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  • Retirement Strategy: It Is A Correction, Not A Crash [View article]
    WTI at about $85, with contango in the futures market (it is profitable to fill tankers with crude oil and park them in the ocean while cycling through oil futures)... where is panic selling (fear) creating a major opportunity for the patient?

    In the long run, say out to 2025, the market for petroleum will sort out any short-term oversupply conditions. Demand is not really going away, as global population is increasing, and the fleet of internal combustion engines in the world keeps getting bigger. Obviously I am oversimplifying, but crude oil is the lifeblood of global GDP.

    I note that COSWF is yielding around 7.3%, subject to Canadian foreign tax with-holding. The price recently has been trading at new lows (w-a-a-a-y below the midpoint in the 52 week range.) I believe that year-end tax-loss selling probably will drive COSWF even lower in December of 2015, but I thought this is a good time to nibble. So I bought a few hundred shares.

    This is not a recommendation, and should not be construed as investment advice.
    Oct 11 08:10 AM | 3 Likes Like |Link to Comment
  • Retirees: How To Make The Most Out Of Your Next 15 Years [View article]
    After reading a number of articles on financial abuse of elders, I understand that there is a decline in financial problem solving ability that begins on the average at age 54.... and the decline is sometimes rapid. The author would put the retiree in the role to "select" investments. I think it is only realistic to expect the ability to search and select will decline beginning around age 54.

    In cases of elder abuse, I find it interesting that older people would invest in deals that are too good to be true, Ponzi schemes, replacement annuities, etc. Apparently there is an area of the brain in the prefrontal cortex that does the work of deciding who/what to distrust. When elderly people lose the ability to distrust, they can be an easy mark for unscrupulous family members and financial con artists.

    I think that by the time I am 75 I would want the bulk of my financial assets annuitized. Planning well in advance, I think it is possible to identify one or two companies where the commissions are low and the sales tactics are without a conflict of interest with the annuitant. In my opinion the "ones to beat" are TIAA-CREF and Vanguard for Single Premium Immediate Annuities.

    The objective of annuitizing over age 72-75 feeds back to decisions about the maturity of individual bonds for the portfolio. (I believe the certainty of income and principal repayment is vitally important with bonds, and so individual bonds are my choice, rather than a bond fund.)
    Oct 9 12:11 PM | 1 Like Like |Link to Comment
  • 8 To 14% Discount On Energy Stocks [View article]
    I believe the discount is explained by the retail investors waxing and waning sentiment for the sectors held by PEO:
    32% Integrated
    23% Exploration & Production
    17% Service
    Remainder various

    I also believe the enthusiasm for E&P and Service stocks is quite muted these days because of the perception of a "glut" in the US market.

    At the extreme, PEOs discount has been as much as 20%. For a 20% discount I think the retail investor would be both pessimistic about the energy sector and fearful of stocks generally.
    Sep 29 10:30 AM | Likes Like |Link to Comment
  • Inflation Is Killing My Retirement: How I'm Dealing With It, Part 3 [View article]
    Living in the USA, and being retired, "covered" by Medicare, I feel that medical expenses are a huge threat that could cause a retired person to outlive their retirement savings.

    Case in point:
    The front page of the September 21, 2014 NYTimes story about "drive-by" doctoring. The case involved a patient signing all the consent forms, and agreeing to be responsible for charges if insurance did not pay them. During neck surgery, without his knowledge, an "assistant surgeon" was called in, and billed the patient for $117,000. The Times reported that the practice is increasingly common.

    I am skeptical about a portfolio of health care REITs providing adequate income to offset the unpredictable 6-figure medical bills that some retirees are likely to receive in their riper years.

    Beyond age 75, I wonder if it might be rational to annuitize long term investments, and replace them with Single Premium Immediate Annuities (from low-cost sources) with a 4% increase in payments annually. In some states, I understand that annuity payments are creditor-proof. So if a retiree lives in one of those states, and receives a medical bill which he is unable to pay, the provider would probably turn the bill over to a debt collection agency, but (as I understand... and I am not claiming any legal knowledge) any judgment against the patient would not extend to annuity payments.
    Sep 23 10:35 AM | Likes Like |Link to Comment
  • What I See With This High-Paying REIT That Mr. Market Doesn't [View article]
    I regard CSG as a leveraged bet on the management savvy of CEO and founder Jack Cuneo. He and 27 other persons are the full complement of employees.

    10-K filings with the SEC, Statement of Shareholder Equity, show the number of outstanding shares changing frequently. Shares "ebb" due to Redemptions of Common Shares, and Repurchase and Cancellation. Shares "flow" from Public Offerings, Dividend Reinvestment, and Share-Based Compensation.

    As I understand it, FFO is calculated on a per share basis, so if the share count drops by 1.3 million in a year, all other things being equal, the FFO amount will be higher at the year-end basis than it would have been had the share count remained unchanged. Any comparison of P/FFO over time or between REITs over time, therefore, needs to be qualified by the elastic tendencies of the shares outstanding.

    I have nothing but admiration for Jack Cumeo. Filings with the SEC show his purchases of CSG stock, typically 1,000 or 2,000 shares at a time, as well as the awards (share-based compensation?), typically 150,000 to 186,000 shares at a time. At least that's how it looked to me when I looked at the filings on insider transactions in 2013-2014.

    Looking at the calendar, it would not surprise me if some of those investment advisors, who put retail investors into the newly listed CSG shares at $10, called the same clients on the phone in December, and told them about tax-loss selling. Maybe tax-loss selling will tend to depress the market price for CSG in December. If so, the price could bob back up in January.
    Sep 22 02:54 PM | 2 Likes Like |Link to Comment
  • Canadian Oil Sands Update: The Mildred Lake Mine Trains [View article]
    As a holding into the 2023-2025 horizon, I agree COSWF is appealing for current yield and also as a hedge for higher crude oil prices.

    As I understand it, the product of the upgrader is SYN, light sweet synthetic crude oil, which is used to dilute bitumen for transport as "synbit" in the pipelines to various points from Edmonton. If I am correct in this understanding, then I assume that the demand for SYN can be projected far in advance, based on pipeline capacity and flows.

    Currently there is active political opposition to the Keystone XL Pipeline, and I believe President Obama (or his successor) eventually will approve the cross-border connection. When pipeline flows increase, the quantity of SYN demanded will increase, and so COSWF production will rise. Aside from the fact that "Big Oil" will influence elections until they get Keystone XL completed, there are arguments for the pipeline.
    1. Less reliance on rail transport with its costs and risks.
    2. Some construction jobs.
    3. Reducing the price differential between Western Canadian WCS crude and WTI.

    Disclosure: long COSWF. I buy my granola 4x per year with the dividends.
    Sep 19 03:26 PM | 6 Likes Like |Link to Comment
  • The Growing Problem For Income Investors [View article]
    I believe growth stocks have a place in a portfolio that is allocated with the goal of appreciation, as opposed to capital preservation.

    Given goals of portfolio growth, I see some merit in broadly diversifying, such as by a series of buys of the ETF VIG. The ETF avoids selection risk.

    In my opinion the companies with the most rapid earnings growth tend to operate in markets that are rapidly changing and unpredictable. Management of a particular corporation may or may not be able to continue to master the uncertainties and thrive in the near future. But the ETF essentially buys the combined smarts of a broad sample of managers (good, bad and ugly) with an established record of growth in a wide variety of markets.
    Sep 18 09:30 AM | 1 Like Like |Link to Comment
  • Retirement Strategy: Filling A Gap With An Overlooked Dividend Aristocrat [View article]
    As I understand, the regulatory regime for banking in Canada protects the Big Five in a number of ways. Is it true that for one of the Big Five to buy another, a federal board must approve it? I believe the USA has a few zombies among its biggest banks, and for perhaps 30 more years they will "extend and pretend", rather than recognize their losses from the mortgage bubble etc.
    I understand that Canadian retail banking has "home-grown" completion from credit unions, but are protected from foreign completion. Yet Canadian banks can and do enter foreign markets (for better or worse... Harris Bank, TD-Ameritrade, etc.)
    Canadian bankers are able to learn best practices and innovations at home and abroad and apply selectively in their operations.
    In the United States, from the perspective of the Federal Reserve, the larger banks are too big to fail. But I believe the politics in the USA will reward a President when a big bank is made to pay a big fine (without going for the jugular vein, of course).
    Disclosure: I have held BMO and CM in the past, and would consider buying stocks in Canadian banks in the future.
    Sep 9 10:27 AM | Likes Like |Link to Comment
  • Inflation Is Killing My Retirement: How I'm Dealing With It, Part 1 [View article]
    Social Security and military pensions are indexed to CPI, as are many of the defined-benefit pensions from various civilian employers. It is important to know the amount of inflation-indexed pension income a retiree is planning on receiving, before deciding on the portfolio allocation. In my case, retired with a substantial inflation-indexed pension, being risk-averse, I allocate 65% to "Capital Preservation" principally in the form of a ladder of municipal bonds maturing in the 3 years when I reach 74 to 76. The interest payments are predictable. January & July payments are emphasized to match the due dates for my property taxes. Without accepting much risk of default (all bonds rated in the top 4-5 tiers by S&P and Moodys) the after-tax yield on this bond portfolio is 3%.

    On the other hand, in the absence of inflation-indexed pensions (aside from Social Security) relatively less of a retiree's portfolio might reasonably be allocated to Capital Preservation assets.

    In my case, the 35% "Risk" portfolio is designed for 6 equity asset classes which are weighted to equalize the risk of loss in any 12-month period.
    8.225% VIG Vanguard Dividend Appreciation Index ETF. At current price of $78.53 the yield is 2%. The portfolio is based on the Dividend Achievers Select Index (Large Cap companies with minimum 10 consecutive years of dividend increases). Fees 0.1% per year. The dividends paid by VIG sometimes decrease year-over-year, but since 2007 the increases have exceeded the decreases, with a cumulative effect of outstripping the CPI in the same period.
    6.685% Equity investments which are likely to pay higher dividends as a direct result of higher crude oil (WTI) prices. My specific selections include COSWF (Canadian Oil Sands) and PEO (Petroleum and Resources closed-end fund). I anticipate a current yield of 6% before tax. Incidentally the large distribution from PEO at year end coincides with one of the 3 months in which I pay the most for home heating with natural gas.
    6.665% Equity investments in utilities with a history of dividend increases. T and ED are included. Incidentally our water bill comes quarterly and coincides with dividends paid by PPL, AEE and SCG.
    6.47% REITS. My selection to hold outside of a Roth IRA is PCL, in the belief that long-term dividends will increase as a direct result of higher lumber and stumpage prices. My selections to hold inside a Roth IRA include closed end REIT funds AWP and IGR, assuming that dividends will increase if rents increase.
    4.795% VWO Emerging Markets Index ETF. The rationale is similar to that for VIG, with a potential accelerant to dividend growth that I assume may follow from higher growth rates in emerging economies.
    2.17% Equities involved in precious metals and other minerals. Examples include VGPMX and URPTF (uranium in storage). Volatility is high, which explains why the allocation is lightest in this class. This class is not owned for dividend income, but rather for long-term gains.

    This is my personal opinion of how I would construct a risk portfolio intended to keep up with inflation. It is not intended as investment advice, and nothing herein is to be construed as such.
    Sep 5 05:11 PM | Likes Like |Link to Comment
  • Can You Live Off Of Dividend Growth Income In Retirement? [View article]
    From age 58 to 65 (start of Medicare benefits) I would expect significant increases in the cost of health insurance. I don't know whether the assumed $70,000 per year for expenses is so granular as to select a strategy for health insurance and model the cost. In my experience, retiring at 50, continuing in an employer-sponsored health insurance program, the wife and I absorbed double-digit increases in annual premiums. Eventually we moved one spouse (the super-healthy one) over to a high deductible insurance policy. There were no claims from age 54 to 65 on this policy, but the annual deductible was $3500. (And even though the company never paid on a claim, they were charging $525 per month for one person insured during the last year before Medicare eligibility.)

    In our experience there was a need for more dentistry after the teeth had 50 years on them. So basically there is a choice awaiting this couple: "Do you want to keep your teeth?" Spoiler Alert: If they want to keep their teeth, it would be very expensive. But if they don't, that would be expensive too!
    Aug 28 09:07 AM | 2 Likes Like |Link to Comment
  • Electric Utilities Might Belong On Your Sell List [View article]
    Coincidentally, I recently sold all my electric utility stocks, except for ED and a smaller position in PNW. As Dividend Sleuth rightly observed, this liquidation will result in a reduction in dividend income and capital gains taxes. (My gains were about 35% ... which I thought was "ok" on utility shares. Like the man said, the easy money already has been made. By somebody... LOL.)

    As a risk-averse retiree, I do not see other equity investments that are priced attractively at this juncture. I intend to park the proceeds in a low-cost municipal bond fund. Since the duration of the fund portfolio is less than 3 years, I do not anticipate significant losses, if interest rates go up.
    Aug 20 09:30 AM | Likes Like |Link to Comment
  • Housing Relates To Income More Than Credit Now [View article]
    Economic commentary at NAHB website attributes slow home building activity to supply constraints on labor and building lots. Anecdotally the fracking gas boom has recruited a large number of workers who might otherwise have joined housing construction crews.
    Aug 20 09:08 AM | Likes Like |Link to Comment
  • The Coming Market Crash And The "Trigger" [View article]
    I checked the info about "Portfolio Margin" on the websites of ETrade and TDAmeritrde. Basically margin is set at the amount the broker believes is "the largest loss identified" on stress testing the portfolio.
    TDAmeritrade gives the example of a diversified stock portfolio of $65,235 requiring a margin of $9,785.25 (15% margin). Mind you, an account has to be $125,000 minimum to start Portfolio Margin. And if the account value drops below $100,000 the Portfolio Margin eligibility would be finished.

    Still, the methods of Portfolio Margin look like they could increase the leverage of certain brokerage accounts quite a bit... with the increased risk of margin calls and forced selling, should the stocks drop by more than 15%.
    Aug 10 09:10 AM | 2 Likes Like |Link to Comment
  • Midyear Update: Petroleum & Resources Hopes Exxon And Chevron Join The Game [View article]
    Based on information at etf connect, there were a couple occasions which in retrospect look like good times to sell PEO. Approximately 2000 the price dropped from $30 ish to $20 ish. Approximately 2008 the price dropped from $40 ish to $20 ish.

    Coincidentally with these declines in PEO share price, the NAV also tumbled.

    A long-term holder might not have been perturbed by these price declines, because income continued (distribution of long term capital gains near the yearends as well as dividends from the portfolio). I think PEO makes an interesting equity income alternative, because the big distribution at yearend comes in a month with major heating and holiday expenses of the household.

    I don't know about the 1980's, but since 1994 PEO discount has been less than 5% on 5 occasions.... and more than 15% on 3 occasions. At the 52-week low, PEO price was $25.39 and nav was $29.86, for a discount of 15.87%

    In the year 2000 the discount was over 20% for a brief period.

    The 5 year average discount is 13.24%. Historically investors (supply and demand for PEO shares) have produced discounts that range from about 5% to about 20%.

    My sense is that the entrenched management of PEO is not going to be moved "open-end" the fund. They may buy deeply discounted shares on the open market. They seem to be resolute that the promise of 6% distributions will keep most of the shareholders satisfied, and there will never be enough disgruntled shareholders to challenge the existing board. I understand Adams Express (a ditto closed end fund) would have more votes than any other shareholder under any scenario for board election.

    So the status quo will remain, with PEO an alternative for a long term flow of distributions sourced from the petroleum and petrochemical industries. Strategically, I believe it is important to decide on a price low enough to buy PEO in order to expect above average future returns. I would peg that price at $27 and change. Possibly this price will be seen after PEO goes ex dividend in November.

    This is not investment advice. I am expressing personal opinion only.
    Aug 8 10:18 AM | Likes Like |Link to Comment
  • Retirement Strategy: Is It Time To Dump Everything? [View article]
    Jim Skelton - Para Bellum 16:

    You verbally warned readers to take heed of Elaine Garzarelli's "crash and burn in a drug-fueled haze".

    I can't say that I have avidly followed her career, but hers has been one of some significant achievements. After her call of the 1987 crash Elaine Garzarelli developed a celebrity status, which some may have envied. Lehman let her go in 1994. She established Garzarelli Capital, which continues as a going concern. The website of Garzarelli Capital claims that since 1982, Elaine Garzarelli has fairly accurately called the tops and bottoms of the SP 500.

    While I do not know Garzarelli's current market outlook, I read on Reuters that as of November of 2013 she was accurately bullish.

    I thought your input was not-so-wonderful, to the extent that you had nasty things to say. And of what relevance is your opinion of Elaine Garzarelli to the discussion?

    Aug 4 08:49 AM | Likes Like |Link to Comment