In Search of the Perfect Investment

How bad is it out there? From a reader:

HEY HOWDY…. CASH. IS KING – I’m really bearish right now. We see things here in the rust belt pocket of the midwest that east coasters don’t even understand are happening… YOU do – I see it every day – shopping malls – closed and bankrupt – forclosures and short sales in too many previously nice neighborhoods – it is not getting any better here & in the surrounding communities – Unemployment here in Lucas County, Ohio is now 12.8% which is down a bit from last month — people are running out of unemployment coverage so they are dropping off the rolls… NOBODY is hiring for anything that I know of.

Not good for the economy: The Senate shelved its jobless bill after a third attempt to pass it failed, 57-41, with the result that by the end of this week, 1.3 million unemployed Americans will have lots their jobless assistance. AIG, Citigroup, Goldman and others got money, but not the jobless. I guess they don’t contribute to political coffers. Makes sense to me.

Why are high-yielding stocks high-yielding? Is a high-yield necessarily a sign of “Buyer Beware.” Can a high-yielder become a growth stock? There are no simple answers EXCEPT one. You shouldn’t arbitrarily dismiss them. I wrote down the many reasons stocks or funds can become high-yielding. Here’s my preliminary list:

+ Not glamorous company.
+ Not widely followed company.
+ Small company. See reason 2.
+ Not glamorous industry. A REIT. A coal company.
+ Industry perceived as risky – e.g. financial, mortgages, etc.
+ Use of leverage.
+ High dividend payout means the company is closing down. Its resources (coal, gold, oil, etc.) have been exhausted and it’s returning its assets to shareholders. Hence,  little chance of capital appreciation. And little chance of the high dividend being maintained.
+ Perception of risk.
+ Interest rates may rise.

Here’s my latest list of high yielders. These have passed through Harry’s Screen 1 — I’ve junked ones I really disliked. What’s nice is that most of these are holding up well, as the market has tanked in recent days.

Some high-yielders become growth stocks — as when they get taken over because someone thinks there’s more coal in the ground, etc.

High-yielders are some times good for writing covered calls against, since they don’t fluctuate widely in price and hence, most calls expire valueless.

There’s a list of Canadian Royalty Trusts here. Canada is a good diversification in anyone’s portfolio. They’re managing their economy much better than we are.

If you’re looking at a closed-end fund, make sure your purchase price is in line with the NAV — net asset value. Check the Closed End Fund Association. Click here. Don’t buy at a heavy premium.

Meanwhile the taxes go up and up. Here’s a two bedroom apartment in New York City which I own:

Makes you kinda sick? On the other hand, it’s good for my holdings of New York City GOs — triple tax-free general obligation bonds.

I don’t what this chart means — if anything. It comes from Chart-of-the-Day.

Here are the words that accompany the chart:

Today’s chart illustrates rallies that followed massive bear markets. For today’s chart, a ‘massive’ bear market is defined as a decline of greater than 50%. Since the Dow’s inception in 1896, there have been only three bear markets whereby the Dow declined more than 50% (early 1930s, late 1930s until early 1940s, and during the very recent financial crisis). Today’s chart also adds the rally that followed the dot-com bust during which the Nasdaq declined 78%. The current Dow rally has followed a path that is fairly similar to that of the Nasdaq rally that began in late 2002 as well as the Dow rally that began in 1942. It is worth noting that after 300 (plus or minus) trading days the market moved into a trading range/choppy phase that lasted for a year or more.

The new mess in Afghanistan. I updated my site with comments from Stratfor and Andrew Sullivan of the Atlantic. Upshot: appointing General Petraeus will prolong our occupation of Afghanistan, probably indefinitely. For my www.StopAfghanistan.org.

Have a bottle of aspirin next to your bed? Take it when you feel a heart attack coming on? That’s the gist of floating emails.

Snopes refers to a mixture of accurate and inaccurate information. Check out Snopes.

Sound estate planning. I’m looking at a IDGT — Intentionally Defective Grantor Trust. Sounds like a great idea. Big business for the appraisers of the world.

Apple iPhone 4 is “the best ever.” So says my test, “I spent hours on it last night and no problems.” I biked by the Fifth Avenue Apple store yesterday and was staggered to see the line to buy the iPhone 4 stretching around the entire block, beginning on 59th Street, snaking down Madison and returning on 58th Street. To Apple’s credit, it had employees handing out bottled water to those in line. Nice touch.  A Wired.com reported on the iPhone 4 phenomenon:

In fact, the launch of the iPhone 4 may have drawn the largest crowds ever. In New York, Boston, Chicago, San Francisco, Tokyo, Paris and London, thousands of would-be customers queued up, some camping out overnight, to get a chance to buy the phone.

They’ll need some luck. Apple reported receiving more than 600,000 pre-orders for the phone, in a presales rush that swamped AT&T’s and Apple’s web servers and led to countless customer complaints.

Apple is going to $300, if this market ever gets marginally positive. Its upcoming earnings have to be blowout.

Outside the flagship Apple store on Fifth Avenue yesterday.

“Gripping any phone will result in some attenuation of its antenna performance with certain places being worse than others depending on the placement of the antennas. This is a fact of life for every wireless phone,” Apple said in a statement issued to several media outlets, including PC Magazine, which had run tests earlier Thursday. “If you ever experience this on your Phone 4, avoid gripping it in the lower left corner in a way that covers both sides of the black strip in the metal band, or simply use one of many available cases.”

Impeccable Logic.
There was a man, who had worked all his life, had saved all of his money, And was a real miser when it came to his money.

Just before he died, he said to his wife…’When I die, I want you to take all my money and put it in the casket with me.

I want to take my money to the afterlife with me.’

And so he got his wife to promise him, with all of her heart, that when he died, she would put all of the money into the casket with him.

Well, he died.

He was stretched out in the casket, his wife was sitting there – dressed in black, and her girl friend was sitting next to her. When they finished the ceremony, and just before the undertakers got ready to close the casket, the wife said, “Wait just a moment!’

She had a small metal box with her; she came over with the box and put it in the casket. Then the undertakers locked the casket down and they rolled it away.

So her friend said, ‘Girl, I know you were not foolish enough to put all that money in there with your husband.’

The loyal wife replied, ‘Listen, I’m a Christian;

I cannot go back on my word. I promised him that I was going to put that money into the casket with him.’

You mean to tell me you put that money in the casket with him!?!?!?’

‘I sure did,’ said the wife.. “I got it all together, put it into my account, and wrote him a check….”

“If he can cash it, then he can spend it.’

Harry Newton,who is slowly expanding his portfolio of high-yielders. Tennis is on ESPN2 during the day and The Tennis Channel from 7 PM to 3 AM.  Sometimes they bump tennis coverage for the soccer. Then there’s no place to watch it (even the web) until the evening when The Tennis Channel repeats what it feels like.