It's Now Trading At $50, So Is There Any Oxygen Left In O? [View article]
Well here we are 2 weeks later and 10% higher. Is this a simple matter of momentum, where things can be out of kilter and overvalued for a long time, or is there more value here than we gave it credit for. Is there an analysis, beyond sheer numbers, that makes O more attractive than one might think, perhaps because of its reliability in paying over the years. Or perhaps because it conveniently pays monthly to retirees who have monthly bills, Or perhaps because going forward, right now, real estate is generally regarded as undervalued and just starting a recovery cycle. I believe that the market is actually being quite rational on this one, while the analysts are not really seeing the big picture. Of course there is some degree of overvaluation or some time interval in which the value will fall--the old epithet about a broken clock being right two times a day--but for now, this seems to be a refuge for people who want current income, and who fear a general market correction. They are betting that even with a correction, those dividends will continue to roll in, which is why they want to own it.
As for an F on Schwab, I use those ratings and for the most part they are pretty good. However they do not seem to work for my REITs. Frequently, I find that the stocks I like from an undervaluation standpoint are rated C and D. I have interpretated this as more risk but more potential for gain. I usually sell those that have an F, with the exception of the REITS which otherwise look ok in terms of FFOs and such. I am sure that at some point the F will turn out to have been a warnng, but I do not feel particularly threatened by it, once I have considered and otherwise analyzed an equity. WRE was an F for a long time, and is now a C. Perhaps the way to use the low end is to note the changes in ranking, as much as the ranking itself. Would like to hear more from others on this.
Investors Should Sell Verizon Before A Potential Bubble Bursts [View article]
Wireless or otherwise, this is a basic phone company in the communications sense. How many people are going to stop using their phones when the economy tanks. Not as many who will stop eating out, buying new cars, and a host of other non necessities. Telephonic communication is a need at this point, not a want. VZ is currently one of the safest investments, just because of what it does, and because it is a dominant player. That is the reason it is valued more than the average market multiple, not to mention that it is hard to get a decent return from riskless investments such as insured CDs or government bonds. And what if we do not have another recesson for a while. As people play more video games, and as more broadband width is consumed, VZ can keep up with inflation. Can your safe government backed bond do that. VZ has always been buy and hold, and is so today. If you were to sell all the stocks over market multiple, that would be nearly half of all the stocks. Have fun following your own advice and doing that.
Investors Should Sell Verizon Before A Potential Bubble Bursts [View article]
'In a market correction or if Verizon were to report negative news, or possibly disappointing earnings or weak guidance, the stock could be heading back down towards those key support levels.'
Why A Stock Market Bubble Is Forming Right Now [View article]
You cannot eat gold and it does not keep you warm at night. During a recession, people buy less jewelry. The price of gold frequently seems based on fear pushed by late night tv ads. When those people have all they can afford, look out below. Not many others are interested.
Why A Stock Market Bubble Is Forming Right Now [View article]
I think you both are right. Businesses borrow to expand as the recovery takes hold, and individuals borrow to secure the lower rates at the early stages, as their own situations and psychologic outlook improve as well. In essence we are poised to operate on both cylinders. What makes the current situation particularly attractive for individuals are the lowest rates in anyone's memory, the deferral of even talking about doing away with the largely American mortgage deduction, and the still depressed pricing in the housing market. People indeed perceive that the situation may not last forever, and may pass them by unless they act. More fodder for an improving economy.
Why A Stock Market Bubble Is Forming Right Now [View article]
The trouble with over and undervalued markets is that they tend to remain that way for long periods. Attempting to call the turns in these situations is mostly unfeasible, even for psychologists or psychiatrists, which are the primary fields involved. Although we have a similar take on the market, I have elected to remain pretty much invested at all times, minus a living expenses, and (muni) bonds to provide base income. Though invested, the assets slowly evolve as ones I have owned and have been bid up, are traded for more reasonable valuation assets. After a year, I get rid of the ones tht for unknown reasons did not behave as expected as well. When the market tanks, everything goes down, but as we have discussed, the lower PE stocks seem more resilient (but not not the lowest PE stocks, for which a market dip may be a terminal event), and consistent dividend payors seem to have a shallower floor and recover more promptly than the higher flying and widely touted story stocks. Just a difference in style.
Why A Stock Market Bubble Is Forming Right Now [View article]
'I believe that most individual investors have absolutely no business investing in individual stocks.
I think you may be correct, but it is hard to know because we do not really have a denominator to calculate what we mean by most. Many individuals risking their life savings are smart enough to know what they do not know, and thus let someone else pick their stocks, e.g. mutual funds, ETFs, indices and such. But those cost a management fee. Others take a long term view and invest in individual stocks that are reasonably valued by the usual parameters; thye take longer term view, from a 6 mo to many years horizon, according to their own needs, e.g. dividend income, growth, fixed income, etc. They do not have the drag of management, overhead, and other fees, as thus can do as well or better than the pros. The ones who get clobbered are the ones who read about a stock in Barrons (if they even do that), or here on SA, or on the Cramer show, and think they are the first to hear of it and rush to get in before it goes up. They ignore or do not appreciate business cycles, financial sectors, valuations, fundamental or technical analysis, diversification, etc. and just go for TV story stocks. For these types, their sucess with investing money in the stock market will be limited no matter what vehicle they choose to engage. Judgement and experience are not necessarily the exclusive province of financial pros, many of whom are as much salespeople as financial gurus. While large institutions provide many services, there are many private investors you never hear about who do very well. Who have become financial pros themselves. We just don't know how many, because they ordinarily prefer to remain unknown. They are truly the smart ones.
Why A Stock Market Bubble Is Forming Right Now [View article]
Well, perhaps suprisingly, we agree about the big picture. Bullish, except for short term announcements as the Fed gets around to restoring normalcy to rates. Unlike you, I was always fully invested, and took the lumps, but did not panic or sell. Twice in my investing career I have sustained some impressive losses which essentially recovered within a few years, and then went on to more impressive gains. Initially I had a thirty year timeframe, and the surprise is that 30 years later, I still do. What I hold rarely has a PE above 20, and now a days always has a dividend as I prepare for retirement. I believe that this has cushioned the blows to some extent. To diversify, I have decided to buy a physical asset, a 2nd home, of course mostly to enjoy in retirement, but also to diversify away from the market utilizing the lowest interest rates we are likely ever to see again in our lifetime. I did not expect at this stage to be taking out a mortgage, but in this current environment, it seems cost effective to do so, and in the process, it helps the recovery, which according to you, and where we again agree, was one of the Fed's goals.
Why A Stock Market Bubble Is Forming Right Now [View article]
Well, I did not mean to imply that some action on behalf of the Fed was not warranted. Just that the actions that they were forced to take resulted not simply from the actual fiscal crisis, but the reaction to the fiscal crisis as well. If the purpose was to make wealthier people wealthier yet via the market, they have suceeded. If the purpose was to crush retirees who saved for years hoping for at least a modest 4% safe return on their savings, they have succeeded. If the purpose was to transfer a huge and growing debt to our children and grandchildren they have succeeded. If the prupose was to introduce uncertaintly in the workplace by introducing an untested and largely unread major health plan, they have succeeded. If the purpose was to slow an expected recovery by raising taxes during the early stages, they have succeeded. If the purpose was to start a class war by engaging in rhetoric about one's fair share, they have succeeded. If the purpose was to get people back to work, they have not succeeded. One example of missing the mark. They supported Fisker. The extent of the support was about 1/2 m per car, which were sold at a subsidized rate of 100K per car. Only the wealthy can afford a 100K car, e.g. Justin Bieber. So people like he were subsidized 4/5 the cost of the car. This is but one example of what I mean by missing the mark. Try to help the poor by preserving their jobs, houses benefits, etc, as noble as it is, resulted in a wealth effect for the most able, not the least able, via the Feds largesse. Not to mention the moral hazzard of transferring the risk elsewhere so it can all happen again. The Fed simply was reacting the olny way it can to the hand it was dealt. I was pointing out that the new thing was their intervention in long term rates, something that hereforeto was taboo. As other have pointed out, with the situation we have now, it is difficult to make a judgement as to what things are really worth, given the manipulation of the system of setting borrowing rates, both long and short term. This in itself can distort values and lead to bubbles.
Why A Stock Market Bubble Is Forming Right Now [View article]
You are making my point of unintended consequences: 'The segment of the population hurt the most is not the poor but what I would call the Savings Class, mostly older folks who rely on "safe" investments like savings accounts and bank CDs for income. In effect, the Fed is taking money from them and dispensing it to those refinancing their home mortgages, to large corporations and financial institutions and to those willing to throw money into risk assets. '
In essence they have rewarded risky and careless behavior by individuals and their lending banks while penializeing the people who scripmed and saved so they could enjoy their retirements.'
Why A Stock Market Bubble Is Forming Right Now [View article]
'a bubble may form...' 'may' is a weasel word but really does convey your uncertainty. But here where I agree with many on this thread. Stocks by PE and recent history are not in a bubble, and are simply coming up to speed after the crash in 2008. To more normal valuations, as an expected, though slow recovery takes hold. I agree that the Fed has distored the monetary system by fiddling with long term rates, which was previously the domain of rather esoteric bond holders who tried to look ahead 30 years. Sometimes they were right, sometimes wrong, but they set the market by reacting to it, and not from a position of trying to lead it and artifically control it as does the Fed . This is an experiment in progress, which is working out better than the austerity experiment in Europe, but an experiment nevertheless. It adds to the debt, predisposes to inflation, builds roads, bridges, and high speed rail in those nations that get our debt payments, and though intended to get hiring going here, has largely failed. Partly becasue of higher taxes taking down the potential spending.consumer. And it has created uncertainty as to when it all might come to an end. The good news is that the Fed is making every intent to tell us when they will end their experiment, and not to end it so abruptly that the market will crash again as in your bubble concerns. So far it has worked out the opposite of what was intended. It has not boosted jobs, but has goosed the stock market. It is primarily the upper class that has the discretionary income to own stocks and bonds, and they have been the primary beneficiaries of a government policy that has largely missed the mark. Trickle down has always been derided by the democrats, but this is exactly what they have created and embraced. They of course want to take it back by taxing the upper class to take them down and recreate a middle class, rather than raise the lower classes, but that is not what has happened. Attempts to control a free market always have unintended consequences. Enjoy these while you can. Buy that house at 2.6% 15 year fixed rate, monitor your stocks during this time, and cut back out when the Fed tells you to. Just listen to what they are telling you.
Plains All American Pipeline: How High Is Too High For This MLP? [View article]
IJ32
I agree with your analysis. These are just the usual fixed income arguements. Interest rates up, so underlying capital loses, and vice versa. Solution is laddering / diversification so you get a balanced income over the years without having to worry about any one lot of a fixed income asset or any one fixed income asset. Unlike bonds, however, there is no due date for MLPs, though the capital accounts eventually go to zero negating the tax benefits, which we have largely ignored in this discussion. As taxes go up, tax deferral is worth more, so unlike a bond, there is no direct mandate that these drop. In fact, in addition to the low interest rates now in effect, there is a rise in taxes as well, and this can be a factor in investor decision making as well. Agree that if the underlying business is doing well, depite a rise in interest rates, which is bad for the market in general, MLPs may do somewhat better than this article is predicting. Since there are multiple factors at work in the actual market price, it is not easy to predict the exact hit, and since the entire market is likely to respond to raising interest rates with a less favorable general outlook, there may not necessarily be any better alternatives anyway. I suppose one could go to cash, but good luck in keeping up with inflation, and hence maintaining purchasing power. The real threat to MLPs is goverment action similar to what went on with the Royalty Trusts in Canada. The powers that be are increasing taxes on anything they can. Eliminating the tax advantage would indeed be catestrophic, though not forever. In Canada, most had recovered from the initial shock drop within the year. People still need energy.
It's Now Trading At $50, So Is There Any Oxygen Left In O? [View article]
Rhianni32
If you thought it was going from 4.3% to 3% anytime soon, why not hold and enjoy a 25% gain in the underlying price? Then sell and look for another asses throwing off 4.3%.
It's Now Trading At $50, So Is There Any Oxygen Left In O? [View article]
As for an F on Schwab, I use those ratings and for the most part they are pretty good. However they do not seem to work for my REITs. Frequently, I find that the stocks I like from an undervaluation standpoint are rated C and D. I have interpretated this as more risk but more potential for gain. I usually sell those that have an F, with the exception of the REITS which otherwise look ok in terms of FFOs and such. I am sure that at some point the F will turn out to have been a warnng, but I do not feel particularly threatened by it, once I have considered and otherwise analyzed an equity. WRE was an F for a long time, and is now a C. Perhaps the way to use the low end is to note the changes in ranking, as much as the ranking itself. Would like to hear more from others on this.
Investors Should Sell Verizon Before A Potential Bubble Bursts [View article]
Investors Should Sell Verizon Before A Potential Bubble Bursts [View article]
And your point would be . . . .
It's Now Trading At $50, So Is There Any Oxygen Left In O? [View article]
Why A Stock Market Bubble Is Forming Right Now [View article]
Why A Stock Market Bubble Is Forming Right Now [View article]
Why A Stock Market Bubble Is Forming Right Now [View article]
Why A Stock Market Bubble Is Forming Right Now [View article]
I think you may be correct, but it is hard to know because we do not really have a denominator to calculate what we mean by most. Many individuals risking their life savings are smart enough to know what they do not know, and thus let someone else pick their stocks, e.g. mutual funds, ETFs, indices and such. But those cost a management fee. Others take a long term view and invest in individual stocks that are reasonably valued by the usual parameters; thye take longer term view, from a 6 mo to many years horizon, according to their own needs, e.g. dividend income, growth, fixed income, etc. They do not have the drag of management, overhead, and other fees, as thus can do as well or better than the pros. The ones who get clobbered are the ones who read about a stock in Barrons (if they even do that), or here on SA, or on the Cramer show, and think they are the first to hear of it and rush to get in before it goes up. They ignore or do not appreciate business cycles, financial sectors, valuations, fundamental or technical analysis, diversification, etc. and just go for TV story stocks. For these types, their sucess with investing money in the stock market will be limited no matter what vehicle they choose to engage. Judgement and experience are not necessarily the exclusive province of financial pros, many of whom are as much salespeople as financial gurus. While large institutions provide many services, there are many private investors you never hear about who do very well. Who have become financial pros themselves. We just don't know how many, because they ordinarily prefer to remain unknown. They are truly the smart ones.
Why A Stock Market Bubble Is Forming Right Now [View article]
Why A Stock Market Bubble Is Forming Right Now [View article]
Why A Stock Market Bubble Is Forming Right Now [View article]
'The segment of the population hurt the most is not the poor but what I would call the Savings Class, mostly older folks who rely on "safe" investments like savings accounts and bank CDs for income. In effect, the Fed is taking money from them and dispensing it to those refinancing their home mortgages, to large corporations and financial institutions and to those willing to throw money into risk assets. '
In essence they have rewarded risky and careless behavior by individuals and their lending banks while penializeing the people who scripmed and saved so they could enjoy their retirements.'
Why A Stock Market Bubble Is Forming Right Now [View article]
Why A Stock Market Bubble Is Forming Right Now [View article]
Plains All American Pipeline: How High Is Too High For This MLP? [View article]
I agree with your analysis. These are just the usual fixed income arguements. Interest rates up, so underlying capital loses, and vice versa. Solution is laddering / diversification so you get a balanced income over the years without having to worry about any one lot of a fixed income asset or any one fixed income asset. Unlike bonds, however, there is no due date for MLPs, though the capital accounts eventually go to zero negating the tax benefits, which we have largely ignored in this discussion. As taxes go up, tax deferral is worth more, so unlike a bond, there is no direct mandate that these drop. In fact, in addition to the low interest rates now in effect, there is a rise in taxes as well, and this can be a factor in investor decision making as well. Agree that if the underlying business is doing well, depite a rise in interest rates, which is bad for the market in general, MLPs may do somewhat better than this article is predicting. Since there are multiple factors at work in the actual market price, it is not easy to predict the exact hit, and since the entire market is likely to respond to raising interest rates with a less favorable general outlook, there may not necessarily be any better alternatives anyway. I suppose one could go to cash, but good luck in keeping up with inflation, and hence maintaining purchasing power. The real threat to MLPs is goverment action similar to what went on with the Royalty Trusts in Canada. The powers that be are increasing taxes on anything they can. Eliminating the tax advantage would indeed be catestrophic, though not forever. In Canada, most had recovered from the initial shock drop within the year. People still need energy.
It's Now Trading At $50, So Is There Any Oxygen Left In O? [View article]
Rhianni32
If you thought it was going from 4.3% to 3% anytime soon, why not hold and enjoy a 25% gain in the underlying price? Then sell and look for another asses throwing off 4.3%.