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Sugar Charlie

Sugar Charlie
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  • Honeywell International: Watch For Buying Opportunities [View article]
    Modestly long HON and looking to add to my position. Only issue is price. Scarcely a new problem.
    Apr 19, 2015. 07:05 PM | Likes Like |Link to Comment
  • General Electric: Investor Sentiment Has Turned Bullish [View article]
    GE has and has had excellent assets and, all things considered, good management, taking into account the fact that its financial business was enormously successful until the world changed and disaster hit. GE stock has required great patience, which I fortunately have given it. My cost basis is 5.75, giving me a 16% yield on cost. Prospects look pretty good looking forward, and I think that the company is a suitable core industrial name in a well-diversified portfolio. I've done a lot better elsewhere, but if I never do worse on an investment I won't complain.
    Apr 18, 2015. 02:19 PM | Likes Like |Link to Comment
  • The Misunderstanding Of El-Erian's Cash Position [View article]
    Of course I do not compare myself to Buffett. He can do many things that I cannot. I cannot buy a railway. And so on.

    But I can follow similar strategies. I can heed Charlie Munger's advice, quoted above. I can avoid market-timing. I can buy equities in strong companies which can reasonably be expected to grow earnings and dividends. And I do so and have done so for many years. I have substantial positions, for instance, in JNJ, PEP, and WFC, for which I now have almost trivial cost-bases after many years holding these names. Once or twice I have gone into a name before Warren Buffett announced that he had. That builds confidence. Buffett-like strategies have given me success neyond anything I could have expected.

    I have a great anecdote on very good authority. An oil & gas entrepreseur in Western Canada sold his business in the 50s or 60s and went to Richardson's in Winnipeg to invest the proceeds, He said: "I am a wealthy man, but I am NOT WEALTHY Enough to hold BONDS". He stood the conventional wisdom on its head. Most people would be likely to say that they were not wealthy enough to hold stocks. But he saw what taxation and inflation would do to a fixed-income portfolio over any extended period of time. The super-rich need not care (though many do) about the growth of their portfolios, or even the preservation of their purchasing-power. In that sense, THEY are "wealthy enough" to hold bonds.

    The only difference that I can see between the "set of rules" I should follow and Buffett's is that, given my vastly smaller net worth, I must be somewhat more cautious about maintaining liquidity enough to last through market downturns and to supplement possibly reduced dividend yields for a period of some years. Hence my target of about 10% cash and short-term ebt. Actually, my equities have charged ahead so rapidly that I'm currently down to about 7%. I should let some cash accumulate,

    Good luck to all.
    Apr 9, 2015. 11:56 AM | Likes Like |Link to Comment
  • The Misunderstanding Of El-Erian's Cash Position [View article]
    When Warren Buffett moves to cash, so possibly will I. As I understand it, he is still buying equities.

    Meanwhile I have a well-diversified portfolio, 90% equities and 10% cash for liqudity, NOT for yield (which in taxable accounts is usually negligible after tax and inflation). I live handsomely on dividend income.

    I do not consider the S&P 500, or any index for that matter, to be synonymous with holding sticks. I try to buy strong companies which can survive difficult times and which in most periods are growing earnings and dividends.

    I am always heavily over-weighted in consumer staples and similar stocks as bond-substitutes. My portfolio is mostly unrealized capital gain and is well into eight figures. I started investing in the 1970s and am now nearly 75 years of age.

    I learned in October 1987 not to market-time, as the DJIA plunged about 23%. I held on then, and again in 2000 (through the dot-com bibble burst; Im held no dot-com names), then again through "9/11" and the recessionary years which followed, and then through 2008-09. I have prospered.

    Here is Charlie Munger's view in a 2013 interview:

    "So how much does Charlie worry when Berkshire's common stock declines?

    '"Zero. This is the third time that Warren and I have seen our holdings in Berkshire Hathaway go down, top tick to bottom tick, by 50%. I think it's in the nature of long term shareholding of the normal vicissitudes, in worldly outcomes, and in markets that the long-term holder has his quoted value of his stocks go down by say 50%. In fact, you can argue that if you're not willing to react with equanimity to a market price decline of 50% two or three times a century you're not fit to be a common shareholder, and you deserve the mediocre result you're going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations."'

    We will probably not know how well El-Erian times his exits from equities nor his re-entries, so we will likely never know how his results compare with those of long-term investors like Buffett.

    I believe that most individual investors woill do better following Buffett-style strategies than market-timing, even in circumstances when equity valuations look high as,-- yes,-- they do currently.

    Good luck to all.
    Apr 8, 2015. 04:28 PM | Likes Like |Link to Comment
  • Should You Consider Magna International [View article]
    An excellent overview. Thanks. I am long MGA and very successfully so. While I am always heavily over-weighted in consumer staples as bond-substitutes in a 90%- equity portfolio, I have cyclicals for diversification. I am hoping to hold MGA for Warren Buffett's "ideal" period,-- forever. Well, of course, I'll be 75 shortly, so we have to read "forever" in context. Thanks again and good luck to all.
    Apr 6, 2015. 11:44 AM | 2 Likes Like |Link to Comment
  • How Far Could Stocks Fall Monday? [View article]
    Those who invest on the basis of stuff like this,-- whether on any given occasion the forecast proves to be right or wrong,-- deserve the inferior results they will get over an extended period. The only reason I bothered to read it was that the title caught my eye on one of the SA e-mail lists, so that on a quiet Sunday I eecided to read the piece as a matter of amusement. I would not have acted on it, no matter what it said, under any circumstances.
    Apr 5, 2015. 03:53 PM | 1 Like Like |Link to Comment
  • Freeport-McMoRan: The Market Is Clearly Mistaken About This One... A Textbook Case [View article]
    I got rid of my small FXC position when it acquired the o & g operations and indeed did so in circumstances of alloeged conflict of interest (as to which there was a settlement involving a payment by FCX). There are other fish in the sea, and personally I don't care two pins what its prospects are. Once bitten twice shy. I never want to hear about the company again.
    Mar 29, 2015. 01:53 PM | Likes Like |Link to Comment
  • United Technologies: Larger Dividend Increases Could Be Its Upside Catalyst [View article]
    Thanks. Very informative and useful. This is a top-quality name which I hold as a long-term core position which I want to increase, so I am in no hurry for rapid appreciation of the share price. If the management has been cautious with dividend increases, I bear in mind the current economic headwinds, and am prepared to trust the judgment of the management and the board.
    Mar 13, 2015. 12:24 PM | Likes Like |Link to Comment
  • Bank Of Nova Scotia Is A Safer Bet Than The Market Is Representing [View article]
    Am long BNS and the other Big 5 Canadian banks,-- in different proportions,---as a satisfied long-term investor. Of course there is an element of cyclicality in these names, and now the Canadian banks are suffering from the interrelated impact of the the lower oil price, weaker economic conditions, and the weak CAD. There are always bearish aricles in SA on the Canadian banks, often with exaggerated warnings about home prices, and some even advocating short sales of these names,-- a risky strategy.

    As I have been forced to sell a number of BNS shares to meet compulsory annual payouts from a retirement shelter, I have been replacing these sales up to my permissible limit in another shelter. This is in my view a good entry-point to the Canadian banks (I like BNS and TD best, then RY) especially for long-term investors.

    As to Scotia's international exposure, if you are for example in Santiago, Chile, you will see their logo everywhere. Their Chilean subsidiary is one of the largest banks in the country.
    Mar 12, 2015. 12:10 PM | 5 Likes Like |Link to Comment
  • Buy The Dividend Company That Manages All The Real Estate [View article]
    Thanks. As usual, something interesting and in this case new to me. Worth a continuing close look, though I always have to grit my teeth to buy a high,-- at least high-ish here,-- P/E name, even where this looks justified on earnings growth.
    Mar 8, 2015. 03:13 PM | Likes Like |Link to Comment
  • Is It Time To Dump The Dow? [View article]
    "... But if you turn on financial TV, open the newspaper or view a financial website you will inevitably see a box that shows the Dow, S&P 500 and the Nasdaq."

    The Canadian Broadcasting Corporation, Canada's national public broadcaster, performs highly important public funactions, including investigative journalism, in-depth political reporting and commentary, and production and broadcasting in the arts. But its business and financial reporting are in my view second-rate. I am reminded of this nightly during broadcast of The National, the hour-long principal news broadcast of the day.

    In the course of the programme the conversion rate of the USD/CAD is shown, and the principal Toronto Stock Exchange index. But of the U.S. indices only the DJIA and NASDAQ are shown. The S&P 500 never appears. The public. in other words, are invited to believe that the DJIA is the best guide to performance of the broad U.S. market. The (mostly) blind are leading the (mostly) blind. This deficiency annoys me night after night. If the public expect to see the DJIA, include it. But if the S&P 500 is shown, at least some people will begin to learn what it is, and perhaps how it di9ffers from the DJIA, and get on the road to becoming better informed financially.
    Mar 8, 2015. 03:01 PM | Likes Like |Link to Comment
  • The Deflation Hoax [View article]
    Since its publication, I have liked and sympathized with David Beckworth, "Deflation Isn't Always Dangerous" (Barron's, November 19, 2007)

    Not only central banks but legislatures, broadly speaking, pursue policies designed to favour debtors over creditors by eroding the real value of debt. This is very clear in insolvency legislation, and especially pronounced in jurisdictions where creditors are, or are perceived as, largely foreign, and where local interests are for example resource-based, such as farming interests.

    Creditors,-- including small or middle-class savers who save in bank accounts or by buying bonds, are put onto a treadmill, with the value of their savings systematically eroded. I like to say that if,-- as is true save exceptionally and intermittently and in the short term,-- currency is [expletive], a promise to pay currency is also [expletive].

    A remarkable anecdote I have on good authority is a comment made by an oil and gas entrepreneur who in the 50s or 60s sold his business in western Canada and went to Richardson's in Winnipeg to invest the proceeds. He said: "I am a wealthy man, but I am NOT WEALTHY ENOUGH to invest in bonds". He stood the conventional wisdom on its head. Normally you would hear "I am not wealthy enough to invest in stocks". But he saw how inflation and taxation would erode the value of bonds, leaving little or no real return after tax. Lenin, in fact, is quoted as having urged that the bourgeoisie be destroyed through the "two millstones" of inflation and taxation.

    The most striking single illustration of inflation I have ever seen is a plaque in the parish church of Burford, England, a very beautiful Cotswold town about 20 miles west of Oxford. Here the outer walls are scarred by gunshot which which Cromwell's forces executed a number of Levellers. Here too Mr. Speaker Lenthall is buried (look him up on the internet). And here is a plaque showing benefactions to the parish from about the 13th or 14th century. One, if memory serves, is a sum of about two shillings (which is 10 new pence in the decimalized currency) bequeathed AS A CAPITAL SUM, the income to assist bthe poor of the parish. By the late 50s and early 60s, two shillings would have bought four Cadbury chocolate bars. Now I don't think it would buy anything at all.

    Good luck to all.
    Mar 1, 2015. 04:41 PM | 2 Likes Like |Link to Comment
  • Caterpillar: Tax Avoidance Or Tax Evasion? [View article]
    Thanks. I have not the whistle-blower's specific knowledge of the detail, nor am I a tax specialist or a CPA. (My background is as a member of the Canadian bar for a little under fifty years, and a law teacher of commercial and public law subjects for about 35.)

    My skepticism starts with the fact that the specific tax-strategies complained of seem less aggressive than those successfully pursued by the tech giants, for example in situating their patents and other intellectual property outside the U.S. so as to generate income (I suppose the IRS would say, situating income) outside the U.S., or in marketing their goods through non-U.S. subsidiaries, so as to generate income outside the U.S.

    "Substance over form" and "assignment of income" doctrines are the typical boiler-plate that every tax administration has recourse to. That doesn't mean that they should be dismissed, but only that they should be met with a degree of skepticism.

    A friend who has practised tax law with a large NYC firm says "I don't really understand the arguments about substance or assignment. If there is a transfer pricing dispute or maybe a hybrid instrument or hybrid entity issue, that is plausible but substance and assignment sound like grasping at straws. I can't imagine they would do the work to allocate income in the three situations you describe. Seems strange to me. "

    Add to that that, perhaps for perfectly good reasons, the whistle-blower is a disgruntled employee,-- with an axe to grind,-- as I myself would be in similar circumstances. And I wonder too whether he may have a potential share in any IRS recovery.

    So I view the IRS claim with a certain skepticism.

    Within a diversified portfolio I have some cyclical industrial positions of companies which I regard as strong long-term names. One is a minor position in CAT, well in the black. So my dog in the IRS-CAT-fight is a minor entrant, and I can regard its progress with serenity.

    Thanks, incidentally, for your consistently good pieces, which I read and enjoy.

    Good luck to all.
    Feb 28, 2015. 04:06 PM | 3 Likes Like |Link to Comment
  • Deere's Low-Quality Earnings Spell Trouble For The Dividend [View article]
    What would have motivated Warren Buffett to increase his stake in Deere?

    ...Berkshire also revealed that it increased its stake in farm-equipment maker Deere & Co. to $1.5 billion. The stock was likely picked by Berkshire Chairman and CEO Mr. Buffett, who has said that the smaller stock picks in the firm’s portfolio are likely those of his two investment managers, Todd Combs and Ted Weschler, while the larger positions are his.

    During the second quarter, it held 3.9 million shares of Deere, according to a regulatory filing. Berkshire’s holding in Deere was omitted from its original filing for the third quarter as it had requested confidential treatment from the SEC to build its position secretly. On Tuesday, Berkshire revealed in an amended filing for the third quarter that showed it had increased its stake in Deere to about 7.6 million shares. As of the fourth quarter, it had further increased its stake to 17.1 million shares, or 5% of the company’s total shares. ...
    Feb 26, 2015. 04:09 PM | Likes Like |Link to Comment
  • Caterpillar: Tax Avoidance Or Tax Evasion? [View article]
    I read the account of the IRS claims in the WSJ:

    The IRS complains in particular about:

    (1) the sales by independent parts-manufacturers to CAT’s Swiss subsidiary;
    (2) the loans by a Swiss subsidiary to the parent, and
    (3) the prepayments by subsidiaries to the parent.

    I'm really not impressed or convinced by the IRS's objections, which strike me as prompted by the current public and Congressional anger over international tax avoidance. I don't see what is illegitimate in any of the three strategies mentioned above, and I hope that the IRS claims are rejected. That would be my view as a matter of principle even if I did not have a small position in CAT.

    Was the whistle-blowing employee a tax-specialist? Did he have his own reasons for getting onto his high horse? Might he simply be someone who objects on principle to tax-avoidance strategies? What probative value has the opinion of a so-called "conscientious" employee?
    Feb 26, 2015. 01:42 PM | 2 Likes Like |Link to Comment