Yieldpig

Sideways Summer?

2012-05-17T22:08:00.001-04:00

It's beginning to look a lot like last summer SeekingAlpha

Bear Market..Bull Market? It Just Doesn't Matter

2012-05-04T17:33:00.001-04:00

SeekingAlpha

High Tech...High Yield!

2012-04-19T09:00:00.001-04:00

Check out a recent post to Seeking Alpha. No shortage of Apple fanboy blowback. SeekingAlpha

The Three States of Wealth

2012-04-04T21:06:00.004-04:00

My oldest son is finishing up 6th grade. It was a big change from 5th grade. Puberty. Girls. Tighter cliques. iPhones. Profanity (an unavoidable rite of passage among males). And a more challenging academic regimen, mainly, science. Hard as Chinese arithmetic science. Chemistry. Not my stronger suit as a dad, tutor, and spirit guide. Luckily, my mom is a science teacher with 40 plus years in the can. I grew up around it and have a pretty good understanding.

A few weeks ago I was meeting with a client: one of the brightest media/advertising/marketing guys I've ever known and incidentally, an educational background in microbiology. Smarter than a tree full of owls. As we talked about the business outlook, the markets. and the inordinate amount of twenty something female employees who walked around his shop loudly in boots, our conversation turned towards the hobbled real estate market. We trade stories about deals we has heard about where investors who while surfing the wave of the 2003 to 2007 "anyone can make money" real estate business would parlay a big win into the next deal and then the next until the tone arm was abruptly ripped from the record. His conclusion was a theory that wealth, like matter, isn't really created or destroyed. It's just moved around or changing states. He's a smart cookie.

I never looked at it that way but it makes sense. So if you took the three different states of matter, solid, liquid, gas, what asset classes would fall under each?

Solids - Naturally, commodities or, what Dennis Gartman refers to as "stuff that hurts if you drop it on your foot: metals, energy (I know..it comes in all three solid, liquid and gas..but work with me here), even real estate. You can touch and pick up coal or gold or corn or the dirt on a commercial lot. The value of these can go way up or way down. But at the end of the day, it's still there. It may be worth a million dollars. It may be worth pennies. It's worth something if you can sell it. Then it becomes a liquid.

Liquids - Financial assets like stocks and bonds and cash are pretty liquid. So are mutual funds and ETF's to some extent but I have my doubts. More in a second. Stock and bond markets flow by the minute. By the tick. Constantly in motion. You can literally press a button and get a check that day. I've always loved that idea. The danger is that they could become the third state of matter: gas.

Gas - The price of a stock goes to zero. A bond issuer defaults. That's what I would consider a gas. It's there but you can't really see it and, eventually, it evaporates all together. Most options, save for calls written against a long stock position, are gaseous. They have a defined expiration date which means that they are guaranteed to go to zero. CMO's on all the insane asset backed shit Wall Street cooked up during the boom? Y'know...the ones that were layered with so many slivers of different mortgages that the dumbass ratings agencies said "What the fuck! AAA!!" A lot of that stuff is or will eventually be in the gas bracket when some analysts throw in the towel on trying to figure out what's in them. Beachfront condo pre-sales for condos that were never built? Nebulous. And although my jury is still out, ETF's are increasingly giving me that derivative, bullshit vibe. I hope I'm wrong.

As much as the investment industry, especially the technicians, wants you to think it's a science, it's not. It's an art with a lot of math mixed in. Leave the science to the smarter people.

Why Rick Santorum Scares the Crap Out of Me

2012-03-23T14:36:00.002-04:00

I try to keep this column somewhat politically neutral. But with the 2012 Presidential race gaining engine pressure, I can't resist.

I don't like Rick Santorum at all. I have no clue about his economic or national security policies. To my knowledge, he has none. I am pretty familiar with his social issues. My impression is that if it feels remotely pleasurable, he's against it.

He hates porn. He's virulently homophobic. He believes that married people should only have sex to procreate. These really have nothing with fixing the economy of or the huge fiscal issues we have staring down the barrel at us. Unless he plans to tax them or eliminate them so that we can focus better.

Rick is a politician of the worst kind. The kind that doesn't have a clue about how to govern a state as complex as the U.S. So, in order to win, he resorts to vitriol and demogougery. Hmmm...sounds like a guy you can catch anytime on the Military Channel.

Ultimately, this is even more dangerous than a clueless, rookie senator with a scary sounding ethnic name or an out of touch, ultra wealthy uber white guy who is about as exciting as beige paint.

I don't like where our nation is. We need our groove and can do spirit back. Taking the Oliver Cromwell approach isn't going to fix things.

Santorum is a guy standing on the corner of Repressed and Denial. Let's make him and his kind go away.

Who's with me?

Imagine All the Fanboys...Living Without Steve

2012-02-27T22:31:00.003-05:00

Over my shoulder the other day, I barely saw a snippet of a segment on CNBC about two guys who were organizing some kind of birthday celebration thing for Steve Jobs who, sadly, won’t celebrate anymore real, earthly realm birthdays. After grumbling under my breath about how stupid that seemed, I recalled the scene from the John Lennon docu-pic “Imagine” where a dirty, young hippie was caught sleeping (stalking?) in the garden of Lennon’s gigantic mansion: Tittenhurst.

The “security detail”, who look like they could’ve been in his band at the time, nab the scraggly kid and bring him to Lennon on the porch. Obviously, the kid is an obsessed fan and when he comes face to face with his messiah, he presses Lennon for the deep, mystical, inner meaning behind his songs. John, ever the cynical realist, bursts the kid’s bubble with a plain “I’m just a guy who writes songs.” I’m sure the former Beatle was playing up the working class hero thing for the cameras before he hopped into his Rolls Royce to be whisked to his waiting private jet. But whether Lennon saw himself as “just a guy who writes songs” or not, he was trying to put things into perspective for his young visitor.

After putting that all together, It kind of makes me wish that Steve Jobs had done the same for the legion of Apple fan boys or the market for that matter. Granted, Jobs was a genius on the level of a Thomas Edison (and consequently and equal SOB as well). He helped change the way we do a lot of stuff and made himself and many others obnoxiously wealthy in the process. But when you break it down, he was a guy in a black mock turtleneck and jeans that sold computers.

But wait? If Steve had kept it real for the fan boys he would have lost his slavish army that would help to hype product launches and insure that the shiny, happy people would line up in the freezing dark around the block to buy the newest shiny happy gadget. Couldn’t John Lennon have done the same thing? Convince the kids that the Beatles were still bigger than Jesus so they’d keep buying the shiny happy records? Sure he could’ve and he could’ve probably pulled it off. But he didn’t. And they still bought the records. And to think that Steve Jobs was so into the Beatles that he named his computer after their record label.

Again, I’m not knocking Steve Jobs. The guy helped change media as we know it. But just like John Lennon said that he was a guy who just wrote songs. Steve Jobs was just a guy who sold consumer electronics. And now he’s gone. Remember him, if you like, but let it be.

Honestly, Apple’s cool and all, but who in their right mind should pay $500 for their stock? Here’s how to get exposure to AAPL, at a decent value, using these three lil’ piggies.

AT&T (T)

Recent Price: 30.14
Fwd P/E: 11.9
Current Yield: 5.8%

Ma Bell got first dibs on the iPhone since it’s inception. They were also the first telecom provider to peddle the iPad. Sure, everyone else sells the iPhone now, but T was there first. And something tells me that the deal with giving away the old iPhone 3’s is sort of a consolation price when the exclusivity went away. The company’s a cash flow monster and the yield is sweet. Think of T as the railroad. Apple makes the locomotives. But T gives ‘em something to roll on.

Corning, inc. (GLW)

Recent Price: 13.52
Fwd P/E: 9.73
Current Yield: 2.21%

After building tens of thousands of miles of fiber optic cable for telecom providers to over build at the end of the century and seeing their stock price soar to near $100 and crater to around $2, GLW proves that there are second, third and fourth acts in America. The company created a boss product in Gorilla Glass which is used for touch screens in smart phones and tablets as well as LCD panels and televisions. The company counts Apple as well Samsung and other tablet and smart phone titans as customers. Great fundamentals: good free cash flow, low debt, trades right at book value. Remember, iPhones aren’t the ONLY smart phones and lots of smart phone makers use Gorilla Glass.

Intel Corp (INTC)

Recent Price: 26.89
Fwd P/E: 11.14
Current Yield: 3.12%

What can you say? INTC is a hoss. Piles of cash. Low debt (if any). A growing dividend. And they make the brains for 80% of the world’s desktops and laptops. Wait? Those’re buggy whips? Oh, well, I guess the $9 billion commitment to capex to develop products for the smart phone, tablet, and everything else space. Pretty soon your handheld, your tablet, your car, your microwave, your refrigerator will all have Intel inside. Consider the people who make the Core processor a core holding.

Follow us on the Twitter. @Yieldpig

Yieldpig, Copyright © 2012 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Oil? Shmoil.

2012-02-24T10:30:00.001-05:00

I'm looking at the weekly chart of USO. I'm the farthest thing from a wiggle reader. But it looks like lower lows and lower highs

The whole thing with oil is really starting to piss me off. And if you drive, too, you should share the sentiment. There's absolutely NO reason for prices to be here.

Iran? Please.

Oh..I know I've been dark. I owe you guys at least 1500 words. I'll make good. Promise.

How to Fix The Postal Service

2012-02-01T21:49:00.003-05:00

Last year, the U.S. Postal Service lost over $5 billion on operating revenue of $65.7 billion for fiscal year 2011. The USPS needed about $70 billion or so for expenses and officials warn that the agency could run out of cash completely by the end of FY 2012. How the hell do you have a near monopoly and run the business into the ditch that badly? I wish I knew. Probably having a business model that relies on the oldest mode of transportation known to man, the feet, where small, cheap items are delivered, by hand, six days a week to over 100 million different locations is a logistical bitch and an enormous drag on resources. And I’m sure the $5 billion plus retiree health care pre-funding and other human capital related liabilities don’t help matters.

Yes, it would appear that the USPS is terminally screwed. Unfortunately, old timey mail is still kind of a necessity. How else will registered mail travel to deadbeats and miscreants? Like anyone will click on a received receipt on an e-mail if they’re being sued for back child support, again. The good news is that the business is fixable. The bad news is that it’s going to be an ugly, bloody process.

Check Your Package

Shipping and package services contribute a little better than $10 billion to the Post Office’s annual revenue. Sell that concession to FedEx or UPS. Make ‘em bid on it. Keep the USPS branding. They would just be using UPS or FDX as the mule. They’re gonna be in the neighborhood anyway, right? Think about all of the enormous transportation overhead. Gone. Instantly. All processing, tracking, anything logistical (that the two private companies excel at), farm it out. Are people going to lose their jobs? Sure they are. But we’re talking about the survival of an American institution that was founded by Ben Franklin: the father of true, American enterprise. The free marketeers will touch themselves like Natalie Portman in “Black Swan”. The non-freemarketeers or whatever the hell they’re called will stroke out. Fine. Fox and MSNBC always need content.

Aye…Robot

The rest of the USPS $60 billion+ in revenue comes from regular, first class mail, periodicals, and the crap known as direct mail advertising. Keep that business. It can be a money maker. Automate it even more than it is now. I mean REALLY automate it. Even more robots in the sorting process. Even experiment with automation in the mail delivery process. Google has been developing driverless cars (and for the life of me it mystifies and scares the shit out of me. I mean, why the hell does a search engine/media company need to get into the driverless car business?). I’m sure they’d JV with the USPS. Imagine. Electric, robot mail trucks rolling through your cul de sac. Will there be casualties? Of course. But the human factor is, unfortunately, part of the problem. So reigning it in is part of the solution.

And there’s another solution. Instead of dumping $5 billion into retiree health care prepayment (c’mon…that’s putting money up a goat’s ass. Have you seen the kinda shape some of the people who work at the post office are in?), quasi privatize the USPS and take a $5 billion equity stake in the business. Would the pride of ownership alter the attitude of the lady behind the counter at the post office in the mall that stays open till 10pm on April 15th? Good question. The guys in the brown uniforms seem to get the job done efficiently. I’d bet they’ve got UPS shares in their 401(k).

Here’s How Blackberries SHOULD be sold…

2012-01-25T23:19:00.002-05:00

I use an older, hand cranked, coal fired Blackberry. I’m loyal to it. Sometimes, when I fiddle with my son’s iPhone, I feel dirty, like some old, shriveled college professor trying to shtup a nubile coed. And I get mad as hell at Research in Motion for blowing the lead they had initially in smartphones.

This week when the company announced it’s management shuffle, the marketplace didn’t necessarily do back flips. The founders were replaced by an insider with a multi-national, bureaucratic pedigree. Doesn’t exactly scream “innovation”. So I’ll pretend I’m an ad guy pitching the company on how to sell Blackberries like a boss.

First, I’d hit the fact that one of the company’s biggest customers is the U.S. government. Sure, it’s a risky strategy. No one really thinks “Yeah! Department of Agriculture! Badass!”. But that’s not who we’re trying to reach. RIMM’s position was that it had the most secure network and OS out there. Then the system goes down because it gets hacked. News flash: everyone’s been hacked, is getting hacked, or will be hacked in the very near future. It’s the world we live in. It’s still a pretty secure platform. The President of the United States, who has NEVER been allowed to have a cell phone for security reasons, has a Blackberry.

Second, functionality. The Blackberry’s internet ability, especially on older handsets, sucks. So what? I screw off on the internet enough at the office.. There are a couple of sites that have a decent mobile app for Blackberry and I can get what I need. Is it iPhone awesome? Not even close. But I don’t particularly want or need that. I dig on Twitter and, frankly, Twitter for Blackberry is just fine for what it is. E-mail and texting still rock like the Who on “Who’s Next”. Ever wondered why the text is so intuitive on an iPhone or an Android device? It’s because touch screens, as magical and amazing (the most over used word of the decade) as they are, aren’t really worth a shit when you’re trying to do real, grown up work. And that’s what they’re used for: work.

Lastly, integrity. RIMM has had difficulty getting a decent foothold in emerging markets. The main reason is that most emerging market governments are at least a wee bit oppressive and typically demand access to the Research in Motion network. Why? So they can spy on their citizens. The company typically doesn’t oblige. Apple doesn’t give a shit about an iPhone users privacy and Google seems to sliding down the same slope. RIMM hasn’t gone their or, seemingly, not as overtly. That says something.

Yes. I like my Blackberry. They’re not for everyone. They’re not cute. They’re not particularly fun. But they work well. And there’s your tag line, Mr. Client: “Blackberry: Work well” That one’s on the house.

The Trend Is Not Your Friend

2012-01-18T23:08:00.002-05:00

Think about all of the trends you’d like to forget: leisure suits, shoulder pads, disco, rollerblading. The fallout typically involves photographs that find their way to the internet 20 years later, possibly injury, or even the regrettable one night stand that haunts us every time you hear Spandau Ballet’s “True”. Trends can also come back to haunt us as investors.

I’ve never been a momentum guy or technical guy, and certainly not a trend guy. I’m just too uncoordinated. Besides, it seems that once everyone starts jumping on a trend, it’s done for the most part. If you follow the rest of the lemmings, you will soon have your rear end handed to you in a Ziploc bag with your name written on it with a Sharpie.

The cloud. Energy MLP’s. Treasuries. Oh, and gold…the mega trend of the decade. Did you finally break down and go long GLD in September 2011 because EVERYONE said the shiny, yellow metal was going to $45,000 an ounce because a huge, cataclysmic collapse was coming? Congratulations, you’ve given back 12% of your money. But it’s OK. You’re still getting a dividend, right? My bad, GLD or Krugerands buried in Ron Paul’s back yard don’t pay a dividend. But you can always trade it for some ammunition or water at the displaced persons camp underneath the interstate after the huge upheaval.

Look folks, I’m sure there’re many of you reading this who did make money on commodity trends or surfing other investment waves. God bless you. But I’m also willing to bet that a lot of you didn’t. Let’s remember Einstein’s definition of insanity: doing the same thing over and over expecting different results. If you’ve been chasing investment trends since the tech boom of the late 90’s and you’re still working with the same $10,000 in your Ameritrade account, but down the crack pipe and get help. It’s not working.

What works? A process. Look at Benjamin Graham. Look at Warren Buffett. Look at Mario Gabelli. Look at John Calamos. Why are they the greatest of the great? They have or had a definitive, disciplined process. Were they correct 100% of the time? No. But, they’re more successful on a consistent basis because of their process. Warren Buffett didn’t just throw a wad of money at IBM because he figured that Berkshire (BRKA) needed some tech exposure and he kinda new the name. He, and the rest of the big brains at Berkshire, used their process and came to the conclusion that IBM would be a good addition to Berkshire’s portfolio because of the different criteria that Berkshire looks for in a holding; strong cash flow generation, high quality, well known franchise, excellent management. If Buffet had just wanted some tech exposure, he could’ve just bought a tech ETF. Of course, as soon as the talking heads caught wind of that trade, the ETF share price would’ve spiked like Stephen Tyler’s blood alcohol level after falling off of the wagon. And what would happen? The lemmings would jump on the trend.

Even the stodgy, boring Dow Jones Utilities went through a bit of a trendy phase last year returning an astounding 19%. If you put new money in that space are you paying too much? Maybe. So, avoid the trend trap. Find a big name with decent fundamentals that’s cheaper. Southern Company (SO) trades at 18 times earnings (expensive for a utility) and yields 4.2%. Exelon (EXC) trades at around 10 times and yields 5.3%. An 80% discount in P/E and a pickup of 130 basis points in yield makes more sense and may protect you from the market handing you the aforementioned Ziploc bag.

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Yieldpig, Copyright © 2012 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

2012 Stock Market Predictions!!!

2011-12-28T21:48:00.005-05:00

OK. I’ll admit it. I used the cheesy headline to get lots (dozens and dozens) of hits. Everyone’s constantly hunting, scouring the information universe to see what gurus and pundits think about the forthcoming year. In 2009, I wrote a “prediction” piece that was a little more longer horizon. How’d I do? I didn’t pick any individual stocks, per se. More macro stuff than anything. You can go back and read it if you like

http://www.thestreet.com/story/10653348/1/go-long-bottled-water-twenty-teens-predictions.html

I think we did OK. We skipped writing a prediction for 2011 and judging from this year’s action, it’s just as well. It would have been a complete exercise in futility.

I will make a forecast for 2012, though. I predict, at best, the markets will be unpredictable. They always are. Could anyone predict the enormous, maybe bigger than ours, monetary crisis in Europe? I’m sure there are a lot of naysayers who may be proven somewhat right who doubted the viability of the Euro all along. But on this magnitude? Probably not. It’s always that way. I’m currently reading Reinhart and Rogoff’s “This Time Is Different” on the Kindle (thank to my wise and thoughtful sister for the gift card!). If you’re serious about investing and economics, I mean TRULY serious about really learning about it, red this book. It’s tough. It’s like going to school. But that’s what it takes.

Anyway, so, agreeing that markets are as unpredictable as Charlie Sheen and a stolen prescription pad, what do you do? I’m sticking with the strategy, yet to be named, I’ve been using for the past few years. As far as stocks are concerned, own big, cheap, well run, well known names that pay you something. What do I mean by cheap? A good place to start is the forward P/E ratio. The S&P 500 currently has a P/E of around 12 or 13. So, good stocks with a P/E less than that of the index are probably a smart move. Stocks like International Paper (IP) trading at 9.6 times 2012 earnings yielding 3.5%, Eli Lilly (LLY) at 9.5 times 2012 earnings with a 4.7% yield, and Intel (INTC) at 10.32 times 2012 earnings and yielding 3.4% are probably good ideas. I know. I’ve talked about these names before. I still like them. They’re great companies. Their multiples are reasonable to just down right cheap. And they pay you more than a ten year treasury for your risk.

Incidentally, had you owned those three names this year, your return just from capital appreciation would have been a little better than 15%. Throw in dividends and you’d be flirting with 20%. Not bad considering the S&P 500 has returned…oh…almost nothing this year? Did I mention I’ve written about these names in the recent past?

As far as bonds go, caution is probably the operative word. I’d stay away from government stuff. Hell, I haven’t bought a government bond for a client since 1997. Yeah, I’ve missed some run up. But I’ve always been taught that bonds are for income. They should pay you something. I’ve always gravitated toward corporate bonds. I guess it’s the equity background. I still hold the same belief. Again, use the same philosophy for corporates that you would for stocks. Big, cheap, liquid, well known names. Don’t pay too much (par or less…NEVER pay a premium for a bond) and get some yield. Don’t be afraid to dabble in the upper end (“B” rated or better) of the junk bond world. Don’t go out too far on the curve (10 years…tops!) and trade ‘em if you can. Yes…trade bonds. If you buy it at 96 and it goes to 110 and paid you 6% in the process, that’s a 20.5% total return. At the end of the day, the bond is really only worth 100. Let someone else pay 110.
Also, some financial company bonds are floating around out there that look attractive from a price standpoint. Worth a look, but be choosy and expect the worst while you hold it. Also, plan on trading those as well.

2011 was weird. 2012? Who knows? But judging from the past few years, at least some weirdness is guaranteed.

Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Blame The Euro Crisis on Charlemagne

2011-12-21T22:51:00.004-05:00

It all goes back to the 700 and 800’s to the brother of a hunchback and the son of Pepin the Short.

It’s easy to hang the albatross of blame for the shitstorm in Europe on the French and the Germans. After all, they’re the economic Alpha males of the continent and, let’s face it, the Euro was just a way to ensure their continued dominance. Not like they haven’t been running the joint since the Romans left.

No, the real culprit was a guy by the name of Charlemagne. If you took Western Civ in 9th grade, you remember him. A Frankish (French) king, Charlemagne was crowned Holy Roman Emperor by Pope Leo the Third in 800. But what did Charlemagne do?

The Roman Empire as everyone knew it had long since gone teats up. Greater Europe was basically a tribal bouillabaisse: the Franks in France, the Saxons over in most of Germany, the Moors and the Basques over in Spain. Charlemagne became the first Pan European badass and pulled all of it together. He converted the Saxons to Christianity, kicked the Lombards out of Italy, and basically, backed the Roman Catholic church as the premiere “spiritual” and political force on the continent. Charlemagne was the muscle. When all was said and done, His Holy Roman Empire stretched as far east as Czechoslovakia, Serbia and Croatia, as far south as Barcelona and Rome and as far north as the Danish border. Yep. Pretty much all of Europe. Oh, and there was a common currency known as the Livre Carolinienne backed by a silver standard.

Ironically, Charlemagne was probably born somewhere in Belgium but is identified more as a Frankish or French guy. However, his favored capital was in Aachen with the throne residing in Aachen Cathedral. Where is Aachen? Oh yeah…in Germany although France has held the deed to the town a couple of times. So, the quick version is that once all of the different, indigenous European tribes kicked out the Romans and did their own thing for a century or two, a Franco-Germanic dude decides it would be a better idea if everyone was united under his terms, of course. He mixed it up semi-successfully with the Moors. Never conquered them but worked out a couple of alliances that he eventually hosed them on.

Let’s see. A Franco-Germanic power consolidator who makes war and forces conversion on to peripheral peoples. Hmmmmm? Anyone see a pattern here? Anyone? Bueller? Three centuries later, Frederic Barbarossa continued to piss off the Italians and everyone else. Then Napoleon, Kaiser Wilhelm, Hitler. But it all goes back to Charlemagne. And it never really seems to work at least not long term. It’s Einstein’s classic definition of insanity: doing the same thing over and over while expecting different results. It’s been 1200 years, France and Germany. Time to let go.

The Karate Kid

2011-11-30T22:56:00.002-05:00

If you listen to the financial television news yappers long enough, especially around mid-day (I’ve got a big ass flat screen..not my idea..outside of my office so…unfortunately…I don’t have much of a choice), they start sounding like Ralph Macchio’s mentor, Mr. Miyagi (played by Pat Morita in his biggest role since Arnold on “Happy Days”). Only instead of the zen like “wax on…wax off” it’s “risk on…risk off”. I’ve been in this racket long enough to collect a few buzz phrases and, by far, “risk on…risk off” is one of the most moronic. Enough already.

Newsflash: all investing is “risk on”. Stocks go up and down. Bonds are subject to fluctuations in interest rates and credit ratings. Currencies are at the mercy of their sovereign issuers and the court of world confidence. And commodities? If a butterfly in Brazil bats its wings on Tuesday, a flood in Missouri on Thursday can guarantee financial ruin by Friday. Translation: you’ll lose an assload of money on your soybean trade.

Risk still ticks deep within the bowels of the perceived “no lose” bank certificate of deposit. You could get caught with a shitty, low rate if rates decide to go up. If the issuing bank fails and you’re insured up to the FDIC limit, you’ll get your money back. However, it could take a while based on how screwed up the failing institution is. Risk is everywhere. It doesn’t care what you think. Deal with it.

Honestly, Daniel San was pretty much an enormous pussy whose ass got kicked on a regular basis. Then he stepped up, got some mad skills, started doing the ass kicking himself, and won the love of Elisabeth Shue. Granted, Daniel San would’ve probably been happier if it was the nasty, “Leaving Las Vegas” Elisabeth Shue, but we’re talking about a character played by Ralph Macchio so he was lucky to get ANYTHING.

Investors should take a cue and stone up. Who knows where this whole thing is going? However, I think it’s probably one of the better times in history to buy awesome stocks cheap. Keep in mind they’re NOT going to go up 167% in a week. But, with huge names, and again, I’m beating the same drum I’ve been beating for months, like International Paper (IP), Eli Lilly (LLY), or Intel (INTC) at 20% or better discounts to the S&P 500’s P/E and beating it’s dividend yield by 120 basis points or better, why wouldn’t you make a fist and go long. You’re probably going to do OK.

You’ll also probably do OK takin’ a look at this week’s three lil’ piggies…

“Nice Assets…”

Federated Investors (FII)
Recent Price: 15.87
P/E: 10.59
Current Yield: 6.04%

The Skinny
We’ve probably oinked about this one before…so…what the hell…we’ll oink again. FII is an asset manager…mutual funds…managed accounts..pension plans…etc. It been smacked about like most financials. The difference is that this one may be worth holding. Stock’s cheap at 10x’s forward earnings. Average ROE over the last five years has been around 39%. Pretty strong. The yield is especially compelling for a financial name and a non-bank financial at that. Analyst estimates have also been relatively stable compared to FII’s peer group.

The Danger
With the market up 300 one day down 278 the next…who wants to own ANY type of investment? That’s the challenge FII and every other money manager faces: outflows by scardey investors. And, despite the fundamentals, psychology will probably keep a lid on financial stock prices for a while. Growth’s pretty anemic as well. And although it looks like the world fired the money bazooka at the Eurozone problem, it’s not going away anytime soon. Financials aren’t for the lilied of livers.

“Better homes and dividends…”

Meredith Corp (MDP)
Recent Price: 29.00
P/E: 11.09
Current Yield: 5.27%

The Skinny
Good franchise here. Company publishes 80 titles with it’s flagship brand being Better Homes and Gardens. Branded online media grabs an average 22 million visitors monthly. Stock’s cheap at 11x’s forward earnings. Low debt to capital at only 15%. Makes you feel OK with the 5+% dividend. MDP has also done a good job of licensing the brands, again mainly Better Homes and Gardens, through smart deals with the retail Leviathan Wal Mart (WMT).

The Danger
Print media has that jaundiced, walking around with an oxygen tank look. Better Homes is a great brand and will probably do OK in the post print, tablet world. But what sleepers like ”Diabetic Living” and “Quilts and More”? Don’t see those burning up the ol’ iPad, huh?

“United we log on…”

United Online (UNTD)
Recent Price: 5.28
P/E: 6.60
Current Yield: 8.2%

The Skinny
Another Yieldpig repeater here. Starting out as Juno Online, a Johnny Comelately dial up service, UNTD has evolved into an interesting amalgamation of social media sites that include classmates.com, memorylane.com, and their strongest brand, FTD.com (yes…the flower thing). Classic deep value metrics: 0.5 times sales, 96% of book value, and a $1.27 in cash per share. It’s no Groupon. Oh yeah…they’re actually making some money AND giving it to shareholders.

The Danger
While UNTD’s properties are in the “hot” social media sector, they don’t exactly possess the heft of a Facebook. Year over year revenue growth is also a little soft giving up about 5%. Long term debt is a little concerning, too: about $260 million on a market cap of $470 million. Odd in a space that typically doesn’t have a whole lot of debt. And although FTD.com is a known quantity, it’s definitely a consumer discretionary. Might be more classic value trap than classic value.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Let 'Em Dangle*

2011-11-16T22:23:00.002-05:00

On Halloween, we got a visit from the ghost of markets past. MF Global, a major, global financial derivatives broker run by Goldman Sachs, U.S. Senate and New Jersey Governor’s Mansion alumni John Corzine, filed for what is now the 8th largest bankruptcy in U.S. history. No surprise that the S&P 500 gave up nearly 2.5% on that day as investors had flashbacks of the Lehman Brothers failure in fall of 2008.

Immediately, there was pulling of hair and gnashing of teeth comparing MF’s flop to Lehman’s. There are similarities and differences (some of which I debated with Fox Business News’ Charlie Gasparino via Twitter that morning). The major difference was the size and scope. While certainly newsworthy, MF’s (kinda makes me laugh writing “MF”) failure was nowhere near the size and scope of Lehman’s. Lehman was like the class skank who gave the entire football team herpes; they had sold EVERYONE their shitty mortgage backed products and everyone had bought tons of what would eventually become Lehman’s shitty bonds. No wonder Hank Paulson was so pissed! They helped infect the whole system. MF Global affected an already gun shy market mostly psychologically.

The main similarity is how both MF and Lehman blew themselves up (and Bear Stearns and Wachovia and Long Term Capital Management): some kind of derivative. There’s a reason Warren Buffett called them “financial weapons of mass destruction”. If used incorrectly, they almost guarantee wrecked markets and firms who dabble with them. You’d think that eventually, these guys would learn. Apparently, they don’t.

When institutions fail due to their own stupidity, I have very little sympathy. Wachovia was an awful bank. I had a checking account with them because I had to open one with a home equity line we had with them. It was an awful bank. I’m sure many people are glad it’s dead. Although, while firms like MF Global and Lehman and Bear Stearns were arrogant. Wachovia was more dumpy and pitiful. Good riddance.

There’s enough blame for where we are to go around. However, what really makes me angry is that the “bank runs” that created chaos and failure in 2008 and today, mostly in Europe are all institutionally driven. It had everything and nothing to do with how you and I as individuals invest our money. And we feel powerless. To steal from Chris Rock, I don’t agree with Occupy Wall Street but I understand them. Apparently they don’t have a cohesive issue. I think I have one for them.

*”Let ‘Em Dangle” is an awesome, creepy Elvis Costello song about a conviction and execution by hanging. It’s on the album “Spike”. If anyone has seen my copy, please return it.

Well…enough darkness…maybe this week’s three lil’ piggies can brighten things up…

“You might get some in your stocking…”

Oxford Resource Partners (OXF)
Recent Price: 16.32
P/E: NA
Current Yield: 10.72%

The Skinny
I haven’t been real piggish on energy MLP’s for a while. Mainly because everyone wanted them. Now that they’ve gotten clobbered, I’m changing my tune a bit. OXF fits that bill as units currently trade at a 40% discount to the 52 week high thus bumping the yield way up there. The numbers are encouraging. 2001 EPS will come in at a loss of around 45 cents. The forecast for next year is $1.17...a possible 300%+ increase. Despite the loss, things aren’t all bad. Assets (the stuff in the ground) have increased by 18% over the year and since the U.S. is the Saudi Arabia of coal, if regulatory attitudes change for the better, OXF could be an interesting position.

The Danger
Coal, like just about all commodities (except for oil…WTF?) have been beaten like a rented mule. In fact, some of the punditry talks of the commodity trade being dead. Finis. Maybe. Maybe not. While OXF units look cheap, a buyer could be walking into a classic value trap. Also, no one really has to rehash the current, hostile regulatory environment. The jury’s still out on a global slowdown. If there is one on the horizon, rest assured coal exports will slow.

“Hey now…you’re an all star…”

BlackRock Enhanced Dividend Achievers (BDJ)
Recent Price: 7.15
P/E: NA
Current Yield: 9.51%

The Skinny
If dividend stocks are all the rage (you’re reading this…aren’t you?), this closed end fund is on steroids. Historically, the fund chose stocks based on the Dividend Achievers Index, although that has changed (more in the next paragraph). In addition to selecting companies who have been growing their dividends consistently, the fund uses a covered call option writing strategy to enhance the yield. The fund does this rather than employing leverage which is a plus. Shares trade at a 10% discount to NAV which is a pretty good bargain. All in all, not a bad lookin’ little CEF.

The Danger
The fund changed managers and strategies last year. Apparently, it wasn’t a smooth transition. The fund gave up 10% last year and is off the same this year. Thank God for the huge yield, eh? Speaking of the yield, it seems a little high. Hopefully they can keep it up, but as yields on everything continue to shrink, prepare for a cut. Lastly, covered call options are an awesome protective, income tool, but, you always cap your upside.

“Go fly a kite…”

Kite Realty Group Trust (KRG)
Recent Price: 4.10
P/E: NA
Current Yield: 5.85%

The Skinny
KRG is a smallish ($265 million market cap) Midwestern retail REIT . The firm is vertically integrated with about 9.3 million square feet in it’s portfolio. Their current FFO (funds from operation) trend is good growing at a decent 6.3% clip which ain‘t bad considering that commercial real-estate is basically in a bonafide depression. Shares trade at 22% discount to their book value and the low, single digit share price is tempting if you’re still trying to bottom fish REIT reef.

The Danger
Commercial real estate still sucks and will continue to suck for a few years. Be prepared to wait. While KRG has some great, big box anchor tenants (Publix), it does manage a lot of smaller space geared towards small businesses. Again…depression conditions. Small shop occupancy declined last quarter by 60 bps. And for a deeply discounted security, the yield actually feels a little chincy. There are higher yielding REIT’s out there.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Toga! Toga! Toga!

2011-11-02T22:51:00.003-04:00

It finally dawned on me. The very best analogy for the whole European mess would be the basic plot line of the classic comedy “Animal House”.

Greece is the party hardy Delta house. Failing grades, dilapidated facilities, garbage everywhere thanks to a general strike. Germany and France are the combined evil forces of the snooty Omega house and Dean Wormer. I’m not sure who’s who. Nevertheless, they conspire to assert control over the mythical Faber College, forcing everyone to conform and do it their way.

The austerity measures being dictated to Greece sound a lot like Dean Wormer’s “double secret probation”. Nobody is really sure what the hell it is and, in the back of their minds, they know it probably won’t reign in the rogue Greeks anyway.

Greece’s attitude, especially now with their threatened referendum on the bailout totally reminds me of Otter’s speech after they’ve completely trashed Flounder’s brother’s Lincoln. Here’s the clip:

http://youtu.be/zOXtWxhlsUg

In the end, the Delta’s get expelled. But, as a last hurrah, they cause complete chaos and completely dismantle the homecoming parade.

http://youtu.be/pX71mALOPKs

I genuinely hope that a Greek expulsion or withdrawal doesn’t cause create chaos in Europe. Unfortunately, it probably will and rest assured we’ll get a dose over here as well. But I’m afraid everyone is following the script fairly accurately.

Well, it wasn’t over when the Germans bombed Pearl Harbor and it’s not over till we meet this week’s three lil’ piggies.

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Abandon All Hope...and Go Long

2011-10-19T22:54:00.002-04:00

Giving up is a new beginning. Letting go. Flushing it out. Or just, simply, shrugging and walking away from it. It could be a job, a crappy relationship, a business, a sports team, a government leader, or an investment. Investors are probably a little past that point now. Stifel Nicolaus macro strategist (and all round neat guy) Barry Bannister poses that bear markets end and bull markets begin with investor disdain for equities.

I spent a few days last week meeting with fund managers, analysts, and other gurus. This was the takeaway from listening to a handful of money managers was this: “Bonds…bonds…not Treasury bonds…but corporate…high yield..some emerging market debt…and…oh…I don’t know…gosh…it make me nervous but..umm…OK…stocks…maybe…but only if they pay dividends.” The rhetoric doesn’t get more chickenshit than that.

I listen to an impassioned Dr. David Kelly, J.P. Morgan’s chief U.S. strategist tell a room full of the doubtful hopeful that investors just need to grow up and buy some dividend paying stocks. There was also a general consensus among the parade of experts that leadership in Washington at both the executive and legislative level was ineffective and absolutely useless. No faith whatsoever. And that’s a great sign. It is. Honestly.

So where do we go and what do we do? The S&P 500 sits at around 1210 give or take, about 3.7% down YTD. Not bad considering the smacking about it’s received since mid-year. My Spidey sense tells me we finish the year flat to slightly up. Things are just too weird (Europe, Washington, Europe…yes…so fucked up you have to say it twice) to let us bust completely loose. Don’t worry. Engine pressure is building and we will see some, as the reformed Broker author Joshua Brown would say, “face ripping” rallies in American stock markets. This is just too good of a place for good things not to happen.

So, Mr. or Ms. Investor, how do we position ourselves going into all of this? Again, the rational fear of uncertainty (in good times there’s an irrational lack of fear) still grips the mood, so the mega cap, blue chips that PAY YOU SOMETHING make the most sense. Still lovin’ my industrial trifecta of Dow Chemical (DOW), International Paper (IP) and DuPont (DD). Big technology ex- Apple (AAPL), Amazon (AMZN), and Google (GOOG) is intriguing with Microsoft (MSFT) trading so darn cheaply with so much cash. Intel (INTC) has bucked the trend and rocked like Keef Richards before his visit to the Swiss clinic of late. Speaking of drugs, Eli Lilly (LLY) and Glaxo Smith Kline (GSK) look pretty groovy. And from the oil patch (yes…a commodity) Conoco Phillips (COP) is the safety choice while Total (TOT) is a good play on the emerging and frontier markets.

The best part? All of these names pay you 3% or better just for showing up and signing in. These are huge companies with solid earnings. And they’re cheap. They won’t stay that way for long.

2011-10-06T07:37:00.002-04:00

I won't pile on or try to stand out in the "Me Too" chorus about Steve Jobs. What can you say that hasn't been?

I've written my share of what the fanboys would consider Apple "hater" posts. Most of those weren't directed at Steve Jobs personally. My beef is mainly most of Apple's hardware products. They're brilliant and liberating, but only for a select few who can truly afford them. Seriously, at the end of the day, the $400 Toshiba laptop does the same exact thing (basically) as the $1400 Macbook.

Now, my position is different on the iPod concept. Jobs was a late period, northern California hippie. Price points were reasonable on the two thirds of the iPods and 99 cents a download is completely democratic. I have a hunch that was by desgin and directed, like just about everything else at Apple, by Jobs.

Jobs was a complex human like all of us. Beneath the hippie persona lurked a ruthless, textbook corporate giant. Early on, he hosed partner Steve Wozniak at of part of their "Break Out" bonus at Atari. Woz stuck with him. The rest of the story is filled with accounts of control freakiness, brutal dismissals and humiliating dressing downs for failure.

However, Jobs was the closest thing our period of American history will have to a genuine Thomas Edison. Certifiable, inventor genius. Edison was complex and ruthless, too. Look it up. But outside of those traits, that spirit of innovation and commercialism is what sets America apart, makes us great, and will continue to make us great.

Jobs helped shape media and changed the way we access and consume it. Was it all him? At huge companies, it's usually a group effort (See "Steve Wozniak"). But he sure as hell inspired it and put his stamp on it. 56 is young. Who knows what he could've done with another 10 or 20 years. But look at what he did with the time he had.

The Kindle is more important than the iPad…you just don’t know it yet

2011-09-29T00:35:00.002-04:00

My kids are responsible. For my birthday four years ago, it was a tiny, itty bitty iPod Shuffle. Bigger than a chicklet, smaller than a boom box, it said you could fit 250 songs on it but I goosed mine to 290 (the one minute Ramones songs created the additional space). Last Hanukkah/Christmas, we’re one of THOSE households, it was the basic Kindle. I was surprised and delighted by both. However the Kindle inspires to historical proportions.
The bottom line is that at the end of the day the written word is a bazillion times more important than recorded sound. Gutenberg’s printing press preceded Edison’s phonograph by 438 years. That’s just the historical perspective.

Now, with the Kindle Fire, Amazon has unveiled its answer to the iPad. The event is much more than the business move of one big content distributor trying to compete with another big content distributor by unveiling a piece of hardware that makes accessing content easier. It’s a bold, cultural explanation that, hopefully in time, will make us a smart people again. Digital music democratized the music industry. Anyone with a song, a microphone, and a computer, can be the Beatles. The same is happening in the print publishing business. A twenty something girl made a million bucks self publishing her own, teen vampire novels. That’s democratization and Amazon is storming the ramparts.

It’s all about price. The iPad, while technologically amazing (the MOST overused word of the last couple of years), is prohibitively expensive. Yes. $600 to $700 is a lot of money for a shiny toy to read on although it makes you look very cool at the airport or on the subway and would probably get you laid at some Starbucks. Fewer and fewer Americans can comfortably consume that price point. However, at $199 on the high end to $79 for the basic reader, Amazon’s Kindle products are tiny, digital bookmobiles, coming to our neighborhoods and helping us fall in love with reading again. If you’ve been forced to go to Wal Mart on a Friday evening or have been stuck in line at the cable company office, you know firsthand that, as a society, we’re not quite the intellectual powerhouse that invented things like the telephone or accomplished feats like putting a man on the moon. We need to read more. A LOT more.

Program cutting happy, Tea Party congressmen have had a hard on to get rid of the Department of Education for decades. Here’s their chance. Deep six it and its $70 billion annual discretionary budget. Now, buy a basic Kindle for half of the American population, roughly 150 million mouth breathers. It would run Uncle Sam about $11.85 billion (probably less…Amazon would probably give the government some kind of bulk for a savings of $58 billion. It’s a start. But it would accomplish two things. By killing an entire Federal bureaucracy, it would throw the Teabaggers a bone. The second result would be more people reading which would eventually translate into a smarter population. And just think of what that kind of revenue bump would do to Amazon’s earnings.

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Singles Going Steady

2011-09-15T00:05:00.003-04:00

“My assets froze while yours have dropped. Now is that? Is that?”
“Is That Love?”- as recorded by Squeeze by Chris Difford/Glenn Tilbrook

Last month, we published a note examining well known, large cap names with single digit P/E’s and dividend yields of 4% or higher. A month later we’ll reiterate that call. For investors with a longer term horizon, there’s gotta be a pony in here somewhere.

The S&P 500 is basically where it was when we posted the previous piece. So what’s changed? Not much except for the situation in Europe has gone from “bad” to “even worse”. Granted, there was a zero growth jobs report for the U.S. somewhere in the mix. But that’s not nearly as exciting as sovereign default.

Nevertheless, most of the names we profiled (COP, IP, INTC, LLY) are priced about where they were a month ago. The appetite for risk assets (aka “stocks”) wasn’t that great in August. It’s probably even weaker now. So Its difficult to step up to the counter and order with conviction. It will be even more difficult with the names we are about to look at as most of them deal with either U.S. industrial recovery or, cue ominous, scary music, a return of confidence in financial companies. All have forward P/E’s of 9.5 or lower and yield at least 3.5%.

Dow Chemical Co. (DOW)
Eaton Corp (ETN)
AFLAC Inc. (AFL)
EI DuPont de Nemours and Co. (DDD)

Adding those names to our previous suggestions would help you build out quite the blue chip portfolio.

The question is still “are we there yet?” And the answer is still “I don’t know.” However, here is another handful of large company stocks with single digit forward multiples and respectable dividend yields. The good news is that markets are still quite volatile. Yes. That’s a good thing in that opportunities to buy high quality at good prices will be created thanks to fear and stupidity. Art Cashin, an NYSE veteran floor guy suggests that in times like these, investors should “turn their baskets” in order to catch some bargains they may want. The market may turn or not. Either way, there are worse stocks you could be stuck with.

Is that love or this week’s three lil’ piggies?

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Greek Lightning

2011-08-31T22:43:00.003-04:00

There’s been a coup in Greece and I have been anointed “Generalissimo”. It was bloodless affair since the army was on strike and too busy hanging out on the beach with gorgeous Greek women. Work, which mainly involves cleaning up our financial mess, will begin after a splendid lunch of souvlaki and grape leaves followed by some Zorba like dancing.

Before I make my first official, major policy decision, I’m going to make a phone call. I’m not gonna tell many people, if any, about it. I’m calling some of the guys at the University of Chicago, put them on retainer, and have them on standby. Now, I’m poised to shake things up.

The Finns (seriously…the Finns?), thanks to their resurgent right wing government, are, get this, actually demanding collateral for their portion of the bailout. I really do appreciate their help in the past, but that was then and this is now. My back and the backs of my fellow Greeks are against the wall. The continent’s favorite autocracies, Germany and France, are hemhawing and craw fishing on the Eurobond deal.. However, while they’re farting around, Greece is dying by a thousand paper cuts. It’s time to make the first tough phone call.

I dial the number and listen to the tell tale little European ring. Some one picks up. Terse and French. “Allo.”

“Nick, it’s the new Generalissimo. How’re you?”

“Ah, bon jour. Yes, I heard. A bloodless coup, no? Always for the best.”

“Of course. Look, I’ll be quick. Our rear end is in a sling. We owe everyone a buttload of money.”

“Yes. It is quite a lot.”

“Yeah, and, well, you know how we do business, all of the under the table deals and what not. Hard to tax that.”

“Yes. Yes. What is your point?”

“Yeah, well, at the rate things are going, we won’t be able to pay that back in…well…forever. So, it’s been fun, but I think, as does the rest of my country, that we’re ready to go back to the drachma.”

“Pardon?”

“We’re done. We’re out of the Euro. Hey! You were gonna kick us out any way. I figure we saved you the trouble.”

“Is this legal?”

“I guess so.There’s no real central authority. So who’s gonna enforce it? Some one in the Hague? Bring it on beotch!”

“You’re leaving the Euro?”

“Looks that way, huh?”

“But this will create chaos!“

“If you kick us out its chaos. If we pull out its chaos. If you write down some of the debt…”

“Yes, chaos.”

“Correctomundo. I’m sorry about all of this. I know everyone really wanted this to work out. But, that’s how the baklava bounces. Oh, don’t tell Angie. I’m calling her next.”

“Merde.”

Nick slams down the phone and the line goes dead. The conversation with Angie goes about as well, save for the unintelligible angry German rants. Thank God it was over the phone. I could just imagine all of the saliva.

The next day, we pick up the Chicago Boys at the Athens airport and come back to the office. We toast the memory of Milton Friedman with a little Sambucca and get to work restructuring everything: new currency, redenominated debt, monetary policy, everything. It’s just like Chile or Argentina but with bouzoukis instead of gauchos and castanets. We hit the reset button. All things Euro: gone. Adio’! Global financial markets go bananas not in a good way. Sorry about that. But we’re talking about the welfare of my people and as Generalissimo, it’s my duty to bring that.

What little foreign investment that was here in Greece has fled. It would have left eventually anyway. But now, thanks to a cheap currency and an exotic, Mediterranean locale, Greece is the number one vacation spot in Europe. Why go to the French Riviera and pay out the wazoo? Oh and the foreign investment that left? When you’re a rockin’ travel destination, a funny thing happens. People come from all over to build resorts and other ancillary infrastructure. They’ll need people to work. Wow! Throwing off the shackles of the Euro and putting the country back to work all in the first year? Can you say “Generalissimo for life”?

Fiat currency. It’s a beautiful thing.

Know what else is beautiful? This week’s three lil’ piggies…

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Train In Vain

2011-08-17T21:58:00.004-04:00

“…so alone I’ll keep the wolves at bay.” - The Clash

Since the financial crisis of 2008, many investors have played the part of the forlorn character in the most awesome Clash song “Train In Vain”: standing, waiting, and hoping for interest rates to go up while opportunity speeds away down the railroad tracks. How do we know this? Fed Chairman, Ben Bernanke told us.

When the banking system and the credit markets locked up, the Fed opened up the monetary floodgates and saturated the money supply with liquidity of biblical proportions. Bond yields and other interest rates cratered. The consensus, from CNBC to the barber shop, was that rates would skyrocket in lockstep with the onset of the coming hyperinflation. An investor needs income, however, he’s too chicken to go out too far on the curve (which isn’t even THAT great). He keeps it close in and earns precisely bubkus, Richard, nil. And as rates continue to NOT go up, income investors complain about the lack of income.

So what should they do? Well, first of all, they need to accept the reality that rates are going to stay miserably low for at least the next two years. See, all of that money needs some velocity meaning that people have to want the money and the people with the money (banks) must be willing to lend it. That’s not happening and as the economy continues to bumble along, it won’t happen any time soon. You will earn very little money in conservative, fixed income investments. Accept it and if you want to earn any money, you are going to have to do something different. Yes, that may translate into owning some equities.

The smart thing to do would be to find sectors that will continue to perform decently in a low interest rate environment. One of the best and possibly most conservative places to look would be at utilities. Utilities as a group have under performed the broader market mostly due to the misplaced fear that interest rates are going up. Historically, utilities don’t do too well in rising rate environments. That’s not going to happen. The 10 year Treasury is yielding 2.21%, Yes. 2.21%. It’s not going to kill you to add a couple of big, regulated electric utilities to the mix. Duke Energy (DUK) is huge, well run and has a 5.6% dividend yield. The company is in the process of acquiring Progress Energy (PGN). The combined entity will be the largest regulated electrical utility in the U.S. of A. PGN is trading at a slight discount to the acquisition price so that might be a cheap way to buy some DUK. PGN yields 5.5%. Southern Company (SO) is a perennial favorite. The 4.8% dividend is a little thin in our opinion and the valuation is at the upper level of its range. But, it’s an incredibly well run business that you could be comfortable holding for the longer haul.

Mortgage REIT’s should also do well in the suppressed rate environment. When you can borrow at damn near zero, as long as you halfway know what you’re doing, the math should work in your favor. Our favorite idea, no surprise, in that space is Annaly Capital Management (NLY). Valuations are ridiculously, single digit low and the sick dividend yield of 14.5% make it worth a peek.

Still convinced that rates are about to scream up? Your wait may be in vain. You might want to make sure your Kindle is charged up. It’s gonna be a while before the inflation express comes barreling down track number nine. Don’t believe me? Call a retiree in Japan and ask how their fixed income choices are working out for them. Think their higher interest rate train has pulled into the station?

Well…some things you can’t explain away…like this week’s three lil’ piggies…

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Big Cap Bargain Bin

2011-08-10T22:07:00.003-04:00

Like the gutless, cowards they are, S&P downgraded the credit rating of U.S. Treasury bonds last Friday afternoon, after the market close, to AA+ from their historical gold standard of AAA. Keep in mind, these are the same geniuses who gave AAA ratings to mortgage backed securities that were brimming with toxic assets and who kept an A rating on Lehman Brothers up till the Friday of their weekend failure back in early fall 2008. Meanwhile the other two agencies, Fitch and Moody’s , reaffirmed AAA’s all around. Now with the scarlet letter of a AA+ rating, America gets to sit in the penalty box with the likes of General Electric (GE) and Berkshire Hathaway (BRKA, BRKB). There’s worse company to keep.

Was the downgrade the real reason for this seemingly brutal sell off? I don’t think so. The downgrade was just the cherry on top of the double crap sundae of an obvious, slowing U.S. economy and the mounting debt crisis in Europe which, is basically the fourth or fifth inning of the experimental baseball game known as the Euro. Please. Couldn’t you come up with a better name? Anyway, there’s lots of hand wringing, and tooth gnashing and round the clock CNBC coverage. Is the market getting hammered? You bet. It’s being beaten like a rented mule. Naturally, comparisons to the trauma of 2008 are being thrown about. Don’t believe it. Not for a second.

Sure, the economy does suck on ice. However, the financial system is much healthier than in the dark days of 2008. Thanks to the banks not lending the money they got from the Fed, they have plenty of liquidity. That was the danger in 2008. The credit markets locked up. GE couldn’t roll over its commercial paper. G-FRIGGIN’-E!!! The company Thomas Edison started. You know, the guy who invented the light bulb? Things were downright frightening in 2008. You had cooler heads like PIMCO’s Mohammed El Arian telling their wives to run to the ATM to take out as much cash as they could. That’s scary. No food in the grocery stores, Mad Max scary. We’re not there yet and I don’t think we will be (of course, anything is possible). Europe’s a different story. Their Lehman moment is approaching. It will be eurostyle fugly. It will affect our markets but we should have enough cushion to hang in there OK.

In 2008-2009, you could buy big, industrial names like General Electric (GE), Dow Chemical (DOW), International Paper (IP), and Alcoa (AA) at single digit prices. That may have been a once in a lifetime type of opportunity. But that doesn’t mean that there aren’t some bargains currently floating around out there.

Here’s a handful of big, liquid names that now have single digit, forward P/E ratios and have dividend yields of 4% or better.

Conoco Phillips (COP)

International Paper (IP)

Intel (INTC)

Exelon Corp (EXC)

Eli Lilly and Co. (LLY)

These are all top shelf, well run, big companies. The yield on the 10 year treasury is a miserly 2.13% and, according to Fed chairman Ben Bernanke, it’s not going up anytime soon. Depending on whose number you look at, the forward P/E of the S&P 500 is in the low teens. I’m not the smartest guy in the room, but something tells me that half the P/E and twice the yield is a bargain for a known quantity.

If it’s time to buy or not, nobody really knows. But it never hurts to make a shopping list. Get your pencil out.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

These Things Take Time

2011-08-03T22:50:00.005-04:00

I had a fraternity brother who was, perhaps, the biggest Smiths fan (remember…this is circa 1986) ever. If I hadn’t known him better, his room would have resembled a creepy, stalker shrine to the band’s front man, Morrissey…aka…Steven Morrissey…aka…Steve the Nutter. What always amazed me is that my fraternity brother was from a tiny, rural, farming community. Talk about a collision of outliers! The mopeyist of mopey Britpop meets an obsessed fan from an isolated area of the rural south. Before the internet. Before smart phones. Three years later, the Smiths broke up and Morrissey was making mediocre solo records. I’m sure at the time other people were “discovering” the Smiths, but it was too late. It wasn’t relevant. However, it took a little while for the word to spread.

It’s no surprise that financial markets and crappy economies (yes…our economy IS crappy…don’t let anyone tell you differently) take time to realize things: prices are too high and they need to come down, prices are too low and its time to buy. This sector is done, this one’s about to pop, interest rates, everything.

This week the market has been expressing its opinion on a lot of things. Some observers may say it has to do with the bicameral circus debate on the debt ceiling. I don’t buy it. The smart people knew it was bullshit kabuki, political theatre. It was already baked into the cake. Two of the ratings agencies have reaffirmed the T-bond’s AAA rating. If the other downgrades? BFD. Those guys lost just about every ounce of credibility thanks to their brilliant calls on mortgage backed securities and Lehman Brothers.

No. Parts of the market are starting to realize that the Eurozone is a big, fiscal hot mess and that their unified currency is whistling past the graveyard. Face it. The Euro is DOA. It’s just that no one has accepted that fact yet. Well, not everyone. Basically, a major, world currency is going to die a slow, agonizing death. It will take time. And as the Euro and all around it gasp and writhe slowly but surely, it will affect U.S. markets and the economy. Where is Milton Friedman when you need him? Fiscal shock therapy stat! But this storm has been brewing for a couple of years but now the market is starting to wake up.

It’s taken a while for the market to realize that rates aren’t going higher any time soon so utility stocks make some sense. Never mind that most pay dividends that exceed the Ten Year and that, as a group, they outperformed the broader market during the hell of Q4 2008 – Q1 2009 and have underperformed since then. The utility average is just starting to show some signs of life. Yes. I am saying that utility stocks are a good place to be as we stare into the face of uncertainty. But, then again, when do we NOT do that on a daily basis?

Yes, dear reader, these things take time. How soon is now?

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Enough Blame to Go Around

2011-07-20T22:21:00.004-04:00

It’s the banksters. It was the Bush. It was Obama. It was Reagan. It was the people who couldn’t afford a house and borrowed more than they should have. It’s the unwed welfare mothers who get paid more to have more illegitimate children. As usual, post modern America is too busy yelling and trying to assign blame for the current pickle we are collectively in rather than solve the problem. I’m going to point my finger and I’ll only have to do it twice.

There are two completely different groups who are mostly responsible for the mess. They’re not necessarily directly responsible rather their seemingly incurable addiction to government sponsored entitlement. You can probably figure out who they are: the very poor and the very rich (this includes corporations which are legal entities and are viewed as an individual being). They’re an enormous drain on the system and they’re clobbering everyone in the middle. Personally, I’m sick of it and I really wish someone in Washington would get a clue. Oh wait, my bad. Washington basically represents these two groups almost exclusively.

This is an awesome chart on the income sources of the very top of the American income scale I pulled from Business Insider. Look at the squiggles on the far left and then the far right. A century ago, the very wealthy vaulted America full bore into the industrial age. They built big, successful business. The businesses represented their wealth and value. Bottom line: they created stuff. The far right tells a different story. The uppermost of the uppermost have evolved from a class of creators and innovators into a bunch of overpaid assholes who create very little if anything.

So the upper end’s first crime is ceasing to create value. The second offense is there powerful grip on government entitlement. They, individuals and corporations, have the money to flex political muscle in order to influence legislation. Whether it’s farm subsidies to grow or not grow certain crops, tax breaks, government contracts, whatever. My favorite example and I’m not screaming “It’s the Bush administration’s fault!” was the fact that the VPOTUS, Dick Cheney was formerly the CEO of oil services behemoth Halliburton (HAL). Throughout the wars in Iraq and Afghanistan, Halliburton and its various subsidiaries such as KBR, received lucrative, no bid contracts worth billions of our tax dollars. I can’t understand how that’s legal and why more people weren’t absolutely blinded by anger. I can feel my blood pressure spiking right now.

I don’t have any charts about the lower end, but with stats like 14% of all Americans using food stamps, why go there? That’s a harrowing statistic. Don’t get me wrong, no one should be hungry in America. No one. But we’re seeing multi generational dependence accessing government assistance. There’s something terribly wrong with that. The next generation should do better. Sure, Uncle Sam’s helping hand is there as a safety net. It’s not designed to be a way of life. It’s not a skill you should teach your children.

The problem is entitlements and the rate at which we pay or don’t pay for them. Should a guy who make $400,000 a year pay into social security at basically the same rate that his assistant who makes $30,000? C’mon. That’s not a class warfare question, its common sense. The answer is a simple no. Just like the question as to whether or not unwed mothers on government assistance should receive more assistance as they produce more children. Again, the answer, as cruel as it sounds, is “no”.

The top gets heavier. The bottom grows. And the middle continues to get squeezed. I don’t know about you, but I’m tired of it.

OK…stepping off of the soapbox and over to this week’s three ill’ piggies…

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The Language of Letting Go

2011-07-06T22:01:00.006-04:00

There’s no gentle way to say this. The real estate market sucks. It will continue to suck for quite some time. It may never return to the stupid levels it saw at its peak in some people’s lifetime. More people will lose their homes and many will remain upside down. There are enough houses in the nation’s inventory to last nearly a decade. So, theoretically, no more houses need to be built for ten years. This isn’t opinion. It’s fact.

Now, do me a favor. Go back and read the first paragraph out loud. Finished? Good. If you’re not feelin’ it, do it again. Do it as many times as you need to in order to accept those facts. Because the sooner we all do this collectively, the sooner the dead, smelly albatross known as the housing market will fall from our collective neck and allow us to move forward. Once the rest of the national financial psyche decouples from the real estate market, things will get better.

Check out this awesome chart of housing starts during various recessions.

Yes. The current squiggle (ours) is the worst. Is there good news? Yes. It’s bumping along the bottom. It might not be going up. But it’s not going down as quickly as it did at the onset. Here’s a chart on housing permits.

Still pretty freakin’ dismal. But so what? We know these things. But unless you can fly around the earth like Superman and make it spin backwards, thus turning back time, just let it go. James Altucher, one of the greatest bloggers out there PERIOD (check him out at http://jamesaltucher.com), put it this way: “There’s $15 trillion dollars in our economy, recession or no recession. Its falling like snow. Reach out with your tongue and taste it.” True dat.

Read more: http://www.businessinsider.com/the-easiest-way-to-succeed-as-an-entrepreneur-2011-4#ixzz1RNeXx3PM

Let’s reach out and grab a hold of this week’s three lil’ piggies shall we?

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