Triangle Capital and New Media Investments

We highly suggested a handful stocks for purchase in 2015.  Two of which were Triangle Capital and New Media Investments.  Both of these companies are proving us right as we get first reports of income and dividends for the first quarter.  Let's take a quick look at what we know now and what one might expect for the next few months from these two stocks. 

Triangle Capital is a well run, maybe one of the best run, companies we know.  Late in 2014 the stock sold off down into the upper teens price due to what we consider a small credit concern in the last earnings report.  There was also concern about rising interest rates would eat into their income going into 2015.  Both of these concerns have proved pointless as the credit issue has not popped back up and we now know interest rates are staying put for the foreseeable future. We are on record of saying interest rates are going nowhere through 2016.  Triangle Capital has yet to report earnings for the last quarter and is scheduled to do so in early March, but they have stated the first quarter dividend and added a nice 5 cents to the regular payout.  In all we believe TCAP is a buy right here before the earnings report and the 10% dividend looks safe.  We expect the shares to top $25 before year end and maybe ease up close to $30.  In all a nice annual profit. 

New Media Investments we believe has one of the smartest game plans anywhere.  They are using equity raised from shareholders, not debt from banks as newspaper chains have done in the past, to fold up newspapers into an ever increasing group.  The key here however is NEWM is buying in the sweet spot of the newspaper business, small to medium sized weeklies and dailies.  We have been pushing purchase of this stock for sometime now and we have been proved right. The stock is now up over 10% from our suggested purchase price just two months ago and the that does not include the dividend.  The company just reported earnings this morning and they were excellent showing gains and nice expense control.  They also raised their already nifty dividend to 30 cents per quarter getting them back to over 5%.  The dividend is supported by a solid cash flow.  NEWM is buying newspapers for 3 to 5 times cash flow which would be unheard of in the past regarding newspapers. These newspapers are making 8 to 12 times cash flow so one can see they are immediately adding to NEWM's cash flow.  Such is the dynamics of the newspaper business today.  We spent over 3 decades in the newspaper business and have been pounding the table that small dailies have a monopoly status in the markets they operate and none other than Warren Buffet supports our thoughts as he is buying up these newspapers as well.  Go out and buy NEWM today and you will get a nice dividend and should see above $30 share price by year end.  Might even push $35. 

We have a position in NEWM. 

Your best investment right now.

We have been here before about three years ago and once again this once in a lifetime opportunity comes forward.  We really think this is your last chance to get in on this incredible deal in the next maybe 80 years.  So consider doing so before it passes you by this time.  We expect this is worth at least $100000 to your pocket too and almost anyone can get in on this opportunity. 

What we are suggesting is buying a home to live in and taking out a 30 year loan.  The 30 year loan can still be had under 4% if you move on it now.  We personally have a big fat 30 year home loan under 4% and will not pay the loan off until the very last day of the very last payment being due. Borrowing under 4% for 30 years is like free money in that one can bet interest rates will rise back to a normal 6% or so at some point and maybe higher if inflation takes off.  So using someone else's money, like your bank's money, for that long is simply the best bet for an investment right now. 

Add in that in many markets it is still a buyers market as many house buying prospects are likely more like suspects in that they can not qualify for a loan.  Good credit and some money to put down and you got a pre-approved loan nowadays and the opportunity to use that leverage to negotiate from a strong position with home sellers who are needing to sell. 

Finally last and certainly not least we are still on record saying the 30 year fixed rate home loan will soon be history.  Federal support of these mortgages ends sometime in 2017 as it stands now and past that point mortgage lenders will not want to take on the risk of a 30 year loans, especially under the Dodd Frank financial laws passed in 2008. 

So go find a new home, not a house to invest in, but a home to live in.  Take out a 30 year cheap interest loan and know you have done the best thing you could do with your money right now. One can also expect that you will get some additional home price appreciation if you pick a good quality home, keep it up, and buy in a good neighborhood.  All in all a win win. 

Fox in the hen house!

This must be another gilded age and frankly we are glad to be right where we are at this moment.  We continue to trade and invest and see nothing but gains.   We are of the opinion that much of these gains are stock and fund picking that has proved to be right.  Read back over some of our recent posts and you will note a concentration on mega cap stocks and municipal bonds, which have proved to be excellent vehicles for profits in this environment.  Financial engineering via stock buybacks and higher dividends rewards those in the mega cap selections and low rates delivered via political decision making by Obama and The Federal Reserve have helped make the mega caps richer and richer and give municipal bonds holders well preserved profits from lower than low rates.  It is indeed a blessing to be here. 

In this case the fox in the hen house gets the chicken and runs to safety without a shotgun raised nor anyone complaining. The thing is that we have been raiding the hen house for some months going into years now and still no danger for the fox. Our trading portfolio having moved into now the third trading month of the year has tilted ever so much towards undervalued financial's JP Morgan, Citibank, American Express, Goldman Sachs, Met Life, and Prudential exactly those stocks getting rewarded by the Obama administration and soon the Clinton administration.  Ditto for the move into technology, Apple, Microsoft, Intel, Oracle, AT&T, and Verizon, again those getting byes on regulation and taxes polices from the Obama and who in turn contribute to his political leanings.   We finish out our current trading portfolio with New Media Investments a company raking in cheap medium and small sized newspapers where we believe the sweet spot lies.  We would also like to note our stock of the year pick Triangle Capital is up over 10% since we suggested purchase only two months ago.  It is good to trade and profit with the politically connected and rich in this new gilded age. 

Yes as we have said before there are huge numbers of people without employment and it will remain that way since the purpose of current political policy is not to gain jobs but to keep people on the government dole and down on the plantation voting for the current administration and next administration in power.  In the meantime it remains good to be the fox who can make endless runs to the hen house taking candy from babies and participating in the never ending generational theft.

              

Information Technology

We have been trading information tech for some years now.  Our largest trading position is Apple, and we have positions in Microsoft, Oracle, Verizon, AT&T, and consistently consider Cisco a good option opportunity.  We plan on adding Intel shortly. In effect something like 30% of our holdings is in technology.  We consider these stocks ripe for future gains and perfectly positioned to gain market share. More and more of your life is being ruled and is dependent on technology. 

Note all the stocks we listed, excepting VZ and T, and something jumps out.  That something is each has a cash horde and no net debt.  The growing part of our economy has NO net debt and huge growth going forward.  If there has ever been a time in our economy where that was so I do not know when.  Add in that Apple has used it's superior credit rating to issue bonds at generational low rates some with maturities out to 100 years. Microsoft just announced a similar debt offering. The idea is to take advantage of its credit rating and use bond proceeds to buy back stock.  The dividend rate is actually higher than the bond interest rate so the effect is immediately positive to the company. Other tech stocks are doing the same. 

This cash hordes are allowing such companies as Google, Apple, and Microsoft to be early partners in emerging technology as well since they invest in these start ups and early age companies and when they go public make a bundle of capital gains. Simply said if you are picking individual stocks you need to have these in your portfolio.  If you are in the S&P 500 index you already have a heavy weighting in them.  So take a look at your retirement assets and make sure you have some exposure to these growing companies and be comforted in knowing that with them there is no need to try and pick some small tech companies because being in the bigger ones you already have some assets those as well.  Take understanding that these big boys know where the opportunities lie and where the opportunities do not lie so let them do the heavy lifting. You just sit and enjoy the capital gains and safe stable dividends backed by all that cash. 

For those so inclined we suggest using VGT, Vanguard Technology Information ETF .

         

Inflation for growth is a real concern.

The market has been back sliding for about a month now.  Most of this action is directly related to the ongoing fourth quarter earnings reports that show no growth in the fourth quarter of 2014.  Investors are expecting the first quarter to be a no growth quarter as well since forward looking statements by those reporting are pessimistic. There is also the perception that the second quarter 2015 will have similar no growth prospects.  So much for the Obama turn the page recovery he was pushing in his latest State of the Union address. 

Frankly we are not surprised as we have stated all along this was a no growth economy.  Political economy policies of high deficits and high regulation is for the first time in 4 decades producing declining numbers of small businesses, which are the growth engine and job production incubator of our society.  Financial engineering of the Federal Reserve which since Fall of 2015 has come to a stand still in that the Fed is no longer printing money by adding to their trillion dollar plus balance sheet.  However note that the Fed has not stopped reinvesting maturing US Treasury bonds of their 4 trillion dollars of holdings..  In effect the stoppage of Fed printing money increase has resulted in the lack of earnings growth as noted in the current earnings reports. Artificial growth is just that. 

A no growth politically restrained economy with no continuing of the increase of money printing means no GDP increases and no more of the asset inflation we have had now for 6 years. In essence no reason for stock prices to continue their upward trend as well.  Stock prices will likely continue the January 2015 backing and filling for the foreseeable future.  Note that most stocks have not actually gone down much, excepting for those which are highly interest rate sensitive.   The interest rate sensitive stocks such as insurance companies and banks are treading water going backward since most investors believe that interest rates are headed lower and those corporations will feel the strongest pinch in lower earnings. 

Here is something you can count on going forward.  There will NO interest rate increases in 2015 and 2016 by the Federal Reserve.  Chair Janet Yellin, who made the unheard action of meeting with ONLY Democratic US Senators just this week, now knows that the economy is too weak for a increase this year and surely will not do so in 2016 due to the her desire of keeping a Democrat in the White House next term.  You heard that news here first .  So with that info we can rest assured that the economy will stay flat and the mega sized corporations will continue to reinvest their no growth but steady profits into more stock buyback's and higher dividends. 

Note that there is absolutely no wage growth and that is due to the lack of wage pressure since there is still huge pools of unemployed who can be employed cheaper.  Add in the millions of illegals who are about to get green cards and there is no chance for wage growth for years going forward.   The Federal unemployment report is as all know not showing the large numbers of unemployed who have dropped out of the work force and out of those government reports.   So with no wage growth and no job growth we continue a stalled economy with many living off government benefits and seeing no hope for the future.  All this will continue to contribute to the no growth scenario.

Investing in this environment is difficult, but not impossible, if you stay with the politically favored companies.  For instance if you had taken our suggestion last year and bought some Nuveen North Carolina Premium Fund, symbol NNC, you would not only have enjoyed the monthly 5% tax free dividends, but at the end of 2014 enjoyed a nice capital gains distribution and in January 2015 a big 4% move in the traded value of the shares.  Interest rate deflation makes tax free bonds more valuable.  The shares still selling for more than a double digit discount to net asset value likely have more gains ahead.  If you are investing for retirement keep those funds in mega and  large cap stocks.   If you are stock picking try Apple which seems to be immune to a downturn as we suggested in one of our 2015 predictions.  Nothing like owning a stock in a business where there are millions of addicted users who will pay anything for the next upgrade in play toys. 

A real concern going forward is that the Federal Reserve mistakes even the smallest of up ticks in wage growth or prices as growth and thus thinks inflation is at hand.  The result would be the two pronged policy changes.  One, the end of reinvesting of maturing US Treasuries and two, a quarter point up tick in Fed interest rates.  That would in our opinion be the death nail for this no growth economy. The danger is greatest later in 2015 since that would be the last chance for Fed action before the 2016 election year when as we noted no rates will be move upward due to election year concerns.  Any up tick in rates would reward those holding banks and insurance companies, which currently are selling at give away prices of below 8 PE's.  PRU, JPM, and MET are outright bargains for long term holdings right now.  There of course is the opposite fear that the Fed will keep zero interest rates too low so as to keep their gun out of bullets if there is a real downturn due to geo-political events. Add in at some point there is real concern of an all out currency war as too many nations have zero interest rates and resort to devaluations to help their economies. Danger, danger Will Robinson, only fools or those willing to take huge risks invest in any stock outside the top 50 mega caps and there only those favored by Obama and Democrats.  US Treasuries are equally dangerous as when the Fed begins dumping their trillions bonds values will crash.  

We have positions in all securities mentioned, except US Treasuries.