Investing for the long term.

News and financial web sites are full of ideas of where you should put your investing dollars in 2014. Ditto for newspapers and television.  This stock, that stock, maybe a bond fund, or how about some gold, and surely do not forget to pick the right fund to invest in while doing so. All this is hogwash and frankly comes from reporters and 99% of the media that knows nothing, absolutely nothing, about investing.  Many of these same reporters either have some vested interest or likely sitting on a big fat pension plan at work that makes saving and investing meaningless.  Below I will give you three time tested guaranteed ways to invest for the long term, where you can put your money on autopilot and forget about it. 

The most important item on your checklist is your company 401-k plan.  If your company has a plan invest as much as they allow or at least as much as you can afford. All this money is invested from your income prior to getting taxed so you in effect get something like 20% plus in return your first year, depending on your tax rate.  The IRS limits are $17500 for those under 50 years old and $23000 for those over 50 years and up. Most companies also match an amount as well so at least go as much as the match to get the free money, so tack on 3% or more onto your first year return.  Most importantly here is to begin as early as possible since the key to investing is not the amount, but the time our money has to compound. A little money invested builds up to large amounts when it has 20 years plus to compound. One last point, there is no need to invest your money anywhere else if you have not maxed out your 401-k plan. So disregard all that other noise out there if you have not done so. 

If you have maxed your 401-k plan your next best investing vehicle is a Roth IRA.  Again your IRS limits are $5500 for those under 50 years of age and $6500 for those 50 years and over.  You likely have some choices here in where to invest a Roth IRA since it is outside your employment company retirement assets so chose Vanguard.  Vanguard is the cheapest and best place to place investing assets. They are investor owned and operate the least expensive funds period. Take advantage of their advice as well as they have no dog in the fight other than to serve clients. 

Before we move on to a couple other investment ideas for 2014 let's discuss where to place your money.  Again disregard the advertising and noise you are seeing and place your money in index funds either in your IRA or 401-k.  Vanguard has an excellent one in the Vanguard 500.  If you are not flat out retired do not waste time in bond funds or in cash place all your assets in index funds or in stock funds if you have no index funds in your 401-k plan.  If you are retired and can move your 401-k money wherever you like so again move it to a Vanguard IRA and maybe spread it out with about 20% in Vanguard 500, 40% in Vanguard Equity Income, and 40% in Wellesley Fund.  Safe, dependable income, some growth, and good sleep at night. 

The next choice in placing money away for the future is selecting a Health Savings Account for your health insurance choice at work.  These vehicles are excellent if you are young and thus are spending next to nothing in healthcare.  Place the maximum amount if they will let you.  For 2014 they are $3300 for individual and $6550 for family plans.  If you are 50 or over you can add $1000 to each of those amounts. The choice here is simple sent your money to a insurance company and let them insure you to pay a small co-pay and deductible or send your money to your account and save the money for future health care needs.  Yes you might have to pay for some healthcare needs above a annual physical included in the High Deductible Health Plan, that is paired with a HSA, but in the end you are protected against a big time expense by the plan and if you stay health the money can just pile up inside your HSA. 

If, and this is a big if since most people do not make it this far with their money, once you have fully invested in your 401-k, your Roth IRA, and your HSA, then you can look at other investing opportunities.  The first choice would be a cheap Vanguard Annuity which is a tax advantaged way to put money away with the magic of tax deferred compounding like a 401-k with no contribution limits.  Note I said cheap here since annuities are wrapped in an insurance product which increases the cost of investing.  

The only time you invest in individual stocks is if you have the time and patience to do significant research to know what you are doing since owning one stock can pose great risk to one's assets.  Once again first up is maxing out your 401-k plan at work, maxing our your Roth IRA, and finally maxing out your HSA.  I expect 90% of all people will be covered by these three options.  So ignore all that noise, put your money on regular contributions and sleep at night knowing your money is safe and there will be plenty there to retire on when the time comes.

              

Maybe Not your father's church building, but certainly your mother's church building.

Since our last posting on building a church was so highly read, top posting of the month and in the top 10 overall, we figured we would post another one on the same subject.  This is primarily a financial blog, but our highest readership is when we post something not financial.  LOL. Enjoy and thanks for the readership. 

Touring the new First Baptist Church Richlands Family Life Center building in construction after the Recommitment Sunday Services a few weeks ago was a happy moment for me.  This building has been a vision for many for a long time and seeing it nearing completion brings much joy. As the building goes up one thing that some church buildings have adorned to them on the outside is missing from this building and that being a BIG Christian cross.  That leads me to surmise that this might not be your fathers church building but it most certainly would be your mother's church building.  Here is the rest of that story. 

This new Family Life Center building was brought forth by donations from the congregation to bring enough financial resources together to make a strong down payment before taking out a longer term loan with the lending institution.  The last buildings the church built,  those two just adjacent to this new one, were brought forth quite differently.  That money came from the pockets of many church members who bought "church bonds" for face amounts starting at $250 and up.  Others outside the membership bought them as well since the going rate for the interest was a tidy 6%.  How do I know this?  Well from my piggy bank so to speak as a teenager came $250 to buy a bond myself.   The last building the current sanctuary was initially hulled in when the bond money ran out and completed by the men and women of the church who put together enough additional money to buy building materials and finish off the inside the sanctuary with church men doing the labor.  Certainly a church building that unlike today's structure that it was actually built, or at least finished, by our fathers. 

Few today will remember an issue for that sanctuary was not the building of the structure, or even raising the money.  No the issue was the cross that was to sit on top of the sanctuary steeple.  Especially a cross with Jesus hanging on it.  Hard to remember now but back in the 1960's and early 1970's Baptist were Baptists and Catholics were Catholics and Catholic churches has BIG crosses adorned to the outside of their buildings and Baptist churches did not.   Do some history reading and check out the absolute horror that Baptists had concerning a certain presidential candidate that was on the ballot in 1960.  Trust me  that candidate being a Catholic did not set well with North Carolina Democrats.  Only the endorsement of a NC Democratic Governor candidate at that time allowed him to pass muster as ok to vote for by the then dominant NC Democratic party.  

This brings me back to the current cross that sits atop the First Baptist Church Richlands steeple today.  The pastor of the church at the time of the building of the sanctuary wanted a nice big cross to  be placed on the steeple, maybe even one with the  body of Jesus on it.  Now that was not going over well with several of church's women and most notably my mother.   Big crosses were for Catholic churches and not Baptist churches. Despite assurances by the then pastor that putting a larger cross on the steeple would be fine with a Baptist church my mother was having none of it. She basically told the pastor and anyone within earshot, that if we were going to be a Baptist Church, then we were going to be a BAPTIST church and not a CATHOLIC church and that meant absolutely no big cross on the steeple.  She made clear to the pastor if a big cross went up she was going to climb up there on the steeple and take it down herself.  What she really meant was that someone like me or whoever she could find would climb up there and take it down under her supervisory direction.  I knew she meant it and after some shall we say "sprinted Baptist" discussion it became clear to the pastor she was not joking. 

So the compromise was had that a smaller more" Baptist appropriate cross" would go up and that is what is sitting up there today. So yes this new Family Life Center might not be your father's church as they did not actually build it like before, but is most surely is your mother's church as there is no big cross anywhere to be found on the outside of the building.  So therefore she would consider it a proper BAPTIST church building she would proudly call hers. 

Stocks we have dropped in the last year and why.

We add and drop stocks as we find they lose value or they no longer fit our trading style.   Below are some we have dropped and why.

ERF...One of our favorite trading stocks ever.  We got tired of the instability of the stock price and frankly the mismanagement by the CEO.  Too much risk for the reward. 

CTL...We continue to keep this stock in our sights, but unless something changes believe the risk/reward here is too great to the downside.  Much of that risk is with large institutions who continue to exit this security and push down the price.  Long term someone looking for a stable dividend might be ok. 

LO...Great stock and solid stock.  Just got too high in price for out liking.

BCE...Again great company that is premium priced like LO

TCAP...Still good long term holding for the dividend and future growth.  But we believe it is premium priced and therefore subject to sell off if reports one bad quarter. 

ARCC...A good long term holding business develop company like TCAP.   However unlike TCAP ARCC is more subject to interest rate increases that will weight on stock price. 

JNK....We believe this remains a good stock to own for dividend and stability.  However due to the stability there is little opportunity for option income. 

INTC...Price has moved up enough we are uncomfortable trading this security. 

BTE...Like ERF there is too much uncertainty right now in Canadian oil sector.  However BTE might be the best of the bunch now. 

BBT...Price too rich for a financial stock.  Future good for this company. 

SBY...Not best of breed in the house renting business. 

NOV...Great stock with good future.  Price just too rich for us.

              

Tell that preacher that damn road is going to be paved.

Our family lived for 40 years next to a parsonage, not just any parsonage, but our very own Baptist preacher parsonage of the First Baptist Church Richlands.  Living next to your pastor can bring it's moments and adjust your actions and speech.  For instance if you have just banged your thumb with the big hammer trying to hit a nail you are careful about letting fly a colorful metaphor or at the very least you look around to see who is close by before letting loose with how much it hurts.  On the plus side there is always pastoral counseling close by when needed.   

We moved beside the preacher in 1967, shortly after our new preacher John B. Stephenson moved in next door.  There are no colorful metaphors to explain John B. as he allowed his close friends to call him.  You see John B. was a big man, both in size and personality.  He did things his way and had a way of making you believe it was God's way as well.   Big John as he became known in the congregation followed a Godly man who personified a dignified older Baptist preacher.  D. M. Clemmons was loved by the church and his retirement get together was a sad event.  The leaders of the church however saw this as a opportunity to find a way to leave our cramped quarters on Hargett Street and build a new church building.  We needed a "building preacher" and they believed they had found one in Big John. 

Big John brought with him a quiet dignified wife and two teenage sons.  Being a teenager myself at the time trust me I have got some stories I could tell about being next door friends with the teenage preacher's sons, but this posting is about Big John.  Big John's big personality would come forward some Sunday night's as occasionally after the second hymn Big John would become filled with the joy and decide to skip the sermon and spend the rest of the time singing hymns from the Baptist hymnal.  He would even allow members to shout out the next hymn to be sung by just loudly saying the next hymn number.  Frankly all that singing would lift your spirits and make you ready for the Sunday night after church ritual of going to the Tastee Freeze about two blocks away and getting a soft serve dip cone.  I suppose after all that singing God would approve a little sugar treat before going home. 

Anyway Big John was here to build a new church and he set about making that happen. First off he needed the road that went by the parsonage and the land the church was eyeing to be paved.  The parsonage was almost right across the street from the proposed new church.  The road had been a dirt road for years despite being being in town. The issue for NC Country Road 1301 was there was not enough people living on the roughly two mile road to deem that NC Dept. of Transportation paving it.   To Big John this was not a good reason not to pave as he had a new church in mind and he also had God on his side.  That was a powerful duo that he took with him when almost every single week for almost a year Big John would pull his new 1967 Ford LTD out of the parsonage driveway down the dirt road to the highway headed to Raleigh and the NCDOT offices to explain how he and God wanted that road paved. Secretly I thought and so did Big John's teenage sons that he wanted the road paved so his new LTD would stay cleaner when he took to driving it.   I expect NCDOT got tired of hearing and praying with Big John somewhere along the way.  One late summer afternoon when both our families had just finished moving the summer grass Big John invited us over to his backyard for some just out of the fridge watermelons for refreshment.  During the time we were partaking in the refreshment the parsonage phone rang and Big John's oldest son went in to answer the phone.  Jerry coming outside after the call was asked by the pastor who had called.  Jerry said it was the Chairman at NCDOT.  Big John asked what he was calling about and Jerry said he wanted the preacher to know something. Big John asked Jerry what the message was and Jerry said "Daddy do you want the exact message" to which Big John said of course.  Jerry then uttered these words "tell that pastor that DAMN road is going to be paved"  and might he add "shortly".   Big John had his paved road and now set about to buying some land on that road. 

Now the land the church was eyeing was owned by several families, some family trusts where the people did not like each other, and one old lady who had made clear she had no intention on selling to anyone period.  This land buying called for a big man and all these people did not know they had met their match in Big John.  So Big John spent several months or so assembling the approvals of these entities to selling what would soon be several acres of land for the new church building.  Now he did not pull the trigger on any of the purchases until he had ALL the land since to build the church the entire parcel was needed.  Now he got to the old lady and she as advertised would not bulge.  Big John tried several ideas and incentives and she still said no.  Let me say up front here I have had a personal prayer with Big John and there is no doubt in my mind or anyone's mind who has done so Big John has a direct link to God when praying. He could plant one on that would make you want to go home and stay good for several weeks.  So one afternoon tired of trying to get the one lady to sell he figured it was time to go pray with the Methodist.  Now Baptist preachers then were not supposed to do prayer with Methodist, who in our opinion were not truly saved, but Big John knew he had licence with God and went to visit.  How I wish I could had been a proverbial fly on the wall at this prayer session, because I am absolutely sure the floor likely shook at this old lady's house during this one. See Big John being a big man could plant his foot in such a way that he could literally shake the floor during prayer. Anyway after leaving the house the very next day the lady called Big John and told him to draw up the deed to sell.  Big John had done the big deed and got him some church land. 

Next up was building a new church.  But something happened at this point I will never understand.  Big John decided to depart us in 1969 and take his preaching to another church in Dunn NC.  Maybe I being too young did not fully comprehend the deal but leave he did and left the final church building to another pastor.  I prefer to believe that like Moses leading the Israelites to the Promised Land and God not letting him actually go in is what happened with Big John.  He got the church the road, the land, and some fine singing, but God had other plans from that point on.  What I do know is that God's hand was in all this because God sent Big John to the church to get the road and land jobs done where no other preacher could have done the task.  

             

Trading Portfolio December 2013

We look for value priced large cap stocks that offer little risk of further downside and upside potential.  However once they move up nicely we will not chase value that is no longer there due to the increased risk profile. The selections here offer good value and at or near the strike price is a good entry point.  Almost all have better than average dividends too. 

AFL....Low PE insurance company.  Lots of cash flow.  Our strike price of $60 is perfect for buying the duck. 

ARCP...A triple net lease REIT.  New rapidly growing company that we believe is value priced at our strike price of $12.50. 

BP...We will be careful with positions in this security.  There is large upside potential due to the low PE, but there is also significant downside risk if some new legal issues come forward. 

CSCO...Makes lot of routers for the web. Stock price has been hit by some weak earnings of late. Strike price of $19.

HFC..Refiner with high margins from Dakota oil.  Strike price of $35.

IBM...This large cap tech company has taken a beating in stock price over the last year as the growth rate has come down significantly.   Add in Warren Buffet has bought shares.  Strike price $170. 

JCP ..We are slowing exiting this stock with a much smaller loss than we had expected.  Perfect example of how hedging and options can dig one out of a deep hole. 

JPM..Best run bank in country with bad PR holding price in value territory. Strike price at $50. 

KO..Large consumer stock which has sold off.  Strike price of $38.

NNN..Large triple net lease REIT.  Solid solid solid.  Strike price of $30.

O..We consider this a blue chip triple net REIT.  Strike price of $35. 

PM..Tobacco stock that has sold off due to currency concerns.  Cash flow king strike price at $82.50. 

POT..Fertilizer stock that has sold off too much. Strike price of $29.

SHLD..We like the risk reward here.  Strike price of $37

SO...Blue chip utility that has sold off. Strike price of $39. 

T... Blue chip big cap Telecom,.  Strike price of $33.

VZ...Blue chip big cap Telecom.  Strike price of $45. 

               

Rice and Tomatoes.

Rice and tomatoes has been on my table for as long as I can remember.  That is rice with tomatoes stewed in with some seasoning for the main course, sometimes the only course.  Add in some sweet tea and you have what I call the Dixon Family Meal, as in the long time Dixon Family Meal that predates my dining on this simple dish.  I got to thinking about this dish after watching A Chef's Life on TV this season and how the chef there had rice and chicken as their family time honored meal. 

I expect if rice and tomatoes was not the first meal I had when I came off of baby food it certainly was pretty close.   Our family has been serving this meal likely since our earliest moved to North Carolina in the 1700's.  Simply put rice was grown in the coastal area here was to be found in abundance, which made it cheap.  Tomatoes of course are a staple of southern gardens since almost forever and a farming family could grow all they wanted or needed.  So combining this pair was a natural food that could fill hungry children with good nutrients without costing a fortune.  My grandparents decided to have 10 children, so of course this meal was a staple on the meal table. 

The natural progression is that the 10 children took the meal as a comfort food when they left home and started having families.  My part of the extended Dixon family certainly did and there was a point where we dined on the food almost every Saturday night.  My mother put up tomatoes in the summer in jars and we had fresh tomatoes to combine with rice all year long.   Frankly there was a time when I tired of the food, but shortly after leaving home it was not long before I welcomed rice and tomatoes stewed up by my mother when I would return home.   

Now I am sure rice and tomatoes has it's many cooked variations over the 10 children, but I have my favorite.  Some good rice, some homegrown tomatoes if possible, some bacon seasoning, salt and a good helping of pepper.  Add in a pinch of sugar as well as most southern cooks do to most all vegetable meals.  Honesty here, no matter how many times my father tried or I tried our rice and tomatoes would not and did not ever taste like my mother's. I expect most of you have that issue with the dish your mother made best. 

So I give praise to the simple comfort food or rice and tomatoes and suggest if you have not tried this meal then give it a try on a cold winter night soon. 

Follow Warren Buffet in this stock?

Over the almost three years we have been posting on this blog we have constantly suggested Canadian oil stocks as good safe picks.  Honestly we have made some picks that were not good up to now.  ERF which was our favorite for many years when we exited earlier this spring, due to uncertainty about it's dividend and management that had not been truthful is down.  CVE, which we considered a long term pick, has not done well since we picked it.  We also suggested one take a look at COSWF and it too has been down over the last two years.  So accepting now what we post on these Canadian oil stocks might not be wise.  

However maybe you will consider what Warren Buffet is doing in Canada.  For several quarters now Mr. Buffet has been buying and buying some more Suncor Energy.  If you take a look at the stock trend line for SU you will find that it too has not done well over the last year.  In fact two years out this stock is flat.   So with a 2% dividend I suppose one can say they are up a little, unlike CVE, ERF, and COSWF, which are down even with the higher dividend payout in these two stocks.  It appears from what can be surmised from the release of stock buys from Berkshire Hathaway BRK.B, Mr. Buffet's stock, that he added even more shares of SU over the past quarter.  So what is one to make of these buys by the Oracle of Omaha. 

Frankly I do not know and neither does anyone else from what I can search and read.  SU is a major player in the oil sands of Canada as is COSWF, which is the major holder of the oil sands real estate. Imperial Oil, IMO, is the other major player here and it's stock is slightly down over two years.   The majority holder of IMO is Exxon Mobile so there is some major money in this space.  COSWF has been rumored for some time to be a buy out candidate, but as yet no one has pulled the trigger.  Exxon has been the most rumored buyer of COSWF so as to cement their place in the oil sands project.  There has been some noise about Mr. Buffet buying out COSWF.  

Now here are the pertinent facts we know.  One BRK.B has significant profits in the railroads hauling oil out this area for some time now via the company's rail holdings in Burlington Northern.  In fact the cash flow from transporting oil has been huge the last year.  So owning more of these oil sands makes some sense due to the increasing use of Canadian oil assets in the US and the Gulf oil refineries.  Note that BRK.B has big holdings in Phillips 66, PSX, which owns refineries on this Gulf end.  Warren has big money in oil and notably Canadian oil already.  Let's also consider that Exxon has interest here in not allowing a big player take over oil assets in the oil sands that might damage their investments there.  So lots of angles here and we have no clue which one to follow. 

There is another wildcard here too and that is the Keystone XL Pipeline.  This pipeline that would transport oil from the oil sands to Gulf refineries and would increase the use of Canadian oil.  It could also hurt the profits on BRK.B's railroad assets.   Of course this pipeline is being held up by Obama due to assumed environmental concerns or more precisely appeasing his environmental supporters.  Unions are hopping mad due to the holdup since the pipeline would produce lots of high paying jobs with juicy union dues. Lots of players and lots of angles.  Could be Mr. Buffet knows Obama is going to approve the pipeline at some point and there will be enough oil flowing south that both the pipeline and the railroads will have lots of business.  Trust us here there is enough oil in Canada to supply oil to the US for hundreds of years. 

There is also plenty of oil here in the US to make us all but energy independent in a decade and if that occurs Mr. Buffet loses some of his investment in SU and his railroads lose business.  So is maybe Warren is pushing Obama to approve the pipeline to make his Canadian investments good.  So you see there is no way to be sure with any stocks in this sector. 

Finally is the fact oil use is going to decline in the US due to the huge supply of cheap natural gas coming on the market via fracking.  How much decline is to be seen, but it is going to decline and along with less dependence on the middle east too. 

With all that said here are some ideas.  COSWF has a 7% dividend and could pay you while you wait.  CVE has a 3% dividend and it's own refinery.  ERF seems to have regained it's footing and has a 6% dividend as well and would benefit from the pipeline. SU has the upside of being in the Buffet portfolio.  IMO has the huge backing of Exxon.  Take your pick as it seems sooner or later Warren Buffet is rarely wrong. 

               

Some position changes in portfolio.

With the November trading period starting next week we are making some changes in our portfolio.  

NOV...this stock has run up over $20 per share and we are no longer comfortable with any possible downside.  Still a good company with excellent prospects.  We will be dropping it as of this Friday's options expiration. 

IBM...We have been warming up to IBM for some time since it keeps selling off and reporting weak quarters.  IBM still has significant advantages in it's business and we believe they will get their operations back growing shortly. A single digit PE and a $170 strike price are a good entry point. 

KO..Has had some bad quarters of late, but has enormous leverage and reach in it's stable of businesses.  The stock seems to have settled in here around $39, so we will make our strike price $37.50. 

CSCO.. Sooner or later the upgrade cycle will commence and Cisco makes components required for almost any upgrade in technology.  A stable price that is not overvalued at around 11 PE and little downside risk.  Our strike price will be $21. 

JCP...Housekeeping note.  We will likely be called out of half of our position in this stock this Friday with a sizable loss. However we have been able to mitigate about half our expected loss with the use of options. 

Adding ARCP to our portfolio.

We will be adding to our portfolio this week with a REIT named American Realty Capital Properties.  This now little REIT will be getting bigger, a lot bigger, soon with the buyout of Cole Properties which it has been pursuing for some time.  ARCP will then become the biggest player in the triple net leasing space. 

Triple net leasing, which basically means the renter is responsible for all expenses at a property, is the fastest growing part of the real estate investment market.  Several more companies fall into this category, including NNN and O which we currently trade.  We like this line of business because much of the rental space is in small retail such as gas stations, and small strip centers.  These are the most popular of shopping venues now and tend to have the longest rentals.  In fact the average leases of ARCP will be over 11 years when the merger is complete.  Over 90% of that with grade A leases. 

Add in that the merger will actually be positive to the debt load of ARCP currently and be accretive to earnings.  The payout rate after the merger at current pricing will be about 7.5% and it is a monthly dividend.  

ARCP has been growing lately adding deals that improve it's cash flow and size making the firm a stronger player in this market.  I would expect some more consolidation in this space as the only way to compete here is to get bigger. But right now ARCP will soon be top dog even without a long history like NNN and O.  But I would expect it to 5 years down the line to be considered a blue chip like the other two  

So now it would seem to be a good bet for long term appreciation, a nice dividend, and some safety due to the leases it currently owns.  We will be trading this stock at $12.50, but frankly wonder if we will see it again at this price. Any pullback below $13 would make for a good buy.  

Note that REIT's dividends are not taxed at the lower federal rate since REIT do not pay taxes at the federal level. However at 7% plus even taxed it looks good and if you are in the lower two brackets you have zero tax liability.

           

Trading Portfolio October 21, 2013

Our current trading portfolio.  Not necessarily for long term holding as we trade options.  However our strike prices would make good entry points. 

AFL...still has a single digit PE and presents a good value.  We trade for a $52.50, but expect we will need to move this strike price up a bit.  The duck continues to sell insurance. 

BCE...Canadian telecommunications company that has improved prospects since Verizon will no longer be entering the Canadian market.  We trade at $40. 

BP.. We continue to believe the single digit PE makes this stock priced right here at $40. The lawsuits will continue to ease as we move forward. 

HFC...Again a single digit PE presents value and we trade this stock at $35 which gives us plenty of room in case Obama does something to blow up the oil market.  Oil refinery company. 

JCP....A big mistake and we own it at $10.  We will try to trade our way of this stock and erase some of the loss and then exit the security for good. 

JNK...New to our portfolio, but one we have followed for a long time.  We like it at $40 and with the economy slowing and the threat of rate increases pushed off for awhile this stock should be a good trade.  JNK is a junk bond ETF that pays a monthly 6% plus dividend. 

JPM...Big money center bank we trade at $45.  All the bad PR will lift eventually and this stock will take off from the current single digit PE. 

LO...Our strike price has been $37.50 but this stock has moved up a good bit and now might be out of our trade zone.  We believe it might be overvalued now. 

NNN...Safe safe and safe at $30. Great blue chip REIT. 

NOV...This stock also might have moved up past our trade price of $62.50 and might be dropped.  Supplies oil drilling equipment to oil companies. 

O...We continue to like this blue chip REIT and trade it at $35. Monthly dividend and a shareholder friendly company. 

SHLD...We like the options on this stock but trade it with lots of room just in case we are wrong.  $37 strike price.  We believe this is a real estate play and not a retail play. 

SO...We have added this stock back to our portfolio since it has sold off so much.  Strike price $40. Good utility company that has been under the gun of the EPA and we believe it is oversold. 

T...Safe telecommunications stock we trade at $33. Blue chip stock if there ever was one. 

VZ...This telecommunications stock might have moved up too far to continue to be traded at $45.   We find the recent buyout of Vodafone to be a positive.

             

How to hire good salespeople.

Over the years I must have hired or managed a couple hundred people or more.  That is what happens when you where employed by 7 publications over a long three decade plus career.  Much of that time was spent in management of advertising sales people and as happens with sales staff there is a lot of movement in and out of the office.  Much of that I am proud to say was staff moving up and onward to better opportunities.  Of course I did some firing too, but that was likely less than a dozen overall. 

The need for good staff that could talk to small business people and converse with large corporate advertisers kept me on my toes when replacing people leaving employment.  Through the years that I interviewed prospects I refined my approach and frankly believe I got better at the task.  The need to get better became more critical in the late 1980's when the people showing up for jobs frankly got less qualified and more in need of skill training due to the declining quality of public schools.  I am not saying anything here that anyone who hired people before and after that time will tell you if they are honest. 

So as I got better and refined my hiring skills there came a point where my interviewing skills got to the point I could pick good staff almost every time I hired for a position. In fact I got so good I bragged about it, and as they say it ain't bragging if you can back it up with results.  Since I was very successful over the years in sales and retired early due to those good hires I say it is a fact. Good sales managers hire good staff, give them the tools to sell, and gets the hell out of the way. Only thing left is for the manager to clear out red tape making sales easier and to resolve disputes among staff and if are not resolving disputes over who's sale it is or who's terrritory it is then you have one lousy staff.  

Being able to pick the good ones from the not so good ones has two strong advantages.  One, you are spared the expense and trouble of firing them and the loss of sales revenue that comes with that issue. Two, and maybe just as important, you spare yourself and the person being hired the future issues of not being placed in a position that fits their long term future and harms your status as manager. 

My interviews at the end took less than 20 minutes max and afterward I could weed out the good ones quickly.  If you hire people now I expect you are asking how did I do it and just what was the plan.  Well after some serious considerations of not giving away the secrets and hard won approach without just compensation I have decided to go public for free.  It also has not hurt that in the last year or so I have been doing some consultation work with a couple of newspapers and realize it could not hurt to spread the experience and skill sets. 

First off when hiring anyone in sales the key is not to look for skills or experience.   You need to look not for aptitude, but for attitude.  Yes, I know they need to have some smarts, but if given a choice I would rather have someone who has the right mindset and not the right mind. Honestly I have hired some people who some people thought were dumb as they come, but day after day they brought in sale after sale and I certainly did not mind that and praised them to the hilt for their results.  If I can find the person with a good attitude then I can teach them the finer points of sales. After all if someone can sell the product they can be taught how to haul it in so to speak.  Any manager will tell you if the salesperson is getting the big sales, cleaning up after them so to speak is not an issue. 

Three things you are looking for in the person.  One, first and foremost, is ego drive.  Without a stout ego they will quickly become dejected and emotionally down after some nos, which they will most certainly get their share of,  and that will be noticed by the person they are trying to sell to and kill the sale before it starts.  That ego drive amounts to the absolute driven internal go  that says I can do it and I can do it better than anyone else so get out of the way and let me do it.

Second thing you look for is empathy.  The sales person with empathy will follow up a sale with someone with the desire to make sure that the sale produced results for the person. They will work hard to make sure the sales money is well spent and there is value for the customer.  They are not afraid to follow up since they honestly believe there product is worth the price.  The sold to person will sense that empathy and form a bond with the salesperson that should result in continued sales for the salesperson. 

Lastly and not least is the ability to get along with the rest of your staff.  I said rest of your staff and not other people.   Being able to get along with the rest of your staff means they will not hinder or impede the sales of other staffers and be able to work as a team when needed. 

Of course the question here is how on earth do I find people with those qualities, but maybe more specifically how do I weed out the ones with those qualities from the ones without those qualities.  Well I have refined the interview questions down to only six that will net you those results and as I said the interview can be done in 20 minutes or less. 

Question Number One...What motivates you.....You are looking for answers such as "money" or "recognition", not " it feels good', or " makes me happy".  You are searching for ego drive here so the more brass balls you find in the answer the better. None of that touchy feel answer stuff. 

Number Two...Why do you want this position...Again you are looking for "money", or " this is a position that makes me proud", not " I like to work with other people", or ' your company is known to treat people nice'.  Again some ego drive they want the job because they want to do something for themselves and make some sales for you.  Note these first two questions should give at least similar answers if not the applicant is trying to fudge some here.  Trying to make you happy with their answers. 

Number Three...Describe your best boss and your worst boss ...You are looking for answers such as "treats his staff fairly", or " pushes us to do better", or even "knows how to teach and how to not scold in public".   For worst boss you are looking similar answers but the opposite side of the best boss.   From time to time you will get answers such as they were sexual predators or stole from the company so use some followup questions to steer them to what you are looking for in traits not what the boss did that was out of line.  The deal here is a good boss for them has BOTH ego and empathy and the interviewee sensed that even though they do not know what they were sensing. 

Number Four...Tell me about your proudest achievement ...Answers here need to be some sales record or big sale or I just kicked someone else's butt in sales as again you are looking for ego drive the most important attitude for the job. Now young people will sometimes come across as cocky when they have nothing to be cocky about and that is ok because as we said we are looking for ego.  A good sales manger can train and redirect that ego drive to some good sales. 

Number Five...Tell me your best personal traits and your worst personal traits. I love these questions and they are maybe the best of the interview in finding out what you are looking for in a employee. Note this is question number five and is placed here for a reason.  The interviewee is likely some frustrated and mentally tired here since the interview is not going as they were expecting or planned for and usually by now have given up the fight to answer questions as they think you want to hear and thus you get some good results.  Best traits of course are ego drive and empathy type answers as noted above and you can weed them out as they talk.  As for worst traits, if they can not answer this one and frankly many can not and more importantly are afraid to do so I generally would not hire them.   If they do answer that means they can brutally honest with you about themselves and likely can work well with others since they can sense how they come across to others.   There is the concern here that you will hear something like " I drink too much", etc. that will give you pause and likely drop them quickly from your list and consider that a gift from not having to fire them later. 

Number Six...Sell yourself to me in three minutes or less...This one is a good one since if they can sell themselves to me in the three minutes I give them,  then they can likely sell my product once trained in the product we are selling.  Also give them three minutes and trust me here almost no one can last that long in a sales pitch and that is just fine.  If they last the three minutes you might consider this person too talkative to be someone who will get along with your sales prospects.  Again no empathy as in thinking to themselves how am I coming across to the person I am trying to sell the product. 

Now trust me on this one no one who you interview will be prepared to answer questions like these.  They are ready to tell you about their prior jobs, prior experience, skill sets they have, etc. and being unprepared you get some honest answers.  There are obvious trip ups here where if they are trying to think on the go and fudge some answers it will not work. 

Tally up the answers on your interview sheet and you will find those with the traits I suggested are needed for good salespeople.  In fact maybe any new employee if you like.  Now if you try this and succeed as I know you will since this advice was free email me as a thank you and ask me about my favorite charity as payment.  See not completely free if you have empathy for the person passing on this info. You do have empathy don't you? 

Bulletproof no more.

Those of you who drink or have drunk alcohol a bit too much sometimes you understand the idea behind this posting.  No we do not drink to excess, if fact we indulge in almost no alcohol.  But the reference here is when many people drink too much they get the idea that they have become bulletproof.  The thinking that they can say anything or do anything and nothing bad can happen to them.  In drinking and in trading that is not good thinking and can lead to some very bad outcomes.  

So for about 5 months our trading has been well bulletproof, no mistakes, no losses, no bad decisions, and lots of profits.  Sure enough about a month ago we bought some JC Penney puts at $10 and figured it was a quick buck in a stock that had been hit hard. Our personal opinion was and still is that JCP will survive.  We rode what was a half position for us for about one month and decided our bulletproof status meant we could dive in for another half position for a full $100k buy in JCP.  

Sure enough we have discovered once again we are not bulletproof.   In the last week or so lots of bad PR has pushed JCP below $10 and now below $8.   Ouch we are sitting a fat loss and because of the way options work are stuck in the position since the cost of getting out is likely to be more than just having the buy the stock as an assignment later this month.  The second half of the position expires in November so we got to wait until then to unwind this bad trade.  Lots of time to let this stupidity sink in we suppose. 

There is frankly no telling what the final verdict will be and if the worst happens could lose the whole position.  But since both these options expire before the end of the year and the lucrative holiday shopping season for JCP is upon us we will assume for the moment we will get out with our pants on, but full of holes. 

Here is the lesson and after three decades of trading we have once again been taught the lesson with a loss.  This market is not a good market for trading and the best approach is to trade with super solid securities such as VZ, T, NNN, O, and other such stocks that have great balance sheets and investors run to when full of fear. Not much downside if we make a bad trade and easy to get out of if we do.  Yes, the profits are not as great, but solid profits are good profits and big losses such as JCP here take time to be made back. 

There will be times again to do run and gun trading, but not now and certainly not with stocks such as JCP. 

                

Big Education in Johnston County

My mama, and I bet your mama, taught you that when someone gives you a gift that you say "thank you".  Certainly not to go out and talk about the person behind their back with something like "yeah the gift was nice, but they should have given us more"  That is precisely what is going on with the "Stand up for Students Johnston County" rally at the Johnston County Court House this week.  Why do I call it a rally, or more honestly a political rally?  Well here is the visitor list, former Democratic Rep. Bob Etheridge, current Democratic Superintendent of Schools June Atkinson and several other Big Education big wigs, all liberal democratic leaning.  One of the people there is strongly anti-charter school as well. Not a Republican in the bunch and certainly not some of the local legislators or commissioners who have helped with funding the local school system. Seriously Mr. Etheridge seems to think the state can not live without his continued "wisdom" and does not realize his time on stage is up. Statesmen bridge the gap between two sides in a quiet dignified manner and has the trust of both sides. Elder statesman Mr. Etheridge is not. 

The sad thing is that two Johnston County officials have decided to attend.  Johnston County Superintendent Ed Croom and Johnston Community College President David Johnston.  Now I like both of these men, but so help me can they not see this is a political rally best left to politicians?  Both I bet are smarter than me and certainly more accomplished and that means if I can see this they should be able to do so too. 

Let's set the stage here.  The Johnston County Commissioners just added a nice teacher supplement to the local teachers pay that local taxpayers will be pay from now until forever each year.   We are headed into a bond issue that includes $57 million to build public schools and buy some technology in this county and $7 million to build some infrastructure at Johnston Community College.  Guys I go to tone deafness here.  Are you so eat up with your ivory tower jobs you do not see how this comes across to the taxpayers of Johnston County?  How about thanks for the pay raise, but kiss my butt because it was not enough.  Add in the taxpayers you are flipping off will be voters for the bond issue shortly and you can not get more lousy timing. 

Maybe Mr Croom forgot but the Johnston County Public Schools just got a black eye from being tone deaf for not inviting the Neuse Charter Schools seniors to their college fair.  I mean he and the SSS principal passed off responsibility to each other and then to the fair administrator when they realized it did not look good.   Surely that lesson woke up some of the highly paid minds in the administration building down on US 70 East, but apparently not.  

Personally as a voter and taxpayer I just might decide to vote against the bond and work to get others to do so as well if these gentlemen do not come to grips with the situation here and stay home.  With the expected small turnout of voters it would not take many to vote NO to put an end to this bond issue either.  Might be time for some real elder Johnston County statesman or stateswoman to come forward and counsel our two school leaders here.  Any adults out there?  Either that are our two education leaders in Johnston County might want to come down with 24 hour viruses or maybe need to schedule a haircut about the time the event is going on.

               

Two situations where regular people have got screwed in the market.

The last two days present two reasons why regular people do not trust the stock market and traders such as myself just want to throw up your hands and get out completely.   What makes this more aggravating is that what I am about to point out does not involve the one thing that irritates me most of all and that is insider trading where people in the early know trade on the news.  That is totally illegal but goes on all the time. 

Yesterday Goldman Sachs issued a report on JC Penney saying there are two scenarios where the company goes bankrupt.  Today Goldman Sachs follows up with a downgrade of the stock to $7 per share.  Now this is all well and good if Goldman actually thinks these two reports to be true. 

 However the one thing Goldman did not mention is that they have a vested interest now in JC Penney failing and falling hard.  Goldman has loaned JCP a couple of billion dollars of much needed cash to keep the concern going through the critical fourth quarter period.  Yes one would say why would a bank that loaned serious money to a business want it to turn around and fail?  Well Goldman has secured that loan with JC Penney real estate.  Real estate in nice retail locations.  Retail locations that right now is most valuable due to the tightness of that market. 

 If JC Penney fails and falls hard that real estate will be taken over by Goldman at lower prices which Goldman can then resell for tidy profits.  So Goldman's downgrades are self serving.   The worst part here is all this is legal, but it is not ethical.  If someone has money in JCP then you are taking some losses in the holding.  Add in that big chunks of JC Penney retirement and pension assets are in JCP stock as well.  Why does Goldman get away with this without SEC oversight and why does Goldman not get some news coverage for what they might be doing to JC Penney employee retirement assets? Goldman is Democrat heavy in it's leanings and political contributions. 

Second situation involves JP Morgan.  JP Morgan is a fine bank.  In fact JPM as said by Warren Buffet is run by the best banker in the country Jamie Dimon.  Jamie Dimon steered JPM through the financial crisis and post crisis without any real need for bailout funds and continuing profits.  He took care of shareholders and bank deposit holders as well.  Mr. Dimon has an well formed ego, but we expect that is certainly well deserved due to his fine management.  

During the 2008 election cycle Democrat Jamie Dimon supported and gave money to the Obama campaign.  He supported Obama during most of his first term.  However Mr. Dimon before the 2012 election had the audacity to say some negative things about Obama's policies and how they were effecting his shareholders and customers.  Obama who does not like that kind of talk has turned the US Justice Dept. dogs on Mr. Dimon and his bank with lawsuit after lawsuit which in turn has lowered the bank's stock price and cost the bank billions in legal fees.  Shareholders are taking a hit and frankly it has reached the point fair trading in the stock is hard to find.  Everyday there seems to be some new lawsuit and people trading in the stock on the news.  There is nothing illegal about all this of course, but it certainly is not ethical on the government's part in picking winners and losers when the losers are regular people, employees, shareholders, and customers of JPM.

Update on Some Prior Stock Picks.

Some other stocks that we follow and trade with some updated comments on each. We currently have positions in all of them expect SO. 

BP...We have had this stock in our trading portfolio almost all of 2013.  We believe most of the downward bias in this company is now priced in the stock.  With a PE of around 5 it is hard to see it drop lower.  The press has moved on to other issues and BP has been using the lack of press coverage to fight back against some dubious claims on the trust fund.  BP has also used the time to realign their asset base and redefine their business to higher growth prospects.  There is also the continuing rumors of a takeover by Exxon or another big oil company supporting the shares.  We like here around $40. 

CTL... Centurylink has frankly got us concerned.  The company remains a viable long term business and has slowly moved their assets to higher growth areas and away from legacy line wire business. However the change over has slowed and the missteps by management this year have been a concern. The stock has responded by moving downward all year.  We still believe the dividend is safe at this lower rate and the company will soon switch over to reporting profits as their carry forward losses dwindle.  We would be careful here in buying shares and if own them might lighten up a bit.  We continue to consider dropping it from our trading portfolio is weakness persists.  We like it close to $30

LO...Lorillard continues to prosper selling cigarettes and is in the forefront of the new e-cig business.  The dividend is safe, but the company is not safe from Obama.  Once the 2014 elections are over there is the risk Obama will lower the hammer down and try to ban menthol cigarettes.  No longer needing the black votes who generally smoke the most menthols he can let lose the regulations. So there is danger here, but the risk is mitigated by the high payout.  We prefer it closer to $40. 

JCP...Will Penneys survive?  Who knows?  It has a cash reserve courtesy of Goldman Sachs, but the cash is secured with some of the valuable real estate.  We see little of no growth for Penneys going forward, but we personally see the company surviving. The product mix and the positioning of lower middle class makes for a sweet spot of retail.  They have decent shopping experience stores and lots of merchandise.  Add in we are going into the best season for the company to make up some lost ground.  We have a significant position and might add more.  Our position is at $10, but one could buy it around $12 and be well positioned. 

SHLD...If you want a wild ride try Sears Holdings. Under $30 one month to over $60 the next month. This stock is for the brave and nimble trader.  We like it under $40, but with enough room will trade it higher.  The real estate is unencumbered by debt and the management , be it not smart retailing wise, is smart money wise.  Sooner of later Eddie Lampert will make a move and I want to be here when he does do so. 

HFC... We continue to like the refiners here as long as Obama does not allow a pipeline from Canada.  Higher prices for refined gas from lower priced crude makes refiners a sweet spot here and none other than Warren Buffett see it too.  We like HFC due to being the lowest PE of the group and sitting on top of the West Texas oil boom.  Nice dividend and solid capital gain prospects. But close to $40. 

AFL...We continue to like the duck.  Good safe dividend.  But what we really like is the low PE where we believe the stock to be under priced.  Any buy below $60 should get one in good for some long term capital gains. 

SO...This former super safe stock remains on our watch list and frankly here at $40 or so the bad news might be baked in, but with Obama's EPA you never know.  If it dips below $40 we might dive in since the price will become most compelling for a regulated utility and one in a good regulatory area when it comes to state government issues.  After all these EPA mandates are eventually paid by ratepayers and not the company. 

            

In Search of Safe Dividends

Yield is something retirees, savers, and anyone looking to get their money to work for them seeks.  Current US Treasuries pay about 2.75% and they are fully taxable by the Federal Government, so your final yield could be as low as 1.5% or so.  Not much and certainly will not keep up with inflation. So where does one go for yield, or more specifically safe yield.  Quality dividend paying stock are our choice.  Some over or close to 5% yields, well covered by cash flow, and a favorable preferred federal tax rate. 

In the past most would reach for the nearest electric power utility, which is almost guaranteed to stay in business, hold the current dividend, and raise it a bit each year or so.   Frankly electric utilities now are no longer safe.  In fact one that I found to be very safe Southern Company, symbol SO, now concerns me a good bit. Southern has been forced into the carbon capture business by the EPA due to their dependence on coal fired generating plants and the cost overruns, the large increases in rates to consumers, and the ever increasing regulatory hand of the federal government have made this stock's dividend suspect.  One can now say that about almost any utility, Duke Power being a local one that now is getting eaten up with costs from their own clean energy projects. 

So again this leaves one asking where are good alternatives now. Below we will list several we believe to be quality companies with safe and sometimes increasing dividends for the next five years or so.  Understand with the current administration in Washington DC there are no completely safe alternatives as any day Obama could wake up and decide today is the day to regulate this industry into submission. 

BCE...A 5% plus dividend in Canada where this telecom is safe from the over regulation in the US. The recent huge buy out of Verizon Wireless by Verizon will keep that company from moving any assets in to Canada and that pushed up these shares about 5% recently. The closer to $40 per share you can buy it the better. 

JPM...Despite the recent fees and fine this company has had to pay it is still the premier banking franchise in the US and has plenty of profits and cash flow going forward to do well and pay dividends.  Once the Obama administration is gone you can expect this stock to soar and payouts to increase significantly.  Just at 3% yield.  Try to buy it around $50 or just above. 

O...Realty Income might be the safest dividend in the country now.  Yield is above 5% and is regularly increased and is paid monthly.  Realty Income has long term triple net lease rents that are secured by long term retail businesses.  Add in that the recent low borrowing rates have been a bonanza for this company that has restructured a good bit of their long term debt at cheap rates. Buy under $40

T...AT&T will be one of the two remaining wireless telecom assets in the US soon.  They have significant cash flow, low borrowing costs, and a dividend well covered by profits.  At 5% plus this is a sleep well at night payout.  I like the stock at around $33 per share. 

VZ...Verizon having finally made the deal to consolidate their wireless assets in the US should prosper going forward.  The best network added to low borrowing rates and huge cash flow protects your dividend.  VZ now around 4.5% yield is another sleep well at night payout.  Buy at around $45. 

We have positions in all these stocks.