STI Hedge Fund September Performance.

The STI Hedge Fund cash flow model is working as designed. The results for September are a pleasure to report with a annualized 24.09% gain for the month.  These results are nicely above our 18% goal.  Yes, we are still holding some significant carry forward losses, but these positions are still producing cash flow for the month. Our total forward month option positions are higher than normal but still well within tolerable levels.  As we had expected in last month's report our interest expense is well covered by dividends and added significantly to our monthly profit.  Trading expense was as expected and is included in the monthly net.  There is no denying that the higher than normal VIX, or market volatility, is helping our profits but again the fund is designed for anticipation of such moments. We also benefited from the 5 week cycle this month.  If we had not been so deep in the money for some of positions we could have almost doubled the monthly results due to the higher VIX, but as a hedge fund you make choices and our earlier choice was to deploy almost all assets. Lastly as noted in earlier reports we continue to err on the side of cautious stock selection a market trending downward. In any case we could not be more pleased with this monthly performance

 

Results for the now completed three quarters of 2012 is 16.73% net of expenses and interest expense. We expect to end the year at around a 15% gain with expected capital losses taken.

 

Profits for the month came from three nice tobacco stock trades.  Also a couple of real estate trades and almost every trade being above normal profit expectations.

 

Looking forward we still have good trading profits opportunities for October, but due to stock market downturn which has forced some forward option positions as noted earlier we are reduced to having about 50% of our trading positions open.  Dividend coverage should cover interest expense and might produce profit again there again.

 

We also began to sell in the money options to rid ourselves of several stocks that no longer fit our trading profile and those are now being optioned at a capital loss price.  These capital losses could effect performance in the remaining three months of the year. Even with that we expect some carry forward losses into 2012.  The idea is to produce above average market profits while protecting capital as much as possible.  Unlike many other hedge fund models our model allows for continue monthly income while waiting on recovery of stock values thus avoiding liquidation issues.

                

Wealth Envy

In the past week I have had Facebook conversations about taxing people who have higher incomes.  Again let me point out that we are not necessarily talking about "wealthy people" or "the rich", we are talking about people with higher incomes. In this case an individual with higher income means anyone who makes an annual salary over $200k. That is a lot for most people, but if you live in New York City that is not much income for the cost of living. Ditto for those living in Washington DC.  Also many people who own S- corporations report that much annually, if you include all income like investment income,  they report on a S- Corp tax return. But these businesses have to reinvest in their businesses and that comes out of profits so even if they make $200k they actually have much less real income. But that is not the point of this posting, the point of this posting is the question why so many people seem to envy those who have more money or make more money. What do they see that makes them almost crazy with envy and want the government to take it away via taxation of some sort.  Do they believe they will feel better or be better off themselves if the government confiscates someone else's money?

 

Frankly I have never been envious of others who have more, I preferred to find out how they did it and do it myself.  I remember years ago when a very successful real estate entrepreneur came to town and was staying the night in a local motel. Several people asked him to TAKE them to supper with him and he declined. I asked him to HAVE supper on me as it was my treat as I wanted to pick his brain and he accepted. We had a interesting evening as he did most of the talking and I did most of the listening. I expect he enjoyed watching me soak up his experience.   He also realized I understood the difference between thinking he was rich and OWED me a meal and my wanting to PAY for his meal and get smarter.  For the record at the end of the evening he managed to have the meal charged to his room. I later sent him a gift certificate to a nice restaurant in his hometown refusing to have him pay for an evening that was to my benefit. 

 

If the people who were envious of others who have more would look at life in a different way they too might find their way to some wealth as well. I will point this out in a later posting about listening to those who are successful.  Frankly the problem with the US government currently is not lack of revenue, but too much spending and way to much waste. Time and again when taxes are raised with the promise of cutting spending, no spending is ever cut and all you get is more spending with the additional taxed revenue.  Add in all the incredible waste that occurs at the government level and until that is resolved why should they get more revenue. But that is an argument for another day.

 

What is interesting to me during all these facebook chats is that everyone who is telling me they want to tax "rich people" more NEVER takes up my personal offer to help them with some things I have learned along the way to achieve some level of wealth.  Never do they take the offer to have lunch and chat.  My personal thinking is most of these people do not want to be challenged about the mindset they already have about money and wealth. Much easier to complain about how other people have some money.  It goes back to grade school when the kids who worked hard and made good grades made it tough on those who wanted to take it easy and not be shown up by those who did achieve. The same thing is occurring in adulthood as many of those same people do not want to change their lifestyles, spending and investing patterns, to accumulate anything.  So the best approach is to complain that others who have did so in a unfair way.  As one liberal once said some people just won life's lottery so let the government take it away from them and give it to me.  Also could be they do not want to take the chance of BUYING me lunch.

 

Frankly wealth envy is a ugly emotion.  It is demoralizing and diminishes the desire for people to want to achieve more. Several years ago we got a new fax machine at my workplace and since I used it extensively I was part of the group trained to use it. Later on someone came by who I knew was a liberal and asked how to send a fax on the new machine. I asked him if he wanted to learn the liberal way or conservative way. He said how could there by such ways. I said well the liberal way is I take your fax and do it for you and next time just ask me to do it again. The conservative way is for me to teach you how to use it and you never have to ask me again and you can use the machine anytime you want to. Frankly he was offended by the offer and that did not surprise me.  For the record I ended up faxing it for him.

            

Gold and attaching your assets to something of value.

With gold getting sold off significantly now is a good time to take a look at gold and real values.

 

One of the most amusing things about investing to me has been the flight to gold. Most people who own gold tend to consider it a storehouse of value when inflation heats up or when the government collapses. These same people also tend to be big buyers of US Treasuries too. Does not make sense does it?  The late great Louis Rukeyser used to have a pet name for gold traders and buyers calling them "gold bugs".  His purpose was to point out how people who are attached to gold as an investment are like bugs attracted to sweet or light. No matter what happens, no matter what evidence arises gold to them is just that gold. Sorta reminds me of Ron Paul followers:)

 

One other thought and if you get nothing out of this posting take this thought and ponder for awhile. People tend to be emotional buyers and sellers and therefore flock to buy stocks and commodities like gold and silver when prices are going up, of course it is at that point they are the most expensive. Usually they tend to sell them later when they have gone down in price or either hold them praying for something to save them by pushing up the price again. Bonds buyers are similar, they tend to flock to buy bonds when fear is in the air then see their principal erode when inflation heats up either via having to sell the bond at a loss or hold them when everyone else is buying bonds with coupons much higher.  Therefore bond buyers now are buying EXPENSIVE bonds. Expensive bonds are bonds with low rates of return. Obviously the correct purchasing decision is the other way, buy bonds when coupons are high and hold on until times are bad and sell with a nice capital gain. You win on both ends.

 

I can see the attraction to gold on the assumption that currency becomes less valuable gold goes up in price and offsets any loses in value. If the government collapses you still got gold that will hold whatever wealth you might have. The problem I have is that if the government collapses who, if anyone, is going to pay you for your gold. Where would you sell it, what would you sell it for?  Frankly in a situation like that you are better off owning farmland or a nice homes to live in as a storehouse of value. The only way, in my opinion, that gold holds value is if the government does not collapse. Then you can use your gold holdings as value against currency value declines and sell it as needed since there will be someone to sell it to. Even then it does not pay a dividend and since it is an emotional buy you can see days like the last couple where the bubble bursts and the price falls rapidly.

 

 I own copper mine stocks as my hedge against inflation. Same lack of supply and absolutely essential to modern society to operate with all the new technology.  Try building something like a cellphone or computer without copper and you can not do it.  Gold does have uses, but beyond a few like places where guaranteed connection without corrosion it is not an essential metal.  Yes, we use it in jewelry and such, but again these are non essential purposes.  Oil also has some inflation protection value. However there is always the risk that if supply gets constrained too much by silly government and environmental regulations the politicians will give in to voters and regulations will be reduced. There are also huge deposits of oil out there just waiting to be tapped and once tapped oil prices will come down quickly.

 

My personal preference for inflation protection is good old common dividend paying stocks. Ownership in a corporation. When inflation heats up companies can raise prices and not lose a single dollar of profit in their business. In fact if profits are a percentage of price then you actually will benefit from inflation since companies just raise the price of their goods to offset inflation costs in their expense of operations.  You also will get inflation protection from rising dividend income if inflation heats up. Finally if government collapses US Treasuries could be frankly worthless.  On the other hand you stand a better chance of having something of value in owning a share of a corporation in this scenario, even if that chance is quite small.  Now selection of stocks are essential as if you own something not absolutely needed by consumers when things turn bad consumers can stop buying your product. However look at what people do not give up in times like right now.  Telecom, electricity, gasoline, medical supplies, and yes cigarettes.  So safe investments can be found in these stocks for bad times. You can also find some select commercial real estate as well.  Lastly and most importantly when markets are in a tailspin, solid dividend stocks have a floor in their price where people consider there is bottom level value due to the dividend. You will note the vast majority of holdings in the STI Hedge Fund is in precisely these common stocks. In late spring I began exiting positions that did not meet these criteria and will finish it off at year end 2012 with a selling of more I do not expect will perform long term in the current environment.

 

So reconsider your holdings here and maybe include good dividend paying stocks as part of your portfolio.

             

Three companies doing something right.

My specialty is higher paying dividend stocks, but as I survey the market landscape daily I keep an eye on how companies are doing business wise. Currently there are a good number of businesses doing very well even in this economy. Below I will briefly point out three of them and why if you are a capital gains investor they might fit your portfolio.

 

Nike..symbol  NKE...year after year this company continues to amaze me. They sell high priced branded shoes that they make inexpensively at a extremely high profit margins.  The key is branding and making customers believe they have to own a pair or not be hip. They go out sign sports stars to push their products on young people and year after year it works. It all began with Michael Jordon and unless someone finds a way to untie sports shoes and being hip it will never end as long as their are sports stars to sign to fat contracts. Yes, it is frankly stupid to spend hundreds of dollars on shoes such as these, but remember we do the same when buying diamonds and jewelry another high profit business.  Even liberals who hate the overseas factories keep a pair in their closets. Owning Nike stock you would have doubled your money in the last five years.

 

McDonalds...symbol MCD.. let's face it their food is ok, not good, just ok. They stay under assault from the food police. But again hipness is what counts and for young people being seen in McDonalds is cool. The music is upbeat, the selection of food makes it possible for anyone to find something to eat and they figured out long ago the future was overseas having saturated just about every nook and cranny in the US.  McDonalds also has proven they got a farm system for management second to none. It seems they got the right leaders at the right time in the right place every time and everywhere. I go to McDonalds occasionally and wonder at just how they sell so much food to so many people. As a investment owning their stock has been a winner. Great capital gains and solid and rising dividend.  Another double of money if you owned their stock the last five years.

 

Apple...symbol AAPL..Like the other two companies above owning Apple products is hip. Just look at the lines that form at their stores every time a new product comes out.  Young people might not buy health insurance, but trust me they will dig deep and do without almost anything to own an Apple product, be it phone, pad, pod, etc. Steve Jobs might be dying of cancer, but he will die knowing finally his superior product line finally beat Bill Gates and Microsoft in the marketplace.  Owning this stock the last five years is almost a 10 bagger. If anyone in my lifetime has done more good for making the world a better place than Steve Jobs I do not know who it is. Do not tell me he owes more taxes or has a debt to mankind after all the jobs and wealth he has created for so many people since the early 1980's.

 

These are just three of the companies out there that are growing and prospering in this time of uncertainly and no growth world economy.  If you do your homework you can likely find more that are not thriving right now and can make you some serious capital gains over the years.

 

Lower rates for Housing will not a recovery make.

In a posting earlier this week I made light of Bernanke's attempt to get a recovery in housing moving by using his immense balance sheet at the bank to push longer term rates lower.  The reason simply put is if 3.25% mortgage rates will not get people out buying, who thinks 3.00% will get them moving and that is about the extent the fed can make rates move.

 

Yesterday the market did it's part pushing down pushing down the 10 year US treasury bond to 1.72% and the 30 year bond to 2.78%.  Now say what you will, but tying up my money in a 30 year bond and getting paid 2.78% interest is absolutely nuts with the inflation risk you take on. Add in that essentially paying the government to take your money for one year at .10% is equally nuts. The only thing that is not nuts is taking out a home loan at 3.25%. Check out the amortization table on that baby and you will see why, you pay virtually nothing interest wise on the loan. So lowering it to 3.00% is going to save little interest, lower the payment nominally and frankly will do nothing to move the housing market forward. So the question is why and then what to do about it.

 

First off let's be honest no matter how much Obama begs you to by a home and no matter how much the federal reserve lowers rates getting a home loan now is a crap shoot. You either better have 20% down or sterling credit. Ignore all the BS being said by government types the fact is they have made it tough to get a loan. It begins with the new Dodd-Frank regulation and ends with the soon to be in force international rules called Basil 3. The FDIC has also put the squeeze on as well. All these require banks to keep lots more capital in house and not lend it out. They also say the bank will be penalized severely if they are even caught considering lending to someone that might be a bad loan.  If you do not believe it ask someone who actually deals with loans today and the first thing you will hear is they are making nothing commission wise due to the few loans being issued. If you do have good credit be prepared to be pursued for your business however. Of course tight lending leaves out young people who are the prime candidates for homes. It also does not help those who would buy up multiple homes for rental purposes who could deploy more capital if down payments were lower.

 

Of course there are other reasons for housing not moving and at the top of the list is the employment situation in the US.  Two things in play here. One, the simple fact many who are unemployed are underwater in their homes and therefore can not move to new employment even if they wanted to without defaulting on their homes. Two, like it or not the unemployment checks going out right now for what seems a never ending limit keeps many who actually could sell their homes from moving since they are just waiting for a job to open in their current location before moving.  Just not much you can do with these situations to make the situation better.

 

There are some things that could be done to make things eventually turn up and none of them involve Obama or the US government propping up home values, homes loans, or helping to keep people in their homes. Frankly the government got us into this housing mess by pushing banks to make home loans to anyone who breathes and the market complied with lots of home loan arrangements for subprime customers and the accompanying massive building of homes to sell for those loans.  The result now is a massive oversupply of homes and  lots of homes in or near default.  The first thing the government needs to do is just get out of the home business. No more Fannie Mae, no more Freddic Mac, strip Dodd-Frank of the onerous bank regulations,  tell Basil 3 to kiss off, and no more loan programs to keep people in homes. Most importantly tell banks no more selling of your home loans to secondary servicers thereby keeping them in house, but in return you can lend to whoever the banks thinks can service a loan. That means a return to home savings and loans and the situation as it was in the past when loans were mostly local.  The FDIC would then be only interested in making sure there is enough capital on hand just in case the bank goes down, but with homes loans kept in house trust me that will be an outlier. Ask Canada how this works since they basically handle home lending this way and never had the housing debacle the US is saddled with currently.

 

 Of course when you allow all those loans to default you will get even more supply on the market.  But in return banks and loan firms will then have the opportunity to turn many of them into rentals and many of them into real home loans for young people who have good career prospects and a real chance to pay off a home loan. Heck, maybe even get people to buy homes that are the right size for them, not McMansions that some felt they needed in the past couple of decades to keep up with the Joneses. Another effect of the government getting out of the home business and the supply getting much bigger is that home prices will actually get to drop to what is the real price via supply and demand and with the low loan rates trust me you will see some serious buying up of inventory.

 

The next thing you do is make clear that the current 99 weeks of unemployment will not be extended and new people coming into the unemployment insurance payout will be ended at one year period.  This will focus unemployed minds on the need for new jobs and moving if needed to the new job.  Default or not when you are hungry you move. You also consider taking to a new career while on unemployment by attending a local community college and acquiring a new skill.  Yes, you default, but again the bank in the new location will consider your situation and just might see your new career as a risk to take for a home loan.  There will so many people like this banks, who will then be locally making home loan decisions will be attuned to the fact if they do not make the loan someone else might. Markets are beautiful things when  allowed to operate. Finally your new home will likely be priced much lower than the one you left and much easier to afford and the bank, who now is keeping the loan in house, will not allow you to make a foolish mistake of buying as much home as you can afford.

 

Of course none of the above will happen, too many interests with their hands in the honey pot. and too many politicians wanting to equalize home ownership.

                

Buy when others are fearful. Sell when others are greedy.

Few investors want to come out of from under their bed after a day like today. Frankly I took a nap and felt better after getting back on line and taking a look.  Yes the capital value of my fund is ugly, ok butt ugly. But after surveying the individual stocks I come away not totally pessimistic. Trust me being down six figures in your fund can get anyone to worry, but as last time we went through a period like this a few weeks ago I remain pleased with my stock picking.  Fully 50% of all my losses are in four stocks of the 23 positions I have now.  Two of those selections were fully expected to be sensitive to the economy. One of the others is getting hit due to exposure to the financial sector. One due to some bad management calls.  The others have hung in there well since they were picked for a market like this one. 

 

I am finishing up the trading for September right now and cash flow wise the fund continues to produce. I am glad I finished the selling by the end of trading yesterday or I might not have been able to say that. The question now is if today offered some final selling.  We have tested the low earlier this year and it has held so far. Thursday brought some bad news, China economy slowing, Europe getting no better, and the US economy is finally being accepted to be in the dumps. The final point is important as accepting the fact that the US might be entering a double dip is actually helpful.  I draws the attention of the political class headed towards an election and it washes out the amateurs in the stock market.

 

 As I opined yesterday do not expect any improvement in the economy until we get past the 2012 election. Yes, that is now just under 14 months away, so built portfolios to handle than span of time. Frankly if we do not get a change in leadership in Washington DC in 2012 this will not get better.  Build a portfolio to last until then so at tha point you make adjustments to election returns as well.

 

I continue to like dividend paying stocks in solid companies. As noted in the headline buy when others are fearful and right now others are fearful.  I noted to a friend today now is the time to look for stocks that have been hit but have long term promise. Do not waste resources on those stocks that held up, just wish you had some as I do.  Stocks that held up lately are LO, DUK, MO, NNN, SO, and T. If you looking for extremely safe depositories of cash these stock do offer safety and frankly are much better than US treasuries paying nothing.  if you bought US bonds lately prepare to hold these low paying bonds for awhile because once the economy does turn up your selling value with get killed by up to 50% or more. You can also get out a stock screener online a point it towards the S&P 500 and see which stocks are down and pay good yields and do some research.

 

If you are looking some interesting opportunities, CTL, HCN, and PFF offer dividends and capital gain potential.  If you are a real gambler I suggest looking at some of the banks that have been beaten down badly. Take BAC, it is not going out of business the government will not allow that as with the new banking laws banks are now a utility.  Of course I am the person who bought GS several weeks ago at $125, take a look today and you will see what pain looks like. BAC could be bought here at near a 5 handle and a option sold for Dec.for $7 at 55 cents. A chance at a 26% return in three months. Might happen, might not, but you got a eventual winner with solid option opportunity.  

 

The thing to remember here is unless the American people go totally nuts and continue stupid leadership the US economy will return to growth.  Those who heeded that advise time and time again in the past made money.  Keep the faith until proven otherwise and position yourself by taking advantage of opportunities. Trust me if I give up I will opine as such by signing off this blog and head to the beach for the rest of my life. 

 

I own long or have options on all stocks in this posting except BAC.

            

North Carolina's Crowning Glory!

Frankly anticipation of enjoying this delight has been building for several months.  The good news is you can enjoy it too. Add in that Obama, the NC Legislature, Gov. Perdue, nor anyone else can do anything to mess it up. Truth be know none of them can enjoy this delight any more than you can and likely a good bit less since they can not do it with just only loved ones or like you by yourself. Finally no other state has quite the selection to enjoy this delight that we have here, so you are in for the special treat if you want it. So settle in and get ready.

 

What am I posting about? Well several years ago Our State magazine, the highly read magazine about North Carolina, did their very first poll on what makes North Carolina special. They asked readers to name the "best of North Carolina". The editors were anticipating names of places, mountains, beaches, towns, people, etc. but were surprised with the results they got back. North Carolina voters responded over and over in a large majority with one word. That word was OCTOBER!   October my readers is North Carolina's Crowing Glory!

 

So with great anticipation of experienced Octobers for over 50 years I know we are less than a  9 days away from another 31 days of wonderful. October has so many opportunities to enjoy in North Carolina, but all these begin with what many consider the best weather of the year. Cool evenings, warm days, low humidity, and low rainfall averages.  Just right to get outside and lap up the pleasures.

 

Those pleasures can range from a trip to the beach where the crowds are gone and the sea water still warm. Hotel rates are cheaper too. You can rent a house right on the beach for lots less than the summer. I personally like the Clamdigger Inn at Pine Knolls Shores, but any will do. Just walk the beach and enjoy. Take in the week of the full moon and it is even better. For the record the second week of October. 

 

Of course there are the mountains of North Carolina. The second week on for all of October offer you the pleasure of mountain foliage color and in Carolina nothing can be finer.  I personally revel in the Linn Cove Viaduct around Grandfather Mountain, but you can not go wrong almost anywhere in the mountains in October. May I suggest the Inn at Iris Meadow in Waynesville for your retreat. Wonderful accommodations and excellent hosts too.

 

You can try the Uwharrie Mountains in central North Carolina. Yes, these really are not mountains, but nevertheless you will find great views and easy access. How about a golf game in Pinehurst. Add in shopping and the culinary opportunities and being outside there during October is serious enjoyment.  A trip to the state capital to explore the treasures in the museums and such. The outlets in Smithfield for some early Christmas shopping.  The riverwalk in downtown Wilmington, New Bern and it's waterfront. The lakes across the northern tier of the state are fabulous this time of year too. Just sitting outside on your deck and enjoying the weather.  The list goes on and on.

 

The bottom line here is that frankly you can get in your car and enjoy the great weather, the colorful scenery almost anywhere in North Carolina.  Most can be done with just day trips. Free and without guilt. So let the fun begin, let the enjoyment commence, and get out and enjoy North Carolina's crowning glory the month of October.

Manipulation Constipation

I expect all of you have experienced times when things just will not move. Certainly not move in the way you prefer.  So you take to the the medicine cabinet, pharmacy, or other natural means to get things moving. Sometimes it works sometimes it does not. In any case you end up feeling miserable until things do move. Even when they do move things can turn out not as expected.

Our good Federal Chairman Ben Bernanke seems to be in that situation himself.  He has tried everything in his book of remedies to make this economy move. In essence manipulating every lever he has and as I opined in an earlier posting running out of bullets.  Basically Bernanke has decided the US economy is constipated. Never mind the politicians in Washington, and specifically our President Obama, keeps promoting policies that are like cheese, bread, and fast food burgers anything that keeps things from moving. The policies recently put forward makes the people who could move the economy forward just stop doing anything for fear of being regulated or taxed or in essence being force feed some more cheese.

Today it looks like Bernanke wants to try his newest and likely only remedy left to make things move and that is selling his short term holdings and buying up lots of long term holdings.  His hope is this will lower interest rates for mortgages and consumer items and make people buy them or maybe just move around some. Some interest rate sensitive stocks have sold off this morning just from concern about this action. Remember just last month Bernanke said he had given up trying to make things move and closed his medicine cabinet and gone to the beach. Now he has decided that maybe the bad smelling air coming from the lack of movement needs attention after all.

Personally I do not see this having an effect either since the same people needing to make the economy move will see this as just manipulation of the constipated economy and will still just sit there. Expect the bad smell coming from this economy to continue until November 2012 when maybe, just maybe, some real medicine can be applied. Anyone ever took castor oil?

             

Reeves Utility Income Fund.

I believe I have posted on this fund in the past, but thought I would update some info on the fund and inform new blog readers as well.  Reeves Utility Income fund is in my opinion one of your best income choices out there. It provides monthly income and also contains some income securities that frankly I like and believe are choice for long term income.  The securities in the fund also tend to be good at raising their dividend payout regularly as well.

 

The fund is a closed end fund, which basically means the shares are sold on the open market and normally the fund does not issue additional shares.  The only drawback to this fund is a higher annual expense ratio than I like, but the advantages of the fund outweight the one big drawback in my opinion.  You will not get rich owning this fund, but on the other hand you will get steady monthly income and solid as a rock capital preservation.

 

The most interesting part of this fund is the fact it goes beyond utility stocks to find income.  Holdings include electric utilities, gas utilities, MLP pipelines, telecom,  some tobacco and agency reits, preferred stocks, and lastly some foreign holdings in the utility area.  When I look down the list of holdings in this fund I frankly find few securities I do not like in a income fund. For instance I do not see Berkshire Hathaway as a serious income holding.

 

All in all if you are looking a fund for income to spend and depend on this is it. Good for retirees and maybe even IRA's.  The symbol is UTG.   Website is http://www.utilityincomefund.com/ .

 

The fund increased it's payout to 12.5 cents monthly in April of this year and now at the current price of $24 to $25 per share pays you just over 6%. The dividends are qualified for the lower tax in the US as well, so depending on your tax you will owe no more than 15% federal tax. In fact many people currently get this dividend federal tax free.

 

I do not hold UTG in any account.

 

 

                

This keeps me from sleeping well some nights.

We are living in a world where sooner or later Greece is going to default.  The US markets are unstable due to political headwinds in the US, but even more importantly the worries about what will happen when Greece finally goes down.  Markets naturally price in the worse case scenario and let things settle out once the actual event happens.  The worse case scenario begins with  Portugal, Spain, and Ireland going down as well. The final nail is France and/or Italy and one or more of the European banks going down as well. Italy and France have large economies and their troubles begin and end with the government debt being held by large banks there.  The contagion comes to the US when one of more of the US money center banks who have holdings in those European banks either as deposits or European government debt gets hit as well. We are talking upwards of $100 billion dollars or more hits on US banks, who are already wobbly in capital.  There is also the fact exports that come from the US to Europe will get hit when Europe has trouble.

 

Frankly no one knows what will happen when Greece ultimately defaults.  The sad thing is that the Greek people do not understand they have been living so long above their productive lives that the austerity that is coming will likely bring the Greek government down and maybe out all revolution. Political leaders in Europe know this and worry about their own situations. Germany the only economic stable country in Europe has propped up Greece until now, but the costs are now becoming prohibitive and Chancellor Merkel knows she is running out of favor with the German people on bailing out Greece.  I would expect one more band aid moment here, but can not see where Greece lasts out 2012. 

 

Obama sees what is happening in Europe and knows if Greece defaults the contagion is sure is plunge the US back into recession and with it his already fading reelection chances. Obama has been urging Merkel to keep Greece afloat at least until his own election is over, but Merkel has her own reelection problems. Merkel is slowing beginning to tell Greece they are on their own. If this was not so serious the game of politics here would be good clean fun.

 

This deadly serious game is ultimately coming to an end  and markets react daily by being on a roller coaster. My best guess is that it will hurt US interests significantly, but not as bad as some believe.  Again markets assume the worst. The European bank does not have the ability to print money like the Federal Reserve, so the US has leverage when needed here. There is also the fact that the Federal Reserve has offered to lend money to European banks to prop them up. If that actually occurs Bernanke will be taking the Federal Reserve into uncharted political waters and frankly I fear the repercussions when he sits for renomination.  Of course Obama wants Bernanke to bail out Europe to help his prospects. 

 

All of this mess could come crashing down one day or ugly market morning with dramatic drops in markets and prices which could approach the 2008 debacle. On the other hand it could go drip, drip, drip like water torture slow too.  Europe and Greece are playing a game of make believe everything is all right, but make believe has to end and what happens then is a guessing game. Frankly the worries here keep me from sleeping well some nights

Ignorance wrapped in ideology on Municipal Bond Taxation

I am not happy to continue pointing out ignorance in our chief executive but he just keeps doing things that are just that ignorant.  Even senior members in his own party are rebuking him on these two proposed policies. Obama is a gentry liberal and he values what he considers "fairness" above creating jobs.  He is starting to remind me of George Bush in his stubborn refusal to accept the fact he, like Bush, is just plain wrong on some issues.

 

No other proposal shows the ignorance, and I do mean ignorance,  of Barack Obama than his inclusion of the taxation of municipal bond interest into the yet to be submitted jobs bill. Basically his proposal is to tax the municipal bond income of anybody earning over $200000 in income going forward.  Obama's stubborn ideology comes into play here and that is to tax at much higher rates anyone and anything that earns income more than what he considers fair.  He has tried this before with charity contributions and this time with municipal bond interest. Bless his little heart, but he just can not see past his ideology.  In the case with municipal bond interest and in the case of charity contributions he not only is blind, but he is putting the screws to the people who he says he cares for the most.

 

By proposing to limit the deductibility of the large charity contributions that higher income people contribute to higher education causes he endangers things such as endowed chairs, student scholarships, and creating certain endowed programs. These charity contributions help keep teachers and professors employed and pay for students to go to school.  Already the teacher's unions have called the Democrats in Congress and told them no way and these same Democrats are telling Obama his charity contribution limitation ain't gonna happen.

 

  In the case of taxation of municipal bonds interest he is killing jobs at the state and local level, including the public employee unions who are his base. Already many Democratic governors and mayors have called Congressional Democrats raising concerns about this idea. Not only is it a jobs killer, it is also a tax raiser on regular folks who will have to pay higher taxes to recover the higher interest costs that come with taxable municipal bonds. Frankly I am not sure that taxing municipal bond interest would pass court muster, but that is another argument for another day. 

 

In any case both are non-starters with Democrats. So Republicans will never even have to weigh in period. Not sure who is advising Obama, but he looks stupid even suggesting these ideas. But maybe he just can not help himself since he is so consumed with hate for anyone he considers the evil rich.    

 

Full disclosure: I have holdings in municipal bonds and make charity contributions.    

Good Question on 401-k Distribution.

Yesterday I had someone e-mail me about what they considered their soon to come distribution of 401-k money at 59.5 years of age. I expect many people are confused by this rule.  

 

You do not have to take a contribution from your 401-k or IRA at 59.5. You can of course and past that age can basically take out all of it or any portion of it you need for living expenses. But unless you actually need this money for expenses the best course is to leave it alone and let it accumulate tax free for as long as you can.  Only at age 70.5 are you required to begin minimum distributions from your retirement assets in these accounts. There is a formula to go by and your tax advisor can provide it or you can find it on the web, but the formula starts out at some under 4% of the assets in ALL your 401-k or IRA accounts. One other point if you are still working at age 70.5 other rules apply and you need to check them out.  The reasoning here is of course any assets distributed to you are considered taxable.

 

The added accumulation of tax deferred money in your 59.5 to 70.5 year old retirement account will likely be significant as well since in basically 11 years you should no less than double your assets there. Of course if you are still working during that time you can continue to contribute to your account.

 

 If you have your assets in a former employers trust or even in some mutual funds I highly suggest you consider moving your funds to Vanguard. Vanguard is the least expensive mutual fund group out there and is owned by the investors who have funds there. The service is top notch as well. Yes, your current manager or broker will not like this advice, but ignore them as your interests are paramount here. Saving the up to 1% annually in expenses can add up to significantly more money in your account when you do tap it and will keep more in your account as you tap it. Also consider the funds you have your assets in as well. Once past 59.5 years loss of principal becomes more important than growth of principal so consider good corporate bond funds and blue chip stocks as your best choices. I really like Vanguard Wellesley personally as a major choice here, not your only choice of course.

 

Full disclosure my IRA assets are in Vanguard as well as Wellesley fund. I get no consideration from Vanguard now or in the past.

             

Phillip Morris, Oh how I love thee...

If you are looking for a international stock play with superb management and fabulous shareholder instincts I dare you to find a better candidate than Phillip Morris, symbol PM.  This morning they did what they seem to do on a regular basis and that is do something spectacular.  The news this morning is a 20% plus dividend increase.  The increase from an annual $2.56 to $3.08 is staggering and is wholly comfortable within their profit structure.  Add in that the company rewards you with capital gains year in and year out and that just makes this stock so much more delicious. In the last year they have gone from $54 to now $66, and that is down slightly from a over $70 high. I would expect the stock to retake that high soon.  Marlboro, their prime product, might be one of the most recognized products on the planet and indeed they sell cigarettes to the Chinese, Japanese, Europeans, and most of the rest of the world. They also are domiciled in Switzerland, where greedy American trial lawyers can not touch them.

PM was spun off from Altria in 2008 as the growth portion of that company and the international wing as well. It was also domiciled in Switzerland for legal purposes and has preformed like a winner ever since the spin off. If you are looking a long term winner for your investment portfolio I could not recommend a stock any higher than PM. Capital gains and rising income, what is not to like. Makes you want to light one right now to celebrate...huh?

I do not own PM either long or as an option, but with this mornings news they offer opportunity to do so.

More Artifical Stimulus

Why can we not see that spending all these billions that Obama is suggesting will not do anything to help the economy or create jobs. We just spent over $4 trillion dollars of stimulus the last three years and we are worse off than we were before all the spending and borrowing. Now Obama wants to spend another $450 billion of good borrowed money after bad.  This is similar to the silly millions North Carolina governors spend to entice companies to locate in the state and hire workers. None of this money, either federal or state, does anything but try and help the politicians doing it keep their jobs. The borrowing does make the Chinese richer however. Results or results and they speak for themselves.  A billion here and a billion there and after awhile we are talking about real money here.

 

The correct way to help create jobs is to get government out of the way of private business, set a level playing field, and let businesses do their thing.  Of course you got to believe this actually works before you try it and no one in charge right now believes in this approach.  So we continue on down this path of getting nothing done, because the current administration is clueless. The American people, as I opined in the last posting, have a choice to make in 2012. Either we head down the road where Europe is now or we get back to where America has been in the past, which is prosperous and innovative.

                

This stock screams BUY!

This is not a new selection for me and I do own 2000 shares of this company, but investors and traders when a great stock is taken out back and beaten up good without any serious reason it rates BUY and BUY!  I also mentioned this stock on my radio show last Friday as well, so I am eating my own cooking here. Even if I am missing something the dividend payout at now 8.8% is worth pulling up to the table and taking a nice bite of for income investors.  Centurylink, symbol CTL, just keeps getting hammered and market is again doing so today.  The reasons in my opinion are not justified, but for the record I will put them out there. CTL just bought Qwest and frankly Qwest was not the best run company in the world so CTL is being punished for the acquisition. CTL has also significantly lowered profit forecasts going forward from anywhere near $1.90 to as low as $1.70 to account for the acquisition going forward. However note CTL is also forecasting a nice recovery in profits back to the old level in 2012 and 2013.

 

 CTL is not valued on profits, but cash flow, because as a legacy telecom company they have lots and lots of write offs and writing down of capital expense going forward so essentially they pay low taxes and have much more cash to play with each year. CTL pays out that cash to investors and only uses about 50% of cash flow in doing some allowing for a robust captial investment plan.  CTL does have a nice debt load, but even after servicing the debt load the company has ample resources to grow and pay dividends.

 

CTL management has also shown itself to be a solid buyer of merged legacy telecom companies and knows how to squeeze out cash from the acquisitions.  Embarq is a perfect example and I expect Qwest to be no less positive going forward for the company. Actually Qwest might be a better buy since Qwest has significant urban assets from which to leverage sales and technology. CTL has partnered with Verizon to sell wireless in their areas of service and continues to sell DSL and television access too.

 

Yes, I believe in this company and will likely consider taking another bite of this delicious safe dividend myself. Remember CTL is a S&P 500 stock and is going to be around a long time as they service areas where the big boys of telecom, AT&T and Verizon, have no desire to expend resources.  I would again suggest you consider CTL at the current price of under $33 an excellent buy for BOTH income and capital gains.

           

Taking a Loss.

As I opine regularly that the most important element of my trading and investing success is the goodly number of mistakes I have made over three decades of investing and learning not to make the same ones again.  Of those mistakes far and away the most important one I no longer make is knowing when to take a loss. Most people make this mistake over and over and it keeps them from making real profits in the stock market or any market for that matter.

 

 I have made several mistakes in the last six months of trading. Frankly the mistakes are picking stocks that did not perform as well as I expected.  Not going to spend time going over the details as they are not important. What is important is that I have tagged them mistakes and by the end of 2011 will sell them out of my portfolio and most likely at a loss. That loss part again is the part where most investors and traders have the problem.

 

Taking a loss means you have accepted that the stock will not perform going forward and the best choice is getting as much of your principal back and using it in better opportunities.  Most people decide not to take the loss and begin wishing and hoping that the stock will come back to at least the original price and save them from the loss. Yes, you can do that but the time opportunity wasted and the opportunity to actually make profit in another investment are not there as long as you do not accept your mistake.

 

I know several people currently who are down big in certain local bank stocks who are doing just that hoping their investment will get back to the original value. Chances are good with the current banking landscape that is not going to happen. But think for a moment if it did happen, how long would you have to wait for it to happen. How long are you going to wait for the recovery and is the time opportunity lost in another better and quicker profit you are missing out on with the wait.

 

Most times your best choice in any bad investment is get it sold and move on. Also take into account Uncle Sam is going to help you out on the loss allowing you to take up to $3000 annually in capital losses against regular income and carry forward the loss indefinitely until you make enough capital gains to eat up the losses.

 

So take a look at your investments and as we move towards year end weed out your bad investments and move on to better opportunities.

               

A 50 Year US Treasury Bond?

Are you ready for a 50 year government bond?  It just might be coming your way soon. Bernanke who is basically out of bullets and knows Obama is only hurting the economy with his efforts is said to be considering putting a 50 year bond out there. I expect most of you think, "I have no interest in a 50 year bond", well this is not going to be your choice event.  The new bond will be a take it or leave it proposition as Bernanke's plan is to limit the shorter maturity bonds and add the longer maturities. The purpose here is to apply serious pressure on longer term rates. In effect he wants to force you into buying homes and investing in stocks and businesses to get the economy moving. This will also make your current investments in shorter term US bonds less valuable since there will less of those issued and the market place for them less liquid.  He has tried about everything else so why not this I suppose.

 

Now first off if you are interested in buying the 50 year bond or decide that since there are not any short term US bonds to buy take some 10 or 30 year bonds please call me.  If you are fool enough to buy some of these I got some lower swamp land in Duplin County to talk to you about now.  Buying a US government bond that yields 3% or less to own for 10 years or more is like lighting yourself on fire. Stupid at best, ignorant at the least. The inflation risk you are taking on is excessive, the payment risk you are taking on could ramp up as well.

 

The down side for the government is that the deficit cost will go up a good bit, but the long term benefit is that the payback of principal and interest when inflation heats up the government will be paying you back in worthless money since the buying power will be gone by the time you get it back. All this is intriguing to see what goes down.

 

I suppose this is what passes for QE3 now when you have no options left, but the effect on the economy will be minimal as most people will likely buy the longer maturity bonds as it is clear that most people do not care to buy into other investments now, just buy what they consider to be safe US Treasuries. The one thing that could be helped is this would drive down mortgage rates even lower than the now 4% 30 year mortgages.  Of course no one presently is buying homes at this rate so one has to wonder if 3% mortgages will make any difference.

 

 

Stock Market Roller Coaster

I expect you like me wonder where this market is going. Right up front frankly I do not know. The stock movement we are now seeing is nothing more than emotional swings of traders and sometimes investors responding to real world events. Much of the down draft the last two weeks has been Europe news driven.  The facts there are simple, one or more countries is going bankrupt, one or more banks there is going down, and when this happens if will likely bring down some American companies as well. So when people get fearful of what is happening in Europe they head for the exits and sell everything.  On the other hand when these same traders and investors get emotional lift from good news they push the market up.  High volume stock trades are also making these moves more volatile than normal since the those computer driven trades pile on when the movement is one way or another. The fear here is if Europe really does go off the deep end where a bank or country finally does go under without Germany stepping in and keeping the losses to a minimum.

 

One can expect this type of movement to continue for some time to come as the economy is going nowhere for at least another 14 months plus, or until the election of 2012.   With this in mind as I have opined in earlier postings your best choice in investing is select dividend paying stocks and municipal bonds.  Stocks such as CTL, BCE, DUK,. HCN, MO, NNN, SO, and T are safe investments that yield 5% plus.  Note that NNN and SO have actually gained price in this market.

 

And yes for the uptenth time if you are looking somewhere to park your funds for two years, agency reits are the ticket. HTS and AGNC or good. Superb safety can be found in NLY.

 

You can buy tax free municipal bonds that 5% or more for par now. Safe GO or revenue bonds are out there. Be very cautious of any government bond fund however.

 

 If you are looking for good mutual funds I favor Vanguard.  Funds in that family that are safe investments are Wellesley, Equity Income, and 500 Index, all of which pay good dividends and offer some capital gains down the road.  Unfortunately too many people are taking their money out of stocks and stock funds and putting them in what they believe to be safe US Treasuries. Yes, you might get your original money back, but it will be worth less than when you put it in and you get nothing in interest payments. US blue chip companies are solid and cash rich in many cases and when you couple that with good dividends you get solid investments. Muni bonds protect you from tax increases and Vanguard, cheaply operated and investor owned, make for good safe keeping places as well.

 

I own all of the securities recommended above, except NLY. So I eat my own cooking.

 

 

                  

Kobayashi Maru .

Star Trek fans know what those words mean, for you non trekers it is known as the "no win scenario".  In Star Trek lore young officers were put on a simulated bridge of a starship and placed in a life or death scenario where they had to make choices that with the computer programing there was no way to win. The purpose is to test the skills of young officers. ( bonus points to those who can name the only person to actually win Kobayahsi Maru.)  Like that person who actually won the scenario  I too "do not like to lose". But this is not about my desire to win, this posting is about the country's need to win and even more importantly what the younger generations must decide about the future and for your lifestyle and your assets it could be a no win scenario.

 

 I have always believed adult behavior begins around 35 years of age. At that point you are old enough to discover you actually are not immortal and will someday die. Therefore you begin to make plans for the future that involves your certain death. You begin to look at the world from a viewpoint of macroeconomics that includes the other people in your life and their futures. Of course in today's extended adolescent delayed culture it might be necessary to move that a few years to say late 30's. I suppose you could say the Dixie Chicks had it right in their song  that all young adults need room "to make the big mistakes" and only then discover the "high stakes". We are in the midst of something we seem to be naming The Great Recession. At this point in my mind it is not important who or what caused it, it is important how to get out of it and return to the prior growth based opportunity economy. It is even more important to solve long put off financial problems that left unchallenged will change our country in significant ways. These are "high stakes" if we to avoid a "new normal."  A "new normal" which includes high unemployment rates, even higher taxes, a much lower standard of living, and loss of individual choice,  equal opportunity,  and freedom.

 

Politicians, with voters approval, have spent tax revenue and borrowed money in excess using the strong dollar, the current world's reserve currency,  to a point that we can no longer put off the day of reckoning.  If you have a pension, retirement money invested, and any assets such as homes you likely have felt the pain over the last two years. Soon there will be more job losses and loss of lifestyle freedoms as we borrow more to maintain current standards of living. The fact is that the past two years are the first salvo and if left unchanged will result in a USA that will be dramatically different in 2020  than it is today. That might sound like a long ways off in time, but is just over eight years away. The CBO has modeled current government spending and the piling up government debt and said if nothing changes the current economic model of the USA will collapse under the debt load sometime around 2019. You read that right the debt load will be such that we simply can not operate the society as we know it. We will owe $1 trillion in just interest annually by the year 2020. That means no matter how much you want to ignore politics and such you will have to deal with the problem. The unconnected younger generation must make a decision.  

 

It is an adult decision. We either have to accept cutting federal and state government spending now, or face the fact that the credit card will run out and leave us a changed society.  We have used our inheritance from the greatest generation, the global acceptance of the dollar as the reserve currency, to the final end. There is nothing left and your date with destiny has arrived. Either we decide to make the hard decisions now or leave yourselves, your children and grandchildren with a life not so pleasant. If that is what you want, then do nothing. Adulthood is making your appetite meet your resources. Delay of gratification. 

 

There are two sides to this issue. Above I noted the frugal side where government spending must be reined in now. The other side is growth in the economy.  If we are fully come out of this economic mess we also must address the growth side of the private economy.  We must embrace free market ideas that made this country grow back in the 1960's and 1980's.  Ideas here include genuine long-term reductions in Medicare, Medicaid and Social Security costs  major deregulation, including Environmental Protection Agency rules, Dodd-Frank financial burdens and nanny-state consumer regulations; unlimited oil- and gas-drilling and shale-fracking authorization;extension of the repeal of the double tax on American corporations’ foreign profits; limits on unemployment insurance extensions; and withdrawal of his big union initiatives, such as the National Labor Relations Board’s opposition to the Boeing Co. building a factory in South Carolina. and repeal of Obamacare. All of these keep business expansion from happening and without the changes will make it virtually impossible to balance the federal budget.  These are wealth creation ideas. The silly and sad attack on wealth creators such as Bill Gates, Steve Jobs, and other brilliant Americans who have created wealth for themselves and others is something that is suppressing the economy currently.

 

Using government as we are doing now to try and micro management the economy by artificial means has not worked to produce growth and never will. Continue down this path and you get life as it is in Europe now. No opportunity to improve your standard of living and few lifestyle choices. That is the path we are on now.

 

I was blessed to be young and live in a society at the time where opportunity, hard work,  and achievement was rewarded. Where there was a safety net, but not one that is a lifetime safety net of no work as it is today. I have won Kobayashi Maru and now enjoy the fruits of many years of labor and taking advantage of opportunity. If we do not implement the changes noted above young people today will not experience such lifestyle freedoms. The election of 2012 is your generational moment. You must decide which way you go, like Europe currently which is in decline or like a America of my youth.  You need to demand that politicians embrace pro-growth policies if you want a bright future.  Barack Obama frankly does not embrace these policies.  Right now no one of the other side does either. Only your DEMAND of pro-growth policies on the winner of the other side will get you your chance at an opportunity society. Make your choice as this is the most important decision you will make in your life. if you demand the right course, and choose correctly, you too can win Kobayashi Maru and experience a new birth of freedom in this country.

 

 

Speculative Buyout Opportunity and Dividends too.

Canadian Oil Sands, symbol COSWF, is the largest holder of Canadian oil sands assets. This company is as pure a play on oil sands as you can buy. The dividend until recently would ride up and down directly tied to the price of oil. However since the conversion of many former oil trusts in Canada to corporations COSWF has pretty well set the dividend at 30 cents per quarter and used the rest of their significant profits to enhance the production of their assets. These oil assets are considerable and at current production will last at least 30 years. Buying COSWF means you get a direct play on the price of oil and 30 years of dividends too if there is no buyout.

 

Now the speculative part is that if the pending Keystone XL Pipeline is approved by Obama you likely could see Exxon Mobile step up to the plate and buyout COSWF.  Exxon is the smartest oil money on the planet and I would expect sees the considerable opportunity in future profits in buying out COSWF. Let's note here that Exxon already owns about 25% of the oil sands assets through it's subsidiary Imperial Oil in Canada, symbol IMO. If they buy COSWF, which holds about 37% of the oil sands they would have controlling interests there.  The building of the Keystone XL Pipeline will allow the oil sands crude to be piped to the USA to be refined and used by USA customers. Of course if you have been reading my postings you know the Keystone XL pipeline is not a given since Obama is being pushed hard by environmental interest to not allow the building of the pipeline.

 

However if the pipeline is not built chances are good that Chinese interests already invested in the oil sands assets will step up and buy COSWF and build a pipeline to the Canadian west coast for shipment to China. So either way the odds are there are some buyout capital gains here in the next year or so. I would expect that buyers of these assets would prefer buying them on the cheap now before the economy rebounds and oil prices move up.

 

In any case owning COSWF at current prices gets you a 5.1% dividend and serious opportunities for capital gains either by price appreciation in the stock or buyout by the Chinese or Exxon.  Finally note the reason COSWF is a buyout candidate is the price has been beaten down due to pressure on oil prices due to worry about a double dip recession. At the current $24 price it is down from a recent $35.  Most analysts believe COSWF is worth around $50 if priced fairly.

 

I do not own COSWF.

                

Get out of the market and join Bernanke at the beach?

This just might get me out of the market, put my money in a hole in the ground in the backyard and join Bernanke at the beach. Several weeks ago Bernanke and his band of interest rate deciders at the Federal Reserve said they were tired of trying to get the economy moving without help from Obama. So they put interest rates on autopilot for two years, called adjournment and headed to the beach.  Maybe after 2012 elections they hoped would get some help, maybe not, but why keep trying when you are getting nothing but additional policy that hurts business from the White House.

 

Well I might join him now after Obama's latest policy decision. This one is related to real estate, you know that booming construction and selling homes business that is doing so well under his leadership. Yesterday the SEC noted in a press release that they were going to revisit the 1940 rule that allowed real estate investment trusts to avoid taxes at the source and pay taxes at the investor end. Basically that means that is you invest in a REIT the operator pays no corporate taxes and all income gets taxed at the investor.  In return the investor gets no preferential treatment on taxes and pays the full rates, no capital gains no preferred dividend taxation. This rule put in by Franklin Roosevelt, you know the president Obama thinks is his mentor, was done to help real estate investment grow. This is because real estate, where 99% of all investment is get rich reeeeal sloooow, needed the help at the time. The other 1% is when a politician buys land, uses public funds to build an adjacent freeway, and says Shazaam I got profit!  Check out Harry Reid on this one. Anyway real estate ain't exactly booming right now and anything that hurts investment there policy wise is just stupid.

 

Enter the new look see on the 1940 rule by the SEC and you get immediate sell off in real estate investment trusts. Yes, the very ones which I have been saying are safe investments for two years going since the Federal Reserve said no rate increases, agency REITS . Add to that all the real estate REITS  that use the 1940 rule are now in jeopardy. Obama, who says he wants to add jobs and investment, yet just keeps screwing business interests and this one in a business which needs little push to just fall over and die. You would think on one of his trips out of DC to golf he would drop by the SEC and tell them to cease and desist, but I expect he likes this action since he has done nothing to stop it. Maybe it comes under his "is it fair" rule. I do not know. What I do know he is without a doubt one of the most clueless, ignorant, and arrogant individuals we have ever had as president. Jimmy Carter must go to bed happy now, knowing he will no longer be pointed out at the worst president of the 20th Century.

 

I can not say where this ruling will go or what it will be, but I do know it will dampen real estate investment going forward and continue to cause more sell offs in the REIT stocks.  It is just enough for make me say to heck with it, sell out of everything, and join Bernanke at the beach. Seems many other businesses and capital are doing the same thing already.

                

 

The current market.

The current market continues to trade in a narrow range, but in my thinking the bias is down.  There is an obvious absence of buyers and with that scenario any little negative economic event could send stock prices tumbling. I frankly am surprised the market has held up as well as it has now. The economy is not growing and might be contracting. There is the obvious lack of leadership in Washington and no desire to do what needs to be done to turn things around. Trust me there are ways to turn this economy around, but the current administration is not going to do it since that is not their approach. One will note that almost everyday the market starts up as bargain buyers do some selective buying and as the day progresses the traders sell into the strength. That is a basis for weakness in pricing of stocks. O course as I said with the economy bad there is no reason for stocks to go up.

One will note that the S&P trades in a narrow range here 1100 to 1250 here and we are at the top of that range currently. I would be surprised by a breakout to the topside anytime soon. There is some talk on the street that the market might begin pricing in a one term president here and if so you might see some upside as fall begins, but buying into such sentiment is suicide for investors and traders if you are willing to take that bet. Friday's employment report will move the market some, but in this environment where there is the expectation of a bad number that is likely priced in. Friday might find some weakness from traders wanting to get out of positions before the long weekend. All of this is short term trading, not investing.

Smart stock pickers will take any weakness here for buying long term holdings in good dividend stocks. CTL, T, and PFF all offer good buy and hold opportunities. If you are more risk adverse, ERF and JNK offer good upsides as well.

I currently hold long or option positions in all stocks listed except T.