THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN
"No pain, no gain"--- Tony Horton
"The deeper that sorrow carves into your being, the more joy you can contain" --- Kahlil Gibran
There was plenty of pain and sorrow this week---but what an opportunity to learn.
Again, I was thankful for the safety net of good dividend/interest yielding securities. They remained solid throughout the week. I was especially pleased how my real estate investment trusts (REITS) held. This emboldened me to purchase a position in the D series preferred ofAshford Hospitality Trust (AHTpD). Ashford owns several hotels throughout the country that are managed by a sister organization. This sector was battered in 2008 and 2009 and none more than Ashford. But some recent acquisitions and the reinstitution of its common dividend gave me sufficient comfort to buy the preferred. (Remember, preferred dividends are paid before common dividends.) Its yield is 8.6%. Since REIT dividends do not qualify for the 15% tax treatment, I purchased it in my tax deferred 401(k)account (see the presentation here). http://www1.snl.com/irweblinkx/yearlypresentations.aspx?iid=4088185
I am shocked by the lack of accurate reporting from Japan and place the blame squarely on the Japanese---their culture and their government. The code of bushido lives strong so saving face is more important than transparency and candor. I am sorry if you believe this assessment is harsh---the truth often is. This lack of transparency has kept the markets in more turmoil than necessary. I have been able to determine that the supply chain for the smartphone market will likely be disrupted. 90% of the resin which forms the substrate upon which chips are attached to circuitboards in smartphones and tablets comes from Japan and 50% of that comes from the affected area. (See article below from the Financial Times). I suspect that within a month or so, this shortage will be felt. As a consequence I took a profit by selling all of my Apple, Skyworks Solutions and Acme Packet albeit at much smaller profits than two weeks ago. I love tech in general and smart phones in particular, but this is too much uncertainty for me. I will be back sometime. Cramer is out of tech as well.
Nuclear power is dead for the foreseeable future thanks to the tsunami. Even China put its 27 nuclear projects on hold. Germany took off line 1/3 of its reactors. This is HUGE. Nuclear supplies 1/3 of the power of Europe; 70% in France. The UK had planned on building 10 plants in the next 15 years. Hail the continued vitality of fossil fuels and the return of King Coal. The US is the Saudi Arabia of coal and natural gas. It will take some time for the transition to take place, but I do believe that long term, this bodes well for the US economy, at least in relative terms, even if it will contribute to the ecological debate. I feel certain that all investors will have exposue to coal at some time, like they do now to oil. My exposure came this week with a purchase of Peabody (BTU), a big player worldwide in thermal (for heat and energy) and metallurgical (for steel production) coal. I also bought Caterpillar (CAT) which with its acquisition of Bucyrus International is now a big player in the drag line business. Cramer did a coal segment this week.
Speaking of fossil fuel, please read the attached article from Investor Business Daily about domestic oil production, and note that Cramer had back to back shows featuring the CEO's of Continental Resources and Whiting Petroleum, two big shale oil players. As my loyal readers know, I have been studying this sector for some time (see. Vol 56) and that I own Enerplus (ERF) a former Canadian oil trust which is active in the Bakken fields in Canada and North Dakota. My studies led me to Magnum Hunter Resources Corporation, a small oil and liquid gas producer with properties in the Marcellus, Eagle-Ford and Bakken oil and gas shale fields. Its March, 2011 powerpoint presentation http://www.magnumhunterresources.com/corporate_presentations.html is very informative. I liked the story, did some more research and bought the series C preferred (MHRpC) which pays a 10+% annual dividend (monthly, not quarterly) which in turn qualifies for 15% tax treatment. ( KNOW YOUR TAX LAWS) making it suitable for my personal acccount. These preferreds are redeemable (callable) at $25 after December, 2011 which makes my purchase at 25.45 somewhat risky. But for reasons that are beyond the scope of this article, I believe it unlikely that they will be called then or any time soon. If you wish to know why I believe this, email me.
I recognize that I have done a considerable amount of "trading" recently, especially in tech. I submit, however, that circumstances (e.g. tsunami) and my desire to capture profits from every investment justify this conduct. I believe that individual investors can and should "time" purchases and SALES to maximize profits. In days past when transactions lagged for days and were expensive to effect through brokers, frequent trading did not make sense. But, in a Scottrade (or E*Trade, Schwab, etc.) world, trades are effected instanteously and for the grand sum of $7. I will spend $7 to save $1000 in profit each day and every day. Sell, capture a profit and buy again when it starts to rise. What is wrong with this approach, so long as one knows the tax consequences (which is why I "trade" primarily in my tax deferred401(k)? Small investors have very few advantages, but being nimble is a big one. Use it.
Smartphone makers face chip resin shortage
By Kathrin Hille in Hong Kong
Published: March 16 2011 19:44 | Last updated: March 17 2011 02:42
A few months from now some of the newest smartphones could be in short supply as a relatively minor coating of plastic inside the handsets falls prey to disruptions caused by the Japan earthquake.
The rise of Taiwanese and South Korean technology companies has created a healthy alternative supply of certain components, but a handful of upstream parts and materials remain concentrated in the hands of very few Japanese companies.
One of these is Mitsubishi Gas Chemical, the world’s largest producer of bismaleimide-triazine (BT) resin, a material used to make substrates that connect chips used in handsets to printed circuit boards.
The company halted production at its two plants on Friday and could not say when work would resume: its Fukushima factory was damaged by the tsunami that hit Japan’s north-east coast following the earthquake.
As MGC accounts for about half of the world’s BT resin supply, the closure is likely to cause delays to handset chip production and smartphone assembly – a vivid example of the nature of Japan’s role in the global electronics manufacturing chain.
That resin is shipped from MGC’s factory to companies such as Taiwan’s Kinsus and Unimicron who use the chemical to produce a thin supporting material, known as the IC (integrated circuit) substrate.
Chip packaging firms, such as Taiwan’s ASE or SPIL, then take semiconductors supplied by chipmakers, including Taiwan Semiconductor Manufacturing (TSMC), and attach them on to the substrate, which are then attached to a printed circuit board.
That component is then incorporated into the final product – a smartphone or tablet PC – by a contract manufacturer, such as China’s Foxconn.
“If we assume that once the substrate vendors exhaust their existing 1-1½ month inventory [of BT], and if MGC is not able to ship for two to three months, then we estimate that this would impact nearly 40-50 per cent of shipments of global communication ICs for smartphones, tablet PCs, feature phones and networking devices,” says Andrew Lu, an analyst at Barclays Capital.
Two other Japanese manufacturers, Hitachi and Sumitomo, account for another 40 per cent of the global BT resin production. While both companies’ production remains unaffected by the earthquake, switching suppliers is likely to create long delays.
“No BT resin is exactly the same, so changing suppliers will force the customers to redesign the way the substrate is attached to the chip,” said Mr Lu.
The differences between MGC and Hitachi resins could mean that substituting one resin for the other, without changing the product’s design could make the substrate crack when exposed to the heat generated by the chip. Analysts estimate that such a switch could take up to two months.
Most chip design houses that sell semiconductors used in mobile devices would be affected.
“At ASE and SPIL, client exposure to the BT shortage includes Xilinx, Altera and Qualcomm,” says Redtech, an independent technology advisory firm.
Qualcomm said it was closely monitoring the supply situation for BT resin but believed that disruptions would be mitigated by the use of “buffer stock” and adjustments to “near-term material mix”.
“Switching suppliers is a real problem for new products. One that could be affected is Qualcomm’s new family of Snapdragon chipsets,” Mr Lu said. The new chip set family is designed to power next-generation mobile and gaming devices expected to be launched from early next year.
It is still unclear which devices will use the new Snapdragon chip, which was only announced in February. Previous versions of Snapdragon was used in a wide range of products ranging from Asus’s EeePC netbooks to Google’s Nexus One phone and a range of HTC smartphones.
Additional reporting by Robin Kwong in Taipei, Mitsuko Matsutani in Tokyo and Paul Taylor in New York
No comments:
Post a Comment