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Foggs Knackers

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  • Why The Efficient Market Hypothesis Is Useless [View article]
    There are a few superstar stock pickers like Warren Buffett and Peter Lynch who have demonstrated that stock market prices are not perfectly efficient but countless studies have shown most money managers and individual investors cannot consistently outperform index funds, even ignoring fees.

    Market returns reflect the aggregate performance of all participants, so it is very likely that (before fees) about half the players will underperform and half will outperform the market, however defined. After adding fees, the average results tilt toward underperformance.
    May 27, 2015. 10:36 AM | Likes Like |Link to Comment
  • Indexing Really Is The Future Of Investing [View article]
    One take on passive investing is not to build a "global cap weighted" portfolio but rather to put together a well diversified collection of securities from non-correlated asset classes. The portfolio is re-balanced periodically to limit over commitment to individual asset classes and to enforce a sell high and buy low trading discipline. This seems to work well for many institutional investors.
    May 2, 2015. 12:12 PM | Likes Like |Link to Comment
  • 4 Graphs Of Warren Buffett's Top Bets [View article]
    If you peruse WEB's annual reports, you will find a convincing argument that selling small amounts of Berkshire produces cash flows equivalent to dividend payments. WEB like to receive dividends that he can reinvest. He prefers to not pay dividends because he is a far better asset manager than most of his shareholders. Due to the magic of tax deferred compounding, Berkshire has increased from 30 to 210,000 per share over the last 50 years, for a CAGR close to 20%
    Apr 30, 2015. 11:48 AM | Likes Like |Link to Comment
  • Why An Income Portfolio Beats Capital Gains Every Time [View article]
    Are there any income oriented portfolios that have outperformed Berkshire Hathaway over the last 50 years? While never paying a dividend, the share price has increased from around $20 in the mid-60's to $213,000 today, a CAGR close to 20%.
    Apr 19, 2015. 02:20 PM | 1 Like Like |Link to Comment
  • The Perfect Portfolio For Retirement Is An Illusion [View article]
    In 2004 Microsoft issued a $3.00 special dividend. When the stock when x-dividend it's market price dropped $3.00 per share. If you invested the dividend in more stock, you would own more shares but have no immediate increase in wealth.
    Apr 19, 2015. 12:14 PM | 1 Like Like |Link to Comment
  • The Perfect Portfolio For Retirement Is An Illusion [View article]
    My point is that the earnings used to pay dividends already belong to the shareholders, so a dividend payment generates no immediate increase in shareholder wealth. As a shareholder your investment returns come from corporate earnings. Dividends merely share some portion of the earnings.

    Imagine owning a small business with an appraised value of $1,000,000. Now imagine paying out $50,000 in dividends. Do you think the appraised value of the business would be anything other than $950,000 after the payment?
    Apr 19, 2015. 12:07 PM | 1 Like Like |Link to Comment
  • The Perfect Portfolio For Retirement Is An Illusion [View article]
    1. If the condo nets $1,800, it has a bond like quality that puts a floor on its market value. It is probably worth at least $400,000. That would give the owner a 5% after tax rate of return.

    2. There is an important difference between real estate rental income and stock dividends. Rental income increases the owner's wealth. Dividend income is a transfer of cash from the company's balance sheet to the stockholder. It produces no net increase in shareholder wealth.
    Apr 18, 2015. 11:31 AM | 2 Likes Like |Link to Comment
  • Strong Earnings To Drive April Dividend Hike At Apple [View article]
    Does AAPL use overseas cash to repurchases shares? Or is this not possible?
    Apr 8, 2015. 10:35 PM | Likes Like |Link to Comment
  • The 'Efficiency' Of The Market Doesn't Matter To Smart Investors [View article]
    I guess the large majority of professional portfolio managers who fail to outperform index funds are just not "astute investors." If it were easy to pick a few great companies at fair values, we would all be billionaires.
    Jan 30, 2015. 09:49 AM | Likes Like |Link to Comment
  • The 'Efficiency' Of The Market Doesn't Matter To Smart Investors [View article]
    The EMH may have it flaws, but no one except Warren and Charlie and handful others, can consistently identify and profit from inefficiently priced assets. For the rest of us, a portfolio of broadly diversified, low cost, stock and bond ETF's, held long term with occasional rebalancing, produces reliable returns. Even Warren Buffett recommends index funds for the average investor.
    Jan 29, 2015. 11:01 AM | 1 Like Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    You make a valid point about the extra income. For a better comparison, one must assume the investor takes $1,600 per year out of the index fund to make up the difference in dividend income. With this drain, the index fund would grow to $286K rather than $364K.

    So the two portfolios would generate roughly the same income and capital appreciation over 20 years.
    Dec 2, 2014. 07:18 PM | Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    "The equity portfolio, while underperforming the S&P 500 in total return generated 55.4% more in income. That's a considerable amount of money that the S&P 500 can't make up for in total return and by selling some shares to make up the difference."

    Using numbers from the article ...

    $70,000 invested in the S&P at 8.6% compounded annually over 20 years would have grown to $364,497. The seven stock DGI portfolio would have grown to $274,201.

    Why would anyone prefer $32K in extra dividend income to $90K in extra unrealized (and untaxed) capital gains?

    Supporting calculations follow ...

    $10,000 in GIS would grow to $47,480 at 8.1% over 20 years
    KO 41,695
    DEO 40,169
    BP 47,480
    SO 37,275
    VZ 31,473
    T 28,629
    Dec 2, 2014. 04:48 PM | 1 Like Like |Link to Comment
  • Why I Just Sold Berkshire Hathaway [View article]
    What if the share price is increasing and you need to sell fewer and fewer shares to produce the same income? The effects of market fluctuations cancel out in the long run.
    Nov 13, 2014. 11:53 AM | 2 Likes Like |Link to Comment
  • Why Did ETFs Become So Popular? Fewer Folks Are Buying The Hold-N-Hope Hype [View article]
    Good points, Bryan.
    Nov 4, 2014. 12:16 PM | Likes Like |Link to Comment
  • Why Did ETFs Become So Popular? Fewer Folks Are Buying The Hold-N-Hope Hype [View article]
    This must be the worst possible 65 year period in history. At least the buy-and-hold investor broke even after inflation and enjoyed some dividend income. What is the alternative? If anyone knows how to move in and out in anticipation of market moves, please reveal your secrets.
    Oct 19, 2014. 12:57 PM | Likes Like |Link to Comment
COMMENTS STATS
32 Comments
25 Likes