Friday, May 31, 2013

Time to Get Out of Bonds?


That’s a question friends have been asking me of late, and it’s a question I can’t respond to very usefully—because no one I know, including me, can know the future.
I do know there is a good reason to get out of bonds now (fear or rising interest rates accompanied by falling bond prices) and also a good reason to stay in bonds now (fear of a global economic collapse accompanied by the continued safety of bonds).
My fingers-crossed guess is that getting out of bonds now will prove to be the better decision.
What’s the middle ground? Do what day traders do.

My Stock of the Day: IPAR


Inter Parfums, Inc., had a robust spring, caught its breath a couple of weeks ago, and this week may be resuming its upward flight. 
Its long-term chart suggests rewards in acquiring the stock in pullbacks.   
My three-month chart suggests now could be a good time to do so.
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.

Thursday, May 30, 2013

Economic Outlook Is Brightening


Writing for ETF Trends as 2012 was coming to a close, Tom Lydon discussed a new ETF that targets both dividends and growth. No one can know how TDIV will perform in the future, but it came out of the gate like Secretariat.  I much prefer ETFs with average double-digit returns over 10, 5, and 3 years in addition to the year to date. Even so, I’m keeping an eye on TDIV. See my TDIV performance chart at Yahoo!
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.

My ETF of the Day: TDIV



Writing for ETF trends as 2012 was coming to a close, Tom Lydon discussed a new ETF that targets both dividends and growth
No one can know how TDIV will perform in the future, but it came out of the gate like Secretariat.  
I much prefer ETFs with average double-digit returns over 10, 5, and 3 years in addition to the year to date. Even so, I’m keeping an eye on TDIV. 
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.

Economic Outlook Is Brightening


 In last Saturday’s New York Times, Tyler Cowen brought out attention to five bits of good economic news. “The state of the economy is far from ideal,” he said, “but some very definite positives are brewing.”

Wednesday, May 29, 2013

Stocks Selected the Ben Graham Way


Guru Focus analyzes the stocks Warren Buffett, Ben Graham, and Peter Lynch buy, sell, or hold. Its screeners are designed to replicate the selection steps used by such legendary investors  in up, down, and sideways markets.
Charlie Tian, Ph.D., a physicist, offers a free seven-day trial to his site’s subscribers and ongoing services for $299 yearly.

My Stock of the Day: WX


A way to identify stock-market winners was presented by Marc Reinganum and further developed by the American Association of Individual Investors. Its collective stock selections were up double digits in the last 10, 5, and 3 years.
WX (WuXi Pharma Tech (Cayman) is among its selections just now. Check it out at AAII, along with the other stocks now meeting his requirements. Also, see my WX chart at Yahoo!
To access all the information and advice dispensed at AAII.com, you'll need to be a member. That's still just $29 for a full year.
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.

Tuesday, May 28, 2013

Buy Property—or REITs?


There’s a lot to like about a good real estate investment trust. All REITs must return 90% or more of their net income to shareholders to keep their tax privileges. So, they offer potential for both income flow and capital appreciation.
Dennis Miller, writing for Investopedia, does a good job of detailing the bad as well as the good about both REITs and real property.  


My Stock of the Day: USCR


The criteria for Jim O’Shaugnessy’s mighty Tiny Titans stock-selection strategy is detailed at AAII.com. Among others, it includes requirements for cash flow, price to sales, and price momentum in the last 12 months.
USCR (U.S. Concrete, Inc.) is among its selections just now. Check it out at AAII, along with the other stocks now meeting his requirements. Also, see my USCR chart at Yahoo!
To access all the information and advice dispensed at AAII.com, you'll need to be its member. That's still just $29 for a full year.
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.


Monday, May 27, 2013

My Stock of the Day: PFIN


P & F Industries is just now among the eight stocks passing the requirements of Professor Joseph Piotroski’s stock-selection strategy. See my PFIN chart at Yahoo!.

What We Need to Know About Stocks


Here’s the advice from Dr. Bart DiLiddo, creator of VectorVest: We need to know what a stock is really worth; how safe it is,  and when to buy, sell, or hold it.  
VectorVest is among my most-recommended resources for do-it-ourself portfolo managers. It responds to the three needs.
His service is pricey, but DiLiddo offersa  five-week trial for $9.95. Also, he offers a free detailed written analysis of any stock you request.


Saturday, May 25, 2013

Stock Options? No.


In a study comparing investing in stock options vs. investing in stocks, prepared for the New York Times, the option investors made only one-fifth as much money as those who didn’t.
I see stock options investing as a get-rich-quick scheme best avoided by those new to the world of investing and at best a dubious idea for experienced investors in common stocks.
Yes, there is a potential for financial gain for even newcomers to puts and calls, but the potential for loss can be far greater. Writing in the New York Times of May 24, 2013, Nathaniel Popper cites a study involving 68,000 retail investors. Those who traded retail options “lost an average of 4.5 percent each month.”

Friday, May 24, 2013

The Internet and You


In my 29 years of managing OPM (other people’s money) I learned a lot about human nature, including a few motivational attitudes that I believe are harmful. Today I’ll mention just one example:
• I’m scared to death of the stock market. I keep my money in bank savings accounts, certificates of deposit, and annuity contracts.
That attitude suggests to me that you’re blind to the biggest thief of all: inflation. It has averaged 4.1% yearly since World War II, ranging from very high to very low.
Going forward, no one can know what the rate of inflation will be, so for planning purposes 4.1% is a defensible working number. As such, your various forms of savings are unlikely to add real money (purchasing power) until your net gains (after fees and commissions) exceed 4.1% annually.
To get that much just now, you pretty much need to put your life savings into well-selected stocks, no-load mutual funds, and/or ETFs (exchange-traded funds). And perhaps MLPs, preferred stocks, and laddered bonds when interest rates start trending upward.
If that’s what you’d do, vow to become a knowledgeable do-it-yourself  portfolio manager. You can do so free of cost with small bites like the posts in my blog. In time, you’ll begin to feel comfortable expanding your interest into the DIY resources I mention. Also:
Get real. Every bit of your life and mine is driven by guesses about what the future may hold. Every bit. No one can know the future, so we need to make educated guesses. Those can be driven nicely by the Internet and you.

Evaluating Piotroski's Picks



I’ve pointed out that AAII.com, the website of the American Association of Individual Investors, details 77 investment strategies and names the tickers of companies passing the focus points of each.
I’d now like to point out that Professor Joseph Piotroski’s stock-selection strategy tops the other 76—and that his way gave double-digit price gains in the last 10, 5, and 3 calendar years. And by the way: his price gain was +70.2% for 2013 through the market close of April 30.
The following strategies, too, were up double digits in each of the last 10, 5, and 3 calendar years:
Stock Market Winners, Price to Free Cash Flow, Driehaus, Buffett: Hagstrom, Neff, Rule #1 Investing, Estimated Revenue: Top 30 Up, Lakonishok, Dreman With Estimated Revisions, P/E Relative, Templeton, IBD Stable 70, Estimated Revenue: Up 5%, O’Neil’s  CAN SLIM, Graham—Defensive Investor (Non-Utility), and MAGNET Simple.
For comparison, AAII suggested the S&P 500 as a benchmark. It was up 5.7% annually (10 years), 2.9% annually (5 years), and 39.4% (3 years)—and 22.5% for 2013 through the market close of April 30.
And Nasdaq provides charts, data, and a bullish/bearish rating for each stock fed into its evaluation procedure.

Most Disliked Companies: Bad Investments?


AdvisorOne points out that Adelphia, Enron, and WorldCom were among America’s most-disliked companies—and that all three went out of business.
Harris Interactive’s reputation survey for 2013 lists these companies, in alphabetical order, as the 10 most disliked:
AIG, American Airlines, Bank of America, BP, Citigroup, Comcast, Goldman Sachs, Halliburton, J.P. Morgan Chase, and Wells Fargo.
Also, you might want to check the 10 most disliked in 2012.


My 10-Second Market Evaluation


It’s a basic technical chart that requires just a smidgen of interpretation.
The shaded portion represents the trend of the total stock market, as measured by VTI (Vanguard Total Stock Market ETF). And there are three moving averages, each represented by a line of a different color:
•The green line is a moving average for the last 50 days. When the green line is above the red and the red is above the purple, the market’s trend is probably bullish (upward).
• The red line is a moving average for the last 100 days
• The purple line is a moving average for the last 200 days. When the purple line is above the red line and the red is above the green, the market’s trend is probably bearish (trending downward).
Any other alignment of the green, red, and purple lines suggests a market dangerously driven by whipsaws (changes in direction).
• A crossover of the green line above either the red or purple is a hopeful early sign of an improving market.
• A crossover of the purple line over either the red or green is a bearish signal.
I’ve left the chart showing a range of the last five years (5y) of movement. You can click to change it to a more easily read chart by clicking a range of 3m (three months) or any of the other alternatives. I mostly use 3m and 5y.
Oh, and one last point: Such a chart can be used to evaluate the performance of a given mutual fund, ETF, or stock.
For an explanation of the term moving average, you can go to Investopedia. 

When to Accept Your Social Security Checks

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When still in our early 60s, Dee and I launched an extended discussion of when to turn on our Social Security income spigot. We were NAPFA financial advisors, so we had more than one reason to examine the question.
We even interviewed the ladies behind the window in the Social Security office in downtown Orlando. They urged us to start taking our money at age 62. We didn’t.
We could afford to wait until we turned 70.
So that’s what we did. For us, it was an excellent decision.
Our monthly income is a lot higher than it would have been had we accepted the advice so eagerly given to us at the Social Security office downtown.
The example she cites tells us why to wait. Take the earliest possible retirement and the monthly check is for about $1,628. Or wait till age 70 and the monthly income flow is about $2,939. Annually, that’s $19,536 vs. $35,268.
Or twice as much if each spouse qualifies for those same examples.
To estimate your own Social Security retirement benefits, visit the Social Security Administration’s website.




Wednesday, May 22, 2013

Alternatives to Yields on Stocks


Like you, I am a DIY portfolio manager—and I’m retired, so I like to make a lot of money but am wary of losing much, or any. 
A portfolio holding a mix of stocks and bonds is a popular hedge against serious losses—say, 60% or 70% or 80% common stocks with 20% or 30% or 40% bonds, all chosen carefully and cautiously.
Another possibility is to acquire preferred rather than common stocks. Preferred stocks may carry less risk than common stocks because the preferred are something like a merger of bonds and common stocks. However, there’s a problem lurking:
As with bonds, the resale value of preferred stocks falls when interest rates rise. In the May 18, 2013 issue of The Wall Street Journal, Tom Lauricella examines the current search for higher yields in stocks, bonds, preferred stocks, master limited partnerships, and REITs—with a warning about non-U.S. real-estate investment trusts. Also:
At TDAmeritrade, you’ll find a preferred-stocks screener that identifies 15 with yields greater than 7%. That’s not a recommendation of what to invest in. It’s an informative list published on May 18, 2013.
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.


Monday, May 20, 2013

The Real IRS Scandal


Writing in The New Yorker magazine, Jeffrey Toobin writes: “Campaign finance operates by shaky, or even nonexistent, rules, and powerful players game the system with impunity. A handful of I.R.S. employees saw this and tried, in a small way, to impose some small sense of order. For that, they’ll likely be ushered into bureaucratic oblivion.”
Also: “It is certainly true that the I.R.S., and every other part of the government, should be evenhanded in how it applies the law, regarding liberal and conservative groups alike. If left-leaning organizations were disguising their true purposes to obtain 501(c)(4) status, the I.R.S. should have turned them down, too.”
Maybe it did. The detail will likely come out as the matter is pounded to death by pointy fingers in the coming weeks.
What, if anything, will the issue do to the stock market? Hard to know, but my guess: Nothing.
 

Evaluating America's 1%/99% Situation


In today’s New York Times, Timothy Noah extends the Times’ ongoing discussion of The Great Divide, “a series on inequality — the haves, the have-nots and everyone in between — in the United States and around the world, and its implications for economics, politics, society and culture.

“The series moderator is Joseph E. Stiglitz, a Nobel laureate in economics, a Columbia professor and a former chairman of the Council of Economic Advisers and chief economist for the World Bank.”

Noah’s central point is that the wealth being accumulated by the 1% of us is a challenge to America’s economic health and so is the growing skills-based gap.

I’d add that the 1% ought to be worried about the growing poverty within the 99% because that’s money disappearing from the pockets and purses of the customers and potential customers needed to buy the goods and services offered or promoted by the 99%—and the erosion of the buying power of the 99% has been continuing since 1979.

Also, the 1% needs to remember that the world history of revolutions tells us gross imbalances in rich vs. poor have ultimately not gone well for the terribly outnumbered rich.

Timothy Noah is the author of “The Great Divergence: America’s Growing Inequality Crisis And What We Can Do About It.”


Sunday, May 19, 2013

TD Ameritrade's ETF Target-Date Choices


My clients and I were buying and selling through Jack White before the firm became first TD Waterhouse and then TD Ameritrade.
I knew, respected, and liked  the real Jack White, who was an example of competency and ethics, so perhaps that explains my recent transfer of fondness to TD Ameritrade. Or the explanation may be that Jack’s brokerage house appears to remain a good choice now that it’s all grown up.
I do like this website. It bristles with attractive features. For example, there’s a parade of ETF managed target-date funds that I think is worthy of a DIY portfolio manager’s attention. Here they are:
Kiplinger recommended TD Waterhouse in its December 2012 issue.
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.

Saturday, May 18, 2013

NASDAQ's Incredible Stock Screeners


Nasdaq has free stock screeners, powered by Zacks, and I think it’s easy to feel good about that. The one that jumps out at me searches for stocks that meet Benjamin Graham’s tests.
In alphabetical order, these five are examples of stocks Ben might be excited about today: ATK, AFAM, DIT, CHEUY, BVN. At Yahoo, I’ve put together a comparative performance chart for those five.
Also, five more are presented in my comparative performance chart for these five stocks: DIIBF, HFC, HXM, LPIH, NOV.
My third Ben Graham chart today compares the five stocks with the lowest price/earnings ratios, a projected p/e ratio of double digits 12 months from now, and selling for $10 or more at yesterday’s market close (May 18, 2013): HFC, SUHJY, BVN, DIT, CHEUY.
I do recommend choosing a NASDAQ-Zacks screener to fit your own stock-selection approach and then using it to find stocks worthy of presentation to your own evaluation procedure.
By the way: Zacks offers a free report that “reveals 10 of Zacks’ most potent stock-picking strategies.”
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.


When the Past Tells the Future


I became a Jim O’Shaughnessy fan many years ago, when reading his first book, “What Works on Wall Street.” I liked him more when sharing lunch with him before he spoke at a national NAPFA conference. I now admire him even more because of his latest book, “Predicting the Markets of Tomorrow: A Contrarian Investment Strategy for the Next Twenty Years.”
In it, his fourth, he says his research into data all the way back to the 1790s shows equity markets tend to move in cycles of 20 or so years. Then, he discusses strategies likely to shine in the present trend.
Cara Scatizzi has an excellent review of Jim’s new title at AAII.com. It and his others are offered by online bookstores, including Amazon.



Friday, May 17, 2013

Time: Housing Jump Looks Real


America’s economic recovery did a fake-out in 2009-2010, but price gains in 2013 appears to have leg.
That’s Michael Sivy’s report in the May 15 issue of Time Magazine.
Nationally, he says, the median price increase in first quarter 2013 was 11.3%—“the biggest yearly gain since 2005.”
Buying a home, he adds, is now less costly than renting in most American cities.
Morningstar says these real-estate stocks are among those that averaged double-digit gains in the last five and three years, last year, and in 2013 YTD (through May 16): HCN, NNN, OHI, TOLAY, WPC

7 Stocks With Bigger Dividends


According to Guru Focus, these seven stocks just lifted their yields into a range of 2.4% to 3.1%: AWK, BAX, EE, KMB, MSA, NHC, WTR.
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.

Thursday, May 16, 2013

Inflation: How Fearful?


Porter Stansberry is perhaps the foremost Chicken Little of those of us wondering what’s ahead for the economy, stocks, bond, real estate, and life savings. He famously predicted the American currency and economy would collapse in 2011 (“The End of America”), largely because of record hyperinflation. It didn’t happen.
Didn’t quite happen, either, in or after the runaway inflation years of 1979-1982. I remember it with sorrow because it brought down my favorite savings bank (City Federal, of New Jersey) and ended the national-expansion dream of its CEO and my boss, the brilliant entrepreneur Gil Roessner.
Also, I remember it with a smile, because it prompted the best investment advice I ever gave to my clients. 
When the annual yield on 30-year U.S. Treasury bonds moved well into double digits, I advised them to buy as many as they possibly could—especially for their tax-sheltered retirement accounts, notably IRA and 401(k).
Many did so.
I see today’s rising high inflation as a step  toward the next opportunity to pump up my retirement account and legacy trust—if and when long T-bonds are once again paying 15%+ yearly.
I have good reason to guess that another period of hyperinflation lies ahead. History.
The United States has inflated away its current war debts starting with that of our Revolutionary War and, more consistently, after each war from the 1846-1848 Mexican-American.
So, yes, there’s good reason to believe America’s economy is edging into hyperinflation because of our two simultaneous long-distance wars (Iraq and Afghanistan). We’ll see. If it happens, you’ll know what to do. 
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.



Wednesday, May 15, 2013

4% Rule on Retirement Withdrawals?

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In 1993, Bill Bengen of Bengen Financial, in San Diego, challenged the widespread 4% withdrawal rule for money management in retirement by testing every 30-year retirement period since 1926, reconstructing market conditions and inflation. He identified 1969 as the worst year for retirees because a combination of low returns and high inflation had eroded the value of savings.
Michael Finke, a professor in the department of personal financial planning at Texas Tech University, in Lubbock, is a co-author of a paper that’s perhaps more critical of the 4% rule—which hasn’t worked of late, a time of prolonged low returns.
“There haven’t been any historical periods that look like today,” Professor Finke said. “We’ve never had an extended period where rates of returns on bonds have been so low and valuation on stocks so high.”
What’s more, the classic 4% rule fails to consider above-average spending in the early years of retirement, Finke says, draining too much of the capital needed to support the last 25 retirement years. So:
A standing 3% withdrawal rate in the early retirement years (and beyond) is closer to sustainability, he concludes.
Never forget: All investments and savings are gambles on the unknown future and thus subject to loss. Even educated guesses about the future are guesses.


What Is a Closed-End Fund?


CEF Connect describes itself as the authority on closed-end funds, so its education center might be the obvious starting point in a visit to its website.
“Closed-End funds are generally designed for regular cash flow,” we’re told. The potential CEF advantages begin with income distributions to investors on a regular schedule—for the most part, monthly or quarterly.
That feature appeals to me a lot more now than I’m retired.
In CEF Fund Key Concepts we quickly discover two important bits of information:
“If the net asset value of a fund is $20, and the fund is selling on an exchange for $18, the fund's price is said to be at a 10% discount to net asset value.
“If the same fund is selling for $22, the fund's price is said to be at a 10% premium to its net asset value.”
If you are retired or soon will be, you do need to extend your understanding of investments to CEFs—and also to MLPs (managed limited partnerships) preferred stocks, and REITs, among other alternatives to common stocks and being a landlord. Dividend Detective is a good site to visit first, but so is Dividend Yield Hunter.