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  • SCHP: The Best TIPS Exposure Investors Can Get [View article]

    I agree that to the extent it is known (or planned) when in the future there will be withdrawals of capital, the lowest risk and lowest cost security would be a directly-owned (no intermediary) TIP maturing in that year.

    For instance, if the investor plans to annuitize $100,000 in constant dollars per year at age 73 to 75 (in 2023 to 2025) he might consider purchases of $100,000 principal TIPs maturing in each of the 3 years. The yield would be low, as befits a very low-risk investment in an era of "zero interest rate policy".

    I doubt that this tactic would be terribly popular. It would perhaps appeal only to investors ( some retirees might be among them) who are convinced that "the way to win will be by not losing".
    Aug 1, 2015. 02:30 PM | Likes Like |Link to Comment
  • Gold Crush - It Ain't Pretty And It Will Get Uglier [View article]
    My guess is that it is VGPMX, Vanguard's fund that is mainly invested in miners' stocks.
    Jul 20, 2015. 02:12 PM | Likes Like |Link to Comment
  • Saudis' Real Target May Be Canadian Oil Sands [View article]
    Saudi's Real Target Canadian Oil Sands? Seriously?

    (I agree with the observation that U. S. shale producers are not "the target". Ali bin Ibrahim Al-Naini, Minister of Petroleum and Mineral Resources for Saudi Arabia, said as much to an audience in Germany on March 4 of this year.)

    The Saudi goal is "market stability". They plan to "moderate" the "volatile oil investment cycle". In November of 2014, in response to falling Brent crude prices, they decided not to cut production. Why not?

    In Al-Naini's stated opinion, Saudi Arabia was mistaken to cut production in the 1980's, because this action ceded market share to other producers (both OPEC and non-OPEC).

    Saudi Arabia evidently expects global (especially Asian) demand for petroleum to increase over the long term. Their goal is to maintain market share as demand grows. They intend to maintain "spare production capacity" with which to increase exports, if there is a supply disruption elsewhere.

    The market is presently oversupplied, but Saudi Arabia expects long-term supply reductions from high-cost areas, such as the arctic, deep offshore, oil sands of Canada and Venezuela, and shale oil in the US. With the cuts in capital spending in the high-cost areas, Saudi Arabia is likely to see their expectations realized.

    Perhaps of greater importance is the behavior of national oil companies in Iran (NIOC) and Iraq (INOC). Al-Naimi argued for price stability "for the benefit of all producers", and he called for "co-operation". In other words, Saudi Arabia will continue increasing production, until national oil companies of other countries join in a multinational arrangement to limit production.

    Russia will meet with OPEC July 30, and no doubt the topic of Russian production will be discussed.

    If any country is "Saudi Arabia's Number One Target", Iran would be it.

    King Salman bin Abdulaziz Al-Saud clearly perceives Iran as a rival for influence in the gulf region and a threat to security within the kingdom. The suicide car-bombing in Riyadh on July 16 could be perceived as orchestrated by Iran. Saudi Arabia is increasingly committed to the use of military force in Yemen and Syria to fight Iran's proxy groups. Theoretically the lifting of "nuclear sanctions" on Iran could allow Iran to double petroleum exports. Somehow, I think Saudi Arabia will not allow Iran's coffers to be filled by new oil revenues.

    The full text of Al-Naini's speech is on-line on the website of the Embassy of Saudi Arabia.
    Jul 17, 2015. 01:06 PM | 4 Likes Like |Link to Comment
  • Bond Yields Are Too Weak; I Would Rather Buy Dividend Growth, Microcap, And Drywall [View article]
    TIPs would be nice to have in a portfolio if there is an unexpected increase in CPI-U. That is generally be deemed a low probability event... but nonetheless one that an investor might want to hedge the risk of.

    Based on the 10-year TIPS Spread, last time I looked the bond market was priced on the expectation of 1.86% inflation.

    I don't pretend to know that the bond market will be "shocked" some day by unexpected inflation. But with Fed openly aiming for 2%, and the ECB committed to do "whatever it takes" to avoid deflation... just maybe it could happen.

    Such is the appeal of an inflation-protected bond. Would you like yield with that? Then the choices get slimmer, and other risks enter into the scene. For example Western Asset Management has a couple of closed end funds, WIA and WIW. (Funds, in contrast to a TIPs bond held to maturity, can go down and stay down in price.) WIW was recently priced at $11.12.
    NAV=$12.83 Discount -13.33%
    The maximum discount in the past 52 weeks = 15.12%
    The average discount over the past 5 years = 11.19%
    Distribution yield=3.62%
    (Data from cefconnect)

    Comparatively, I doubt that drywall (with my carpentry skills, for sure!) would increase in value, to say nothing of distributing monthly income like WIW.

    Fixed Income investments are not for everybody. However, a retiree might consider some allocation to fixed income, with its highly predictable (full faith and credit) schedule of future payments.
    Jul 16, 2015. 06:06 PM | Likes Like |Link to Comment
  • Stock Bubble And Its Buyback Genesis Suddenly Vulnerable [View article]
    There is blooming stagflation in Brazil, no doubt. But ... USA?
    Jul 16, 2015. 05:16 PM | Likes Like |Link to Comment
  • SQM -22% as Potash directors resign from board amid Chilean scandal [View news story]
    At $14.40 my limit buy was filled (about 105% of 52-week low).
    Relative to book value as reported by Yahoo Finance, $14.40 share price is 1.65x book value ($8.65). A couple of potash majors for comparison: POT 2.72x and MOS 2.72x BV.
    SQM supplies 46% of the potassium nitrate sold in the world and 35% of the lithium.
    Obviously, SQM could trade lower. I regard it as a commodity company "suffering" through the low end of the price cycle for iodine and lithium.
    There is also speculation that POT will sell their stake after pulling their directors off SQM Board. POT management says they are reviewing the holding. That could be a coded message broadcast to Private-Equity Land that POT would consider offers. But unless an offer is at least 2.5x BV, in my view, POT would be better off owning more -- not less -- of the global supply of potassium nitrate.
    Jul 16, 2015. 04:34 PM | Likes Like |Link to Comment
  • The Chemical And Mining Co. Of Chile Is A DOG! I Think We'll Adopt It... [View article]
    I waited for $14.40 and now include myself among those who think most of the downside is wrung out. (I previously sold at $31 and change.)
    Jul 16, 2015. 04:14 PM | Likes Like |Link to Comment
  • The Silver Fake Out [View article]
    "People are selling silver."

    I wonder whether the market for SLV and the market for silver coins have comparable dynamics. I believe the US Mint had a greater than 100% rise in demand for Silver Eagles ... the buyers being coin dealers (and ultimately the dealers' customers). I imagine that those ultimate buyers of Silver Eagles respond to declining spot prices by increasing the frequency and amounts of their purchases. (They are opting "out" with some of their savings: out of the USD, securities -- and the insecurities that go with them--, institutional promises, vulnerablilty to hacking, etc.)

    I imagine buyers of SLV as investors seeking a non-correlated asset that will increase in price at the same time the SP500 and Long Treasuries will decrease in price. These buyers could panic if they see mounting minuses on their account statements, as SLV trades for less than their cost. If they never have their "hands on" the shiny metal, it may be understandable that they would respond to declining price by clicking their mouse on "sell"... out of fear that all may be lost. I gather that the author's point refers to these people selling silver, rather than the US Mint or dealers.
    Jul 10, 2015. 10:05 AM | 1 Like Like |Link to Comment
  • Be A Cash-Holding Shark As The Market Bloodbath Approaches [View article]
    This is not a political forum, but the original article did seem to put out that political observation out there, so it is no wonder that you would ask for those details.
    In my view, Walker's supporters tend to be vague about the benefits of Walker's initiatives.
    I believe that initiatives which weakened the effectiveness and power of public sector unions created winners and losers in the state, so your assessment of Walker depends on whether your own bull is getting gored.
    The initiatives which undercut public education may have avoided tax increases (the winners would be property owners at tax time), but the losers are the people who chose a career in public education and their students.
    Fiscally, I believe that Walker cut taxes but increased the state's indebtedness.
    Jul 9, 2015. 10:08 AM | Likes Like |Link to Comment
  • Total: Undervalued Oil Stock With A Secure 5% Dividend [View article]
    The USD/EUR exchange rate has fluctuated quite significantly.

    An apparently generous yield in a foreign currency may disappoint if the USD appreciates significantly in terms of that currency.

    The USD has been appreciating in terms of the EUR. I do not have the ability to predict where it goes next. I am tempted to assume that USD/EUR will go from .915 to 1.0 (parity) and beyond. A dazzling rationale could be offered, based on flight-to-safe-haven and comparative interest rates when the Fed will have begun to "take away the punch bowl". One guess is as good as another.

    But if it is correct to assume the USD will strengthen in EUR terms, then it would be better to wait on a purchase of TOT for its "5% Dividend", until the stronger USD trend is concluded.
    Jul 7, 2015. 11:59 PM | 2 Likes Like |Link to Comment
  • Cameco: Down 15%, So What Now? [View article]
    CCJ / CCO is still under the shadow of claims by Canada Revenue Agency for taxes on the income of their Swiss subsidiary... as far as I am aware. I have not seen any news to the effect that CCJ won or lost their case.

    Disclosure: long URPTF
    Jul 7, 2015. 12:51 PM | Likes Like |Link to Comment
  • Cenovus Energy Sells Lands: Is A Dividend Cut Next? [View article]
    I believe CVE management is making the right moves, given that they understand themselves to be in a commodity business near the low point in the price cycle. Also that they are making heroic efforts to cut costs and reduce debt, hoping that earnings will revive in time to avoid a dividend cut.
    Today I bought CVE at USD $15, having sold a while back at $35-and-change. In my view, the goal with a cyclical stock is to buy a bit earlier than the bottom (and likewise to sell a bit earlier than the peak).
    Yahoo Finance says the book value of CVE is $10.82... if the sale of fee lands to the pension fund adds $2, make BV $12.82. A $15 stock price would be 1.17x BV. If somebody wants to buy the company during the low phase of the oil price cycle, I would guess they would be advised to bid 1.8x
    Jul 6, 2015. 02:52 PM | Likes Like |Link to Comment
  • Canada's Economic Woes: The Collapse In Oil And A Looming Recession [View article]
    I agree with the observation that there are opportunities in Canada's energy patch. Crude oil production is a commodity business. In Canada, some companies operate well, in possession of massive long-life reserves. In my view, money can be made buying a bit in advance of the bottom in WTI (and selling a bit in advance of the peak). I believe that there will be no "announcement" of the bottom, however, I expect numerous M&A deals to coincide with the bottom.
    Shell's acquisition of BG may be a harbinger of what is to come, globally. Speaking of Canada, "oil and gas are on sale now". This would be of no interest to those who believe WTI is going down to $40, and it will stay there for 200 years. But those who believe oil will be $120 during their lifetimes -- might just be interested. CVE recently sold their fee lands to a public sector pension fund. I can imagine other transactions happening around the cyclical bottom. Maybe IMO will "surprise everybody" by making a bid for Canadian Oil Sands Limited (COS/COSWF). Maybe one of the Big Five integrated oil companies will scoop up CNQ. Tactically, not knowing which alpha dogs are sniffing around which Canadian E&P companies, it might be a goal to buy them all if/when the share price is less than 1.5x book value.

    I am stating a personal opinion only, not to be construed as investment advice.
    Jul 2, 2015. 04:10 PM | 1 Like Like |Link to Comment
  • Chart Of The Day: Is China Sending A Warning? [View article]
    I believe the Chinese government would like to engineer a "soft landing" in the real estate and stock market bubbles, and thus have cut interest rates and reduced the bank reserve requirement. However, after the mania of buying stocks on margin, I believe "Crash 3" is underway. Margin calls will force selling of Chinese stocks, and possibly the sell-off will culminate in a panic.

    I am curious about people's thoughts about the linkages or mechanisms that would connect a crash in China with a crash on Wall Street.

    I can imagine the crash in Shanghai directly causing fear and trembling in Singapore (and thus setting up a generational buying opportunity in Singapore stocks). But are the margined Chinese accounts going to be compelled to dump US stocks? If so, would the amounts be sufficient to move the needle on the SP 500?
    Jul 1, 2015. 09:54 AM | 2 Likes Like |Link to Comment
  • Investors Go Short On Singapore Stocks [View article]
    Reuters reported 6/19/15 that short interest on Singapore Stock Exchange had increased to 1.2% of the share float, based on Markit as a source.

    I believe that recent investor sentiment about Singapore stocks has been pessimistic, due principally to the growing awareness of the economic slowdown in China. That, together with blogs by Iceberg and Muddy Waters to question the accounting standards of Singapore-based Noble, may explain much of the increase in short-selling.

    The headline of the article is not to be taken literally, if 98.8% of the share float is not sold short.

    I am puzzled by the reference "Includes SGF", because the article makes no mention of SGF (Aberdeen Singapore Closed End Fund). To the best of my knowledge SGF does not sell short. As of October 2014 Annual Report, SGF investments did not include Noble.
    Jun 25, 2015. 12:43 AM | Likes Like |Link to Comment