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jhollieb

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  • Bond 'Losses' Got You Down? Ask Yourself These 4 Questions [View article]
    poor student, thanks for the info. I guess in and of itself that doesn't tell us how decent growth decent yielding large caps would have performed if only high and quickly rising interest rates was a factor.
    Sep 19 01:25 AM | Likes Like |Link to Comment
  • Is The Bond Market Bull Dead? [View article]
    You are correct BubbaJM, these ETFs are not meant to be held long term because the derivatives they hold are meant to approximate twice the inverse of a single day at a time's treasuries. Still I hold a small position in TBT and even smaller in PST as a very rough hedge against the 12 % of my holdings in non-Treasury bond funds. On a day to day basis they usually give me reverse results from my bond funds.
    Sep 16 07:40 PM | Likes Like |Link to Comment
  • Bond 'Losses' Got You Down? Ask Yourself These 4 Questions [View article]
    I agree with the two prior commentators. Those who think a holder of an individual bond is not hurt by rising interest rates because they continue to get their 2% if they hold to maturity, are putting form over substance. The value of that bond goes down, whether it's a realized loss or not. It's no different than if the bond investor held a bond fund that included that bond and other bonds that lose value with rising rates. In the fund, lower yielding bonds are replaced over time with higher yielding ones. So while the bond fund investor may realize some capital losses or reduction in capital gains, at least some of that (and potentially all and more) is returned in the form of higher interest payments. The notion that if your principal is not hurt, you did just fine is wrong when year after year the individual bond holder is losing out on higher interest rates.

    Bricwall, it makes logical sense what you say about low growth dividend stocks. I have eliminated my telecom stocks and reduced my already small utility holdings. As for blue chip stocks with decent growth, I am curious about how they performed during the 70's and early 80's when interest rates were rising a lot and for an extended period.
    Sep 16 06:39 PM | Likes Like |Link to Comment
  • Singing The Big Bad Bond Blues [View article]
    First off, I think many individual investors in or nearing retirement are still functioning in the old days where the rule was not to touch principal, but only income. That led to inordinate reaching for yield. It's only in the last few months that investors have started to see the negative effect of that. Total return, combined with sensible withdrawal rates is the key to having the best financial results and not running out of money.

    This plan may not work for everyone but I have a fixed percentage in equities, regardless of the market. The percentage of my portfolio in bonds varies widely and currently is the lowest ever, 12%. I am not afraid of cash. Few bonds have a duration that make the yield they offer worth the risk of inflation and interest rates rising.

    As for point number 8 of the article, I was never comfortable with the volatility of TIPs. Those of us who bought i-bonds in the maximum amount allowed in the first 10 years of their issuance have a tidy sum of a cash equivalent with inflation protection currently yielding 2 to 4% with no chance of principal loss (assuming the U.S. government doesn't go bankrupt). Of course nobody can get that result by buying i-bonds now since the current fixed rate is 0% and the purchase amount per investor is limited to $10,000 plus the amount of one's tax refund. It's still worth considering for someone who thinks inflation is coming soon or to park a small amount of cash for a year.
    Sep 11 03:13 PM | 1 Like Like |Link to Comment
  • Which Is The Best Tobacco Stock In The Industry? [View article]
    Litigation is always a big risk with tobacco stocks. For the foreseeable future, PM has an advantage because it sells tobacco products only in foreign markets. I am long PM.
    Sep 11 01:54 PM | 1 Like Like |Link to Comment
  • Rates Rising, Preferreds Falling - Should You Buy? [View article]
    It is simply not true that "[i]n reality, rates have not actually risen." That is only true at the short end. Nor has "The 10-year treasury ... risen nearly 77% in the last year." The 10 year treasury has fallen. It's yield has risen. Yield and price for bonds (as well as preferred securities) are inversely related.

    Whether and when the Fed actually raises rates on short term treasury instruments is of limited concern to investors in preferred securities. As the economy improves (or appears to be improving) medium and long term interest rates will continue to rise.

    Preferred stocks are generally issued in perpetuity. Their call provisions are at the option of the issuer. This gives them a high interest rate sensitivity.

    I don't believe that, with intermediate and long term rates still near historic lows, that this is a good time for most investors to purchase preferreds.
    Sep 9 12:02 PM | 2 Likes Like |Link to Comment
  • The Supreme Court is due to hear a "pay for delay" a case today over whether it's legal for drug companies to pay generic rivals tens of millions of dollars to hold off from launching copycat versions of medicines. The case is the FTC vs Actavis (ACT) and involves Abbott Labs' (ABT) AndroGel testosterone treatment. The FTC says the practice costs customers $3.5B a year, while drug firms argue that it protects innovation.
     [View news story]
    "Marginal cost" is the cost to make the very last item sold. It is what it costs Coach to make the very last purse, which is far less than what it cost them to make the first one. All overhead, salary and other costs have already been covered. The only thing left to make the last purse is the raw material costs of that one purse. It the same with "marginal price". It's not the $600 full price that people are paying for the purse in the Coach stores and department stores. It's the clearance discounted sale price charged at the Coach factory outlets. The economic principle is "working down the demand curve."

    Think of it like marginal tax rates. No one pays 39.6% on every dollar of taxable income. You only pay that rate on the amount of your taxable income that is in that bracket.

    It's been years since I taught basic economics. If you don't get it, you don't get it.
    Aug 8 10:59 PM | Likes Like |Link to Comment
  • The Supreme Court is due to hear a "pay for delay" a case today over whether it's legal for drug companies to pay generic rivals tens of millions of dollars to hold off from launching copycat versions of medicines. The case is the FTC vs Actavis (ACT) and involves Abbott Labs' (ABT) AndroGel testosterone treatment. The FTC says the practice costs customers $3.5B a year, while drug firms argue that it protects innovation.
     [View news story]
    Lawrence-- Where did you study economics? Economics 101 tells you that price is set at the meeting of marginal cost and marginal price. Nothing is more basic than that. Return on invested capital is part of profits, not costs, from an economics point of view. Marginal price is the price receive for the last purse sold, which in Coach's case would be the lowest price received for its most discounted purse or other item at its factory outlets. Don't mix up finance and economic theory.

    If you were correct why would anyone ever invest in anything-- whether their own business or that of others.
    Aug 7 01:45 PM | Likes Like |Link to Comment
  • The Supreme Court is due to hear a "pay for delay" a case today over whether it's legal for drug companies to pay generic rivals tens of millions of dollars to hold off from launching copycat versions of medicines. The case is the FTC vs Actavis (ACT) and involves Abbott Labs' (ABT) AndroGel testosterone treatment. The FTC says the practice costs customers $3.5B a year, while drug firms argue that it protects innovation.
     [View news story]
    Lawrence J Kramer, microeconomics doesn't say that competition drives price to cost. How would anyone make a profit?

    Rather, according to microeconomic theory, competition drives marginal price (the price of the last purse sold) to marginal cost (the cost to manufacture, distribute, etc the last purse made). Given Coach's factory outlets with their significantly lower price points, the price of the purses etc sold in their retail stores and other retail stores selling their products is high enough to give them ample products. Coach does have positive earnings, doesn't it?
    Aug 6 12:38 PM | Likes Like |Link to Comment
  • Ambev: Stock Swap Merger Means Free Money [View article]
    The increase in IOC may be good for the company's taxes, but not so good for U.S. investors. As I understand it, dividends paid by Brazilian companies to U.S. shareholders are not subject to withholding by the Brazilian tax authorities. That is not the case for IOC.
    Jul 31 05:37 PM | Likes Like |Link to Comment
  • American Tower: Time To Abandon Ship? [View article]
    If you look at the price chart of AMT over time periods up to one year, if closely follows that of REIT mutual funds. This is particularly the case since the Fed taper talk in May. To what extent may the price movement in AMT be a result of the fact that when interest rates go up, high yielding securities, like REITs get sold off? When REITs are sold off REIT and real estate mutual funds must meet redemptions and sell portfolio holdings. In other words, while AMT is not a high yielding security, does it get treated like one by the market because it is a REIT?
    Jul 31 04:40 PM | 2 Likes Like |Link to Comment
  • MLPs are staging a bit of a recovery today after several days of losses amid rising interest rates, with key drivers Enterprise Products Partners (EPD +1.9%) and Kinder Morgan Partners (KMP +1.8%) showing the way. But as the move in longer yields was only about 60 basis points, 24/7's Jon Ogg shudders to think what could happen to MLP pricing if rates rose 150 or 250 bps. [View news story]
    The whole notion that you won't lose if you hold a high income producing asset, like bonds or MLPs to maturity or death is form over substance. Sure, if the market price of this asset goes down you won't realize a capital loss or reduced gain. But the fact is that as interest rates go up, had you sold the MLP when it became overvalued, the proceeds could be kept and used to purchase a higher yielding asset, like another MLP. Psychologically you may feel better that you didn't realize the loss or reduced gain, but the fact is you are financially worse off. It's what economists call opportunity cost.
    Jun 8 10:03 AM | Likes Like |Link to Comment
  • MLPs are staging a bit of a recovery today after several days of losses amid rising interest rates, with key drivers Enterprise Products Partners (EPD +1.9%) and Kinder Morgan Partners (KMP +1.8%) showing the way. But as the move in longer yields was only about 60 basis points, 24/7's Jon Ogg shudders to think what could happen to MLP pricing if rates rose 150 or 250 bps. [View news story]
    Who said anything about a movement to bonds? Bonds got hit by the tapering talk more than any segment of the equity market. The price of bonds is directly correlated with interest rates.
    On the other hand, I do think MLPS, like REITs, utilities and some consumer stocks became overpriced and I took some profits in REITs and staples before the recent downtrend, but that was just rebalancing to keep my allocations among equity sectors in the percentages I want. The proceeds are in cash waiting for when prices get a little more justiifiable
    Jun 6 05:42 PM | 3 Likes Like |Link to Comment
  • Stay On The REIT Track And Sleep Well At Night [View article]
    To demonstrate how investors in the past two weeks have been irrational in selling anything that sounds like it might be a high yielder, I have been following AMT for a while to look for a good entry point. Now AMT is a REIT but not typical in that it does not hold what we commonly think of as real estate. It owns cell towers. The yield is paltry for a REIT, under 2%. And yet it lost almost 9% of its market value in the last 8 trading days.
    Jun 2 11:48 AM | 1 Like Like |Link to Comment
  • Do Not Let The Fed Scare You Out Of Blue-Chip Dividend Stocks [View article]
    I agree with this article for the most part. On the other hand , as money has moved into high yielding dividend stocks disproportionately the past year or so, my portfolio allocation to consumer staples, large cap pharmaceuticals and REITs grew too high. So I took some profits here and there in the interest of rebalancing. Maybe collectively I sold 8% of these positions. I'll move some back if valuations become enticing, which is starting to happen.

    It seems like the market for the past seven days has been throwing the baby out with the bath water. Any type of investment that has a decent yield has been punished. Some deserve it -- like, in my opinion all bonds and bond funds and, to some extent, REITs. You articulate good reasons why blue chip stocks should not be treated the same.
    May 31 06:47 PM | 4 Likes Like |Link to Comment
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