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  • Expectations Realigned For LinkedIn  [View article]
    I use Linked In pretty regularly, exclusively for business related matters, and to keep in touch with professionals in my field. It is a reasonably useful search tool for jobs. I am constantly asked to upgrade or add something, which I always decline. Not sure what the upgrades are supposed to do, but I have little use for them. Basically I view LinkedIn as a reasonably functional substitute for Facebook, but what it's real business model is, I could not say. Perhaps the lack of profits is catching up with it finally.
    Feb 10, 2016. 07:38 PM | 1 Like Like |Link to Comment
  • These 26 Dividend Aristocrats Won't Let You Sleep Well At Night  [View article]
    Truly an outstanding article, well researched, easy to read and understand, and dead on. The article reinforces the truth that there is no substitute for careful, hard headed research on a company. No graph, list, metric or investing "philosophy" can substitute for research, and unfortunately much of the critical information needed for an unbiased evaluation of a given company is impossible to find (until the company goes bankrupt or sustains major pain). But I loved the article, thanks for writing.
    Feb 10, 2016. 04:51 PM | 3 Likes Like |Link to Comment
  • Why You Should Not Attempt To Double Your Dividend Aristocrat Yield  [View article]
    "if a dividend aristocrat rises above the selected strike price of the call options, i.e. more than about 10% in a year, the call options will be exercised and hence the shareholders will lose their shares on the expiration date."

    This article makes several assertions that are completely opposite my personal experience. I have been trading options for more than ten years, and I sell covered calls frequently. In ten years, only once have my shares been called away prior to expiration of the call, so I believe that early exercise is a rare event. Of course the shares get called at expiration if the stock price exceeds the strike price, but the author of the article was suggesting calls with approximately a one year duration, so the stock owner continues to collect dividends for a year or so, and can always roll the calls close to expiration if they think the stock remains viable.

    There are a few downsides to the strategy, but I don't think they are what the author of this article suggests. One problem is that the owner of the shares is essentially locked into the position, so if the stock goes down sharply, the only way out it to buy the call back, then sell the underlying shares. But for the hard core DIV investor, and there seem to be a large number on this site, they presumably plan to hold the stock regardless of its price, so buying the call and selling the stock is a non-issue.

    The biggest risk is if the stock goes up sharply, then of course the owner of the shares fails to participate in most of the rally. But again, for the hard core DIV investor, this should not be much of an issue, since you are presumably in the game for the dividends, not the share price appreciation.

    I think the strategy is quite suitable for the DIV investor who wants the income more than share price appreciation, and is confident that the underlying stock is a good investment. Personally I am more of a trader than a DIV investor, so options suit me fine, but to each their own.
    Feb 10, 2016. 02:44 PM | 3 Likes Like |Link to Comment
  • Retirement Frontline: Cash Is Trash Unless You Invest It To Produce More Income  [View article]
    If you believe the market is headed substantially lower, and the market includes your current stocks, then it makes perfect sense to sell everything right now, hold the cash until the market drops by whatever percentage target you set, then buy it all back. Example, if you sell your entire portfolio, wait until the portfolio averages down 20%, then rebuy, you will be perhaps 15% ahead (transaction costs, lost dividends) of where you would be if you hold your positions. If you don't know which way the market is headed, or if you truly do not care about the total return on your positions, or your think the market is going to turn around and head up, then holding makes sense.
    Feb 8, 2016. 01:20 PM | Likes Like |Link to Comment
  • Cameco Shielded From Commodities Bear Market  [View article]
    The article is peppered with "could" or "may". I am unclear what the author believes. Certainly it is possible that uranium prices will increase, certainly it is possible that Cameco stock price will increase, but I cannot tell what actionable recommendation on investment the author is stating.

    I have commented for the last two years that there is a large amount of high grade uranium ore already discovered, there is not now nor do I expect any shortage of uranium ore over the next ten years, the unit consumption of uranium per reactor is going down due to improvements in operations, and the number of reactors being shut down worldwide is going to place a damper on uranium fuel consumption for at least the next five years. Beyond that, the increase in Chinese and Indian reactors should be good for uranium pricing, but this is well out into the future, and does not provide a near term catalyst for uranium fuel pricing or Cameco stock.
    Feb 8, 2016. 10:34 AM | Likes Like |Link to Comment
  • Ford: We Are Liking This Trade  [View article]
    " Broken stocks of good companies are the ones that would provide good returns in the long run."

    I have read various versions of this theory on SA and elsewhere. In fact, it is so commonly repeated on SA that folks who state this theory do not bother to document or support the claim. I question the accuracy or usefulness of this statement. In the long run, you can only buy the stock of a company, you cannot buy the company itself, unless you are Warren Buffet or similar.

    So in order for this theory to be accurate, it is necessary to believe that a valuable underlying company translates into long term upward "force" on the stock. Is there any evidence of this? Isn't it just as likely that stocks go out of favor for a wide variety of reasons, maybe for no reason at all, and remain out of favor for an indeterminate length of time. Such seems to be the case with Ford, it has been trading at a low P/e ratio for years, and despite decent profits and outstanding sales, the price remains depressed. What is the basis for believing that the stock price will recover to higher P/E multiple in any given investment timeframe?
    Feb 7, 2016. 07:18 PM | Likes Like |Link to Comment
  • Freeport-McMoRan: Will The Rally Continue?  [View article]
    The author asserts, with no backup, that China consumption of copper will increase due to buildout of the telecommunications network. The article referenced by the author is published by an institute supporting copper, and the article merely points out that the rise of wifi, fiber optics, and broadband does not mean the death of copper in telecommunications. This is certainly true, however the referenced article makes no claim, not cites any statistics, that the consumption of copper in telecommunications devices is increasing.

    A different perspective on production and consumption of copper may be found here http://on.doi.gov/1nS6OjR. Note that electric and electronic goods accounts for only 19% of total copper consumption. The article does not break down copper consumption by electric motors versus electronic devices, however if the split is roughly even, the only 10% of copper consumption goes into electronic goods, and even a 10% increase in electronic equipment copper consumption would result in a 1% jump in total copper consumption, scarcely enough to move the needle.
    Feb 5, 2016. 01:30 PM | 1 Like Like |Link to Comment
  • Natural Gas Prices Look Unreasonably Low  [View article]
    I am a bit confused by this article. The author points out that natural gas prices have dropped substantially over the last year. The author dismisses the argument that the drop in prices is related to a production glut, noting that rig count is down. The author also dismisses the argument that the price drop is related to lack of consumption, pointing out that consumption is up. So that only leaves a few possibilities. Either the average natural gas investor does not believe in the facts as presented by the author, or does not care about the facts as presented by the author.

    In either case, the price of natural gas is disconnected from both the real supply and real consumption data. In that case, what is the point discussing consumption and supply data, since neither appears to influence the price? Does the author think that at some time in the future, the price of natural gas will correlate with actual supply and consumption data? If so, why does the author believe this, and when does the author think the price will begin to correlate with hard data?
    Feb 3, 2016. 02:52 PM | 1 Like Like |Link to Comment
  • Chevron - Dividend Cut Speculation Unfounded  [View article]
    Maybe I missed the part of the article that indicates why the author feels the dividend is safe. The author carefully points out that Chevron expenditures exceed it's cash flow, and the expenditures are being funded by selling off pieces of the company, and by borrowing. And the author notes that in the long term this business model is not sustainable. Yet the author cheerfully notes that Chevron has committed to at least one more year of dividends. As I recall, so did Kinder Morgan, and I think Seadrill did as well. Why does the author believe that Chevron would not consider dividend reduction or elimination in an effort to bolster cash flow, maintain credit rating, and avoid stock price loss? If oil prices remain low, sooner or later Chevron will need to cut the dividend, why not get ahead of the problem?
    Feb 1, 2016. 01:23 PM | 7 Likes Like |Link to Comment
  • The Limits Of 'Brand Value' For Ferrari  [View article]
    I believe the author has hit on an interesting point. The value of a company may reasonably be estimated as the net present value of its future profits. It may be difficult to estimate future profits, but if you are thinking of buying the company, you certainly need to try to understand how much money the company is going to earn over the life of your investment.

    Buying the stock of a company is a completely different matter. The value of a share of stock may be totally unrelated to the intrinsic value of the company, as the shares are essentially sold at auction every minute of the day, while presumably the intrinsic value of the company changes relatively slowly. The share price reflects the marginal price a willing buyer is prepared to pay, and is certainly more psychologically based than it is based on the intrinsic value of the company. We have no way of knowing what the next buyer is thinking, no way to determine how much they are willing to pay (until they actually buy), and no way of knowing what factors they think are important.

    So certainly if you are thinking of buying Ferrari (say you are Bill Gates on a day off), you are likely going to want to perform a discounted cash flow analysis, and you might offer something close to the net present value you get. Buying the stock is a whole different ballgame, in that case you need to estimate how you think the stock will move over your investment timeframe. You may well believe that the stock is likely to move up if the stock is trading below it's intrinsic value, but it could take years for the market to recognize this, and of course by then the intrinsic value is going to be very different.
    Jan 27, 2016. 05:49 PM | 3 Likes Like |Link to Comment
  • Time For The Contrary Investor  [View article]
    "where the price is hugely down yet the intrinsic value should hold."

    I would argue that commodities like oil have little or no intrinsic value, unlike a company that produces something. One can argue with some conviction that the intrinsic value of a company is the net present value of the future profits that company will produce. While it may be difficult or impossible to predict with certainty how much profit will be produced in a given year, it is still possible to make a good case that the intrinsic value, i.e. what I should pay for that company if I wanted to buy it today, can be computed based on a cash flow model.

    The same cannot be said for a barrel of oil, as it generates no cash flow until it is sold. The price at sale time cannot be predicted with any certainty, so the only value that barrel has is it's present value, which is it's current price. So I question the author's argument that somehow purchasing oil at a current relatively low price means that the price is below "intrinsic" value, whatever the author means by intrinsic. If the author believes that the price of oil will rise in the future, that is a different claim, and one that I would agree with. When the price will rise, and how much, is clearly a matter of considerable debate. But arguing that the price will rise because oil is below it's "intrinsic" value seems to shed little light on the question of the future direction of prices, and the timing.
    Jan 27, 2016. 01:00 PM | 1 Like Like |Link to Comment
  • The Coming Natural Gas Supply Crisis  [View article]
    What crisis is the author referring to? If prices remain low, production will eventually decrease, creating a shortage, at which point prices will rise. Where is the crisis? The author is not claiming that there is a long term shortage of gas in the ground, so at worst there will be the usual rapid price fluctuations associated with capitalism at its finest.
    Jan 26, 2016. 08:51 AM | 1 Like Like |Link to Comment
  • Will The Cold Weather Heat Up The Natural Gas Market?  [View article]
    "The colder weather could boost demand for natural gas, which is still down for the year."

    I am confused by this article. The author points out several times that the actual temperature is warmer than normal. In other parts of the article, the author mentions the blizzard, and wonders why the blizzard has not increased consumption of natural gas. Then he mentions that the cold weather could boost demand. What cold weather is the author talking about? The blizzard was not accompanied by unusually cold weather. The Northeast, where I live, is well above normal temperature for this time of year, as is the west coast. My conclusion is that there is no evidence in this article, or in the weather reports, that the temperature is below normal now, and there is no evidence in this article or in the long term weather reports that the weather is likely to be colder than normal in the next month or so. And by then spring will almost be here.
    Jan 25, 2016. 07:09 PM | 2 Likes Like |Link to Comment
  • Scrap The 4% Retirement Rule, Buy Dividend Stocks With 4% Yields Instead  [View article]
    MintyFresh is dead on with his/her comments. Statistics for retiring people are depressing, if you plan to live off dividends alone. According to this website http://bit.ly/1SuPRbu the average American in their 60's has about $170,000 set aside, so let's give a couple $340,000. At 4%, that amounts to less than $14,000 per year, plus perhaps $30,000 per year in Social Security, for a total of $44,000 per year.

    If you can live on that, more power to you. Where I live, that amount is unlikely to cut it, between utilities, property tax, medical insurance premiums, homeowners insurance, car repairs, food, house repairs, the occasional trip, the list goes on. So the average retired couple is likely to need to withdraw some of their savings each year to live. Now I know there are folks on here who will argue that the average couple should move somewhere cheaper to live, and there is certainly come merit to that. And for those willing to do so, go for it. But if you want to retire in an expensive region like the Northeast, $44K per year isn't much.

    So there are options, including working perhaps part time, eliminating all frills like vacations, and moving to a smaller, less expensive house. But this article makes it seem that the average person just needs to purchase 4% dividend yield stocks and chill for the next 30 years. The real issue is that if you need to withdraw a portion of your investment every year to supplement the dividends, you need to take a much harder look at the potential for loss of principal than if you can simply live off the dividends. And since the average American is nowhere close to the magic retirement investment figure, they will likely be forced to withdraw principal to live.
    Jan 19, 2016. 03:52 PM | 2 Likes Like |Link to Comment
  • Freeport-McMoRan: Capitulation?  [View article]
    Owning FCX at this point requires an iron stomach. For those considering a speculative purchase, I suggest considering purchasing protective long term puts on the stock, and selling short term near the money calls. The trouble with owning the stock naked is that prediction of the future price of gold, oil, copper, and molybdenum is impossible at this point, and prediction of the mind of other FCX holders is even more difficult. So think of protective puts like wearing a condom. You might not like it, but at least it offers some protection against unlimited risk.
    Jan 12, 2016. 06:35 PM | 4 Likes Like |Link to Comment