wearmanyhats

During the tech stock craziness of the 90’s, one or two prescient financial newsletter writers discussed bluetooth and how it would revolutionize the electronic industry.  They correctly predicted that any company using this new technology would be moving in the right direction. How right these writers were.  Bluetooth technology now seems to be everywhere. 

Such is the case with the Global Positioning System (GPS) technology.  In this case, many people use it for hunting, hiking, traveling, etc.  There even is a game in a park near our home where people can have a GPS scavenger hunt.  Investors who want to be in on this kind of technology need look no further than at Trimble Navigation, LTD (TRMB) for the patents on this important technology.  That’s the kind of news a good investor would find quite useful.  And guess what?  It’s selling fairly cheap right now as are many good stocks.

While innovations appear constantly, none probably will affect our daily lives more than Buckyballs, the newest material formed from the most recently discovered form of carbon.  Using a geometric shape of adhering the atoms, the strength of the material is believed to be stronger than the strongest composite steel.  It’s conductive properties make it perfect to protect planes from lightening strikes, and the ways in which this material can be used is not even fully comprehended at this time.  Speculation has it that it might even be able to be made into airplanes themselves, making planes lighter and more fuel efficient.   

So what does bluetooth and GPS have to do with Buckyballs? Well, consider how that both bluetooth and GPS started sometime within the past thirty years.  If you had known about the companies that created these fine innovations, wouldn’t you have wanted to know how to get in on the ground up?  In order to do that, you need to first know of the invention, then be aware of the advent of a new company selling this valuable product.

Investors need to know when the time is transitioning from the buggy whip to the car. It simply does no good to invest in technology that is on its way out; rather get in on the new! I’ll be watching more about the buckyball technology, the company that may come of it, and folow this amazing new invention that will change the world.

As you’ve seen in this blog before, high yield dividend stocks are on sale now, and worth grabbing if you have any money to spare.  They are among the first to bounce back whenever investors begin to buy again.  High dividends are quite appealing.  However, it’s only surrendipity that they go up even on days when the Dow goes down.  Today was just such a day.

British Petroleum Prudhoe Bay Trust (BPT) was one such stock.  The fact that it went up yesterday during an upward market was expected.  But to go up $6 in one day when the Dow went down was terrific!  In fact, it is now rated a “buy” by Argus, and a new article out by Marketwatch touted the terrific buys in the oil sector.  Can’t decide which oil stock to buy and don’t care if you get a good dividend?  Try XLE, the ETF oil sector SPDR, which is trading only ten dollars above its 52 week low.  Grab if we have another day of big losses, because sooner or later this will all shake out and oil will bounce back.

Frontline (FRO) has bounced back from it low six days ago at $25 to its current $30.  Euroseas Shipping (ESEA), which has gotten a true drubbing in this recent bearish market run, came roaring back today, up 7%.  All of these shipping firms have been covered in a previous blog.  But it’s nice to get that dividend to offset losses.  Hopefully these stocks will bounce back even more that what anyone would expect.

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CNN’s travel reporter confirmed this blog yesterday that travel bargains abound.  For a myriad of reasons, travelers are holding on to their money and not spending it on travel right now.  Therefore, the reporter advised, you can bargain with hotel managers, and find bargains on cruises that are so cheap that you almost can’t live in one other place for that amount.  If your job looks secure, you have an excellent financial cushion and you have put away a supply of goods that you would use in the event of a downturn, then travel is a good idea.  It might be a long time again before you see these kinds of bargains.

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Investing in money is easy to some extent because it’s fairly predictable.  Investing in other things that are less tangible are more tricky.  Investing in education, for example.  Generally you can take classes , get a degree and expect employers to reward you with more pay.  Now companies may be doing anything to pare back costs.  Expect payments for classes to be on the cutting table in the future, if not already. That doesn’t mean you shouldn’t take classes to improve your career moves.  In case of a layoff, guess who will get hired first:  the person who is currently up on the most recent changes in their field or the one who has been going home to supper every night?

Another way people “invest” is in their children.  Parents think that their children will take care of them in old age, but let’s face it.  Some children fly the coup and never even call home!  Others get bogged down in their own struggles in life.  Have a back up plan such as long term care to help out with costs of living in case of illness.

Finally, offbeat “investments” such as invention, books, music royalties, and other creative endeavors can often bring in wealth.  Don’t be afraid to branch out beyond the paycheck.  To bring home the point, Elvis made 52 million dollars this last year, and he’s been dead for three decades!  That’s something worth knowing when it comes to pursuing the creative side of life!

Whenever a portfolio is getting pounded as it is for those of us who stayed in the market during this downturn, a person might wonder what on earth will be the first to recover.  The answer is almost universal during times such as these: small cap stocks.

Normally I like individual stocks because their growth can really thrust a portfolio upward during a bull market.  It’s hard to predict which mutual fund will grow in the double or triple digits during the year, but individual stocks are pretty good at doing just that.  However, there are certain windows of opportunity to use good mutual funds, and just about now would be it.  Whenever you feel the market has finally hit bottom, (soon, we hope!) that would be the best time to find a great small cap fund and jump in for good returns.

Mutual funds have fallen by the wayside a bit since ETF’s have become popular.  Make no mistake, ETF’s are superior to mutual funds only when it comes to fees.   ETF’s follow one particular sector, such as GLD follows gold or XLS follows oil, or OIH holds oil handler stocks, and are traded like a stock. Therefore, all you pay is usually a negligable trading fee.

One thing that people sometimes forget about a good mutual fund is that you have experts who are doing the legwork for you, often using first hand investigation.  Mutual fund managers will  talk to top executives in the company as well as analyze company financials all to decide if it is worth buying tens of thousands of shares.  These big funds are sometimes managed by two people, who have a raft of other folks helping gather data on each of their picks.  An ETF takes the good with the bad companies, which is a desireable strategy only if a particular sector is on the rise.

Back to the issue of fees.  While ETF trading is just a regular trading fee, that’s not so with a mutual fund.  If you don’t watch it, fees can chew away at your gains.  The one major piece of advice that I give on this subject is to never pay any kind of front or back fee, also known as an in or out fee.  There are so many excellent no load funds out there that it is worth your time and energy to research out which ones would be the least expensive, with excellent returns.

One last thing to note:  mutual funds are generally less volatile than individual stocks, which means that during a downturn, they don’t drop as far nor as badly as a plain old stock. But their recovery is not as dramatic as a regular stock can be either. 

Which one to chose? A good screener through your broker will help you find some ideas.  Personally, I always like top names because they often attract excellent talent.  Companies like Dreyfus, Janus, and Fidelity are fairly well known.  But don’t underestimate quieter companies such as Marsico, Brandywine and Oak.

Small cap value funds and regular small cap fund traditionally do well during any economic recovery.  While the market is not necessarily there yet to recover, watch and be mindful of a strategy.  Small companies bounce back faster because they are more nimble. Global small caps may produce even more sparkling results.  Be sure to read the prospectus, keeping mindful of all fees that involved, and how soon you can sell out of the fund should you need liquidity. I know that prospectuses are not light reading, but they can be done fairly quickly.  But we’ll save that for another article.

“I don’t get it,” said my husband, in a most puzzled tone.  “If the country is in so much trouble, why then is our currency so strong all of a sudden?”

It does seem counterintuitive.  The Congress has just had to fork out billions to rescue the financial industry.  There are banks going broke, and the job losses have just gone wild in the past few weeks.  In the meantime, our dollar is bouncing back from getting kicked to pieces in the past few years.  What a bizarre time for our currency to be doing so well, right?

Well, right, in a way.  But it really does make sense.  People are frightened of what the future holds in their bank accounts.  The call has been made by many finacial experts to jump out of the market and put all their cash in government bonds only.  The result: people are flocking to Treasuries and the dollar.  Since people are willing to pay more than the next person to get the dollar, other currencies drop in value. 

“Okay,” he said, still unconvinced.  “So I don’t get it.  Who wants the currency of a nation that is in such debt?”

“Good point,” I said.  “Consider the fact that the U.S. government has always paid its treasury debt.  Always.  No matter what the rest of the people had to go through, it has always paid its debt. That’s critical to overseas investors.  They want to be sure they don’t lose their money, consequently, they invest with a nation that has a long history of keeping its committment to pay up.

Now how long the dollar is going to stay strong for overseas investors is anyone’s guess.  First, if the national debt gets back into a more manageable zone, then the dollar will probably remain strong.  If, however, overseas investors get nervous, then gold will rise again and the dollar may fall. 

In the meantime, you can take advantage of this rising dollar by heading overseas for vacation, and there’s no better time than now.  The airlines are cutting special deals for international flights because of the drop in fuel costs, and some are even revisiting how much it charges to travel all together.  Travel packages might even be cheaper than any other time in the past few years.  Finally, shopping and hotels might be a bargain since many Americans are staying home more now due to job cutbacks.  Consider all of these factors.

And since this blog is all about investing, this might be a time to look into investing in the Forex.  Today.com even has a forex trading blog that might be of service to you. Tell ‘em I sent you, and good luck riding a new wave on the dollar.

I rarely get to see my godson, who also is my nephew, and he was visiting his grandfather the other day when I came over,too.  We began to talk about what we believed would be the future financial picture,but my godson only saw it in the terms that he could understand.

“It’s just a  correction,” he said.  “It’ll bounce back.”

“It took until ‘58 for the market to bounce back after the depression,” The Old Man said to his grandson.

Stunned, my nephew said, ‘But it’s not like this happens every day, right?  I mean, it’s only happened once before, during the Depression, right?”

“And in 1867,” I added, “And in the 1890’s,.”

He was shocked that this was not only the second economic crisis in the history of our nation.  It doesn’t matter what or why, these events happen periodically, and how bad they get is all due to how the Fed and others respond.  In this case, the government learned from its mistakes during the Depression when Hoover stood around and did NOTHING! Now they are rushing in to try to stave off a huge Depression, and it might just work and keep us in a recession.  If we had done nothing, as so many free marketers had suggested, then a Depression would have been iinevitable.  Bernanke, an avid scholar of the Depression knew this, and that’s why he’s acting today.

The thing about economic downturns is that they are all unique.  For example, during the Depression, 25% of the workforce, mostly men, were unemployed.  Today it is not likely that that number will get that high.  For one thing, there are so many jobs in this nation that go unfilled that many employers seek for workers in Mexico or other countries.  If people get hard up enough to take the laborer jobs, the meat cutting, potatoe chip packing, produce picking jobs that have often gone to foreign workers, then unemployment becomes an underemployment issue.  At any rate, this recession does not have a serious unemployment problem-yet.  That could change soon, though.

Is this financial crisis the worst our country has ever seen?  Not today. The time after the Civil War was pretty terrible, especially down in the South.  Inflation was as bad as we had ever seen it before.

Since we have seen hard times before, and since inflation may look more on the horizon, what then could the problems be?  Deflation would be a good start.  The commodity bull market has suddenly halted, and gold has been in a free fall.  Will this continue?  Many financial gurus do not believe so, even though the charts sure look as though any upward movement is pretty dead.  The downward spiral of oil has suddenly made companies shut off their explorations.

It’s unlikely that Saudia Arabia is going to allow their last precious drops to go for anything less than a premium.  They have already decided to cut production, and even though Americans are using less fuel, sooner or later the cuts in production will drive the price back up.  That, in turn, will spark inflation.

In the meantime, watch this cycle of deflation.  Unlike inflation, which seems to always be around, deflation is unusual.  Consider that you are truly living in a historic time.  That ought to make your day!

Like many Americans living in the cold climate, preparing for winter is one of the necessary tasks that we face each fall.  In my case, I’m in the middle of remodeling, and have no insulation in the kitchen cieling, so I am rushing to put in batting.  It keeps the heat in, but lets it be accessible when my husband comes home and wants to change around some wiring before we sheetrock.  Hence, no blog yesterday, but today, very sore shoulders.  And legs, and muscles I didn’t know I have.

This activity is metaphorical for what is going on in the investment world right now.  We are preparing for a change in climate.  The market, which is going through a huge downturn, is still showing too much weakness to invest.  And real estate is shut down due to lending factors, unless you have cash.  Bonds have gone down, and gold has been correcting. 

In response to all of that, Americans have been taking advantage of the “no place to put your money” by doing upgrades on their house.  Others have been buying treasuries, paying down debt, and picking up a few bargain houses for rentals.  Still others have entered into the tricky world of peer to peer lending and maybe even some folks are buying viaticals, something I would advise against.  Whatever the case may be, saavy investors are trying to protect their money as best as possible. 

I just spoke to my husband today as he is trying to noodle through the upcoming market changes, to understand my frantic preparations.  We have to do the following:  put aside investment capital to buy gold and silver, and at the same time, pay down some debt that we acquired when one of us was ill.  If we can, we’ll buy the rest of the needed things for our house while they are down in price.  If not, we’ll have to get more clever about money in the future.

He spent time trying to understand my explainations, and I found that my readers might want to understand, too.  So for the next few articles, we’ll put some of these upcoming events into som perspective for you. 

But for now we are preparing, getting ready for the changes that will come just as sure as the sun will  shine tomorrow.  And just as gardeners knows they must plant the seeds for a harvest, so must we plant our seeds now as investors.

My father is a faithful follower of Martin Weiss and his associates.  For many years their advice has been his faithful quest.  Sometimes I disagreed with their analysis,  sometimes we shared the same view.

Several months ago, and even more so, several weeks ago, we once again parted ways  on what we believed would happen to global stocks. They said that no matter what would happen here, the growth in China and India was such that our fiscal problems would have no bearing over there.

“There’s no way that the biggest customer of their businesses could have a cold without giving them the flu,” I told Father.  “If we suffer from terrible times economically, then you can bet they will have it worse.”

We discussed it emphatically.  He didn’t know if he believed them or not.

Then recently the news reports of abandoned factories in China began to hit mainstream media.  People in China began to flock to rallies designed to protest plant closures.  Still Edelson and Sagami of the Weiss group pounded the table crying that the growth was there.

Today they changed their tune.  Now they believe we will be plagued with deflation, and that third world nations will have a massive financial wipeout due to lack of orders from the U.S. 

I hate it when I’m on a different wave length than Weiss. He’s careful with money and has years on him that I do not.  But this situation was different because it seemed so apparent to me. 

Now comes the hard part for you to hear.  As wonderful as these low gas prices may be, they will not continue. This is simply a correction.  It will not be like this for long because anyone owning any amount of oil at alll will do their best to get their profits back up. 

Another thing, don’t expect long term deflation. Why?  Because worker’s wages have not really caught up with the increase in the cost of living.  Those cost of living increases will come.  The deflation which Weiss is predicting is already true.  Last year, the insulation I bought for my walls cost more money than it did this year.  And retailers are already looking at sales as a way to get rid of merchandise that people aren’t going to buy easily for the holidays.

Weiss says the deflationary period will not last long. I agree.  In fact, the free fall in the price of gold will be so fast, and the turn around for the price will be equally so fast that it will give you whiplash.  Watch it. 

Prepare for the upcoming changes in our economy.  There are ways.  I will explain more on this tomorrow.

Yesterday I wrote about excellent buys in the shipping industry.  Today I’m following up with stocks to avoid.  Now, one might ask why bother with the ones to avoid?   Well, perhaps you have a way of screening stocks and some of these come up.  Maybe you even like some of them.  No problem.  Here is just another point of view about them.  Also, I encourage you to be sure to read the last paragraph for some ideas about our current market. 

Star Bulk Carriers (SBLK) is not a star pupil destined for fast track upward. I liked its dividend until I saw the P/E was over 48.  Run, don’t walk away from this one.

 US Shipping Partners (USS) may very well be one of those companies that you should buy, throw into a drawer and give to your grandchildren.  For right now, this liquid bulk hauler is runniing in the red, irregardless of how much dividend they give.  There are enough excellent other stocks out there to grab.  So unless you are interested in a longshot, I would head the other way.

Paragon Shipping (PRGN) startled me with its new found money.  Its increase in revenue is spectacular.  However, it leases out most of the management of their equipment, and has a P/E over 21, which is not a bargain.  Although the dividend is solid and the price seems low, I would pass on this one for some later time.

Ship Finance, Ltd (SFL)  is one that I used to own a few years ago.  It did well for me then, but I’m glad I took the profits and ran.  Currently the price is near its all time low, and the P/E has been adjusted to reflect its declining revenue.  It leases its ships to Frontline - remember them?  With all of the excellent stocks out there, don’t shed a tear to let this one wander off.

Years ago Knightsbridge Tanker (VLCCF) fell to an ungodly low number such as $8 and I didn’t buy them.  Why were they so low?  Simple, they had a lease agreement that needed to be renewed and it was anyone’s guess how the shareholders were going to vote on this issue.  I vowed if they ever got low again to pick them up.  Today I am breaking my vow.  It’s about time for that lease to get voted on again, and my confidence in the direction of the stock is limited.  I believe the parties involved will probably get it all together, but with these factors on the shaky side, I would flee to the more concrete investments in this transport category. 

 The stocks I recommended yesterday are all high dividend yielding stocks designed to give spectacular returns even while they correct.  Those returns make them desireable during market downturns, but this doesn’t mean they will never drop in value during a bear market.  Still, if you throw them into an account and leave them there, at least your money market account will continue to accrue funds.

Do you remember how on October 1st I said to sell some of your gold so that you could releverage?  I believed at that time that gold and slver would take a severe but temporary downturn.  Since then it has dropped over $100/ounce for gold.   Hold that cash!  Get ready to rebuy.  Don’t take ‘no’ for an answer when it comes to finding silver, either.  I hear that it is getting more difficult to find.  But shop around, be persistant when it comes time.  The time is not yet.  Be patient.  It is coming.

 Also, please remember that the bear market, the market downturn is NOT over.  It may be near a bottom, but it may not be.  If you buy now, be prepared to be brave if initially it loses money.  That is the hardest part of contrarian investing.

More tomorrow!

Remember Jackie O?  After John Kennedy died, she married a shipping tycoon.  Onassis made his wealth in shipping, and for good reason.  I was amazed this weekend when I heard on an I-max film that a properly loaded barge can carry up to 900 truckloads of freight.  Imagine how much money that is for each item, and you have a sense of why it is so profitable.

For twenty years I have dilligently watched high yield dividend stocks, and let me tell you, there has never been a time to buy shipping stocks like there is today.  Imagine landing a stock that will pay you a 20% dividend any time they can?  These opportunities just don’t come along often. Not only that, but because it is a cyclical stock that is on its bottom, the growth potential is huge.  Here is a list of stocks to buy in this sector, and tomorrow, the shipping stocks to avoid. 

There are a fair number of excellent shipping firms that are now on sale.  My favorite, Frontline (FRO) has been on the top of my list for some time simply because the return on the investment over the years has been phenomenal. However, other firms have been quite excellent, too.

Diana Shipping (DSX) is worth a second look these days.  The recent market drop was punishing to this dry bulk shipping firm.  But the net revenues have almost doubled and costs have been cut.  The yield is only 13% but the P/E is under 9, which makes me think it to be a bargain.  The fact that it is hauling dry freight makes me both concerned and happy.  It’s not dependent upon oil as freight when the world, reeling from high prices, has cut back.  However, if a worldwide recession kicks in, the demand for hauling may drop as well.  Anyone buying it should keep an eye on it after Christmas, when there might be a serious decline in hauling needs.

At first glance Eagle Bulk Shipping (EGLE) might look as though there will be tumultuous times ahead.  Indeed, with demand down and new vessels set to arrive, one might wonder if the insiders are more than a little crazy to be buying the way they are.  But the fact is, they are buying.  The dividend, currently at 21%, is very attractive as is a low P/E.  Since inside trading is often a result of people who know why they should buy, perhaps we should jump on board. The share price is almost at an all time low, so it is a bargain.  This is one company that people may actually be able to hold and grow as the cycle of transports come back into favor, and then hold for a long time after that.

Euroseas, Ltd (ESEA) is one of my favorites.  I held it throughout our recent stock drop and was pleased to see the dividend it paid out.  It’s a small water transport company with one ten ships, but during tough financial times, smaller companies have a tendency to recover faster because they are more nimble.  The P/E is a ridiculous 3, and although I didn’t see insiders trading, I am still pleased at the price.  This is one to open the back of the truck and shovel it in.

I have long touted Frontline (FRO) as the stock I should have bought and held.  For those readers who are tuning in late, let me mention that the recent price drop was due to a huge dividend that was paid out earlier this month.  On top of that,  the P/E of 3 makes it a howling good buy.  It is known for spinning off companies and dividends together, it was on a great run up when the cycle took a downturn, and is starting already to bounce back as investors jump in.  It is a long term hold just to make you rich.  The most recent dividend was so excellent that the return on it was over 28%.  Now that’s the kind of return you can take to the golf course and brag about.

One of the few actual growth stocks in this category would be Navios Martime Holdings (NM) based out of Greece.  The stock has fallen to such a degree that it has a P/E of less than 2, and if it recovers to its previous high, could more than triple the return on the stock. The dividend return sounds promising at 6% but in reality, they pay out less than a dime on each share.  This is a growth stock, and there is no hedge for the investment.  I also do not like the fact that insiders are trading out.  Still, they are a fairly young company with a fantastic growth in both net and gross earnings.  I hope the management can grow this company in the right way.

Another growth stock that is acting an awful lot like a high yield dividend stock is Ocean Frieght, Inc. (OCNF).  This newbie seems like an old hand at the business already by repositioning itself for the more challenging dry bulk environment.  Already the CEO has ended a charter to give its company more flexibility, a typical example of how small businesses can move more nimbly in a downturn.  The company is so new that I am not necessarily recommending it; I like to watch them a few years first.  I don’t like the fact that they use second hand vessels, because those vessels can need more repair.  Yet I use a second hand car with no ill effects.  So maybe I need to just think more sensibly.  With a P/E of under 8 and a dividend return of 40%, it’s almost worth the jump.  Be careful if you do buy in.  The fact that it does have such a high dividend makes me nervous.

You can use these comments to help you invest in to the sector now when it is quiet to enjoy dividends and growth.  And if you have any suggestions or questions, pop the off here for us to discuss.

If you are an investor and have been for any length of time, you know that sometimes during the darkest hours, you can find some of the nicest bargains.  Well, now is definately the time you need you night vision goggles.  Most people agree that the bottom of the market is pretty close, if not already there.  So the time to pick up good bargains is here.  Why?  It gives the turnaround time to build momentum  and a better return for you. 

Since the price of oil has dropped significantly, now is a great time to stock up on both high yield dividend stocks such as British Petroleum Prudhoe Bay Trust (BPT)  and  the Canadian trust of Enerplus (ERF.)  I’m not as crazy about ERF because there’s no telling how the new tax laws in Canada will affect the buying pattern for this stock.  But it is still a bargain for a short term hold.

But the screaming deals are in shipping.  You can grab so many and sit back and let them make you wealthy.  Tomorrow I will be featuring the deals in there, as there are so many wonderful high yield dividend stocks to be grabbed.

There are excellent buys in other sectors, too.  One of my favorites is HQH, which is a healthcare fund that invests in small to mid size stocks.  It’s conservative, and can be sold out for a quick profit at $15.50. 

There’s more:  Stocks such as GE, a global leader in so many areas of life, is at a P/E of under 7.  It deserves a second look.  3M (MMM) has dropped to where it is a great bargain, as long as a sell goes in around its traditional high of the early to mid $90 range.  This is even a great time to buy into Johnson and Johnson (JNJ) for a long term portfolio and throw away the key.  However, this is best for the new IRA or the kid’s long term IRA.  Remember, the markets are still quite volatile, and there could be a bump or two now and then.

Goldman Sacks (GS) to me is hot, hot, hot.  Buffet has given it his critical eye and likes what he sees.  Charles Schwab (SCHW) has clung stubbornly to its 20 P/E mostly because it stayed out of the risky derivative and subprime markets.  The results have been an enviable stock growth.  They obviously learned their lessons in the mid ’80’s and their conservative nature has made both their customers and investors happy.

I would be careful of investing in other random traders, however. Rumor has it that other e-traders are in big trouble.  And the banking industry is not out of the water yet.  But this may be the time to grab some hot deals.  Share your ideas here!  We’d love to hear about them.