The Little Professor

An Investor's Guide to Real Diversification

Because of business cycles and the impossibility of consistently predicting the future, diversification is essential. Diversification does not mean having many individual investments, it means having many different investments. It means having an all weather portfolio, a portfolio that will have some winners no matter what the economy does. With diversity you win less and you lose less.

The Most Likely Market Scenario

We are recovering from the recession and the market rise reflects this. We are in the early stages of a new bull market which has a long way to go. Recent market pull backs have been brief and unconvincing. The weak dollar, low interest rates and low inflation combine to fuel the rising market.
As to inflation as long as there are large numbers of idle plants, equipment and people, it will be subdued. Increasing the money supply by itself does not create inflation. you need people willing to spend the new money. Incidentally we learn in Economics 101 that money is not increased by the printing press. Only a tiny percentage of money is in the from of printable notes. Money is increased by loans and credits.

The Most Likely Market Scenario

We are recovering from the recession and the market rise reflects this. We are in the early stages of a new bull market which has a long way to go. Recent market pull backs have been brief and unconvincing. The weak dollar, low interest rates and low inflation combine to fuel the rising market.
As to inflation as long as there are large numbers of idle plants, equipment and people, it will be subdued. Increasing the money supply by itself does not create inflation. you need people willing to spend the new money. Incidently we learn in Economics 101 that money is not increased by the printing press. Only a tiny percentage of money is in the from of printable notes. Money is increased by loans and credits.

Suburban Propane Waters Down Its Stock

SPH has done wonders in increasing its earnings and dividends in the face of adverse conditions. Raising new capital by selling stock is more conservative than by taking on more debt. SPH is improving its balance sheet. If its to its advantage to sell stock at the higher price, that advantage is also belongs to its stockholders. This balances the dilution.

BP Financial Gauge Analysis for June 2009 Quarter

BP earnings and its stock price are bound to improve as the recession eases, oil prices resume their rise, and the dollar its fall. For the long tern holder, this stock is a great hedge against inflation and occasional daily reversals in price should be ignored. As a bonus the stock's dividend yield is far above average.

Upward Curve of Treasury Yield Could Signal Recession's End

The recession is not over. All the wishful thinking in the world won't change that fact. 2009 is a recession year. One statistic such as the wiggle of the treasury yield curve, by itself, is unconvincing prove. How about the sharp and continous rise in unemployment and the continued failure of the banks to lend. It is true we won't know the bottom when it comes. What worries me is that when the bottom is reached, the economy might just stay there, meaning no rapid recovery. This recession is different from others. The latter often were caused by swelling inventories accompanied by high interest rates. When inventories and interest rates dropped sufficiently, recovery followed . It will not be so easy this time.

The Closed-End Fund Discount Quandary

The fact that a closed end fund sells at a large discount to its net asset value does not mean that it is a bad fund. Some times very large discounts present wonderful buying opportunites. There are a number of reasons why closed end funds trade at prices different from net asset value. First we are talking about different markets. The market for the fund's stock is not the same as the market for its individual assets. Different dynamics, especially in the short run affect the different markets. Emotions and short selling and covering also come into play. At any time closed end funds can narrow or eliminate the discount by buying back their own shares or by converting to an opened end or exchange traded fund.

MLPs: Profits in the Pipelines?

I have a heavy position in KMP, TPP, NS, and some other pipelines. Although their prices have dropped, their dividends have been rising and yields are at historic levels. I am holding tight. Even so as the recession deepens and lengthens so does the risk of holding these stocks. I worry about the heavy debt and the likely drop of imput through pipelines as the economy continues to contract. This in turn would make debt servicing more difficult and threaten payouts. These stocks are not for widows and orphans. On the other hand, if we ever get through this recession, these MLPs could become magic money machines.

Electric Utilities: Now a Screaming Buy?

Place your bets. It sure beats plane and hotel costs to Vegas.

The High Dividend Stock Investor's Collapsing Dollar Survival Guide, Part 4

Under normal conditions many of the stocks discussed would be wise investments. Today buying any of these is equivalent to tossing the dice. In my opinion only those who can afford to lose and who have a long time horizon-over 2 years- should buy right now. Except for brief rallies the bear market continues, and the economy slips further. This recession more than others is proving that a falling tide lowers all boats. It is likely that many of the fat dividends mentioned will be cut.

The High Dividend Stock Investor's Collapsing Dollar Survival Guide, Part 1

Your economic understanding is badly flawed. The government increases the money supply not by printing more currency but by creating more debt. Creating money does not cause inflation if people aren't going to spend it. The money supply is rapidly contracting and people aren't buying. We do not have have too much money chasing too few goods. We have too many goods chasing too little money.