In A Post Flash-Crash World, No One Should Use Trailing Stops [View article]
Tim: You make a good point - one so obvious I'm surprised we don't hear it more often from the pundits on TV, etc.
I never thought trailing stops made sense anyway, even decades before HFT became huge. Now, in the HFT world where flash crashes appear to be a part of life, despite the empty claims by regulators that May 6th, 2011 "can't happen" again -- they're much worse.
Before HFT, a stock could take a huge plunge on news. Trading could be halted, and when it resumed it could be down huge. One's stop will not buy "insurance" in such a scenario. This included huge, popular, heavily traded companies.
But now, with HFT, where ETF market makers etc. will back away if they can't get good prices for the component stocks on the exchanges (and who can blame them?) and stocks can get "flashed" within 15 minutes -- trailing stops are just requests to get reamed.
It's not a conspiracy. It's just an effect of the new market technology. Liquidity is fantastic -- until it suddenly is strictly limited, and there is no warning when that shift may occur.
I just wonder how long it will take all the pundits, like the Fast Money "hedge fund" clowns on CNBC, to quit advocating trading on charts and with stops. Of course, they're trading with OTHER peoples' money and selling advice -- so maybe they'll go on doing it until people get smart enough not to listen.
....
Maybe if you think you're smarter than everyone else and want to closely monitor the market every minute it is open, you can mitigate this issue. Good luck with that. And let's not forget, markets are global in scope now. Can you monitor and hedge 24 hours a day?
I have a life. I don't want to closely monitor the markets more than 30 minutes a day (monthly options expiration day may be an exception some months), much less 6.5 hours or 24 hours.
Looking At Fundamental Questions In MLP Investment [View article]
nstollon: Thanks for the article. Nice to see an article, and comments, that takes a reasonable, balanced look at various trade-offs to the complex business of holding MLP's in their various legal variants, for the long term, along with some of the tax implications.
Since it was set up, the Alerian AMLP C-corp ETF has been widely maligned by detractors and many mainstream media copycats, in what seems like a very unbalanced way -- assuming the C-corp structure is (roughly) akin to the Anti-christ.
Meanwhile, the very similar but non C-corp ETN, AMJ was supposedly akin to a fleet of angels since it avoided the C-Corp tax issues.
As I've been stating, and as I believe this article and the body of the comments confirms -- it's a trade-off, with various complex issues.
Fine. What investors need is a fair and impartial evaluation of such trade-offs (like C-Corp taxes vs. unlimited ETN credit risk), and then they can make their own (relatively informed) decisions.
Personally, having dealt with estate and trust complexities that seem quite like beings from hell (to this guy who hates tax complexities), I'll go with the simple C-corp structure, and pay the piper now, all day long.
Each to their own, and that's what makes a market.
bpertum, it will be interesting to see how "unassailable" Microsoft's Office is, with its new (rip-off) annual (large) licensing fee (Office-365).
For me, I bought multiple Office 2010 licenses for 3 PC's for about $100, and don't plan to buy ANY more MS products that use this sort of model.
I hadn't bothered with things like OpenOffice and other free alternatives. If push comes to shove, I certainly will when the price goes from $35ish per PC to many $hundreds over the life of a PC.
Aside from clumsy corporate organizations which are too inefficient to change or even get out of their own way, I have to image that a LOT of current Office customers will be thinking the same way.
It looks to me like MSFT is going to accelerate their path toward obsolescence, unless it stops behaving in such a customer-hostile way.
"Almost a year ago, I wrote a bullish article on Apple, arguing that its sky-high ROIC made it a great value for investors even at such a high price."
That article was posted May the 15th, 2012 according to the page it is posted on. AAPL was about $550 then. The bullish article recommends people buy and hold the stock for the long term, and talk about the company doing great things.
So now, with the stock over $100 lower, you HATE AAPL, and say it is worth less than half what it trades at now.
So why should readers regard your current opinion as any better than your last opinion?
Disclosure: I don't pretend to have any special prognostication skills about public company prediction from year to year -- but I don't write for profit blogs or newsletters dishing out stock picks for money either.
Why Passive Index Investing Is Merely An Illusion [View article]
Tim, while I generally enjoy your articles on dividend growth investing, respectfully, I think you're mainly playing semantics games here.
1). The management of which components a major index like the S&P 500 owns over time is at a completely different scale and timeframe than the typical actively managed mutual fund.
2). The difference in expenses between holding a typical actively managed mutual fund and an efficiently managed high quality index fund are considerable, and the main part of the performance differential Bogle points to in his books and articles. (As do other peer authors like Larry Swedroe, for example).
3). The individual stock pricing concerns you mention are for arithmetically derived stock indexes. In the modern era, other types of indexes, such as equal-weight indexes are becoming available. (Higher expense ratios are the trade-off, so what is better in the long run remains to be seen). The Value Line is a long term example of an equally weighted index using a geometric average (source, Wiki and reading I have done over time on Value Line).
...
Nothing wrong with the concerns you are raising. But your research, analysis, and conclusions are incomplete, and would be better placed in context vs. your implication that indexes like the S&P 500 (and their weaknesses) represent all of the choices available for a passive index investor.
Disclosure: I invest both passively and actively, in stocks, in stock funds, and in other investments. I consider high quality reasonably priced active fund families like the American Funds vs. cheap and highly efficient Vanguard Index funds just another avenue for long term diversification.
If the prospects for intel are so good, given the fundamental strength of the company, I question the need to buy puts for insurance, unless you want to go "all in" for the short term.
I would instead advocate averaging down gradually, if lower prices present themselves.
If Haswell and its impressive power saving properties really do propel Intel into better markets, better profits, etc. over time, then putting up with some volatility and reaping a nice dividend while you wait are a small price to pay.
If Intel's position is so weak that potential owners are worried about the stock being decimated (which I think is unfounded), then the bullish articles are unjustified. (Writers, is it a "good" stock (over an INVESTMENT timeframe), or not?)
Disclosure:
In the short run, I have been selling OTM PUT options on INTC, and buying it near $20 on average. Over the long run, I have watched INTC rise to meet various threats like when AMD challenged them in the PC market. INTC may not be quick to react, but they react with strength and with quality, and they are relentless. I expect Haswell to be a part of that tradition continuing going forward. (Just one man's opinion).
Big Tex: As a guy who has been trading various stock option strategies for 30 years now, if you're really interested in this kind of information, you should SERIOUSLY consider buying a good BOOK on the subject.
This way you get a coherent overall look at what options really are, the theory and math behind them, as well as many trading strategies, and how they interrelate.
I would suggest a website like Amazon as a good place to read reviews on such books, possibly look at some of the contents online, etc.
There are MANY beginner books which are decent. There are a number of intermediate books, once you have a firm grasp on the fundamentals.
If you're thinking of trading options in a meaningful way, there will be SERIOUS money involved over time. Taking the time (and a little money) to get some meaningful education in this which isn't a haphazard group of internet articles is, in my opinion (as an old-school person) is a VERY worthwhile investment of time and effort.
Finally, once you get a very firm grasp on options and some real world trading experience, I would strongly recommend the Charles Cottle books, which can be found used on places like ABEBOOKS for very reasonable prices. Options: Perception and Deception... is the older cheaper one and Options Trading: The Hidden Reality... is the newer one which is more updated material and some better graphs, but more expensive.
(I accidentally found references to free downloads to the later one when looking for the title -- I have my doubts that this is legitimate).
Disclosure: I have no relationship (aside from being a satisfied customer) with Amazon, and no relationship with any book authors, aside from being "a fan" of many and "a big fan" of several.
Fire Your Investment Advisor And Buy European Equities [View article]
I find it interesting how people start recommending things like FEZ or VGK only after they have appreciated quite a bit.
I have quite a bit of VGK (I like it better than FEZ for its better diversification, but it has a similar performance profile) from a cost basis of about 40. For one thing (which one can verify by perusing my comments on VGK for over a year), I was pounding the table for selling OTM puts on significant VGK dips (at strikes like 30 and 36 with very nice premiums), advocating patiently buying it all the way down to 15 or 20 if the opportunity presented itself.
Given the global nature of many of the top VGK companies' businesses, much of their eanings and dividends should do fine (say roughly 80% or so of current numbers), even if Europe does continue to experience stress and fear. When the EU economy does eventually recover, you've got a large capital gain from sub-40, and were paid a substantial dividend to wait.
I'll agree that FEZ or VGK looks far better from a value perspective for the long term than XLG or its peers. It's just too bad that so many "advisors" wait until things are relatively expensive to recommend things.
Disclosure: I am not selling anything to anyone. My comments are based on what I am personally doing, and I have a long timeframe in mind to wait for results.
Sprott's John Embry: 'The Future For Retirees In America Is Grim' [View article]
systemBuilder, you are flat out wrong. Whining is the favored method of the redistributionists to justify confiscation and redistribution of wealth. That seems to work so far, to let the left buy votes from the duped and ignorant, but it doesn't actually solve any problems.
Funny thing, I was just an average guy who never had any inside information to front-run anything. All I had was the wisdom from my depression era parents to live frugally, work hard, save a LOT, and invest those savings (and the income from the savings).
Nothing remotely like CEO income, no favors from anyone in congress, etc. And yet somehow, I was able to comfortably retire at age 48, when I decided that work at a "white collar sweat shop" no longer was a good deal for me.
But I guess I must be imagining all of this or be a liar, since in your world, this is impossible for an average worker to achieve.
I notice like all redistributionists that you never use words like personal responsibility, personal savings, personal investment, or property rights.
So in your world, where a Steve Jobs or a Warren Buffett or a Michael Dell, etc. creates nothing and a secretary or sales clerk does "the hard work", where do the innovative ideas that create real wealth and better living standards over time come from?
Wishful thinking? Theft by government fiat?
There are plenty of socialist and communist systems which run with the economic ideas you espouse. Funny how they aren't economically too successful, generally.
Can Chairman Bernanke Talk Investors Out Of Higher-Yielding ETFs? [View article]
Gary:
"How can anyone refrain from riotous laughter?"
Great line, and great point.
When I think about the collection of idiots running Washington (and by extension, the first world generally) -- it amazes me that they are able to maintain confidence in the system. (I'm talking about politicians generally, not just central bankers).
But then I just read a lot of comments on various sites about political issues and I remember -- never underestimate the stupidity of the public in general (especially given the deterioration in modern educational standards, generally).
All I know to do is stay well diversified, and use some common sense. Along with my dividend-growth stocks for example, I've been long (and wrong) anti-inflation issues like TBT and FCX.
Hopefully things don't get bad enough when the unwind comes to blow up the whole system -- but the more things get skewed and the more people chase -- the more I wonder how ugly it can get when the great yield chasing unwind reaches full speed.
Protecting Your Portfolio From Inflation [View article]
Fund Gurus:
With respect, there is a very BIG difference between the way inflation hedges behave relative to inflation over time, and in the short run.
There are all kinds of ways over time to hedge a portfolio against modest to moderate long term inflation. Dividend growth stocks selling consumer staples, such as the two high quality examples you name are fine examples.
However, if we have a massive fairly sudden spike in inflation due to lack of investor confidence in the US dollar and a massive rise in US interest rates (and plunge in bonds) -- this will be a horse of a completely different color.
Things like TBT, TTT, GLD, and miners and commodity stocks in metals, oil, basic materials, etc. would likely do quite well then. Of course while inflation is low, they can perform randomly, or badly.
So, I think that at the end of the day, in the real world, you're back to good old fashioned prudent portfolio allocation. If you have a fear of inflation in the future (as I do), you can more heavily weight outfits like FCX, TBT, and GDXJ, but you have to put up with plenty of pain if inflation stays muted.
...
Oh, and if you're saying you can just ignore inflation no matter what, as your dividend growth portfolio will outrun everything else in the long run -- you can't count on that. If the dollar blows up, the global stock markets could well implode (on a dollar-adjusted basis) in a way that makes the 2008-2009 meltdown look like a Sunday picnic.
Unraveling The VXX Roll Yield Riddle [View article]
Nukeman, with respect, I see no comment at 11:43 on the tenth by you. I see one at 11:33, which I presume is the one you mean.
This lack of care or accuracy seems consistent with your lack of care in understanding the math and reality of these contracts you are discussing. You need to be VERY careful what you do -- if the market spikes down very hard and people become afraid, you can get hurt VERY badly if you are short a lot of these things.
VXX is an ETN. Thus it has NOTHING behind its "assets" aside from the credit and reputation of the bank (Barclays). The last time I read, there wasn't even any requirement that banks hedge (fully or even partially) their ETN exposure. So you potentially have 100% credit risk if the bank blows up. (Congress will ensure FDIC insurance pays off to prevent complete financial meltdown -- ETN's on complex financial derivatives? I wouldn't bet my life savings on that).
Many people have commented with alarm as the volumes of such ETN's continue to grow unabated. When (not if) the system comes under great stress again due to financial events, geopolitics, etc., we shall see.
As the commenters on this article imply, in the short run, the people "raking in all the money" on these contracts are the ones betting correctly that the market doesn't plunge. They will be right of course, until (without warning) they aren't. Then the worm will turn hugely and it will be very ugly.
The folks confidently, blissfully, selling lots of VXX and related contracts naked short will be extremely unhappy when this happens. If it is violent enough, if the margin accounts don't cover the magnitude of the losses, then Barclays et al will be very unhappy. If Barclays blows up and takes the system with it -- I don't know, but all those physical gold bugs may not look so dumb after all.
(Disclosure: I am not a gold bug, can't predict the future in any way, and only sell VXX short via being long a limited number of LEAP puts for the long run, thus strictly limiting my risk. I am finding over time that these are keeping more premium, so this simple trade may not work much longer).
Unraveling The VXX Roll Yield Riddle [View article]
polly, you are correct. I would strongly receommend traders choose options instead of these products themselves. Though the options do have some cost, you can't blow up your account if you are (for example) long some put options, and keep your position size small -- and just vacuum up some contango over time.
Stops, as discussed below, often don't work. And in the world of HFT, the machines can run stops all the time. I don't even understand how traders can have ANY confidence in stops any more, since HFT is the majority of the market volume.
Arena And Vivus Weaken On Poor Obesity Drug Prospects In Europe [View article]
So now we will be able to calmly wait and see how Belviq does in the U.S. If it lives up to safety and higher prescription expectations, based on real world results as ARNA longs expect -- THEN reapplying in Europe would be a logical step.
There is no hurry here. With both drugs on the market, the facts will tell the tale in time. No more need for hype from either side.
With all the lawsuits in medicine and all the push for anti-obesity ANYTHING in the US, via both political correctness and a genuine desire to decrease long term health risks (and therefore costs), I believe the potential for ARNA is terrific over time.
Disclosure: Patient ARNA long with a cost basis of well under $3 from before the initial FDA approval. Also gradually selling some ARNA options for income. (Last sold July 6 Puts on the dip after the European rejection news. Wonder if I'll get to sell some 12 calls for a nice premium again, since the April 12's I got about a buck for in Jan. have expired).
ARNA is a lot riskier than my favorite drug company, GILD, but the potential profits are significant over time.
Vanguard Natural Resources: An Upstream MLP With An 8.80% Yield [View article]
Albert:
Please tell me that you know what a collar is, for hedging purposes. (It is spelled correctly in the VNR oil hedges chart you provide, and I reviewed the overall document it came from on their website, so I am confident that is what they are talking about).
I realize that the call transcripts often contain such misspellings, but the fact that this is misspelled 4 times (that I noticed) in the cited transcript with nary a [sic] or mention from you makes me question:
Is this simply lazy editing, or do you actually understand the hedging vehicles VNR is referring to?
.....
Assuming you understand this, upon reviewing their 2013 vs. 2012 results, a couple of questions arise:
1). Since they apparently have a lot of their energy revenue fairly tightly hedged, shouldn't the unit price be far more stable than it has been? (i.e. look at 4Q 2012)
2). I notice that in 2013 their overall expenses have risen significantly, along with the production volumes. Net, their coverage of unit payments declined from over 1.4x to only 1.0x.
So, with this trend, their future prospects look far less secure to me than their marketing would suggest. Did you notice this trend, and if so, does it concern you?
The reason I ask, is given the trends I note above, simply buying high quality, reasonably high yielding oil production majors like COP or CVX, while more risky in the short run due to less hedging, looks far more promising in the longer run due to better apparent expense management. (Especially if one patiently waits and buys on meaningful dips. One can also earn respectable OTM option premiums on the oil majors. For VNR, the option premiums don't look worth bothering with to me).
In A Post Flash-Crash World, No One Should Use Trailing Stops [View article]
I never thought trailing stops made sense anyway, even decades before HFT became huge. Now, in the HFT world where flash crashes appear to be a part of life, despite the empty claims by regulators that May 6th, 2011 "can't happen" again -- they're much worse.
Before HFT, a stock could take a huge plunge on news. Trading could be halted, and when it resumed it could be down huge. One's stop will not buy "insurance" in such a scenario. This included huge, popular, heavily traded companies.
But now, with HFT, where ETF market makers etc. will back away if they can't get good prices for the component stocks on the exchanges (and who can blame them?) and stocks can get "flashed" within 15 minutes -- trailing stops are just requests to get reamed.
It's not a conspiracy. It's just an effect of the new market technology. Liquidity is fantastic -- until it suddenly is strictly limited, and there is no warning when that shift may occur.
I just wonder how long it will take all the pundits, like the Fast Money "hedge fund" clowns on CNBC, to quit advocating trading on charts and with stops. Of course, they're trading with OTHER peoples' money and selling advice -- so maybe they'll go on doing it until people get smart enough not to listen.
....
Maybe if you think you're smarter than everyone else and want to closely monitor the market every minute it is open, you can mitigate this issue. Good luck with that. And let's not forget, markets are global in scope now. Can you monitor and hedge 24 hours a day?
I have a life. I don't want to closely monitor the markets more than 30 minutes a day (monthly options expiration day may be an exception some months), much less 6.5 hours or 24 hours.
Looking At Fundamental Questions In MLP Investment [View article]
Since it was set up, the Alerian AMLP C-corp ETF has been widely maligned by detractors and many mainstream media copycats, in what seems like a very unbalanced way -- assuming the C-corp structure is (roughly) akin to the Anti-christ.
Meanwhile, the very similar but non C-corp ETN, AMJ was supposedly akin to a fleet of angels since it avoided the C-Corp tax issues.
As I've been stating, and as I believe this article and the body of the comments confirms -- it's a trade-off, with various complex issues.
Fine. What investors need is a fair and impartial evaluation of such trade-offs (like C-Corp taxes vs. unlimited ETN credit risk), and then they can make their own (relatively informed) decisions.
Personally, having dealt with estate and trust complexities that seem quite like beings from hell (to this guy who hates tax complexities), I'll go with the simple C-corp structure, and pay the piper now, all day long.
Each to their own, and that's what makes a market.
Danger Zone For This Week: Apple [View article]
For me, I bought multiple Office 2010 licenses for 3 PC's for about $100, and don't plan to buy ANY more MS products that use this sort of model.
I hadn't bothered with things like OpenOffice and other free alternatives. If push comes to shove, I certainly will when the price goes from $35ish per PC to many $hundreds over the life of a PC.
Aside from clumsy corporate organizations which are too inefficient to change or even get out of their own way, I have to image that a LOT of current Office customers will be thinking the same way.
It looks to me like MSFT is going to accelerate their path toward obsolescence, unless it stops behaving in such a customer-hostile way.
Danger Zone For This Week: Apple [View article]
Near the beginning of this article you said:
"Almost a year ago, I wrote a bullish article on Apple, arguing that its sky-high ROIC made it a great value for investors even at such a high price."
That article was posted May the 15th, 2012 according to the page it is posted on. AAPL was about $550 then. The bullish article recommends people buy and hold the stock for the long term, and talk about the company doing great things.
So now, with the stock over $100 lower, you HATE AAPL, and say it is worth less than half what it trades at now.
So why should readers regard your current opinion as any better than your last opinion?
Disclosure: I don't pretend to have any special prognostication skills about public company prediction from year to year -- but I don't write for profit blogs or newsletters dishing out stock picks for money either.
Why Passive Index Investing Is Merely An Illusion [View article]
1). The management of which components a major index like the S&P 500 owns over time is at a completely different scale and timeframe than the typical actively managed mutual fund.
2). The difference in expenses between holding a typical actively managed mutual fund and an efficiently managed high quality index fund are considerable, and the main part of the performance differential Bogle points to in his books and articles. (As do other peer authors like Larry Swedroe, for example).
3). The individual stock pricing concerns you mention are for arithmetically derived stock indexes. In the modern era, other types of indexes, such as equal-weight indexes are becoming available. (Higher expense ratios are the trade-off, so what is better in the long run remains to be seen). The Value Line is a long term example of an equally weighted index using a geometric average (source, Wiki and reading I have done over time on Value Line).
...
Nothing wrong with the concerns you are raising. But your research, analysis, and conclusions are incomplete, and would be better placed in context vs. your implication that indexes like the S&P 500 (and their weaknesses) represent all of the choices available for a passive index investor.
Disclosure: I invest both passively and actively, in stocks, in stock funds, and in other investments. I consider high quality reasonably priced active fund families like the American Funds vs. cheap and highly efficient Vanguard Index funds just another avenue for long term diversification.
Intel: No Has Been With Haswell [View article]
I would instead advocate averaging down gradually, if lower prices present themselves.
If Haswell and its impressive power saving properties really do propel Intel into better markets, better profits, etc. over time, then putting up with some volatility and reaping a nice dividend while you wait are a small price to pay.
If Intel's position is so weak that potential owners are worried about the stock being decimated (which I think is unfounded), then the bullish articles are unjustified. (Writers, is it a "good" stock (over an INVESTMENT timeframe), or not?)
Disclosure:
In the short run, I have been selling OTM PUT options on INTC, and buying it near $20 on average. Over the long run, I have watched INTC rise to meet various threats like when AMD challenged them in the PC market. INTC may not be quick to react, but they react with strength and with quality, and they are relentless. I expect Haswell to be a part of that tradition continuing going forward. (Just one man's opinion).
Intel: No Has Been With Haswell [View article]
This way you get a coherent overall look at what options really are, the theory and math behind them, as well as many trading strategies, and how they interrelate.
I would suggest a website like Amazon as a good place to read reviews on such books, possibly look at some of the contents online, etc.
There are MANY beginner books which are decent. There are a number of intermediate books, once you have a firm grasp on the fundamentals.
If you're thinking of trading options in a meaningful way, there will be SERIOUS money involved over time. Taking the time (and a little money) to get some meaningful education in this which isn't a haphazard group of internet articles is, in my opinion (as an old-school person) is a VERY worthwhile investment of time and effort.
Finally, once you get a very firm grasp on options and some real world trading experience, I would strongly recommend the Charles Cottle books, which can be found used on places like ABEBOOKS for very reasonable prices. Options: Perception and Deception... is the older cheaper one and Options Trading: The Hidden Reality... is the newer one which is more updated material and some better graphs, but more expensive.
(I accidentally found references to free downloads to the later one when looking for the title -- I have my doubts that this is legitimate).
Disclosure: I have no relationship (aside from being a satisfied customer) with Amazon, and no relationship with any book authors, aside from being "a fan" of many and "a big fan" of several.
Fire Your Investment Advisor And Buy European Equities [View article]
I have quite a bit of VGK (I like it better than FEZ for its better diversification, but it has a similar performance profile) from a cost basis of about 40. For one thing (which one can verify by perusing my comments on VGK for over a year), I was pounding the table for selling OTM puts on significant VGK dips (at strikes like 30 and 36 with very nice premiums), advocating patiently buying it all the way down to 15 or 20 if the opportunity presented itself.
Given the global nature of many of the top VGK companies' businesses, much of their eanings and dividends should do fine (say roughly 80% or so of current numbers), even if Europe does continue to experience stress and fear. When the EU economy does eventually recover, you've got a large capital gain from sub-40, and were paid a substantial dividend to wait.
I'll agree that FEZ or VGK looks far better from a value perspective for the long term than XLG or its peers. It's just too bad that so many "advisors" wait until things are relatively expensive to recommend things.
Disclosure: I am not selling anything to anyone. My comments are based on what I am personally doing, and I have a long timeframe in mind to wait for results.
Sprott's John Embry: 'The Future For Retirees In America Is Grim' [View article]
Funny thing, I was just an average guy who never had any inside information to front-run anything. All I had was the wisdom from my depression era parents to live frugally, work hard, save a LOT, and invest those savings (and the income from the savings).
Nothing remotely like CEO income, no favors from anyone in congress, etc. And yet somehow, I was able to comfortably retire at age 48, when I decided that work at a "white collar sweat shop" no longer was a good deal for me.
But I guess I must be imagining all of this or be a liar, since in your world, this is impossible for an average worker to achieve.
I notice like all redistributionists that you never use words like personal responsibility, personal savings, personal investment, or property rights.
So in your world, where a Steve Jobs or a Warren Buffett or a Michael Dell, etc. creates nothing and a secretary or sales clerk does "the hard work", where do the innovative ideas that create real wealth and better living standards over time come from?
Wishful thinking? Theft by government fiat?
There are plenty of socialist and communist systems which run with the economic ideas you espouse. Funny how they aren't economically too successful, generally.
Can Chairman Bernanke Talk Investors Out Of Higher-Yielding ETFs? [View article]
"How can anyone refrain from riotous laughter?"
Great line, and great point.
When I think about the collection of idiots running Washington (and by extension, the first world generally) -- it amazes me that they are able to maintain confidence in the system. (I'm talking about politicians generally, not just central bankers).
But then I just read a lot of comments on various sites about political issues and I remember -- never underestimate the stupidity of the public in general (especially given the deterioration in modern educational standards, generally).
All I know to do is stay well diversified, and use some common sense. Along with my dividend-growth stocks for example, I've been long (and wrong) anti-inflation issues like TBT and FCX.
Hopefully things don't get bad enough when the unwind comes to blow up the whole system -- but the more things get skewed and the more people chase -- the more I wonder how ugly it can get when the great yield chasing unwind reaches full speed.
Protecting Your Portfolio From Inflation [View article]
With respect, there is a very BIG difference between the way inflation hedges behave relative to inflation over time, and in the short run.
There are all kinds of ways over time to hedge a portfolio against modest to moderate long term inflation. Dividend growth stocks selling consumer staples, such as the two high quality examples you name are fine examples.
However, if we have a massive fairly sudden spike in inflation due to lack of investor confidence in the US dollar and a massive rise in US interest rates (and plunge in bonds) -- this will be a horse of a completely different color.
Things like TBT, TTT, GLD, and miners and commodity stocks in metals, oil, basic materials, etc. would likely do quite well then. Of course while inflation is low, they can perform randomly, or badly.
So, I think that at the end of the day, in the real world, you're back to good old fashioned prudent portfolio allocation. If you have a fear of inflation in the future (as I do), you can more heavily weight outfits like FCX, TBT, and GDXJ, but you have to put up with plenty of pain if inflation stays muted.
...
Oh, and if you're saying you can just ignore inflation no matter what, as your dividend growth portfolio will outrun everything else in the long run -- you can't count on that. If the dollar blows up, the global stock markets could well implode (on a dollar-adjusted basis) in a way that makes the 2008-2009 meltdown look like a Sunday picnic.
Unraveling The VXX Roll Yield Riddle [View article]
This lack of care or accuracy seems consistent with your lack of care in understanding the math and reality of these contracts you are discussing. You need to be VERY careful what you do -- if the market spikes down very hard and people become afraid, you can get hurt VERY badly if you are short a lot of these things.
VXX is an ETN. Thus it has NOTHING behind its "assets" aside from the credit and reputation of the bank (Barclays). The last time I read, there wasn't even any requirement that banks hedge (fully or even partially) their ETN exposure. So you potentially have 100% credit risk if the bank blows up. (Congress will ensure FDIC insurance pays off to prevent complete financial meltdown -- ETN's on complex financial derivatives? I wouldn't bet my life savings on that).
Many people have commented with alarm as the volumes of such ETN's continue to grow unabated. When (not if) the system comes under great stress again due to financial events, geopolitics, etc., we shall see.
As the commenters on this article imply, in the short run, the people "raking in all the money" on these contracts are the ones betting correctly that the market doesn't plunge. They will be right of course, until (without warning) they aren't. Then the worm will turn hugely and it will be very ugly.
The folks confidently, blissfully, selling lots of VXX and related contracts naked short will be extremely unhappy when this happens. If it is violent enough, if the margin accounts don't cover the magnitude of the losses, then Barclays et al will be very unhappy. If Barclays blows up and takes the system with it -- I don't know, but all those physical gold bugs may not look so dumb after all.
(Disclosure: I am not a gold bug, can't predict the future in any way, and only sell VXX short via being long a limited number of LEAP puts for the long run, thus strictly limiting my risk. I am finding over time that these are keeping more premium, so this simple trade may not work much longer).
Unraveling The VXX Roll Yield Riddle [View article]
Stops, as discussed below, often don't work. And in the world of HFT, the machines can run stops all the time. I don't even understand how traders can have ANY confidence in stops any more, since HFT is the majority of the market volume.
Arena And Vivus Weaken On Poor Obesity Drug Prospects In Europe [View article]
There is no hurry here. With both drugs on the market, the facts will tell the tale in time. No more need for hype from either side.
With all the lawsuits in medicine and all the push for anti-obesity ANYTHING in the US, via both political correctness and a genuine desire to decrease long term health risks (and therefore costs), I believe the potential for ARNA is terrific over time.
Disclosure: Patient ARNA long with a cost basis of well under $3 from before the initial FDA approval. Also gradually selling some ARNA options for income. (Last sold July 6 Puts on the dip after the European rejection news. Wonder if I'll get to sell some 12 calls for a nice premium again, since the April 12's I got about a buck for in Jan. have expired).
ARNA is a lot riskier than my favorite drug company, GILD, but the potential profits are significant over time.
Vanguard Natural Resources: An Upstream MLP With An 8.80% Yield [View article]
Please tell me that you know what a collar is, for hedging purposes. (It is spelled correctly in the VNR oil hedges chart you provide, and I reviewed the overall document it came from on their website, so I am confident that is what they are talking about).
I realize that the call transcripts often contain such misspellings, but the fact that this is misspelled 4 times (that I noticed) in the cited transcript with nary a [sic] or mention from you makes me question:
Is this simply lazy editing, or do you actually understand the hedging vehicles VNR is referring to?
.....
Assuming you understand this, upon reviewing their 2013 vs. 2012 results, a couple of questions arise:
1). Since they apparently have a lot of their energy revenue fairly tightly hedged, shouldn't the unit price be far more stable than it has been? (i.e. look at 4Q 2012)
2). I notice that in 2013 their overall expenses have risen significantly, along with the production volumes. Net, their coverage of unit payments declined from over 1.4x to only 1.0x.
So, with this trend, their future prospects look far less secure to me than their marketing would suggest. Did you notice this trend, and if so, does it concern you?
The reason I ask, is given the trends I note above, simply buying high quality, reasonably high yielding oil production majors like COP or CVX, while more risky in the short run due to less hedging, looks far more promising in the longer run due to better apparent expense management. (Especially if one patiently waits and buys on meaningful dips. One can also earn respectable OTM option premiums on the oil majors. For VNR, the option premiums don't look worth bothering with to me).
Thank you