Last Day of the Year

Jason Zweig had a writeup over the weekend about dividends that covered a lot of ground including an interesting point of view from the CEO of Diamond Offshore (DO) who talked about the extent to which dividends reward shareholders (we’ve all heard that one before) as opposed to stock buybacks which he said rewards the people selling which is a different way to articulate it. There is of course some benefit to existing shareholders from stock buybacks but this particular CEO seems to really care about how shareholders are treated. Dividends of course play a huge role in the long term success of a portfolio. There are various statistics floating around about how much of the total return of equities comes from dividends, the numbers are big but I have seen several numbers that vary widely so you can do your own digging here and pick the number and time frame you think makes sense. As we have gone over many times before, dividends are not the top priority here versus protecting the bottom line number of the portfolio but dividends are still very high on the list of things we care about. My thinking here is that adding an extra 100-200 basis points in dividends versus the benchmark means the rest of the portfolio may not have to work as hard (meaning not take on as much risk or volatility) but there comes a point where too much yield means more risk is being taken. That line in the sand is not something that someone else can define for you although in my opinion above 7-8% for the...

Last Day of the Year

Jason Zweig had a writeup over the weekend about dividends that covered a lot of ground including an interesting point of view from the CEO of Diamond Offshore (DO) who talked about the extent to which dividends reward shareholders (we’ve all heard that one before) as opposed to stock buybacks which he said rewards the people selling which is a different way to articulate it. There is of course some benefit to existing shareholders from stock buybacks but this particular CEO seems to really care about how shareholders are treated. Dividends of course play a huge role in the long term success of a portfolio. There are various statistics floating around about how much of the total return of equities comes from dividends, the numbers are big but I have seen several numbers that vary widely so you can do your own digging here and pick the number and time frame you think makes sense. As we have gone over many times before, dividends are not the top priority here versus protecting the bottom line number of the portfolio but dividends are still very high on the list of things we care about. My thinking here is that adding an extra 100-200 basis points in dividends versus the benchmark means the rest of the portfolio may not have to work as hard (meaning not take on as much risk or volatility) but there comes a point where too much yield means more risk is being taken. That line in the sand is not something that someone else can define for you although in my opinion above 7-8% for the...

Sunday Morning Coffee

Yesterday CBS had a couple of shows targeted to the 75 Anniversary of the NCAA Mens Basketball Tournament. One of the two shows consisted of a roundtable with some very successful coaches including Rick Pitino and Billy Donovan. Pitino is a true titan of college coaching, he’s taken three different teams to the final four (a total of six final four appearances) and won the title as coach of Kentucky in 1996. Donovan was a star on the Pitino coached Providence team that went to the final four in 1987. After a cup of coffee in the NBA Donovan went to work for Pitino as an assistant for five years before getting a head job at Marshall before going on to University of Florida where he coached them to back to back national titles in 2006 and 2007. As a side note, the vast majority assistant coaches make almost no money, they are doing it for love of the task and for the hope of getting a shot as a head coach. If you are a fan of college basketball then you’ve probably noticed how many assistant coaches each team has (seven or eight is not uncommon) and again maybe one of them makes something resembling a living. The reason there are so many is because someone gave each head coach a shot to start out and the move up and so the guys who do reach the pinnacle (a head coach job) are returning the favor. Back to Donovan and this show yesterday; as successful as Donovan has become it was striking to see the profound effect (from...

Sunday Morning Coffee

Yesterday CBS had a couple of shows targeted to the 75 Anniversary of the NCAA Mens Basketball Tournament. One of the two shows consisted of a roundtable with some very successful coaches including Rick Pitino and Billy Donovan. Pitino is a true titan of college coaching, he’s taken three different teams to the final four (a total of six final four appearances) and won the title as coach of Kentucky in 1996. Donovan was a star on the Pitino coached Providence team that went to the final four in 1987. After a cup of coffee in the NBA Donovan went to work for Pitino as an assistant for five years before getting a head job at Marshall before going on to University of Florida where he coached them to back to back national titles in 2006 and 2007. As a side note, the vast majority assistant coaches make almost no money, they are doing it for love of the task and for the hope of getting a shot as a head coach. If you are a fan of college basketball then you’ve probably noticed how many assistant coaches each team has (seven or eight is not uncommon) and again maybe one of them makes something resembling a living. The reason there are so many is because someone gave each head coach a shot to start out and the move up and so the guys who do reach the pinnacle (a head coach job) are returning the favor. Back to Donovan and this show yesterday; as successful as Donovan has become it was striking to see the profound effect (from...

The Right Tool vs The Wrong Tool

We live in an area with steep, winding, unpaved roads which become very difficult to drive on in the snow. That difficulty doesn’t prevent people from coming up here in their two wheel drive cars and other unsuitable vehicles and trying. The first picture was taken yesterday at the “100 Mail Boxes” and would be an example of the wrong tool. The Pinzgauer picture was not taken here, I just found it on the internet and think it is neat but that would be an example of the right tool. There are probably several investing metaphors that would work...