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  • Avoiding The Endowment Effect: Should Mike Sell? [View article]
    "First off, I hope I'm not being presumptuous in assuming that I am the "noted DGI investor."" - Mike Nadel

    Perhaps the original post was missing a white space and intended to say 'not Ed' (which is easily verified by reviewing your profile - your name is NOT Ed).

    Once upon a time we had a 'notbob' around these parts, but he went legit and changed his name to Robert.

    Aug 2, 2015. 03:14 PM | Likes Like |Link to Comment
  • Alliance Resource Partners acquires rest of White Oak Resources [View news story]
    "David M, Don't overlook the value of technological innovations. The Nazis converted coal into gasoline. The energy trapped in coal is immense. The USA has the worlds largest coal reserves and who knows what can be done with this asset." - aretailguy

    South Africa has been producing synthetic diesel fuel from coal since the 1950s, out of necessity more than anything. (next link is to a powerpoint presentation)

    See slide 5 in the presentation

    It's called the Fischer–Tropsch process:

    If the cost of producing petroleum products via oil extraction increases sufficiently it will become economic to generate them from coal or nat-gas instead. It's one of the positive aspects of "Peak Oil". There's plenty of coal that can be used to produce the same gasoline, diesel fuel, etc. (at slightly higher prices), so we won't be going without them entirely.

    Disclosure: Long ARLP and AHGP.
    Aug 2, 2015. 08:51 AM | Likes Like |Link to Comment
  • Avoiding The Endowment Effect: Should Mike Sell? [View article]
    "Larry Swedroe refers to this principle as the "endowment effect." In his opinion, "If you would not buy more at a given price, you should be willing to sell at that price." - Ted Fischer

    Sorry, Larry's opinion is, as stated, lacking any context.

    If I bought a full position in KO at a 3.10% yield point and it currently trades at a 3.2% yield point, it is still worth buying in a general sense. I may not choose to buy more simply because I have a full position already, although that in no way invalidates the worthiness of buying KO at the slightly lower price for someone without any position.

    Perhaps Larry goes into more detail in his book and Ted's summation is a simplification of that expanded line of reasoning. Then again, perhaps not and Larry's opinion is not very thoroughly thought out.

    As an unverified, blanket statement however, I disagree with Larry's claim.

    As for KMI. They just completed a massive consolidation of the Kinder Morgan family. It will take time to iron out the financial pile of details. I'm a bit overweight KMI myself, but I'm waiting to see how they address and consolidate everything before even considering selling shares. The dividend is growing great, as promised, and that's why I bought it in the first place.
    Jul 30, 2015. 05:05 PM | 12 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]
    ">>capital intensive coal industry.<<
    Therein lies the Problem." - Isuavecito

    Read the numbers before you jump to a conclusion on a particular company. The INDUSTRY is capital intensive, but the company has a Debt/Equity ratio of 0.61, and a distributable cash flow of 1.7 x the dividend payment. They've done a pretty good job of managing the financials in a conservative fashion.

    Mr. Market must have like the results of Q2 operations as the price is now more than 4.25% above my buy price from yesterday and my yield is still over 11% with the new, higher dividend.

    Read through the Q2 conference call transcript for yourself:

    You might like what you see.
    Jul 28, 2015. 04:13 PM | 2 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]
    "The company reports Q2 2015 this morning." - me

    Q2 earnings were off by $0.13 on a 1% increase in revenue. Still, they raised the next dividend by 1.9% and now have a forward yield over 11.6%. It's a steal at under $25 per share.
    Jul 28, 2015. 08:33 AM | 3 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]

    If you decide to trim and invest elsewhere you might consider looking into ARLP.

    The price of this company has been beaten down to the point of absurdity: P/E < 6, Payout Ratio < 60%, Yield > 11% and they have had over 20 consecutive quarters of increasing their dividend. Their debt is also very reasonable for the capital intensive coal industry.

    Analysts covering ARLP give it 2 strong buys, 3 buys, and 2 holds.

    If you split your KMI sale money and were to put some into ARLP the "excess" yield there would allow you to put the remaining money into lower yielding DG stocks while still matching the KMI income you lost. (1/3 at 11% and 2/3 at 3% gives 5.6%-ish total income)

    The company reports Q2 2015 this morning. Maybe you'll like it enough to dip a toe...
    Jul 28, 2015. 07:55 AM | 2 Likes Like |Link to Comment
  • Why I'm Calling The Federal Reserve's Bluff [View article]

    1) Puerto Rican Bond fund facing lawsuits and arbitration demands over losses exceeding $600 Million:

    2) Congress is considering a bill to allow Puerto Rico to file for bankruptcy and "adjust" their debts:

    Yep. Our government bonds are safe. Trust us.
    Jul 25, 2015. 09:13 AM | Likes Like |Link to Comment
  • The End Is Near For Puerto Rico Bond Investors [View article]
    Nice piece of self promotion.
    Jul 25, 2015. 09:03 AM | Likes Like |Link to Comment
  • DVK Portfolio Comparison To SPY, Using Sharpe Ratio [View instapost]
    I put a more detailed response in a comment on DVK's recent article:

    But the end result is that changing the 10/31 portfolio value to something $5K to $7K lower actually improves DVK's Sharpe Ratio by lowering his volatility:

    New Value
    for _________ New
    10/31 ______ Sharpe Ratio

    $39,000 ____ 0.4543
    $38,000 ____ 0.4481
    $37,000 ____ 0.4387

    Thanks for uncovering the longrundata issue. I don't think a small change in one month's returns will cause much change in the SPY Sharpe Ratio, though it would lower the Annual CAGR value a tiny bit.

    I still believe my results are indicative of "the truth", even if not 100% correct. The data suggest DVK's reward to risk is about 10% to 15% better than SPY over the seven year period.
    Jul 21, 2015. 11:21 PM | 1 Like Like |Link to Comment
  • The Real Difference Between Total Return Investing And DGI [View article]
    The engineer gene in me appreciates the approach. Despite the use of different metrics, both DGI and TR approaches are based on a company's ability to continue growing.

    Instead of "Tastes Great" vs. "Less Filling" we have

    "Pays Great" vs. "Keeps Compounding".

    So long as both remain true wealth grows over time.
    Jul 21, 2015. 11:07 PM | 8 Likes Like |Link to Comment
  • Periodic Table Of Dividend Champions - Which Champions Have The Best Combinations Of Yield And DGR? [View article]
    "the correct balance of your DVK portfolio on 10/31/08. Smarty claims he copied your data correctly but I think there is a clerical error (same total as 8/31/08.)" - FinancialDave

    I double-checked the document DVK sent me and the values are the same for both months. I don't know how DVK maintains his document so I can't comment on how it got that way.

    In addition, I don't see why the exact value matters so much. The Sharpe Ratio I calculated is based on the standard deviation of the monthly returns. If you change one month's value, the return for that month and the following month both change. In this case, it has almost a "don't care" impact on the Sharpe Ratio.

    DVK's portfolio value for 10/31 is noted as $44,836. On 11/30 the portfolio value was $36,464, a drop of over 18.6%. Changing the value on 10/31 to something "worse" causes the data on 11/30 to improve significantly, which offsets much of the negative impact of the change on 10/31.

    I went back and recalculated the Sharpe Ratio for a few different possible portfolio values on 10/31 and got the following changes in the Sharpe Ratio:

    October 31
    Value _______ Sharpe Ratio
    $44,836 ____ 0.4299 (the original Sharpe Ratio I calculated)
    $44,000 ____ 0.4383
    $43,000 ____ 0.4467
    $42,000 ____ 0.4529
    $41,000 ____ 0.4565
    $40,000 ____ 0.4571
    $39,000 ____ 0.4543
    $38,000 ____ 0.4481
    $37,000 ____ 0.4387
    $36,464 ____ 0.4324 (the portfolio value on 11/30)
    $36,000 ____ 0.4263

    So as you can see, changing that one month's portfolio value has almost no impact on the final Sharpe Ratio. In fact, most of those different values cause DVK's Sharpe Ratio to improve.

    So even if DVK transcribed something improperly that one month, his Sharpe Ratio is still better than SPY's was. The validity of the exercise remains unless you're just going to claim that DVK's values were ALL wrong and that seems a bit overboard as an argument against the original result.

    At some point you just have to accept the data and the results it presents.
    Jul 21, 2015. 10:58 PM | 5 Likes Like |Link to Comment
  • Is HCP The REIT Buy Of The Year? [View article]
    To see a real US Battleship look here:

    If you haven't ever seen a battleship up close and in person, and you get an opportunity to pay a visit, I'd highly recommend the trip. They're pretty impressive.

    USS Alabama, Mobile, AL
    USS Iowa, San Pedro, CA
    USS Massachusetts, Fall River, MA
    USS Missouri, Honolulu, HI
    USS New Jersey, Camden, NJ
    USS North Carolina, Wilmington, N.C.
    USS Texas, LaPorte, TX
    USS Wisconsin, Norfolk, VA
    Jul 19, 2015. 10:28 AM | 3 Likes Like |Link to Comment
  • Measuring The Success Of Your Dividend Portfolio [View article]
    "and that metric (the last 3 years based on current portfolio makeup) gives the SPY a 65% advantage in risk adjusted returns. To me anyway that seems pale in comparison to a metric that gives the DVK portfolio a 10% advantage over 7 years on a portfolio the is unrecognizable to the original." - FinancialDave

    Sounds like a Recency Bias to me.

    "The Party Effect or Recency Bias is where stock market participants evaluate their portfolio performance based on recent results or on their perspective of recent results and make incorrect conclusions that ultimately lead to incorrect decisions about how the stock market behaves." - Wikinvest

    The way I would interpret the meaning of a measurement based on the most recent three years of data would be that SPY outperforms during bull markets. However, SPY's performance during a down market and the years immediately afterward was equally as disappointing when compared to DVK's portfolio. Don't you think that's an important fact for an investor to know too?

    Since the typical investor will experience all kinds of market conditions, then it seems to me that performance over all types of markets, in total, would be a more complete measure of reward to risk for any method.

    As for turnover, I (still) don't get it. What difference does turnover make? Someone who day trades e-mini contracts might have turnover in the hundreds of percent, yet the Sharpe Ratio can still be used to compare reward/risk to DVK or SPY.

    DVK's written DGI methodology has allowed him to sell some stocks and buy others, from Day One. It's part of his DGI method.

    If market conditions present him with a chance to sell an overvalued, low yielding stock for an undervalued higher yielding stock with similar dividend growth characteristics, why wouldn't he do so if his 'rules' allow it? Why can't he trim some stocks to add another and improve his portfolio's diversification, or reduce the concentration in one stock?

    Those changes don't invalidate the reward/risk ratio measurement, it simply means that those changes are a part of his written DGI methodology which the reward/risk ratio is measuring, just like it measures the performance of the S&P 500 index (with a ~20%, seven year turnover), which is based on written rules (implemented by a committee of some sort).

    Extending your prior comment, do you feel that the Sharpe Ratio is evaluating the S&P 500 committee's "fund managing" ability, as you stated it is evaluating DVK's fund managing ability? I imagine the committee membership changes over time, but the rules that drive their decisions probably change much more slowly. It's the rules that determine what companies are dropped or added, not the committee members, just as it is DVK's rules that determine what stocks he selects to hold or sell.

    If you don't feel that having information about both good and bad times is a better way to evaluate your investment approach, then by all means, Party On. Ignore the four years where SPY lagged significantly. Me, I'd rather make my evaluation after seeing both sets of data.
    Jul 17, 2015. 03:25 PM | 4 Likes Like |Link to Comment
  • DVK Portfolio Comparison To SPY, Using Sharpe Ratio [View instapost]
    "10/31/08 $44,836.00

    this total looks out of place and is further suspicious because it is exactly the same total as 8/31/08." - FinancialDave

    I got those numbers from DVK. I transferred all of them to a spreadsheet using a single cut and paste from his data so I don't think I could have "entered" the numbers improperly.

    You'll have to ask DVK to verify them. I'll see if I still have the original data set somewhere and double check when I get the chance.
    Jul 17, 2015. 02:49 PM | Likes Like |Link to Comment
  • DVK Portfolio Comparison To SPY, Using Sharpe Ratio [View instapost]
    ""... in a recent book by Lowell Miller, where he notes that some people point out that "you can't eat risk adjusted returns." Which of course is very true and one of the reasons why I like to report REAL results." - FinancialDave

    "Tell that to the SPY holder at the end of December 2011 when his holdings were valued 18.25% lower than DVK's portfolio." - me

    I might add that roughly 300,000 Baby Boomers retired that month and may have had to convert their TR portfolio to an income portfolio at a inoportune time in order to generate the cash stream needed to fund their living expenses.

    One aspect of DVK's portfolio I didn't note here is the much higher level of income it generated (with the same TR as SPY) and the fact that he didn't have to do anything like restructure it.
    Jul 16, 2015. 10:11 PM | 1 Like Like |Link to Comment