"It's the weather" That's all Abe has left to pretend that 'recovery' is right around the corner. Japan just printed its worst current account deficit on record and its worst GDP growth since Abenomics was unveiled – both missing by the proverbial garden mile and both confirming that all is not well in Asia. As for the perpetual hope of a J-curve (or miracle hockey-stick reversal)? There won't be one! As Patrick Barron noted, "monetary debasement does not result in an economic recovery, because no nation can force another to pay for its recovery."
Worst current account deficit ever – and a chart that shows absolutely no hope of a turn anytime soon…
and the worst GDP growth since Abenomics was unveiled and 2nd quarter missed in a row…
Perhaps I can shed some light on Japanese Prime Minister Abe’s missing J-curve; i.e., why Japan’s trade deficit seems to be increasing rather than decreasing after massive monetary intervention to reduce the purchasing power of the yen. Monetary debasement does NOT result in an economic recovery, because no nation can force another to pay for its recovery.
Monetary debasement transfers wealth within an economy by subsidizing exports at the expense of the entire economy, but this effect is delayed as the new money works it way from first receivers of the new money to later receivers. The BOJ gives more yen to buyers using dollars, euros, and other currencies, as the article states, but this is nothing more than a gift to foreigners that is funneled through exporters. Because exporters are the first receivers of the new money, they buy resources at existing prices and make large profits. As most have noted, exporters have seen a surge in their share prices, but this is exactly what one should expect when government taxes all to give to the few.
Eventually the monetary debasement raises all costs and this initial benefit to exporters vanishes. Then the country is left with a depleted capital base and a higher price level. What a great policy!
The good news is that Japan does know how to rebuild its economy. It did it the old-fashioned way seventy years ago–hard work and savings.
And the latest joke from Asian trading floors: "when asked what he thought of the recovery, Shinzo Abe responded "Depends!""
The result of all this total and utter disaster for the Japanese economy – a melt-up in JPY crosses (i.e. JPY weakness with USDJPY back over 103) supporting US equity futures into the green… because what do you do when Chinese credit markets are collapsing, the Japanese economy is imploding, and the fate of Germany (and therefore Europe's) economy lies with Russia… you BTFATH…
Sometimes an investment idea is so strong, it bears repeating.
#-ad_banner-#In late February, my colleague Michael Vodicka implored readers to give emerging market stocks a fresh look. Though he cautioned that these struggling markets may not have yet hit bottom, he added that "the MSCI Emerging Markets Index is trading at just 11 times earnings. Not only is that a massive 40% discount to the MSCI World Index, it's the widest gap since the financial crisis of 2008 and a 10-year low." As a potential catalyst, Michael noted that the recent price rebound for many commodities should help bolster a number of emerging market economies.
But there's another, even more powerful reason to own emerging markets, which merely strengthens the investment case: They reduce risk. That may seem counterintuitive, so let me explain.
Back in November, S&P Capital's Global Equity Strategist Alec Young took a look at historical market returns to identify how domestic and foreign stocks performed each year. If these two asset classes merely mirrored each other, then there would be no need to own foreign stocks. But as we saw in 2013, U.S. stocks soared, while emerging markets slumped.
The advantage to owning asset classes that have divergent returns is that a broad-based portfolio can smooth out volatility. Said another way, such a mixed portfolio can reduce risk by delivering non-correlated returns, delivering higher risk-adjusted returns. Young's conclusion: "the 'sweet spot' on the efficient frontier, or the allocation that produced the highest risk adjusted returns was a 70% domestic allocation coupled with a 30% foreign weighting."
Not only did such a portfolio beat a basket of U.S. only stocks over the past 40 years, but "the 70% to 30% U.S.-foreign allocation also produced a higher risk adjusted return than the 19 other possible domestic-foreign allocations we analyzed," he concludes.
Of course, foreign stocks comprise everything from multi-billion dollar Swiss drug giants to small-cap retailers in Indonesia. Simply focusing on blue-chip stocks in well-developed economies in Europe are not going to provide much diversification with U.S. stocks. For example, the Vanguard FTSE European ETF (NYSE: VGK) has traded in lockstep with the S&P 500 over the past year, with both the Europe ETF and the U.S. index delivering a roughly 20% gain.
Of course any investment in emerging markets over the past year may have seemed mistaken. Indeed, warning signs emerged back in late 2012, led by the plunge in commodity prices that would have clued investors in to a timely exit. But S&P's Young isn't talking about near-term results, simply because we really don't know how foreign stocks will perform in any given year.
Make no mistake. You don't need to absorb massive risk by owning emerging-market stocks and funds — if you choose the right assets to own. Young recommends shares of the iShares Core MSCI Emerging Market ETF (NYSE: IEMG), which owns stable companies such as Samsung (OTC: SSNLF) and China Mobile (NYSE: CHL).
Right now, that's about as far as many U.S. investors want to go with their foreign exposure. As recently noted in The Wall Street Journal, "after years of distortion from crisis and crisis response, the world is rebalancing. For emerging markets, the path will surely be bumpy."
Yet that article also notes that emerging market economies tend to carry a lot less debt than the U.S. and European economies. And many of the most troubled emerging markets are still far healthier than they were when prior economic crises spread across the globe.
To be sure, emerging markets don't outperform developed markets over the long run, as this recent article in The Wall Street Journal notes. "But emerging markets have tended to do stunningly well over shorter periods when investors neglected or rejected them," the authors add.
As an example, emerging markets slumped badly when the dot-com bubble imploded here in the U.S.
"By 2001, assets at emerging-market funds had dwindled 20% from 1996, and many investors gave up; in 2001 alone, they pulled out 6% of their money … Naturally, between 2001 and 2010, emerging markets returned an average of 15.9% annually, while U.S. stocks grew at an annualized average of 1.4%." The key takeaway: The best time to focus on emerging markets is when others have shifted assets elsewhere.
A Top-Performing Mutual Fund
In addition to the exchange-traded funds (ETF) cited by S&P's Young, investors should also consider the Harbor International Investor Fund (Nasdaq: HIINX). "This fund has generated exceptional performance by ignoring short-term volatility and focusing on the long term," according to Morningstar, which gives it a "gold" rating.
The approach used by this mutual fund's portfolio managers speaks for itself: "Management looks for long-term catalysts that may not materialize for three to five years or more, opening it up to a broad range of opportunities. Rather than spending time trying to guess a company's near-term earnings, the team looks for structural shifts that will affect industry pricing power and competitive advantages, which drive profits over the longer run," writes Morningstar's Kevin McDevitt. The approach has yielded a 21% annualized gain over the past five years, and equally important, the key holdings in the portfolio aren't tightly-correlated with U.S. stocks.
Risks to Consider: If you have a six or 12-month time horizon, then you should never invest in emerging markets. They can radically underperform the developed markets in any given year, as was the case in 2013, and could still be the case in coming quarters.
Action to Take –> If you have a longer-term time horizon, then history suggests that you're bound to generate strong returns form emerging markets, simply because we have been through a period of underperformance. It's an asset class that zooms into and out of favor, and right now, the current disdain for them, along with their non-correlation with U.S. stocks, gives them the potential for a solid rebound.
If you read StreetAuthority Daily on a regular basis, you know that we've been talking a lot about what we call "Legacy Assets" lately.
Today, I want to tell you why they matter.
#-ad_banner-#Warren Buffett, widely considered the greatest investor of all time and one of the world's richest men, has said of his legacy:
When you get to my age, you'll really measure your success in life by how many of the people you want to have love you actually do love you.
I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them.
But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don't care how big your bank account is, your life is a disaster.
Buffett means what he says. And he backs up his words with action.
In 2012, Buffett donated over billion to charity, more than 3 times as much as anyone else in the world that year.
He has promised that when he dies, 83% of his wealth will be given to the Gates Foundation — a non-profit that donates billions each year to charitable causes.
Still, Buffett's 3 children and won't be hurting. Even if he gives away 99% of his wealth, as he's said he will, the 1% left over will still come to 5 million.
You see, as Chief Investment Strategist of StreetAuthority's Top 10 Stocks advisory, I know that many of my readers aren't just investing for themselves — they're investing for their family — their children, grandchildren…
And with those goals in mind, the focus of Legacy Assets becomes even more important: rising dividends, market-beating growth and — most important of all — safety, are key.
That's how you build a legacy.
In my own life, I've had the good fortune to benefit from a Legacy Asset.
When my grandfather passed away several years back, my parents found a surprise in an old safe at the back corner of his home.
Share certificates of IBM.
You see, my grandfather wasn't the investing type. As a European immigrant to Canada who came with next to nothing, the only thing he really trusted was his own industriousness.
But he did understand machines. Having trained as a machinist, he could relate to the "nuts and bolts" side of IBM's business. It was something real he could see and touch, and he knew that real industry created real value. So he invested his precious capital.
And he never sold. Instead, he kept those certificates as insurance in case times got tough. His shares in IBM became something of lasting value.
And whether he knew it or not, he created a legacy of wealth for both my parents and my two daughters.
That's the kind of story I want every reader of Top 10 Stocks to have.
So when we set out to find the best Legacy Assets on the market for our special report, my research team and I knew that these investments should share several important traits.
Barring some sort of apocalypse, these companies aren't going anywhere. Most have been around long before any of us were born.
They've survived and prospered during World Wars, the Great Depression, and the collapse of empires around the world.
But here's the important thing…
It's not just the companies themselves that have stood the test of time.
The products they make have remained virtually unchanged. In some cases, the same products have been generating wealth for over 200 years.
Popular tech companies like Apple and Microsoft have to come up with the next high-tech gadget or operating system every year.
"Legacy Assets" don't.
Unlike banks or insurance companies, Legacy Assets don't deal in "reverse-collateral mortgage swaps" and other hard-to-understand financial products.
Legacy Assets simply produce valuable, easy-to-understand products that you probably use every day.
A common mistake investors make is investing in products or businesses they don't fully understand.
As legendary investor Peter Lynch put it:
Getting the story on a company is a lot easier if you understand the basic business. That's why I'd rather invest in panty hose than in communications satellites or in motel chains than in fiber optics. The simpler it is, the better I like it.
These Legacy Assets make products that are so simple, yet so integral to the American way of life that even your granddaughter can likely ask you about them by name.
And that's the real secret…
When looking for Legacy Assets, the first question you want to ask is:
"Can I easily imagine my grandchildren and great-grandchildren enjoying the same products this company makes 50 or even 100 years from now?"
If you can answer "Yes" to this question, chances are you're looking at a Legacy Asset. My advice: choose a handful of Legacy Assets, buy them, and make them the cornerstone of your portfolio. Plan on holding shares for the long-term. Chances are they'll still be around after both you and I are long gone… and they'll still be creating wealth for whoever owns them after that.
If you're curious about what my research team and I think are the absolute best Legacy Asset stocks to own for the long haul, I invite you to check out our free special report. As I said, you don't have to own every single one of them (you might even think of an additional one or two you'd like to add to the list). All it takes is a handful to create wealth that lasts for generations.
Authored by Kristina Wong and Jeremy Herb, originally posted at The Hill,
If there is a new cold war with Russia, many observers believe the U.S. is losing it.
First under President George W. Bush and now under President Obama, the U.S. and Vladimir Putin’s Russia have engaged in a series of foreign policy battles — and Putin has repeatedly got his way.
The Russian president’s objective is clear. He wants to reassert Russia’s influence in Eastern Europe while preventing NATO’s further expansion toward Russia, said Erik Brattberg, a resident fellow at the Atlantic Council.
Diplomatic fights over Syria in 2013 and Russian’s military clash with Georgia in 2008 have given Putin confidence in the current fight over Russia’s invasion of Crimea, a region in eastern Ukraine with long ties to Moscow.
“He's counting that there would be no significance response from the U.S. and the European Union and so far he’s been right,” Brattberg said.
Lawmakers and experts across the political sphere warn that if the Obama administration and its western allies are not effective in dealing with Putin this time, it could have serious consequences going forward.
And the dangers go beyond Putin.
China is closely monitoring what’s going on, Brattberg said, and could become more assertive in territorial disputes with its neighbors if it sees the West back down from Russia.
Of particular concern is a small group of islands in the South China Sea that both China and Japan claim, he said. If China were to use military force against Japan, the U.S. would be contractually bound to defend it.
“It’s not like the Chinese are sitting there [thinking], ‘What can we take tomorrow that we maybe thought we couldn’t do a month ago,’” said Gary Schmitt, a resident scholar at the conservative-leaning American Enterprise Institute.
“It’s more the case that some incident will happen and they’ll calculate: “Look, the U.S. really isn’t going to react,’ and they’ll take advantage of that situation,” he said.
Putin has arguably emerged as the victor in a series of confrontations with the U.S.
In 2008, Putin caught U.S. officials flatfooted and annexed Georgian territory without serious repercussions, according to a recent interview in the Washington Post with Daniel Fata, deputy assistant secretary of defense for European and NATO policy from September 2005 to September 2008.
Last August, Russia thumbed its nose at the U.S. by granting former National Security Agency contractor Edward Snowden asylum after he leaked classified material to the press and fled the country.
In September, Putin got the U.S. to back down from military strikes against ally Syrian dictator Bashar Assad, by brokering a last-minute deal to destroy Syria’s chemical weapons.
The deal had the advantage to Russia of ensuring Assad could stay in power, and since the deal Assad has solidified his control of the country.
Although Russia's invasion of Georgia happened during the Bush Administration, Brattberg said Putin views Obama as particularly weak and his "reset" policy as naive.
“Putin sees Obama as a weak leader. I would point to Syria in particular. We drew a red line and didn’t back it up,” he said.
The administration has pushed back at such criticisms, with Obama this week saying Russia’s actions were a sign of weakness that would isolate the country.
The administration has taken several steps to make that happen.
The U.S. has sent six additional F-15 fighter jets to Poland to bolster a NATO air policing mission, and announced sanctions and visa restrictions that could be imposed on Russian leaders and entities found to have threatened Ukraine’s sovereignty.
But the efforts appear to have done little to slow Russia down.
Crimea’s autonomous parliament appears to be moving ahead with a vote to secede from Ukraine and join Russia. A referendum is planned on March 16.
Schmitt said that for the United States to turn the tide, it should take stronger steps such as admitting Ukraine into NATO or sanctioning Russia’s gas exports.
“The legacy [for Russia] would look like: ‘It looked good at the time but now it looks like we really stepped into it,’” Schmitt said.
Brattberg said the U.S. should be doing more to lead and unify a fragmented European Union.
“There has been some disconnect over sanctions between some European Union countries, and there is the need for the U.S. to really show leadership and lead them in the same direction,” he said.
Critics doubt the administration can provide this leadership at a time it is looking to focus on domestic policy, end the war in Afghanistan, and pivot to the Asia Pacific.
At the SASC hearing earlier this week, Republican senators decried shrinking defense spending as a part of the U.S’s GDP at a time when the U.S. was being challenged by Russia and China.
The White House’s 2015 budget request, unveiled earlier this week, would hold defense spending nominally flat for a third year and a decline in real terms.
When assessing a company's stock, many investors make it a point to check out its bonds, too. This can often provide insight into a firm's financial health and where its stock price is headed.
#-ad_banner-#Keeping an eye on credit ratings is especially smart if you're thinking of buying stock in an out-of-favor company struggling to turn itself around. You certainly don't want to sink hard-earned cash into a stock based on a nice-sounding turnaround story only to find out the hard way — by further decimation of the stock price — the firm was a financial wreck on the verge of bankruptcy.
If they don't watch out, that's just what could happen to shareholders in one struggling retailer.
The company is the subject of much turnaround chatter. And its stock has shown the ability to post exciting returns recently, more than doubling from mid-November 2012 to mid-May 2013. After retreating over nearly a three-month period, it popped again, this time almost 60% from early August to mid-September 2013. Following another pullback, it was on the move yet again from mid-January to the end of February, rising 31% during that time.
But despite these brief, intense updrafts, the stock is still trading around , leaving shareholders no better off than they were in mid-November 2012. Worse, the stock could plunge far lower within a year.
One key sign of this possibility — the status of the firm's bonds, which are rated "Caa1" by Moody's and "CCC+" by Standard & Poor's. Both ratings mean the same thing: The bonds are extremely speculative. And both are just two notches above the level where default with slim chances of recovery would be considered imminent. I think it's safe to say the stock of a firm with such severe financial issues is probably as dangerous as its bonds.
The company I'm referring to is none other than the ailing consumer electronics distributor RadioShack (NYSE: RSH). Besides horrible credit ratings, here are three other reasons not to buy into "The Shack's" turnaround or consider dumping the stock if you already own it.
Dismal Financial Performance
The March 3 earnings reports is the latest example (and the stock is down around 20% in the four days since).
For the fourth quarter of 2013, sales fell 20% to 5 million and RadioShack posted a bottom-line loss of .93 a share — 12 times the .16 loss Wall Street expected. Since 2010, sales are off more than 8% annually, from .5 billion to the current .4 billion. During the same period, EPS dropped from .68 to a loss of .97.
|RadioShack recently announced it would soon be shutting down 1,100 of its approximately 4,100 locations.|
Looking back further, RadioShack hasn't grown substantially for nearly a decade — since 2005, when sales reached .1 billion (a 6% increase from 2004). Since then, sales have only eroded.
It's hard to see RadioShack improving the top and bottom line much when it's up against such fierce competition from far stronger rivals that offer the same or similar products, often at better prices and in more convenient and varied venues. Why, for instance, would consumers make a special trip to RadioShack for things like computer products or even smartphones when they can typically get them cheaper at Wal-Mart (NYSE: WMT) or Target (NYSE: TGT) – and do all their other shopping at that same time?
They usually wouldn't, hence RadioShack's current predicament. Competition from Amazon (Nasdaq: AMZN) and other far cheaper online retailers has obviously hurt the company, too.
Turnaround Plans Are Too Little, Too Late
RadioShack is taking measures typically seen at ailing companies. Last October, for instance, it received 5 million in new five-year financing from GE Capital and Salus Capital Partners, though this was likely its last chance to tap the capital markets. The company is attempting to rebrand, too, most recently with its humorous "The '80s called, they want their store back" Superbowl commercial and a "Do It Together" marketing campaign stressing customer service. And of course, it's closing stores, announcing recently that it would soon be shutting down 1,100 of its approximately 4,100 locations.
But to my mind, RadioShack's best attempt at survival is the testing of new concept stores, the first of which opened Jan. 10 in Lynwood, Calif. The stores are intended to provide an upgraded shopping experience with things like a modern new look, touchscreens and apps with product information, displays with in-demand brands such as Apple (Nasdaq: AAPL), Samsung (OTC: SSNLF), and HTC (OTC: HTCKF), and a do-it-yourself area where customers can plan their own electronics projects.
The problem is there are only a handful of these stores, and analysts estimate RadioShack has sufficient liquidity for perhaps another year. Assuming the new concept stores would even be successful, revamping enough of the remaining 3,000 locations to revive the company would likely be a multi-year, multi-billion-dollar project. So I'm concerned the company will run out of money well before its turnaround is complete.
Risk to Consider: RadioShack's future is very much in doubt. Current shareholders could lose their entire investment.
Action to Take –> RadioShack has been around for decades, so it's tempting to think its current situation is a chance to buy a good company cheap, then watch the stock rise by multiples of the current low price. Of course, no one can predict the future, but I'm inclined to see RadioShack more as a value trap than a profitable turnaround play.
The company has lost nearly 90% of its market value during the past three years and could be out of business in a year. Since buying the stock at this point is a huge risk, I wouldn't invest any more in it than you can afford to lose.
The euro and Swiss franc rose to new highs since Q4 2011, while sterling moved to within half a cent of the best level since 2009 set in mid-February in recent days. The market was all rife with speculation of a break out. However, our reading of the technical and fundamental condition, suggests dollar bears tread carefully.
If the past week was about the lack of escalation in both Russia/Ukraine and China, coupled with the ECB holding pat, next week may see the pendulum swing back a bit. This could lend itself to a more consolidative trading, which in the current context, may be somewhat supportive of the greenback.
With a referendum planned in Crimea next weekend that will likely lead Russia’s annexation, the confrontation may escalate again. Although the yuan strengthened in the past week, we suspect that uncertainty spurred by the first on-shore default and the apparent official desire to inject more volatility may weigh on the yuan.. China unexpectedly reported a large trade deficit in February, and although it was the distorted by the lunar new year, some will see evidence that the yuan is now over-valued. The ECB did not change policy, but the large pay down of LTRO borrowings, and the strength of the euro, may spur speculation that the door to easing has not closed. Moreover, official efforts to jawbone the euro lower may also increase.
Euro: The rally in the second half of last week, left the euro stretched. This is illustrated by the fact that it spent the pre-weekend session above the top of its Bollinger Band (two standard deviations about the 20-day moving average). That last time it did anything close to this was in mid-September last year. In addition, its proximity to the psychological and technically significant .40 area may change the risk-reward calculations for many participants. This is not to say that a deep pullback is necessary, but we can see a move back into the .3780-.3825 band.
Sterling: Short-term market positioning, judging from the Commitment of Traders remains extreme for sterling. This might help explain the market’s cautiousness as sterling approached .68. There is a mild bearish divergence that is evident on the daily RSI. Support is seen .6640-60. Separately, we note that the euro’s downtrend against sterling from last August high near GBP0.8770 has been approached. We draw it coming in on Monday, March 10 near GBP0.8310, which is near the top of the Bollinger Band, and GBP0.8298 by the end of the week. While a convincing break has to be respected, we are bit wary.
Yen: The dollar is over-stretched against the yen. At its high, the dollar was nearly 3 standard deviations away from its 20-day moving average (~JPY103.55). The top of the Bollinger Band comes in near JPY103.10. By this measure, the dollar is the most stretched against the yen as it has been in years, including the earlier run-up in anticipation of Abenomics beginning in late-2012. We had suggested dollar potential into the JPY103.10-65 band, and now that it has reached it, we suspect a consoldative phase is near, especially if we are correct about the larger investment climate. Initial support for the dollar is pegged near JPY102.80-JPY103.10 now, with additional support near JPY102.50.
Canadian dollar: The optics of Canada’s jobs data were worse than the details, but the Bank of Canada is now the most dovish within the dollar-bloc. The US dollar tested important technical resistance near CAD1.11 before the weekend. This corresponds to a retracement objective and a trend line off the Feb 21 high near CAD1.12. Our reading of the technical indicators warn that the dollar will likely rise through the CAD1.11 area and test CAD1.12 in the days ahead.
Australian dollar: With the help of spectacular first tier data, especially robust retail sales and trade surplus, the Australian dollar was the strongest currency last week gaining about 1.75% against the US dollar. It closed on March 6 above the top of its Bollinger Band, for the first time since mid-January and moved back barely within in before the weekend. The close was near its lows after new four month highs were recorded. The close below .9080, which corresponds to both the 100-day moving average and the minimum retracement objective of the Aussie’s slide since last October, warns of additional near-term losses. There is potential from a technical point of view back into the .9015-40 range. On the upside, the .9200 is an important psychological level and coincides with the 50% retracement objective of the slide.
Mexican peso: The peso participated in the move against the dollar at the end of last week. After breaking below the lower end of the trading range since mid-January around MXN13.20, the greenback found support near MXN13.11. Technically, we see the risk that the break is not sustained and the greenback moves back into the MXN13.20-MXN13.40 trading range and possibly toward the middle to upper end again. On March 6, the US dollar closed below the bottom of the Bollinger band for the first time since last September. It moved back into the band before the weekend. The 20-day moving average, the middle of the Bollinger Band comes in near MXN13.26 and that seems to be the immediate risk.
Observations from the speculative positioning in the CME currency futures:
1. Position adjustments remained minor. In the previous reporting period there were no gross position changes of more than 10k contracts. In the most recent reporting period there was one: the gross long euro position rose 10.9k contracts to 103.9k. This is the largest gross long position since last November. There were no other gross position adjustment that exceeded 6k contracts.
2. Among the small adjustments, the general pattern was to add to gross short currency positions. They were only reduced in sterling (-4.3k contracts to 41.4k) and peso (-2.6k to 29k contracts). In both of these currencies, exposure was reduced as both the longs and shorts were pared.
3. Outside of the euro, which as we have noted saw a large rise in the gross longs, the gross longs of the other six currencies we review were evenly split between buying and selling.
4. The gross long euro and sterling positions dominate the speculative currency future long positions (103.9k and 71.0k respectively). None of the other currencies’ gross long position is more than 24k. The 12.2k gross long Australian dollar futures position and the 6.2k peso futures position seems particularly small. It may be begging for a contrarian stance, but as we note above the technical outlook suggest this is not the time.
5. The gross short positions are less concentrated. The yen, of course, is the leader with 100.1k gross short futures contracts, but the euro’s 80.4k and Canadian dollar’s 84.4k contracts are also substantial. They are followed by the Aussie (53.4k contracts) and sterling’s gross short 41.4k contracts). The lower level of gross short peso (29.0k contracts) and franc (19.7k contracts), in part simply reflects the lack of participation presently.
In today's world of high-frequency, short-term trading, many funds have sprung up that take positions based purely on statistics and for mere seconds (or less) at a time. Fundamentals get thrown out of the window; long-term appreciation and dividends are often never considered.
#-ad_banner-#Traditional long/short hedge funds are still generating impressive returns using tried-and-true methods, however. Heavy research into valuation and commitment to investment ideas over a greater horizon will never go out of style. This type of investing mantra is suitable for the great majority of investors as well.
Getting a peek into that research can be done each quarter when funds release their long positions in a filing called a Form 13F. While 13F data has its pros and cons, following managers who have demonstrated performance over a long-term horizon can lead to profitable investments.
Warren Buffett, esteemed investor, founder and the largest stakeholder of Berkshire Hathaway (NYSE: BRK), is the polar opposite of a short-term trader. The Oracle of Omaha is a legendary buy-and-hold investor, which is why his filings can be so insightful.
I've pored over Berkshire Hathaway's 13Fs spanning the last 12 quarters with a few criteria in mind.
First, find big-cap stocks that have had a home in the fund's portfolio for three years or longer. Second, pick out large dividend-payers (great than a 3% yield) with a history of yield growth. Finally, whittle the results down to three stocks from different industries for diversification purposes.
At 3.5%, General Electric (NYSE: GE) offers the highest dividend yield of the stocks in my screen. The company is currently undergoing significant internal change, looking to file an IPO for its consumer finance unit in the coming months.
|The Oracle of Omaha is a legendary buy-and-hold investor, which is why his filings can be so insightful.|
GE Capital, as it is known, accounts for nearly half of the company's operating earnings. The spin-off could unlock billions in value for GE shareholders and reduce credit and liquidity risk overall. On a performance note, the stock has returned 25% in the past three years, not including dividends. While not drastic, the slow and steady growth is respectable when combined with the dividend payout.
As many investors know, the Coca-Cola Co. (NYSE: KO) is one of Buffett's most prolific holdings.
Since 1988, Berkshire Hathaway has poured .5 billion into Coca-Cola, making it the fund's second-largest position at 15.8%, taking a backseat only to Wells Fargo's (NYSE: WFC). The 400 million shares owned have steadily increased in value over the years since he began purchasing the stock in 1989, registering a modest gain of 18.6% in the past three years. Buffett still has high hopes for the brand, citing that 3% of the liquids that the earth's population drinks are Coca-Cola products. India and China are being targeted heavily in the coming years, with a portion of the company's billion in marketing efforts going to those emerging markets as 2016 approaches.
Procter & Gamble (NYSE: PG) was a standout pick in my screen, primarily due to its yield of 3.1% that has been growing since 1957. The consumer goods staple faces similar challenges to Coca-Cola in that its global presence is subject to currency pressures, which recently accounted for a drop in fiscal second-quarter 2014 earnings. However, PG has built a vast portfolio with brand names recognized worldwide, bolstering its ability to consistently pay and increase its dividend. The stock has seen performance similar to GE looking back three years, prompting Buffett to take profits and lighten his position slightly over the study period.
Warren Buffett's Top 10 Holdings
Risks to Consider: Despite being aware of Buffett's investing approach, one should use his disclosed portfolio as a framework. Berkshire Hathaway has the solvency and time to see investments through good times and bad. Also, take note that all dividends were determined at today's dates, so they may have carried different yields in the past.
Action to Take –> Are any of the names overly surprising? Not necessarily, but if you have been on the lookout for conservative, high-income investments, consider these three names to add to your portfolio. Keep long-term appreciation in mind, but view the dividend payouts as consistent income or as opportunities to reinvest. Both GE and PG are already past their ex-dividend dates, but Coca-Cola will be trading ex-dividend on March 12, leaving time for investors to still get in if looking to take advantage of the upcoming payout.
Having expressed her perspective of Russia Today’s “whitewashed” coverage of Putin’s invasion of Russia, Liz Wahl resigned live on air yesterday. This came on the heels of her colleague Abby Martin’s recent comments voicing here disagreements with Russian policies on the same state-funded network. Russia Today has responded… “When a journalist disagrees with the editorial position of his or her organization, the usual course of action is to address those grievances with the editor…But when someone makes a big public show of a personal decision, it is nothing more than a self-promotional stunt.”
Russia Today full statement:
Ms. Wahl’s resignation comes on the heels of her colleague Abby Martin’s recent comments in which she voiced her disagreement with certain policies of the Russian government and asserted her editorial independence.
Abby Martin’s comments…
The difference is, Ms. Martin spoke in the context of her own talk show, to the viewers who have been tuning in for years to hear her opinions on current events – the opinions that most media did not care about until two days ago. For years, Ms. Martin has been speaking out against US military intervention, only to be ignored by the mainstream news outlets – but with that one comment, branded as an act of defiance, she became an overnight sensation. It is a tempting example to follow.
When a journalist disagrees with the editorial position of his or her organization, the usual course of action is to address those grievances with the editor, and, if they cannot be resolved, to quit like a professional. But when someone makes a big public show of a personal decision, it is nothing more than a self-promotional stunt.
We wish Liz the best of luck on her chosen path.
Imagine walking into a casino and taking a seat at the nearest roulette table. You set down a 0 bill, receive four green chips, and proceed to stack them all on red. If the ball lands on a red number, you instantly double your money. If not, you lose it all and walk away with nothing.
The croupier gives the wheel a spin, lets the ball fly, and waves his hand over the table to signal no more bets. The adrenaline starts pumping as you watch the ball bounce from slot to slot, finally settling on… 20 black.
Your chips are unceremoniously scooped up. That was fast.
#-ad_banner-#But wait. This is no ordinary roulette wheel. The dealer decides to reimburse you for your play and gives you back. Emboldened, you pocket the chips and lay down another Ben Franklin on the table for a second spin. This time Lady Luck smiles on you.
The ball lands on 5 red. The dealer doubles your bet and pushes 0 toward you. But once again, he gives you an extra bonus just for playing.
The laws of mathematics say this is a "can't-lose" proposition. Guess wrong, and you still get 40% of your money refunded. Guess right, and you're entitled to an extra 40% bonus on top of any winnings. Pretty soon you'll be asking the pit boss for permission to raise the table limit to ,000 per hand, or 0,000.
That's what the Cook Inlet Recovery Act "loophole" is offering investors in oil and gas right now.
The investment world hasn't yet caught on to the Cook Inlet Recovery Act yet, which is why now is the perfect time to tell you about it. Simply put, it may be one of the easiest tools we can use to secure big gains and high yields over the next few years…
Passed to stimulate production and tap into Southeast Alaska's abundant energy resources, the architects of the Cook Inlet Recovery Act are aiming to boost the availability of critical natural gas supplies during the harsh Alaskan winters.
You see, as with any sort of business venture, oil and gas companies prospecting for hydrocarbons involves an element of risk. Some holes are bountiful. Others are dry. You win some. You lose some. And there are high stakes. Drilling and completion costs in places such as the Bakken Shale in North Dakota (where demand for fracking crews is fierce) can run more than million per well.
Even small independent producers have to spend huge amounts of cash to explore and develop their properties. Magnum Hunter's (NYSE: MHR) upstream spending budget has totaled 2 million through the first half of 2013. Kodiak Oil & Gas (NYSE: KOG), which has seven rigs running, spent 8 million last quarter alone.
Whether these companies find oil or not, that money is gone.
But the Cook Inlet Recovery Act has changed that for any company in this Alaskan oil-rich area.
This is a place where explorers can spend freely knowing that they'll recoup 40% of whatever capital expenditures are made. Guaranteed.
So if a company invests 0 million for exploration and development, it gets back million in the same year those expenses are incurred. And if that wasn't generous enough, there's a second component.
For any well that turns out to be a dud and isn't economic to operate, the state will throw in an additional 25% credit (technically a tax-loss carry-forward). When combined with the initial 40%, that means 65 cents of every dollar spent will come back to the company.
Not only do these incentives eliminate most of the risk, they let producers exploit abundant energy reserves and send the state of Alaska a bill for roughly half the cost.
And the crazy part is, Cook Inlet is a proven hunting ground. It relinquished 227,000 barrels of oil per day at its peak and still contains hundreds of millions more up for grabs. In fact, the latest U.S. Geological Survey study estimates the potential remaining haul at 600 million barrels of oil and 19 trillion cubic feet of gas.
I know of no other place in North America where this one-of-a-kind opportunity exists.
But harvesting that oil won't be cheap. To raise capital, one company operating in this space recently issued preferred shares that carry a rich yield of 10.1%, and that's just part of the reason that I recently recommended it to my High-Yield Investing readers.
Bottom line, with the Cook Inlet Recovery Act "loophole," companies can take on a lot more risk — and reap more reward — with a lot more safety. You'll be hearing a lot more about this area in the coming months — and you'll want to consider companies operating in this space for your portfolio.