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  • Go Where It Is Darkest: When Company, Country, Currency And Commodity Risk Collide! [View article]
    Thanks for a great article. You show the symbol for Lukoil as "LUKFY," however, I can only find stock charts with "LUKOY."
    Nov 23, 2014. 11:19 AM | Likes Like |Link to Comment
  • Why The Global Gloom? [View article]
    "If we've learned anything in the current recovery, it's that 1) fiscal stimulus (e.g., the ARRA) doesn't work, and 2) monetary stimulus (e.g., QE and zero interest rates) don't work either. Government policymakers cannot conjure up prosperity by spending more money or cutting interest rates. What's needed is for government to get out of the way and boost incentives for the private sector to jump-start the economy. That means lowering marginal tax rates, simplifying tax codes, eliminating subsidies, and reducing regulatory burdens."

    Well, if you've studied economics, you'd know that fiscal stimulus does work as a mathematical certainty, including cutting tax rates which is a form of fiscal stimulus, and cutting interest rates also works until the zero bound is reached, which has been the case for a few years. The ARRA worked, but it was pathetically limited in size relative to the economy and temporary. Cutting the payroll tax rate must have worked while it existed, but that has been reversed thereby reducing subsequent growth. Cutting corporate tax rates might bring some cash back to the US which could be distributed to stockholders via stock buybacks or dividends, but won't affect wages or prices and probably won't affect capital spending unless you believe that the economy suffers from under-investment (over-investment is more likely true at this point). There's debate about the effectiveness of QE, but apparently it has done some good in terms of rescuing bank balance sheets from impaired mortgage loans and contributing to wealth effect growth such as it might exist.

    Corporate taxes have already declined from 4% of GDP to only 1% of GDP over the past five decades, so even eliminating them couldn't have much effect. It has been well proven that corporate taxes are entirely borne by corporate owners not employees or consumers of their products. The objection to eliminating them entirely is that corporations benefit from government operations in many ways just as individual citizens do, and should pay a fair share; perhaps 1% isn't fair.

    In regard to fiscal policy, what would help the economy the most quickly and most impressively would be massive tax cuts to folks with household incomes of about $100,000 or less. The top 1% of income earners has a marginal propensity to consume of less than 1%, while folks with less than median income have one in the 90%. Demand growth must keep up with investment growth to avoid a drop in investment spending which can cause a recession, and that requires either higher wages or lower taxes on the people who do the most spending, or growth in debt ofy those folks, which is nearly impossible in an over-indebted and credit constrained population. Of course, massive government spending would also work, but politicians have not allowed that.
    Nov 23, 2014. 10:41 AM | 5 Likes Like |Link to Comment
  • For Middle-Skill Occupations, Where Have All The Workers Gone? [View article]
    My gut reaction is similar, however, there is the issue of causation versus coincidental correlation. One item in particular makes me wonder: "...overinvestment (by 1929 there were over 600 automobile manufacturing companies in the USA) caused the depression that made the rich, and most everyone else, ultimately much poorer." Investment spending is per se part of GDP, so increased spending increases GDP in the current accounting period. You seem to suggest that the question is whether excessively increased investment spending leads to a big drop in investment later, resulting in recession, if there is not concurrent growth in personal incomes spread across the income distribution. I think so, since then there is excess capacity and not sufficient consumption to make previously increased investment economic.

    However, I should also note that a huge cause of the Great Depression was the crash in the stock market, since that wiped out many middle class families. The crash resulted from a preceding big run-up in stock prices fueled by excessive allowable margin debt, up to 95% loan to value, which was then progressively reversed to much lower allowable margin as prices collapsed, resulting in margin calls (in those days brokerages set their own margin levels, not the Fed). I view the present malaise as a result of many factors leading to the continuous drop in real median income for 30 years, including an 8-9% drop since the latest recession "ended," and near record debt-to-income levels as folks have used their home equity ATM and credit cards to get them through several recessions.

    In any event, folks who complain about federal deficits should look at the tax data you cite and wonder whether the federal budget and the economy would be better served with slightly higher corporate tax revenue and lower taxes on the middle class. State economies might be improved by the similar tax policy in order to reduce property taxes.
    Nov 22, 2014. 07:01 PM | Likes Like |Link to Comment
  • Prospect Capital And Required Returns [View article]
    Surfgeezer: Love your comment! For older investors who want high current income and do not wish to risk living on long term capital gains, hold the very high yielding stocks for dividends, possibly hedge with puts, and reinvest distributions on occasion, possibly by selling puts or spreads, and/or enhance returns by selling covered calls or puts or put spreads. In general, the very high distribution yielding BDCs, mREITs, REITs, MLPs and royalty trusts will beat the low distribution yielding DGI stocks over 5-10 year frames, particularly if the current income is reinvested wisely. However, I suppose much depends on the comparative returns of selling puts and covered calls or spreads on various stocks. For those who want or need cash current income, total return is not the issue.

    Long PSEC, FSC, AGNC, ARR, JMI, WMC, IVR, BBEP, SDRL, ARCP, ROYT, SDR, SDT and CHKR, most with put hedges.
    Nov 22, 2014. 01:04 PM | Likes Like |Link to Comment
  • A Scandal That Should Shock Nobody [View article]
    I'm hoping the market price of ARCP will go lower so I can roll down my 10 strike put hedge and buy more stock with a current dividend yield higher than 11%. Wondering if there might be a double bottom around 7.50 with year end tax loss selling, similar to preferred stocks in 2013.

    I admit there is a huge danger that the class action lawsuit being organized could result in ongoing large attorneys' fees to ARCP, and months from now or longer, possibly a judgement to compensate buyers for at least a $3/share loss of capital. Such a judgement could cost investors all their dividend income for a few years, or cause the company to sell assets to pay the judgement (more likely I'd guess). Apparently the assets on the books are excellent and current cash flow is very secure, however, the future situation is clearly speculative in that regard.
    Nov 22, 2014. 12:21 PM | 1 Like Like |Link to Comment
  • Fifth Street Finance's Upcoming Fiscal Q4 2014 Net Asset Value Projection [View article]
    Thanks for another great detailed analysis.

    I'm a bit puzzled by your disclosure: "[In 2013] I once again initiated a position in FSC at the following prices (in chronological order): 1) $9.55 per share; and 2) $8.97 per share. Seeing that FSC was trading at an even larger discount to NAV, my second purchase was approximately double the monetary amount of my initial purchase. Spotting a unique scenario developing, I sold 50% of my FSC position on 7/9/2014 at a price of $10.11 per share." Looking at charts on finviz and StockCharts, I don't see FSC ever trading above 9.50 in 2013, and never at 10.11 (it looks like around 9.70 on 7/9/14).

    Long FSC for dividends with put hedge at 10 strike. Probably will add some here with put hedge and sell some 10 calls if there's any premium to be had. Will sell put hedge if stock price gets to 7.50.
    Nov 22, 2014. 10:53 AM | 1 Like Like |Link to Comment
  • Trying A Little Too Hard [View article]
    Unwittingly or not, in October, 2006 the Fed led the charge to summarily and totally shut down the subprime and Alt-A mortgage lending, and succeeded spectacularly within just a few months (Alt-A dragged on for a while longer than subprime). The financial crisis was the result and consumer credit is still incredibly tight, particularly in mortgage lending. HARP 1 and 2 have given only 2 million borrowers a better footing. Given the still dismal state of consumer debt to income levels, unless they revise the guidelines and again allow lending again against residential equity with credit and asset qualification in addition to income only, the economy will continue to do nothing much for years. It would at least help some if they pushed Mel Watt of FHFA or Congress to open up HARP to non-GSE insured loans.
    Nov 16, 2014. 09:19 PM | Likes Like |Link to Comment
  • Elon Musk Appears To Have Misled Investors On Tesla's Most Recent Conference Call [View article]
    Good for you presenting some real facts about "Obamacare" (pretty much the same as Heritage Foundation Care or RomneyCare). In November 2013 for my wife and 17 year old daughter I identified a MNSure (Obamacare) 90/10 policy for 153/month (before any subsidy) with all the free preventive stuff in Obamacare starndard minimum policies and a $2000/yr deductible with 2000/yr max out of pocket. My wife was out of work. In December she got her job back and was forced to accept the grandfathered employer plan, an 80/20 plan with 2750 deductible and 2750 max out of pocket for 599/month and much less free preventive stuff. Our complaint is that we CAN'T get Obamacare as long as the employer plans are grandfathered.
    Nov 16, 2014. 12:18 PM | 1 Like Like |Link to Comment
  • American Realty Capital Properties, Inc. - Shareholder/Analyst Call [View article]
    Capt Jack: "...SEC filings of multiple books being found with different numbers on them and RCS not being all that honest as to why they have multiple books with different numbers and which set of books is the more factual."

    If that's the case, it seems ARCP stock holders should be grateful that the deal is not going to happen.

    Makes me wonder whether the collateral for ARCP debt is correctly valued. One would think an investment in the largest holder of triple net leases would be a real nice long term income investment, but not if it turns out the financing is all screwed up.

    Long ARCP but have held, and will hold, only with a put hedge until the smoke is fully cleared. So far making more on the put hedges plus income than the loss on the stock price.
    Nov 15, 2014. 07:50 PM | Likes Like |Link to Comment
  • American Realty Capital Properties, Inc. - Shareholder/Analyst Call [View article]
    Do I understand correctly that Nick Schorsch is chairman of both ARCP and RCS Capital? Is he also chairman of the "affiliate" of ARCP which has the purchase agreement with RCS? How does he explain why RCS would "termination" the purchase agreement of an affiliate of a company of which he's chairman. This seems very odd. Why did he terminate the agreement, and does it have anything to do with the accounting issues? Anybody know the motive to terminate? Then ARCP, of which he's chairman, sues RCS, of which he's also chairman, for terminating the agreement with an affiliate. WHAT?
    Nov 15, 2014. 03:37 PM | Likes Like |Link to Comment
  • The One Sector You Must Own Today (Part I) [View article]
    Unanimously approved by both boards; vote of unit holders November 19, 2 PM CDT in Dallas; at least 37% of unit holders already known to favor.
    Nov 15, 2014. 03:15 PM | Likes Like |Link to Comment
  • The One Sector You Must Own Today (Part I) [View article]
    You mentioned QRE. Thought BBEP was buying them. Long
    BBEP with put hedge.
    Nov 15, 2014. 02:33 PM | Likes Like |Link to Comment
  • The Best Offense Is A Good Defense [View article]
    Great article. I note that during the Sept-Oct correction the NYSE Hi-Lo index went from 90 to under 15 while its rsi went from 70 to under 15. Then it went from under 10 back to 80 on Friday while its rsi went back to 80.89, about as high as it ever gets (i.e. it appears to have topped again in the short term). The McClellan oscillator went from -76, a typical bottom, to +80, a typical top. The summation index has rallied about 900 points, about as much as it ever does in an intermediate swing. The averages could go choppily sideways from here for several weeks during this seasonally favorable period, but I'd expect a short term pullback from here until the McClellan oscillator gets back to -50 or so. A sustained downturn is not out of the question given the status of flattening long term averages and internal weakness.
    Nov 9, 2014. 09:32 AM | 2 Likes Like |Link to Comment
  • Retirement Strategy: One Basic Flaw Of Dividend Growth Investing [View article]
    Can't argue with the principles of DGI, but I suspect the plain vanilla version of the strategy is sufficient to build the required dividend income only for those who have at least 20-25 years to wait for sufficient dividend growth. It doesn't necessarily work for somebody already retired who wants to switch from a portfolio of low yielding CDs or bond funds into DGI unless they already have the necessary capital to get the required income with the current yield of the DGI stocks.

    Richard Waldren makes and interesting comment regarding those who would like to try increasing the current yield of a DGI portfolio and don't mind trading options on a regular basis (strongly suggest the need for a discount options broker). However, the stock can be lost forever to a higher cost basis in a strongly uptrending market, not to mention loss of qualified dividend status if the stock is repurchased right away. A possible alternative approach for a covered call strategy would be to do that with the very high yielding mREITs and BDCs which rarely exhibit strong uptrends (in fact I recommend collars for such stocks where by capital is protected by long puts in addition to writing the covered calls. There is usually time to avoid calls being exercised, and in any event they don't have qualified dividends, so getting called isn't a big deal.

    There is one dilemma that DGI proponents do not sufficiently address, namely, what is the definition of a "dip." We see the comment about buying on dips repeatedly in articles about DGI investing. The ability to do so implies that there is always an investable cash reserve on hand, and that means the investor is never fully invested or there must be significant new money to the table. That isn't the case for many retired investors. (Selling covered calls is one possible way to accumulate additional funds on a regular basis.) Assuming one does have the funds available at a particular time, what exactly constitutes the "dip" that triggers additional investment. Is a dip a 5% drop near term, a 10% drop, a 20% drop, etc.? Whether DGI investors agree or not, "buying on dips" is market timing as soon as a buying criterion is specified.
    Nov 8, 2014. 08:20 PM | 1 Like Like |Link to Comment
  • Shale Oil Stocks: Do Not Count On A Major Slowdown In The U.S. Oil Production Growth [View article]
    Apparently, at least until now, world oil supply is increasing faster than demand. With an inelastic demand curve, that translates into pretty severe price volatility on the downside. My answer to the present circumstances, or any other circumstances, is to hold the energy producers for the dividends but hold them with put option hedges; that's worked well this year with the massive downside in equity prices. If (when?) the high yields disappear, I'll change horses (mREITs, BDCs, midstream MLPs, REITs). Long BBEP, SDRL, ROYT, SDR, SDT, CHKR with put hedges.
    Nov 8, 2014. 09:05 AM | Likes Like |Link to Comment