THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
I am a few days late, having spent the weekend in London with our daughter and son in law. HOLY EXCHANGE RATE!!!
"Life is on the wire---the rest is just waiting...The streets are rough" ---- Karl Wallenda
Some of the Wallendas have achieved fame and fortune by walking the tightrope without a safety net. Other Wallendas have died from a fall. This past week reminded me that I am not a Wallenda. The "safety net" of high yielding securities just cannot be beaten. You may tire of me hammering this point, but it is a mantra worth repeating: Yield Rises When Price Falls. Thus, if a high yielding stock starts to fall in price, buyers rush in for the dividend. Take Windstream Corporation (WIN)last week, It reported a disappointing quarter and dropped---but not too far because yield hunters grabbed its nearly 8% dividend. This does not mean that any company can or should withstand a series of bad quarters, but I for one am staying with this company for at least one more reporting period. I reduced a position in another telecom, Frontier (FTR), when it reported a bad quarter in January, but it bounced back this quarter. Thank goodness, I kept some of it. I will likely add some more FTR with its delicious nearly 9% dividend.
The commodity sell off last week caused me to take a profit in one of my gold positions (GLD). It came back today, and I have no doubt that I will be in and out of GLD for the foreseeable future. One of my readers sees no intrinsic value in gold and believes such an investment is folly. Folly it may be, but it is a folly that the market has embraced for several thousand years. Just last week, the Mexican central bank reported that it purchased 100 tons of gold for its foreign exchange reserves in a move that signaled a growing international dissatisfaction with the dollar serving as the world's reserve currency. The Financial Times reports that this year central banks will purchase more than 240 tons of gold which is the largest amount of gold purchased for that purpose in 30 years and the first time in 20 years that the world's central banks will be net purchasers of gold. Currently only 18% of mined gold is held by central banks (52% in jewelry, 16% held by individual investors). The smallest relative gold position is China (holding only 1100 tons of gold in foreign exchange reserves vs. 8100 tons by US). If its central bank starts to add gold, the price will undoubtedly rise. Keep an eye on gold, good and bad.
Speaking of commodities, I still like oil, and I added Sabine Royalty Trust (SBR) on its dip last week. It is a great way to play oil with its monthly dividend which runs 3 months behind the market. Juicy payouts should be coming in the next few months. I maintain positions in several oil companies: big (Shell, Chevron, Conoco), small (MHRpC, MHRpD) and royalties (SBR, PBT, BPT). I also love coal, but have no way to play it because of the absence of dividends available in coal stocks. The International Energy Agency expects coal consumption to increase 20% by 2020. Currently, my play of choice in coal is Norfolk Southern Rail (NSC) which is a huge transporter of coal from which it generates up to 40% of its revenue.
A Wallenda I am not, and a Wallenda I will not be
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