Foggs Knackers

Foggs Knackers
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  • Why Do Corporations Pay Dividends?  [View article]
    Berkshire Hathaway has been under Warren Buffett's control for six decades and is still growing. It has never paid a dividend because Buffett reinvests all the profits and does not want to make taxable payments to shareholders. In several annual reports he has explained how periodically selling small numbers of shares is economically and financially equivalent to receiving dividend payments.
    Feb 6, 2016. 08:57 AM | 3 Likes Like |Link to Comment
  • Doubling Your Dividend Aristocrat Yield  [View article]
    There are several closed end funds that write covered calls against stock portfolios. They tend to outperform in a falling market and underperform in a rising market. Over long periods, my guess is that they do not beat a simple buy and hold strategy.

    Of course, if "income" is more important than total return, then covered calls make sense.
    Feb 2, 2016. 11:21 AM | Likes Like |Link to Comment
  • Should You Be A Passive Investor These Days?  [View article]
    Warren Buffett, one of the most successful stock pickers of the past 60 years, advised his wife's trustees to invest her inheritance in low cost S&P 500 index funds. I wonder why he did not simply hire trustees who have mastered the art of stock selection. It can't be all that difficult to beat the market averages, can it?
    Dec 19, 2015. 03:10 PM | 2 Likes Like |Link to Comment
  • There Is Nothing Total About Total Return  [View article]
    The Excel XIRR function calculates internal rate of return from a table of dated cash flows. Enter beginning market value, deposits, withdrawals, and ending market value and XIRR generates the annualized rate of return. For a time weighted average you can use XIRR for short periods, say quarters, and link the returns.
    Nov 20, 2015. 10:38 AM | Likes Like |Link to Comment
  • Apple: Why $116-$120 Will Soon Be History  [View article]
    Listed option market makers normally hedge their positions to generate a profit no matter which way the underlying shares moves. For example, if a option dealer is short calls to a retail investor, he will buy the stock (to hedge the short calls) and also buy puts (to hedge the stock position). The dealer has eliminated market risk and, if the option premiums and carrying costs make sense, he will always show a profit.
    Nov 8, 2015. 11:59 PM | Likes Like |Link to Comment
  • Intel Goes Ex-Dividend This Week: How To Double Your Dividend And Earn Over 15%  [View article]
    A spike in the market price cannot hurt you as long as you don't mind selling the shares far below current market. The point of writing covered calls it to sell appreciation above the strike price. When a stock gaps to the upside and goes in the money, you must close the contracts with cash or give up the stock below market. Either way, the loss can be equivalent to several years of dividends and option premiums. Options are risky, even the relatively conservative covered call write play.
    Nov 2, 2015. 01:07 PM | 1 Like Like |Link to Comment
  • Intel Goes Ex-Dividend This Week: How To Double Your Dividend And Earn Over 15%  [View article]
    Selling covered calls works great until it doesn't. Investors who were short Microsoft calls were crushed when the stock spiked 10% on earnings last week. Several years of dividends and option premiums likely vanished.
    Nov 2, 2015. 09:12 AM | 4 Likes Like |Link to Comment
  • Is The 4% Rule Becoming The 2% Rule?  [View article]
    Spending rules become irrelevant for larger estates. A retired couple with $1M in savings, living on $40K, does not have a lot of options when the nest egg starts to run out. A couple with $5M, living on $200,000 can adjust spending habits without suffering too much.
    Oct 8, 2015. 12:31 PM | Likes Like |Link to Comment
  • Windows 10 Shaping Up To Be A Disaster For Microsoft Shareholders?  [View article]
    Ditto my PC, laptop, and a couple of Oracle VirtualBox instances.
    Aug 10, 2015. 12:54 PM | 2 Likes Like |Link to Comment
  • 3 Bearish Charts  [View article]
    If you have a long relationship with Schwab and accounts of reasonable size, they will give you margin money at close to 2%. You have to ask. Or just tell them you are going to move your accounts to Interactive.
    Jul 30, 2015. 10:05 PM | 1 Like Like |Link to Comment
  • So, You'll Switch To Dividend Growth Investing After You Have Your Millions, Eh?  [View article]
    If you plan on leaving retirement assets to your heirs, you can pass on a Roth IRA and the inherited accounts remain tax free.
    Jul 9, 2015. 10:29 AM | 1 Like Like |Link to Comment
  • So, You'll Switch To Dividend Growth Investing After You Have Your Millions, Eh?  [View article]
    If our friend accumulated $2M in Berkshire Hathaway shares in a taxable account, he would have paid no income taxes over the years because Berkshire does not pay dividends. Rather than switching to dividend stocks, he can sell, say $100,000 annually and, if he has little other income, pay almost no capital gains tax. As long as Berkshire appreciates by more than 5% on average per year, the nest egg will continue to grow.
    Jul 8, 2015. 11:18 AM | 1 Like Like |Link to Comment
  • 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