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  • Learning From Target Date Funds Without Actually Using Them [View article]
    Maybe I am not reading closely enough but I read your article and discussion of "liquid" and other alternatives that might be used and I can't find a single word about what those alternatives are? Do you assume that all readers understand the lingo/jargon of the professional money manager?
    Sep 16, 2015. 02:09 PM | 1 Like Like |Link to Comment
  • Omega Healthcare: Quality At A Discount [View article]
    Steve: Thanks for the opinion--I am thinking you are right. Today I bought a third of a position at just over $33 and maybe in the next few days I will buy another third if the price drops a point or so. So now we can wait and see what the Fed does and what impact it has. Seems like a coin toss to me what the Fed will do (I hope they raise) and even more of a coin toss as to how the market will react. But my guess is that over the next few years there won't be very much in the way of interest rate hikes (as the economy struggles to do anything more than flatline and inflation drops even more) so I am slowly buying REITs and intermediate term corporate and muni bonds to bring my allocation back into a more normal balance.
    Sep 14, 2015. 07:50 PM | Likes Like |Link to Comment
  • Stocks Are Like Hamburgers: Be Bullish When Prices Go Down [View article]
    Mark: I wonder if you have Buffett's theory right? I think he is talking about a market correction when some macro event is causing all stocks to fall. That might be like the price of hamburger falling and could be a great time to buy. When an individual stock (IBM) or industry (oil) falls there is generally a specific reason for the drop. Then you aren't sure there will be a bounce back. How would investors have fared if they used your hamburger theory buying Eastman Kodak over the last 30 years and how would investors have fared if they bought the passenger train industry in the 1950-60s? Maybe the analogy for these types of investments--if you are a hamburger distributor buying and selling the product do you want the price of hamburger to drop? Depends.
    Sep 14, 2015. 09:53 AM | Likes Like |Link to Comment
  • Omega Healthcare: Quality At A Discount [View article]
    Tiki--Thanks for that idea. I might just buy a half tomorrow and see what happens later this week but it is tempting to wait when many investors might overreact to an 1/8 or 1/4 point increase, even if it might be the last increase in the fed rate for many a year if we get another recession.
    Sep 13, 2015. 07:16 PM | Likes Like |Link to Comment
  • Omega Healthcare: Quality At A Discount [View article]
    Let's assume you are right and interest rate increases shouldn't harm OHI. If the Fed raises rates this week will the OHI drop anyhow--even if it doesn't make any sense? If you were about to buy would you wait until rates increase?
    Sep 13, 2015. 02:16 PM | Likes Like |Link to Comment
  • Oxymoron: Shrewd Government Refis Credit Card [View article]
    You make it sound like bond investors are forced to buy longer term bonds because the government issues more of them.
    Sep 13, 2015. 07:16 AM | 1 Like Like |Link to Comment
  • Should You Invest In Market Neutral Funds? [View article]
    Herman: I feel the same way about Vanguard and have had all my funds there for many years. They seem to be in an awkward position related to the active/passive debate. They were the big pushers of the index fund starting in the 1970s but in a recent article on Morningstar, the case was made that Vanguard's active funds outperformed their index funds. I think many investors might not even be aware of Vanguards active funds because they don't push them--kinda what you are saying about the sales pitch for the neutral fund. Getting back to their recommendation not to take a big position in the neutral fund just because you think the market is overpriced. If I were to totally believe the market is efficient then that says to me the market is never expensive--it is always priced right so don't bother timing it. So why buy a neutral fund and give up market performance if you don't believe the market is overpriced? I don't totally agree with the efficient market theory but I understand the dilemma for Vanguard.
    Sep 13, 2015. 07:07 AM | Likes Like |Link to Comment
  • Should You Invest In Market Neutral Funds? [View article]
    Ronald/Herman: I don't own a market neutral fund and am not pushing them but they all don't have high fees and aren't all sold by "wall street hucksters". And I am thinking comparing their returns to the S&P 500 at the top of a six year bull market misses the point of the funds.

    Vanguard (a non profit company) has a market neutral fund (VMNFX). Morningstar gives them a 4 star rating (bronze). The expense is .25% and their performance over the last three years is 4.96% per year. Morningstar compares them to the Barclays US Agg Bond return of 1.71%--so they outperform their benchmark by over 3% a year.

    My understanding of the purpose of this fund is to hold money when you think the stock and bond markets are both overpriced (sound familiar) and get you a better return than cash. They are not intended as a long term investment to compete with the stock market. Vanguard has done an excellent job and if the market drops 30% in the months to come we might might wish we owned it.
    Sep 12, 2015. 02:15 PM | Likes Like |Link to Comment
  • Amgen Vs. Regeneron In The PCSK9i War, With Comments On Competitive Threats [View article]
    DoctoRx: Not related to this article but saw in today's WSJ that Gilead borrowed $10 Billion yesterday in the corporate bond market. Any thoughts on a near future merger.
    Sep 10, 2015. 06:37 PM | Likes Like |Link to Comment
  • How Safe Are The Distributions For PIMCO CEFs In The Aftermath Of PHK's Crash? [View article]
    GB: What we have here is a failure to communicate! IMO, the irrationality is obvious-- at least for the financial press--Morningstar, Yahoo and all others that I know of show as the CEF distribution rate only the monthly portion of distribution and ignore the total distribution number that includes the year end distribution (remember those 8 of 10 PIMCO funds). Again--using PDI as an example, the financial press shows a 9% distribution rate instead of the real distribution of 14% for 2014. My take is that many investors would buy the CEF with a 14% distribution and pay a premium for it but ignore the 9% distribution which results in a discount for PDI. You might think that gives you an edge but I'm not sure how. Calling the Fund companies irrational is a little more difficult but I don't understand why PIMCO and other CEF companies tolerate the financial press giving out the flawed data--they are in competition with open end funds and ETFs so why not try to make their products appealing. Bill Gross could have raised hell about the issue in one of his monthly letters when he was at PIMCO and it would probably have been fixed.
    Sep 6, 2015. 08:24 PM | 1 Like Like |Link to Comment
  • How Safe Are The Distributions For PIMCO CEFs In The Aftermath Of PHK's Crash? [View article]
    Double Hmmm Jack:

    According to the Fidelity website on closed end funds "To maintain tax free status a CEF must pass onto shareholders--98% or more of net realized capital gains and 90% or more of net investment income from dividends and interest payments". Since no mutual fund wants to give up tax free status --causing a double (or triple) taxation to shareholders--that tells me CEFs distribute almost all of their income.

    Your CEFs might not have year end distributions (or you might not be aware of them) but of the 10 Pimco funds that Lefty addresses in the article, 8 had a year end distribution in 2014--and all of them currently sell at a discount. What is amazing is that the only two that didn't have a year end distribution (PGF and PHK) sell at a premium--confirming in my eyes that investors are often unaware of the year end distribution and thus, in comparison, paying up for those whose entire distribution is showing up in the financial press.

    Of course there is no guarantee that there will be a December double distribution and of course the amount will vary based on the income. But there is no guarantee that the monthly distribution will stay the same--point of the article. Just like the performance of open end funds changes from year to year--but would you buy one without knowing about total returns? If I buy a fund based on the size of the distribution (which I don't) I want to know about the TOTAL distribution.

    You say "Yes of course portfolio managers will decide"? How about the board? How about a fund company policy? Looks like Pimco (8 of 10 funds) has close to a policy.

    Maybe investors who are too lazy to do the deep digging should be in index funds but what is the purpose of SA if not to make it a little easier? Why shouldn't an article by Lefty (and he usually does a great job) provide the important stuff?
    Sep 6, 2015. 04:28 PM | 2 Likes Like |Link to Comment
  • How Safe Are The Distributions For PIMCO CEFs In The Aftermath Of PHK's Crash? [View article]
    Lefty: It's hard to disagree with your statement about the "irrationality of CEF investors" but I wonder if a large part of that is caused by the irrationality of CEF fund companies and the financial press (maybe including you).

    I am thinking that the IRS requires that mutual funds (including CEFs) annually distribute all of their realized income. For income CEFs that usually comes as monthly distributions and a second distribution in December to balance. For whatever reason the financial press has decided to ignore the second December distribution when calculating the annual distribution/yield. You call it a "special distribution" even if it occurs every year as in PDI's case. So the distribution shown for PDI on Morningstar is 9.41% and that is what you quote in your article. The actual distribution for PDI over the last year is closer to 14% and was also much higher in 2013 and I am guessing it will be much higher in 2015.

    If there is any logic in distributing a large chunk of income as a "special" distribution it isn't obvious to me--and the policy seems to vary dramatically within a fund family like PIMCO--almost as if the manager gets to make that decision. Nor is it obvious why the financial press chooses to ignore these annual distributions in their quoted yield (other than it makes for an easier calculation). If PDI increased their monthly dividend to consume most of their income I bet that their discount would disappear as some investors spotted what seems to be a higher distribution (even though it had been there all along).

    So investors who never get beyond the headline distribution numbers when selecting their funds end up with what seems to be irrational investments like PHK.
    Sep 6, 2015. 09:58 AM | 5 Likes Like |Link to Comment
  • Value Investors: The Best Valuation Ratio May Not Be What You Think [View article]
    Fred: If I am understanding your findings, and just focusing on the annualized return portion of your findings--do you have a way to combine factors? There are four of the six you tested that far exceeded the benchmark. What if you looked at the stocks that made the low 20% threshold for all four of those factors? I would guess that the number of stocks that meet that threshold would be less than 10%-say 50 stocks at any one time. It would be interesting to see how that smaller subset performed compared to the benchmark.
    Sep 4, 2015. 10:10 AM | Likes Like |Link to Comment
  • Investment Strategies For Enhancing Required Minimum Distributions From An IRA [View article]
    Brian: You mentioned up front that you have other sources of income and I am guessing that includes taxable investments. I am thinking that most SA readers will also have taxable investments as they near RMD time. It would seem the first thing you might want to do is look at the tax impact/return of the whole portfolio and not look at the IRA in a vacuum. Second thing I would do (am doing) is think about my marginal tax rate now and what will happen when RMDs add to taxable income (and for many Social Security will also boost taxable income in that same time frame). Let's assume you are currently in the 25% Fed rate but will go to 30% Fed rate--if you put your qualified dividend and capital gain investments in your taxable account you will pay 15% tax on those dividends--if you place them in your conventional IRA you have converted that tax to 30%. Do you really want to do that? The only real benefit of a conventional IRA is to defer taxes--putting qualified dividend stocks in an IRA does defer taxes but it also increases them. If you put foreign dividend paying stocks in an IRA it will be even worse--you will pay the foreign tax on those dividends (and in most cases not get a credit) and then you will have converted a 15% tax to a 30% tax.

    If you look at the entire portfolio you will probably place the highest taxed items in your IRA--taxable bonds, REITS, BDCs, royalty trusts and the lowest taxed items in your taxable account--munis, qualified dividend stocks, long term capital gain stocks.

    Also be aware that at the time of death your IRA tax liability will pass on to the beneficiary whereas for most (except the super rich who pay an estate tax) the unrealized long term capital gains tax will disappear--a crazy gift from Uncle.
    Aug 27, 2015. 12:40 PM | 1 Like Like |Link to Comment
  • My Favorite Ratios - Part 1 [View article]
    Mepat1111: I don't disagree with most of what you are saying. I guess it comes down to what one of our recent Presidents might have said. "What is the meaning of cash"? The article wasn't dealing with the benefits of share buy backs. It was making the case that share buy backs provide cash to shareholders. Your comment says nothing of cash. When you get a dividend you get cash. You might choose to reinvest that cash but that is your choice. If you want cash to spend in retirement you have it with dividends-that is the reason this site is overflowing with dividend growth investors. Where is the cash from share repurchases? As I mentioned, it goes to ex shareholders. None of it goes to the shareholder who retains his shares. Maybe I am being too literal in reading the authors view of cash--if so let him make that point instead of paraphrasing some unknown comment of Warren Buffett who in 50 years has only repurchased shares twice at Berkshire Hathaway. As to your statement that buying back shares "benefiting remaining shareholders"--apply that theory to IBM over the last three years--would shareholders have not been better off with real cash from dividends instead of buy backs at falling stock price? I will summarize my point--share buy backs might or might not be beneficial to the shareholder but they are never a return of cash to shareholders.
    Aug 15, 2015. 12:43 PM | Likes Like |Link to Comment