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Bruce7b

Bruce7b
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  • Clouds Over Omaha - Time To Sell Berkshire Hathaway [View article]
    physdude: You might be right. From what I understand corporations holding stock in other corporations don't receive capital gain treatment--they pay full ordinary income (up to 35% Fed). They do get a break on dividends and pay a reduced rate which is probably why Buffett likes dividends received (but not dividends issued). KO has badly under performed the market over the last five years and yet they continue to be very pricey based on past performance--what does Buffett do if he sees that trend continuing? To avoid paying those taxes does he continue to under perform on this section of the portfolio? And won't he have the same problem on all of his corporate holdings over time? Mutual funds get to bypass taxation but BRK isn't a mutual fund and maybe shouldn't try to invest like one.
    May 7 07:51 AM | Likes Like |Link to Comment
  • Water And The Future Of Energy Economics [View article]
    And not a word about impoundment? Many articles such as this talk about "finite" fresh water. You call it a "limited commodity". Is fresh water finite or limited? Yes, but we as a country decide what the limit is. Much of the rain falling in this country started as evaporation of salt water. That is especially true of the eastern half of the country. We choose how much of that water to impound. So the limitation on fresh water is self imposed. We could double or triple the number of reservoirs if we so choose. I am even guessing that solar powered pipelines could move water to the drier portions of the country. Obviously environmental concerns need to be addressed.
    May 7 07:32 AM | 1 Like Like |Link to Comment
  • Clouds Over Omaha - Time To Sell Berkshire Hathaway [View article]
    JMajoris: Senility creeps up on all of us--no wonder he has under performed the last 5 years. You notice Charlie Munger in the background clearing his voice. (Good research on your part though!).
    May 6 07:24 PM | 1 Like Like |Link to Comment
  • Clouds Over Omaha - Time To Sell Berkshire Hathaway [View article]
    Dgleason: You have come to the right place as a new investor. Read a cross section of the articles and especially the comments. Question everything, especially if it comes from Dividend Growth Investors. You will quickly come to understand that most of the articles are written by folks trying to sell you something (nothing wrong with that as long as you understand that up front).

    So I will respond to your points.

    That Buffett " would absolutely consider the dividends as a reason for keeping the stock". He might take that into consideration (to me it is a negative) but I can almost guarantee you that he wouldn't consider the yield on purchase price. He will get the same 3% dividend that everyone else gets, whether they bought the stock at the all time high (Apr 2013) of $43, or bought it 20 years ago for half that price. Buffett is trying to maximize his return--you notice all the chatter about Berkshire not beating the S&P for the last 5 years? And historically he has beat by a large percentage. Do you remember hearing how much of that return was from dividends? Don't think so because Buffett and the market are concerned with total return--dividends are a part of total return, not an addition to it. Return on yield, IMO, is pointless. It typically seems to be used by dividend investors trying to convince themselves that they made a good investment. Most of the historic increase in a dividend is either from inflation or from an increase in payout ratio--check KOs numbers and you will see plenty of both. When Buffett bought KO it had a dividend rate of less than 1%--so was he buying Coke for the dividend or for the total return?

    "What else would he invest in that would give him a greater ROI?". KO has a current PE of 22 and the analysts estimate growth of earnings of 7.4% over the next 5 years. That is an abysmal PEG ratio of 3. There are hundreds (thousands?) of stocks that have better futures--in fact there aren't that many stocks with PEG ratios that high. Now maybe you or Buffett think the analysts are wrong about the growth. I think , if anything, they are overstating the future earnings.

    "He has plenty of money--so why would he sell". As mentioned above, Buffett needs to at least match the S&P or his role as CEO of Berkshire is questioned. Selling KO has nothing to do with "needing" the money. If KO is going to under perform the market in the future, that makes the job of out performing the market that much tougher. But as I mentioned, I think he is stuck in his large stock positions and that is one of the main reasons he is under performing.
    May 6 04:01 PM | 1 Like Like |Link to Comment
  • Should People Listen To John Hussman's Forecasts? [View article]
    Larry; It's hard to defend the recent Hussman mutual fund record and I won't try but all your comments could have been made in 1999 just before the market tanked. You say that all of Hussman's views are priced into the current market but wasn't that true in 1999--I am guessing he had the same views then? Many fund managers/pension fund managers can't or won't invest according to their actual market opinions because if they do they will be fired--if they have short term under performance. That's one of the many reason mutual fund managers under perform long term--they are forced to make short term decisions to keep their jobs. Hussman must have the luxury of investing his convictions. FPA funds also seems to do it if you read the comments of Bob Rodriquez and look at their current cash positions. You might also want to read the current Jeremy Grantham letter that discusses the Hussman position--in many ways the Grantham views are identical to the Hussman views other than Grantham thinking the market will run a little longer before crashing.
    May 6 07:49 AM | 3 Likes Like |Link to Comment
  • Clouds Over Omaha - Time To Sell Berkshire Hathaway [View article]
    JMajoris: Only a certified dividend investor would calculate a return that compares current dividend with basis (I assume that is what you are doing) and uses that as a factor in holding a stock. I don't think Buffett's mind works like that (nor does mine). He is a total return investor and looks at the current valuation and he is looking at the future earnings and discounting them and he might be seeing the same thing as I do--KO is on the downhill slide because of health issues with sugar. But the bigger point I was making is that if he does decide to sell Coke or any of his holdings he has a big problem unloading the shares without causing a major drop in price.
    May 6 07:21 AM | 2 Likes Like |Link to Comment
  • Clouds Over Omaha - Time To Sell Berkshire Hathaway [View article]
    The problem with Buffett buying huge stakes in individual stocks, as opposed to his preferred purchase of whole companies, is the conflict of interest that comes with the purchase. He was stuck with Washington Post when he probably should have sold 10 years ago because of his relationship/board position with the Graham family (he loved them too). If he tries to sell Coke the stock price would probably tank with his first quarterly sales numbers. Same is true of all his large positions. He either needs to use his excess cash to buy back shares or find whole companies to buy. If he can't do that he might as well concede defeat and issue a dividend. I have always thought his ego won't allow him to reduce the size of Berkshire with either share buybacks or dividends--he wants Berkshire to be the largest market cap in the world and slowly but surely it has moved up the hill.
    May 5 07:46 PM | 2 Likes Like |Link to Comment
  • May, The Silly Season, Is Upon Us [View article]
    I have read scores of articles on this topic over the years and I think your version is the first that looks at both the tax issue and "what do you do with the funds" question. Think I will stop reading "go away in May articles".
    May 1 07:58 AM | Likes Like |Link to Comment
  • Yield Sucker Bet [View article]
    Bob: You must get your numbers from the same source as Donn. The IPO for PCI was January 29, 2013. PCEF has been around for three years plus so comparing returns since inception seems pointless. What is comparable is returns for the last year. For the last year PCI had a NAV return of 7.07%(Morningstar) and PCEF has a return of 2.91% (Morningstar). Beyond that they don't seem to be comparable. Are you happy giving up 4% in one year? As you say you can compare them quarterly in the future.

    I just can't see how an ETF with an expense ratio of 1.77% (on top of the already high expenses of closed end funds--which to me is the great flaw of fund-of-funds) can possibly compete. To overcome that burden would take brilliant managers and why would brilliant managers manage a small ETF? On the other hand PIMCO runs a lot of money so can afford brilliant managers.
    Apr 30 06:53 PM | 1 Like Like |Link to Comment
  • Yield Sucker Bet [View article]
    Donn: We must be looking at different performance numbers. Using the performance numbers provided by Morningstar, PCEF shows a NAV return of 2.91% for the last year and an annual average of 6.87% for the last three years. So how do you get a total return of 1% a month? I agree that total return is all important (plus some measure of risk) and that distribution (what I think you are calling yield) is close to meaningless. So what accounts for the difference in the numbers?
    Apr 30 03:58 PM | Likes Like |Link to Comment
  • Yield Sucker Bet [View article]
    Guys: I understand that no one likes to be called a sucker but just about all of us make bad investment choices. If we don't want them pointed out not sure why we would read the articles on this site--or are you just looking for confirmation that you made good investment choices?. Seems like Exhibit 3 should be convincing and Donn it's not based on "what might happen"--it's what DID happen over the last five months. So unless you think the last five months were a fluke it seems to be a suckers bet to continue with the high expense, double expense, underperforming PCEF. Mr. Lee didn't ask this question, but I wonder if any fund-of-funds investment has ever been a good investment?
    Apr 30 07:41 AM | 1 Like Like |Link to Comment
  • 3 Unique Multi-Sector Income Strategies [View article]
    Michael: Your positions seem similar to those of Samuel Lee over at Morningstar although his favorites also include PDI and BTZ. Would be great if both of you would address what will happen to these funds when the interest rates go up. Recent survey of economists (67 of them) were 100% that interest rates (10 yr Treasuries) will rise within the next 6 months. So does that mean that you disagree with the economists; or that you don't think rising rates will have a negative impact on these funds (why not?); or that there just aren't any better hiding places?

    Fibonacci--according to Morningstar BIT has only 2% in preferred.
    Apr 26 07:56 AM | 3 Likes Like |Link to Comment
  • Is There One REIT Every Investor Should Own? [View article]
    Bmattei: Because of their tax advantages, so many c-corps have converted to REIT status in recent years that the category covers a lot more ground than it used to. So it seems like a higher portfolio percent is reasonable compared with 20 years ago. Is owning Rayonier of Weyerhauser as a REIT any more dangerous than owning them as natural resource stocks? Same with Iron Mountain, Corrections Corp. and St. Joe. Then there are the MReits that I include in my bond category (high yield risky portion). I opine that Adam should identify the REIT universe that fits with his suggested allocation. I have an allocation of 15% for REITs but it might be 20% if I included everything the IRS classifies as a REIT.
    Apr 25 11:45 AM | 5 Likes Like |Link to Comment
  • The Efficient Market Hypothesis, Fact Or Fiction? Part 1 [View article]
    Larry: You might want to expand on John Doe and the value premium. Isn't the value premium a measure of risk and isn't that measure of risk nothing more than volatility? If that is so than all the studies that might show mutual fund managers outperform are explained away by a second hypothesis that is questionable--at least outside academia. Seems self serving for Fama/French to develop the yardstick to measure the accuracy of their own theory. I don't think I have ever seen a measure of fund manager performance that hasn't been adjusted behind the screen.
    Apr 22 08:31 AM | Likes Like |Link to Comment
  • Natural Gas Offers Great Short- And Long-Term Opportunities [View article]
    Ian: Not sure what your purpose is in comparing natural gas and oil. Oil is not used for generation of electricity except in very limited cases (mostly in Hawaii). So unless you are making the case for natural gas as vehicle fuel or talking about eliminating home heating oil (which might make sense over the long haul) it seems like you need to compare natural gas with coal, nuclear and solar. At this point I don't think natural gas is cheaper than coal or nuclear and it sure isn't cleaner than solar. So the argument for natural gas seems to be that it is much cleaner than coal, much safer than nuclear and at least for the time being cheaper than solar (but solar is coming up fast in the outside lane).
    Apr 21 07:37 AM | 1 Like Like |Link to Comment
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