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  • 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 | 1 Like 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
  • Picking Up Yield In The Recent Energy Sector Decline [View article]
    My previous comment should read: Synthetic Crude (NYSEARCA:SCO) which is light, not WCS, which is heavy.
    Aug 3 01:50 PM | Likes Like |Link to Comment
  • Picking Up Yield In The Recent Energy Sector Decline [View article]
    Obviously there is a time and place for energy equities in a portfolio. As to petroleum, right now I feel the time is "later", primarily because I foresee supply increasing more rapidly than demand. Gulf coast refiners in the US would probably benefit, if the price of WTI is weaker than the price of gasoline at the pump. However, I think the best times to invest in the sector are when WTI crude prices are high and rising.

    Western Canadian Select upgraded by Syncrude may have long-term prospects of rising prices, as transportation constraints are relieved in coming years. My preferred way to participate is COSWF, which made a 2-year low of $17.76 in late January 2014.

    Also, I believe Uranium is another fuel which will see rising spot prices. Again looking to Canadians, URPTF (Uranium Participation) represents ownership of uranium already mined and in storage. Changes in the spot price of uranium have a fairly direct influence on the price of these shares. No yield.

    Disclosure: long COSWF and URPTF, as an inflation hedge.
    Aug 3 01:22 PM | Likes Like |Link to Comment
  • Retirement Strategy: Is It Time To Dump Everything? [View article]
    The article certainly prompted some interesting responses. I agree with Regarded Solutions that this is not the time to sell everything, but I have been gradually taking profits in equities.

    As a retiree I am quite risk averse. I thought risk in the equity markets was quite low in the spring of 2009, and I believe it to be quite a bit higher now.

    On the matter of Investor Greed versus Fear, I would be more interested in the CAPE as an indication of investor fearlessness than CNN's meter. CAPE is now about 26. It has been higher historically on occasion (28 at the 2007 peak, 44 at the 2000 peak, etc.) The Cyclically Adjusted P/E is elevated now. Over the coming decade, therefor, I expect that total returns from equities will be depressed.

    Today's environment presents higher risk and lower prospective returns. So, I believe this is a good time to raise some cash, preserving capital until such time as the environment becomes more favorable to equity investment.

    The problem I have with CNN's meter is that it changes from fear to greed and back quite often. Since January of 2012 I see 5 peaks in greed (over 80 on the CNN scale) and 4 peaks in fear (under 20).

    I followed the link to the Gallup study. By the way the link does not go directly to the Gallup Item... It goes to a different Gallup survey about Americans' attitudes toward the stock market. But I found the survey results referred to, dated May 8, 2013. Gallup did find that 52% of American households owned stock, down from the pre-recession level. Gallup's interpretation was that unemployment explains it. Fewer American households have the savings, in other words, to invest in the stock market. Gallup's interpretation does not attribute it to fearfulness about equity markets.

    My sense is that for those who do have the ability to invest in stocks, the price appreciation since March of 2009 has been noticed, and they bought stocks, not only with cash but extensively on margin as well. Now, I see discussion about how much higher the stock indices can go before the "overdue correction". Personally, I feel I can afford to miss out on the price appreciation which may be expected.

    My comments here are not investment advice. I am respectfully discussing an article and comparing the author's views to my own perceptions of markets.

    Jul 29 10:41 PM | 1 Like Like |Link to Comment
  • HCP: Decidedly More Affordable After CEO Got Fired [View article]
    October 2, 2013, The day before the news about Mr Flaherty's termination came out, HCP closed at $41.77 ... Recently (July 8, 2014) HCP closed at $41.33 It is true that the day the news came out, HCP stock dropped nearly 5%, but it seems to me that the share price has pretty much recovered by now.

    Flaherty was President, Chairman and CEO. There were fewer checks and balances in that arrangement than there would have been had there been two persons in those roles.

    I imagine the severance payments to Mr Flaherty would have been in excess of $13,000,000. I am curious what the actual amount was.
    Jul 10 08:02 AM | 1 Like Like |Link to Comment
  • Getting The Returns Without The Risk [View article]
    Excellent thought-provoking article. The recommendation for a "retiree" of a 1-7 year bond ladder would perhaps be suitable for an individual with no intention of dissipating (or decumulating) wealth and thus not planning to "die broke".

    Highly rated GO municipal bonds, or water & sewer revenue bonds, with adequate call protection might be the optimal categories for after tax yields relative to risk of default. I would add that prudent diversification would require at least 20 issuers, with a maximum of 2 issuers per state. As an additional filter, I would try to avoid issuers where political corruption is a recorded fact.
    Jul 8 01:52 PM | Likes Like |Link to Comment