markets if you want to hold through them. I'll work on figuring out this method before I worry about another one...!
    18 Jun 2013, 11:06 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    It's like me & online bank accounts as I've rate chanced (not recently), & charge cards as they morphed, merged, split & appeared at my door.

     

    I've been eyeing several brokerages as offering things I can't get at Scottrade... but then Scot gives things they don't... soon I'll have a pile of these too. ...nothing foreign yet. I'll come to you when for brokerage advice when I'm ready to go foreign!
    18 Jun 2013, 11:16 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Tack,
    Thanks for the reply. I am sure that could be true. I have not explored other strategies for using options. And, I have never lost a dividend because I don not use a covered call in the month a company has an X-DIV date.
    19 Jun 2013, 07:23 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » Behind the rise in rates and the slide in stocks is the FT reporting Bernanke is likely to...
    Monday, June 17, 2:54 PM ET
    Behind the rise in rates and the slide in stocks is the FT reporting Bernanke is likely to signal the Fed is close to tapering at his post-FOMC meeting press conference on Wednesday. Bernanke has a dual communication issue: To signal economic improvement is leading the Fed to taper, while at the same time reassuring markets the Fed remains and will remain extraordinarily accommodative. The Dow (DIA +0.3%) is up just 50 points now.

     

    HERE WE GO AGAIN !!!
    17 Jun 2013, 08:06 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Yes, the morning articles were that QE would continue unabated. And the market went up 190. Then that article came out about 2PM and it dropped to 50 up.

     

    If nothing else it should tell you where the markets head is right now. It is all about the FED. Nothing else really matters. The headline numbers that were put out this morning "sounded" good. But, when you actually checked them all out it was mediocre at best. But, the market shot up 190 points any way.

     

    I will probably regret ever saying this, because I KNOW there will be a lot of pain involved, but I can't wait for the day that the real numbers actually matter.
    17 Jun 2013, 08:57 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Why the market dropped...

     

    I was looking at why, & CNBC pointed to a news article by a journalist saying Fed would start tapering? Yikes, that's all it took for a total downturn? It's like being run over by a vat of lemmings. I couldn't believe that's all it was.

     

    Heady or something? Hillsburth (spelling?) has a connection with the Fed, but does this guy? And why panic now, it's only 2 days away to hear the REAL news?
    18 Jun 2013, 01:47 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » I know TACK has already voiced his opinion about this. If he is still up to voicing it again I don't want to get it wrong.

     

    I was out all day so I did not see that type of drop. To be honest whether it is a valid drop or not has me concerned..
    17 Jun 2013, 09:00 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    In all honesty IT to me it is all noise unless it directly affects one of the company I have invested in.

     

    To give you an idea of what I am talking about the talking heads today on CNBC, FBN and Bloomberg came out with the news that Lowes was buying Orchard Supply's assets for 205 million and assuming their "current" debt. People actually ran out and bought the stock. I KNOW they never did any research because the company has filed for bankruptcy???? Then all the online news orgs jumped on the bandwagon, and some more people bought. NOTHING had changed.
    Here an article about it:
    http://bit.ly/17UpHI2

     

    Unfortunately all those people are going to learn a lesson from the school of hard knocks because they trusted someone else to do their DD. It is like they used to say about nuclear weapons "Trust but verify".
    17 Jun 2013, 09:48 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I get the impression that the government/media complex is trying to distract us from issues of the day. IRS and NSA for starters. I see they have more speculation on Jimmy Hoffa. What next Elvis sightings?
    http://usat.ly/1bPyWqo
    17 Jun 2013, 10:32 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @BD4 - Lol
    18 Jun 2013, 01:49 AM Reply Like
  • Stilldazed
    , contributor
    Comments (2097) | Send Message
     
    bd4,
    Ever since the Snowden NSA news, we haven't heard about Benghazi or the failed DOJ fast and furious gun running scheme. Ron Paul warned us about the NSA years ago, but Snowden has too much information for a compartmentalized classified operation. I wouldn't be surprised that this is a red flag operation (not that most, if not all the info is true).

     

    Coming up next to keep us off kilter? Who shot JR. redux. ;-)
    18 Jun 2013, 03:18 AM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Exactly. It is all just noise. But, when the market dropped 140 points with the second article I started going through my watch list to see if any had gone into buy territory. Because I know nothing in the "news" has changed why I want to buy or sell a company.

     

    I love it when the markets tanks on "news". It is just another buying opportunity, as long as I have made sure I have enough cash available to do something.
    18 Jun 2013, 09:05 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @BDU

     

    Been saying the same thing for a year now. I even go further as I am a member of the NRA because I like the 2nd amendment. They tried to take away the 4th. Now all of a sudden the 1st amendment becomes an issue.

     

    BUT THEY CAN USE THE 5TH ONE HUH??

     

    So what's up with Rice now running the NSA. Did the POTUS try to make a point here? Just sayin..
    17 Jun 2013, 10:38 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » So what time does King Ben talk Wednesday. Same 2.30 time?
    17 Jun 2013, 11:07 PM Reply Like
  • richonsilver
    , contributor
    Comments (245) | Send Message
     
    You guys are moving fast and furious in here preventing my efforts to catch up and keep up. I have gone from reading to scanning over to "hustling thru" but I stop on posts that pertain to my biggest interests.... precious metals and specifically silver. I am also interested in thoughts about where the real estate market is going since I may be selling in the next year or two. I have bounced in and out of SA forums over the past couple of years but am definitely a newbie in here looking for opinions of more experienced investors so here goes.
    I have been in PSLV since late last fall and as a result am far below the break even point. As I get to my annual distribution date from an IRA where I can take the minimum required by law or anything up to 10% of my long term plan in the IRA, I and contemplating which to do and all the while wondering when I should seriously consider putting my home up for sale as I plan to move on to smaller quarters.
    My best case scenario is to have silver prices remain stagnant a few more months so I can average down my PSLV purchase of last year. Then I am hoping for real estate to continue it's modest rise so I can get the most from my sale which I project is likely between 10-20 months away based on various unknown factors in my life.
    During some recent reading I came upon an article pondering the question of what is better moving forward, shorting silver or investing long. The author suggests shorting has been working lately but inevitably that wil change and silver prices will move upward, possible by a significant amount, This guy, along with all the others I read give us a broad "it could happen in weeks or months" prediction and says once silver and gold prices do take off that will probably cause real estate values to decline.
    Well, this is all pretty foreign to me because while I try to read and understand the markets, I often feel the breeze of writers and posters flying overhead since my novice status has me at a disadvantage. To put it simply, I don't understand half the stuff I am reading. So, I ask questions and appreciate answers and opinions.
    First, I will plug the article that has most recently caught my attention and then ask a few questions....

     

    http://seekingalpha.co...

     

    TIMING seems to be the key for someone like me who has a strong interest in silver and also plans to sell real estate in the not too distant future. When do I buy more silver or specifically PSLV and then when is a good time to sell the house? My win win scenario is for silver to lag a few months so I can average down the PSLV and then have the market remain kind of quiet, allow real estate to float where it is and maybe rise a bit and then ultimately sell my house before another bubble pops and real estate values tumble.
    I just do not know enough to understand when these things are likely to happen or if indeed they really will happen with any significance. So, any opinions on where silver is going, real estate is going and the relationship of one to the other over the next 10-20 months would be welcome. Thanks.
    17 Jun 2013, 11:35 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » FOLKS

     

    This poster is a friend and I would appreciate you experts give him your opinion.

     

    I would appreciate it enormously..

     

    Thanks!
    17 Jun 2013, 11:39 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @ Rich

     

    I'll try on real estate which I know a little about.

     

    Silver & RE have no relationship. Housing depends hugely on your specific local market. Currently where I am is a bidding war & prices go up if the house is decent. Other places are still depressed market & prices haven't moved much from 4 years ago.

     

    If the general economy is good & there isn't a flood of new houses, house prices will go up. If the economy is poor, such as the stock or bond market go down, there'll be less money to buy with, so less demand so lower prices. That doesn't mean prices go down, only that they stop rising.

     

    If interest rates increase there'll be less affordability for higher or middle houses. They're prices won't increase as much. Higher rates often means lower cost housing goes up in value as it gets competed for. If rates go up enough, then housing is hurt across the board (10% rate or more..) Mostly a move from 2 going to 4% sounds like a lot & makes runs as the rates increase... but once they've increased it doesn't matter much. People need places to live & buy a house if they can afford it & it's appropriate for them. Whether they buy is judged against rental costs. AND rents go up when buying goes up in price for investors. So there's a lag for rent increases to have an effect, but moderately higher rates is a zero-sum game, & doesn't effect stuff that much.

     

    Bubble? What bubble. Watching the media is something else. Just because there was a decided housing bubble doesn't mean such a thing will ever exist again. There is no run up on houses, no exuberance, no "it can't fail." It's just a normal market now. House prices will gradually go up in most areas. If the economy is poor they'll go up less or even regress slightly (by 1-5%, not the 50-75% after the bubble broke & before). In a specific local where business leaves, they can go down hugely. Houses go up because of inflation, & land gets more valuable closer to the center (city) as there are more people on the planet. Meanwhile, the big investment value is the leveraging of 20-25% of your money, lets you buy a house over time as you pay in. It's not really a rapid rise investment nor a mysterious increase. It's those boring factors.

     

    So if you sell in a couple years we'll be 2 years further from all these foreclosures & short sales after the bubble. So prices will be higher. EXCEPT if you are in an area where for some local reason, it will be higher now. Also if you're house is getting older & something might be much more broken later than it is now. Also if the stock market or general economy go haywire or down in a couple years (say after QE ends), then everything might take a lot longer to sell & be worth a slight amount less than right now.

     

    Best way to find out - ask a few experienced RE agents in your area. Also read a news article on it, if there are any locally.

     

    Hope that helps.
    18 Jun 2013, 02:11 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    P.S. on housing bubble, & why there isn't one now.

     

    The bubble was based on cheap debit available to the everyday person. We were a heavily debit based society that didn't give a hoot about realistically paying off our personal debit. Credit card debit was everywhere. (Not sure how it compares now, but at least it's entered the nation's consciousness.)

     

    To go with that easy general debit access, there was a shift in qualitfying people to buy houses. So traditional is you can afford 27-33% of your monthly income to pay a mortgage payment (including homeowner's insurance & taxes escrow). 27% was the norm for years with 33% only in limited cases. Now with subprimes & easy money, that ratio was moved to 45% of income or something like that. I personally was pre-qualified for a house so expensive, I spit stuff out my nose when the loan officer informed. I had good credit rating, but 45% of my income? That is how the housing bubble formed. Everyone & his uncle, brother & cat, could suddenly afford a house. If they could of before, now they could afford 2x the size house. So demand went up as everyone applied, so housing prices skyrocketed on the demand.

     

    Then the bubble burst on the cheap money (that gets into economics that I'm not qualified to lay out.) Banks got hit that'd been using the subprimes. Demand for houses fell as money wasn't flowing in endlessly. Prices fell. That meant a lot of people were underwater owing mortgages on houses that were no longer worth their mortgage value. Add a recession where people were tighter on money, & now they couldn't just sell to get out of the house & back into renting. (Since selling wouldn't cover their mortgage to the bank.) They had to foreclose. Add that it was 45% of people's income, so it took nothing but a sneeze for them to get behind on payments. There was no wiggle room for rainy day expenses.

     

    We're not heading to another housing bubble like that unless something causes unrealistic & unsustainable flow of money to individuals. So far the only place that money is flowing, is from the Fed to the US treasury as it buys up bonds.
    18 Jun 2013, 03:55 AM Reply Like
  • Hebba Investments
    , contributor
    Comments (1299) | Send Message
     
    Thats an interesting point curls - I'd add in that inventory levels are currently still very low (about 1/3 normal) so there is still something wrong with this housing market. I think what you are seeing happening is that many people are stuck in their homes and unable to sell because of various reasons, s only a small supply is available to the market place. Obviously, with low supply that means that housing prices can rise as buyers have to buy limited supply.

     

    Rates are starting to rise and many of the people who could afford to buy have taken advantage of low rates (why wait?) and you have the stragglers that will buy quickly as rates begin to rise. That means that we may see demand being pushed forward (to now) as buyers lock in rates - which will mean future demand may not be strong. I'd expect housing prices to flatten or drop as the year moves on if interest rates continue to rise or stay flat.

     

    I always like to think about what the negative scenario that takes the contrarian view because you have done a good job laying out the case why homebuyers are in decent shape and we wont see a crash in prices. I'd say one of the scenarios that could cause a housing crash is a spike in inflation coupled with an economic downturn (stagflation).

     

    IF that happens then we may witness a situation where homebuyers who've stretched themselves to buy as much house as they can with these low rates, find that their every-day costs are rising. An economic downturn would put additional pressure on employment and stock prices and thus exacerbate the situation.

     

    I cant say that this scenario will happen, but I do believe inflation is around the corner and the negative consequences of QE will come home to roost. I think the dollar will be the key here - if it starts to fall then this scenario may be much closer to happening then people think.
    18 Jun 2013, 08:13 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    @ Hebba - there's your comment! I've been looking for it from earlier. I want to agree with some good points added... and play contrarian too... :)

     

    I agree, there is a lack of supply & I didn't focus on that nearly enough. So in short term, prices may be inflated & not increase or even drop a tad over next couple years depending on local market. There's that new housing hasn't been built after the bubble burst. Also upside down mortgages. Lots of people refinanced, but some didn't qualify, & can't afford to move at the loss. ...in some markets that may keep rents up as those people rent & insist on enough to help cover their mortgage.

     

    "which will mean future demand may not be strong."
    That scenario tends to be shortlived. Demand tends to level out within 6 months or maybe 9 months. By the next spring hot season it's USUALLY a whole new ballgame.

     

    "I'd expect housing prices to flatten or drop as the year moves on if interest rates continue to rise or stay flat."
    Interest rates effect house prices at first. In my observation it tends to stop being an influence before I can get my act together to take advantage of it. More seriously, it's normally not that long lasting an effect. Seller's want their profit & it's more often that houses will take longer to sell. That's the factor that varies in order to offset the supply & demand issues. It can stretch to 9 months or even more for some houses, so this can very much matter in one's figuring.

     

    "one of the scenarios that could cause a housing crash is a spike in inflation coupled with an economic downturn (stagflation)."
    Inflation doesn't seem to matter much. Everything inflates. Houses are desirable to get into before they go up in price... so the house market moves just fine.

     

    Your point on affordability is a big one. There's definitely an issue if there's economic downturn, whether there's inflation or not. Still it normally makes a 1-5% difference. Maybe push it to 7% or even 10% unless the local area is dependent on businesses the close. It not the bubble's 50-75% drop (after an equally crazy rise.)

     

    IMHO. Thanks Hebba for bringing some important needed cautionary ideas to this topic.
    19 Jun 2013, 12:05 AM Reply Like
  • richonsilver
    , contributor
    Comments (245) | Send Message
     
    curls,

     

    Thanks for taking the time to explain that. I am glad to hear someone knowledgeable in the real estate area assure me/us that we are not likely going to see another drastic plunge in RE anytime soon. I thought and now you have confirmed that in areas without extenuating circumstances, real estate values should slide up little by little over the next 10-20 months. That would be my best case scenario within reason. Along with that I need my modest investments to improve, one of which is the PSLV I mentioned. Without being unreasonable and greedy my hope is to see a light upward move in RE and a nice rebound in silver over the next 10-20 months. If those two occur I will have averaged down my PSLV (this fall) and watched it rebound while the value of my home rises. Is the hope of my real estate value increasing by 5-6% each year for the next two and unreasonable expectation? That is my hope along with a rise in silver of double those numbers.
    Well, that's my hope right now as I move forward and look to better things. Thanks again for your time.
    19 Jun 2013, 01:18 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    " Is the hope of my real estate value increasing by 5-6% each year for the next two and unreasonable expectation?"

     

    Not sure. On a lower end house 120k in a neighorhood recovering from foreclosures, it's likely. But, in a regular healthy neighborhood, I'd bank on 2-3% as the norm. In a more expensive house 400k, 6% may be pushing it even more. Again, 2-3%, maybe 1%. I'd strongly suggest talking with a few RE agents about selling your house. As you chat, you can ask & get the scoop on your local area. That's the big key. Location, location, location is for real.

     

    I want to caution that while usual drops are 1-5%. Maybe pushing 7 or 10%, in an area that collapses such as factories closing, prices can plummet. So make sure you aren't in that type of areas... where if the economy & market crashes, you'll have missed the chance to sell reasonably. Again, ask a RE agent.

     

    Agents will be optimistic because they want you to love the market, but you can read between the lines.

     

    Go to a site like MLS with the agent, or listingbook (agent sets you up), or realtor.com & look at house prices (comps) over time. Stick with a single neighborhood & look at rises each year. It's a lot easier to ask a RE agent.

     

    Slight upward in RE is very reasonable all things continuing stablely.
    19 Jun 2013, 01:38 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Temperpedic (TPX) -- looked like a possible find based on it's new ads for temp controlled beds & a CNBC interview. It's gone up in price while it's sales (for it's own products, not the bought Sealy unit's sales, are down 10%), so it might go a little more to $50 from $45 because of interest, but it's not something special in my opinion. ....just in case someone else was tempted to spend time looking too.
    18 Jun 2013, 02:14 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @CURLS

     

    You found your laptop huh??
    18 Jun 2013, 02:19 AM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    For investors who own bond funds, this interview with the CIO of fixed income at TCW Ted Rivelle is worth a read. I have been saying much the same thing for months now. The article should be available to non-subscribers:

     

    http://bit.ly/19fFgIm

     

    He refers to the rise in the ten year treasury yield from 1.66% on 5/1/13 to now as being a "dress rehearsal" for the end of QE and that the end of QE will result in a "sea change". He also makes the common sense observation that once owners of bonds see the handwriting on the wall, "you can see a rather rapid adjustment actually occur" which is something the FED would prefer to avoid by trying to soothe the market.

     

    TCW is one of the major bond fund managers like PIMCO, offering bond funds the TCW Funds and MetWest Funds:

     

    http://bit.ly/19fFjnh
    18 Jun 2013, 09:23 AM Reply Like
  • Eric Parnell, CFA
    , contributor
    Comments (2228) | Send Message
     
    Hello southgent1951,

     

    Thanks for sharing this information from TCW. This is excellent material.

     

    I think it's worthwhile to add a few points to the widespread discussion about the end of QE and how it is likely to impact fixed income markets, as I believe a few key points get missed by analysts. First, when the Fed decides to scale back on Treasury purchases, the assumption that is almost always implied in these discussions is that all else will be held equal. Put simply, the Fed is going to stop buying $45 billion in Treasuries each month and no other market forces are going to adjust or react to this change in the marketplace. But this is never the case, as the entire market ecosystem is impacted. And in recent years, this has included institutions exiting risk assets and unwinding long stock positions that they were taking on by leveraging up the proceeds from the Treasury purchases by the Fed. The cash proceeds from this stock unwind has typically found its way back into safe haven Treasuries at an amount that has been vastly greater than the reduction in Fed purchases, leading to lower Treasury rates during QE off periods instead of higher.

     

    Second, a reduction in the net addition of Treasury purchases or the elimination of additional Treasury purchases by the Fed is much different than the actual sale of Treasuries by the Fed. As long as the Fed is sitting on the supply and not actively adding supply to be sold into the market, the impact on interest rates is notably different and likely negligible as a result. This is one of the key differences between today and the comparisons to the 1994 scenario.

     

    Lastly, the association with recently rising interest rates and the potential tapering of QE is misplaced, as the trigger that started interest rates to rise is not correlated at all with the discussions around Fed tapering the way it is for the stock market. Instead, all signs suggest the recent rise in interest rates has far more to do with the increase in implied volatility in the Japanese bond market, particularly since early May when JGB bond rates spiked higher.

     

    I'm not saying with all of these points that we won't eventually arrive at a juncture where interest rates are heading higher due to Fed policy, but a number of signs suggest that this is not what is happening right now. Then again, perhaps I am wrong. It will be interesting to see.

     

    Thanks again for sharing these articles. They were excellent reading.
    18 Jun 2013, 10:19 AM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Eric: I start with this question. What would the ten year treasury rate be now without the FED's intervention in the market? To answer that question, I have only history as a guide and fortunately most of that history involves periods where the FED was not buying treasuries. Instead, the market was setting intermediate and long term rates while the FED was influencing short term rates through federal funds.

     

    Over long periods of time, the average spread over the anticipated inflation rate for a ten year treasury yield is about 2.5%. It can move higher or lower based on investor's confidence in their inflation forecast.

     

    The average annual inflation forecast embodied in the 10 year TIP, as of yesterday's close, was 2.04%

     

    10 Yr. TIP= +.15% (up from a negative .64 on 5/1/13) http://1.usa.gov/yFD89A

     

    10 Yr. Nominal 2.19%
    http://1.usa.gov/oLC2C9

     

    Break-Even=2.04%

     

    This would put the free market rate at around 4.5% on the ten year.

     

    I would agree with Rivelle that the rise in bond yields was a dress rehearsal for the end of QE, a long and potentially treacherous process of interest rate normalization, meaning simply a return to rates determined by the market using long standing criteria such as inflation forecasts rather than influenced by massive bond buying by the FED.

     

    It is difficult to say with 100% certainty what initiated the rate rise. Bernanke's comments about tapering were not made until 5/22 as I recall and the ten year had already risen to 2.03%. But savvy investors would not be waiting for FED speak to make their move and to Get Out of Dodge before the Sheriff comes back to town.

     

    If an individual investor like myself sees the problem on the horizon, I suspect that bond managers see it too:

     

    See my Last Blog Discussion:

     

    The Difficult Path to Interest Rate Normalization

     

    http://bit.ly/16IGJJI
    18 Jun 2013, 10:52 AM Reply Like
  • Eric Parnell, CFA
    , contributor
    Comments (2228) | Send Message
     
    Hello southgent1951,

     

    Thanks for your reply. You make a number of excellent points that you argue very well. And I completely agree that interest rates will be heading higher from current levels at some point in the future. I'm still not sure myself if now is the time that it is going to happen or if it is more likely to come at a later date. At present, I continue to believe that it will come later, but perhaps I will be wrong.

     

    To your points about where interest rates would be today without Fed intervention, here are some of the additional points that I consider. First, 10-year Treasury yields had fallen as far as 2.04% in December 2008, which was before the Fed had launched QE (they had initiated MBS purchases in November but they did not begin to settle until January 2009). This, of course, was an extreme crisis period, but it implied genuine concerns about a deflationary outcome. This leads to the second point, which is if the Fed is truly fighting a deflationary battle, it would imply that U.S. Treasury yields would be far lower than they might otherwise be under conditions of price stability or inflation, and that interest rates could actually be lower than they are now if the Fed had not intervened along the way since deflationary pressures would have been allowed to fully take hold. Lastly, from the late 1800s up until 1966, average long-term interest rates consistently moved in a range between 2% and 5%. It was not until the late 1960s and the inflationary 1970s following the collapse of Bretton Woods and all of the other monetary policy actions during the time that long-term interest rates moved decisively above this range. And it wasn't until 1998 that we first returned to this range and have remained in it for the 15 years since. I'm not saying this is the case, but is it possible that the 22 year period from 1966 to 1998 when long-term interest rates ranged from 5% to 15% was the anomaly and that the cumulative +100 year period otherwise when interest rates ranged between 2% and 5% is actually a return to the long-term normal. Once again, I'm not suggesting this is actually the case, but it is something that I am exploring in the context of the broader interest rate discussion.

     

    Thanks again for your excellent response. You make a number of outstanding points and I look forward to following your blog discussions going forward.
    18 Jun 2013, 11:24 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » ERIC

     

    Thanks for stopping by. We appreciate your thoughts all the time.. Don't be a stranger.
    18 Jun 2013, 10:21 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » I PERSONALLY would like to know what everyone thinks on this .

     

    IF BEN DOES SAY QE WILL BE REDUCED DOES THE MARKET

     

    1) REACT IRRATIONALLY AND DROPS
    2) REACT RATIONALLY AND DROPS
    3) NO REACTION
    4) RISES

     

    I am confused because I believe TACK, who I respect , and if I am correct here, just expects a few days of irrational drop which can create a buying opportunity, While others think stopping QE'S will be devastating to the markets.

     

    So PLEASE take the time to answer and explain your response for all

     

    THANKS!
    18 Jun 2013, 10:34 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    IT,
    I'm in the camp of an irrational drop. How long the markets act irrationally is another question. It just might be the catalyst for the "correction" the market has been waiting for..

     

    If we get that reaction , I will be looking to add or initiate positions, as I believe the overall trend for stocks is higher..
    18 Jun 2013, 11:33 AM Reply Like
  • tampat
    , contributor
    Comments (995) | Send Message
     
    I'm going to make a wild guess and say the Fed does not start tapering and instead gives reassurance that they will continue what they are doing for the time being. This will probably act like a shot of adrenaline to the markets.

     

    They may add some comment about tapering sometime down the road and be a bit confusing in that regard so maybe we get some volatility as often happens after these meetings, but my guess is overall the actions they take, or inaction, will be positive for stocks.

     

    I don't think they are going to end the party at this time and that they know just how fragile things are.

     

    To answer your question specifically, I would go with number 1 or 2 as not sure what the difference is. If they actually say they are going to 'taper' or adjust the QE now, look out below and I wouldn't try to catch that falling knife too soon.
    18 Jun 2013, 12:09 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    IT: In my scenarios, there is no good result for bonds. It will only be a question of how bad will it be and how fast rates normalize to market levels. If institutional investors start front running FED talk and actions, which is what started to happen in early May, then we could see a rapid rise in rates that would be totally outside the FED's ability to control unless it was willing to make QE a permanent policy in pursuit of debt monetization which is not going to happen. Bernanke created this monster and now we have to navigate treacherous waters to get from point A (manipulated interest rates) to B (market based rates)

     

    I previously referenced a study, summarized in the Big Picture blog, that estimated that the FED's policies were causing a 1.75% loss in GDP due to reduced income on risk free savings. That estimate was based on history, where the average rate on risk free savings was almost 5% in the last 9 recoveries from recessions. A parabolic rise in stocks is one of many possibilities.

     

    http://bit.ly/YF81Ij

     

    Part of the slow recovery now can be attributed to that loss of income resulting from the FED's current policies.

     

    As to stocks, flip a coin. Money may move out of bonds into stocks as the only game left in town as the FED continues ZIRP into 2015 that will keep short rates near zero as the yield curve steepens. Ask me whether I would whether buy Royal Dutch yielding over 5% or to keep my money in a MM fund earning .01%.
    18 Jun 2013, 12:17 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @PAWS

     

    "To answer your question specifically, I would go with number 1 or 2 as not sure what the difference is."

     

    The difference is did the QE'S artificially inflate the stock market hence a rational drop. Or did QE'S have no effect except emotionally on the markets hence a irrational drop.

     

    Some believe QE'S have no impact on the stock prices, while others believe in the adrenaline camp.

     

    So will corporate bottom lines change if QE'S are eliminated???
    18 Jun 2013, 12:44 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    IT: American corporations are sitting on $5 trillion in cash earning nothing as of 2011, far more now.

     

    http://bit.ly/190n7Mq

     

    When rates return to market based levels, both consumers and corporations will have more money to spend just due to the increase in income flowing a rise in interest on risk free savings.

     

    And, those companies have locked in low rates just like American homeowners.
    18 Jun 2013, 12:50 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Southgent,

     

    I believe when we flip that coin , if one is in equities, it will be "heads" you win, "tails" you win.. With the other secular trends that are emerging as backdrops, I am of the opinion stocks will be much higher down the road. When bondholders wake up and look at their statements , it wont be a pretty sight.. Trust me they are not paying attention and will then ask the question , how can this be? Then we know what their reaction will be.

     

    On a different track, for those with a shorter term outlook, note that when the S & P has dipped to its 50 day MA this year, the subsequent increase has been 7% or greater. On June 6th the S & P once again dipped to that trend line. If that trend holds this time, a similar move of 7% or more will put the S & P over 1700 and at all time highs..

     

    Food for thought..
    18 Jun 2013, 12:53 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @SOUTH

     

    So you see no downside in stopping? If not then why don't they stop?
    18 Jun 2013, 12:57 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    IT: I did not say that there was no downside. I said that the transition could be treacherous particularly if the large bond owners start to head for the exit at the same time, causing spikes in interest rates that unsettles everyone including many stock market investors who are easily spooked. Anyone buying in October 2008 is not someone who is easily spooked by a return to normal interest rates. I am beyond being spooked,

     

    Long Term 10 Year Treasury Chart
    http://bit.ly/WGQM6i

     

    The current rate is just not normal but the stock market has done well in recent history with the 10 year moving between 5% to 7.5% (1991-1999) and over 4% (2003-2007).

     

    One possible scenario is that stocks move up as bonds move down in price and up in yield. We could easily see big up and down days as the market adjusts to the new reality of normal interest rates.

     

    One reason to continue QE for a few more months is to keep mortgage rates at abnormally low levels allowing more households to refinance. That is the only rational reason to continue it for a few more months.
    18 Jun 2013, 01:05 PM Reply Like
  • tampat
    , contributor
    Comments (995) | Send Message
     
    "So will corporate bottom lines change if QE'S are eliminated???"

     

    Well IT, lets see about that. If the QE ends and if it creates a drag on the economy then yes, corp bottom lines will change for the worse.

     

    Southgent has a valid point of increased interest income but thats different than income from operations. I'm not sure I agree with his result, I need to give that some thought.
    I dont see how that helps consumers who are already stretched thin.
    18 Jun 2013, 01:08 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @SOUTH

     

    "One reason to continue QE for a few more months is to keep mortgage rates at abnormally low levels allowing more households to refinance. That is the only rational reason to continue it for a few more months."

     

    This point I disagree with. If someone hasn't refinanced by now they have been asleep for 4 years now imo..
    18 Jun 2013, 01:09 PM Reply Like
  • tampat
    , contributor
    Comments (995) | Send Message
     
    I agree with you IT.
    Those who haven't refi'd at this point just can't due to their financial situation or being underwater on their mortgage.

     

    Home prices need to rise more to create some positive equity for those who haven't refi'd yet due to their homes value.

     

    While home prices are rising for some homes in some parts of the country, I dont think all boats are rising here. There is still a pretty significant backlog of foreclosures that have been held out of the market and still plenty of weak housing markets as well.

     

    And the high unemployment and stagnated wages are still a drag.
    Things are still worse than some people think, but I am not aiming that comment at anyone who has posted anything.

     

    I think the economy is on a tightrope and thats why the QE goes on.
    18 Jun 2013, 01:16 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    IT: Millions have not been able to refinance due to negative equity. At the peak of the housing downturn, over 12 million homeowners were underwater.

     

    Last year, JPM estimated that the rise in home prices brought 4 million homeowners into positive equity, leaving an estimated 7 million households under water.

     

    http://bloom.bg/11wH8Ls

     

    Under the HARP program, a household can refinance with negative equity, provided Fannie or Freddie owns the loan and other criteria are met, but many negative equity mortgages are owned by banks and mortgage companies.

     

    I look at the FHFA monthly refinance report that covers refinancings of GSE owned mortgages in total and for those under the HARP program. That kind of data point is very important in my current Big Picture views:

     

    That data series can be found here:

     

    http://1.usa.gov/WtA7tX

     

    This is the link to the last report which covers March 2013, please note that almost 16 million mortgages owned by Freddie and Fannie that have been refinanced through March 2013 since 2009!:

     

    http://1.usa.gov/12Te0R1

     

    In markets suffering a parabolic 20% compounded home price increase in the 2002-2007 period, there is nothing that can be done by the FED or the government to help a homeowner who bought that house in San Jose for $815,000 in 2006, with no money down, only to see the price return to trendline at around $400,000 by 2009.

     

    And the FED needs to quit taking money from the millions of people who played no role in creating that mess in order to help reduce the mortgage obligations for those who bought late in the housing bubble cycle.

     

    The FED is causing more harm to economy now than good but some long term good can come out of continuing QE until the end of this year by helping about 2 million more households refinance at abnormally low rates who will consequently be in a position long term to support a more durable U.S. economic recovery based on spending based on increases in their disposable income rather than spending ever increasing amounts of borrowed money (1985 to 2007).

     

    You need to examine my posts dealing with this long term positive force. I briefly touched upon it today and yesterday in a comment to a negative article about GE:

     

    http://seekingalpha.co...

     

    I know that F&G is familiar with my thesis but others may have not read one of my dissertations on the subject.
    18 Jun 2013, 01:37 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @PAWS

     

    "I think the economy is on a tightrope and thats why the QE goes on."

     

    This is why I have a major concern. I remember years ago HOPING to get a Mortgage under 10%. Thought my parents Mortgage of 6% would never happen again.

     

    Now QE'S HINGES on people getting a Mortgage for under 4%? This is why I feel we have some serious issues going forward. Interest rates cannot stay low forever, car incentives are back where they were in 2008/9, I really don't want to hear we have no inflation, I was at the mall 3x this week and they were empty.

     

    So I just feel the bar has been set so low that anything positive just gets people to buy stocks. Look at today, all I hear is what they think BB will say. Like if he even hints the wrong way the markets will sell off.

     

    To me this isn't a stable economy to say the least . I can tell you my group of friends who are middle class have been cutting back expecting tough times ahead. Some posting here might be in that 1% class , which I wish I was in, and honestly they just don't feel the pain some other have been feeling for quite some time.

     

    My 2 cents.
    18 Jun 2013, 01:37 PM Reply Like
  • Rinascimento
    , contributor
    Comments (1029) | Send Message
     
    IT

     

    I believe if the Fed says that QE will be reduced, the markets will barely react or rise as this is more noise and Ben doesn't want markets fall apart before he quits; I am not so much worried about the markets, what I am worried about are the hundreds of trillions of derivatives (interest rates swaps, credit default swaps, currency swaps, and others) hanging over the markets, which exceed the bond and stock markets by many order of magnitude.
    18 Jun 2013, 08:30 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @RIN

     

    That was our downfall a few years ago. Did anyone ever see the movie on HBO.. Too Big To Fail?

     

    I thought it was a good one explaining what might have gone wrong within our system..
    18 Jun 2013, 08:48 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I thought "Inside Job" was pretty good. Another is "End of the road:How money became worthless" Both available from (AMZN).
    Do I need to do a disclaimer?
    18 Jun 2013, 08:53 PM Reply Like
  • Rinascimento
    , contributor
    Comments (1029) | Send Message
     
    IT
    I forgot to mention that the big boyz want to collect their money on the derivatives at the taxpayer's expense (what is new, here?), that's why perpetual QEs is required; maybe the Fed will change QE to a new name to fool people but let's not forget that the Fed has provided trillions of US $ secretly through the back door
    18 Jun 2013, 09:41 PM Reply Like
  • Eric Parnell, CFA
    , contributor
    Comments (2228) | Send Message
     
    Hello IT,

     

    Here is my take on tomorrow. But instead of crunching the numbers, I'm just going to go with my gut here.

     

    The Fed announces tapering and discusses it in its press conference tomorrow afternoon. But instead of falling, stocks actually rally on the news while bonds remain steady and PMs sell off. This initial reaction will give the sense that the Fed will actually be able to pull off tapering and the market will be OK with it. But after trading higher for a few days after the Fed meeting (perhaps as long as Monday or even through the end of the quarter), stocks suddenly run out of gas and roll over into what will be a more sustained correction while bonds start to rally and PMs catch a bid including gold and silver finally breaking out above their downward sloping 20-day moving averages. Perhaps this will all be wrong come tomorrow, but this is where my gut is heading into the overnight.

     

    Thanks again IT. Great instablog discussion!
    18 Jun 2013, 11:31 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » ERIC

     

    Tomorrow will be very interesting for sure. And we can see we all have different thoughts on this.. Let's see what happens !

     

    Gosh, not sure I will get any sleep tonight ! Wonder if the futures have a clue what he is going to say..oooooooOOOOPPPSS!!
    19 Jun 2013, 12:19 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Hum

     

    The S&P is going straight up. What's going on? I feel like I'm missing out, but this is too weird to get in on.
    18 Jun 2013, 10:41 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Yep, it was climbing too high. Time to release that NSA success on NYSE terror threat... Keep down volatility in front of tomorrow's meeting.

     

    So convenient, NSA showing "why" it's a good guy & not to pay attention to phone records discussion.

     

    Anyone with thoughts on the news?
    18 Jun 2013, 12:10 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » Total control of when to say what , never changes CURLS..
    18 Jun 2013, 12:46 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I hate to sound conspiratorial but...I think a lot will depend on how the media/government complex spins it. Do I know how this will effect all of my holdings? NO. Personally I would like to see a return to more normal rates. This zero interest rate deal is distorting the markets to the point that we are hanging on every nuance or inflection. It seems it is not just having an idea and working hard to build on it to a profitable end. Rather I have an idea how can I get a government grants and local tax breaks to work the tax code to my advantage. This seems to be facilitated by unusually low interest rates that allow governments to speculate at very small borrowing costs. Higher rates would be a check on the system. It is a strange world we live in today.
    18 Jun 2013, 10:57 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    Brazilians are touchy about their bus fares. http://reut.rs/19fVNfm ... .20 real is about .09 US dollars.
    18 Jun 2013, 11:29 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I see that O is starting to elude to life after Ben. Next up Janet who is more dovish then our current chairman. If they do end who will buy the big spenders bonds at zero interest rate?
    18 Jun 2013, 12:21 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @BDU

     

    Some feel the withdrawl will have no long term effect. Do you??

     

    Janet is going to be handed a hand grenade as I see it. Pin already pulled.

     

    I predict the FED might even INCREASE it's program.. Then what happens ??
    18 Jun 2013, 12:50 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Never forget no matter what the FED says their real mandate since 1913 has been to be the bank of last resort for the US Federal Government. Even with lower deficits this year the US government is still having to borrow money to pay the bills, thus increasing the total US debt. Which is kind of disturbing when you think about it because the sequester were not really bottom line cuts but only cuts to the growth of the US budget. Some day the US will have to make real cuts because even if they tax everyone at a 100% rate it still will not cover the 220 trillion in obligations. They are at slightly over 100% GDP now, do you see that improving in the near future? Do you see the US GDP covering 220 trillion in obligations in the long term? Eventually, something will have to give. Until then I don't see the FED not buying US bonds. Especially seeing how the rest of the world has been stepping away from the table. In the long term say 25-30 years I don't see things playing out much different than it has for Japan the last 30 years.
    18 Jun 2013, 01:15 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I seems it will eventually end when the service on the debt overwhelms the GDP and we are getting closer. This won't end well.
    18 Jun 2013, 01:32 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    There are those who believe that rates will remain low, near where they are now, when the FED ends its abnormal monetary policies. The U.S. experienced far faster recoveries from the past nine recession when rates on risk free savings averaged 5%. The reason is simple-more income-more spending-more jobs- more growth-more profits.

     

    We have a long historical record of how the market sets interest rates. For most of our history going back to 1790 on the ten year treasury, the FED was not manipulating interest rates by buying most of the new treasury issues at the rate of $45 billion per month.

     

    This is not rocket science. We know how investors set interest rates in a free market. The free market rate is simply not a .1% spread over the anticipated annual inflation rate over the next ten years. The average spread is 2.5%, just a fact, with movement slightly above and below that line influenced by supply/demand, confidence in the inflation forecasts and other factors.

     

    I have just written a section in next week's blog that shows how someone could calculate that spread using historical data which I will reproduce here:

     

    *********

     

    Someone could go back and see how that number compares with past data using this process. The market is dynamic so the forecasts will change above and below that level based on other considerations besides the inflation forecast, such as flight to safety or the level of confidence in the inflation forecasts.

     

    10 Yield TIP Yield 1/3/06= +2.03%
    http://1.usa.gov/11vXr7s

     

    10 Year Nominal Yield 1/3/06= 4.37%
    http://1.usa.gov/11vXr7u

     

    Average Inflation Prediction 2.34%

     

    10 Yield TIP Yield 12/12/06= 2.16%

     

    10 Year Nominal Yield 12/12/06= 4.49%

     

    Average Annual CPI=2.33%
    18 Jun 2013, 01:08 PM Reply Like
  • tampat
    , contributor
    Comments (995) | Send Message
     
    Southgent (or anyone else),

     

    What are your thoughts on muni's.
    I have owned (BAB) for a while now and have become indecisive about it.
    Thanks.
    18 Jun 2013, 02:33 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    Just opinion I don't invest in them. If they serve your purpose as a tax hedge I would take any advantage you can. Many municipalities are in the news lately and not for good things. Detroit comes to mind.
    18 Jun 2013, 02:42 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    The closest I have come to owning munis is by using U.S. Global Investors Near-Term T/F (NEARX) to hold my cash in my taxable account. It dropped to 2.06 in 2008 and has since risen back up to 2.25. What is more important to me is it pays out monthly. Anywhere from 1-4 cents a share.
    18 Jun 2013, 02:45 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    TAMPAT: Everyone needs to check the duration of their bond funds and read as soon as possible these two general summaries of why that is important:

     

    FINRA on Duration:
    http://bit.ly/15yDEeq

     

    Vanguard: Get to Know Your Bond Fund's Duration:
    http://bit.ly/13NfZTo

     

    Those publications note a general rule of thumb that will give an investor an estimation of a potential loss or gain resulting interest rate rises or decreases, as the case may be. Just multiply the duration by the percentage rise in rates.

     

    When you have more time, I would recommend reading this Vanguard publication which discusses the extremely important topic of duration starting at page 11:

     

    Bond Fond Investing:
    http://bit.ly/19v0EM7

     

    The duration of the BAB fund was 10.64 years.
    http://bit.ly/11sjqec

     

    That ETF has already undergone a significant price correction moving from over $31 on 5/1/13 to $28.94 now.
    http://yhoo.it/1bSoVbS;range=1y;compare=;ind...

     

    Adjusted for two monthly dividend payments, the decline so far has been 5.89%, which is not that bad considering the ten year treasury rise from 1.66% to 2.2%.

     

    So what does one do? There is never a certain answer. I or anyone else could be wrong about the future.

     

    I do not own the BAB or BABS ETFs. I did have a small position in two leveraged CEFs that own those types of taxable municipal bonds. For the reasons given in a post written last month, I sold 100 of my 250 shares:

     

    see discussion starting at
    3. Sold 100 of the Leveraged Bond CEF NBD at $21.86-Roth IRA
    http://bit.ly/14tP548

     

    That one is trading at around $20.25 now so not too bad yet.

     

    A lot depends on the investor's forecast. I have to go with what I believe rather than what someone else believes when managing my money. I have confidence in my abilities recognizing that we all make mistakes and mistakes in retrospect are easily made when forecasting the future.

     

    see my discussion on cutting down error creep to more acceptable levels consistent with building a pile over a long period:

     

    ERROR CREEP and the INVESTING PROCESS
    http://bit.ly/TJXme2

     

    I know that my forecast is at best within a range of probabilities and possibilities. It is in many ways like trying to play hands of blackjack, your information will always be incomplete:

     

    BlackJack and Stock Investing: Lessons Learned & Applied
    http://bit.ly/1bSoVIX
    18 Jun 2013, 02:52 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    Do you remember the sequester? Millions of babies thrown out on the streets. Police and fire slashed criminals running rampant. Much is hyperbole.
    JMHO but seems the Fed is buying cause nobody else will. If the Fed stops or tapers rates will rise. If rates go back to normal the attractiveness of high yields will bring in buyers. Seems the Pol's are drunk on lower rates. Again it allows them to wheeled power and buy your votes.
    I live in a state where we joke that nothing is legal anymore or everything is illegal. They have laws for the most ridiculous of things. They can not possibly enforce everything so they pick and choose. They do the same with zoning and local taxes. Because everything could be illegal you have to hire an insider to guide you through the process. Taxes are high and you need a tax break to be able to make a profit. This allows the pol's to pick and choose who gets what. Cronies and greasy palms are the result. They can do this because the interest rates are artificially low for municipalities. They are subsidized by the wealthy looking for tax breaks through muni bonds. Sorry for the rant what was the question again?
    18 Jun 2013, 01:13 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    LOL. I currently live in PA. Even with low rates there have been municipalities and school districts going bankrupt. Harrisburg is a good example. Detroit another.

     

    If they can't make it when rates are low what are their prospects when rates go up? Even better what do you think the US government's prospects are at even 4%?
    18 Jun 2013, 01:34 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    "When the levee breaks" hey "black dog"
    18 Jun 2013, 01:40 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Notrub: The government has been receiving a free ride for five years on the back of senior citizens who own their own homes free and clear (about 1/3rd of the total homes in the U.S. have no mortgage) and who have been denied a market based rate on their savings due to QE and more importantly for them ZIRP. Many were depending on that income to make ends meet.

     

    On the plus side for our destitute Uncle Same, the government will receive a lot more tax revenue as incomes increase just on savings and possibly the government needs to go on a diet too. Some people suggest that I need to lose a few pounds and I would not take issue with that opinion.

     

    The amount of interest paid on the national debt per fiscal year (ending in September) can be found at

     

    http://1.usa.gov/qvYMRZ

     

    Also the short term rates will remain near zero for another two years even under my scenario. The rate rise will be in the intermediate and longer term issues later this year and throughout 2014, a significant increase in the yield curve with short rates being anchored by the abnormal ZIRP policy.
    18 Jun 2013, 02:06 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    I agree with you 100% SG.
    I have been living debt free since 2008. I have only made the changes I have because I do not want to depend on the USG for a penny. IMHO they are bankrupt. Thus my US Navy retirement is in question as will be SS when I am old enough to collect it. Thus why build another source of income is my #1 goal.

     

    My current plan is to take SS at 62, because something is better than nothing. And, invest that income into my income stream plan as well. The only thing that has really changed for me is I can no longer count on CDs, savings accounts, bonds to keep up with the true costs of what I have to payout every year for food, gas, utilities, taxes, etc.

     

    My wife is in the camp with the woman who had 50K and just wanted it invested. She doesn't know how and doesn't want to learn. So I just want to have something idiot proof set up that will continue to meet her needs after I'm gone. Which will probably consist of something like WELX that just sends her the checks to deposit and statements to do her taxes every year????

     

    Also, it is the reason I do not purchase physical metals (PMs). They pay no income. The only reason I would need them would be to leave the country. I have personally experience what PMs are really good for. After long talks with my wife over the years leaving would not be an option. So PMs really play no part in my investment plan. I have lived through several crisis in world, country and personal and have observed that the only time that PMs start making a difference there are bigger problems that matter.

     

    So I just stick to my plan of buying conglomerates. I figure if they go away then I will probably have bigger problems than money...:o)
    18 Jun 2013, 02:32 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @NOTRUB

     

    You hear the POTUS talking how education is so important then as you said in my County we have schools closing all over, my daughter who is the head sub, and the kids love her , being told she can't work over 4 days per week next year due to the school district having to pay her benefits ( they refuse to do so). Yet she graduated with Honors and can't find a full time teaching job without relocating.

     

    At least she was smart enough to get her Masters out of the way because in NY you HAVE to complete one in 5 years from full time employment.

     

    Then of course we have Principals and Vice Principals in my town getting paid handsomely just sitting around doing nothing but meetings!!

     

    Now don't you think the teachers teaching are more important. To me were spinning out of control right now !
    18 Jun 2013, 02:48 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Notrub: (1) The government may end up being unable to finance deficits at some point, but I do not see that happening in our lifetime. The odds of a failed treasury auction in say 10 to 20 years is very low, but not non-existent in my opinion. The odds could increase when and if interest rates spike to levels seen in the 1970s and the interest cost alone goes well over $1T a year.

     

    (2) Buffett would agree that gold and silver are not good investments.

     

    See Page 19 of this letter to shareholders:
    http://bit.ly/xcBPQb

     

    I do not believe that gold and silver have a determinable "fair value" but it has been assigned a value by humans for centuries. I would not argue too much with the gold bugs since I have seen the price rise from $35 in the early 1970s to over $1900 in September 2011.

     

    What is Gold's "Fair Value"?
    http://bit.ly/10qWn2z

     

    I own precious metals as a hedge against the Black Swan, but will try to sell high and buy low. I sold in September 2011 and January 2012 and I will just wait for another opportunity to plow the proceeds back into the U.S. Mints silver and gold eagles. I sold all of my junk silver coins:

     

    1. Recent Silver and Gold Coin Sales (9/2011)
    http://bit.ly/XqU0Bx

     

    8. Snapshot of Coin Sales in January 2012:
    http://bit.ly/18tKuTV

     

    3. I am near 62 now. I looked into taking SSN but it would cost be dearly to do so based on my current income, and I have no wage or pension income. It goes beyond the lower amount received over a lifetime.

     

    http://1.usa.gov/10uzm5E

     

    My benefits would be substantially reduced due to my income now:

     

    See: http://1.usa.gov/10uzm5J

     

    "We use a formula to determine how much your benefit must be reduced:

     

    If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.

     

    For 2013, that limit is $15,120."
    18 Jun 2013, 03:17 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @NOT

     

    As far as Physical Metals go one should be more concerned with the return OF your money rather then the return ON your money. Physical Gold is not an investment. It is savings. Or I look at it as insurance and feel everyone should have even a small % in your portfolio. imo..
    18 Jun 2013, 03:23 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    IT: Mark Twain and Will Rogers have a lot of good investment advice.

     

    Will Rogers on Banking and Wall Street:

     

    http://bit.ly/v24U1P
    18 Jun 2013, 03:27 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    NOTRUB: I may need to look into this AGE 62 SSN benefits more. I did a calculation at the SSN site which only asked me whether I had any wage or self-employment income (i.e. income subject to SS tax). I have none. So SS did not reduce my benefits for my interest, dividend or capital gains, my only income sources, so I may apply myself after looking into it some more to be sure.

     

    Retirement Estimator
    http://1.usa.gov/11whAu5
    18 Jun 2013, 03:57 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    I am familiar with the SS reducing your payout $1 for every $2 earned from a job. I watch my Dad live with it until they changed the law.
    If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.

     

    For 2013, that limit is $15,120.

     

    What I was unaware is that dividend income from stocks counted towards that annual limit. I know that my Navy retirement does not, right now I know everything with SS is firmly set in Jello. Because I have written them and gotten that clarification. If so, and I wouldn't be surprised because of the gimmicks they are already trying to pull with CPI calculations to hold increases down, I will have to start doing some research to find out the best way to rectify that situation. But, even if they do reduce the benefit on every $2, like I said something is better than nothing.
    18 Jun 2013, 04:01 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    IT,
    I fully understand all of that. I have personally witnessed its occurrence in other countries. Which is why I know that:
    1) When things get that bad the return of your money isn't a consideration. Your families' personal safety is. And, the PM's primary use was to get out of the situation for safety sake.
    2) Holding PMs makes you a target.

     

    I have discussed the whole thing thoroughly with my wife and we aren't going anywhere if a situation such as that arises because of family considerations.

     

    The most recent example was Zimbawe:
    http://bit.ly/Syhhfu
    http://bit.ly/M9901y

     

    The people who had the resources to have PMs left. And, dealt with the currency of the country they landed in. All the PM was good for was payment to get out. And, conversion to the currency in their new country. So that they had money to start all over.

     

    Years down the line I guess it could become a mdium of exchange of exchange if the crisis lasted long enough. But, to the every day person on the street who want to go buy food it was pretty much useless except in very small amounts. A loaf of bread was 10,000 Z dollars and got as bad as 100,000. If you walked up with a tenth oz of gold or ounce of silver you'd have to give the whole thing for that loaf of bread. Unless of course you wanted change in Z dollars....:o)

     

    Basically, what I am saying is that when things get that bad it doesn't automatically return to the days when the banks and stores had scales and would measure out your dust as payment. All that takes time to be set up, even in the black market. And, everyone has to eat in the mean time.
    18 Jun 2013, 04:18 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @NOT

     

    Thanks for the explanation.. Real life is much better then what if's !!

     

    I got a different view now from your experience.
    18 Jun 2013, 04:21 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    IT,
    BTW, I am NOT saying that people shouldn't buy and hold PMs. Only, that it does not fit my situation. In fact I believe that people should do whatever helps them sleep better at night. Life is too short...:o)
    18 Jun 2013, 04:30 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Wow SG,
    Now you got me going. LOL, I guess I'll spend the rest of the night digging to try and find out exactly what does count as income for SS????
    18 Jun 2013, 04:31 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Notrub: Thanks for bringing this up.

     

    In the comment above yours, I noted that the SS calculator only wanted to know my income subject to SS tax and that would not include dividends, interest and capital gains or any other payment that is not subject to the payment of SS taxes. I will check further into it tonight but it does not appear that "earnings" includes income that is not subject to SS taxes.

     

    Taking SS benefits at 62 is certainly not for everybody as SS points out given the reduction in benefits:

     

    "If you start your retirement benefits at age 62, your monthly benefit amount is reduced by about 30 percent. The reduction for starting benefits at age

     

    63 is about 25 percent;
    64 is about 20 percent;
    65 is about 13.3 percent; and
    66 is about 6.7 percent."

     

    http://1.usa.gov/10uzm5E

     

    So 30% over a lifetime is substantial for anyone having to rely on that money in retirement.

     

    Since I do not care about that reduction, I just as soon start taking the money now rather than later.

     

    I will get tagged on having to include SS benefits in taxable income however, but that is something that will always be the case anyway:

     

    Paying income tax on Social Security benefits

     

    http://1.usa.gov/10uM5oR~/paying-income-tax-on...
    18 Jun 2013, 04:32 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Thanks again SG. Your an info machine...:o)

     

    That was my plan. I do not need the SS benefit to live on. I would just reinvest it for my income stream. 1st I would max the contributions to my IRA and Roth accounts the remainder to my taxable account.
    18 Jun 2013, 06:03 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    Notrub: Earnings are defined by SS to mean "income from wages or net earnings from self-employment". I just misinterpreted it earlier to mean income subject to federal income tax but SS defines "earnings" to mean income subject to SS taxes, a narrower definition than "taxable income"

     

    I checked a few sites and noted this one from AARP:

     

    "Investment income, pensions, capital gains, and inheritances are not considered wages."

     

    http://bit.ly/1018FmP

     

    J P Morgan should also know the answer:
    "Pension payments, annuities, and the interest, dividends or capital gains from your savings and investments are not considered earnings for Social Security purposes."

     

    http://bit.ly/1018FmR

     

    I found one other source with a similar statement and then decided that was enough:

     

    http://bit.ly/1018I1S
    18 Jun 2013, 06:46 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Thanks very much SG. I'll sleep better tonight.
    18 Jun 2013, 07:03 PM Reply Like
  • John Wilson
    , contributor
    Comments (1093) | Send Message
     
    SGent
    "The government may end up being unable to finance deficits at some point, but I do not see that happening in our lifetime."

     

    Didn't you calculate above what the 10 year rate would be with out the Feds intervention? "This would put the free market rate at around 4.5% on the ten year." So if we had this rate which is a reasonable rate (more than double what it is now), you would have the situation where the govt would not be able to service the interest. It is quite within the realm of possibility that this rate could be reached within just several years from now.

     

    Hope for the best, but expect the worst. I agree with Tampat below that we are ruled by sociopaths and psycopaths .Tampat says this not me. I agree with him. We could solve things, but we would never get elected. We are expecting them to solve our issues.
    19 Jun 2013, 12:56 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @JOHN

     

    Thanks for stopping in. Please leave your link to your blog as I am sure we will have many interested in your thoughts on the PM'S..

     

    I SURELY DO .
    19 Jun 2013, 01:47 AM Reply Like
  • doubleguns
    , contributor
    Comments (7886) | Send Message
     
    Notrub, I have a retired Marine check each month but I realize that both that and the SS check are in jeopardy as our county continues to spend money it does not have. All pensions and all transfers from the federal govt are in jeopardy as are any from the states. Here is an IMF working paper that talks about cutting those costs by 30% based on the debt from 2010 and raising ALL taxes by 30% so I assume the cuts will be much higher and the taxes much higher now that the debt has continued to climb much further. Read page one right after the cover page.

     

    http://bit.ly/UvT7kZ

     

    I have insurance on my home, car and life etc...and I have physical for insurance on my finances. In the event that something terrible happens its there. There are many possible events that could create that situation but the most likely is a solar flare and congress just introduced legislation to try and deal with that yesterday.

     

    http://fxn.ws/1bVlMbt

     

    This year is a bad year for sun activity.

     

    http://fxn.ws/1bVlMrH

     

    Me and my wife travel internationally and we ensure that we take physical metal with us then because if there is a problem getting home I intend to go down to the ship yards and speak with the skipper of any freighter, tanker, container ship etc... and get me and my wife a ride home. Metals can do that where I do not have faith in paper because I do not know what the situation might be that might cause that problem. Again its just an insurance policy.

     

    I live in the country so thankfully I most likely will not have to decided to run or perish in place like many city folks but having metals might help those in the city get out but that will depend upon luck, meeting the right people and getting started early but that insurance policy might be what gets those folks out that move quickly and have something to barter with. If I am too old to do that I can at least provide that chance for my kids and grandkids and I can stay to perish in place but I like having that choice for my family.

     

    I know all of this sounds corny but you spent time in the service so you know we should always have a plan B, C, D etc...Physical metals are one of those alternate plans, not plan A and not plan B but its on the list. The insurance policy list, for just in case, but only just in case. I also wear a seat belt and have a gun by my bed for just in case.
    19 Jun 2013, 08:32 AM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    John: Relax, take a deep breath and everything will probably be fine in your lifetime and mine.

     

    Part of the government's interest rate burden will be offset by additional tax revenues generated by that market based interest rate.

     

    As I noted somewhere in these comments, more income from "risk free" saving will also increase GDP.

     

    Real GDP and real disposable income are growing, so there be a bigger pie for the government to tax and that is occurring without market based interest rates paid to consumers and businesses.

     

    Real Gross Domestic Product
    http://bit.ly/VeK1dl

     

    Real Disposable Personal Income
    http://bit.ly/Z48N5f

     

    The government has at least started to restrain the growth of spending.

     

    The chief economist of GS noted that deficits as a percentage of GDP was over 10% in 2009 and will be about half that amount in 2013. The GS forecast is that the number will fall to about 3% or less in fiscal year ending in September 2013.

     

    A summary of that report can be found at the Pragmatic Capitalism site.

     

    http://bit.ly/1908FJG

     

    The Washington Post story also summarizes that report and contains a historical graph showing the ratio of deficits to GDP:

     

    http://wapo.st/1908FJJ

     

    The government does not finance most of its debt using the long term treasuries. The average maturity on U.S. debt is rising but is still slightly over 5 years.

     

    The U.S. government certainly faces interest rate risk when refinancing its debt.

     

    This July 2012 report published at GARP.ORG has a number of graphs on that subject:

     

    http://bit.ly/1908FJL

     

    GARP stands for Global Association of Risk Professionals.

     

    A large amount is financed with treasury bills (3 and 6 month, 1 year) and shorter term notes than the 10 year (2,3,5, 7 year). All of those rates will be much lower than 4.5% over the next several years with the bills hugging zero into 2015 due to ZIRP.
    19 Jun 2013, 08:58 AM Reply Like
  • Hebba Investments
    , contributor
    Comments (1299) | Send Message
     
    @notrub Great points but i'd respond with this about PM's

     

    "So I just stick to my plan of buying conglomerates. I figure if they go away then I will probably have bigger problems than money..."

     

    Right now its very easy for investors to take this opinion - stocks have been going up for 5 years while gold have been dropping for the last two. But lets not forget that it isnt always about conglomerates going out of business. In financial stress even conglomerates suffer - stocks like WMT (the best of the best) dropped 25% and others dropped even more. Big banks shed 50-75% of their values.

     

    There is major risk inherent with these investments too - lets not get so complacent we forget that.

     

    The response would be, "well Gold dropped 30% too in 2008" - besides the fact it recovered and ended the year up, I would respond with at the time it dropped it was making new highs, now its making new yearly lows - so I dont think the reaction would be the same.

     

    Finally, in terms of the argument "I dont think I want to leave the country so I dont own gold." I'd say you dont have to leave the country to want to own gold - gold is insurance in case of major financial chaos - you dont have to leave to benefit.

     

    What if you lived in Cyprus and didnt want to leave? If you owned gold you would have done just fine in the recent events. There is nothing that guarantees we dont have similar financial chaos here.

     

    If there is a major war the dollar will suffer. If international entities want to strike back at the US they will hit the dollar. If/when the financial crisis rears its head again, do you really want to own conglomerates trading at alltime highs? As a general rule, the things that go up the most go down the most in a crisis.

     

    There are a lot more points here but you dont have to be a goldbug to own gold - it provides diversification and protection that stocks do not. Remember stocks can go down and they can go down by a lot - its not a one-way street.
    19 Jun 2013, 01:58 PM Reply Like
  • Notrub
    , contributor
    Comments (343) | Send Message
     
    Hebba,
    You are entirely correct. Thanks for the response. I am well aware what stocks can do I owned Phillip Morris from the 1970s till 2001. I went through all the turmoil of the Vietnam war, Watergate, the oil embargo and resulting chaos, the law suits, government regulations, the 1987 crash and the 2000 crash. I never sold my shares through all of that. If I still held those shares today I would be a multi millionaire. Unfortunately, I lost it all to a divorce....:o) My point is I KNOW from personal experience that Large blue chip conglomerates work through the long run no matter what happens. Yes, the price will go up and down over time. Sometimes a lot in both directions. What that experience taught me is that even in the worst of time those kind of companies kept paying a dividend. And, that is what I need a steady flow of income.

     

    I am NOT saying just buy the stocks and forget about them. As with any company things can change. Look at Kodak.

     

    As I said, I am not telling anyone to shun precious metals. Everyone needs to do what they need to do to fit their circumstances. I am just saying at 56 years old precious metals do not fir my foreseeable needs. Unlike 1970-2000 time is no longer on my side. I need all of my money working to provide income. Life and the markets aren't fair. We just have to learn to play the hand that is dealt us...:o)
    19 Jun 2013, 03:56 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Hebba,
    If I may , there is inherent risk with all types of investments that we can agree on..

     

    You state that by owning conglomerates back in 2008 , some suffered losses in the neighborhood of 50% or more, That is very true. Than as stated "do u want to own the same conglomerates that are now at all time Highs" . Well I believed you answered your own question and proved the fact that these conglomerates can and do come back , I'm not suggesting "buy and hold then forget"
    BUT Unless I'm missing your point stocks present no more risk than any other investment ,and for some far less risk over time..

     

    Please don't lose sight of the dividend factor which over time trumps all investments ---without question.. Correct me if i'm wrong but an investment in Gold pays me no such interest over any time frame..
    I understand the principle of "insurance" gold and other metals represent to some.. But I have a feeling that the insurance will be getting a lot cheaper in the days/ months & possibly years ahead.. ( Yes i mean years ) Plenty of risk now with Gold in a bear market. Time will tell.

     

    Best of luck - Just my .02
    19 Jun 2013, 06:18 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » FEAR

     

    Is this a bear market to you now?? Or is this just a correction of hysteria?
    19 Jun 2013, 06:22 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    IT,

     

    was referring to Gold being in a bear market now, which it is..

     

    I will lay out my theories on Gold , and will ask all to shoot them down and tell me why i am wrong, I am no expert in PM's BUT , i do give credence to charts and such, i believe Gold can fall much lower.
    19 Jun 2013, 06:27 PM Reply Like
  • Tack
    , contributor
    Comments (12721) | Send Message
     
    SPX down 3.44%, not even remotely a bear, or even a moderate correction.
    19 Jun 2013, 06:27 PM Reply Like
  • southgent1951
    , contributor
    Comments (2519) | Send Message
     
    IT: Gold and silver are in bear markets and the prior one was really long.

     

    Bonds will be in a bear market, defined to mean a 20% decline from their recent highs. This may take a few more months.

     

    Nothing important happened today in stock land. Doug Short has a chart showing the dips since the bull run began on March 10, 2009:

     

    Third Chart on this Page:
    http://bit.ly/nJLfB3

     

    -15.99%
    -19.39%
    -9.94%
    -7.67%
    Up +146.7%

     

    I would prefer that the market go up 6% a year adjusted for inflation, without all of the drama, measured in precise daily increments down to the hundredth decimal point to achieve that result. But I have grown use to the drama and have learned to wait with eager anticipation for the wild days and sharp down moves.
    19 Jun 2013, 06:39 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    IT , Tack,

     

    no, no, I was referring to Gold , please re read my statement "with Gold in a bear market "..

     

    SPX is surely not in a bear market..
    19 Jun 2013, 06:40 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » FEAR

     

    Got it. Thanks!
    19 Jun 2013, 06:44 PM Reply Like
  • Tack
    , contributor
    Comments (12721) | Send Message
     
    FG:

     

    I was responding to IT. Should have inserted header. His comment wasn't clear, as to subject. I thought "market" was broad market.

     

    (I sure wish SA would make replies attach to the post that is being replied to!)
    19 Jun 2013, 06:46 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » SOUTH

     

    Check out EBAY ASE'S are selling for $28 bucks still !! I expect gold to bounce off this $1350 figure as well. If not then I decide to lock in profits and sell some physical..
    19 Jun 2013, 06:47 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @BDU

     

    In NY we have a Mayor who DOUBLED a parking ticket on a meter, and also if you just double parked for a minute in the Bronx 5 years ago the fine was almost $200 bucks!

     

    Now he tried to outlaw a 32 oz soda, and tell a businessperson that they could not display their cigarettes in their own store windows..

     

    What has this country some to? Bengazi, IRS,DOJ, NSA, ??

     

    Socialism??
    18 Jun 2013, 01:43 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    Here they have done away with parking meters. The spots have numbers and you go to a parking kiosk on the block somewhere to pay with credit card or bills. I don't think it takes coins. The conspiracy theorist in me thinks couldn't NSA tell where your car was parked?
    Socialism? More like statism or fascist ... You own it and are responsible for it but the state tells you what you can do with it.
    I have been shaking my head at Bloomberg for awhile.
    18 Jun 2013, 01:54 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @BDU

     

    Gotta give him credit though. He figured out a way to get re-elected to a third term:)

     

    But NY'ERS have had enough of him....Wanted to run the Marathon after we had Hurricane Sandy? Guy just doesn't get it anymore.
    18 Jun 2013, 01:59 PM Reply Like
  • tampat
    , contributor
    Comments (995) | Send Message
     
    "What has this country some to?"

     

    IT,

     

    Well, I think you meant 'come' to, but thats ok :)

     

    I think it has come to this. A plutocracy and/or oligarchy led predominantly by sociopaths (http://bit.ly/I9QlAr)
    and psycopaths (http://bit.ly/12TgZsC).

     

    Before you consider scoffing keep in mind that not all psycopaths and sociopaths are serial killers or locked up in institutions. Actually, most of them aren't locked up anywhere and many are very intelligent. Big corporations and politics are filled with those types though they can be found in all walks of life.

     

    And if it isn't bad enough to have those people running things, we have the maroons who keep electing them.

     

    Are we getting off the path with this subject?
    18 Jun 2013, 02:05 PM Reply Like
  • Stilldazed
    , contributor
    Comments (2097) | Send Message
     
    "Are we getting off the path with this subject?"

     

    Tampat,
    Only if we spend too much time on the subject. Politics and politicians are a reality that has to be dealt with when investing, not so much one party vs. the other, but in a more general sense of what drives pols overall.
    18 Jun 2013, 02:13 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    Maybe but I like it. It is kind of big picture view point that is needed for a well rounded investing perspective.
    Many companies make profits on government largess. It is good to know before investing hard earned savings. Balance sheets are distorted by tax codes. Stock buy backs and CEO options are popular because of tax implications.
    18 Jun 2013, 02:13 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    That easy.. Money. I noticed that insider trading is still legal for them. At least on a federal level.
    Zero interest rates gives them the power to grant and insider trading gives them the power to profit from it.
    18 Jun 2013, 02:26 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Tampat,
    'Are we getting off the path with this subject ?"

     

    I Came back after leaving for an hour to see 18 new posts.. concerns over fed, economy, etc.. May I suggest a deep breath , get back to what the market is telling us ... Not suggesting everything in this economy is wonderful , but remember where we have come from , there is improvement, that's all the market has told us and is telling us now.

     

    Sure we all know someone who is struggling, but Consumer spending has remained solid (up 3.4% in 1Q13), despite the increase in the payroll tax that took effect in January. That was supposed to be the death knell for the consumer, Remember ? The industry that helped lead us into the Great Recession, Housing, is also doing its part in leading us out.

     

    It s not peachy , but when the picture becomes rosy, peachy and euphoric , then the market will be topping out and on its way down. We aren't there yet.. Plenty of worries, market corrections along the way, but we go higher as I believe we can put this commentary surrounding the FED, et al ,in the same category as when we were told that the fiscal cliff, sequestration, debt downgrade, tax hikes, eurozone , Spanish bonds, Greek default, Italy austerity issues, Cyprus (you get the idea) were taking us down.. Look where the markets are..

     

    I respect everyone's opinion , and many QE arguments make sense, but my firm belief is that no one really knows how QE will end.

     

    Eurozone breakup argument and prediction made sense when it was bandied about, -It hasn't happened.

     

    Sticking my neck out again , no taper till '13

     

    My .02 for a tuesday aft.
    18 Jun 2013, 02:55 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @F&G

     

    Gotta ask you this then. You once made a post that you are trying to wait for a pullback to invest a persons 250k. That you were waiting for a pullback personally as well. I am with my limited funds that is why I am asking.

     

    Do you still feel this way or have recent events convinced you otherwise. No disrespect , I just am curious..

     

    Thanks!
    18 Jun 2013, 03:40 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    IT,

     

    Usually when go on one of my rants about the market,, I'm always referring to what I perceive as the long term trend.. -- LOL

     

    However, as we all have mentioned , I would like to see some sort of pullback before deploying funds.. Only thing I've done lately for myself is opening up a couple of covered call positions , like the (EBAY) example I mentioned here.

     

    The one position I added for that person with $250k is buy some (T) around $35.25 for him on the recent drop we saw a few days ago.
    -- 5% yield..

     

    I may start a position on QCOM for that account around the $61-62 level.

     

    I tend to be overcautious when selecting entry points , even though its all in the context of 3-5 yrs at least. -- Just my nature..
    18 Jun 2013, 04:55 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    How much of the 85 billion per month is the Fed buying in MBS?
    http://bit.ly/13ZvSov
    Thats a lot of houses.
    18 Jun 2013, 05:52 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @PAWS

     

    "Are we getting off the path with this subject?"

     

    Nope, this thread is open to everything. I like to discuss politics as well. If we don't the markets may one day never matter anyway !!

     

    BTW sorry for the spelling error, Bloomy does that to me...
    18 Jun 2013, 02:17 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » ANYWAY....

     

    Onto the next CHAPTER !!

     

    http://seekingalpha.co...

     

    I OPENED IT WITH A QUESTION...
    18 Jun 2013, 02:28 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » I might add just got a PM...You guys are now a top 5 blog!!
    18 Jun 2013, 04:45 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4528) | Send Message
     
    Curls, Tradewin,

     

    Always good to learn from a trade or situation. If you kept an eye on that (WLT) situation we spoke about, You noticed WLT was up 16% today,, it dropped to 11.16 yesterday , matching the 2008 low of 11.12. (double bottom) reversed that day and then took off today as the sellers were done.. Two days doesn't make a trend but that was a case where the charts told a story.

     

    I didn't react , so no $ for me , I shoulda been more aggressive and talked Krusty into this one.. Fun to play with other peoples money .. :)
    18 Jun 2013, 05:07 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    F&G

     

    Well, hum. A chance for me to study a chart move. (Not tonight though.) I need to make back my money - so a little playing is in order. I did passingly notice (WLT) up today & was wondering what was up.
    19 Jun 2013, 12:38 AM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    I have another stupid question... Using the way back machine does anybody remember during I think the Clinton administration that government bonds were changed? Seems to me that prior the debt was financed with long term bonds. After the change it was a shorter term bond or note. I have tried to look for this but can't seem to find it. Does anybody have any information or could point me where I could find it?
    18 Jun 2013, 05:58 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    From the Wiki...

     

    "The U.S. Federal government suspended issuing 30-year Treasury bonds for four years from February 18, 2002 to February 9, 2006. As the U.S. government used budget surpluses to pay down Federal debt in the late 1990s, the 10-year Treasury note began to replace the 30-year Treasury bond as the general, most-followed metric of the U.S. bond market. However, because of demand from pension funds and large, long-term institutional investors, along with a need to diversify the Treasury's liabilities - and also because the flatter yield curve meant that the opportunity cost of selling long-dated debt had dropped - the 30-year Treasury bond was re-introduced in February 2006 and is now issued quarterly. This brought the U.S. in line with Japan and European governments issuing longer-dated maturities amid growing global demand from pension funds.[citation needed] Since the 1970s the 10 Year Treasury Note and the 30 year fixed mortgage have had a very tight correlation."
    18 Jun 2013, 08:45 PM Reply Like
  • bd4uandu
    , contributor
    Comments (1795) | Send Message
     
    Hey congratulations IT number five right at the bottom of the page. (scroll down)
    That axion power host will be a tough one to crack. Them lawyers are tricky.
    18 Jun 2013, 05:59 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » @BDU

     

    That stock is a dud though. They just keep talking themselves into believing it is a good deal. I know a few and sorry to say they are way underwater on that one.

     

    I never thought this would work out the way it has anyway. So I am glad for all of you!

     

    Axion can stay number 1 , no worries here. Some are making money on this blog. THAT WAS MY OBJECTIVE !!

     

    OK..ONTO CHAPTER 11 !!!!!!!
    18 Jun 2013, 06:10 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    Okay, this weird - chapter 11 just disappeared. It's not in IT's instablog list. The link to it above disappeared.

     

    Could SA have removed it? But why? The short sports side track? A computer glitch?

     

    There was stuff in chapter 11 I was going to go back to read!
    19 Jun 2013, 07:25 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » CURLS

     

    I will have it fixed in a few minutes. SA deleted my blog because I have capital letters in it..Don't ask!
    19 Jun 2013, 07:32 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (3503) | Send Message
     
    "SA deleted my blog because I have capital letters in it..Don't ask! "

     

    I won't. It's like asking why a stock is dropping on good news. ...you never really want to know...
    19 Jun 2013, 07:34 AM Reply Like
  • Interesting Times
    , contributor
    Comments (10139) | Send Message
     
    Author’s reply » http://bit.ly/11NRxhT

     

    Let's start all over !! What will BB say today?

     

    Chapter 11 is now up and running, Symbols will be dropped from now on as well..

     

    No need for them anyway !
    19 Jun 2013, 07:45 AM Reply Like
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