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.