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"no ordinary recession"

“this is no ordinary recession” Niels Jensen

Refer to the July 2009 link to Mr Jensen's paper about: “Are we facing a deflationary spiral or will the monetary and fiscal stimulus ultimately create (hyper) inflation?” A crisis of the magnitude we are having does not fade into obsecurity easily.

· 2009/07/13 08:35 · Tom Connolly

Few Bargains

Janson Zweig's June 6 column in the Wall Street Journal: is this rally a great garbage market? Stocks that pay dividends have been dragging behind. I noticed this in our list too…especially in the utilities. I hope to have a table in June's issue showing the peak yield of each stock in our list and when it was, as well as its annual price growth since 1998 and the portion of the total return resulting from dividends over the last decade. I'm working on that data here in Toronto and getting help from our son and son-in-law who are much better at Math than I. All the while we are helping out with our 10 day old grandchild Zach and 20 month old Julia. I don't know how single mothers do it.

Avner Mandelman's column of June 6 2009 in the Report on Business was about value investing and full of interesting ideas. For instance, he outlines his method of computing both the intrinsic value of the market as a whole and an individual stock: multiply long term ROE by book value to get expected earnings and then decide on the multiple. If the stock trades below its intrinsic value, and everything else is good, buy. It's the MARGIN OF SAFETY Warren Buffett speaks about.

· 2009/06/06 19:52 · Tom Connolly

Yield Charts May 2009

STALWART YIELDS ARE HIGH: “What is it that most investors fail to consider?” (answer just below) I've been watching my weekly-plotted yield charts recently. They go back to 2000. (My monthly charts go back to 1985) Our old stand-by stocks near the bottom of our list have not had such high yields in years. BCE, in fact, has not had a higher yield this century, TRP since 2001, Enbridge since 2004, Telus was higher in 2002 and 2003 with the dividend reduction hubbub, CU, as you can discern from its chart, had a higher yield in early 2004. Fortis' yield pattern is different…down evenly from 2000 to nadir in 2005, and then rather evenly up since then. Generally*, it might be a good time to buy if you are interested in adding one of these utility-type commons to your portfolio. Keep an eye on what's going on with prices of these stocks in the near future. Investigate before you invest. The yields on these few stocks seem to have stop going up and are going sidewards. Yield could go higher as many investors consider 'utilities' to be yield-sensitive: Ten year Treasuries are up a full percent since the start of 2009. On the other hand, maybe they have peaked: yields could go sidewards, or maybe start down (all bank stock yields are well down from their peaks). We do not know. Investors seem to be abandoning these stalwarts and rushing into other, shall we say more exciting, stocks since the lows of early March. This is good. It could give us a chance to pick up some solid dividend payers…stocks that have been increasing their dividends even in the midst of the turmoil…stocks that have a long consistent record of dividend payments (well except for Telus) and a more dependable rate of growth. I uploaded TRP and CU's yield charts as examples. Click on Yield Charts. Notice how the last few plots (on the right of the chart) are 'kind of' next to each other (sidewards?) in the CU chart, but down a bit in the TRP graph. I put the GWO yield chart up too as an example of what yields are doing in financial stocks.

* By 'generally', I certainly do not mean today. We have been waiting years. But roughly, looking only at the charts, these few stocks seem to be in a buying range. ♣ OBSERVATION: with stocks in the list doing different things at different times, we have diversification (non-correlation) within the list itself. ♣ I write this the day after Standard and Poor's lowered its outlook on British debt from stable to negative. The impact of what governments are doing to curtail the financial mess are being accessed. The deficits are huge. Could America lose its AAA rating? And what effect would that have? Profound, needless to say.

  • “What is it that most investors fail to consider?” page 42 of Jim Rogers great little book A Gift to My Children - A Father's Lessons for Life and Investing “Most look for the bull and neglect the bear. As an investor, I am always in search of 'what is bearish'. When people are crazed about an overheated market and are oblivious to other investment possibilities, that's when I find a good deal. During the stock market bubble of 1998, when most people ignored commodities, I started a commodities index.” TC: There more about commodities on page 41 too. ♣ Many stocks have been rising since early March 2009. But not all. Hence, I looked around for stocks with rising yields (lower prices). The financials and non-financials often go in opposite directions, often are non-correlated.
· 2009/05/22 08:32 · Tom Connolly

Economist May 9 2009

  • 'Inflation is bad, but deflation is worse' was the title of one of The Economist's editorials in their May 9 2009 issue. I've read it twice so far.

“Inflation or deflation

tell me if you can:

will we become Zimbabwe

or will we be Japan?”

This was the opening paragraph “Merle Hazard, an unusually satirical country and western crooner, has captured monetary confusion better than anyone else.” The Economist said. Some other thoughts from the Economist editorial: ♣ “America's worst recession since the 1930s” ♣ the decline of house prices “is forcing households to reduce their debt which could subdue economic growth for years ♣ “In truth, the data suggest only that the economy is contracting at a slower pace than before. Nevertheless, the figures seem to point to a deepish recession, rather than the rerun of the Depression that was feared a few months ago.”

  • Buttonwood headline May 9 2009 “Investors' optimism has returned very quickly. Too quickly” (Title: Happy days are here again) Other thoughts from Buttonwood's Philip Coggan who won the title of Senior Financial Journalist of the Year: ♣ “The world is still drowning in debt.” ♣ Bear markets are normally pitted with some vigorous rallies, as investors in Japan have discovered over the past 20 years.”
  • Mergers: “To get a takeover right is extraordinarily hard. the majority of defaults fail: managers overpay, overestimate the savings deals will generate and often clobber their firms' balance sheets by trying to make a great leap forward.” These were the opening two sentences of 'Buying on the dips'. the people at The Economist can write. The Economist is expensive, but worth every cent. It is a pleasure to read even topics I'm not interested in.
  • 'Off their trolleys' headline was “Consumer spending may have hit bottom, but America's mountain of debt means the climb back up will be slow and painful. This column too was most interesting. For instance, “Last year household wealth fell by 18%, or by $11 trillion”
  • Infrastructure investment - there was an interesting column on this topic too - beware of heavy debt (the amount of leverage) and light volumes.
· 2009/05/13 07:32 · Tom Connolly
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