bearfund

Total Rating:
+5 / -1

497 Comments

    • Wed Oct 29th 10:29 AM | Rating: 0 0
      Commented on:
      Why I Prefer Dividend Paying Stocks
      Oh, and jswede, you're correct that we're all looking for total return. The problem with your thinking is that any investor or position trader with a horizon farther out than a couple of months MUST price all his deals and dividends in gold. Across the broad market, capital gains consist almost entirely of monetary expansion and are illusory. If you track your gains and losses in dollars, you will be deceived by the central bankers into believing you've done far better than you really have and will pursue inefficient and even losing strategies in the false belief that they are sure winners.
      View article »
    • Wed Oct 29th 10:24 AM | Rating: 0 0
      Commented on:
      Why I Prefer Dividend Paying Stocks
      Very few companies that do not pay dividends are actually investing the cash in their businesses. The typical non-dividend stock is in a tech company that fancies itself a "big time growth player". Classic examples are MSFT, GOOG, and AAPL. Those tens of billions in cash that they "reinvested in their businesses" are in fact not invested in anything. They're sitting on the balance sheet doing nothing. Because the truth of the matter is that those companies have one or two good businesses and attempts to grow have been met almost universally by failure. So if they do "reinvest" then you can kiss that pile of cash goodbye. And in the meantime for every 100 shares you hold you have 80 shares in a profitable business trading at 40x earnings and 100x book, plus 20 shares in a money market fund that trades at a 500% premium. Is either one a good investment? I'm not going to argue with the tape by shorting these guys but I think you'd be better off in gold.

      As for when the "right time" might be? Market close on Monday was one of those "right times" for taking a chunk of gold out of the cellar and exchanging it for solid stocks that will pay 4-10% dividends for decades to come. Which is exactly what I did. No doubt there will be more, perhaps even better, such opportunities. You don't have to buy at the exact bottom to make money, you just have to buy when the current and future yield is high enough to be worth the risk. Because of the mega-boom in US stocks over the past 25 years, that mostly means the only time you will be compensated for the risk is after deep waterfall plunges. Even the best companies are overvalued 95% of the time now. That is why I rarely believe in automatic dividend reinvestment. And of course when prices really get out of hand I just sell.

      Permabears use this persistent overvaluation as an excuse to do as you suggest, take no risk, and sit on gold and nothing else forever. That's fine if you have a source of income sufficient to meet your lifetime objectives without any returns. I'm not in that happy position, so I must take some risk. I try to take it wisely, which is to say when I'm likely to be paid for it. This is one of the rare times I think that just might happen.
      View article »
    • Tue Oct 28th 23:49 PM | Rating: 0 0
      Commented on:
      What Dividend Yield Can - And Can't - Tell Us
      All real returns come from dividends. Find companies that will not fail and pay dividends above the going interest rate and above inflation, then buy and hold. The return is in the dividend, not the sale. And never forget what to do with the dividend: if interest rates are negative, save it in gold. Otherwise, save it in paper. And don't hesitate to sell paper or gold when the right dividend-paying investment opportunity comes along.
      View article »
    • Tue Oct 28th 23:41 PM | Rating: 0 0
      Commented on:
      Pace of US Housing Price Declines Continues to Slow
      Housing prices in gold terms hardly fell at all. And remain well above historical trading ranges. Housing in income terms is likewise ridiculously expensive. Either the dollar or housing needs to lose at least 50-60% of its value before this cycle reaches its low.
      View article »
    • Tue Oct 28th 10:06 AM | Rating: 0 0
      Commented on:
      Ignore the Hype - Gold as Currency is Dead
      I'll be happy to give you FRNs for your gold. True, in the long run we're all dead, but in the long run betting on paper money has not been a good strategy. I'm sticking with the full weight of human history and betting on some good old fashioned mean reversion. If you want to take the other side of that trade because you are so confident in Hank Paulson, Ben Bernanke, and George W. Bush, I salute your naive bravery but I will still be happy to take your money.
      View article »
    • Mon Oct 27th 10:15 AM | Rating: 0 0
      Commented on:
      Why I Prefer Dividend Paying Stocks
      You're missing the bigger picture here. Dividends represent part of a company's income; that is, they are your claim on the ROE. Typical ROEs might be anywhere from 8% to 40% depending on the nature of the business. That is far, far higher than just about everyone's long-term real growth rate. Note that the total market's real growth rate is approximately equal to the true real growth rate in GDP. Even the government rarely pretends that real GDP grows faster than about 3% a year. So your real capital gains as a long-term index investor will be around 3% a year as well. And given that most people think of large-cap indexes when investing in this space, it will likely be less than that.

      But wait, less than 3% annual gains? History suggests that the long-run returns are much higher! What gives? The rest of your gains represent nothing but the increase in the money supply, which is currently running anywhere from 2% to 40% per year depending on your preferred metrics. In fact, the money supply usually grows much faster than real GDP, meaning that the majority of nominal capital appreciation in stocks is not real. But you'll be taxed on it anyway, which further reduces your real return. In reality, long-term indexers in taxable accounts are unlikely to achieve any significant real return. Those in untaxable accounts may do slightly better but given the massive increases in the money supply it would take only small changes in measurements or assumptions to make the difference between a real gain of 2% and a real loss of 3%.

      That's why dividends are so important. They represent the vast majority of all real returns on stocks. Over the past 10 years, that's been true in nominal terms, but it's always true in real terms. But, one might ask, what do you do with dividends? The most obvious answer is to reinvest them, as most traditional advisors recommend. And, indeed, this can be a good way to compound your gains. But it's very sensitive to market conditions; reinvest a 4% dividend at the wrong time and your long-term real return on it will be negative for 50 years. I would suggest this only when you believe that the stock is very attractively valued. Much better is to siphon off dividend payments and store them in the form of gold. The real return on gold is zero, but you've already received your return. Putting it aside in this fashion builds a risk-free pool of past gains that can either be saved for retirement or invested at the right time.
      View article »
    • Sun Oct 26th 11:22 AM | Rating: 0 0
      Commented on:
      Flying Bankers and the Economic Crisis: How Do We Make Banks Lend?
      Why they won't lend is CRUCIAL. If you don't understand this, you don't understand anything.

      No one wants to lend to someone who cannot repay the loan. Look at the typical American's balance sheet and you wouldn't lend to him either, not at ANY interest rate. Unlike your (unnamed, of course) banks declining to issue secured credit cards, which makes sense only if the cost of maintaining the account is excessive, banks asked to lend to people whose assets are all pledged as collateral on loans that exceed the value of those assets, have no savings, and have jobs of questionable security that pay slightly less than their outgoing cash flow are only being prudent when they decline such wonderful opportunities. It is very likely that there is no interest rate at which such loans can profitably be made.

      There is absolutely no way to fix this problem without simply giving people printed money. And once you start that, expect the Treasuries bubble to finally burst. Future government borrowing from anyone other than the Fed will become all but impossible.
      View article »
    • Sun Oct 26th 11:10 AM | Rating: 0 0
      Commented on:
      No Use Crying Over a Spilled 1%
      Characterizing lenders as "afraid to lend" might be accurate in the interbank market but is not really true on a broader level. The truth is much worse: borrowers have run out of capacity to borrow. AIG is a great example: they got $85b and blew through it in a few weeks, then got $37b more and have since blown through most of that. And we haven't even started talking about individual debt owed by a nation of people who do not save.

      Fear can be moderated and eventually fixed. Nothing can fix the unhappy combination of being cash flow negative and having liabilities that far exceed one's assets.
      View article »
    • Sun Oct 26th 11:01 AM | Rating: 0 0
      Commented on:
      Please Close the Markets
      Closing markets never solves anything (just ask Russia and Iceland). If you do it, people will trade in the streets instead. And perhaps more to the point, it removes the last traces of liquidity and condemns late panickers to bankruptcy. The prices are what people are willing to pay. Not having a safe, convenient place to ask and offer those prices does not make them higher.
      View article »
    • Sun Oct 26th 02:28 AM | Rating: 0 0
      Commented on:
      Is This the Last Great Bubble?
      Buddha, getting flattened? Geez, I dunno. I've been holding - and accumulating - TBT since it was first issued. In dollar terms, I'm down 6%. In real terms, I'm up about 11%. And I'll keep buying more every time the market goes apeshit and drops the long bond yield below 4%. I don't really see a 6% drop against dollars as "getting flattened" but if that exceeds your risk tolerance you'd best stick with FDIC insured CDs and enjoy your withering dollars like a good little comrade because about the only thing that did better in that time was bills and they're now cratering.

      This is my largest dollar-denominated position by far and I intend to own it until yields reach the 10-12% range - because I'm conservative and don't want to be too greedy; my gut tells me these bonds are worthless and I should be planning to short to zero. Since I do not use (additional) leverage there is no reason for me to sell until I can do so on my own terms. Anyone can see that the bear has spared this particular asset class thus far and will in time turn his full fury upon it, and that the government is determined (what else does it know how to do?) to print and borrow and spend in unlimited quantity, so my patience here is likewise unlimited. I don't really care about mark to market losses when I'm betting against macro imbalances.

      The market corrects imbalances like these. Always. You just have to wait and endure. I ought to know - I've been living in the San Francisco Bay Area since 2000, watching my friends' and neighbours' houses appreciate like rockets, refusing to buy the whole time because I knew the prices were too high. They took out equity and went to Tahiti; I mailed off another teeny rent check. Yes, I left money on the table. But they're not going to Tahiti this winter, while I'm in the same apartment paying the same rent - and sitting now on a pile of gold watching their world crumble and waiting for my next big profit.

      Patience.
      View article »
    • Sun Oct 26th 01:50 AM | Rating: 0 0
      Commented on:
      Gold in a Credit Crisis
      Nadler is a well-known dollar lover who does not understand or appreciate the role of gold throughout 5000 years of human history but lavishes praise on the central bankers. I don't think it's weird at all that he consults for Kitco; they are in the business of dumping gold for dollars. Seems like an ideal fit for him.

      And yes, I say that Kitco is in the business of buying dollars because that is what they do. Most metals dealers are basically market makers; they trade metals and paper for one another and make their profits on the spread. You can see this at some of the more reputable dealers; as supply from mints has been shut down by secret order, they have raised both their bid and ask prices in an attempt at price discovery. That's why guys like CNI still occasionally have at least a little stock: they're capturing large spreads (and taking large risks) at price levels 10 to 80% above COMEX "spot" levels. Kitco, on the other hand, has no stock and is not making bids that can be called even halfhearted. They are in the business of borrowing gold from their customers and using the proceeds to buy dollars; they do this by accepting dollar-denominated payments and then simply waiting to deliver the promised metals until they feel like it (more properly, until they have made enough money using their received cash as collateral to short gold for more dollars on COMEX).

      It's hard to prove this particular brand of fraud, but no one I know trusts Kitco just the same. Nadler just seems to fit right in. He probably creeps out at night to visit Bernanke and Paulson and share a few drinks with them, and perhaps a few laughs at the expense of his "customers". So why should anyone be surprised by his commentary? At least he's consistent: bullish on the dollar when it's rising, bullish on the dollar when it's falling. That anyone still pays any attention to him at all must be a broken clock effect.
      View article »
    • Sat Oct 25th 23:40 PM | Rating: 0 0
      Commented on:
      Stocks: A Bear Case
      LCACM, in the world of finance, negative feedback would simply mean raising interest rates when the availability of presumably cheap assets stimulates more demand for borrowed money, and lowering them when assets are perceived to be expensive and no one wants to invest. That's a fancy way of saying that a fixed monetary base and market rates do exactly what you want. So much for fiat paper and central bank wizardry, eh? Turns out the best countercyclical actor is the free market.
      View article »
    • Sat Oct 25th 21:24 PM | Rating: 0 0
      Commented on:
      Stocks: A Bear Case
      The only reason to buy stocks is the dividends. Nearly all real returns come that way. Why? Simple: the return on equity is much greater than the rate at which the economy grows in real terms. Virtually all capital gains are a byproduct of monetary expansion and do not reflect a real gain. Since monetary expansion occurs at several times the rate of real growth, capital gains in nominal terms are completely irrelevant for index investors and trivial for investors in all but the smallest companies. This system suits the government and central bankers well; they can capture enormous tax revenues even at low rates because the money they are being paid is just cycled around from the printing presses. The real losers are speculators in non-dividend stocks who consistently lose 2-3% of their investment every year even while the price of the shares in dollars is rising. It's a nifty scam but you'd have to be retarded not to see through it.
      View article »
    • Sat Oct 25th 21:05 PM | Rating: 0 0
      Commented on:
      The Recession Is Already Priced Into Stocks
      News flash for basehitz: posts have been overwhelmingly bearish for months. That's why it's called a bear market. The bear market will end when the imbalances that led up to it have reverted to the mean. Not before, no matter how high your bearish sentiment indicators go. The imbalance, of course, was in the supply of cheap money, and its expression was in housing prices. When they retreat to their historical mean (around 150 oz gold for the median SFH) we'll be close to a bottom. That means either house prices or the dollar need to fall by about 60% from here.
      View article »
    • Sat Oct 25th 19:43 PM | Rating: 0 0
      Commented on:
      How the Lehman Bailout Increased Moral Hazard
      The way to solve this problem is a constitutional amendment mandating the death penalty for any government official who gives, or proposes giving, or votes for giving, public money or financing to a private company or individual, except on ordinary commercial terms for actual goods and services received as required for the ordinary operation of government. Furthermore, the amendment should require death by mutilation followed by hanging in chains for any government official who attempts on behalf of the government to seize any ownership interest, with or without compensation and/or the approval of its owner(s), of any part of a private corporation or business operation of any kind, and render null and void any transaction part of such attempt. Finally, it must allow any citizen to bypass the judicial process in cases in which the amendment's requirements had obviously been violated, and directly and immediately torture and kill any and all public officials responsible for nationalisation, and/or who impede their efforts to impose the required penalties.

      Government is supposed to be answerable to the people, not the other way around. This would be a step in the right direction; if ratified today, most of the federal government would be executed by angry mobs by this evening. Anyone else want to see Hankie's head on a stick? Time to call your state legislature.
      View article »
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»