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AuCoaster

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  • A Dividend Growth Portfolio - How Did Income Hold Up During The Last Recession? [View article]
    The Chowder Rule performance shows that it is a good system for identifying superior companies. And best of breed companies should outperform the general market in the long run. This would be true of non-dividend stocks and dividend stocks.
    Jun 19, 2015. 06:45 PM | Likes Like |Link to Comment
  • Do Buybacks Benefit Dividend Growth Investors? [View article]
    One can find examples of every likely case, demonstrating that there are real life examples of the different possible outcomes. No surprise there.
    As investors we should be interested in what is most likely to happen.
    A few isolated examples does not tell us that.

    History shows that dividends per share tend to increase over time following increases in earnings per share. That is for the market as a whole. The best companies will probably increase their dividends, while the weak ones might not.
    Jun 19, 2015. 06:17 PM | 1 Like Like |Link to Comment
  • Bank Stock Prices And Higher Interest Rates: Lessons From History [View article]
    Dr. Z,

    Mark-to-market does not apply to bonds classified by the company as Held-to-Maturity. So, there is no need to pretend about the accounting.
    Jun 19, 2015. 05:38 PM | Likes Like |Link to Comment
  • Bank Stock Prices And Higher Interest Rates: Lessons From History [View article]
    Their durations will be influenced by the nature of the business.
    A bias toward duration matching of assets and liabilities will push the portfolio toward much shorter average durations for property, longer for casualty, and much longer for life insurance. And, reinsurers should generally be longer than insurers.
    Jun 19, 2015. 01:13 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: I Do Not Care If I Beat The S&P 500 At All [View article]
    You might have a long wait on that. I remember the CAD being 10-30% below the USD for most of my life. The more recent decade of CAD being close to parity feels like the aberration to me.
    Jun 19, 2015. 01:00 PM | 1 Like Like |Link to Comment
  • Bank Stock Prices And Higher Interest Rates: Lessons From History [View article]
    I think there is fundamental basis for your hypothesis.
    But, your correlation is overpowered by other elements, probably making it unreliable. And, we don't know from your article if or how you have controlled for those elements.

    I would expect rising Treasury interest rates to have a dampening effect on all stock prices as valuations will be affected by the competitive alternative of bonds. Of course, to the extent that rising rates reflect a strengthening economy, stock prices should rise. And short-term flow of funds away from bonds toward stocks can drive rates and stock prices as well. So, there are opposing forces, making any correlations hard to interpret. There are so many currents in the valuation waters.

    Regarding profits, rising interest rates will increase the cost of doing business, especially for banks when the short-term rates are rising. The benefit to bank revenues from rising long rates will be slow in coming as the new loans at higher rates will be a small part of the total asset base. So, unless short-term rates stay low, the costs should rise faster than revenues, hurting bank earnings in the short run. We certainly saw an extreme example of this in the Savings and Loans crisis long ago.

    While a broad correlation is observed, I do not think the implications are so clear or reliable. The varying specific circumstances are important to the issue. A deeper fundamental analysis is needed.

    I look forward to seeing the financial analysis in your next installment.
    Jun 19, 2015. 12:46 PM | 1 Like Like |Link to Comment
  • Bank Stock Prices And Higher Interest Rates: Lessons From History [View article]
    It is important to remember that Insurers and Reinsurers have huge bond portfolios. Their existing bond portfolios will decline in value as rates rise. Holding to maturity mitigates this problem. But, in the near term, the true economics of rising rates will be negative on a large bond portfolio.
    Jun 19, 2015. 11:42 AM | Likes Like |Link to Comment
  • Bank Stock Prices And Higher Interest Rates: Lessons From History [View article]
    By "your data set" I mean the data set that you have used.

    I am not concerned about the accuracy of the data.
    I worry that the correlation is meaningless.

    Your hypothesis might be correct. But, the correlation does not serve to prove it because of the problems that I have outlined in my comment.
    Jun 19, 2015. 12:26 AM | 2 Likes Like |Link to Comment
  • Retirement Strategy: I Do Not Care If I Beat The S&P 500 At All [View article]
    You don't need non-US stocks to get exposure to international revenue and profits. The S&P 500 have substantial revenue from outside the US.

    Of course, the best companies in the world are not just in the US.
    But, the US does have a large pool of great companies.
    Jun 19, 2015. 12:16 AM | 3 Likes Like |Link to Comment
  • Bank Stock Prices And Higher Interest Rates: Lessons From History [View article]
    Spreads are critical to bank profits. But, legacy loans are a drag on profits in a rising rate environment. Valuations should be lower in a higher rate environment for all stocks, as lower PEs align with higher rates. All creating a tug of war on bank stock prices. There are many moving parts, and different for each bank.

    Seems that bank stock prices are correlated with economic growth more than anything else. Within your data set, they also seem to be correlated with time, generally rising over time. And you have many years of data. Because of this I think the stock price data needs to be adjusted for inflation.

    I think your data set also shows a very highly negative correlation between interest rates and time, simply because of the prevailing rate trend during your data sample. The data sample is skewed by this dominant trend.

    In fact, using the same method in your article, I believe we could demonstrate a very highly negative correlation between interest rates and population. A scatter diagram would strongly support this hypothesis, with observed population being generally lower when rates were higher.

    All of this has me doubting the relevance of the correlation shown.
    Correlation is not reliable or sufficient for this question.

    I look forward to your second installment, digging deeper into the question.
    Jun 18, 2015. 11:57 PM | 3 Likes Like |Link to Comment
  • Federal Reserve Meeting Report: Economic Growth To Achieve An All-Time Record! [View article]
    But, it is not record growth. Unless you mean record slow growth.
    The economy is in slow motion, and not near the top.
    Jun 18, 2015. 01:43 AM | Likes Like |Link to Comment
  • Federal Reserve Meeting Report: Economic Growth To Achieve An All-Time Record! [View article]
    Longest, but also the weakest for job creation.

    We are moving in slow motion. So, it should last a long time.
    When you travel slowly it takes longer to reach your destination.
    Jun 17, 2015. 07:29 PM | 1 Like Like |Link to Comment
  • History Of Bull Market Length [View article]
    I consider 1982 to 2000 to be one bull market. 18 years.
    1987 was an up year! It had a temporary surge that collapsed and dipped before recovering to where the year started. So, while technically having the rule-of-thumb bear decline, it was not a bad year. Just a blip.

    Having said that, I think the passage of time is not meaningful.
    What matters is cycle progression. Markets generally rise until the profit outlook deteriorates. This comes when the inputs to production become expensive, squeezing profits. So, when wages, materials, energy and interest rates start reaching frothy levels, profit growth will be unsustainable, and the price of stocks will decline.
    Jun 16, 2015. 08:42 PM | 1 Like Like |Link to Comment
  • Quote Of The Day – Tuesday, June 16, 2015 [View instapost]
    Seems to me that selling when the price is "too high" at the top of the market should be as much fun as buying when the prices are "too low" at other times.
    Jun 16, 2015. 06:45 PM | 3 Likes Like |Link to Comment
  • Dividends Are Not That Reliable [View article]
    RAS, Just look at the history of dividends and earnings.
    Dividends grow as earnings grow, with some lag.
    Google the topic if you want to see it for yourself.
    Jun 16, 2015. 02:14 AM | Likes Like |Link to Comment
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