Ex-investment industry guy willing to take questions

[0121stockpicker]

Spent twenty year in the mutual fund and investment banking industry analyzing stocks, etc. now semi-retired. Given its too cold for me to detect I'm more than happy to spend some time sharing my opinion if anyone has any investment related questions. Feel free to post or message me if you have any.

Eric

 

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[bill from lachine]

Eric,

First off thanks for offering your services to the crew.....very generous on your part.....

I'm sure you've got the answer on your finger tips.....but seem to recall that 40% or more of the S+P gains over the long term was thanks to the dividends...better returns and lower beta/volatility versus playing the high beta growth stocks.

The floor is yours dude.

Regards + HH

Bill

 

[0121stockpicker]

I'm a big fan of dividend paying stocks for a number of reasons. And more than happy to throw out a few recommendations.

I would point out that there are two macro risks for dividend stocks - rising interest rates and any changes to the tax code raising the tax rates on dividends ( which almost happened this year). Either of these would make dividend yielding stocks less attractive and pressure prices.

 

[bill from lachine]

Stockpicker,

I loaded up with blue chip consumer staples US stocks this summer......Coke, Costco, Walmart, JNJ, MacDonalds, Visa, etc, and even threw in Whole Food Marts for a laugh....I either wrote covered call options which got called away or flipped them out for a profit....lol.

For the most part they are all higher than when I cashed out.....so much for outfoxing the market....lol.

Going forward I'll probably take a passive approach and maybe take a flying on Smith + Wesson.

Regards + HH

Bill

 

[bill from lachine]

Folks,

Feel free to jump in.....stockpicker was kind enough to offer his expertise so take him up on the offer.....

Might sound a bit intimidating but investing is not rocket science....heck if I can figure out the basics anyone can....lol.

Regards + HH

Bill

 

[Native Floridian]

I'm a big fan of dividend paying stocks for a number of reasons. And more than happy to throw out a few recommendations.

I would point out that there are two macro risks for dividend stocks - rising interest rates and any changes to the tax code raising the tax rates on dividends ( which almost happened this year). Either of these would make dividend yielding stocks less attractive and pressure prices.

Historically, this is sound advice. reinvested dividends make a huge difference in returns. This holds especially true with mutual funds. Where i disagree is with the risk assessment on div paying stocks in a rising rate environment.

Right now we have historically low interest rates. Those rates are being held at these levels artifically putting most areas of the bond market into an extremely overbought condition. This is evidenced by yet another year of net outflows of Equity mutual fund assets and net inflows for Bond funds. Some see this as a bond bubble. Regardless of how it happens once rates start to rise, and probably well before, there will be mass exodus out of the bond market. In a normal market rotation when money flows out of bonds one of the historic pockets for that money is dividend paying stocks. Bond investors still seek income and safety and dividend paying companies are but one shelter that meet those needs. As it stands, high quality div paying stocks are doing well because of the low rate environment.

As we move forward, many see an end to the 30 year secular bull market in bonds. Whether that's true or not, the one place you don't want to be when the music stops is in the bond market. More specifically in bond mutal funds. And in bond funds where the protfolio is now at a significant premium. Or in funds that are managed for total return. There are some safe havens in the spread market. Still, all that money is going to be looking for a place to land. If traditions hold those seeking income and quality will look to dividend paying companies. For these reasons, rising interest rates, when combined with the positive economic climate that will usher them in, instead of putting pressure on dividend paying stock prices could be a catalyst to higher price levels.

 

[Sis]

Spent twenty year in the mutual fund and investment banking industry analyzing stocks, etc. now semi-retired. Given its too cold for me to detect I'm more than happy to spend some time sharing my opinion if anyone has any investment related questions. Feel free to post or message me if you have any.

Eric

Hello Eric,

Thank you for your offering of trying to help with questions of investment.

I have a thread here and wonder if you might take a look at the policy (I've uploaded 2 images of the policy on that page), which includes lots of big brand names involved with it and let me know what you think, please.

Some such brand names include but, not limited to:

ATT
Union Pacific
Eastman Kodak
Chrysler
Goodyear Tire
DOW
International Bus
Liberty National
Westinghouse
US Steel
GE
Sears Roebuck
American Tobacco
Texas Company (TEXACO)

You can see them here on this link Old Gold Policy Holder

Personally, I would prefer you to answer on my thread if you will, please - since it makes it easier for me to find and relate too.

Thank you for your time,
Sis

 

[lastleg]

Eric, what do you predict for fixed income mutuals for 2013? 73 yr old, no debt, all in Vanguard.

 

[Native Floridian]

Eric, what do you predict for fixed income mutuals for 2013? 73 yr old, no debt, all in Vanguard.

I'm sure Eric will chime in -

Without knowing your individual circumstances it would be unwise for anyone to give you investment advice. While Vanguard is just fine slinging mutual funds to the do-it-yourself crowd, they protect themselves with numerous disclaimers that they are merely providing a product, not giving investment advice. Thus, when you blow yourself up, it's on you not them.

The problem with the do-it-yourself investment community is that many, if not most, investors do not know what they are doing. They invest with companies like Vanguard to save a few bucks on sales charges.

That said, if you are among those who does not know what to do, the best advice is to seek out a professional to help you. You can start the process by asking other proesssionals you know and trust who they would recommend. It's going to cost you some money, but nearly as much as investing in the dark.

Here's a freebie ,and it's not advice - it's market knowledge - The bond market (fixed income) has gone from an oversold condition in 2008 to an overbought condition today. Everyone and their mother owns fixed income. As soon as the Fed indicates it is done propping up the economy rates will rise and there could be, note, could be, a mass exodus out of fixed income. This could be bad news for anyone invested in fixed income mutual funds. Will this happen in 2013? ? ? ? By the time the Fed acts the bond market will have already voted. For that reason many analyst are recommending diversification away from traditional fixed income.

 

[lastleg]

Native F, thanks for your opinion. However I am no novice to mutual funds. I went to ML in 1979 to open an IRA and got
churned every six months. Then to Ivy later to Janus and you may know their outcome. Meantime I bought WM shares and
that was another useless exercise. Finally after investing wifes money in Vanguard I came onboard and am happy I did. I learned
that I did not have a chance investing free lance even though I pored over the WSJ every day for years.

As far as getting blown up without a guarantee to never lose a cent I don't know of any investment without market risk. With one
exception, CDs. That is a slow boat to bankruptcy. And annuities are insurance products and feeds the salesmen while leaving the
buyers eating gruel

Vanguard has been very good to me. I won't say how good but I'll never have to turn a lick except for helping the less fortunate.

 

[Native Floridian]

If you've been investing in the stock market since 1979, it is the market that has been very good to you. Research has shown that someplace in the neighborhood of 90% of investment return comes from allocation and not individual investment selection. Along the lines of - the worst investment in the best market is better than the best investment in the worst market. Obviously the stock market has been very good to us over the past 34 years. More like the past 30. As long as you were in it, you benefited. my way of saying you give Vanguard way too much credit. if anything give yourself a pat on the back. Vanguard is no more than a product supplier. It is the investor who needs to know what to invest in. In your case, you own those returns and that performance, not Vanguard.

That said, regarding bonds, FINRA issued an Investor Alert last week or the week before. Essentially explaining the obvious, that when rates start to increase there could be large loses in fixed income investments. This hold especially true for holders of mututal fund fixed income. Where as owners of bonds are backstopped by Pay at Par maturity dates, mutual fund holders have no such net. The funds are perpetual with no maturity date. If loses do occur they could be locked in for years or for a lifetime.

Today's bond prices are supported by record low interest rates. Rates that are being kept this low artificially. We are not in a normal up/down rate/price cycle. Those coming into the bond market today have to ask themselves, if rates rise, will i ever see this price level again? The answer - only if rates come back to this level. One has to reason that, that's not likely to happen.

There are a slew of other risks as well, this is the big picture.

 

[lastleg]

Thanks again Native. One of my best performers has been Intermediate Tax Exempts. I am lightening up on longer exposure to
bond rates. Again I have no quarrel with Vanguard as you seem to have. They have been responsive to all my needs including
free avoidance of probate problems. Have you checked Vanguard Funds Performance? Quite impressive with their rock bottom
fees. Admiral shares are even less.

Best of all I don't have to worry about getting scammed. I don't try to get homeruns anymore. I like steady and predictable.

 

[Native Floridian]

Vanguard like all fund families has some good performers. Mostly, it is a mid pack performer. From an inside WAll Street POV they refuse to pay for help. The best and the brightest rarely go to Vanguard as a first choice, if at all.

MY problem with Vanguard is the disservice the do to the average investor. They have reduced investing to a one factor decision, fees. Years ago Bogle hired the NY advertising firm that coined the phrase "load." to refer to the competition. Most folks who invest don't realize that there is no such things as load and no load funds. Those are Madison Avenue terms, not Wall Street or regulatory terms. Bogle's goal is to make everyone believe that success is related only to the fees you pay. Vanguard has paid Millions to convince investors that they can do it themselves, that they don't need professional help. The truth is, there are some who can do it themselves. But most can't. We see the fall out, the victims of the Pay for advice/do-it-yourself war.

The fact is, most people are clueless. They have no idea what they are doing. That you come here to ask a question about the bond market shows the extent of the problem. You are 100% in bonds. The bond market is nearing the end of a 30 year secular bull market. That Bull market followed a 20 year plus bear market for bonds. Interest rates are being kept low artifically causing a mass inflow into bonds funds, a bubble. As soon as the economy starts to percolate the party in bonds is over. And, it's going to be over for a long time. Every professional on the street knows this and is working hard to get their clients off the tracks. Fixed income alternatives, buying the underlying paper instead of funds, shortening duration, Sub par spread market, etc.

Yet, over at Vanguard, if you want to take that 401k rollover that took you 25 years to amass and put it into long duration bond funds that will pay you the highest income? Step right up Mr. Sucker, let us show you how easy that is to do and thank you for your business! That, that 401k could be put at substancial risk isn't something that comes up.

That's my problem with Vanguard.

 

[lastleg]

Native, you sound like a broker throwing stones at Bogle for daring to offer low cost (no load) funds to the great unwashed.
He's a champion in my book for helping ordinary Americans slowly safely achieve financial independence. I don't do index funds
to the extent he recommended. I prefered to let smart guys do the stock picking and to do that you need to monitor them on
a regular basis. No bull market lasts indefinitely.

If you are right about bond yields slipping there is always the money markets for a safe haven. You do know Vanguard staggers
maturities on their bond funds?

 

[Native Floridian]

There are two answers to getting churned by a broker.

1. Complain and if need be file an arbitration suit. usually, complaining will get you action if your complaint has merit.

2. In the future work with advisors on a fee basis. The fee is negotiable and based on your account size. Because the advisor's pay is linked to the fee, the only way the advisor benefits is by increasing the assets under managment. There is only one way to get that done - do a good job for clients. Good advice, good service, and beleive it or not, lastly, good performance, is how most advisors grow their business. Satisfied clients refer friends, relatives, and business associates. Fee isn't for everyone, but is an alternative when trust is an issue. In a fee arrangement there is no doubt the advisor is doing their best because their future income is riding on how well they perform their job.

As for being scammed:

We hear this a lot. Truth is few people are scammed. Not that it can't happen. Mostly the old boiler room days are over. From the other side of the table the POV is that when things go wrong clients grow sharp teeth and look for ways to recover their investment. For example the 80 year old woman who harangued her broker into buying her tech stocks in the 1990s boom when her friends told her she was missing out. Then came the collapse and then came the lawsuit. That broker was saved by the word "unsolicited." That word checked off on the order tickets proved the little old lady who knew nothing about the stock market had in fact ordered the broker to buy the stocks for her against his advice. The broker's own notes showing several conversations where he tried to stop his client also were strong evidence that the broker did nothing wrong. Still, ask that woman or anyone who knew her, and they will tell you the broker did her wrong. He scammed her. And, so it goes in the financial services industry.

 

[lastleg]

It all boils down to learning how to make money and not to lose it. I've been through the meltdowns and through consistent
allocation in equities and bonds I always keep building shares in my funds. Net asset value times shares equals peace of mind.

 

[Native Floridian]

LL, I may sound like a broker throwing stones, but realize, Vanguard is not my competition. I'm just telling you the way it is. You don't want to listen, that's Ok. OTOH you sound like a Boglehead who believes John Bogle created Vanguard as a public service.

I never said rates were going to slip. I don't know where you got that.

As for money markets as a safe haven, tell me how that works? When exactly do you decide it's time to no longer trust staggered maturies and the rest of the Vanguard braintrust's strategies? Down 10%? Down 20%? More? How do you know when to do that?

Has Vanguard forwarded FINRA"S bond market warning to you yet? If not why not?

 

[lastleg]

I should have said creep rather than slip. I just imagine how J Bogle was hated by the load guys. I also did business with a
brokerage that had an excellent standing in the community. It was a real estate investment and I was totally in shock with
this guy's lack of knowledge. When I asked him to explain it I found out he knew less than I did. These brokerages were on
every main street in mid-America. Evidently they only handled accounts for widows and folks who just had no idea about fees
and expenses. Now if they could guarantee above average returns for an extended period the brokers would be worth the
added expense but so far I have not found that to be the case.

Of course I can't be everywhere so you may be the exception to the rule.

Oh, I have been listening. If anyone wants to throw the dice let them seek brokers.

Thanks for the FINRA alert, I'll check that out. I'm just a blue shirt guy, worked all my life. If I wanted a round of golf
I had to do it on my time.

 

[Native Floridian]

LL, you sound like you had a bad experience with a broker/ advisor. So you know ,i am the rule for my profession, not the exception. Like all professions there can be bad apples. And, because we hold positions of trust, the media is all to ready to tatoo all of us with the sins of a few. The misconception that we are all bad is something again, that is a bought and paid for marketing campaign. it's all about money. The management fees at stake are in the hundreds of billions. The job of the John Bogles of the world is to convince you that we are all at best useless and at worse crooks. The money spent to send that message is in the hundreds of millions. That you believe good advisors are the exception shows how effectively that money was spent.

If you doubt your beliefs expressed here are part of some Madison Avenue ad campaign you've again used the term load as an investment term. Again, the term "Load" is an advertising term, not an investment term. Coincidently a term paid for by Bogle.

We realize we can't reach those who have bought into an advertising campaign. For that reason we don't target those individuals with our own marketing. They are not our target market.

 

[lastleg]

Native, I'm sure you have a sterling reputation. I was responding to the anti-Bogle rhetoric. If I wanted to look for villians I
could find more than enough on Wall Street.