May, 2012

"We won’t win the race for new jobs and new businesses and middle-class security if we cling to this same old, worn-out, tired `you’re on your own’ economics that the other side is peddling. It was tried in the decades before the Great Depression. It didn’t work then. It was tried in the last decade. It didn’t work. You know, the idea you would keep on doing the same thing over and over again, even though it’s been proven not to work. That’s a sign of madness.”   ~  the Teleprompter  (POTUS)

"Listening to Barack Obama lecture ANYONE else on economics is like getting a lecture from Jimmy Carter on the proper way to execute a hostage rescue. What’s up next? Will we have Bill Maher explaining civility? Will Keith Olbermann be coming along to explain proper workplace etiquette? Hey, Champ, maybe this wasn’t explained to you at Harvard, but when you’re in the process of decimating the country’s economy through your own incompetence, people may be a little dubious when you tell them going a different way would be “madness.”  ~ John Hawkins (Political Writer)

The Professional Opinion

None this month - taking a subscription vacation.

Buy Recommendations

From the Compost Bin:  According to Suze, another Doomsday Prophet,  buy no more than 15% gold, buy TIPS, ETFs and Dividend paying stocks.

Turkey just south of San Simeon, CA.

Personal Portfolio

An Arm and a Leg
With all the drivel our favorite teleprompter has been spewing about the wonderful things he has done for the energy sector, one would expect gasoline prices to be coming down.

In reality, the teleprompter has done as much to promote sound energy policies as  Al Gore has accomplished in creating the Internet.

Speaking of energy, one might take a look at Chesapeake Energy this month. Trading at half the price of its 52 week high, I think there's possibility there .....provided the CEO and his reported 'conflict of interest' issues are only smoke, and not fire.

Personal Portfolio


HBAN remains a favorite of mine and I've got lots of shares :)  Oh, and they quadrupled their dividend as well to four cents :)


If only Bank of  America was performing as well..........

So what about Facebook?


Personally, I would stay away from this one and I have nothing to do with it anyway.   Another thing to consider is the economy.  As  the economy improves and particularly if we get the teleprompter voted out of office, more people will be going to work.  More people working means less time on Facebook.  Less time on Facebook means less clicking on advertising links.

I could never figure that one out anyway.  I go out of my way not to click on advertising links.  I go to places for information, not their wonderful ads.

Brave New World,  I guess....

Electronic Arts Revisited (Groan)


So what did Electronic Arts do as soon as I bought it?  Declined in price from the original purchase at 16.60 a share, of course.

I got back on the horn to my sister the other day and asked her is she was still enthusiastic about the stock, particularly after it made the news as  the worst tech company around for management leadership and other fairly important items.   She said she was, and that gamers are a particularly vocal crowd and that EA is listening to them.

So,  I will continue to hold.  

TIPS - What are they Anyway?


I don't know all that much about TIPS and the like beyond layman's knowledge of the subject but maybe this will help out:

TIPS, otherwise known as Treasury Inflation Protected Securities are pieces of paper you can buy which hedge you against losing the purchasing power of your dollars due to the effects of inflation over time.

People who believe inflation is going to ramp up in a big way in the future use TIPS and hard commodities like gold to protect themselves.  Gold in particular is quite popular these days among the fear mongers.

5 and 10 year tips last month turned yield-negative, which means people have been bidding up the price they pay for TIPS to the point that the yield on the paper is in the minus.

In other words, imagine paying $20.00 for a bond that yields -.5%.  What this basically means is that you are so scared of inflation and the world at large that you are willing to lose some money in order not to lose more.

People like Suze and a bunch of others came out in 2011 saying that 2012 was going in flames. Today they are still saying it but have toned the rhetoric down, saying it still could be pretty bad in 2012 but in 2013, 2014 it's sure disaster.

Curiously enough, they are all either pandering gold, term life insurance, annuities and living trusts. 

And coincidentally I'm sure....they all happen to know each other and they probably all watch CNN and MSNBC as well.

To my way of thinking, if you look at the earnings multiples currently priced into the overall market versus where they would be during normal times,  you're still looking at lots of bargains out there even after the considerable run-ups we've experienced. 

Equity funds even now are still experiencing large outflows into fixed income securities.  This of course is driving yields on any bonds issued by the government into the ground. People who depend on CD's, govt bonds and the like are finding it hard to live on the  fraction of a percent interest many of these pay.

This leaves them with three other options - invest in higher yielding junk bonds, putting NAV at more risk or investing in stocks paying a dividend, putting share price and dividend yield at more risk. The third is buying insurance contracts, otherwise known as annuities.

Either way the extremely low rates of interest are in the end going to have the effect of driving more people into stocks for growth and yield.  And...if you happen to be holding quality equities now, you could end up in the catbird seat further on down the road.

If you're maxing out your retirement vehicles - Roths, 403B's, 401k's and the like and buying quality in them....that's even better.


Annaly Capital Management, my favorite REIT has come out with their Q1 Commentary:

Annaly Commentary

This  is an example of NAV (Net Asset Value) fluctuation in return for yield.  For some people,  preservation of NAV is the most important thing and for them,  this  would be  the wrong type of investment.  For me,  I'm not so concerned because this is a decent company and it's share price will fluctuate has a great yield.  

Holding a REIT like this  doesn't mean you have to hold it forever though, as long as you hold it on the distribution date for the dividends.  I may trade this several times a year when something attractive comes when NLY is trading high and BAC gets hammered.  I'm currently holding a lot of BAC and plan on selling it back in the near future for a profit and more shares of NLY.  Works out well most of the time.  

Chesapeake - The Victim of a Hit Piece and Possible Buying Opportunity?



It all started out with this.


Chesapeake rebuffed the accusations,  basically saying that the detractor did not know what he was talking about.


Of course, everyone else piled on, launching investigations of possible breaches of fiduciary duty.


A very lengthy  response was issued by Chesapeake counsel and it can be found on their web page.

I think Reuters did a hit piece.

I'm sure all this is very distracting and it led to indications of an early termination of the founder's well-participation plan.

All that aside, it appears  the natural gas decline is bottoming out and Chesapeake is closely tied to nat-gas prices.

Trading at about 50% of its 52 week high, this sure looks tempting but if anything it may go lower because Kinder Morgan is working on putting a couple more large natgas pipelines into service, and all of it headed to the east coast.

And, some companies recover well from the 'appearance' of impropriety  and others don't.


What we have here is CNBC's
 prophet, seer, revelator - and major PITA.    Detailed Opinion Here

Financial Analyst - NOT

Soothsayer - NOT

Bearer of Practical Financial Advice - Occasional

Man's Worst Nightmare - Maybe......

Having to listen to annuity pitches interspersed with vitamin infomercials  could be worse.

Let's  keep track of just  how well this PITA's  'predictions' pan out for the rest of the year.

2012 Predicted Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Gold $2,000.00 1736.7 1716.28 1671.9 1664.2
Recession  60% Chance Nope! Nope! Nope! Nope!
TIPS Current 5yr Yield Home Run - Maybe 0.95% 0.90% -.126% .125

Two Canes

San Simeon, California at the Best Western