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  • Forget The Trains And Planes, Buy This Industrial REIT For A 20% Treat [View article]
    You make a statement that the FFO number is "incompatible". Are you saying the 21.2 number for 2014 is wrong because it uses trailing earnings but a share count that has been inflated for the new issuance of 9 million shares? Since REITs seem to be constantly issuing new shares I would have assumed FFO would automatically be corrected for new issuance. This is the first time I have seen any mention of this topic in the many REIT articles I have read on SA.
    Jul 15, 2014. 12:50 PM | 1 Like Like |Link to Comment
  • Sell-Off In Refiners Is Overdone [View article]
    Clint: I hope you are right about GILD since I own a small chunk but it won't be because Vanguard is buying it. Most of the shares you mentioned are held in index funds--they are forced to buy the stock based on market cap. In their Health Fund, out of 89 stocks owned, it is 60th in value of holdings. If you listen to Vanguard there are 59 health stocks they like more than GILD--I think they are wrong but they just might know more than me. My guess is Fidelity's holdings of Gilead are also mostly index.
    Jul 13, 2014. 03:32 PM | 2 Likes Like |Link to Comment
  • Sell-Off In Refiners Is Overdone [View article]
    Your argument that Congress won't allow "opening exports fully" seems to be a typical straw man argument. IMO the issue is how many oil and pipeline companies will make the same request to export light oil and condensate (many) and how with DOE not allow all of those requests after approving two exceptions. Seems to me the key question is that if all those condensate requests are approved what happens to the refiners? It has to be negative so we have to determine how negative.

    Anybody out there have enough knowledge of the light oil/condensate market to hazard a guess?
    Jul 13, 2014. 11:40 AM | Likes Like |Link to Comment
  • Linn Energy: Value Gap Suggests Risk Of Underperformance [View article]
    Richard: Writing articles is a tough way to make a living. Every time there is a negative article on SA the termites come out of the woodwork crying "short". Funny how they never say a word about the writers of positive articles owning the stock. No wonder most analysts give only positive ratings to stocks. Ignore the termites and keep writing it as you see it.
    Jul 11, 2014. 01:02 PM | 6 Likes Like |Link to Comment
  • Leverage In Closed End Funds: Another Look [View article]
    A few observations from looking at Morningstar data. (1) looking at the expense ratio by fund (they show the expense with and without leverage)--in almost all cases the cost of leverage seems extremely small so I am not seeing support for your statement that many closed end funds have high borrowing costs. (2) some funds charge expenses not on net assets (assets less leverage) but on gross assets. Many of the closed end fund expenses are high to begin with (2% or higher) but when you add expense on leverage, that can reduce returns dramatically. Morningstar frowns on the practice but it might not be obvious to investors.

    In any case your results will continue to be questioned just because they are counter intuitive. Why not pick a category (such as general equity) and show the individual funds split between levered and unlevered and show the 1/3 year returns by fund. Then readers can double check any numbers that look questionable. I own only one of those general equity funds (SOR). It doesn't use leverage and has performed well. The answer might be as simple as the good managers don't use leverage because over a cycle it doesn't increase returns after expenses.
    Jul 8, 2014. 10:11 AM | 1 Like Like |Link to Comment
  • How To Prepare For The Upcoming Correction [View article]
    Varan: I think you are right about the writers that are selling something and the DGI crowd is ripe for the plucking. But I think it goes beyond that--I think most of us tend to use the right side of our brains far too often in the investing game. We might talk about "due diligence" but there seems to be a lot of going along with the crowd mentality, and right now (with the FED keeping interest rates at near zero real) the crowd is bidding up anything with yield so dividends and junk bonds are working just fine because of the supply/demand.

    I spent my first two years of reading SA articles trying to understand DGI and the conclusions I came to are that many (not all of course) don't seem to care that much about total returns, after tax returns or the possibility that the dividend stocks are overpriced. They do care about such fluff as monthly dividends.

    Jason: I forgot to mention that I think you are totally right about Gilead--it seems to be strangely underpriced. I own a decent chunk and would buy more except I assume I must be missing something--it looks too good to be true.

    Varan: Part of me is still on the investing dark side. I am slowly moving to ETF index funds (VOE, VBK, IESM, IPKW are purchases over the last year) but like Jason I am not fully convinced I can't beat the market. Even the ETFs I buy tend to be not the broad based indexes but instead the sector funds or those that use size/value factors. But if I am going to beat the market it better be with my very best ideas (GILD for example). I plan on moving to something like 50% ETF in the years to come which should mean I am half matching the market (however defined) and my best ideas might outperform (probably wishful thinking). Now, if I can just keep myself from market timing.
    Jul 6, 2014. 12:56 PM | 3 Likes Like |Link to Comment
  • How To Prepare For The Upcoming Correction [View article]
    Jason: Maybe like most of us your investing philosophy goes a lotta different directions at once. (1) You say the market can't be timed but you are calling for a definite correction--and I assume you don't mean in 10 years, so that sounds like timing to me--you're just not following your beliefs by selling . (2) You don't want to time the market but you're going defensive and buying silver--sounds like timing to me. (3) You think the market is going to correct but want to stay fully invested by buying "defensive" stocks and I assume accept a loss of capital as long as it's a smaller loss than the market will absorb (but a much bigger loss than going to cash). Sounds like timing to me.

    I am guessing your investing philosophy is in transition. Many of us have gone through that. You start out thinking you can time the market and you think you can outperform by selecting individual stocks but over time you find out that your market timing is wrong more often than right and when right it is way too early ( I called the internet bubble but unfortunately I was 3 years early) and you give up on market timing (you're not totally convinced yet!).

    Sooner of later you will realize that your stock selecting is not beating the market and then you can move toward the index route and stay fully invested or do what many SA readers do and pretend that benchmarks aren't really that important, which allows them to think they must be beating the market since those dividends keep arriving.
    Jul 6, 2014. 11:40 AM | 7 Likes Like |Link to Comment
  • The Sustainable Portfolio: Employee Ownership Ranking [View article]
    T Rail: Reading your article, it just doesn't seem like there is enough information available on employee ownership to use it as a filter. If you want to keep your portfolio from reaching that steady state you might consider corporate governance ratings (which to me might indicate the type of management philosophy you are looking for). Not sure if it is available on your European stocks but it is for most US stocks. Of your two US stocks, Ecolab has the best rating available (1) and HCP has the worst rating (10). Personally, I would never own a stock with a corporate rating of 10. You can get ratings at Yahoo finance. First get a stock quote, then go to "profile". Corporate rating is a number from 1 to 10, with some explanation provided of how they arrived at the number.
    Jul 5, 2014. 10:21 AM | Likes Like |Link to Comment
  • Value Over Glamor: 2 New Studies Reinforce The Argument That Book Value Is The Best Metric [View article]
    I was hoping that the comments would lead to an ETF (among the 2 million out there) that focus on book value (not dividends). Better yet, book value ex financials. Any recommendations?
    Jul 4, 2014. 08:10 PM | Likes Like |Link to Comment
  • Is Your Active Manager Beating The Benchmark Index? [View article]
    Looks like a typical flawed comparison that the index industry loves to trot out. Comparing actively managed funds to an index shows us almost nothing. Indexes don't have expenses or transaction costs and they don't need to maintain cash reserves to redeem shareholders wanting to cash out.

    The other distortion the index industry loves is to compare index funds to the number of actively managed funds that beat. Anyone can start a mutual fund and most of them never gather enough assets to be viable and disappear. Instead, compare the amount of dollars invested in actively managed no load funds that beat the average of index funds and you will get a different answer. Even more so if you adjust the risk downward for actively managed funds for the cash reserves.

    Lastly, investors in actively managed funds don't select funds at random. For example, compare Dodge and Cox International (DODFX), Vanguard Selected Value (VASVX) Prime Cap Odessey (POAGX) and you will see actively managed out performance.

    Whoever chooses the assumptions determines the outcome of all financial analysis.
    Jul 2, 2014. 01:41 PM | Likes Like |Link to Comment
  • Need 7-8% Yields In Retirement? Build Your Income Portfolio With Closed-End Funds (Part II: Leverage) [View article]
    It seems strange (almost unbelievable) that during the last three years the general equity funds with leverage haven't outperformed unleveraged by a wide margin. I can see leveraged funds under performing if you included a down year like 2008. From everything I have read the cost of borrowing for closed end funds is very low (but maybe it is higher for equity than income). With the S&P going up some 50% during the last three years what would account for this? I assume you are using 2011-2013.

    It looks like there are only about 18 funds in your graph (which seems low if it includes REITs, MLPs and all other domestic equity). Do you have a list of the funds included in the graph?
    Jun 30, 2014. 01:46 PM | Likes Like |Link to Comment
  • When Might North American Oil Production Peak? [View article]
    You make it sound like the only way to increase the distribution is to build more pipelines--and you might be right. But it seems that there are other options to grow the distribution. Are PAA current pipelines running at 100% capacity? If not, earnings will grow as usage of their current pipelines moves toward 100%. If they stop building new pipelines wouldn't their cost drop? At some point there will be sufficient pipelines in place (whether that is 2018 or 2025) and the question is what income can investors expect on an ongoing, no growth environment. We MLP investors need to think about this before we reach that point. I assume PAA has thought about this even if they don't discuss it openly.
    Jun 25, 2014. 02:47 PM | Likes Like |Link to Comment
  • The Implications Of A K-1 Tax Form When Trading ETPs [View article]
    Nathan: Why not start by telling us readers what an ETP is. First time I have seen that acronym.
    Jun 23, 2014. 06:00 PM | Likes Like |Link to Comment
  • The Hurdles Are Getting Higher For Active Management [View article]
    Larry: Your whole concept that small investors that buy their own stock are "victims" of actively managed funds seems strange in the extreme--on a site where I assume the vast majority of readers buy individual stocks. I sure don't feel victimized by a mutual fund, hedge fund, pension fund, etc. that outperforms me by better market timing or better stock selection. My guess is that many small investors do feel victimized when mutual funds we own (active or passive) charge excessive expenses (especially if they are hidden in the transaction costs), window dressing, late trading and all the games that are played by mutual funds (and contribute to their under performance). I am hoping/guessing that Morningstar's stewardship ratings have me covered in that area.

    IMO, passive investing is destructive to corporate governance and probably the economy as a whole--we see the huge increase in management pay over the last 30 years for example--it's not coincidental that it has occurred as the percentage of stock owned by individuals has dropped dramatically (as you mentioned in your article). Passive investors, since they are forced to own an investment that is included in an index, tend not to take an active role in the governance of their own holdings. I think the solution to this is to eliminate corporate voting rights for all passive investments.
    Jun 17, 2014. 11:53 AM | 1 Like Like |Link to Comment
  • The Hurdles Are Getting Higher For Active Management [View article]
    Seems like your article flips back and forth between actively managed funds and actively managed investments. So your quote of Mr. Sharpe "the average actively managed dollar must under perform" is only true if you include all the non passive investments including those purchased directly (outside of funds) by individual investors. There is nothing that keeps all actively managed mutual funds (as a group) from outperforming as long as the total of individual investors buying stocks directly under performs. In the same article you mentioned another academic study that says "on average, individual investors have perverse security selection abilities". This statement seems to question the efficiency of the market but in any case if the small investor, selecting his own stocks, under performs badly that seems to say that ignoring costs, the total of actively managed funds have to outperform. Hope this helps!
    Jun 17, 2014. 10:39 AM | Likes Like |Link to Comment