Sent: Tuesday, August 17, 2010 5:27 PM Subject: Risk/reward volume 16 THIS IS NOT ADVICE. THIS IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN This weekend I was comparing notes with a subscriber and fellow yield hunter. He has been intrigued by Telefonica, the Spanish telecom because of its 7+% yield. His interest prompted my investigation. I found the following. Many foreign telecoms are former state owned monopolies that remain crown jewels of the respective economies even after privatization. For example, French Telecom (FTE) is still 25% owned by the French government which is heavily reliant upon the dividend for operational cash flow. Indeed, recently FTE's suggestion that it would institute a share buy back program was shot down because of its potential impact on the dividend. FTE was forced to publicly promise not to cut the dividend for 3 years. Telefonica (TEF)is one of the largest companies in Spain, pays a 7+% dividend, is the third largest telecom in the world and dominates telecom in the Spanish and Portuguese speaking world. Telecom New Zealand (TNZ) is undergoing some structural changes that could have a long term impact but its current 9+% dividend is irresistible. Vodafone, a British company, is the second largest telecom in the world, pays a 7+% dividend, has outposts throughout the former Empire and owns 50% of Verizon Wireless. In sum, I like the close political connection between these companies and the payment of dividends to the sovereign (note the UK's need for the BP dividend). It gives an added level of assurance. Moreover, since these trade as ADR's the dividends (which are "qualified " for 15% tax treatment) are paid into the US in pounds, Euros and NZdollars making them excellent hedges against a declining dollar. I bought all four today