BigOlDave

The DJIA's Dangerous Indexing Philosophy

I compare my portfolio with the S&P 500.

Maybe that's because, when I hear the media report "the S&P is up 1.09 points for the day, closing at 1046.50", it's easy for my aging mind to calculate that the market's moved only about a 10th of a percent.

So I'll assume that I've made a little money today.

Dividend Portfolios: Diversification Ideas

David Van Knapp,

Thanks for your comments. I'm going to your site to print out/study other things you've had to say.

Here's some investment advice from King Solomon (Ecclesiastes 11:1-6) which seems to line up with some of the things you've said (though Sol said just pick 7 or 8 that you think will be winners, not 10-15):

Ecclesiastes 11

1 Cast your bread upon the waters,
for after many days you will find it again.

2 Give portions to seven, yes to eight,
for you do not know what disaster may come upon the land.

3 If clouds are full of water,
they pour rain upon the earth.
Whether a tree falls to the south or to the north,
in the place where it falls, there will it lie.

4 Whoever watches the wind will not plant;
whoever looks at the clouds will not reap.

5 As you do not know the path of the wind,
or how the body is formed [a] in a mother's womb,
so you cannot understand the work of God,
the Maker of all things.

6 Sow your seed in the morning,
and at evening let not your hands be idle,
for you do not know which will succeed,
whether this or that,
or whether both will do equally well.


Best regards,
Just another Dave

The Death of Buy and Hold Is Greatly Exaggerated (Part 2)

It's incomprehensible that anyone considers "Buy & Hold" a viable strategy.

It's neither.

You know, a lady I knew (now long dead) bought stock in strange little companies. Her wealthy husband thought she was nuts, but loved her and knew he couldn't change her mind about anything, so he gave her money to "play" with: a little bit at first, then -- after these little companies started doing tremendous business and their stock prices surged -- he draped gobs of free cash, even selling some of his old dogs and letting her invest.

They retired wealthier than he deserved. She turned her account over to her broker, and they retired. During the next 20 years, business went global, their investments withered, she died, he went senile, and he refused all brokerage advise.

He held ...and held ...and held. First her textile stock went bankrupt, then the steel services company merged and he got skinned, and the rest of his investments got shifted into a mutual fund at his son's urging.

Then the son died. The woman's daughter-in-law slavishly hangs onto her withering mutual fund because it "keeps up with the market pretty well."

If your objective is to "keep up with the market pretty well", stop reading Seeking Alpha and other thoughtful sources, put your money into an INDEXED mutual fund, and go volunteer at a charity someplace. Vanguard pumps these products because they manage them for the lowest fee around. But a bad strategy for a low price is ...

...still a BAD STRATEGY!

Buy-and-hold has even been forsaken by entertainers like Jim Cramer. The new version is "buy-and-homework". Better yet, "Do homework / Buy Low / Do homework / Sell just as soon as things start turning bad or when there's a faster train on the tracks / Do homework." This strategy is guaranteed to outperform the market and, over the intermediate term, make you money.

It's working for me! And that's in the worst stock market environment since that long-dead, wealthy lady first started investing.

Dave

Dividend Portfolios: Diversification Ideas

These are stocks I hold (but will trade if P/E rises) for their dividends, with yields as of today's share price and y-o-y share price appreciation in parentheses (S&P was -31.4% during the last year).

o General Mills Inc.(GIS) = 3.1% (-11.5%)
o CurrencyShares Australian Dollar Trust (FXA) = 4.0% (-15.4%)
o Navios Maritime Partners L.P. (NMM) = 16.4% (-31.8%)
o Tele Norte Leste Participacoes
SA Sponsored ADR (TNE) = 9.4% (-40.9%)
o Himax Technologies Inc (HIMX) = 8.3% (-43.1%)
o AT&T Inc.(T) = 6.8% (-31.1%)

This is a fully diversified portfolio, and it's generating cash for me to use for my "next great pick": I don't reinvest to buy more shares in any of them. Lately, these also defy the reasoning that a high dividend yield means the share price won't appreciate.

But the enormous y-o-y losses more than offset the dividends. Obviously, last year I should have gone 100% into cash and waited for some of these to crater so that I could get some appreciation in share price ...plus the nice dividends.

So take a look at where the price is now and where it is reasonable to assume it will go in the future. P/E is a good measure when used to compare current P/E with both historic ones, and the P/Es of what the experts consider comparable stocks. Obviously, since I'm still hanging onto all the holdings listed, I expect share price apprecfiation, NOT dividends to make up for future decay in share price.

Does anyone have any exciting "next great pick" to recommend? Would anyone recommend dumping any of my picks?

I ask because I'm interested in your responses.

Dave

Tuesday's Options Recap

EXM suspended it's dividend as customers have begun abrogating established charter rates. That kills needed cash flow for shippers like EXM (DRYS has already suspended it's dividend) For details, go to: www.excelmaritime.com/...

Sure this is a prudent decision, but these customers annoy the snot
out of me. They unilaterally void contracts! Who in the world does
this, except customers of shippers ...or perhaps only the dry bulk
shippers? Don't think for a second that if charters are doing this to
Excel, they doing it worldwide to all of the dry bulk carriers.


From a legal standpoint, this lets Excel et al re-charter their boats
to the highest bidder wherever and whenever there is stuff to be moved
internationally. That will mean that Excel can jump out or the
customers will have to pay up ... retroactively, plus whatever premium
Excel will have from an optional customer.


For 2009, Excel is dead in the water! Expect shares to sink back
toward $3.50, at which point, I'll be buying with both hands ...unless
the world does not want to do business with anybody.


Dave

Wall Street Breakfast: Must-Know News

Rachael,

Would it be possible to enhance SA's stock site's symbol? Click Ariba (ARBA) and all we get is the chart. If this is too much work, why not forward to Google/Yahoo/MSNBC or another site that at least tells us what sector it is in? Maybe you could even collect some ad revenue for the click!

Dave