Big K

Where Are the Bears?

The market has returned to normal. Neither high nor low. In March, 666 on the S&P was a flyer. Many bears on this bearish forum think we are headed back there and below. Wake up and smell the coffee. That was a once-in-a-lifetime buying opportunity. I'm sorry you all missed it!

China's Investing in a New Currency... And It Ain't the Dollar

Come on guys, nobody takes the Geithner and Bernanke clowns seriously anymore. They have burned up all their dry powder and are out of scams. The gallows floor is now open beneath us. Look out below!

If the Chinese are stupid enough to keep their money with Tim "Madoff" Geithner and Ben "Ponzi" Bernanke, we are happy to take them to the cleaners too. Afterall, it is the American way.

Cramer's Lightning Round - The Hottest Market in the World (6/9/09)

Realty Income Corp's leverage is less than half of most REITS. They
will not have trouble refinancing in 4 years, when their earliest note
is due. Realty Income also has been paying down some debt. Cramer has been right about many companies, but here I think there is much less risk than he is giving them credit for. Many REITS have an unbelievable amount of debt, with little chance of repaying it. Not the case for Realty Income who has a debt of only $1.3 billion (about $13/share). Consider, for example, similarly sized Weingarten Realty, a company that up until the last several years, had been well managed and conservative. Their debt has suddenly ballooned to $3.2 billion in the last several years (about $26/share after they issued more shares). Unlike irresponsible Weingarten and many other REITS, Realty Income has been much more prudent and conservative in their use of debt to expand, so I believe much less risk than most.

A Year and a Half Later, the Mainstream Press Gets 'Underemployment'

Need to stop outsourcing jobs to foreign lands. How many factories have been shut down so a company can make the exact same product in a foreign land to save some money, only to import the product back to the US? This surely won't work for long because Americans won't have the kind of jobs to be able to afford that product. Especially when these same companies are bringing in foreigners to work the jobs that do remain in the US. We are really beginning to see the effect of this kind of short-term thinking, the US's 3rd world destiny. Obama needs to make good on his campaign promise to put a stop to this. Moreover, on imports, we need to protect our markets better through fair trade, not free trade, which is isn't working out too well for working Americans.

Pequot Capital Closes: Expect Downward Pressure on Top Holdings

More generally, such hedge funds don't sound either successful or well-regarded to me. If they were, they wouldn't have to be shutting down amid this kind of controversy. Maybe the author symbolizes what is wrong with Wall Street today, a culture of dubious expectations. Until the SEC opens up an investigation, is violating the law considered successful and well-regarded, as long as they can get away with whatever they were doing? For the rest of us, it is good news that the SEC is cleaning up the street, enabling the rest of us to have an honest chance. Cheaters will not be missed.

BTW, the piddly holdings of this hedge fund are insignificant, especially compared with Madoff's caper, and will be a drop in the ocean when they are liquidated.

How Today’s 2.46% Dividend Yield Could Destroy Your Wealth

More important than the current yield is the rate at which the company increases the dividends. Take ABT for example. It currently pays a 3.6% yield, but just raised its dividend by 11%. If you had reinvested these, you would have a 15% higher dividend this year than last. Keep this up for a few years, and then you've got a great yield. Few jobs give you a 15% raise every year. It takes some time and patience to get a fat dividend, but the important thing is reliability of the dividend and its rate of growth.

Current Rally: Are We in May 2003 or May 2008?

Another aim to fit the current situation into a past pattern. Sorry, each time is different. The market does not remember or care what happened last time. Attempts to fit the current market with some historical trend have no merit. One thing is for sure; this is not May 2007. The market fell down 50-60% after summer of 2007. It won't happen again, for quite some time. Too many bears are praying for this to happen again, writing articles like this one. They missed it in 2008, and have now sold short, after the market is down 50%. It's too late.

While the economy is still sputtering, it is far from dead. The recovery of the averages recently is not yet a bull market, but a correction of an oversold condition. For stocks to fall again another 50 or 60% from here(because this is where the author might like to "revalue" them), the country's economy would have to regress back to a point where there is 30% unemployment, and we all should grow our own vegetables and hunt buffalo. It ain't gonna happen.

Realty Income: Prudent Management, Justified Premium?

So, what's the answer to the title question? Is the stock worth the current price of $21 or the liquidation price of $15? It should be worth more than liquidation price, because even liquidated property has to be managed and a business run of it. Without management and a business, the property will have much less value. So, the actual price has to be higher than liquidation value. I've owned the stock for several years now, and the price has not appreciated, but I've reinvesting dividends for the last year, thus has resulted in 10% more stock and 10% higher dividends. Doing this allows me to get a little raise every month. A couple of decades of this, and we'll be talking about real money. O has to be one of the best REITS out there.

In the REIT world, so many have cut or eliminated dividends that it is scary to hold them anymore. The benefit to shareholders is the dividend, and without it, there is little reason to hold a REIT. So far, O has continued to pay theirs, and has managed their considerable debt well. How long will this continue is anyone's guess. The debacle with REITS in the last 24 months has chased me back to the dividend aristocrats such as SYY, KO, JNJ, PG, PAYX and ABT. The dividend pay rates are lower, but they are much less likely to be eliminated or cut. In fact, these companies are raising their dividends every year. So, if you hold these stocks a few years, they will pay a dividend yield comparable to a REIT, based on your original investment, with much less risk.

The rag is off the bush with REITS. Many of us thought they were safe, boring investments which paid a decent income and would be appropriate for conservative investors. I've been trying them for 6 or 7 years now, and I've discovered that nothing could be further from the truth. They are anything but safe and solid, as it's been one heck of a rocky road. I have had some spectacular rises, only to be followed by armaggedon style crashes. Some have gone belly up (i.e. Mills Corp, GGP), some have plummeted to nothing (i.e. HPT, DDR), and many are just plain old disappointing (i.e. WRI, AHT, SPG). REITS actually represent high risk, leveraged-to-the-hilt, life-on-the-edge, white knuckle type investing. The right way for a conservative growth & income investor is to look at the better managed companies with solid business models that have much lower debt, pay 2-4% dividends, with increasing revenue and earnings annually. With the regular dividend increases, dividend aristrocrats will beat REITS, and the companies will unlikely suddenly stop the dividends or get into serious financial trouble like REITS do (seemingly routinely, nowadays).

JNJ: Don't Get Fooled by Dividend Plays

The author needs to do some better explaining of this one. Only the holders of record are "eligible for the dividend." If you excersize a call option, it means you buy the stock. Turning around and selling an equivalent call is a different transaction, and does not un-do your purchase. You still own the stock until someone buys and excersizes your call. So, the folks described above must excersize their calls by buying the stock at the strike price, then sell the covered call on it, and hopefully receive the same premium. Until someone buys the option from them, they have to bear the market risk. Deep-in-the-money call ensures that the call will actually be excersized. The caveat is receiving the same premium. I don't see how it is possible to do this within one second, however.

Weingarten Realty REIT: Strong Yield, Safe Property Portfolio

The author would do well to do some research before singing the praises of REITS such as WRI. Since this article was published, the dividend was slashed 50-60%. The cut in dividend was widely predicted and should have been known by the author if he were really on top of it. WRI has been badly managed over the last 10 years with debt ballooning to $3.2 billion. The debt increased by almost a factor of 6 while the FFO has barely doubled. WRI has a nice portfolio of good performing assets, but in the hands of fools who can't balance a checkbook. Under the current (mis)management, it is likely these good assets will pass from the stockholders' hands to those of more shrewd creditors who will force WRI to accept pennies on the dollar to get out from under the mountainous debts they've racked up.

Mack-Cali Late to the (Follow-On) Party

I was looking at the April Value Line report on WRI. It is
shocking to see how this once very successful business has been run
into the ground. While WRI's properties are performing adequately,
unfortunately, the management has trashed the business over the last
decade. They allowed the debt to balloon to $36/share. How does a
fairly small company like this allow their debt to grow to $3.2
billion? The good news is that they have solved the problem by adding
more shares, reducing the debt to somewhere between $20- $26/share.
The bad news is the debt is now $20-$26/share. If they kept all the
dividends to pay off the debt, at the now lofty new dividend rate of
$1/year, it would take 20 years to pay off this debt.

This is what killed the REIT industry. Borrow, borrow and borrow some
more, and don't pay down any debt, just roll it over. Oops, credit is
cut off to the debt junkies. The drinking party is over.
Accordingly, WRI will stagger in a stuporous hangover for years, and
that is if the retail situation doesn't get any worse. Now that
rolling the debt over may no longer be an option, WRI is a potential
bankruptcy candidate, despite a fairly robust business. It's time to
remove the fools in the executive suite and replace with people who
know how to balance a checkbook.

Cramer's Mad Money - Unhealthy Interest in AIG (5/14/09)

Motley Fool says NAT raises dividend money by selling stock. Cash flow from operations doesn't cover the dividend. I've also heard this from other reliable sources such as Value Line. Cramer seems to disagree. Cramer needs to explain the discrepancy here, not simply deny it. Give us the numbers in a sober detailed analysis of the balance sheets. Yes, NAT has no debt and is not a failing company, but I don't understand how they can pay out dividends that are bigger than their cash flow and/or earnings. Apparently, dilution is the solution to dividend contribution.

General Mills: What the FDA’s Warning Means for the Market

Store brands are not made by the name brand company. They are made by copy cats in China and are not as good as name brand products. Chinese ingredients are inferior and may even be toxic, i.e. melamine in dog food, antifreeze in toothpaste, lead in toy paint, melamine in baby formula, etc. You get what you pay for. Take chips for example. You can buy Frito Lay brand and get a delicious high calorie chip. Buy the store brand, and you simply get high calorie "cardboard". It's not worth the indulgence. They make you fat, but without the pleasure. The store brand simply doesn't taste as good because it is cheap and has inferior ingredients. Same story with Cheerios, and on and on... People buy Coke because it is the name brand. The Walmart brand is just sugar water. Most folks demand quality. Any hack can make a cereal, corn chip or play a concerto. Some unsophisticated consumers may not be able to tell the difference between Mozart and Mobooty. It takes know-how, ingenuity and talent to make the performance truly good. Name brands such as GIS, KO and PG will always dominate because life is about more than just saving a few pennies. It is about living and enjoying.

Short-Selling Hedge Funds Started the Fire

Naked short selling is helping to make many people very wealthy. In March, there was such a fire sale going on that the smart money was picking up bargains in quality stocks at prices not seen in generations. Imagine getting some REITS for pennies on the dollar. I hope for much more selling. I look forward to buying companies like O, KO and PG for a dollar a share. These will pay a 200% dividend. Bring it on.....

Modest Dividends Point to Delayed Recovery

Since the Dow is an arbitrary selection of stocks, the yield on the Dow now is of no relevance when comparing with the 1930's. I could choose a Dow now that has a higher yield, if that were the criterion. Currently the Dow contains badly mismanaged companies like GM, or scam companies who steal their shareholders equity, like AIG. When you choose companies run by creeps and incompetents to represent your average, you don't do so well. Hence, this article has no reason to exist. Instead, the author of this article should watch and learn from the professionals in this field who follow the S&P 500, and mostly ignore the Dow.

The author missed an important point when he says "CEOs ploughed cash back into buybacks at the expense of dividend hikes for the most part.". Actually, CEOs plowed the money back into their own pockets with unethical pay raises, undeserved bonuses, and sham backdated stock options. That's the reason to avoid most companies on the market today. I stick with companies that have a fair dividend (3% or greater) with a long history of increasing dividends. Afterall, many of the wealthy in this country did so by holding high quality dividend aristrocrats for decades and are now receiving dividends equal to 100% or more annually based on their original investments. Such companies that could have brought you wealth had you bought them decades ago, especially if you re-invested dividends, include KO, PG, CL, CLX, KMP and ABT. These managements, and others, reward their shareholders rather than steal from them.