I Eat Bear

I have been watching individual stocks, and the market as a whole. My findings concern me.

Mostly,my concerns stem from P/E values. They are, by most any standard, pretty high right now. Considering we are recovering from a questionable return from a serious market downturn, that is a BIG issue right now. I can find very , very few stocks, that are CHEAP. In fact, I could give cause for another round of blows, for those who did not learn in the last downturn.

Ok, a P/E is a hard thing to give a number to. It depends on the company, and the sector. A P/Eof 15 is HIGH, and should be considered so, for MOST stocks. Yet, the tech sector thinks a P/E of 30 is a low-grade stock. Some of those have P/E values well over 50. In my book, that is too over-priced.

P/E, price to earnings. Put another way, it is how long it will take your stock to pay back your initial investment,, in years. Now, when I look at tech stocks, I start to believe that high PE ratio. Face it, they are risky, and they are boom and bust industries. You have to have some, or you miss the boom, and you can't have much or you WILL bust.

So, let's just stick with the BASICS. Let's avoid some sectors, for now, with out of line P/E ratios. If we can not find stocks, that follow the RULES of investing, then let's ignore them,, for now.

Rules of P/E. Highly profitable companies will head to the north end of the 15 P/E. They will provide CONSISTENT returns, albeit, not always market beating ones. Stable, but more risky stocks, offer a payback in less time. Face it, if you buy a stock, you want it to pay for itself before you grow OLD. Beyond 8-15 years, you will change your mind and move on to greener pastures. As well, you should. Yes, 500% or more percentage returns are possible, in shorter time frames, but for the MOST part, that comes from years of investing, and getting it RIGHT, in a single stock. Neither of those is easy to do.

So, play some odds. Use good sense about it.

Ordinarily, I would recommend a diversified portfolio. But, I am SERIOUSLY beginning to wonder, if this is the time for that. OK, mergers, aquisitions on the rise, stocks up 35% from bottom, all signs the bull is out of the bag. Shorters are running scared. GOOD. Inflation is so likely, it is not funny. All positive signs for stocks. EXCEPT, P/E's are too high. And, I am willing to bet dollars to donuts that will have to come down. For a WHOLE LOT of them.

First, my late BLUNDERS. Two stocks, I should have been buying, and let it slip, until,,, ALMOST too late. And, to tell the truth, I am still deliberating, but I KNOW my conscience is WRONG on this. Both happen to be in the shipping industry. The problem right now, with this industry is OVER-SUPPLY? Too many ships, too little market. Just over one year ago, the market worked quite differently. Supply, could not meet demand. And, it paid a PREMIUM for newer ships. Now, if you listen to the media, there is little market for anything. The question is, can this sector "stay afloat"? Well, coming quickly to the chase, there are TWO in this sector, that stand out. DSX, Diana Shipping, and TBSI, TBS Industries. I missed DSX at $12.00 and change lately and I have been kicking myself ever since. They did cut the dividend, which used to be decent, at about 3+%. I want to believe they will go back to that at some point. With a 3% dividend, and stock price growth, they make a fine stock to own. Even so, at $12, I MISSED, the much of the growth potential for that stock to rise again to $16, $24, and higher. I believe it will, and it will return to dividends, but likely in the 1% range. It is still a good stock, and will explain BRIEFLY later.

Why invest in TBSI? Because less than 3 years ago, the stock appreciated 800%. Same industry as DSX. What happened? Well, we had a little thing called a GLOBAL FINANCIAL CRISIS. Anybody with debt, was considered the worst sinner of all time. SHIPS, cost money to build and maintain.

Why I like shipping. Barriers to entry are substantial. Oceans get bigger, not smaller. Better players will get more market share.

WARNING, WARNING, DANGER Will Robinson. These are MARVELOUS day trades, but like me, you are likely to lose your shirt if you miss-judge even slightly. HIGHLY volitile. Not for the squeamish. But, good long term plays.

OK, what have I been doing right? DIVIDEND plays.Two stand out immediately, and a third is showing tons of promise. Well, my first theory in investing is do not LOSE money. I did ride the last downturn, to not lose market share. That may have been a poor move on my part, but it too had benefit. I did not have to decide after the fact, where to put money. I knew. Dividend plays.

So, I give you these two up front. TNH, Terra Nitrogen. Dividend over 8%. Not cheap stock, not big company. Concerns me the company is so small, but it is stout enough, to fend off some would be buyers. Sooner or later, the BIG bucks will win, but in the mean time, this is a stock, hard to over-look.

Second on my "buy' list is BP. It is a petroleum player, with a 6%+ dividend. It is hard to deny the sector will do good over time. It is not the biggest, and maybe not the best, in volume, but I like the management.

Third on my success list is BHP. I like the fact it is a commodities player right now, and one of the biggest. It is a producer of "all" natural resources. Pick one. Gold, they mine it. Silver, got that too. Iron ore, likely the biggest. Rubies, that too. Diamonds, no thumbs down there either.
Reasonable stock price, and a stock buy-back plan for years to come. To be aquired? Who are you kidding? This company will acquire others.

Those convictions I feel good about. If I had to put my whole portfolio, in the hands of those, I could sleep well at night.

Then I do have some, that resemble FLEAS. And these, keep me up.

Natural gas, SHOULD be thriving right now, but it is not. Some of that does not make me sleep well too.

The CEO of Chesapeake Energy should be FIRED. He is over-payed, and under-delivers. None the less, he owns (CEO), the largest natural gas producer in the world. A poorly owed and run company, but how do you ignore that in a time of "green is better"? This sorry SOB will still likely profit. But, when he does, can I?

MAYBE, but it is RISKY!

Bet on AXAS, Abraxas Energy. Pitifully, in debt. partners are consolidating LOSING companies to make a last stand. But, it is a negative P/E (rightfully so). If they can get their head out of their (ARSE?) the company could be profitable, or an acquistion target worth having?. Both make money for stockholders.

It has been tempting, to consolidate into a few that I KNOW will produce returns. And, before I leave this I mention TWO more. Diamond Offshore (DO) and Noble Energy(NE). Both offshore oil
drillers, but the other forgetten thing about investments is bet on MANAGEMENT. These are some of the best.

It is TEMPTING, for me to consolidate into just THESE, and I will bet dollars to donuts I beat the market SOUNDLY.

But, I know, you DO have to be diversified.

Bet on a bank?,,,,,,, I do love a good joke. It it right up there with the US CONGRESS. A hall filled with court jesters.

Then again, who says I am right? Two facts you should know BEFORE you judge me. Before the econmy collapsed, I was beating the market, by about 7-10%. Since it has collapsed, I have been beating it by 5-35%, depending on the day you check. 20% is a ballpark.

I did not fall off the hay-wagon just yesterday. Short term plan, find dividends, while they still exist. Growth will follow. Then , be patient, and re-invest.

Comments: View Comments |  Wednesday October 7, 2009

Ok, like many of you I open some of my investment statements and see BIG RED numbers.
Those are not the ones you like to see. But, let's look a little closer, shall we?

Well, some of those are dividend stocks. Yes, I had them marked for re-investment. As dividends were paid, I was paid in stock, less foreign exchange fees, and many had those. Ok, the foreign exchange made money,, lol. Technically, so did I. My numbers on "Gains" may be negative, but those "negative" numbers, are less than the values of the stocks that were bought with the dividends. So, my numbers there are a nice shade of pink? Not nearly as red as they would have me believe. And, I have more of what I bought initially, without spending a penny more out of my pocket. Yes, the re-investmnet is noted as expense on my statement. Is it really. Techically, yes. I bought, and it dropped. Technically, no, I did not buy, I was GIVEN, and reinvested that.

Then there is the other factor. When I started investing, I had limited resources. I could not afford to diversify, even if I wanted to. Enter the stock split. Ok, no, I did not gain a dime on stock splits, and you don't. But, in many cases, I was able to maintain, or increase my original investment amount, take some off the table, and invest elsewhere. Yes, this is the KEY to diversification. And, BELIEVE ME, you need some. If your stock is so good, you can always invest more in it later, as you have funds become available. Your stock price, just dropped, so take a little off, and sock some for a rebuy later. With the rest, invest in divesting. Buy more of things you have less of, or that the market thinks is HOT,, right now.

And what IS the market doing right now? Based on what I see, ABSOLUTELY NOTHING.

So, what should YOU be doing?

ADDING SHARES. Of just about anything. Profitable stocks would be nice, but how long before most of them become MORE profitable than they are now? Well, I will tell you. In the short run, you could lose money on just about ANY of them. If you require returns in a day, a week, or a month, you are wasting your time,,, and mine. I would bet against it. Then again, if you are in for the long term, I have to bet with you. In terms of three years or longer.

In the longer term, the one with more shares, will be the winner. Assuming (the least favorite word in my vocabulary), you have the slightest notion of how to pick a stock, and have ANY luck at all (other than bad luck).

So, quick and brief. It does not matter if you are new to investing or not. Do with what you have.

Make a portfoilio of some dividend stocks. Be willing to ride them for a time. Let them grow, and THEN, at the right time (what have I gotten myself into?) sell for a PROFIT, the growth from the dividends, so you can diversify. Add to that portfolio some stocks with traditions of prior stock splits. Yes, darn it, homework is required. So, is a little luck. It is nearly IMPOSSIBLE to pick a stock based on the fact it will likely split. So, pick good companies, and HOPE they split, when gains are WONDERFUL.

Another way to win, is pick companies you KNOW should be acquistion targets. Hard to figure who they are? Everyone wants a bigger piece of the pie. Who is mostly likely to be today's pie?
Can they be bought out. Many can't. Who is the biggest pie eater right now? You can play both sides of that coin.

But, I can only think of ONE real way to lose in a market doing ABSOLUTELY NOTHING. That is for YOU, to do ABSOLUTELY NOTHING.

Ok, you say the market is up some 25% off of it's bottom of last year. Correct. You say it could and likely will drop. Correct. As sure as God make raindrops (or they come from someplace for you agnostics), the market WILL go up in time. It has to, or it has to cease to exist. Nobody will continue to be a fool long enough for the market to wither and die. It is more guaranteed than the government bonds. The governement is backed by fools and idiots, that are by any other means, court jesters at best. Businesses on the other hand, have a profit incentive.
And, while your "government" may be willing to lose (SQUANDER) MULTI-TRILLIONS, I can assure you, any succesful business venture would not stand for it. Even an unsuccessful one has better sense. (the beatings will continue until Morale improves?)

So, I do believe in the market. I do not believe in the American government. Or, it is what I believe in them to do (mess up a free lunch).

Be that as it may, I know what to do in these times, and YOU should too. ADD SHARES of stocks,,, like a madman. Then pray, and dream of a time when the DOW exceeds 16,000.

And, if we do not get hit by a comet, or have any other global disaster, it WILL. I GUARANTEE it.

Comments: View Comments |  Wednesday September 30, 2009

First, this not not based on anything but my personal expectations. I,e, my crystal ball is, and has always been, in the shop, because it NEVER works. In it's place I have to use some logic.
No gauarantee things will work this way, but it just makes sense that they would.

First, everyone wants to know the graphic that the recovery will have. Hockey stick, "V", 'U", "W. Well, I have to describe it for you. To do that, you have to envision the trip down as something like falling off of a cliff. It was a dramatic fall, and let's say, the parchute failed to open, until very late. By some miracle, before you perished, the shoot did open, and you caught an immediate updraught. It did not take you to near the height you were, but you recovered enough to know, you need to clean your drawers. To this point, we can call it a somewhat "v" shaped recovery, but it has in fact, not recovered. And, it will not, for some time yet. But, if riding air draughts is your thing, you might understands some of the rest of this too.
While we toil between the thrill of the ride, and the need for clean drawers, and counting our blessings for still being alive, we ride to a shortened upside of the "V" recovery (about present time), and take a dip in a "U" shaped fashion. Well, since we had a great fall already, the left side of this "U" is not as great as the right side will be. And, the bottom of the "U" would last maybe 6-9 months. So, by mid-2010, we may be about where we are right now. I can clearly see the DOW to once again flirt with 9200, or lower, and I can see a Dow of 10,000 being surpassed in just over a year. Actually, expect a Dow of 11,500 or better by 2nd quarter 2011.

Ok, it get's fuzzy from here. So far, is pure REASONING. It dropped too far too quick. It recovered too quick, and adjusted. It has not accounted for one thing. TIME. In time, cost go up.
Make that stock prices go up. And to this end, I expect to see a fairly steep rise in the right side of the "U" that followed the small 'v''. By the end of 2011, I expect to see gold at near $1100 an ounce. It will be in range with the other stock price rises, and maybe even slightly less, on a percentage basis. By the end of 2011, I expect to see $90 barrel oil, consistently.

My questions come from the end of 2011 to early 2012. So let me make a definition here. A recession, is a time of hardship, for BANKS. Nothing more, nothing less. Granted, struggling economies can put tight reins on banks. I do see dips on banks throughout 2010 and 2011.
But there is a new concern by 2012. Banks are simply too far over-valued. And I see that sector getting SLAMMED. But, unlike other recessions, caused by banks, this one is different. The market as a whole, goes forward. And, by mid 2012, the Dow is tettering near 12,000. As it shakes off the damage banks try to do, by second quarter 2013, the Dow is pushing 13,500.

To do this takes some great awakening. Somewhere, somehow, people have to "wake up". Enough to realize, that if you let computers rule your life, they will. Goldman's, JP Morgan's, B of A's, Merrill's, they all have "TOYS", to ruin your world,,, forever. Hopefully, by then, people will realize, we can live without those "programs" quite adequately.

Yes, there is some financial pain in the mean time. When, and if we get past that, there is a growth side to push Dow to over 14000, by the end of 2013, with more upside potential beyond that. Dow of 16,000 not out of the question by 2015,,, if you do something to STOP the computers from ruling your world.

A computer is a tool. Nothing more. Take a serious look at a movie called "War Games", and then apply that to the market. Global Nuclear Financial War? No, thank you. How about a nice game of Chess?

I will not be easy, but we can get there. We have to put reins on some of the top players, and the market can soar.

Comments: View Comments |  Monday September 21, 2009

Few people should now doubt, that the US government has once again BLUNDERED beyond anything reasonable. It is not the first, fiftieth, or umteenth time. It is what it does.

Despite history, it continues to ignore the facts.

Wall Street, and the stock market, was designed for the INDIVUAL INVESTOR.

It had NO INTENTION, of allowing short selling, or trades by the nanosecond by IDIOTS at the helm of large companies with NO CONSCIENCE.

And, the SEC is a JOKE, Well, so are the rest of the court jesters (congress), and Uncle FUNNY (O'bama, the Treasury, et al).

It CAN NOT be fixed in it's present state. It should be DESTROYED, like the PLAGUE it has become.

But, NO, I am not going to recommend that at this time. Too many businesses and jobs depend on it, or I would.

But, there IS a solution, for INVESTORS, if someone will just DO IT.

And, it is SIMPLE in concept.

Set up,,,,,, "YOUR STREET",, a mirror of Wall Street, in the beginning. How many companies would LOVE to ditch Wall Street? They would join in droves.

Rules. You must have them.

1. NO short selling,, EVER.

2. Maximium investment in one year is $10,000. Maximum in 5 years is $35,000.

It is just about that simple. but, I will add TWO more rules.

3. NO FUNDS,, of any kind.. EVER.

4. ABSOLUTELY, POSITIVELY, no computerized trades. Trades are allowed by a single investor, on a single stock, for a MAXIMUM of 5 times in one year. Ok, sorry day traders, I had to do this. It it not to hurt you, but to keep the McNasties out.

Ok, NOW the market has a way to PRICE stocks.

Companies will FLOCK to it, and Wall Street will DIE, as it should.

The market, in time will restore itself.

Or, just sign you life savings away to some computer. As a computer programmer by trade,

I GUARANTEE YOU.

It WILL take it, and not feel a thing. And the people doing it don't either.

Think you can join them and get part of that profit?

Sorry, that is not in the program, and it will not be.

Comments: View Comments |  Monday August 31, 2009

How to pick stocks, or even whether you should at all, depends on your age, financial status, and your tolerance.

Before I make it EASY for you, let's quickly dismiss those who need read no further. I have known people to invest until the day they died. That is probably a little excessive. Investments are for gains, usually to be recieved over time. If day trading is your thing, and you can afford the losses you may incur, well, have fun. It is a HIGHLY risky strategy that I DO NOT recommend, for MOST people. If you are already rich, and like to play in the market, have fun, just don't ruin it for the rest of us (largely by short selling, but if you have that kind of volume you can be a terror to a single stock). If you are already rich, take your toys, and play elsewhere. The safety of CD's, treasury's, muncipal bonds, etc will still allow your millions to grow.

The second group to dismiss is the TRULY economically distressed. If you live at poverty level, you need food and shelter, not a stock. A stock certificate is at best a not very tasty meal, and can be a very expensive one. Living under one is not going to be very rewarding either.

So, I am adressing the other 85% of the population now. We have removed the poor and the rich (hopefully). And, even this group is still widely diversified.

To get started, is maybe the hardest thing to do, and the most important thing that you do.
Typically, you have little to start with. That makes it doubly tough. Lots of choices, and most of them cost more than you have to make it worth while (at least for the better ones) So, the first lesson, is the cost of a trade. The price you pay for a stock is not the stock price times number of shares. It is stock price time the number of shares PLUS the brokerage fee for the transaction.

OK, my FIRST recommendation. If you have little to invest and know little to nothing about picking stocks, get into a fund, and NOT individual stocks. While you are in this fund, learn EVERYTHING you can about a FEW individual stocks you may be interested in. I do not address picking funds, but MSN has many decent writers on the subject, Fidelity Investments offers many good funds, and they are not that hard to find. Most come pre-rated for you. But, funds DO have problems. Pick a no-load fund if possible, and one that agrees with your values in life (I am agressive or conservative, I believe in "green" (ecology), or your belief in world economics (ie, China will do better or worse than the rest of the world).

Then, wait and watch. See how much your fund is costing you? Over time it will cost you even more. But did it cost much to learn this? Not really. But, the longer it goes on, the more it will cost you. Oh, you may be making a profit (hopefully, but not guaranteed), but you could make more FASTER, by doing it yourself.

My SECOND recomendation, should not be considered until you have applied the excercise of my first recommendation. That is, you have learned SOMETHING, about a few stocks. Ok, I am going to tell you UP FRONT, you just paid too much attention to media HYPE. Virtually everyone does. But, it is still time to close out your fund, and enter the stock market, as an investor. Picking stocks is about LONG TERM investments. I dismissed day-traders in my first oaragraph or so.

My THIRD recomendation, is pick well. You will have winners and losers. Everyone does. Do not be discouraged by losers. Learn from them. In the end, if you picked all winners, you are lucky, but learned little. Most of you will learn, and in the end, that may well far exceed the results of one who never picked a loser.

My FOURTH recommendation. Diversify. If you start with as little as 5-10 K, don't put all eggs in one basket. You may not need many, but you need a few. Watch out for your eyes bigger than your wallet. Yes, your best investment may be that $150 stock, on 20 shares, or it could be 500 shares of a $2 stock. Risk/reward. A lot of risk in that $2 stock, almost none in that $150 stock. Maybe, some of each, in a little less quantity? Keep in mind that trading cost I mentioned earlier. And, now, you are a BUY AND HOLD investor. Until you hit about 25K, you don't have much choice about that.

My FIFTH recomendation deals with VOLITILTY and DIVIDENDS. Gains in the market are a percentage game. I cannot tell you which is better. A highly volatile stock may have swings of 10 or more percent in a single day. A decent dividend stock may give a dividend of 6% or more in a year. Both could go up or down in stock price in a given year. I can say, the trend in the PAST has been the dividend will pay off better in the long run. What the future holds, is almost anyone's guess (but I do NOT put my faith in Obama's insight, or lack thereof).It is about getting the highest perecentage return on your money (and you now control that).

My SIXTH recomendation, is let your money work for YOU. In time, two things should happen.
Some of your stocks will split. No, don't jump for joy here, because you did not make a dime yet. But, it does offer you an opportunity (I sugeest you take it), and sell some stocks to get into others (see rule 4 - Diversify). The second thing is you should see some share price appreciation. When you see enough growth in share price appreciation to buy15 additional shares from profit from shares , the trigger is set. Consider trade costs again, but 1/2 of those gains should go to additional shares of that company, or another investment (yes, that diversification thing again).

Notice how in all of this I never mentioned a single stock by name? It is a formula, and it works.
You will be beating any index or fund on the planet, if you just keep working at it. There is just ONE more thing to mention, and this downturn, does make it well worth mentioning. There is a time to buy and hold, and there is a time to sell.

I, and you will make mistakes. I did not sell through the last downturn (before it). Had I done so, and had I had a GREAT crystal ball, I would have about 5 times what I do now. Trust me, most of you will not have a crystal ball that works either. Is all lost? No, I applied the rules. Shares will increase in value, and dividends will hold me through tough times.

I will beat the market,, SOUNDLY. Not every year, but most of them.

I wish I could give you one more piece of advice, but I would be wasting my breathe. Petition against computerized trade (a well written program will create a monopoly for the owner only, and anyone that has one, is and will be violating social laws, if not SEC laws) There is no good OWNER of such an animal. Petetion against short selling, allowing for certain commodities that need to. Petition against funds (yes, how you got started), because they RAPE investors over the long term. Or, maybe, just get fees, so they are not percentage based, and reasonable? And yes, funds get too much volume, so they truly CAN influence stock prices.

So, your friends are your enemies. That is the REAL rule of investments. And, let's suppose you do win at stocks over time. You will need to go back and look at FUNDS, because they are more secure? ( I gagged about then, but OK) It is part of a BALANCED portfolio, and part of diversification.

It is a process. You may not need every step. You will need some of them.

Good Luck.

Comments: View Comments |  Thursday July 30, 2009