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gObama, round II
Yesterday President-elect Barack Obama formally announced his plans to overhaul the regulatory structure of the financial industry: “…what I said during the campaign, I meant. We are going to have to greatly strengthen our regulatory apparatus.” Hallelujah! As regular readers of the blog know I spent considerable time in my first several weeks outlining the case for what needed to happen in order for investors, the American public, and the economy to begin operating with a restored sense of confidence. Chief among those...
read moreUpdate from the bottom
You probably saw the stock market rally again today, yes? While it seems as if there is still likely to be bad economic news on the horizon, it seems as if the majority of that bad news has been baked into the financial markets. So I wanted to update you on my having said on November 25th that I thought a bottom had been reached 3 trading days earlier on November 20th. On November 20th, the major stock market indices had the following closes: DJIA: 7,552.29 S&P 500: 752.44 NASDAQ: 1,316.12 Those closing levels remain the low and I still...
read moreDividends, part III
I don’t know where you are while you are reading Our Little Corner of the Internet, but the weather outside is frightful here in Santa Fe…brrrr…and there is lots of snow…and since we’ve no place to go…then let the Blog flow! OK, so I didn’t miss my calling as a poet. Before getting to the third part of the dividends post I wanted to tell you that I revamped part II of the dividends post to make it more readable. At this juncture, and I obviously have practice at this, it has taken me less than one...
read moreDividends, part II
I apologize to those of you who were expecting part II of the dividends post on Friday and it was not forthcoming. I ended up not having Internet access on Friday. So without further adieu…part deux. So now you know that dividends are definitively a good thing, yes? That begs the question, “How do you find companies that pay reliable dividends?” The first step is to become familiar with the term “dividend yield.” Dividend yield refers to the amount of cash paid to you as an investor per share of stock that you...
read moreDividends, part I, addendum
Hello everyone, I hope that each of you had an excellent weekend. A quick addendum to the first posting about dividends. So I think I made a pretty good case that dividends are desirable. They are cold, hard cash return to investors. Because of that fact then you as an investor can deploy that cash in whatever fashion you so desire. However, another advantage of dividends as a source of return is that capital gains are only relevant if in fact you sell your ownership in a financial asset. This has two predominant problems. First, when you...
read moreDividends, part I
I have decided to move a question from the comments section to the main blog because of its importance. Here we are talking about dividends, and thanks to Gary, who asked. When investing in a financial asset (e.g. stock, preferred stock, bond, money market, mutual fund, etc.) there are two ways to make money: capital gains and income. Capital gains are when the value of your investment rises in value and you sell that asset for more money. So, for example, if you bought a share of stock in a business at $50 per share and the price of that...
read moreLay off the layoffs, addendum
I wanted to add an addendum to my post earlier this month about “laying off of the layoff” announcements. Include in that previous post the fact that businesses often want to layoff employees when their prospects are soaring, but cannot because the climate is not right. Economic downturns oftentimes provide the “cover” necessary for firing people because the public, and employees, are more willing to accept firings in the middle of a recession than they are doing boom times. What this means is that often times a...
read moreEverybody else is doing it
Happy Wednesday to all of you! Today I wanted to talk about a conversation that frequently occurs amongst corporate executives, as well as professional investors. I am going to call the conversation the, “Everyone Else is Doing It” conversation and it goes something like this… Executive 1: “We have made all of the loans to safe credit-risk individuals that we can. I believe that we should cut back and avoid the marginal, and unsafe credit-risk folks or we might lose a lot of money.” Executive 2: “Well, if...
read moreDownturns are a test of strength
I hope that everyone had an excellent weekend. In today’s posting I wanted to reveal what I believe to be one of the secrets to making long-term as an investor. Namely, that investors make most of their money in an economic and financial market downturn, but that they just do not know it at the time. This secret is not my proprietary secret, but instead comes from the wisdom of Shelby Davis, the founder of the firm for whom I used to work: Davis Selected Advisers. The logic behind the secret is very straightforward. For example, if you...
read moreA quick missive
Just a quick missive for your weekend from Muggy Miami. In yesterday’s posting I said it would be interesting to see what happened to the financial markets given the huge number of jobs lost in November (i.e. 553,000). As you may know the Dow Jones Industrial Average closed up 3.1%, while the S&P 500 was up 3.7%, and the NASDAQ Composite close up 4.4%. I consider this to be incredibly encouraging. After all, it is difficult to imagine a worse jobs report – the worst in 34 years. What is more, most major U.S. businesses have already...
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