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  • Cohen & Steers REIT CEF Lineup: What To Make Of This Trio  [View article]
    I was puzzled by the mention of capital appreciation. RQI has a "secondary objective of capital appreciation". RFI aims for "a mixture of dividends and capital appreciation". Do these closed end funds deliver capital appreciation?

    The portfolios consisting of REITs would presumably go with the flow of investor sentiment. As a long-term chart for a REIT index such as VNQ shows: from February 2007 to March 2009 the prices for REITs dropped; from March 2009 to January 2015 REIT prices increased. At the January 2015 high of 89.27, VNQ was 1.33 higher than the previous high of 87.94 back in February 2007. One could argue that from peak to peak the REIT index was up about 1.5%

    Mind you, the preferred stock, comprising 18-19% of the closed-end fund portfolios, would not be expected to contribute to capital appreciation.

    It appears to me that RFI and RQI present an opportunity for capital appreciation if the investor buys low (March 2009 for instance) and sells high (January 2015 would have been nice).

    If an investor with a gift for buying at bottoms and selling at tops had done so with specific REITs such as O and HCN, his capital appreciation would have been significantly greater than had he done so with RFI or RQI. Yes?
    Jan 30, 2016. 09:14 AM | 2 Likes Like |Link to Comment
  • No Strategic Reason To Own Nominal Bonds Now  [View article]
    Is the Inflation Trader advocating 100% allocation to TIPs and zero to nominal interest bonds?

    I have looked for material dealing with the optimal allocation of fixed income investments between nominal and inflation-protected securities. I have not succeeded in locating the Efficient Frontier. However, I have always maintained an allocation, with no science to back it up.

    Currently the ratio in my portfolio is 1:8 TIPS to nominal bonds (generally highly rated municipal bonds maturing in less than 9 years).

    The rates of spendable income I have received as interest on TIPs have been paltry. I recently sold TIPs bonds with a 7-year maturity and used the proceeds to buy closed end funds (WIW and WIA). I understood that the portfolios (both managed by Western Asset) of WIW and WIA were about 80% TIPs and 20% high yield, making them significantly more risky than holding a 7-year TIP to maturity. Both funds employ about 30% leverage. But I felt that given the discount to Net Asset Value (about 16%) and the current rate of distribution (3.69-3.95%), I might look forward to monthly cash compensation for accepting the elevated risk.

    Nothing herein is to be construed as investment advice; I am stating personal opinion only.
    Jan 27, 2016. 09:08 AM | 2 Likes Like |Link to Comment
  • Asset Class Weekly: High Yield Blood Bath  [View article]
    I believe the Fed (and the Federal Reserve Bank of Dallas particularly) has looked into the books of member banks to see the extent of troubled assets in the oil patch. I do not believe that the Fed wants to see a "wave of bankruptcies ... coming from the sector". Asset sales may be more palatable to the Fed. Banks may be more-or-less receptive to suggestions by regulators that some sort of buyer (maybe ye olde buyer of last resort?) could be lined up for the "troubled assets". (Not all banks, mind you ... CFR turned down TARP last time around.)
    I think BOK Financial (Bank Oklahoma) attracted a lot of attention when Reuters reported on 1/13/16 their Q4 credit losses of $22.5 million after "a single energy company failed to meet its obligations under a loan".
    A euphemism for what is happening on the books of the banks is "credit migration"... explained as the collective effect of the credit ratings of a number of borrowers being downgraded simultaneously by SP, Fitch, Moody, etc. The outcome for a bank is: "loans that looked good at first" look increasingly like bad credit. It's as though the credits formed a flock and "migrated" from the sunny uplands to a place where provision will have to be made for loan losses.
    The "Tequila Crisis" of 1994 showed the willingness of the Clinton administration, and specifically then Treasury Secretary Rubin to appropriate $50 Billion as loan guarantees to Mexico. Allan Greenspan argued in favor of the rescue. It may be that history will rhyme ... this time for the rescue of Americanos who made the loans to drill for the stuff that made the USA "energy independent".
    Obviously the discussions with banks would be private and confidential. Time will tell how many bankruptcies will actually come to pass.
    Jan 22, 2016. 08:50 PM | 3 Likes Like |Link to Comment
  • Encana: What To Expect In 2016  [View article]
    riskrunner,

    I am with you, on setting an entry opportunity in that ballpark. My Limit Buy order filled today.

    I expect ECA to be a survivor, but history shows the corporation to be artful in spinning off and disposing of assets (CVE, PrairieSky, etc). The surviving ECA in 5-10 years time may look much different than what we see today.

    I believe the market is expressing panic, in fear that oil and gas prices will never go up, and "like Cramer said on Mad Money"... ECA really needs higher oil prices. I may be adding to my cutlery collection (catching a falling knife), but I am quite convinced ECA is about as out-of-favor as it can be.
    Jan 13, 2016. 03:14 PM | 1 Like Like |Link to Comment
  • Encana: Why 2016 Will Be A Better Year  [View article]
    Natural gas futures on CME traded around $1.80 in mid December, since then (perhaps due to falling temperatures), those contracts have been increasing in price.

    The Henry Hub spot price closed a $1.54 on 12/24/15, and has been rising since then.

    According to EIA data, there were 162 operating gas rigs operating for the 1/1/2016 count. From the same source, there were approximately 1,600 rigs operating in July of 2008, when gas was $12.

    Personally I do not have a forecast of where the natural gas price goes from here. Surely it will fluctuate! The price of ECA will fluctuate too ... perhaps hitting a new 52-week low.

    However, I hear that ECA insiders have bought 207,500 shares since August 1, 2015. My old dad used to say, "Buy straw hats in January." Well, this is January!
    Jan 9, 2016. 04:44 PM | Likes Like |Link to Comment
  • Why A Long/Short Portfolio Makes Sense Today  [View article]
    David Dreman, who "wrote the book" on contrarian investment strategy lost money on occasion for investors by - shall we say - being early in buying out-of-favor equities. Dreman said you can't expect to make profits right away with every contrarian investment. It is a strategy that calls for diversification and a long tenure of ownership.
    Jan 7, 2016. 03:18 PM | Likes Like |Link to Comment
  • Cullen/Frost Bankers: A Safer Way To Trade Oil Prices  [View article]
    My limit buy executed at $55.11

    CFR is essentially a proxy for the Texas economy, which is diverse, and continues to attract relocation of businesses as well as retirees.

    I did notice that insider selling included Jack Wood unloading around 90,000 shares during November 2015 in the $69.50 to $73 range. Eric Parnell suggested an exit price of $79 for traders.

    The long-serving (and capable!) CEO is nearing the end of his tenure. I do not imagine that his successor would try a radically different strategy. I expect CFR will continue to lead with technology and to treat customers like part of the family.
    Jan 7, 2016. 02:45 PM | 1 Like Like |Link to Comment
  • Australian Dividend Stocks For High Yield And Capital Gains - Expected 20% Return For 2016  [View article]
    A US investor considering Australian ADRs should also think about the consequences of future movements in the AUD/USD exchange rate... with respect to dividend income and potential capital gains/losses.

    As to dividends on an ADR, the US depository bank distributes the dividends from the foreign stock in US dollars to the ADR holders, after deducting a fee. If a foreign stock pays stable dividends in foreign currency over a period of time, a stronger USD over the period would result in diminishing dividends paid on the ADR. A weaker USD would conversely result in increased dividends on the ADR. Therefor, from a timing perspective, all other things being equal, the best time to be purchasing Australian ADRs for dividend income would be when the USD is peaking relative to the AUD, and on the cusp of a long-term decline. The article alludes to the persistent strength of the USD relative to the AUD.

    By the same token, a weakening USD between the time the ADR is bought and when it is sold would tend to boost capital gains (reported in USD) or alternatively to mitigate capital losses. So with a view to capital gains, the ideal time to buy would be when the USD is peaking, and the ideal time to sell would be when the AUD is peaking relative to the other currency.

    I do not presume to guess when foreign exchange trends will reverse, but I do believe that "Long Dollar" has been quite a profitable position in recent years. There are said to be "crowded trades" long USD and short commodities, short Emerging Markets, etc.

    So, I think there is a reasonable risk-return potential in Australian ADRs. I am long WBK and BBL ... but it seems I bought BBL sooner than I really should have. <wink>

    The same logic attracted me to ADRs of Canadian banks and oil producers recently.

    Nothing herein is to be construed as investment advice. I am stating personal opinion only.
    Jan 6, 2016. 12:58 AM | 2 Likes Like |Link to Comment
  • Inflation Is Killing My Retirement: How I'm Dealing With It, Part 1  [View article]
    Depending on your state of residence, there may be an assumption by the state of the risk that an insurance company would fail and be unable to continue annuity payments. In my state the limit of guarantee is limited to a $300,000 present value of future annuity payments per annuitant resident in the state.

    I agree with Gary that annuities relieve an individual who may have or may anticipate having diminished ability to manage a portfolio. Also, annuities have the effect of dissipating an estate, so heirs will have less to bicker about. The donor who gives with the living hand gets some satisfaction from seeing the gift completed, as opposed to imagining the impacts of post-mortem bequests. Would not apply to everybody, obviously, but in our empty nest the goal is for the second-to-die to die broke.
    Jan 5, 2016. 02:13 PM | Likes Like |Link to Comment
  • How To Get Less Volatility And Better Returns  [View article]
    kevbo53,

    There are etfs which characteristically have low beta, though theoretically the beta on an etf could vary up and down over time. The high-yield dividend stock Vanguard etf VYM comes to mind.
    Dec 30, 2015. 01:17 PM | Likes Like |Link to Comment
  • How To Get Less Volatility And Better Returns  [View article]
    Do the betas for individual stocks change over time? I believe that betas are calculated for a specific period in history, eg 1-year, 3-year, 5-year. I would imagine that disruptive technology, an acquisition, new competition, or something else could radically change the expectations for a specific corporation, and thus raise or lower the beta next time beta is calculated.

    How does the portfolio strategy address the risk of selecting a stock whose beta becomes higher unexpectedly after it has been added to the portfolio? (I suppose it is a risk of "loss" only if the strategy is to sell when this happens.)
    Dec 30, 2015. 10:15 AM | Likes Like |Link to Comment
  • High Monthly Income Available From This Convertible Closed-End Fund  [View article]
    Interesting article and discussion. From the Calamos Fact Sheet for CCD I note that 16.7% of the investment portfolio is rated A or BBB.
    45.1% is rated Junk to some degree (BB 28.5%, B 14.9%, CCC or lower 1.7%).
    38.2% is unrated.

    While the past few years of ZIRP have produced minimal defaults, the coming 15 years may be a different kettle of fish. CCD's portfolio would appear to be dominated by speculative and unrated securities, and therefore some of the discount to NAV may be due to rising investor concerns about default risk.


    Dec 29, 2015. 07:06 PM | Likes Like |Link to Comment
  • Cenovus Gives 2016 Guidance: No Surprises, But Big Decisions Ahead  [View article]
    BOE in the ground, entre amis in Canada. Long CVE.
    Dec 23, 2015. 06:37 PM | 1 Like Like |Link to Comment
  • Using Monthly $50 Direct Purchases To Create The Early Retirement Portfolio  [View article]
    About 11 years ago my wife and I reached a cross-over point, where our long-term investments had an accumulated value sufficient that we could "retire early".

    In our case, drip plans at Computershare, Amstock, Wells, (etc.) played a role, but if I was 33 years old, and had it to do over again, I might not use direct investment, for three reasons.

    First, note the fees for one stock (say XOM, PG, etc) to make an initial direct purchase, buy 12 times per year, sell, and have the proceeds wired to a bank by the transfer agent. Add the similar amounts for each stock that will also be included in the portfolio over the 20 years. I felt the fees were high, after I paid them. I think my total fees would have been less had I chosen not to be "stock-picker", but to take a passive indexing approach. I think the mutual fund to beat is Vanguard's VDAIX fund (minimum $3,000)... the annual expense ratio is 0.2%

    Second, even if I had 50 Direct Investment accounts going, the diversification would still be less than VDAIX. From the Vanguard website I gather that VDAIX replicates the NASDAQ US Dividend Achievers Select Index, consisting of stocks that have raised dividends for at least 10 years consecutively. So the VDAIX portfolio consists of about 180 stocks.
    I have never owned VDAIX, but I believe that a monthly contribution of $250 (or more or less as circumstances allow) could be made with relative ease.

    Third, as the years go by and the 2036 crossover point approaches, you might consider it prudent to re-allocate a percentage of assets from stocks to fixed income securities (perhaps a CD or bond ladder with initial maturities 2036 to 2041). Allocating to fixed income reduces the risk of a market melt-down decimating your portfolio at an inopportune time (such as the 6 weeks after you tender your resignation!). You could liquidate a precise portion of the mutual fund annually on a "glide path" to crossover, making provision in cash reserves for capital gains taxes by the following April 15.

    An alternative to the mutual fund would be an etf, such as Vanguard's VIG (same benchmark index as the VDAIX fund, but with fees of 0.1%) or ishares DVY. If the plan is to add $250 per month, rather than buy a lump sum at the outset, you might have brokerage transaction costs to consider. I understand that VIG can be bought without commission expense through Vanguard Brokerage Services.

    PS. When the crossover point arrives, do not underestimate the impact of increasing premiums for health insurance! In our experience the premiums increased at double-digit rates annually, and Medicare came as a sweet relief at age 65.

    Nothing herein is to be construed as tax or investment advice. I am stating personal opinion only.
    Dec 23, 2015. 06:11 PM | Likes Like |Link to Comment
  • Retirement Strategy: It Is Time For A Break, For Real  [View article]
    Alan,

    My wife is a survivor of cancer - 10 years and counting.

    I see so many others have wished you well before me. I would just add that sometimes the darkest hour is shortly before the dawn. Be well.
    Dec 21, 2015. 12:52 PM | 1 Like Like |Link to Comment
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