I found a website with a great domain name. I wish I'd thought of grabbing it -- Smart Capitalist.
It's a blog, and of course I was attracted to the article on High Income Investment Cash Cows.
I like the general thrust, but take issue with a few items. One, although energy and pharmaceutical companies are in the news a lot, that doesn't mean they're not cash cows, so they're not in the same category as high tech stocks. Some energy and pharmaceutical companies return a lot of cash. Obviously, oil and natural gas and energy itself are rising in price. And pharmaceutical companies have a good business in that once they find an effective drug and get it approved, it's a high margin business. The drug itself is almost "digital" in that it can be replicated very cheaply. The high price is not due to the ingredients, it's to pay for the research. So once a drug makes back its research costs, it's a big money maker.
He mentions insurance, too. I don't recall seeing insurance companies in the high dividend paying lists, but maybe they're just behind the biggies (REITS, consumer goods, utilities, banks). After all, Warren Buffett bought Geigo Insurance for Berkshire Hathaway, so he expected it a large cash flow from it. They buy a lot of clever and entertaining radio ads, so I assume they're still making good money.
smart capitalist
smart capitalist
Wednesday, July 18, 2007
Tuesday, July 17, 2007
The Gold Standard Not So Golden?
Reading The Power of Gold by Peter Bernstein makes me think again about gold as the money standard. I posted before my misgivings about how mining gold apparently creates wealth, instead of the formation of new, better and cheaper goods and services. Bernstein's story dramatize the effect of gold (usually negative) on economies through history, including what happened when Spain stole so much gold and silver from the New World.
And if the economy activity of a country increases, how does that automatically increase the supply of the gold metal? It obviously doesn't.
Yet the concept of hard money is still very popular. Conservative talk show hosts like to promote gold-buying services. I remember when Laura Ingraham interviewed Ron ?, a popular economic commentator and analyst (his own radio show used to be carried here in St Louis on Saturday night, but unfortunately they dropped him). She was surprised that Ron joked that everybody should own enough gold to "bribe the border guards."
The price of gold can go up, but this is not the same as the benefits of a passbook savings account. It's solid metal that doesn't itself pay any money or interest.
Bernstein is building a strong historical case for saying that gold is a liability rather than an asset, at least when you take it beyond its function as decorative jewelry and an electrical component. It's not money, is the message I've gotten from the book so far. And when you try to make it money, it's dangerous.
And the glory years when the world was on the gold standard? This was not the norm. The gold standard in the sense of pegging a country's currency to a fixed price for gold and saying that your paper currency is always redeemable into gold -- that's a product of the 19th century through the beginning of World War I. As somebody during that period said, and which Bernstein quotes enough times to make it clear he agrees, the gold standard was not the cause of the world's prosperity during that period -- it was a result of it.
I'm looking forward to reading what he has to say about modern times and finances.
gold standard
gold standard
And if the economy activity of a country increases, how does that automatically increase the supply of the gold metal? It obviously doesn't.
Yet the concept of hard money is still very popular. Conservative talk show hosts like to promote gold-buying services. I remember when Laura Ingraham interviewed Ron ?, a popular economic commentator and analyst (his own radio show used to be carried here in St Louis on Saturday night, but unfortunately they dropped him). She was surprised that Ron joked that everybody should own enough gold to "bribe the border guards."
The price of gold can go up, but this is not the same as the benefits of a passbook savings account. It's solid metal that doesn't itself pay any money or interest.
Bernstein is building a strong historical case for saying that gold is a liability rather than an asset, at least when you take it beyond its function as decorative jewelry and an electrical component. It's not money, is the message I've gotten from the book so far. And when you try to make it money, it's dangerous.
And the glory years when the world was on the gold standard? This was not the norm. The gold standard in the sense of pegging a country's currency to a fixed price for gold and saying that your paper currency is always redeemable into gold -- that's a product of the 19th century through the beginning of World War I. As somebody during that period said, and which Bernstein quotes enough times to make it clear he agrees, the gold standard was not the cause of the world's prosperity during that period -- it was a result of it.
I'm looking forward to reading what he has to say about modern times and finances.
gold standard
gold standard
Sunday, July 15, 2007
MAKING 36% by Dr. Terry F Allen
Fuller Mountain Press sent me a small book for review: MAKING 36%: Duffer's Guide to Breaking Par in the Market Every Year In Good Years and Bad by Dr. Terry F Allen.
It's basically a lead generator book. That is, if you read it, get excited and want to begin its program -- but you're understandably intimidated by the work involved -- you can enroll in his email trade notification service.
Basically, he advocates making 36% by putting on calendar spreads. These are option trades that take advantage of the difference in volatility between LEAPS (Longterm Equity AnticiPation Securities) and short term options.
Unless you're already an accomplished options investor, I know that's as clear as mud. I've read about calendar spreads before, but I found his explanation somewhat difficult to read in detail. Yet, I know reason to doubt that it works. I'm simply doubtful that too many people can put on these trades and also make the necessary periodic adjustments simply from reading this book. I'd certainly hesitate to risk my money on that. But again -- that's all the more reason why you need his email service.
So far as I know, his method his standard. He does confine his calendar spreads to one particular equity -- one which I wouldn't have guessed, so it's not fair of me to reveal it here.
Plus, he provides a great service by giving us the name of a broker that allows us to do option trades within an IRA. That is terrific news for all of us saving for retirement.
For more information, go to Terry's Tips
calendar spreads book
calendar spreads book
It's basically a lead generator book. That is, if you read it, get excited and want to begin its program -- but you're understandably intimidated by the work involved -- you can enroll in his email trade notification service.
Basically, he advocates making 36% by putting on calendar spreads. These are option trades that take advantage of the difference in volatility between LEAPS (Longterm Equity AnticiPation Securities) and short term options.
Unless you're already an accomplished options investor, I know that's as clear as mud. I've read about calendar spreads before, but I found his explanation somewhat difficult to read in detail. Yet, I know reason to doubt that it works. I'm simply doubtful that too many people can put on these trades and also make the necessary periodic adjustments simply from reading this book. I'd certainly hesitate to risk my money on that. But again -- that's all the more reason why you need his email service.
So far as I know, his method his standard. He does confine his calendar spreads to one particular equity -- one which I wouldn't have guessed, so it's not fair of me to reveal it here.
Plus, he provides a great service by giving us the name of a broker that allows us to do option trades within an IRA. That is terrific news for all of us saving for retirement.
For more information, go to Terry's Tips
calendar spreads book
calendar spreads book
Friday, July 13, 2007
Chinese investment advisor blogger arrested
This story about the arrest of a Chinese investment tips blogger is interesting, and scary in several ways.
Chinese investment tips blogger arrested
First, it reveals that the Chinese government gives warnings by first arresting people. This is apparently their warning to other such people giving investment tips. This guy did apparently go beyond giving his advice, as I myself do on this blog -- he made over $1 by selling investment advice. Here in the U.S. I'd be breaking the law if I gave individual investment advice since I'm not legally qualified to do that. (Though if you want to pay me $1 million, I might consider risking the penalties! :) )
Secondly, the investing psychology of the Chinese people is a boom mentality. A few weeks ago I read an article about how some woman believed that the Chinese government would not let the stock market crash before the Olympics of 2008.
So many Chinese investors apparently think they're now getting a free ride from the stock market -- it's going to keep going up and make them rich because the government won't let it, at least before the 2008 Olympics, to keep from losing facing internationally.
They may even be right, which means the whole question becomes, will they all pull out right before/during or after the Olympics? And, who's going to pay for it all?
Thirdly, the Chinese people also want the security and comfort of taking investing advice, including tips on specific companies, from other people who supposedly are experts. I could be wrong, but I suspect that right now there're not a lot of Chinese shareholders who have heard of the Efficient Market Theory, asset allocation, diversification or the benefits of index funds.
Chinese investment blogger arrested
Chinese investment blogger arrested
Chinese investment tips blogger arrested
First, it reveals that the Chinese government gives warnings by first arresting people. This is apparently their warning to other such people giving investment tips. This guy did apparently go beyond giving his advice, as I myself do on this blog -- he made over $1 by selling investment advice. Here in the U.S. I'd be breaking the law if I gave individual investment advice since I'm not legally qualified to do that. (Though if you want to pay me $1 million, I might consider risking the penalties! :) )
Secondly, the investing psychology of the Chinese people is a boom mentality. A few weeks ago I read an article about how some woman believed that the Chinese government would not let the stock market crash before the Olympics of 2008.
So many Chinese investors apparently think they're now getting a free ride from the stock market -- it's going to keep going up and make them rich because the government won't let it, at least before the 2008 Olympics, to keep from losing facing internationally.
They may even be right, which means the whole question becomes, will they all pull out right before/during or after the Olympics? And, who's going to pay for it all?
Thirdly, the Chinese people also want the security and comfort of taking investing advice, including tips on specific companies, from other people who supposedly are experts. I could be wrong, but I suspect that right now there're not a lot of Chinese shareholders who have heard of the Efficient Market Theory, asset allocation, diversification or the benefits of index funds.
Chinese investment blogger arrested
Chinese investment blogger arrested
Wednesday, July 11, 2007
Euro headed down thanks to euro-boomers?
So Richard Lehman is complacent about the coming baby boomer retirement "crisis" -- in the United States. Interestingly, he's not so complacent about what's going to happen soon in Europe. In his viewpoint, Europeans are too used to living on the welfare state. As I said in my last entry, he expect American boomers to just keep on working until they can afford to stop.
He expects European boomers to stop working and demand that their governments pay the promised retirement benefits -- no matter what.
Since few of them have this money (most Western European Social Security systems are in worse financial condition than that of the U.S.), they're going to have a problem meeting this demand. Also, birth rates in Europe in the past 30 to 40 have been lower on average than that in the U.S. Therefore, there're going to be even fewer workers per retireee than in the U.S.
Therefore, Western European governments are going to have to run their printing presses full-time, to send their baby boomer generation the pensions they've been promising them since they established their post-World War 2 welfare states.
End result -- the euro will be inflated and lose value in comparison to the dollar.
So the current situation where the euro is at a record high against the dollar won't last more than a few years or so.
euro baby boomer retirement crisis
euro baby boomer retirement crisis
He expects European boomers to stop working and demand that their governments pay the promised retirement benefits -- no matter what.
Since few of them have this money (most Western European Social Security systems are in worse financial condition than that of the U.S.), they're going to have a problem meeting this demand. Also, birth rates in Europe in the past 30 to 40 have been lower on average than that in the U.S. Therefore, there're going to be even fewer workers per retireee than in the U.S.
Therefore, Western European governments are going to have to run their printing presses full-time, to send their baby boomer generation the pensions they've been promising them since they established their post-World War 2 welfare states.
End result -- the euro will be inflated and lose value in comparison to the dollar.
So the current situation where the euro is at a record high against the dollar won't last more than a few years or so.
euro baby boomer retirement crisis
euro baby boomer retirement crisis
Monday, July 9, 2007
NO USA baby boomer crisis, says author
I just read Income Investing Today: Safety & High Income Through Diversification by Richard Lehman, and he casually dismissed the upcoming
baby boomer retirement crisis.
No problemo, he says. Most baby boomers just aren't going to retire, at least not for many years.
He notes that in 1935 when the Social Security Act was passed in the United States, the average life expectancy was 64. Therefore, they knew in advance that over half of all workers weren't going to collect Social Security at all!
Now life expectancy is in the 80s. There's no reason to stop working at age 65, and so baby boomers won't. They'll be too scared of running out of money before they die.
This will bolster the Social Security trust funds, because these older workers will keep paying into the system. Plus, they won't be drawing checks until they reach the age (I think it's now 70) when they can receive full checks no matter how much money they earn.
This will also bolster the Medicare trust fund, because these boomers will still be covered by health insurance (though he doesn't seem to think about how much demands will be placed on health insurance companies by covering so many people in the 60s and 70s).
I think he's correct to a degree, but it won't be as smooth as he implies. For one thing, I'm sure that most baby boomers will not want to continue working at the same job they've hated for the past 30 years.
Start an online auction business, yes. Sell macrame designs, yes. Teach English to children in Nairobi, yes. Open up a bait shop in the Ozarks, yes.
Keep working the same, dull boring job -- no.
no baby boomer retirement crisis
no baby boomer retirement crisis
baby boomer retirement crisis.
No problemo, he says. Most baby boomers just aren't going to retire, at least not for many years.
He notes that in 1935 when the Social Security Act was passed in the United States, the average life expectancy was 64. Therefore, they knew in advance that over half of all workers weren't going to collect Social Security at all!
Now life expectancy is in the 80s. There's no reason to stop working at age 65, and so baby boomers won't. They'll be too scared of running out of money before they die.
This will bolster the Social Security trust funds, because these older workers will keep paying into the system. Plus, they won't be drawing checks until they reach the age (I think it's now 70) when they can receive full checks no matter how much money they earn.
This will also bolster the Medicare trust fund, because these boomers will still be covered by health insurance (though he doesn't seem to think about how much demands will be placed on health insurance companies by covering so many people in the 60s and 70s).
I think he's correct to a degree, but it won't be as smooth as he implies. For one thing, I'm sure that most baby boomers will not want to continue working at the same job they've hated for the past 30 years.
Start an online auction business, yes. Sell macrame designs, yes. Teach English to children in Nairobi, yes. Open up a bait shop in the Ozarks, yes.
Keep working the same, dull boring job -- no.
no baby boomer retirement crisis
no baby boomer retirement crisis
Sunday, July 8, 2007
The Power of Gold
I've started reading Peter Bernstein's next book, The Power of Gold. Its theme can be discerned from the subtitle: The History of an Obsession. Its focal point seems to be the old story of a man who was transporting his fortune -- in the form of many pounds of gold -- when this ship he's on is hit by a bad storm. He strapped the gold to his body and of course it drags him to the bottom of the ocean. He didn't have the gold -- it had him.
Still, as always, Bernstein weaves a fascinating narrative of belief and history. I'm pretty sure that when we get to modern times, he's not going to come down on the side of those who believe that we should return our money to a gold standard.
But this book's copyright is in 2000, before the current run-up in gold's price. Are we in the early stages of a new bull market in gold? Should we care?
My own attitude is shaped by the realization that gold doesn't dividends, although it's possible for gold mining stocks to do so. It's not common, though BHP Billiton is a top international dividend paying stock.
gold
gold
Still, as always, Bernstein weaves a fascinating narrative of belief and history. I'm pretty sure that when we get to modern times, he's not going to come down on the side of those who believe that we should return our money to a gold standard.
But this book's copyright is in 2000, before the current run-up in gold's price. Are we in the early stages of a new bull market in gold? Should we care?
My own attitude is shaped by the realization that gold doesn't dividends, although it's possible for gold mining stocks to do so. It's not common, though BHP Billiton is a top international dividend paying stock.
gold
gold
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