The Big Picture for the Week of January 1, 2012

After listening to the umpteenth segment on CNBC where both guests extolled the virtues of some version of dividend stocks, dividend growers or high yielders or the like, it has become clear that we have a very popular theme here. Over the last couple of years I’ve had some posts where I have tried to isolate the importance of dividends to a portfolio but tried to warn of the risk of a cultish devotion to them hence the term dividend zealot. Also during the week I read a post at Seeking Alpha with a cautious tone on a dividend stock bubble and all the usual suspects chimed in about why dividend stocks can’t be a bubble. For people not cultishly devoted (read all the comments on dividend articles at SA and tell me there isn’t a cultish tone) but still very interested in the topic I thought of a different way to articulate my thoughts on this subject which hopefully is useful. In listening to the aforementioned CNBC segments and the articles that have popped up people seem to think of dividend stocks as an asset class which I don’t think is the right way to look at it. People also think of dividends in terms of various strategies like dividend growth and so on and the strategy idea is a correct way to look at it but I don’t think it is the only way. I think of dividends, more precisely yield, as an attribute to be managed in the portfolio. In the trade we executed during the week we added a name that has a pretty easy...

The Big Picture for the Week of January 1, 2012

After listening to the umpteenth segment on CNBC where both guests extolled the virtues of some version of dividend stocks, dividend growers or high yielders or the like, it has become clear that we have a very popular theme here. Over the last couple of years I’ve had some posts where I have tried to isolate the importance of dividends to a portfolio but tried to warn of the risk of a cultish devotion to them hence the term dividend zealot. Also during the week I read a post at Seeking Alpha with a cautious tone on a dividend stock bubble and all the usual suspects chimed in about why dividend stocks can’t be a bubble. For people not cultishly devoted (read all the comments on dividend articles at SA and tell me there isn’t a cultish tone) but still very interested in the topic I thought of a different way to articulate my thoughts on this subject which hopefully is useful. In listening to the aforementioned CNBC segments and the articles that have popped up people seem to think of dividend stocks as an asset class which I don’t think is the right way to look at it. People also think of dividends in terms of various strategies like dividend growth and so on and the strategy idea is a correct way to look at it but I don’t think it is the only way. I think of dividends, more precisely yield, as an attribute to be managed in the portfolio. In the trade we executed during the week we added a name that has a pretty easy...

Trade Executed

We executed a (mostly) across the board trade for large accounts on Thursday buying ASX Limited (ASXFF) which is the stock exchange in Australia. The trade obviously increases our exposure to financial stocks and takes us back to Australia after having been out for about seven months. First from the top down I have been concerned that Australia is at risk for some sort of housing problem although with a far less severe magnitude as occurred in the US and so I sold our holding in ANZ Bank (ANZBY) for large accounts and at the same time sold our Aussie ETFs for their large exposure to the banks. ANZBY is down 13% since that sale and the ETFs are down a little more which is nice but I would not call the sale a major transaction. Going forward I think housing can still be a drag and so I think the banks will underperform but my take overall is that things in Australia look good–drawing this conclusion means you have to believe that China will not stop buying resources and I think Yanzhou’s intended purchase of Gloucester Coal supports that belief. I would also note that the SPX is right at its 200 DMA (give or take) but we have more cash raised than I think is ideal by virtue of selling American Tower. I wanted to buy something with relatively low volatility and higher yield (more on that in a moment) and actually if we have more purchases to make I think most of them, but not all, would be lower vol and higher yield like ASX. In...

Trade Executed

We executed a (mostly) across the board trade for large accounts on Thursday buying ASX Limited (ASXFF) which is the stock exchange in Australia. The trade obviously increases our exposure to financial stocks and takes us back to Australia after having been out for about seven months. First from the top down I have been concerned that Australia is at risk for some sort of housing problem although with a far less severe magnitude as occurred in the US and so I sold our holding in ANZ Bank (ANZBY) for large accounts and at the same time sold our Aussie ETFs for their large exposure to the banks. ANZBY is down 13% since that sale and the ETFs are down a little more which is nice but I would not call the sale a major transaction. Going forward I think housing can still be a drag and so I think the banks will underperform but my take overall is that things in Australia look good–drawing this conclusion means you have to believe that China will not stop buying resources and I think Yanzhou’s intended purchase of Gloucester Coal supports that belief. I would also note that the SPX is right at its 200 DMA (give or take) but we have more cash raised than I think is ideal by virtue of selling American Tower. I wanted to buy something with relatively low volatility and higher yield (more on that in a moment) and actually if we have more purchases to make I think most of them, but not all, would be lower vol and higher yield like ASX. In...

Getting to Know the Future You

A writer named Doug Carey had a post at Seeking Alpha called 3 Pitfalls To Avoid When Retirement Planning. He says don’t wait to start saving, don’t count on Social Security and make sure you beat inflation. Obviously all three important but as I read through I stumbled across what I think could a huge dilemma. In talking about starting early he starts out with something like let’s say a 25 year old wants to retire at 65 and then he crunches some numbers showing the importance of starting early and he is right but there is a problem here that I have thought of often but could never figure out how to articulate (and maybe I still can’t). Think back to when you were 25. Could you have possibly had any understanding or what it meant to be 65? When I was 25, even 40 seemed to be so far into the future that it would never come (not that I wouldn’t make it to 40, but more like it would never come for being so far off in the future). As I got close to 40 I realized that when I was in my 20s I had no concept of what 40 would feel like. At 45 now, from a self-awareness point of view I am quite certain that I don’t really know what it will feel like to be 65, it is possible I don’t understand 50. If I am even articulating this in a way that makes any sense it creates a lot of unknowns in trying to plan for retirement. I think it is...