Change Wave investments has put out a buy recomendation on Harvest Energy Trust. Click the title of this post and it will take you to the video interview.
What is interesting here is that they believe some of the Canadian Energy Trusts will start converting to the US Master Limited Partnership (MLP) structure.
I have written about this in previous posts and I quoted from a research paper written by UBS.
I plan on sending out this report to my email subscribers some time next week. If you want a copy please sign up on our list at www.investingfforincome.com.
I will be following this issue closely over the coming months.
Sunday, September 30, 2007
Saturday, September 29, 2007
Don't Underestimate the USA
Max Whitmore: Inflation? Who Said Inflation?!
The Fed did their thing last week and there was a torrent of words from every corner of the globe about how they had: (1) done exactly the wrong thing; (2) done exactly the right thing; (3) went weak-kneed and gave in to Wall Street; (4) Wall Street failed to get the Fed to do its bidding; (5) Bernanke is a rooky and is making rookie mistakes; (6) Bernanke did a brilliant job; . . . and on and on!!
The only sure thing most agreed on was that the Fed took action to get the confidence of the investing and banking business and to overtly assure the investing public that it was ready to do whatever was required to make sure that the country did not experience undue hardships and possibly a recession. (Bernanke believes that recession is the outcome of bad management, not an inevitable economic outcome no one can control.)
Today, seeking to apply every available tool of good management, the Fed uses just about every type of high-tech computer program available (and many programmed by their own staff) to “run scenarios” that help predict recession or other undesirable economic outcomes if no preventative action is taken today.
Then, a study of these undesirable outcomes is made to see just what different types of present actions “plugged in” to the program might help prevent or mitigate these undesirable outcomes down the road. This computer “looking forward” study helps the Fed to zero in on just what the best action might be today.
It is from these “looking forward scenarios” that the action on the Sept. 18 was framed. The FOMC statement alludes to just this technique. For example, here are some of the key phrases of the FOMC statement of Sept. 18: “Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.”
I believe it was the use of the above mentioned computer programs that led the FOMC to lower rates as much as they did. I do not recall any time in the previous 18 years of the Greenspan Fed that the steps taken were to “forestall” disruptions, as was clearly noted in the FOMC statement.”
Note that the phrase “to promote moderate growth over time” was spelled out, too. In my opinion, this was to salve the frayed nerves of investors worldwide. I think it also was to address the inevitable inflation questions.
The FOMC statement then directly addressed inflation in the next paragraph, again in my opinion, to pre-empt criticism some would level at it as a result of the drop in rates. They said: “Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. ….The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.”
They obviously felt it was necessary to cite the moderation of core inflation to clearly tie the reduction of rates to the goal of promotion of long-term growth. But, they also added that they would be “carefully” monitoring the situation regarding inflation “to foster price stability“. To me this paragraph really was the basic purpose of the entire FOMC statement. It is inflation that now has everyone on pins and needles!
I find it most interesting that inflation is the one outcome that everyone seems to expect. I think I would be fairly accurate if I said that ALL the articles I have read addressing the FOMC action are unanimous in predicting or fearing that inflation was the next outcome. There can be no other outcome they believe. Well, I don’t believe those predictions for a minute. The last thing that usually happens is what everyone expects — the last thing!!
In my view, this is akin to the world believing that interest rates rule the world’s economic health. I have said over and over that it isn’t interest rates, it is money supply. Read my last 3-4 articles again and you will see why.
Basically, because Bernanke’s research papers and essays about the Great Depression — research covering periods as far back as the 1890s — over and over clearly spells this out.
Additionally, he also points out on page 250-51 of his book “Essays on The Great Depression” his take on inflation. In his words, “Theory suggests instead that inflation will be determined by current and expected money supply and demand.” This statement is made as part of an argument about unemployment in the Depression, but clearly again makes the case that control of the money supply is a better control device that any other for inflation.
My own view on this matter goes to a simpler way of stating the situation. Inflation due to a lower value of currency — a condition typically precipitated not by actual conditions but by fear — requires (1) that import levels remain the same, but at higher prices and that (2) internal production capacity of the country is either at or very close to full capacity or that the ability to produce goods to replace the higher cost imports (but at a more competitive price than the imports) is lacking for any variety of reasons.
My own expectations are that imports will substantially moderate in the next 12 months. U.S. buyers of imported goods will find it more competitive to buy USA goods instead of imports. This condition will exist, in my opinion, because this country is a sleeping giant, as Admiral Yamamato of Japan, once observed. If you wake it, it will beat you at every turn.
I see this country going on a production binge not seen in many years. I look for exports to soar, production for our own consumption to flourish, and for the huge foreign investments made by many U.S. companies to become the proverbial albatross about their necks.
I have no way of knowing if Bernanke senses this same scenario, but I would be surprised if he didn’t. The loss of hundreds of billions, several trillions, of our sovereign wealth over the last 30 years occurred because we let it occur.
As a nation, we did not, primarily for political reasons, combat the unfair positioning of many nations against us on the economic playing field. These countries set their currencies — especially China — well below our dollar and used low paid sweat labor to produce goods to sell to our nation at prices we just could not match under such circumstances.
Now, the lower dollar is biting our competitors back in a big way. To continue selling to us, they must sell production at a loss, as the peg of their currencies to our dollar now is having negative consequences for their economy. How long will they do that?
That depends on how serious they think we are in fighting back. We have just seen the biggest increase in U. S. exports in decades during the past 19 months. For the first seven months of 2007 (August numbers not included yet) the U.S. is running at an annual rate of $1.6 trillion (annualized) in exports, versus an annual rate of $1.44 trillion in 2006 (Jan-July 2006 $822 billion vs. Jan-July 2007 $915 billion). That is a handsome +11 percent increase over last year and with the dollar favoring us even more in world markets recently, I expect we might even challenge the +14-15 percent gain year-over-year. (Source of data is U.S. Census Bureau, Foreign Trade Div.).
All this export increase means more and bigger paychecks landing in U.S. households. Now add to this higher income from what I think will be a huge increase in U. S. production for U.S. consumption — at prices better than those offered by imports — and I just don’t see inflation. Instead, I see healthy economic expansion, likely well above our long-term rate of expansion of 3.5 — 4 percent per year.
To have inflation, we would need (1) a Fed not keyed on “carefully” watching inflation and using money supply to moderate it — but our Fed is “carefully” watching — and you need (2) an American business community that passes up the golden opportunity of competing with imports on its own home turf (and winning this time) — but, that too, will never happen!!
Will I be right? I think so. But, I expect that the argument will rage on for the next 6-10 months as investors start an “inflation watch” and slowly come to the realization that the stock market has it right so far.
Stock index prices are climbing and not because of anything except an overall investor consensus that the Fed is right on target. To me my Super Chart Keyline now becomes the front line of this terrific battle. I will be watching it with baited breath. It should be a fascinating few months!
The Fed did their thing last week and there was a torrent of words from every corner of the globe about how they had: (1) done exactly the wrong thing; (2) done exactly the right thing; (3) went weak-kneed and gave in to Wall Street; (4) Wall Street failed to get the Fed to do its bidding; (5) Bernanke is a rooky and is making rookie mistakes; (6) Bernanke did a brilliant job; . . . and on and on!!
The only sure thing most agreed on was that the Fed took action to get the confidence of the investing and banking business and to overtly assure the investing public that it was ready to do whatever was required to make sure that the country did not experience undue hardships and possibly a recession. (Bernanke believes that recession is the outcome of bad management, not an inevitable economic outcome no one can control.)
Today, seeking to apply every available tool of good management, the Fed uses just about every type of high-tech computer program available (and many programmed by their own staff) to “run scenarios” that help predict recession or other undesirable economic outcomes if no preventative action is taken today.
Then, a study of these undesirable outcomes is made to see just what different types of present actions “plugged in” to the program might help prevent or mitigate these undesirable outcomes down the road. This computer “looking forward” study helps the Fed to zero in on just what the best action might be today.
It is from these “looking forward scenarios” that the action on the Sept. 18 was framed. The FOMC statement alludes to just this technique. For example, here are some of the key phrases of the FOMC statement of Sept. 18: “Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.”
I believe it was the use of the above mentioned computer programs that led the FOMC to lower rates as much as they did. I do not recall any time in the previous 18 years of the Greenspan Fed that the steps taken were to “forestall” disruptions, as was clearly noted in the FOMC statement.”
Note that the phrase “to promote moderate growth over time” was spelled out, too. In my opinion, this was to salve the frayed nerves of investors worldwide. I think it also was to address the inevitable inflation questions.
The FOMC statement then directly addressed inflation in the next paragraph, again in my opinion, to pre-empt criticism some would level at it as a result of the drop in rates. They said: “Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. ….The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.”
They obviously felt it was necessary to cite the moderation of core inflation to clearly tie the reduction of rates to the goal of promotion of long-term growth. But, they also added that they would be “carefully” monitoring the situation regarding inflation “to foster price stability“. To me this paragraph really was the basic purpose of the entire FOMC statement. It is inflation that now has everyone on pins and needles!
I find it most interesting that inflation is the one outcome that everyone seems to expect. I think I would be fairly accurate if I said that ALL the articles I have read addressing the FOMC action are unanimous in predicting or fearing that inflation was the next outcome. There can be no other outcome they believe. Well, I don’t believe those predictions for a minute. The last thing that usually happens is what everyone expects — the last thing!!
In my view, this is akin to the world believing that interest rates rule the world’s economic health. I have said over and over that it isn’t interest rates, it is money supply. Read my last 3-4 articles again and you will see why.
Basically, because Bernanke’s research papers and essays about the Great Depression — research covering periods as far back as the 1890s — over and over clearly spells this out.
Additionally, he also points out on page 250-51 of his book “Essays on The Great Depression” his take on inflation. In his words, “Theory suggests instead that inflation will be determined by current and expected money supply and demand.” This statement is made as part of an argument about unemployment in the Depression, but clearly again makes the case that control of the money supply is a better control device that any other for inflation.
My own view on this matter goes to a simpler way of stating the situation. Inflation due to a lower value of currency — a condition typically precipitated not by actual conditions but by fear — requires (1) that import levels remain the same, but at higher prices and that (2) internal production capacity of the country is either at or very close to full capacity or that the ability to produce goods to replace the higher cost imports (but at a more competitive price than the imports) is lacking for any variety of reasons.
My own expectations are that imports will substantially moderate in the next 12 months. U.S. buyers of imported goods will find it more competitive to buy USA goods instead of imports. This condition will exist, in my opinion, because this country is a sleeping giant, as Admiral Yamamato of Japan, once observed. If you wake it, it will beat you at every turn.
I see this country going on a production binge not seen in many years. I look for exports to soar, production for our own consumption to flourish, and for the huge foreign investments made by many U.S. companies to become the proverbial albatross about their necks.
I have no way of knowing if Bernanke senses this same scenario, but I would be surprised if he didn’t. The loss of hundreds of billions, several trillions, of our sovereign wealth over the last 30 years occurred because we let it occur.
As a nation, we did not, primarily for political reasons, combat the unfair positioning of many nations against us on the economic playing field. These countries set their currencies — especially China — well below our dollar and used low paid sweat labor to produce goods to sell to our nation at prices we just could not match under such circumstances.
Now, the lower dollar is biting our competitors back in a big way. To continue selling to us, they must sell production at a loss, as the peg of their currencies to our dollar now is having negative consequences for their economy. How long will they do that?
That depends on how serious they think we are in fighting back. We have just seen the biggest increase in U. S. exports in decades during the past 19 months. For the first seven months of 2007 (August numbers not included yet) the U.S. is running at an annual rate of $1.6 trillion (annualized) in exports, versus an annual rate of $1.44 trillion in 2006 (Jan-July 2006 $822 billion vs. Jan-July 2007 $915 billion). That is a handsome +11 percent increase over last year and with the dollar favoring us even more in world markets recently, I expect we might even challenge the +14-15 percent gain year-over-year. (Source of data is U.S. Census Bureau, Foreign Trade Div.).
All this export increase means more and bigger paychecks landing in U.S. households. Now add to this higher income from what I think will be a huge increase in U. S. production for U.S. consumption — at prices better than those offered by imports — and I just don’t see inflation. Instead, I see healthy economic expansion, likely well above our long-term rate of expansion of 3.5 — 4 percent per year.
To have inflation, we would need (1) a Fed not keyed on “carefully” watching inflation and using money supply to moderate it — but our Fed is “carefully” watching — and you need (2) an American business community that passes up the golden opportunity of competing with imports on its own home turf (and winning this time) — but, that too, will never happen!!
Will I be right? I think so. But, I expect that the argument will rage on for the next 6-10 months as investors start an “inflation watch” and slowly come to the realization that the stock market has it right so far.
Stock index prices are climbing and not because of anything except an overall investor consensus that the Fed is right on target. To me my Super Chart Keyline now becomes the front line of this terrific battle. I will be watching it with baited breath. It should be a fascinating few months!
Tuesday, September 25, 2007
God Bless America
"LET'S BE PERSONAL" Broadcast June 5, 1973 CFRB, Toronto, Ontario
Topic: "The Americans"
The United States dollar took another pounding on German, French and British exchanges this morning, hitting the lowest point ever known in West Germany. It has declined there by 41% since 1971 and this Canadian thinks it is time to speak up for the Americans as the most generous and possibly the least-appreciated people in all the earth.
As long as sixty years ago, when I first started to read newspapers, I read of floods on the Yellow River and the Yangtze. Who rushed in with men and money to help? The Americans did.
They have helped control floods on the Nile, the Amazon, the Ganges and the Niger. Today, the rich bottom land of the Misssissippi is under water and no foreign land has sent a dollar to help. Germany, Japan and, to a lesser extent, Britain and Italy, were lifted out of the debris of war by the Americans who poured in billions of dollars and forgave other billions in debts. None of those countries is today paying even the interest on its remaining debts to the United States.
When the franc was in danger of collapsing in 1956, it was the Americans who propped it up and their reward was to be insulted and swindled on the streets of Paris. I was there. I saw it.
When distant cities are hit by earthquakes, it is the United States that hurries into help... Managua Nicaragua is one of the most recent examples. So far this spring, 59 American communities have been flattened by tornadoes. Nobody has helped.
The Marshall Plan .. the Truman Policy .. all pumped billions upon billions of dollars into discouraged countries. Now, newspapers in those countries are writing about the decadent war-mongering Americans.
I'd like to see one of those countries that is gloating over the erosion of the United States dollar build its own airplanes.
Come on... let's hear it! Does any other country in the world have a plane to equal the Boeing Jumbo Jet, the Lockheed Tristar or the Douglas 107? If so, why don't they fly them? Why do all international lines except Russia fly American planes? Why does no other land on earth even consider putting a man or women on the moon?
You talk about Japanese technocracy and you get radios. You talk about German technocracy and you get automobiles. You talk about American technocracy and you find men on the moon, not once, but several times ... and safely home again. You talk about scandals and the Americans put theirs right in the store window for everyone to look at. Even the draft dodgers are not pursued and hounded. They are here on our streets, most of them ... unless they are breaking Canadian laws .. are getting American dollars from Ma and Pa at home to spend here.
When the Americans get out of this bind ... as they will... who could blame them if they said 'the hell with the rest of the world'. Let someone else buy the Israel bonds, Let someone else build or repair foreign dams or design foreign buildings that won't shake apart in earthquakes.
When the railways of France, Germany and India were breaking down through age, it was the Americans who rebuilt them. When the Pennsylvania Railroad and the New York Central went broke, nobody loaned them an old caboose. Both are still broke. I can name to you 5,000 times when the Americans raced to the help of other people in trouble.
Can you name me even one time when someone else raced to the Americans in trouble? I don't think there was outside help even during the San Francisco earthquake.
Our neighbours have faced it alone and I am one Canadian who is damned tired of hearing them kicked around. They will come out of this thing with their flag high. And when they do, they are entitled to thumb their nose at the lands that are gloating over their present troubles.
I hope Canada is not one of these. But there are many smug, self-righteous Canadians. And finally, the American Red Cross was told at its 48th Annual meeting in New Orleans this morning that it was broke.
This year's disasters .. with the year less than half-over… has taken it all and nobody...but nobody... has helped.
ORIGINAL SCRIPT AND AUDIO
COURTESY STANDARD BROADCASTING CORPORATION LTD.
(c) 1973 BY GORDON SINCLAIR
PUBLISHED BY STAR QUALITY MUSIC (SOCAN)
A DIVISION OF UNIDISC MUSIC INC.
578 HYMUS BOULEVARD
POINTE-CLAIRE, QUEBEC,
CANADA, H9R 4T2
Topic: "The Americans"
The United States dollar took another pounding on German, French and British exchanges this morning, hitting the lowest point ever known in West Germany. It has declined there by 41% since 1971 and this Canadian thinks it is time to speak up for the Americans as the most generous and possibly the least-appreciated people in all the earth.
As long as sixty years ago, when I first started to read newspapers, I read of floods on the Yellow River and the Yangtze. Who rushed in with men and money to help? The Americans did.
They have helped control floods on the Nile, the Amazon, the Ganges and the Niger. Today, the rich bottom land of the Misssissippi is under water and no foreign land has sent a dollar to help. Germany, Japan and, to a lesser extent, Britain and Italy, were lifted out of the debris of war by the Americans who poured in billions of dollars and forgave other billions in debts. None of those countries is today paying even the interest on its remaining debts to the United States.
When the franc was in danger of collapsing in 1956, it was the Americans who propped it up and their reward was to be insulted and swindled on the streets of Paris. I was there. I saw it.
When distant cities are hit by earthquakes, it is the United States that hurries into help... Managua Nicaragua is one of the most recent examples. So far this spring, 59 American communities have been flattened by tornadoes. Nobody has helped.
The Marshall Plan .. the Truman Policy .. all pumped billions upon billions of dollars into discouraged countries. Now, newspapers in those countries are writing about the decadent war-mongering Americans.
I'd like to see one of those countries that is gloating over the erosion of the United States dollar build its own airplanes.
Come on... let's hear it! Does any other country in the world have a plane to equal the Boeing Jumbo Jet, the Lockheed Tristar or the Douglas 107? If so, why don't they fly them? Why do all international lines except Russia fly American planes? Why does no other land on earth even consider putting a man or women on the moon?
You talk about Japanese technocracy and you get radios. You talk about German technocracy and you get automobiles. You talk about American technocracy and you find men on the moon, not once, but several times ... and safely home again. You talk about scandals and the Americans put theirs right in the store window for everyone to look at. Even the draft dodgers are not pursued and hounded. They are here on our streets, most of them ... unless they are breaking Canadian laws .. are getting American dollars from Ma and Pa at home to spend here.
When the Americans get out of this bind ... as they will... who could blame them if they said 'the hell with the rest of the world'. Let someone else buy the Israel bonds, Let someone else build or repair foreign dams or design foreign buildings that won't shake apart in earthquakes.
When the railways of France, Germany and India were breaking down through age, it was the Americans who rebuilt them. When the Pennsylvania Railroad and the New York Central went broke, nobody loaned them an old caboose. Both are still broke. I can name to you 5,000 times when the Americans raced to the help of other people in trouble.
Can you name me even one time when someone else raced to the Americans in trouble? I don't think there was outside help even during the San Francisco earthquake.
Our neighbours have faced it alone and I am one Canadian who is damned tired of hearing them kicked around. They will come out of this thing with their flag high. And when they do, they are entitled to thumb their nose at the lands that are gloating over their present troubles.
I hope Canada is not one of these. But there are many smug, self-righteous Canadians. And finally, the American Red Cross was told at its 48th Annual meeting in New Orleans this morning that it was broke.
This year's disasters .. with the year less than half-over… has taken it all and nobody...but nobody... has helped.
ORIGINAL SCRIPT AND AUDIO
COURTESY STANDARD BROADCASTING CORPORATION LTD.
(c) 1973 BY GORDON SINCLAIR
PUBLISHED BY STAR QUALITY MUSIC (SOCAN)
A DIVISION OF UNIDISC MUSIC INC.
578 HYMUS BOULEVARD
POINTE-CLAIRE, QUEBEC,
CANADA, H9R 4T2
Monday, September 24, 2007
The Dirty Little secret About the Prime West Energy Energy Trust Buyout by the Arabs
Today an Arab country bought out Prime West Energy Trust for a 30% premium. The dirty little secret is that Prime West will now become a "private" flow through entity and will not be subject to a the "Trust Tax".
This is absolutely insane and I am amazed how our media and the public are so naieve that they cannot see what hyprocisy this tax is.
Remember, the "Tax Fairness" policy was designed only to Tax publicly traded Trusts.
This is patently unfair.
Ironicly, the Canadian Minster of Finance sometimes advertises the tax fairness plan on this blog. What a Croc!
This is absolutely insane and I am amazed how our media and the public are so naieve that they cannot see what hyprocisy this tax is.
Remember, the "Tax Fairness" policy was designed only to Tax publicly traded Trusts.
This is patently unfair.
Ironicly, the Canadian Minster of Finance sometimes advertises the tax fairness plan on this blog. What a Croc!
Saturday, September 22, 2007
Unloved Natural Gas
Contrarians should consider investments in the natural gas sector.
After a mini-mania in 2005 as hurricanes temporarily crushed supplies, natural gas prices have settled into a broad trading range and have disappeared from many investors’ radar screens. Sentiment has been extremely negative in the past 18 months, similar to the environment early in the decade, even though prices are well above the levels seen in 2001. Industry investment plans have been steadily pruned, which should ensure inadequate supplies down the road given the relentless uptrend in demand. Thus, the contrary call is to be bullish from a long-term perspective. Temporary weather and hurricane effects aside, we expect prices to grind higher in the coming years.
Article taken from BCA Research
After a mini-mania in 2005 as hurricanes temporarily crushed supplies, natural gas prices have settled into a broad trading range and have disappeared from many investors’ radar screens. Sentiment has been extremely negative in the past 18 months, similar to the environment early in the decade, even though prices are well above the levels seen in 2001. Industry investment plans have been steadily pruned, which should ensure inadequate supplies down the road given the relentless uptrend in demand. Thus, the contrary call is to be bullish from a long-term perspective. Temporary weather and hurricane effects aside, we expect prices to grind higher in the coming years.
Article taken from BCA Research
Friday, September 21, 2007
Dividend Investing
Why dividends are important.
Dividends set a floor price – Dividend stocks tend to trade within their yield range, and rarely do they yield much higher than Treasury bill.
Dividends account for over half of the long-term real return – If you own 100 shares of BMO and receive 4% of dividends, you can DRIP your dividends to buy another 4 more shares. If you keep up the DRIP for 20 years, you’ll have a handsome 219 BMO shares in your portfolio. Even better, some Canadian corporations offer 5% discounts through DRIP.
Companies with long-term track records of stable and raising dividends show quality of the managements – Managements show commitment to shareholders by improving fundamentals and sharing profits.
Dividends cannot be manipulated like earnings – Dividends are real hard cash in your lap. Earnings can be faked by creative accounting.
A stable stream of dividends reward investors even during market down turn – Management pays you to wait even during market setbacks.
Dividends are more tax efficient than regular incomes and capital gains – In British Columbia, if you can make $66,000 in dividends, you pay $0 tax. In regular incomes, you pay $16,880 in taxes. In capital gains, you pay $5,097.
You can safely spend your dividends without harming your portfolio – If you think in terms of income streams instead of portfolio size, you can consume 100% of your dividends without hurting your portfolio. If instead you go for capital gains, consuming your capital during a depressed market will harm your portfolio immensely.
Receiving dividends are passive – Dividends and increases are given to you each quarter automatically without any action on your part. On the other hand, to receive capital gains, you must monitor the share prices continuously.
High dividend paying stocks have historically out-performed low-yield stocks – In David Dreman’s Forbes column (April 2004), he cited that between 1970 and 2003, the top fifth highest yield stocks returned 14.5%, while the lowest fifth returned only 8.8%.
Dividends are more predictable than capital gains – Suppose BMO averages 10% over the long term with 4% in dividends and 6% in capital gains. In a given year, you can count on seeing the 4% in your brokerage account, but the 6% capital gain is less dependable.
Your investment return depends on the company’s fundamentals, not the market’s temperament- You may think a business is wonderful and its stock is outrageously undervalued, but if market doesn’t share your excitement, your effort won’t bring you fruition, and you’re needlessly squandering away precious time. On the other hand, if dividends and dividend increases are your investment objectives, you don’t need the market’s blessing to celebrate. This is one fundamental advantage of dividend investing. When you buy dividend-paying stocks, there’s a strong linkage between your analysis and your reward, and this linkage isn’t compromised by market psychology.
Dividend investing forces you to think in a healthy frame of mind in terms of buying low - I bought Harvest Energy Trust last year. I bought it again this year. I will buy it next year, and possibly for the next 20 years. Why would I want my initial purchase to rise at the expense of penalizing my next 20 purchases? The next time you see dividend-paying stocks tumbling down, please come and give me a high-five.
Dividends set a floor price – Dividend stocks tend to trade within their yield range, and rarely do they yield much higher than Treasury bill.
Dividends account for over half of the long-term real return – If you own 100 shares of BMO and receive 4% of dividends, you can DRIP your dividends to buy another 4 more shares. If you keep up the DRIP for 20 years, you’ll have a handsome 219 BMO shares in your portfolio. Even better, some Canadian corporations offer 5% discounts through DRIP.
Companies with long-term track records of stable and raising dividends show quality of the managements – Managements show commitment to shareholders by improving fundamentals and sharing profits.
Dividends cannot be manipulated like earnings – Dividends are real hard cash in your lap. Earnings can be faked by creative accounting.
A stable stream of dividends reward investors even during market down turn – Management pays you to wait even during market setbacks.
Dividends are more tax efficient than regular incomes and capital gains – In British Columbia, if you can make $66,000 in dividends, you pay $0 tax. In regular incomes, you pay $16,880 in taxes. In capital gains, you pay $5,097.
You can safely spend your dividends without harming your portfolio – If you think in terms of income streams instead of portfolio size, you can consume 100% of your dividends without hurting your portfolio. If instead you go for capital gains, consuming your capital during a depressed market will harm your portfolio immensely.
Receiving dividends are passive – Dividends and increases are given to you each quarter automatically without any action on your part. On the other hand, to receive capital gains, you must monitor the share prices continuously.
High dividend paying stocks have historically out-performed low-yield stocks – In David Dreman’s Forbes column (April 2004), he cited that between 1970 and 2003, the top fifth highest yield stocks returned 14.5%, while the lowest fifth returned only 8.8%.
Dividends are more predictable than capital gains – Suppose BMO averages 10% over the long term with 4% in dividends and 6% in capital gains. In a given year, you can count on seeing the 4% in your brokerage account, but the 6% capital gain is less dependable.
Your investment return depends on the company’s fundamentals, not the market’s temperament- You may think a business is wonderful and its stock is outrageously undervalued, but if market doesn’t share your excitement, your effort won’t bring you fruition, and you’re needlessly squandering away precious time. On the other hand, if dividends and dividend increases are your investment objectives, you don’t need the market’s blessing to celebrate. This is one fundamental advantage of dividend investing. When you buy dividend-paying stocks, there’s a strong linkage between your analysis and your reward, and this linkage isn’t compromised by market psychology.
Dividend investing forces you to think in a healthy frame of mind in terms of buying low - I bought Harvest Energy Trust last year. I bought it again this year. I will buy it next year, and possibly for the next 20 years. Why would I want my initial purchase to rise at the expense of penalizing my next 20 purchases? The next time you see dividend-paying stocks tumbling down, please come and give me a high-five.
Saturday, September 15, 2007
Max Whitmore: They Are All Watching The Wrong Numbers
Below is a newsletter written by Max Whitmore. I find his writings different then all the gloom and doom you hear about.
-------------------------------------------------------------------------
Whitmore: They Are All Watching
The Wrong Numbers
So, the wait for next week's FOMC meeting begins. And the power of the suspense is like nothing we have seen for years! Will the FOMC group lower rates or leave them unchanged? Will they change the FOMC statement implications? Will it be bullish or bearish? Will the Fed bail out the "bad guys?" Will we go into recession? Will my new suit be back from the cleaners in time for me to go to next Saturday's wedding?
Oh come on!! This is all bordering on the silly! Most of the questions that are being asked are superfluous to the real question before the nation. That real question is, "Are we seeing the beginning of a major decline in the stock market."
All the other questions are of little importance. If the market buyers have lost confidence, they should be exiting the market by the millions. Are they? Hardly! Will they? Well, that one requires a bit more examination, so let's look at this last question and see what really solid information we can glean from what is going on.
First of all, the major money investors are not running away. Yes, we are seeing a correction. That is as sure to happen in the stock market every now and then as it is that they will ring the opening gong at the NYSE every weekday morning at precisely 9:30 a.m.
I have shown you many times in the last six to seven weeks that my SUPER CHART KEYLINE is still well below the current market activity. As I write this column on Sept. 11th, my KEYLINE for the DOW closed at Dow 12,017 and the KEYLINE for the S&P at S&P 1369. The actual Dow closed today at 13,308, above my KEYLINE by 1,291 points!! The S&P closed today at 1, 471, above my KEYLINE by a huge 102 points!
Now, you may ask, is this final proof that we will not see what I term a Major Market Reversal — in this instance a crossing below my KEYLINE for six weeks in a row. The answer is clearly no. But, the KEYLINE has only been crossed up and down a total of 16 times since 1963. It crossed UP the KEYLINE in June 2003 at DOW 9120. The S&P crossed up at 988. With current prices so far above the KEYLINE, it only tells us that any near term reversal is clearly not in the card for many weeks, so long as some sort of totally unexpected political or societal event does not intervene. The financials DO NOT call out any danger at this point at all.
OK, you ask, why are so many financial writers suggesting a huge collapse is near? Why are some even predicting a recession? To be honest, I just don't know. What they read as indications of such a disaster is beyond me. All I do is read charts. Charts are dispassionate, absolute, totally uninfluenced evidence of what EVERY investor is thinking today. At the end of each day, ALL these investors have made up their minds that things are either very bad, very good, or somewhere in between those two opposite poles. At the moment, it is clear they do not see a market collapse in the near term — a period I usually define as three to five months.
Understand this. The market as a whole cares little for what the just released data says. Yes, they do respond to monthly employment data and such, but be clear that this constant release of data requires a CLEAR TREND to be emerging before a TREND in the stock market occurs. The current stock market TREND is still UP or the selling would be far greater and my KEYLINE would clearly be in the process of being challenged. Today, it is a long way from being challenged in any way.
So, what does the coming FOMC meeting really mean? Isn't that where I started when we began the column today?
Well, to me it means this. The world of investors (but not all) are watching the interest rates as if the financial world will rise or fall on what happens to interest rates. How far from the real truth this is. Oh my, how far!
Do you really what to know where the market might go in the next three to five months? Then, I would point you to this Web site: http://www.federalreserve.gov/releases/h6/Current/. What's there? Well, in Table 2 a bit down the list (look at the "week average" column under M-2) you will see that the data released the week of Sept. 6 shows that for the week ending August 20, the M-2 increased from the week before by a total of about $48 billion.
It also shows that the M-2 money supply for the next week ending August 27 increased by $65 billion, ASTOUNDING!!! I do not recall any such HUGE two week increase for all the years I have been in this business. It may have happened, but I can't recall it and the data I can get hold of as I write this does not go back to 1967, the year I began my stock market career. Folks, it is all about MONEY SUPPLY — MONEY SUPPLY — MONEY SUPPLY!!
What so astounds me is that the Fed has just kicked in $112-113 BILLION to the money supply at a time when it seems to be conservatively approaching the interest rate question and sending all the pundits off on a wild goose chase about where interest rates are going and thus where the economy is going. Want to really know where the economy is going? With what the Fed just did, it is about to get a kick in the pants that will send it into a HUGE stock market rally and a huge prolonged economic boom!
Do I sound a bit over the top to you? Well, believe me I am standing on the most solid ground there is — the words of Dr. Ben Bernanke himself, the Fed Chairman, the one guy who can make it all happen.
Take a moment and read this quote from his book published in 2000. The title of the book is "Essays on The Great Depression." On page 34 under the paragraph heading titled "3. Conclusion" line 3 to line 7 of this paragraph reads: "Comparative studies of a large set of countries have greatly improved our ability to identify the forces that drove the world (my bold) into depression in the 1930s. In particular, the evidence for monetary contraction as an important cause (my bold) of the Depression, and for monetary reflation (my bold and note: meaning adding money to the economy) as a leading component of recovery (my bold), has been greatly strengthened."
Today, this is precisely what is going on — Reflation! Notice that Dr. Ben never mentioned interest rates as even a consideration of being important. To be fair, he does suggest in one of the later essays that confidence of the population in the steps being taken to improve or stabilize an economy is important, too. In other words, if the money supply goes up, but no one wants to use it, there can be problems.
While some writers suggest that is happening now, I need only look at the chart to see that, so far, that is NOT happening — not even close!
So, what is the bottom line for me? Simply this. Corrections like this one, with charts remaining strong, are the time to accumulate good stocks at bargain prices. I called for a MAJOR BUY last week and stand by that call. I said that only if the SUPER CHART KEYINE were broken to the downside would I change that call. After all, I can't see more than the current chart shows and it usually is a look into the future of three to five months, as I said above, and every now and then even as far as six to eight months. Right now, my opinion is that the three to five months look is what I am seeing.
So, go ahead and read the doomsayers if you want. But, do do this. Watch the charts, too. When the major averages begin to break major supports (we are a LONG way from this at the moment) then get concerned. Want to protect your portfolio cash until you know if I am right? Well, you might use stock index's (short selling or puts) to "freeze" your portfolio values (I wrote about that three weeks ago). Or if your not sleeping well at night, go to 80 percent cash and just wait.
The other 20 percent? Well, half in bonds, which I see continuinge to climb, and the other half into big cap major corporations (again, see last week's column — I suggest defense and major consumer goods types).
You know, all this seems to me to be the fulfillment of a very old Chinese (no pun intended here) proverb my good friend uses now and then, "May you live in interesting times." Boy, you couldn't ask for more interesting than these!!
So, that's all for this week. Hope your coming investment week is a good one. Meanwhile, you keep in touch. I do! See you next week.
-------------------------------------------------------------------------
Whitmore: They Are All Watching
The Wrong Numbers
So, the wait for next week's FOMC meeting begins. And the power of the suspense is like nothing we have seen for years! Will the FOMC group lower rates or leave them unchanged? Will they change the FOMC statement implications? Will it be bullish or bearish? Will the Fed bail out the "bad guys?" Will we go into recession? Will my new suit be back from the cleaners in time for me to go to next Saturday's wedding?
Oh come on!! This is all bordering on the silly! Most of the questions that are being asked are superfluous to the real question before the nation. That real question is, "Are we seeing the beginning of a major decline in the stock market."
All the other questions are of little importance. If the market buyers have lost confidence, they should be exiting the market by the millions. Are they? Hardly! Will they? Well, that one requires a bit more examination, so let's look at this last question and see what really solid information we can glean from what is going on.
First of all, the major money investors are not running away. Yes, we are seeing a correction. That is as sure to happen in the stock market every now and then as it is that they will ring the opening gong at the NYSE every weekday morning at precisely 9:30 a.m.
I have shown you many times in the last six to seven weeks that my SUPER CHART KEYLINE is still well below the current market activity. As I write this column on Sept. 11th, my KEYLINE for the DOW closed at Dow 12,017 and the KEYLINE for the S&P at S&P 1369. The actual Dow closed today at 13,308, above my KEYLINE by 1,291 points!! The S&P closed today at 1, 471, above my KEYLINE by a huge 102 points!
Now, you may ask, is this final proof that we will not see what I term a Major Market Reversal — in this instance a crossing below my KEYLINE for six weeks in a row. The answer is clearly no. But, the KEYLINE has only been crossed up and down a total of 16 times since 1963. It crossed UP the KEYLINE in June 2003 at DOW 9120. The S&P crossed up at 988. With current prices so far above the KEYLINE, it only tells us that any near term reversal is clearly not in the card for many weeks, so long as some sort of totally unexpected political or societal event does not intervene. The financials DO NOT call out any danger at this point at all.
OK, you ask, why are so many financial writers suggesting a huge collapse is near? Why are some even predicting a recession? To be honest, I just don't know. What they read as indications of such a disaster is beyond me. All I do is read charts. Charts are dispassionate, absolute, totally uninfluenced evidence of what EVERY investor is thinking today. At the end of each day, ALL these investors have made up their minds that things are either very bad, very good, or somewhere in between those two opposite poles. At the moment, it is clear they do not see a market collapse in the near term — a period I usually define as three to five months.
Understand this. The market as a whole cares little for what the just released data says. Yes, they do respond to monthly employment data and such, but be clear that this constant release of data requires a CLEAR TREND to be emerging before a TREND in the stock market occurs. The current stock market TREND is still UP or the selling would be far greater and my KEYLINE would clearly be in the process of being challenged. Today, it is a long way from being challenged in any way.
So, what does the coming FOMC meeting really mean? Isn't that where I started when we began the column today?
Well, to me it means this. The world of investors (but not all) are watching the interest rates as if the financial world will rise or fall on what happens to interest rates. How far from the real truth this is. Oh my, how far!
Do you really what to know where the market might go in the next three to five months? Then, I would point you to this Web site: http://www.federalreserve.gov/releases/h6/Current/. What's there? Well, in Table 2 a bit down the list (look at the "week average" column under M-2) you will see that the data released the week of Sept. 6 shows that for the week ending August 20, the M-2 increased from the week before by a total of about $48 billion.
It also shows that the M-2 money supply for the next week ending August 27 increased by $65 billion, ASTOUNDING!!! I do not recall any such HUGE two week increase for all the years I have been in this business. It may have happened, but I can't recall it and the data I can get hold of as I write this does not go back to 1967, the year I began my stock market career. Folks, it is all about MONEY SUPPLY — MONEY SUPPLY — MONEY SUPPLY!!
What so astounds me is that the Fed has just kicked in $112-113 BILLION to the money supply at a time when it seems to be conservatively approaching the interest rate question and sending all the pundits off on a wild goose chase about where interest rates are going and thus where the economy is going. Want to really know where the economy is going? With what the Fed just did, it is about to get a kick in the pants that will send it into a HUGE stock market rally and a huge prolonged economic boom!
Do I sound a bit over the top to you? Well, believe me I am standing on the most solid ground there is — the words of Dr. Ben Bernanke himself, the Fed Chairman, the one guy who can make it all happen.
Take a moment and read this quote from his book published in 2000. The title of the book is "Essays on The Great Depression." On page 34 under the paragraph heading titled "3. Conclusion" line 3 to line 7 of this paragraph reads: "Comparative studies of a large set of countries have greatly improved our ability to identify the forces that drove the world (my bold) into depression in the 1930s. In particular, the evidence for monetary contraction as an important cause (my bold) of the Depression, and for monetary reflation (my bold and note: meaning adding money to the economy) as a leading component of recovery (my bold), has been greatly strengthened."
Today, this is precisely what is going on — Reflation! Notice that Dr. Ben never mentioned interest rates as even a consideration of being important. To be fair, he does suggest in one of the later essays that confidence of the population in the steps being taken to improve or stabilize an economy is important, too. In other words, if the money supply goes up, but no one wants to use it, there can be problems.
While some writers suggest that is happening now, I need only look at the chart to see that, so far, that is NOT happening — not even close!
So, what is the bottom line for me? Simply this. Corrections like this one, with charts remaining strong, are the time to accumulate good stocks at bargain prices. I called for a MAJOR BUY last week and stand by that call. I said that only if the SUPER CHART KEYINE were broken to the downside would I change that call. After all, I can't see more than the current chart shows and it usually is a look into the future of three to five months, as I said above, and every now and then even as far as six to eight months. Right now, my opinion is that the three to five months look is what I am seeing.
So, go ahead and read the doomsayers if you want. But, do do this. Watch the charts, too. When the major averages begin to break major supports (we are a LONG way from this at the moment) then get concerned. Want to protect your portfolio cash until you know if I am right? Well, you might use stock index's (short selling or puts) to "freeze" your portfolio values (I wrote about that three weeks ago). Or if your not sleeping well at night, go to 80 percent cash and just wait.
The other 20 percent? Well, half in bonds, which I see continuinge to climb, and the other half into big cap major corporations (again, see last week's column — I suggest defense and major consumer goods types).
You know, all this seems to me to be the fulfillment of a very old Chinese (no pun intended here) proverb my good friend uses now and then, "May you live in interesting times." Boy, you couldn't ask for more interesting than these!!
So, that's all for this week. Hope your coming investment week is a good one. Meanwhile, you keep in touch. I do! See you next week.
Thursday, September 13, 2007
Trust Sector Offers Upside With MLP Convergence
The Canadian Income Trust sector offers upside with MLP convergence.
The following is an excerpt from a UBS report issued in June 2007.
If you want a copy of this report then please add your email address to our list at www.investingforincome.com.
The report will be made available in upcoming mailing.
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Assuming that a trust signals its intent to convert to an MLP sometime this year,we believe there should be further upside for Canadian investors. We are forecasting a one-year total return of 16% for our coverage universe, which includes the average cash yield of 11.0%. Our valuations incorporate premiums for the MLP conversion, biased toward those trusts with NYSE listings and higher proportions of U.S. ownership.
In the absence of our MLP thesis, the stocks appear fully valued today, reflecting an appropriate premium for the income relative to conventional E&P peers. Based on our net asset value analysis, we estimate that the trusts in our sector are discounting commodity prices of US$50-55 per boe, which compares to the 2008 forward strip of US$61.50 per boe.
These commodity prices imply the sector trading at 110-120% of their blow-down net asset values (i.e., a discounted cash flow reflecting the production of only existing booked reserves), which we believe is appropriate based on our conservative NAV analysis.
The following is an excerpt from a UBS report issued in June 2007.
If you want a copy of this report then please add your email address to our list at www.investingforincome.com.
The report will be made available in upcoming mailing.
----------------------------------------------------------------
Assuming that a trust signals its intent to convert to an MLP sometime this year,we believe there should be further upside for Canadian investors. We are forecasting a one-year total return of 16% for our coverage universe, which includes the average cash yield of 11.0%. Our valuations incorporate premiums for the MLP conversion, biased toward those trusts with NYSE listings and higher proportions of U.S. ownership.
In the absence of our MLP thesis, the stocks appear fully valued today, reflecting an appropriate premium for the income relative to conventional E&P peers. Based on our net asset value analysis, we estimate that the trusts in our sector are discounting commodity prices of US$50-55 per boe, which compares to the 2008 forward strip of US$61.50 per boe.
These commodity prices imply the sector trading at 110-120% of their blow-down net asset values (i.e., a discounted cash flow reflecting the production of only existing booked reserves), which we believe is appropriate based on our conservative NAV analysis.
Wednesday, September 12, 2007
Will Canadian Trusts Convert to US Master Limited Partnerships?
The following is an excerpt from a UBS report issued in June 2007.
If you want a copy of this report then please add your email address to our list at www.investingforincome.com.
The report will be made available in upcoming mailing.
----------------------------------------------------------------
MLPs expected to be a catalyst for the sector. We believe that sometime this year, a Canadian trust will announce its intention to convert to an MLP, which should trigger a positive re-rating of valuations.
In our view, the government will be forced to respond in one of three ways, each of which should be good for investors. First, if the government does nothing, most trusts will be forced to convert to the MLP model in order to remain competitive, which should be positive for valuation.
Second, if the government chooses to invoke the GAAR, the structure may be rejected, although we are unsure on what grounds this might be possible. However, it would further highlight the valuation disparity between the two sectors and, we believe, should contribute to further convergence in valuations.
Finally, the government could choose to alter its proposed “Tax Fairness Plan”, in order to encourage Canadian trusts to remain in Canada. We believe that the government would be reluctant to lose a $60+ billion sector with more than 1.0 million boe/d of production—roughly 25% of total Canadian production. As such, we would place greater emphasis on the latter two options, although the issue is really one of politics.
Will the government back down? The jury is still out on this issue (and we have no special insight), but in our view the first conversion announcement will force the government to respond. This should further focus the market’s attention on this alternative structure and the disparity in relative valuations, which should be good for investors.
In our view, the most likely candidates to announce conversion could be Harvest Energy Trust, Pengrowth Energy Trust, or Provident Energy Trust (not under coverage, which already owns a majority stake in the Breitburn Energy Partners MLP in the United States).
If you want a copy of this report then please add your email address to our list at www.investingforincome.com.
The report will be made available in upcoming mailing.
----------------------------------------------------------------
MLPs expected to be a catalyst for the sector. We believe that sometime this year, a Canadian trust will announce its intention to convert to an MLP, which should trigger a positive re-rating of valuations.
In our view, the government will be forced to respond in one of three ways, each of which should be good for investors. First, if the government does nothing, most trusts will be forced to convert to the MLP model in order to remain competitive, which should be positive for valuation.
Second, if the government chooses to invoke the GAAR, the structure may be rejected, although we are unsure on what grounds this might be possible. However, it would further highlight the valuation disparity between the two sectors and, we believe, should contribute to further convergence in valuations.
Finally, the government could choose to alter its proposed “Tax Fairness Plan”, in order to encourage Canadian trusts to remain in Canada. We believe that the government would be reluctant to lose a $60+ billion sector with more than 1.0 million boe/d of production—roughly 25% of total Canadian production. As such, we would place greater emphasis on the latter two options, although the issue is really one of politics.
Will the government back down? The jury is still out on this issue (and we have no special insight), but in our view the first conversion announcement will force the government to respond. This should further focus the market’s attention on this alternative structure and the disparity in relative valuations, which should be good for investors.
In our view, the most likely candidates to announce conversion could be Harvest Energy Trust, Pengrowth Energy Trust, or Provident Energy Trust (not under coverage, which already owns a majority stake in the Breitburn Energy Partners MLP in the United States).
Monday, September 10, 2007
COT (Committment of Traders) BLOG
There is an excellent BLOG on the Committent of Traders Reports titled the "COT BLOG " that I suggest you follow.
The link is:
http://cotstimer.blogspot.com/2007/09/cots-loooove-nasdaq.html
The link is:
http://cotstimer.blogspot.com/2007/09/cots-loooove-nasdaq.html
Friday, September 7, 2007
Canaccord on Crescent Point
Crescent Point Energy Trust (CPG.UN : TSX : $19.26)
Buy - Target: $22.00
Bruce McDonald
Comment: More of a good thing; Crescent Point announces $400 million acquisition of Innova to consolidates Bakken play.
Crescent Point announced its agreement to acquire all the issued and outstanding shares of Innova Exploration Ltd. (IXL : TSX : C$6.19-HOLD) for $360.1 million. Including assumed net debt of $39.9 million, total consideration to be paid is approximately $400 million.
We estimate thetransaction to be 5% accretive to 2008 production per unit and 7%accretive to 2008 cash flow per unit. On a debt-adjusted basis, the transaction is
only 2% accretive to cash flow. However, we believe the acquired Bakken play asset is world class. While Crescent Point is using almost all of its 2007 "safe harbour" room, which limits its future growth, the Bakken asset presents above-average growth prospects from inventory prospects.
Under the forward strip, pro forma the Innova acquisition, Crescent Point shares are currently trading at 7.0 times 2008E EV/EBITDA, above the smaller cap trust average of 6.4 times, but warranted given Crescent Point's longer RLI.
We maintain our BUY recommendation and 12-month target price of C$22.00. Our target price is based on a 2008E EV/EBITDA target multiple of 7.8 under the forward strip, above our smaller cap trust average target multiple of 7.2 given Crescent Point's distribution stability and large prospect inventory.
Buy - Target: $22.00
Bruce McDonald
Comment: More of a good thing; Crescent Point announces $400 million acquisition of Innova to consolidates Bakken play.
Crescent Point announced its agreement to acquire all the issued and outstanding shares of Innova Exploration Ltd. (IXL : TSX : C$6.19-HOLD) for $360.1 million. Including assumed net debt of $39.9 million, total consideration to be paid is approximately $400 million.
We estimate thetransaction to be 5% accretive to 2008 production per unit and 7%accretive to 2008 cash flow per unit. On a debt-adjusted basis, the transaction is
only 2% accretive to cash flow. However, we believe the acquired Bakken play asset is world class. While Crescent Point is using almost all of its 2007 "safe harbour" room, which limits its future growth, the Bakken asset presents above-average growth prospects from inventory prospects.
Under the forward strip, pro forma the Innova acquisition, Crescent Point shares are currently trading at 7.0 times 2008E EV/EBITDA, above the smaller cap trust average of 6.4 times, but warranted given Crescent Point's longer RLI.
We maintain our BUY recommendation and 12-month target price of C$22.00. Our target price is based on a 2008E EV/EBITDA target multiple of 7.8 under the forward strip, above our smaller cap trust average target multiple of 7.2 given Crescent Point's distribution stability and large prospect inventory.
Wednesday, September 5, 2007
Income Investing with Max Whitmore
Whitmore: Buy — Buy — Buy!
Last Friday at about 8:15 am, the stock markets of the world were hit by a lighting bolt! The Fed lowered the discount rate without warning. The S&P, trading on the Globex markets (a 24 hour market) went straight up 72 points in less than 1 minute! Is that unusual you ask? Well, in all my 40 years in this business, I have never seen ANYTHING, and I mean ANYTHING like it!!
I do remember in 2003 when the Fed intervened (of course they denied it, but the charts proved otherwise) and the S&P rallied for over 32 points in 25 minutes. I had never seen anything like it at that time, either. It was engineered to hurt the bears who had taken nearly total control of the market direction.
And hurt it did. It took two more such Fed interventions over several months, but the bears finally gave up. Those bears realized that the Fed had more money and time than they did. The four-year rally from 7100 to 14,000 was the huge upshot of that Fed action.
In the last ten years, commodities — like platinum, oil, and uranium — have been outperforming every other investment. And according to our experts, the boom has many, many years to go. In this free Special Report from the editors of Financial Intelligence Report you'll discover the five best commodities to invest in now . . . and our top five commodity investment funds for 2008. PLUS, why the 1,870% increase in the price of uranium in the last six years is just the beginning, and how much longer commodity expert Jim Rogers (author of Hot Commodities) thinks the commodity boom will last.
The Charts Still Say "Up"!
I have been telling you in my columns for months, often in the face of severe opposition, that the charts DID NOT say it was time to bail out. They DID NOT say that the credit problems overhanging the market were a crisis. A problem, yes, but a crisis, absolutely not!
And the charts further said that we had, as of last Wednesday, still a long way to go to break this huge uptrend that began because of the Fed action in 2003. I put it all in the column last week, plus my Super Chart Keyline to show you why I held my position so firmly.
Now, look, I am just an average guy that over the years has specialized in the creating and reading of stock charts. Like a landscaper, plumber, or painter, I have learned a craft and learned it well. But, I also learned that in any profession you had better know who the masters of the art are. And, I further learned, if they were in positions of power that could affect your work, you better listen carefully to what they say.
Well, in my business, there is only one individual with honest to gosh, real, true power. That individual is the Federal Reserve Chairman, whoever he or she might be. The Fed Chairman is, without a doubt, the most powerful and thus influential person in the world of finance today. And we all live in a world of finance today, don't we?
Bernanke Knows These Waters
Over 17 months ago, Alan Greenspan, then the retiring Fed chairman after 18 years at that post, turned the reins over to a much younger man, a one Dr. Ben Bernanke, Ph.D., a professor by trade, but a proven monetary genius, in fact.
Now, I don't recall if I have ever written that someone is a genius in any column before this. I don't think so. That word can so easily be misused. But, I do not hesitate to tell you that Dr. Ben is just that. I have read his incredible thesis on what is today called the "Great Depression" and not only does he dissect it into understandable segments, but he then critiques those segments and shows exactly what caused the Great Depression. It was the Fed!
Now, I won't bore you with all the details, you can get his book and read it for yourselves. But, stripped down, he pointed to the real estate collapse of 1927 as the initial shock that lead to the final shock called the "Crash of '29." He pointed out that the entire mess could have been AVOIDED!
[Editor's Note: Bernanke Reveals Fiscal Crisis Ahead.]
The problem was that, after the stock market crash in '29, the Fed dropped the money supply level — after all, the economy was slowing down and no one needed the money, did they? And for the entire decade of the 1930s, until a war forced them to do otherwise, the Fed held the money supply in tight rein. It nearly killed the economy, not to mention the country.
I have never for an instant doubted that the strange coincidence of a housing problem in our day, with the possibly of it leading to our own present-day market collapse, was NOT lost on Dr. Ben.
He has been pumping in enough cash to the economy in the last year to choke a horse, as they say. U.S. money growth is running at roughly +12 percent year-over-year, and today this money is providing the grease to clearly restart the frozen credit markets.
But, Dr Ben saw that was not enough. Confidence was being threatened. And if confidence failed (Dr. Ben wrote about this danger years ago in his thesis) then everything might just collapse.
So, last Friday, he stepped in and lowered the bank discount rate by a half percent and said in effect that the Fed was absolutely ready to do all things necessary to keep the wheels of commerce humming, including the housing market sector.
Still Calling Dow 12,500 Bottom of This Correction
When I wrote last Thursday, "I believe that the 12,500 area will hold up as the key support over the next 4-6 weeks," I had in mind that the Fed had a true genius at its helm.
It was no minor thing that Dr. Ben decided to take the step he did on a Friday. Had he waited, the weekend might have generated a financial disaster on Monday. He understands that timing is everything in the markets and the time to cut off a disaster was ripe.
He wrote years ago that confidence lost is only very, very slowly regained. Better to step in now, I figured he would reason, not later. He did. I expected this or something like it from reading his book!
Okay. The deed is done, but what does it mean? Well, it means this: Every major investor in the world knows that the U.S. is 37 percent -38 percent of the entire world's economic activity. That is just a short 12 percent from being HALF of the entire world's economic activity!
We remain, by far, the biggest gorilla in the china shop, and when the most powerful economic individual in the most powerful economic country speaks and says "Enough!" absolutely everyone is carefully listening and starting to make major appropriate adjustments.
Looking Forward Six Months
Here is what I expect to happen over the next 5-6 months. Europe will begin to DROP their interest rates. We will drop our interest rates to at least 4.25 percent, possibly even 4 percent by year end.
The dollar may slide a bit more; making us even more competitive in world markets with our products (I told you weeks ago that I am firmly convinced its drop is an "engineered" move).
[Editor's Note: Cash in on Dollar Slide. Make 25% to 50% in Six Months.]
And I expect the manufacturing sector of this country will begin to rapidly rise like the potential colossus it is in response to its new position as lowest price, best quality supplier of all sorts of goods. Read the headlines all over the world. Quality is now as important as price to just about every buyer!
I expect that the outcome of the lower rates, higher export environment for the U.S. to set off the coming huge three to four year rally I told you about in an earlier column (see my column of May 18 in MoneyNews.com archives for more details).
This rally, I believe, will carry us to the 19,000-20,000 Dow level. When we look back, we will find the rally's takeoff level began right in this time period.
I expect that the international markets, up until now threatened with higher rates, will begin to respond to their lower rates, just like ours. In short, today's Fed action has been a "sea change" that will result in one of the biggest economic worldwide booms we have ever seen.
But, what about the "crisis" in housing and credit you ask? I believe time will show that this problem, while no small potatoes, proved to be only a blip on the radar screen of the huge coming boom.
Don't misunderstand me, however. There will be some pain for many in the markets in the next three to four months, especially for the ones responsible for its creation. That is as it should be.
But, it will quickly fade. If you lived through the 1987 "crash" you know by looking back at the long term chart that that "crash" is but a blip on the charts, despite all the pain it caused at the time.
The bottom line today is that, like the 1987 crash and even the savings and loan problems in the early 1980s, this "subprime" problem will also be quickly forgotten in the light of the coming huge expansion.
[Editor’s Note: Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.]
What You Should Do Now
My advice to you is to quickly, say over the next two to three months, develop a strategy for your portfolio that will take advantage of this coming boom. Understanding that the growth I am talking about is at least 50 percent in the Dow, find those industries you think will benefit most and get on their coattails fast.
Be wise in your choices by recognizing how much risk you can tolerate because of retirement needs and family obligations, but be a BUYER!! This is going to be a really fun ride. Not straight up, of course, nothing is straight up, but up nevertheless, BIG!!! BUT . . .
Oh, yeah. And what if I am wrong? Well, I won't be so long as we do NOT break the Whitmore Weekly Super Chart Keyline to the downside (See the Keyline chart in last week's column, which is available in the MoneyNews.com archives).
That line is now at the Dow 11,895 level as of the close on Friday (Aug. 17). Hold it and we make our Dow 20,000. Break it and all bets are off and I will tell you what needs to be done if that unlikely event were to occur.
But, it is still an 8 on my 1-10 scale that the Keyline holds all the way to the Dow 20,000 mark. But, so long as my Keyline holds, by 2010, I expect to see Dow 20,000! As Phil Rizzuto used to say, Holy Cow!!
Well, hope your coming investment week is a good one. In the meantime you keep in touch. I do! See you next week.
Last Friday at about 8:15 am, the stock markets of the world were hit by a lighting bolt! The Fed lowered the discount rate without warning. The S&P, trading on the Globex markets (a 24 hour market) went straight up 72 points in less than 1 minute! Is that unusual you ask? Well, in all my 40 years in this business, I have never seen ANYTHING, and I mean ANYTHING like it!!
I do remember in 2003 when the Fed intervened (of course they denied it, but the charts proved otherwise) and the S&P rallied for over 32 points in 25 minutes. I had never seen anything like it at that time, either. It was engineered to hurt the bears who had taken nearly total control of the market direction.
And hurt it did. It took two more such Fed interventions over several months, but the bears finally gave up. Those bears realized that the Fed had more money and time than they did. The four-year rally from 7100 to 14,000 was the huge upshot of that Fed action.
In the last ten years, commodities — like platinum, oil, and uranium — have been outperforming every other investment. And according to our experts, the boom has many, many years to go. In this free Special Report from the editors of Financial Intelligence Report you'll discover the five best commodities to invest in now . . . and our top five commodity investment funds for 2008. PLUS, why the 1,870% increase in the price of uranium in the last six years is just the beginning, and how much longer commodity expert Jim Rogers (author of Hot Commodities) thinks the commodity boom will last.
The Charts Still Say "Up"!
I have been telling you in my columns for months, often in the face of severe opposition, that the charts DID NOT say it was time to bail out. They DID NOT say that the credit problems overhanging the market were a crisis. A problem, yes, but a crisis, absolutely not!
And the charts further said that we had, as of last Wednesday, still a long way to go to break this huge uptrend that began because of the Fed action in 2003. I put it all in the column last week, plus my Super Chart Keyline to show you why I held my position so firmly.
Now, look, I am just an average guy that over the years has specialized in the creating and reading of stock charts. Like a landscaper, plumber, or painter, I have learned a craft and learned it well. But, I also learned that in any profession you had better know who the masters of the art are. And, I further learned, if they were in positions of power that could affect your work, you better listen carefully to what they say.
Well, in my business, there is only one individual with honest to gosh, real, true power. That individual is the Federal Reserve Chairman, whoever he or she might be. The Fed Chairman is, without a doubt, the most powerful and thus influential person in the world of finance today. And we all live in a world of finance today, don't we?
Bernanke Knows These Waters
Over 17 months ago, Alan Greenspan, then the retiring Fed chairman after 18 years at that post, turned the reins over to a much younger man, a one Dr. Ben Bernanke, Ph.D., a professor by trade, but a proven monetary genius, in fact.
Now, I don't recall if I have ever written that someone is a genius in any column before this. I don't think so. That word can so easily be misused. But, I do not hesitate to tell you that Dr. Ben is just that. I have read his incredible thesis on what is today called the "Great Depression" and not only does he dissect it into understandable segments, but he then critiques those segments and shows exactly what caused the Great Depression. It was the Fed!
Now, I won't bore you with all the details, you can get his book and read it for yourselves. But, stripped down, he pointed to the real estate collapse of 1927 as the initial shock that lead to the final shock called the "Crash of '29." He pointed out that the entire mess could have been AVOIDED!
[Editor's Note: Bernanke Reveals Fiscal Crisis Ahead.]
The problem was that, after the stock market crash in '29, the Fed dropped the money supply level — after all, the economy was slowing down and no one needed the money, did they? And for the entire decade of the 1930s, until a war forced them to do otherwise, the Fed held the money supply in tight rein. It nearly killed the economy, not to mention the country.
I have never for an instant doubted that the strange coincidence of a housing problem in our day, with the possibly of it leading to our own present-day market collapse, was NOT lost on Dr. Ben.
He has been pumping in enough cash to the economy in the last year to choke a horse, as they say. U.S. money growth is running at roughly +12 percent year-over-year, and today this money is providing the grease to clearly restart the frozen credit markets.
But, Dr Ben saw that was not enough. Confidence was being threatened. And if confidence failed (Dr. Ben wrote about this danger years ago in his thesis) then everything might just collapse.
So, last Friday, he stepped in and lowered the bank discount rate by a half percent and said in effect that the Fed was absolutely ready to do all things necessary to keep the wheels of commerce humming, including the housing market sector.
Still Calling Dow 12,500 Bottom of This Correction
When I wrote last Thursday, "I believe that the 12,500 area will hold up as the key support over the next 4-6 weeks," I had in mind that the Fed had a true genius at its helm.
It was no minor thing that Dr. Ben decided to take the step he did on a Friday. Had he waited, the weekend might have generated a financial disaster on Monday. He understands that timing is everything in the markets and the time to cut off a disaster was ripe.
He wrote years ago that confidence lost is only very, very slowly regained. Better to step in now, I figured he would reason, not later. He did. I expected this or something like it from reading his book!
Okay. The deed is done, but what does it mean? Well, it means this: Every major investor in the world knows that the U.S. is 37 percent -38 percent of the entire world's economic activity. That is just a short 12 percent from being HALF of the entire world's economic activity!
We remain, by far, the biggest gorilla in the china shop, and when the most powerful economic individual in the most powerful economic country speaks and says "Enough!" absolutely everyone is carefully listening and starting to make major appropriate adjustments.
Looking Forward Six Months
Here is what I expect to happen over the next 5-6 months. Europe will begin to DROP their interest rates. We will drop our interest rates to at least 4.25 percent, possibly even 4 percent by year end.
The dollar may slide a bit more; making us even more competitive in world markets with our products (I told you weeks ago that I am firmly convinced its drop is an "engineered" move).
[Editor's Note: Cash in on Dollar Slide. Make 25% to 50% in Six Months.]
And I expect the manufacturing sector of this country will begin to rapidly rise like the potential colossus it is in response to its new position as lowest price, best quality supplier of all sorts of goods. Read the headlines all over the world. Quality is now as important as price to just about every buyer!
I expect that the outcome of the lower rates, higher export environment for the U.S. to set off the coming huge three to four year rally I told you about in an earlier column (see my column of May 18 in MoneyNews.com archives for more details).
This rally, I believe, will carry us to the 19,000-20,000 Dow level. When we look back, we will find the rally's takeoff level began right in this time period.
I expect that the international markets, up until now threatened with higher rates, will begin to respond to their lower rates, just like ours. In short, today's Fed action has been a "sea change" that will result in one of the biggest economic worldwide booms we have ever seen.
But, what about the "crisis" in housing and credit you ask? I believe time will show that this problem, while no small potatoes, proved to be only a blip on the radar screen of the huge coming boom.
Don't misunderstand me, however. There will be some pain for many in the markets in the next three to four months, especially for the ones responsible for its creation. That is as it should be.
But, it will quickly fade. If you lived through the 1987 "crash" you know by looking back at the long term chart that that "crash" is but a blip on the charts, despite all the pain it caused at the time.
The bottom line today is that, like the 1987 crash and even the savings and loan problems in the early 1980s, this "subprime" problem will also be quickly forgotten in the light of the coming huge expansion.
[Editor’s Note: Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.]
What You Should Do Now
My advice to you is to quickly, say over the next two to three months, develop a strategy for your portfolio that will take advantage of this coming boom. Understanding that the growth I am talking about is at least 50 percent in the Dow, find those industries you think will benefit most and get on their coattails fast.
Be wise in your choices by recognizing how much risk you can tolerate because of retirement needs and family obligations, but be a BUYER!! This is going to be a really fun ride. Not straight up, of course, nothing is straight up, but up nevertheless, BIG!!! BUT . . .
Oh, yeah. And what if I am wrong? Well, I won't be so long as we do NOT break the Whitmore Weekly Super Chart Keyline to the downside (See the Keyline chart in last week's column, which is available in the MoneyNews.com archives).
That line is now at the Dow 11,895 level as of the close on Friday (Aug. 17). Hold it and we make our Dow 20,000. Break it and all bets are off and I will tell you what needs to be done if that unlikely event were to occur.
But, it is still an 8 on my 1-10 scale that the Keyline holds all the way to the Dow 20,000 mark. But, so long as my Keyline holds, by 2010, I expect to see Dow 20,000! As Phil Rizzuto used to say, Holy Cow!!
Well, hope your coming investment week is a good one. In the meantime you keep in touch. I do! See you next week.
Tuesday, September 4, 2007
The Time is now for Oil & Gas Trusts
I will be picking up oil and gas trusts over the next month because I think the lows are in for the year.
The gassy trusts are a real value at these levels because nobody wants them with Natural Gas storage full and prices in the low $5 area.
Remember, be fearful when everyone is greedy and be greedy when everyone is fearful.
The gassy trusts are a real value at these levels because nobody wants them with Natural Gas storage full and prices in the low $5 area.
Remember, be fearful when everyone is greedy and be greedy when everyone is fearful.
Monday, September 3, 2007
I am still hanging with my portfolio
I sold 10,000 SDT.UN and 2,000 HTE.UN during this last correction in order to raise cash.
I am hanging on right now because the valuations in the oil and gas sector is compelling.
I am considering loading up on natural gas Trusts because they are so beat up.
I am hanging on right now because the valuations in the oil and gas sector is compelling.
I am considering loading up on natural gas Trusts because they are so beat up.
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