tag:blogger.com,1999:blog-26781461133018162332024-03-12T17:14:35.689-07:00Muncie BirderMuncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-2678146113301816233.post-57743329625051952012011-12-03T05:27:00.000-08:002011-12-03T11:28:18.232-08:00Birding trip to Kenya November 2011<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-LGHOMzuXL60mf6hTP9n0G1hwd01PeICg__mlBnWtrFw6N9PSrKGCT_OmrcSTWryTkpyeURmqkrg6H_tFzpHZv0e1Y9gw_OZwqsIGYt-Wj8_earei7pWVJpzsD7QjiE8ZGdaO5QSO59yY/s1600/24+Secretary+bird.JPG" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-LGHOMzuXL60mf6hTP9n0G1hwd01PeICg__mlBnWtrFw6N9PSrKGCT_OmrcSTWryTkpyeURmqkrg6H_tFzpHZv0e1Y9gw_OZwqsIGYt-Wj8_earei7pWVJpzsD7QjiE8ZGdaO5QSO59yY/s320/24+Secretary+bird.JPG" border="0" alt="" id="BLOGGER_PHOTO_ID_5681932311841551746" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgW3pSSLwb7y4QQnVFJosy3xHnA_79A_tO7u8waskiQLoN1sLyH2AJeB7CK7_4r5lyOCfiy-9MYZ6j5QmJ57-XtFMh9Vng3z18ntT65cx3ZICei4Ymn-Az5-ircz-migLmSY6q9LCmNjo0p/s1600/8+Crab+Plover.JPG" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgW3pSSLwb7y4QQnVFJosy3xHnA_79A_tO7u8waskiQLoN1sLyH2AJeB7CK7_4r5lyOCfiy-9MYZ6j5QmJ57-XtFMh9Vng3z18ntT65cx3ZICei4Ymn-Az5-ircz-migLmSY6q9LCmNjo0p/s320/8+Crab+Plover.JPG" border="0" alt="" id="BLOGGER_PHOTO_ID_5681932302124942450" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5Pqb8_14LIJsvK465p6lOYdS52C2VcThEXwJjIbcHaNGLxbNMlbWejIDKjBtOIC4Wk1o3LBSjRbWXd53pn4F5W7KXqfKbqy1N_NzGQEe0615CVrvwAv92WGhIyPKKf3-7m1QRY6ikVKmD/s1600/21+Leopard+2.JPG" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5Pqb8_14LIJsvK465p6lOYdS52C2VcThEXwJjIbcHaNGLxbNMlbWejIDKjBtOIC4Wk1o3LBSjRbWXd53pn4F5W7KXqfKbqy1N_NzGQEe0615CVrvwAv92WGhIyPKKf3-7m1QRY6ikVKmD/s320/21+Leopard+2.JPG" border="0" alt="" id="BLOGGER_PHOTO_ID_5681932300006492242" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1n9RX73a2_kor2hQ7fg6h4uW3EupkFiqOmkDY4DG2LWOXnFFxqD1E34tq4msxP3iz6HCvfXJlenRDa-9U_-OieJoWsb_5LJ6UUSyXD_00MTlNiWDMK_qt-AWLXtKccosE5XvOUVAdJvyD/s1600/67+Klipspringer.JPG" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1n9RX73a2_kor2hQ7fg6h4uW3EupkFiqOmkDY4DG2LWOXnFFxqD1E34tq4msxP3iz6HCvfXJlenRDa-9U_-OieJoWsb_5LJ6UUSyXD_00MTlNiWDMK_qt-AWLXtKccosE5XvOUVAdJvyD/s320/67+Klipspringer.JPG" border="0" alt="" id="BLOGGER_PHOTO_ID_5681932294958222082" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJds4yVCBQ8gigBRM5Vjzdv7t_h8Se4-8-_-zEaXdNN50-oyNsKc6vJ3q8eKuKkM8Rq-G2FvTT7n88hVOu8u6qlWcsLi-CfJhFE3jD6k03W1lYN93gX6TxQX5PcAKRumYYkkKl7bZgF5vF/s1600/3.5+Golden-winged+Sunbird+at+Amboseli.JPG" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 214px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJds4yVCBQ8gigBRM5Vjzdv7t_h8Se4-8-_-zEaXdNN50-oyNsKc6vJ3q8eKuKkM8Rq-G2FvTT7n88hVOu8u6qlWcsLi-CfJhFE3jD6k03W1lYN93gX6TxQX5PcAKRumYYkkKl7bZgF5vF/s320/3.5+Golden-winged+Sunbird+at+Amboseli.JPG" border="0" alt="" id="BLOGGER_PHOTO_ID_5681932291309984498" /></a><br />I went to Kenya for during November 2011 for 16 days looking for birds. Saw 452 on the trip of which 247 were new for me. During this time of year one sees a lot of European birds down for the winter and that included many I had seen in Europe. <div><br /></div><div> I arranged the trip through Nature's Wonderland Safaris, a Kenyan company. They did a great job for me. My guide was Japheth Mwok and my driver was named Patrick. The itinerary was compiled to my specifications. I particularly wanted to visit the Indian Ocean coast for the Crab Plover. Many of the package trips do not visit that part of Kenya. </div><div><br /></div><div> The tour started at Nairobi and I spent the night there after a two day flight from Indianapolis at the Nairobi Safari Club Hotel, a very nice high rise hotel with a great breakfast buffet. Left Indy at 2:00 pm on November 2 and arrived in Nairobi at 10:00 pm on November 3. A long trip, but one looses 7 hours on the way over. </div><div><br /></div><div> I was met at the airport by Patrick who took me straight to the hotel. The next morning we headed to Amboseli National Park our first stop. On the way there we chalked up 36 birds, a few of the best being at a mud hole beside the road--Yellow-rumped Seedeater, Cut-throat Finch, Fischer's Starling, and Namaqua Dove. Amboseli is a beautiful place at the base of Mount Kilimanjaro. The grass there is green and the animals are plentiful--hundreds of elephants. I was told that the area lakes are fed by underground runoff from Kilimanjaro. We stayed at Amobseli Sentrim Camp, a very nice place to stay. We arrived during the heat of the afternoon and my guide gave me two hours to rest up before going out to look for birds. </div><div><br /></div><div> I did not rest up. I instead walked around the camp (more like a resort actually) looking for birds. It was extremely fortunate that I did because I saw a Golden-winged Sunbird, the only one of the trip. This is a star bird. One of the hundred birds to see before you die birds. Check out the photo. Others that I saw during that rest period were Taita Fiscal, Common Fiscal, Grey-headed Silverbill, White-bellied Go-away-bird, Scarlet-chested Sunbird (a lot of these), Red-billed Buffalo Weaver, and a Rufous Bush-chat. This bird I was to see several times during my stay there. It sort of liked to hang out around my tent and along the path to the dining room. The camp compound is surrounded by an electric fence to keep tourists safe from the lions, cape buffalo, and elephants. The fence however was a nice perch for the Little Bee-eaters. </div><div><br /></div><div> On the drive around the park that evening a few of the better birds we saw were a Martial Eagle, Wattled Starling, Buff-crested Bustard, Nubian Woodpecker, Two-banded Courser, Northern White=crowned Shrike, and Ruppel's Griffon Vulture. Also many common birds besides. During our two days there we saw a total of 106 birds there with the better being a male and female Pygmy Batis so close we could have reached out and touched them, a Bruru, Pearl Spotted Owlet, Goliath Heron, Long-tailed Fiscal, Pygmy Falcons, Beautiful Sunbird, Fischer's Lovebirds--at least 6, D'arnaud's Barbets (common and beautiful), Red-billed Firefinch, Von der Decken's Hornbills (abundant), Hidenbrandt's Starling. Lilac-breasted Rollers (common), and many many Superb Starlings. Two days at Amboseli really were not enough, but Tsavo West was the next stop and we had to leave. Here we stayed at Kilanguni Serena Lodge. At the entrance to the lodge was one of the grand treats of the trip--two Verreaux's Eagle-Owls. These birds are big--26 inches head to tail. Unfortunately, the lighting was very poor on the limb where they sat and my photos are unrecognizable except perhaps by an expert on these birds. Here we got our first looks at Orange-bellied Parrots and the only sightings of Golden-breasted Starlings (really beautiful birds). Also seen here were Somali Golden-brested Bunting, Sulfur-breasted Bush-shrike, Grey-headed Bush-shirke, Hunter's Sunbird, African Black-headed Oriole, African Green Pigeon, Purple Grenadier (a wow bird), Red-chested Cuckoo, Bateleur, Amethyst Sunbird, Purple-banded Sunbird, Black Cuckoo-shrike, and Norther Grey Tit (looks just like a distant cousin of the Carolina Chickadee) to name a few of the more interesting birds. When I explained to Japheth how in the US we refer to Tits as Chickadees he got a big kick out of that and from then on he referred to all the Tits as Chickadees. A surprise was the sighting of two Klipspringers--a small antelope of rocky areas. Japheth told me that they are common among the lava outflows here. These were an exciting find for me because I really had not expected to see them. They are easy to identify because the insides of their ears are black and white striped. By the time we had left Tsavo West the bird list was over 200 birds. <div><div><br /></div><div> Next stop was the Indian Ocean coast and the Arabuko-Sokoke Forest. Here I stayed at Tembo Point Resort near Watamu. This was an extremely nice resort right on the ocean with a small private beach and a very nice salt water pool. The resort caters especially to Italians. I was the only American there during my stay. Because of the clientele the buffet included both red and white wines and my favorite--Tusker beer. There was also made to order pasta every night. This was the only restaurant I ever ate at where the octopus did not taste like chewing rubber bands. I had no idea that octopus could actually be cooked to taste good until I arrived here. The room however though nice did not include a desk as such. It had a table but the TV sat in the middle of it. There are a lot of very special birds to see here. We had a local birding guide from the forest to help us find them. Among the stars were Dark-backed Weaver, Small Sparrow-hawk, Mombasa Woodpecker, Little Yellow Flycatcher, Black-headed Apalis, Chestnut-fronted Helmet-shrike (a star bird), Scaly Babbler, Retz's Helmet-shrike (also a star), Pallid Honeyguide (we looked and looked before we could finally find it in the tree), Malindi Pipit, African Golden Oriole, African Cuckoo-hawk, Green Barbet, Four-colored Bush Shrike, Lizard Buzzard, Sokoke Scops-Owl, East Coast Akalat, Forest Batis, Eastern Green Tinkerbird, Pale Batis, Amani Sunbird, Fischer's Turaco (we really had to work hard and get soaking wet to see this bird but it was worth it) and Fiery-necked Nightjar. </div></div></div><div><br /></div><div>At Mida Creek we found a lot of Crab Plovers. This is THE bird. Another of the 100 to see before you die birds and Mida Creek is where you see them. </div><div><br /></div><div>Next stop was Sabaki River mouth where we were treated to great views of the Golden Palm Weaver. The book does not do this bird justice. It has an orange breast and crown which the book neglects entirely. Others seen here were the Lesser (100s) and Greater Flamingos, Yellow-billed Storks, Sooty Gulls, and Zanzibar Red Bishop. Also lots of sandpipers but none unusual. </div><div><br /></div><div>The next stop was Tsavo East. This is bush country. Here we spent the night at Aruba Ashnil Tented Camp. Birding here was not so good as it might have been. Only a relatively few were seen. Among the notables were White-bellied Bustard, Black-chested Snake-Eagle, Black-faced Sandgrouse, Klaas's Cuckoo, Somali Ostrich, Chestnut Weaver, Black-necked Weaver, and White-fronted Bee-eater. But the star here was the Lesser Kudu, the only one seen on the trip and also several Gerenuks. Gerenuk in Somali means Giraffe Antelope. When you see the Gerenuk you can imagine what the Giraffe might have looked like 200,000 years ago. You can also imagine what the Gerenuk might look like 200,000 years from now if it survives. Doubtful. </div><div><br /></div><div>We drove back to Nairobi the next day and spent the night at Blue Post Hotel outside of town. This was not a tourist hotel but rather a local hotel and the atmosphere was entirely different. When we arrived there was a band playing on the grounds and a large crowd there. Everyone was having a great time. Fifteen minutes later the rain came down in buckets and the crowd vanished. This hotel is a great birding site. The stars here were the White-headed Barbets (3), Black-throated Wattle-eye, and Rupple's Robin Chat. </div><div><br /></div><div>Our next destination was Mount Kenya. We spent the first night at Castle Forest Lodge, a great place for birds and the second night at Serena Mountain Lodge, a disappointment. At Serena Mountain Lodge you are basically stuck inside the lodge. You can walk about 50 paces to the parking lot and that is about it. Birding stinks. I was extremely dissatisfied. </div><div><br /></div><div>On the way to Mount Kenya we traveled through Kenyan rice fields. Within the rice fields were hundreds of White-winged Widowbirds and Yellow-crowned Bishops. Also along the way were seen Red-naped Widowbird and Tacazi Sunbird. </div><div><br /></div><div>At Castle Forest Lodge Olive Thrush, Olive Pigeon, White-bellied Tits, Hunter's Cisticola, Streaky Seedeater, Thick-billed Seedeater, Chestnut-throated Apalis, Abbot's Starling, Red-fronted Parrots, and the star bird--Hartlaub's Turaco. Other birds besides.</div><div><br /></div><div>On the way to Serena Mountain Lodge, we stopped at Waljee Camp. This is THE place to see the Hinde's Babbler, maybe the only place. There was a flock of about 8 to 10 of these fluttering through the underbrush. We got only quick glimpses of them as they passed from bush to bush before disappearing. </div><div><br /></div><div>At Serena Mountain Lodge the only birds worth mentioning were about 50 Silvery-cheeked Hornbills, and a White-starred Robin. On the road out though things improved greatly though. We saw a Cape Robin Chat, Moustached Green Tinkerbird, Black-collared Apalis, Purple-throated Cuckoo Shrike, and African Golden-breasted Bunting. </div><div><br /></div><div>We headed for Buffalo Springs for three days at Samburu Ashnil Tented Camp. Upon our arrival there, inside the reception area was a mirror on the wall and at the mirror were two Bristle-crowned Starlings trying their best to chase away those in the mirror. I tried to take a photo but it was too dark. This area is supposed to be dry bush country. You would not have known that while we were there. It rained every day and we got stuck in the mud buried up to the axle. Ashnil sent a truck to pull us out with an armed guard. I asked if they could not pull us out were they going to shoot us. I got a broad smile in return which I didn't like the looks of. Fortunately, but just barely they were able to pull us out with the second tow rope after snapping the first. I actually thought they might snap the undercarriage of the vehicle. Because of the rain we saw a few birds that we had not expected to see here--Black Crate, Common Snipe, Moorhen. We looked hard to find the Somali Courser. After finding the first they popped up everywhere. Temminck's Courser was also found. </div><div><br /></div><div>The Ashnil Camp is situated within a cluster of Doum Palms along the river. As a result the Violet Wood-hoopoe is a bird that is found at the camp. It is found usually where the Doum Palms are found. We saw several. Looks just like the Green Wood-hoopoe. </div><div><br /></div><div> Since it was raining heavily, the termites were flying out of the nests on the morning of the second day. It is a sight to behold. The sky was full of them. The flight lasted about one hour or perhaps a little longer. We watched a Lesser Kestrel flying overhead. It would pick the termites out of the air with its talons reach up put them in its mouth then reach for another. Back and forth it flew for several minutes picking the termites out of the air. After the termites had cleared, we spotted vultures descending a couple of miles from us so we headed over to see what was so interesting to them. There were about a dozen vultures and eagles at a not so fresh kill by the road. The bones were picked clean. It surprised me that the hide was all that was left besides the bones. One of the Lappet-faced Vultures was doing its best to dispose of that, but without a great deal of success. The eagle was a Tawny Eagle. The other vultures were African White-backed. </div><div><br /></div><div>From Buffalo Springs we went to Lake Nakuru. This stop was an after thought for me. Since I was in Kenya, I wanted to be certain to catch the two flamingos and this is the place to do so. When I planned the trip I did not know that I would for certain see them on the coast. They were of course at Lake Nakuru but they were not there is vast numbers because the rains had diluted the salinity of the lake considerably. The lake level was about 12 feet above normal. There were thousands of Pink-backed Pelicans there and still numbers of flamingo. The really good birds of Nakuru were the Amur Falcon, Hildebrandt's and Coqui Francolins, Northern Anteater Chat, Long-tailed Widowbird, Scaly-throated Honeyguide, and Little Rock Thrush. </div><div><br /></div><div>That evening I had to catch a plane home but before that was a visit to Nairobi National Park. I didn't see much there. It was raining and the wildlife seemed to be somewhere else. The three birds of note were African Mostached Warbler, Jackson's Widowbird, and African Quail Finch another star bird at least by in my mind. </div><div><br /></div><div>It was a great trip. My guide and driver were wonderful. On the way to Lake Nakuru, we lost the clutch in the car. Patrick got on the phone and within two hours here came another car to take us to a meeting with a car from Nairobi to take us on to Lake Nakuru. Amazing. Patrick stayed with the bad clutch, called for a spare and a mechanic and before the end of the day the mechanic had come out with the spare, fixed the car on the spot and Patrick was back Nairobi before sundown while we were looking for birds at Lake Nakuru. </div>Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-40105962933570541462011-02-13T19:14:00.000-08:002011-02-13T19:35:37.134-08:00The dividend Blue ChipsLast week we saw COP increase its dividend by a whopping 20%. It now yields an extremely high amount for a US oil company. The dividend blue chips have lagged the US equities market greatly during the past two years as investors have bid up the prices of the more speculative equities. I expect KO to shortly raise their dividend. I expect by perhaps 4 cents a share. That would be in keeping with their previous increases, but there is the possibility of a 5 cent increase. KMB recently raised its dividend by 4 cents a share. It was a somewhat modest 6% increase.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-72632018487279402942010-08-30T07:14:00.000-07:002010-08-30T07:18:32.096-07:00U S Stock MarketIt appears to me that the best advice would be to sit tight until after November. There is really no reason to get excited about equities between now and then. Maybe no reason even then. If there should be a severe drop before then and you really can not resist, then make sure that your purchases are in the likes of KO, MCD, ABT, CLX, CVX and PG.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-47561789795240970042010-08-04T19:07:00.000-07:002010-08-05T03:26:05.308-07:00Stocks versus bonds as of August 4, 2010Recently investors have fled stocks and embraced bonds en mass. Let's take a critical look at the comparison of the two.<br /><br />US ten year bonds as I write this pay interest of 3.11%. $10,000 invested in these bonds over 10 years will yield a total of $3110 over the life of the bonds disregarding reinvestment of interest. After taxes maybe about $2650 in the 15% bracket. After taxes and inflation maybe, just maybe $1000 optimistically.<br /><br />Blue chips stocks consisting of KO, MCD, ABT, PG, and CLX invested in equal amounts currently yield at today's price 3.36%. Now these stocks over the past 25 years have each raised their dividends every year. KO ten years ago paid a 0.68 dividend. Today it pays $1.76 or 2.5 times as much. ABT ten years ago paid 0.74 today it pays 1.76 or 2.4 times as much. Ten years ago PG paid 0.64. Today it pays 1.93 or 3 times as much. Ten years ago MCD paid 0.22. Today it pays 2.20 or 10 times as much. Ten years ago CLX paid 0.61. Today it pays 2.20 or 3.6 times as much.<br /><br />But wait you say. The average price of a stock has lost value over the previous 10 years whereas you know that if you buy a treasury bond in ten years you will get your money back.<br /><br />Not so fast. It is true that 10 years ago CLX was selling at 26 times earnings on average and today it is selling for only 15 times earnings. In that sense it has lost value. But during that ten years earnings have grown from 1.64 a share to currently about 4.24 a share. Ten years ago the average price per share was 42.50 a share. Today it is 64.50 a share.<br /><br />10 years ago PG was selling at 35 times earnings on average and today it is selling for only 16 times earnings. During that 10 years earnings have grown from 1.24 a share to 3.67 a share. Ten years ago the average price per share was 43. Today it is 60 a share.<br /><br />The same case holds true for the other three stocks also.<br /><br />So if you hold $10,000 worth of 10 year US treasuries, your after tax return will be about $2650 in ten year. On the other hand if you hold these 5 blue chip stocks your expected return over a 10 period based on history will be considerably greater than $2650. It is perhaps unlikely that the dividends will rise as much during the next 10 years as they have during the past 10 years, but let's assume they will rise 8% annually. In that case in 10 years they will be 2.16 times as much as they are now. The total dividends expected during that period will be $4867. If the current tax rate on dividends should continue which it might not, the after tax amount in the 15% bracket would be $4624 less state taxes. Dividends are currently taxed at only 5% in the 15% bracket. In addition to the increased dividends, there should also be based on history capital gains on this investment. If we use the last 10 years as our guide the capital gains will be in the order of 35% in ten years. Remember though that ten years ago these stocks were all selling at a PE ratio that was considerably higher than they are today. KO at 60, today at 16. MCD at 24, today at 16. ABT at 24, today at 12. CLX at 26, today at 15. PG at 35, today at 16. With 35% capital gains there will be an additional $3500 in return which will not be taxed at all so long as the stocks are not sold, giving a total expected potential return of $8124 versus $2650 for 10 year US bonds.<br /><br />If history is any indication at all, and it might not be, then there is a very strong case that investing in blue chip dividend paying stocks will be a much more worthwhile experience over an extended period of time than investing in bonds.<br /><br />I will point out that there is more risk in investing is stocks than in bonds but that risk can be mitigated by investing in at least five different stocks and investing in leaders in their industry positions as are these five companies. It is worth pointing out though that at one time GM was an industry leader and also considered a blue chip stock. Last year it went bankrupt. The same could once be said about US Steel. It did not go bankrupt but it is just a shadow of its former self. There are countless other such tales. AIG, C, BAC, GE. The latter four are financial companies. Perhaps that should indicate something to avoid.<br /><br />One final thought. The average PE of these stocks is among the lowest it has been in the past 10 years. ABT is currently at 12. During the past 10 years it has ranged from 11 to 58. It is currently very near the 10 year low. The same can be said about the other four.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-30248210603929464692010-07-26T14:57:00.000-07:002010-07-26T15:39:31.530-07:00Getting an early start at investingIt may not seem obvious but the earlier one starts investing, the better the odds that one will accumulate the money one requires at a later time. The secret word here as Groucho Marx would have said is compounding. Given sufficient time compounding can turn a small amount of money into a significantly greater amount. The key word here is time. Consequently, a person that starts a saving program at say age 18 is going to accumulate a great deal more wealth than a person who starts a saving program at age 28.<br /><br />This can best be shown by an example.<br /><br />A person who is 28 might be expected to be able to save significantly more money than a person age 18, but by the time the person age 18 reaches age 28, that person should also be able to save an equivalent amount other things being equal.<br /><br />Let's assume that the 18 year old can save only $50 a month and that the growth rate of those savings is 5% annually. Then by age 28 that person will have accumulated $7546. Without saving another red cent, in 40 years that amount will then be worth $53,123 from an initial investment of only $6000.<br /><br />But how much will the 28 year old have to save each month for 10 years to arrive at the $53,123 at age 68? The answer is $81.44 a month or about 62% more than the 18 year old. But remember the 18 year old is not going to stop investing just because he reached age 28. He/she is going to continue saving and investing.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-5188876679200666662010-06-19T11:03:00.000-07:002010-06-19T11:08:44.770-07:00DividendsI recently ran across a link to a spreadsheet of US stocks that have increased their dividends each year for at least the last 25 years. It is something that must be shared and here it is.<br /><br />http://dripinvesting.org/Tools/Tools.asp<br /><br />I was quite surprised to learn that the list includes 100 companies.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-33965012317529561212010-05-27T06:02:00.000-07:002010-05-27T07:03:09.737-07:00Aeropostale AROAeropostale ticker ARO is a clothing chain that caters to the young set--13 to 17 years old. I normally am not a fan of clothing stores. They tend come in and go out of fashion very fast. But this particular chain has a couple of things going for it currently. First of all their clothing is not extremely high priced. That makes it very attractive in this tight environment. Secondly, the stock is selling at a very low PE ratio in comparison to other clothing chains.<br /><br />Let's take a look at the company financials.<br /><br />Revenue is $2.23 billion.<br />LT debt is zero<br />Equity per share is $4.62<br />Return on assets is 31.6%<br />Market cap is about $2.6 billion.<br /><br /><br />Historical data for the company is:<br /><br />2006 eps $0.67 revenue $1.2 bil<br />2007 eps $0.88 revenue $1.4 bil<br />2008 eps $1.13 revenue $1.6 bil<br />2009 eps $1.48 revenue $1.9 bil<br />2010 eps $2.28 revenue $2.2 bil<br /><br />The company operates 938 stores. Of these 44 are in Canada. It also operates an E-commerce site--www.aeropostale.com. The company has begun opening stores focusing on children in the age group 7 to 12 under the name P. S. It has 14 stores under this label in 5 states.<br /><br />The company just announced earnings for the first quarter of 2011 fiscal year as I write this.<br /><br />eps for the quarter was $0.48 vs $0.33 for the previous year. Revenue was $464 million vs $408 million.<br /><br />The current pe ratio with the current stock price at $27.14 is 11.9 for 2010 calendar year earnings. The pe ratio based on projected 2011 earnings is about 10.0.<br /><br />How does this stock compare to its market segment stocks?<br /><br />ARO pe 11.9 debt zero revenue growth rate 17% eps growth rate 35%<br />URBN pe 20 debt zero revenue growth rate 15% eps growth rate 13%Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-90272969072238374252010-05-05T13:00:00.000-07:002010-05-27T06:02:49.807-07:00Discovery CommunicationsThis is an interesting company. Most would recognize the Discovery Channel which is part of the company. Other channels that the company offers include Animal Planet, the Science Channel, and several other interesting offerings. I find the company interesting because their TV fare is considerably different from most of the other TV channels. Not only does their programming strive to entertain but it also strives to educate and inform. All that is really lacking in their offerings is a news channel and a finance channel to sort of round out their offerings. Maybe sometime in the future.<br /><br />Discovery Communications is a publicly traded company and that is why I am posting this blog. It has several classes of stock outstanding--DISCA, DISCB, and DISCK. I am not all that fond of companies with different classes of stock, but I may make an exception now and then.<br /><br />The financials of the company are as follows for 2009.<br /><br />Revenue $3.5 billion<br />Net income $560 million<br />equity $6.2 billion<br />LT Debt $3.5 billion<br /><br />The class A shares are trading for about $38-39 a share as I write this. With EPS of for 2010 projected to be about $1.64 the PE is about 24. It is currently a little too high to be considered a buying opportunity currently but on a pull back to about $34 the stock would look reasonably attractive.<br /><br />One of the interesting aspects of this company is that it serves markets in 180 countries in 35 different languages. It truly serve a world wide market. I have watched the Discovery Channel is England, Estonia, Ecuador, and Peru. This company has the potential of becoming the Nestles of educational entertainment.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-72788260730534843052010-05-03T09:12:00.000-07:002010-05-05T13:00:24.746-07:00April Trip to Peru<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjd1NK_TaL8KBSWh-Y4R52jrxUd26HPlojYGD5Eb7k9ruPo5Zchq8ruwU3XuTQqNzT3LRXYJg-FLdh829ml9rRpRxkVg_cOAbmZu_tPIxepnAsGNNchCSA8jTQx9bekaRi6H-ep0bBohBF-/s1600/sungrebe+at+Tingo+Maria.JPG"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjd1NK_TaL8KBSWh-Y4R52jrxUd26HPlojYGD5Eb7k9ruPo5Zchq8ruwU3XuTQqNzT3LRXYJg-FLdh829ml9rRpRxkVg_cOAbmZu_tPIxepnAsGNNchCSA8jTQx9bekaRi6H-ep0bBohBF-/s320/sungrebe+at+Tingo+Maria.JPG" alt="" id="BLOGGER_PHOTO_ID_5467099922193281186" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSj-gmlrFrVJF9PMaPuiAf4qPRNXzBvPZqc2qOygmBjYQaofP6FpA9HO1bw7KlqrcGDU1JYeYFZodBC50SiKdLurGj9PDoYkJcKwopq8pSUOEwwmVP-4w3iL956PL1QbUBPVoNfHmAhuYY/s1600/Giant+spider+at+Tingo+Maria.JPG"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSj-gmlrFrVJF9PMaPuiAf4qPRNXzBvPZqc2qOygmBjYQaofP6FpA9HO1bw7KlqrcGDU1JYeYFZodBC50SiKdLurGj9PDoYkJcKwopq8pSUOEwwmVP-4w3iL956PL1QbUBPVoNfHmAhuYY/s320/Giant+spider+at+Tingo+Maria.JPG" alt="" id="BLOGGER_PHOTO_ID_5467099912899281186" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggZp-mlbXa-UdfdOdpGB4gv-hHtmp_8ULcNXt6t4QcuS6plyQ7plMhenkpUzGxO95fdJ5qWR1j3PwkiS028y9FWUfK9vWpMswF0bTAHDKyCkP09SBMm5mhmbznmiREq1n1uroEumkMhGIZ/s1600/Floating+City+at+Iquitos.JPG"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggZp-mlbXa-UdfdOdpGB4gv-hHtmp_8ULcNXt6t4QcuS6plyQ7plMhenkpUzGxO95fdJ5qWR1j3PwkiS028y9FWUfK9vWpMswF0bTAHDKyCkP09SBMm5mhmbznmiREq1n1uroEumkMhGIZ/s320/Floating+City+at+Iquitos.JPG" alt="" id="BLOGGER_PHOTO_ID_5467099904726341650" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGns8MwO1JFvbnNwYgi6UCCcbVQgLAY4lyXuGRn9AewSDuTvZObjkqAfOSU3qVviQR7NQq3lDNk3T1cUj12DgvCiIBkePXQURoh-gMN-YCnoQ_kNqfzEPjL4JoUJbAeFBtybiT8mIT-hOf/s1600/Humming+bird+at+Nazca.JPG"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGns8MwO1JFvbnNwYgi6UCCcbVQgLAY4lyXuGRn9AewSDuTvZObjkqAfOSU3qVviQR7NQq3lDNk3T1cUj12DgvCiIBkePXQURoh-gMN-YCnoQ_kNqfzEPjL4JoUJbAeFBtybiT8mIT-hOf/s320/Humming+bird+at+Nazca.JPG" alt="" id="BLOGGER_PHOTO_ID_5467099889980162834" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEij9EicpB8Q83E-WF5Tltl_oy_zplEFQ1PVgnX6TIfDY46UU3LPYn6lMHHLy4aR3LKARp68CRaP9RvT_c9rYy3-HHtPxWseS17AD92WFVnh9pyOEi5lD91X73mhmMuOWOG6XE25PeC6xkKo/s1600/Andean+Condor+3.JPG"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 320px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEij9EicpB8Q83E-WF5Tltl_oy_zplEFQ1PVgnX6TIfDY46UU3LPYn6lMHHLy4aR3LKARp68CRaP9RvT_c9rYy3-HHtPxWseS17AD92WFVnh9pyOEi5lD91X73mhmMuOWOG6XE25PeC6xkKo/s320/Andean+Condor+3.JPG" alt="" id="BLOGGER_PHOTO_ID_5467099877687840354" border="0" /></a><br />My birding buddy Moe and I spent a month in southern Peru looking for birds. Among the places we visited, my favorite was Parque Nacional de Junin. This is near the town of Junin and rather off the beaten path. Accommodations there are somewhat basic. No shower--too cold--but there was a toilet seat and 4 heavy wool blankets on the bed. Junin is at about 12,800 feet and the evenings are cold. The park ranger took us out on the lake to find the Junin Grebe, a flightless bird found only here. This is an excellent site for birding. Around the lake were hundreds of Puna Ibises, Puna Teals, Yellow-billed Pintails, and many other birds. We spent only one day here but should have spent at least two days. From Junin we traveled to Tingo Maria to visit Parque Nacional Tingo Maria and the Oilbird Cave there. At 6:00 pm each night the Oilbirds fly out of the cave by the hundreds in search of fruit trees for their nightly meal along with hundreds of bats. One of the spectacular sites here is the giant spider that lives in the cave and eats Cockroaches. See photo. The Oilbird Cave area is also an excellent place to see the Sunbittern which is tame here. See photo. Our next stop was Yarinacocha and oxbow lake on the Río Ucayali near the large city of Pucallpa. This is a great place to hire a boat for the day and tour Yarinacocha and the Ucayali looking for birds. The Large-billed Terns and Striated Herons are abundant here and many other birds besides. After the boat trip you will want to stop for dinner at the local open air fish restaurant where you select from the day's catch and have it grilled over charcoal and washed down with the best beer in Peru--San Juan. It is a local beer found only around Pucallpa. I could have stayed there for another week just to drink the beer.<br /><br />From here we took a flight to Iquitos. There are only two ways to get to Iquitos, by airplane or by boat. No roads go to Iquitos. The boat trip is about 4 to 5 days and is only for the very adventurous. The city has almost a half million people and some of them live in houses built on a platform of floating logs tied together with vines. See photo. Iquitos is very near the beginning of the Amazon river. We met three Americans in the mid-twenties there that had purchased a 24 foot canoe and were planning on sailing it down the Amazon to the Atlantic Ocean about 2000 miles. I wish them luck in their adventure.<br /><br />After Iquitos we flew back to Lima to begin our trip down the Gringo Trail to Cusco. The trail goes first to Paracas-Pisco where one can visit the fish markets and take a boat trip to Islas Ballestas. It was somewhat astounding to see the hundreds of gringos packed into the boats heading for the island. The island is the best place to see the Humbolt Penguin and the Inca Terns and several other local specialties besides, but I believe that Moe and I were the only two there interested in seeing the birds specifically. The rest of the gringos I doubt new one bird from the other. We all did see lots of birds though.<br /><br />From Pisco it is a quick bus trip to Nazca where small planes are waiting to whisk you over the Nazca Lines. Last year a pilot had a heart attack and killed himself and a couple of tourists from Chile so now all planes have a pilot and co-pilot. The trip is a little more expense as a result but not outrageous--$80 per person. There is no reason to hang around Nazca longer than necessary and it is directly on the route to Cusco so after a two hour stop over, it is on the bus again heading for Cusco. But one should not go directly there. One should stop next in Abancay. This town is the gateway to the Santuario Nacional Ampay. Ampay was my third most favorite place in Peru. It is in the humid Andes and the hiking is fantastic although at better than 8000 feet, hiking is a chore and exhausting. The birding here is great with two specific rarities to find--Apurimac Brush-finch and Apurimac Spinetail. Lots of hummingbirds besides.<br /><br />When we found out that it would be a four day trip to Machu Pichu, we decided to skip it and head for Puno and Lago Titicaca. We scheduled a trip to Reserva Nacional Titicaca which was quite an adventure. We had to take a 5:00 am collectiva to the small town of Huata where we were to be met at 6:00 am by the park naturalist. We were met by him at 7:00 am on a motorcycle. He took one of us and than the other on his cycle to the park headquarters over a very bumpy trail that went through plowed fields. No place to put our feet except to sort of drag them on the ground. When we were all there, the naturalist put a 25 hp outboard into a wheelbarrow, gave me a 10 foot pole to carry and off we went to the lake shore. The boat was about 20 feet out in the lake and we had to take off our boots, roll up our pant legs and wade out to it. Surprisingly, the lake was not cold even though it is at 11,800 feet. Once we were all in the boat it was off to find the Titicaca Grebe, another flightless grebe that is found only in this one place. We saw several.<br /><br />Our final stop was Colca Canyon and the town of Chivay. The canyon is famous for its Andean Condors. See photo. On a trip to Peru, it is not to be missed. We saw about 20 condors rise out of the canyon as the morning sun warmed up the thermals. Also saw about 300 gringos watching the condors rise out of the canyon.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-66505025045049195772010-02-21T12:42:00.000-08:002010-03-07T04:59:53.196-08:00Asset Allocation for the FutureAsset allocation strategies are based on simulations of past performance. The theory is that the future will mirror the past. If only that were so, life would be so much more simple. The world is changing and if one is to be a successful investor one is going to have to change with it. In the past a conservative allocation strategy has been to allocate about one half of ones assets to fixed income investments and about one half to equities. The assets allocated to equities have generally been recommended as being 75% invested in US equities mostly to large cap equities and perhaps 25% to foreign equities or perhaps even less. The logic behind this distribution is that fixed income is a more stable investment than equities tend to be and US equities are more understandable than foreign equities and better regulated.<br /><br />Of course no one can predict with any certainty what the future will hold, but one can certainly make some reasonable postulates based on trends that are apparent.<br /><br />Trend #1 US budget deficits are increasing rapidly with virtually no end in site requiring the government to borrow more and more money.<br /><br />Trend #2 Production is leaving the US for less expensive economies.<br /><br />Trend #3 Economic development is shifting from the western world to the countries of the east.<br /><br />Trend #4 Many US corporate CEOs are more interested in feathering their nests than in managing a thriving business.<br /><br />These trends suggest that interest rates will rise dramatically in the future as the world's largest borrower runs out of people willing to risk lending money that most likely will not be repaid. The world economic shift taking place suggests that future investment options should also shift with them. And finally they suggest that one should avoid investing in companies paying their CEOs extravagant salaries and bonuses. They do not have their investors' best interests at heart. They have their own best interests at heart.<br /><br />Although these trends appear almost self evident, nothing in this world is deterministic. Everything is probabilistic. There is always a chance that things might not be as they seem. And there is always the chance that things might change. Supposing for example that the US government were to pass a new tax law taxing incomes of over $1,000,000 at a 90% tax rate. Such a change might also change the management styles of many US corporations.<br /><br />So the question is what should an asset allocation look like for the future world economy. To me it seems that one should allocate more assets to equity investments than has previously been recommended. For a conservative investor that would suggest no more than 20 to 30% in debt instruments if that much. Looking towards the future debt instruments seem to be an investment that will not fare very well. For a less conservative investor they might be avoided all together. One might ask why as much as 30% for a conservative investor if in fact interest rates are expected to rise. Why not avoid them all together? Well, the problem is that during periods of rising interest rates equities tend to perform even worse than debt instruments. Most corporations run on borrowed money, not all but most; and if borrowing costs increase their profits suffer as a result. Banks will be especially vulnerable because they borrow short term to lend long term and if they have lent a lot of long term money at 5% interest and they have to pay 6% short term, one can imagine what the impact will be. Another consideration is if one is investing in debt instruments one should avoid the longer term instruments--those over about 5 years in duration. The longer term debt instruments will be the ones that suffer the most during a rising interest rate environment. <br /><br />The remaining question becomes how should one invest ones equity allocation. Certain companies in the US will do much better than others in the future. Companies with a strong balance sheet will be at a distinct advantage over those loaded with bank loans and short term debt. Those that had borrowed long term at previously low interest rates will also be at a distinct advantage. Companies with a large amount of foreign sales will also be at an advantage as they convert foreign currencies back into US currencies and as they service economies growing more rapidly than the US economy. <br /><br />What are some examples of these types of companies? Coca-Cola is one such example. More than 75% of sales is outside of the US. Long term debt of the company is less than 20% of total capital. 3M is another such company. 64% of sales is outside of the US. Long term debt is less than 30% of capital. Multinational companies should be relatively safe investments if not exciting. A non-US company of this type is Nestle, a Swiss company. The question of what percentage of ones assets should be invested in these types of companies is open to some speculation. Perhaps 50% of ones equity portion, perhaps more or less. Despite what the future holds these type of companies should do well provided they continue to have good management.<br /><br /> The Asian countries, Latin American countries and Australia are those where future growth is most likely to occur. Some companies in these countries are traded in the US. Another option is to invest in an index fund or mutual fund that invests in these countries. There are many to choose from.<br /><br /> Personally, I am not in favor of many index funds as investment vehicles. They have one glaring flaw. That is that most are capitalization weighted which means that they are not a diversified investment option. Index funds concentrate most of ones investment in a few very large capitalized companies. But they are an option. On the other hand mutual funds also have one glaring flaw. They have to pay realized capital gains annually on which one is taxed. Index funds generally do not suffer greatly from that flaw.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-72210736414912290662010-01-31T05:49:00.000-08:002010-01-31T13:40:40.533-08:00Investing for Retirement--401k asset allocationIf you have a 401k account you also most likely have mutual funds. But which mutual funds are the right ones to incorporate as part of your retirement account?<br /><br />Opinions on these questions are probably as varied as there are persons who have opinions to express.<br /><br />One of the precepts of mutual fund investing is that future performance can be predicated based on past performance. Virtually all mutual fund investment advisers and the mutual fund families themselves provide volumes of statistics relating to the past performance of the particular mutual fund and the rating agencies rate them based on past performance. Although this seems like a logical approach to evaluating a mutual fund, it is based partly on a fallacy. Not completely but partly. The fallacy obviously is that future performance can be based on past performance. The universe just does not work that way. So then what is one to do?<br /><br />Some of the answer was provided by Harry Markowitz in a paper written in 1952 entitled "Portfolio Selection." His ideas have become known as Modern Portfolio Theory--MPT. Without going into the gory details, the idea basically is that one can reduce risk and increase returns by diversifying ones investments across a wide range of asset classes and rebalancing ones investments periodically. Easier said than done but that is the idea. Mutual funds can play a role.<br /><br />The role that mutual funds plays in ones portfolio is not and should not be a set and predefined function. It should vary with ones risk acceptance, financial goals, and assets.<br /><br />Someone risk adverse should not allocate his/her assets into the same mix of mutual funds as someone not risk adverse.<br /><br />Someone young with his/her future ahead should not invest in the same types of assets as one who is retired.<br /><br />These concepts should be evident but many times seem not to be. The role mutual funds play in ones portfolio should vary with all the above criteria and more besides.<br /><br />Generally speaking one has very few other options than mutual funds for ones 401k portfolio other than possibly company stock. The challenge is in determining which mutual funds one should invest in. Recently, the mutual fund industry has attempted to make this decision a no brainer by devising target date retirement funds that reallocate ones investments based on how near one is to retirement. They universally change the asset allocation to a more conservative allocation as one approaches retirement. They also attempt somewhat to rebalance periodically ones assets at least in theory. Among the different mutual fund companies the investments in these target date retirement funds varies, but with 401k accounts one usually does not have a choice among the different families. There generally is only one choice for a particular target retirement date, but one does not specifically have to choose his/her particular retirement date. One can choose a markedly different retirement date which would change the asset allocation mix.<br /><br />It has been stated as a truism that a younger person should choose a more aggressive asset mix than one nearing retirement. What has not been stated though is how much more aggressive that asset mix should be. Many found in 2000 and again in 2009 that they might have chosen a much too aggressive asset mix as their 401k accounts lost perhaps half of their value and perhaps even more. What seems to be overlooked is that investing for retirement is not a sprint. It is a long distance race. One should invest with that in mind. One should also invest with the future in mind and not specifically based on what happened last year or the last decade. No one really knows for sure what the future might hold. But one can be pretty sure it will not be as the past was. This is where choosing a variety of different asset classes to invest in comes in extremely handy. By spreading ones bets around at least one is not going to suffer a major calamity. Many if not all target date retirement funds tend to concentrate ones investments in what is perceived to be suitable investments but not particularly diversified investments. To illustrate my argument this is the allocation of the Vanguard 2040 retirement fund:<br /><br />72% Total stock market index fund<br />10% Total bond market index fund<br />9% European stock market index fund<br />4.6% Asian stock market index fund<br />4.3% Emerging markets index fund<br /><br />The total stock market index fund consists of over 3400 different stocks. That would seem to be well diversified, wouldn't it? No, it is not. 15.6% of the assets are invested in only 10 stocks. The total bond market index fund is 38% US treasury bonds and 33% US mortgage backed bonds. The same can be said about the other 3 portions of the portfolio. In my opinion this is not as diversified a portfolio as one should have in ones retirement account nor is it as riskless as one might strive for. In other words ones assets might be much much less diversified than one might expect if one is not very careful.<br /><br />For 401k investors though the task of choosing ones allocation can be a lot more complex than just choosing the no brainer approach. For one thing the company might not even offer a target date retirement account.<br /><br />So what then would be a decent diversified portfolio for different types of retirement alternatives?<br /><br />This is my opinion and might vary greatly from the opinion of others. The opinion is based on several premises. First, one should choose a more conservative strategy than a less conservative strategy because these are retirement funds one is investing. Second, one should have a well diversified portfolio because no one knows what the future might hold and it is better to cover the bases broadly unless one has a crystal ball. Third, as one does get closer to retirement the asset allocation certainly should become more conservative but perhaps not as conventional wisdom would suggest. Finally, although one does not know what the future holds, one can be pretty sure it will not be as the past.<br /><br />For a person in his/her 20s with very little in retirement assets and the entire future in front of them.<br /><br />A portfolio that is mostly equities certainly is appropriate, but relying entirely on equities (stocks) is not so appropriate as many would suggest. Those who did so during 2006 and 2007 suffered a world of hurt during 2008 and 2009.<br /><br />A sample type portfolio might consist of the following.<br /><br />20% 500 S&P index fund or broad market index fund or large cap US fund. These have performed really poorly during the last 10 years but we do not invest based on the past.<br />15% Europe stock fund<br />20% Developing market stock fund (remember we are looking towards the future)<br />15% Small cap stock fund. Small cap stocks tend to outperform large stock funds because they have the potential of faster growth. Again we are looking toward the future.<br />20% Money market funds. I said we should be conservative.<br />10% Bond funds.<br /><br />You will note that the suggested allocation is distinctly different from that suggested by Vanguard. This is a more diversified approach to investment allocation than that suggested by virtually all mutual fund companies. I might also add a more conservative allocation.<br /><br />A sample type portfolio for someone in his/her mid-earning years 30-45 would be just a tad more conservative.<br /><br />5% less of option 1 and 5% more of option 5 or 6, preferably 5. Remember we are talking about the future and the US has serious debt problems.<br /><br />A sample for someone 45-55 again would be more conservative still. 5% less of options 2 and 3 and 5% more each of options 5 and 6.<br /><br />A sample for someone 55-65. This is where one either is on track for retirement or one is not on track. If one is not on track and does have close to 10 more years, then all is not yet lost, but if one only has 5 or fewer years then safety first regardless. If one of the retirement options is a mutual fund investing in resource stocks--oil stocks, copper stocks, gold stock--this might be a way to make up some lost ground. It would be worth a shot to divert allocations from 1 and 2 into a fund investing in resource stocks perhaps a total of 10%. That does entail some risks though. To become a tad more conservative one should increase ones allocation into money market funds to at least 35% taking from bond funds and small cap funds and emerging market funds.<br /><br />Finally, how much should be invested in a 401k account. Most companies have a matching amount and one should certainly strive to get the entire match if possible. For many that might be out of reach but certainly get as much as you can. Beyond the match it is not an easy question to answer. A big concern is what the future tax rate might be. Remember that 401k contributions when they are removed are taxed at the full tax rate. It is deferred but not advantaged as it is if one invests in mutual funds outside of a 401k account. In that respect it might be appropriate to consider investments also outside of a 401k account especially with funds that do not have a company match.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-34716130434522927032010-01-07T12:34:00.000-08:002010-01-07T13:24:01.196-08:00Investing in 2010Caution should be the name of the game in 2010, I think. The market has recovered more than fundamentals seem to indicate is warranted. If and when the government stops printing money to 'stimulate the economy' what is going to be the economic driver? I am at a loss to find one. I suppose that if the health care bill were to be passed it might be an economic stimulus for the insurance companies and quite possibly for other health care related industries. It will however take a while for the effect to filter through the system. Unfortunately, the health insurance companies are not investor friendly. Their dividends are worse than poor. They prefer to spend investors' money buying back their overvalued stock. I can not recommend investing in such poorly managed companies. <br /><br />A healthy cash reserve would not be inappropriate for a conservative investor. I know it will earn squat in interest but squat is a whole lot better than a negative return as we all learned during the first part of 2009.<br /><br />If you have some profits, take a few of them now while the taking is good. Put the proceeds into your money market account and grin and bear it. Remember though that investments are based on probabilities. Even though I think the probabilities favor sitting on cash, there is a probability that I could be sadly mistaken.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com0tag:blogger.com,1999:blog-2678146113301816233.post-17465067010647009422009-11-24T19:41:00.000-08:002009-11-25T10:29:59.047-08:00Trip to Uganda<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbq5H3T-tI9Y9CrsCTIxUDiG5cncDaiIEt6YOuzX1m8vIYDgq5fd-TdEllWK9qQzCPuAPnM7uxiX5kcteyu2txWQv9rI4C6jbIRA7fySYNisN2rBGSOgMpWU2fuVSrH6lVT095m5yp0eR3/s1600/saddle-bill+stork+4x8+low+res.JPG"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 214px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbq5H3T-tI9Y9CrsCTIxUDiG5cncDaiIEt6YOuzX1m8vIYDgq5fd-TdEllWK9qQzCPuAPnM7uxiX5kcteyu2txWQv9rI4C6jbIRA7fySYNisN2rBGSOgMpWU2fuVSrH6lVT095m5yp0eR3/s320/saddle-bill+stork+4x8+low+res.JPG" alt="" id="BLOGGER_PHOTO_ID_5408110155643749842" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihDzGGF2f6L6H3vbDNIaIn7_Jg7TNvJy-lCwFagV7QLJ69wwcwql3hPyjtCuKuQhnOX-YiKZrVwKAgZKc3fMeVitMr2m136rlPPlm63RPCVQUZ8Kdan6XxJRx8oSObyMK1nCQvmWKSbBMy/s1600/Canoe+bow+down+channel++4x6+low+res.JPG"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 320px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihDzGGF2f6L6H3vbDNIaIn7_Jg7TNvJy-lCwFagV7QLJ69wwcwql3hPyjtCuKuQhnOX-YiKZrVwKAgZKc3fMeVitMr2m136rlPPlm63RPCVQUZ8Kdan6XxJRx8oSObyMK1nCQvmWKSbBMy/s320/Canoe+bow+down+channel++4x6+low+res.JPG" alt="" id="BLOGGER_PHOTO_ID_5408110150128978354" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjB1HiMmlLJAA9bojJkn7yUsV488QgyDn9IiBMzyephltO07VqntYdTC59ur19n3PbD8bhzwwJtYFw5gPF1UsGCQMA6-WAvGEq5Yiw9B8kGQvWe0PybpIY_sSUHkwoM-lXQd0gtb364F7IR/s1600/shoebill2-low+res.JPG"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 214px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjB1HiMmlLJAA9bojJkn7yUsV488QgyDn9IiBMzyephltO07VqntYdTC59ur19n3PbD8bhzwwJtYFw5gPF1UsGCQMA6-WAvGEq5Yiw9B8kGQvWe0PybpIY_sSUHkwoM-lXQd0gtb364F7IR/s320/shoebill2-low+res.JPG" alt="" id="BLOGGER_PHOTO_ID_5408110148738459330" border="0" /></a><br />I spent 19 days in Uganda in November looking for birds. This is a brief description of the trip for those who might be interested in visiting Uganda.<br /><br />Uganda is a great place to visit if you are a nature lover. I visited six national parks while I was there and several other nature areas also. It was an adventure of a life time. I tallied about 420 different bird species, 5 chimpanzees, one Puff Adder, and many monkeys, antelope, elephants, giraffes, hipos, Cape Buffalo, dragon flies, butter flies, but very few mosquitos. November is part of the 2nd rainy season of the year which begins in October. It did rain about every day while I was there but only for about one or two hours. While it is raining, that is a great time to drive to the nearest bar and have a Nile Special if there is a bar handy. Much of the time there is not. It is best therefore to take a couple along to enjoy during the lunch break. Uganda has excellent beer, but hands down Nile Special was my favorite.<br /><br />My trip was arranged through Birduganda.com. They handled everything. My itinerary was custom designed to my specification with some suggestions from Herbert the director of Birduganda. I was presented with two options for accommodations--luxury and utilitarian. I chose the latter. To my surprise utilitarian was not all that utilitarian. At QE national park I ate my meals at the lodge where Queen Elizabeth stayed in 1954. It is first class. However, I did have my room down the road about 300 yards at a very nice hostel that was suitable for my needs.<br /><br />My birding guide was Robert Byarugaba who lives in Buhoma. He is a top notch guide. You can find him on the internet at robertbirdguide@yahoo.com. Telephone is 256-782-029-054. My driver was Gordon Gongo. He lives in Kampala and is on the internet at gordon.gongo@yahoo.com. I suppose that a very adventurist person might attempt driving in Uganda himself. But the roads are not what one might be accustomed to and road signs are not something one generally sees in Uganda. Gordon also makes a really great beef stew, one of the best meals I had while in Uganda and great vegetable soup also. Uganda is not a large country and most of the interesting places are in the west and southwest. But the roads are in many places rutted dirt and I do not think we averaged more than 20 mph, so distances seem at least three times longer than in the US.<br /><br />The money situation in Uganda is somewhat interesting. The currency is the Uganda shilling which exchanges at about 1900 to the dollar at this writing. A beer costs about 3000 shillings at the better establishments. But that is not what is interesting. What is is that national park entrance fees are for foreigners are in dollars not shillings. They average is about $30 a day but does vary by park, so when you arrive at Entebbe do not covert all of your currency into shillings. You will need a substantial amount of U S dollars also. Another interesting situation is that one is not allowed to walk any trails in a national park unless one has either a local park guide or an armed guard. A tip is expected for these functionaries at the end of the trip. A guard might expect 10,000 shillings. A local guide who is knowledgeable maybe 20,000 shillings for a full day. The guards carry AK47s but I am suspicious that they may not carry any ammunition.<br /><br />Of the total time I was in Uganda, there was only one day which was a disappointment. That was the trip to Kaniyo Pabidi which is part of Budongo Forest Reserve. Birding there was extremely disappointing with only one new species seen. We did see a Chimpanzee there however and Robert also saw two Blue Duikers, an extremely small antelope of the forest. I missed both. There are several species that are supposed to be easy to see there but we had no luck at all attempting to call them in. My personal recommendation is to spend ones time at more productive locations such as Murchison Falls just north of Budongo. The Royal Mile at Budongo is an exceptional birding site and should not be missed.<br /><br />One of the national parks that I visited is Semliki. It is somewhat off of the beaten path and receives only about 2000 visitors a year. That is somewhat unfortunate because it is one of the more interesting national parks and encompusses an environment not encountered elsewhere in Uganda--very tropical. One of the highlights of the Semliki trip was seeing a Puff Adder close up. It was brought to our attention by the commotion that the birds were making. Robert showed it to me and I thought it was a log lying on the ground. Then the log began to move--very slowly. Puff Adders are not fast snakes. The snake we did not see at Semliki but which is supposed to be common there is the Black Momba.<br /><br />The other place worth some note is Mabamba Swamp on Lake Victoria a couple of hours from Entebbe. This is the home to the Shoebill and many other water and swamp birds. The Shoebill is one of the prize birds of a Uganda bird trip. Uganda is the only easy place to see this bird, easy being a relative term. There are two places in Uganda where it is usually seen--Mabamba and Murchison Falls NP. We saw four Shoebills there and many other birds besides.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-84340121924150453772009-09-28T06:52:00.000-07:002009-10-23T11:43:18.572-07:00What should one invest in during retirement?Investing during retirement entails different criteria than investing during ones productive years. There are three paramount criteria that retirees need to consider when considering their investments--current income from their investments, safety of their capital, and protection against inflation. <br /><br />If a person retires at age 65, that person can reasonably expect to live another 20 years. If we assume historic rates of inflation, in 20 years prices will be somewhere between 2 times and 3.5 times greater than they are today. Those are the previous 20 year inflation rates during the past 50 years in the United States. If one does not take inflation into account during ones retirement, the consequences could be considerably unpleasant as one approaches the grave.<br /><br />Many investment advisers suggest a rather conservative investment philosophy for retired persons. Let's review a couple just to get a flavor of what conventional wisdom suggests. Vanguard Retirement Income Fund VTINX allocates 65% bonds, 29% stocks, and 5% short term investments. Its average return since inception is 3.39%. Its current yield is 2%. Fidelity Freedom Income Fund FFFAX allocates 60% bonds, 21% stocks, and 19% short term investments. Its average return since inception is 4.82%. Its current yield is 2.95%.<br /><br />When one considers the current yield of these retirement funds, their asset allocations, and their returns one must question the wisdom of their philosophy. With historic inflation rates running at a minimum of 3.5% annually and as high as 6.5% annually over a 20 year period this investment philosophy is not going to yield sufficient returns nor yield sufficient income to last a 20 year term for the average retiree who is dependent on his retirement income and social security.<br /><br />One of the common rules of thumb for retirees is that they can withdraw 4% of their retirement capital annually and have it last about 25 years. There are web based retirement tools to show the user the amount that can be withdrawn monthly assuming an initial amount at retirement and an expected life span. Unfortunately, many of these tools make assumptions that may not be correct and they do not allow the user to adjust the assumptions.<br /><br />A simple calculator can be found at this link. Too simple.<br /><br />https://personal.vanguard.com/us/planningeducation/retirement/PEdRetTapDetermineWDContent.jsp<br /><br /><br />I believe a better strategy is to allocate more to quality equities that have a history of increasing their dividends. Generally speaking that will accomplish two goals. It will provide over time an increasing income and the increasing dividends generally will support an increasing value of ones assets. Investing in bonds accomplishes neither. That is not to say that bonds have no place in ones retirement portfolio. They do add some stability to ones assets during market turmoil, which they did during these previous two years. Some of them did anyway. Some did not. Only the very highest quality bonds actually added to stability. The rest did very poorly.<br /><br />Let's look at several examples of high quality stocks that have a history of increasing their dividends.<br /><br />McDonalds Corp--MCD--10 years ago paid a dividend of 0.20 a share. Today it pays 1.63 a share. Ten years ago its average price was 42.50 a share. Today its price is 57.00 a share.<br /><br />Procter & Gamble--PG--10 years ago paid a dividend of 0.64 a share. Today it pays 1.64 a share. Ten years ago its average price was 45.00 a share. Today its price is 58.00 a share.<br /><br />Coca Cola--KO--10 years ago paid a dividend of 0.64 a share. Today it pays 1.52 a share. Ten years ago its average price was 60.00 a share. Today its price is 53.00 a share. But recall that 10 years ago we were at the peak of the bull market. KO has indeed during the last 10 years depreciated somewhat in value.<br /><br />Chevron--CVX--10 years ago paid a dividend of 1.24 a share. Today it pays 2.53. Ten years ago its average price was 44.00 a share. Today its price is 71.00 a share.<br /><br />Each of these companies pays a dividend of more than 3% annually, more than either of the two mentioned retirement income funds pay. They also each has a long history of raising their dividends annually.<br /><br />This is not a full proof investment strategy. There are risks involved. One is that one of these companies that has had a history of raising its dividend might fall on hard times and not be able to do so. One might even have to cut its dividend. Bank of America recently was among companies that annually raised its dividend. But it recently had to drastically cut its dividend. A strategy to mitigate the impact of such an action is for one to invest in a diverse holding of stocks. It is generally suggested among asset allocation strategists that one should invest in no fewer than 20 different companies in a variety of industries.<br /><br />One might ask why it would not be an appropriate alternative to invest in a blue chip mutual fund as such a fund should be composed of such stocks. One reason is that the term blue chip has been mis-applied by the investment communities in recent decades to include companies that have no claim to such a title. Another reason is that mutual funds feel themselves obligated to invest in a wide variety of companies. There are not that many companies that actually meet the qualification of quality companies that increase their dividends, maybe 50 to 100. Most mutual funds own many more than that number so they have to reduce their investment standard.<br /><br />There are mutual funds that have a strategy of investing in dividend paying stocks. Several index funds come to mind. One is Wisdom Tree Large Cap Dividend--DLN. Its current yield is 3.3%. Unfortunately, the quality of some of its holdings leaves a great deal to be desired. One of its largest holdings is Bank of America, not a stock that one might choose to invest in. It currently holds stock in about 288 different companies. Considering there are only about 315 large cap companies, they are not all that selective in which ones they choose.<br /><br />It would be a mistake to invest all of ones assets in only this type of companies. Indeed one should choose some bonds and also some other types of equities also. A diversified portfolio has a greater chance of limiting risk than one that is not. But I believe that for someone in retirement it is a better strategy to allocate a larger portion of ones assets to these types of stocks than to invest a large portion in bonds or in other types of equities.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-51638170638353891542009-09-19T15:59:00.000-07:002009-09-19T18:10:43.989-07:00Closed end mutual fundsThere currently are three different types of mutual funds one can invest in--open end mutual funds, exchange traded index funds, and closed end funds. This is a discussion of closed end funds.<br /><br />Closed end funds are bought and sold on stock exchanges very much like exchange traded index funds. As of this posting there are about 630 different closed end funds available. Very similarly to open end mutual funds they come in a wide variety of different types. Some are municipal bond funds, some taxable bond funds, and others covering a wide variety of equity investment categories.<br /><br />There are several specific differences between closed end funds and open end funds however. <br /><br />First they are traded on the stock exchanges. As a result they do not necessarily trade at net asset value. In fact sometimes the price at which they do trade varies greatly from the value of the net assets. At the time of this posting, one astonishingly sells at a premium of 73% to net assets. Back in March 2009 it sold at a slight discount. It is not all that uncommon for a closed end fund to sell at a premium to net assets but the vast majority do not. Currently about 160 do and 470 do not. Occasionally, some closed end funds will trade at a substantial discount to net assets especially during market panics. During the March 2009 market panic there were many closed end funds selling at 20+% discounts to net assets. There are currently about 15 or so trading at such a discount perhaps for some good reason. However, if one can purchase a mutual fund at a substantial discount to net assets, one might give such a fund careful consideration.<br /><br />A second difference is that most closed end funds are considerably smaller than most open end funds. the largest has $3.3 billion in assets. The median about $200 million in assets. The number of shares outstanding is generally a fixed number of shares. Unlike an open end fund, they do not issue new shares at public demand and they do not redeem shares at public demand. They do occasionally issue new shares to cover dividend reinvestment. And they do occasionally liquidate. There is one ramification of this aspect. That is that in general it is a great deal easier to manage a small mutual fund than it is to manage a larger mutual fund. Fidelity Contrafund has $51 billion in assets. American Funds Capital Income Builder has $75 billion in assets. With such a large asset base it is also more difficult to diverge from the market average. They are the market average. The two specifically mentioned have managed to diverge positively from the market average, but most have not.<br /><br />A third difference is that many closed end funds employ leverage, which can work for them in a rising market but against them in a falling market. Not all do but many do. The leverage is in the form of preferred stock and usually represents 30-40% of capital. Many of these closed end funds had issued auction rate preferred stock. A result of the banking crisis was that virtually all of this type of preferred stock became untradable. This led to some difficulties for several closed end funds. Another difficulty many closed end funds encountered was that as the value of their assets decreased during the market collapse of 2008-9, their leverage ratios increased beyond the regulatory limits for their particular funds--33% for debt leverage and 50% for equity leverage. The drop in asset values ment that they had to reduce their leverage, which ment selling assets at distressed prices. Not a particularly good position to be in.<br /><br />During more normal market conditions there is about $20-30 billion in new closed end funds issued on an annual basis. Recently there have been virtually none issued. Buying a closed end fund IPO is a loosing proposition in general. The IPO is generally issued at a premium of about 5% to net assets. Once the fund begins trading there is about a 80% probability that the market price will fall to about a 6-10% discount to net assets. There are certain exceptions to this generality. In 2006 Morgan Stanley China A Share Fund came to market. This particular fund invested in a market that virtually no other mutual fund invested in and a market closed to individual foreign investors--China A shares. The fund immediatedly soared to a premium and during 2007 returned 100%. It now sells at a very small premium of 3% but as resently as April 2009 sold at a premium of 30%.<br /><br />There are two web sites that give a good statistical analysis of closed end funds. <br /><br />http://www.etfconnect.com/<br /><br />http://www.closed-endfunds.com/Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com2tag:blogger.com,1999:blog-2678146113301816233.post-52587191792312759122009-09-12T05:51:00.000-07:002009-09-12T09:08:19.200-07:00S&P 500 Index FundsIndex funds have become extremely popular during the past 10 years and the most popular of all are ones based on the S&P 500. As of this writing SPY, an S&P 500 index, is the most popular exchange traded index fund with $63 billion in assets. The next most popular is GLD with only $31 billion in assets. But that is only a small portion of the total amount invested in S&P 500 based index funds. Nearly every major fund company also offers one. The Vanguard S&P 500 index fund, the granddaddy of them all which started the trend on Oct 31, 1976, has $84 billion in assets.<br /><br />There are basically three selling points proponents of the S&P 500 index funds use when advocating purchase. First is the low expense ratio. The Vanguard fund has an expense ratio of 0.18%. SPY has an expense ratio of 0.10%. The median expense ratio of mutual funds is about 1.5%. Second, is the tax advantage of index funds. Since these are unmanaged funds they are very tax efficient. There is very little realized year end capital gains with an S&P 500 index fund if any at all. Managed mutual funds very often have very large year end capital gains upon which taxes must be paid. Third is that 70% of all mutual funds have underperformed the S&P 500 index so it is better to just place ones money into that index fund than to invest in a managed fund.<br /><br />What is not ever discussed are what the disadvantages of the S&P index funds might be. There are several that one needs to be aware of. First and perhaps formost is the fact that it is capitalization weighted. What that means to the investor is that even though one has an investment in 500 different companies, it is not an equal investment. The top 10 holdings account for 20% of the total assets of the fund. The top 50 holdings account for 48% of the assets. The other 450 the remaining 52%. One of the cornerstones of the theory of modern portfolio allocation, is the concept of rebalancing ones portfolio on a periodic basis normally annually or quarterly to increase ones return and decrease ones risk. Since the S&P 500 index is capitialization weighted, not only is it not rebalanced but one might argue that it is debalanced, if there is such a word. In other words as the price of stocks in the index rise, the index buys more of them relative to the ones that fall in price. That is the exact opposit of the concept of rebalancing. One can in fact visually see the difference to returns that rebalancing has in the past made. There is another index fund based on the S&P 500 that is equal weighted rather than capitalization weighted. It is RSP. It has not been in existance 10 years so we can not do a long term comparison. But over a 5 year period SPY has returned 0.44% and RSP has returned 2.23%. That is despite the fact that RSP has an expense ratio of 0.60% compared to an expense ratio of 0.10% for SPY.<br /><br />The S&P 500 is based only on US based large company equities. It ignores foreign companies, most small capitalization companies, and investments in debt instruments. It actually does consist of a few small cap stocks, ones that are still in the index but have recently fallen on hard times. As of this posting these include Gannet, CIT, and KB Home to name a few.<br /><br />Foreign equities as recently as 1970 accounted for about 30% of total world market capitalization. Currently they have risen to over 50% of total market capitalization probably closer to 60% currently. So in the past 40 years the U S equity market has declined by about 1/2 of the total world equity markets. That decline should be noted by investors. Another aspect that should be noted is that investor returns on foreign equities over the past 5 years have in many cases outpace returns of the S&P 500. 10 year comparisons can not be made because indexes of foreign equites have only recently existed. But here are a couple of comparisons. The 5 year return of the S&P 500 index is 0.44%. That of IEV based on the S&P Euro 350 index is 5.7% despite having an expense ratio of 0.60%. That of EAF based on the European, Far East, and Australian index is 5.4%. That of EEM based on an emerging market index is 16.4%.<br /><br />When we compare the S&P 500 performance to that of the small cap index funds we again see a divergence in returns. For the five year period IWM based on the Russell 2000 had a return of 2.2%.<br /><br />Another aspect of asset allocation that is ignored by many is that of investing in debt investments as opposed to equity investments. The classic concept is that equity investments will outperform debt investments over the long term mainly because one must expect a greater return for the greater risk of equity investments. Invariably investment professionals will advise young clients to invest most of their assets if not all in equities because even though there is a greater probability of suffering a loss over the short term over the long term equities will provide a greater return. Yet the results of portfolio allocation theory tend to somewhat refute this claim. And certainly over the last 10 years debt investments have outperformed equity investments. Almost every managed bond fund over the past 10 years has outperformed the S&P 500 index by a wide margin. Vanguard Long-term Investment Grade bond fund has yielded 8.5% annually on average since Sept 1973. The S&P 500 has returned 6.5% over the same period. Those returns are before taxes.<br /><br />Another interesting comparison is that of the Vanguard Balanced Index fund to that of the S&P 500. The Balanced fund has returned 2.9% annually over the last 10 years opposed to - 0.86% for the Vanguard S&P 500 fund.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-39138058764176847232009-08-01T09:57:00.000-07:002009-08-01T13:31:54.338-07:00Options for Investing in GoldThere is a great deal of interest in gold these days as an investment or a hedge against inflation and a debasing of world currencies. My purpose here is to describe some of the options available to investors. Perhaps investment is not the correct term for those who desire to purchase gold. It does not pay dividends. Unlike investments in common stocks, there are no earnings on which to base ones purchase price. Much of the rationale for the purchase of gold is based on the worry that perhaps other forms of storing value such as currency, savings accounts, and even other forms of investment will be worth much less in the future than currently due to governments debasing their currencies. Recently with the extremely large budget deficits being accumulated by government entities and the attempts to re-inflate the economy there is a great deal of basis for such concern.<br /><br />Following is a discussion of alternatives available to those wishing to purchase gold or invest in gold as a hedge against inflation and the debasing of currencies.<br /><br />First where are places one can purchase physical gold? One option is through dealers on Ebay. Every day there are a number of bullion bars and gold coins available for purchase. This is an attractive option for small quantity purchases of gold, but one needs to be careful about making such purchases and check the reliability of the dealers carefully. One also needs to refrain from bidding more than the gold is worth. This happens quite frequently on Ebay. Another option is through local coin dealers and also through coin shows that come to a near by town. Many times coins and bullion can be purchased at attractive prices by this means. <br /><br />For larger purchases a good option is through one of the large volume coin dealers. Two that deal this way are Monex.com and Tulving.com. There is retail mark up on such gold purchases.<br /><br />An option that has been available for a few years is an ETF that holds gold bullion. GLD is the ticker symbol. It currently has assets of about $31 billion and is 2nd largest ETF behind SPY. John Paulson, a prominent hedge fund manager recently holds nearly $3 billion worth of GLD his largest holding. Thre is also a closed end fund that holds gold bullion--Central Gold Trust GTU.<br /><br />There are three other ETFs available that hold futures contracts on gold--DGL, UBG and IAU. UBG is by far the larger of the three with over $4 billion in assets.<br /><br />Another option which if the price of gold were to increase dramatically is worth considering is an investment in gold mining shares. There are two diverences between investing in gold mining companies and investing in gold itself. First is that an investment in a gold mining company is by definition an investment whereas buying gold itself is not really an investment but more or less a hedge. 2nd is that such an investment is highly leveraged. Gold mining companies operate under a high fixed cost. Even the very largest, Barrick Gold, has a cost per ounce of $443 per ounce up 58% in two years. Many of the smaller miners have a much higher cost. What that means is that if the price of gold increases 10%, say from $950 an ounce to $1045 an ounce, then the profit per ounce for Barrick Gold increases from $507 to $602 an ounce assuming cost per ounce remains constant an increase of 38%. For higher cost producers it becomes a much greater increase. If of course the price of gold decreases, then many gold producers can loose money.<br /><br />Here is a list of some of the gold producing companies.<br /><br />Barrick Gold--ABX market cap $30 billion<br />Goldcorp-GG market cap $27 billion<br />Newmont Mining--NEM market cap $19 billion<br />Anglo Gold Ashanti--AU $13 billion<br />Kinross Gold--KGC $13 billion<br />Agnico Eagle Mines--AEM $9 billion<br />Gold Fields--GFI $8 billion<br />Yamana Gold--AUY $7 billion<br />Compania de Minas Buenaventura--BVN $6 billion<br />Lihir Gold--LIHR $5 billion<br />Randgold--GOLD $5 billion<br />Harmony Gold--HMY $4 billion<br />Eldorado Gold--EGO $4 billion<br />IAMGOLD--IAG $3 billion<br />Royal Gold--RGLD $1.6 billion<br />Allied Navada Gold-ANV $0.6 billion<br /><br />There are a number of index funds and mutual funds that invest in gold mining stocks. Here is a list of some.<br /><br />Market Vectors TR Gold Miners--GDX $2.6 billion<br />Powershares Global Gold and Precious Metals--PSAU $1.6 billion<br />Gabelli Gold and Natural Resouces--GGN $99 million<br />Tocqueville Gold Fund--TGLDX $550 million<br />Fidelity Select Gold Portfolio--FSAGX $2.4 billion<br />AIM Gold Fund--FGLDX $120 million<br />GAMCO Gold Fund--GOLDX $367 million<br />American Century Global Gold Fund--BGEIX $830 million<br />Evergreen Precious Metals--EKWAX $900 million<br />First Eagle Gold--SGGDX $1.6 billion<br />Franklin Gold and Precious Metals--FKRCX $1.8 billion<br />USAA Precious Metals--USAGX $1.2 billionMuncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com4tag:blogger.com,1999:blog-2678146113301816233.post-7490329432812193292009-07-18T09:42:00.000-07:002009-08-03T14:57:34.800-07:00Investing in ChinaThe Chinese economy is growing at a rate of about 2 times to 3 times the rate of developed market economies. Consequently, the chances of making a buck on investments might reasonably be assumed to be better on investments in Chinese based companies than those of developed markets assuming the valuations of those companies are not unreasonable.<br /><br />There are three principal methods that a US citizen can use to invest in Chinese companies. 1. U S listed Chinese companies 2. open end mutual funds 3. exchange traded mutual funds. There are quite a few Chinese companies listed on US stock exchanges. Among the larger Chinese Companies are the following which can be bought on US exchanges.<br /><br />Aluminum Corp of China ACH aluminum mfg. 3.4 billion cap<br />Bank of China BACHY bank about 100 billion cap<br />China Life Ins. LFC life insurance 116 billion cap<br />China Petroleum and Chem. SNP oil and chemicals 72 billion cap<br />CNOOC CEO oil 52 billion cap<br />China Mobile CHL cell phone 190 billion cap<br />China Telecom CHA 31 billion cap<br /><br />There are quite a few other Chinese companies listed on US exchanges. These are just a few.<br /><br />There are about 8 exchange traded index funds available.<br /><br />iShares FTSE/Xinhua China 25 index fund FXI 5.5 billion cap<br />PowerShares Golden Dragon Halter USX China Portfolio PGJ 232 million cap<br />SPDR S&P China etf GXC 180 million cap<br /><br />The others are specialized and very small cap.<br /><br />Among closed end Chinese funds which are traded as etfs are the following:<br /><br />Greater China Fund GCH 202 million cap 10 year return 14%<br />China Fund CHN 400 million cap 10 year return 17%<br />JF China Region Fund JFC 60 million cap 10 year return 9%<br />Morgan Stanley China A Shares Fund CAF 270 million cap (this fund invests in A share securities that are not available to foreign investors generally) It has been in existance only 2 years.<br />Templeton Dragon Fund TDF 711 million cap 10 year return 15%<br /><br />Among open ended funds:<br /><br />Fidelity China Region Fund FHKCX no load 10 year return 8%<br />Guinness Atkinson Chin & Hong Kong ICHKX no load 10 year return 9%<br />Matthews China MCHFX no load 10 year return 14%<br />AIM China Class A load 3 year return 16% has not been in existence 10 years.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-69353332640740415242009-07-08T04:14:00.000-07:002009-07-18T09:42:51.247-07:00Master Limited PartnershipsMaster Limited Partnerships (MLP) are companies that pay out all of their earnings in dividends. With this corporate structure they avoid paying taxes. In that respect they are somewhat similar to real estate investment trusts (REIT) which also pay out all of their earnings in dividends. Because of this the dividends under current tax law are taxed not at the reduced dividend tax rate but at the full tax rate. That is a very important consideration to keep in mind for both for for MLP and REIT. One of the consequences of this is that investments both in MLP and REIT are more suitable currently for tax deferred accounts rather than for taxable accounts. They are more suitable in both a traditional IRA and a Roth IRA as are also taxable bonds.<br /><br />Most but not all MLP are pipeline companies. There are also a few propane companies, coal companies, and marine transport companies. In certain instances one can buy shares in either the Limited Partnership or the General Partner. The Limited Partnership pays in many cases an incentive to the general partner that increases with increased distributions reaching about 50% of the distribution amount at a certain point. In other words there generally becomes a point where the general partner takes home half the distributions.<br /><br />Since limited partnerships pay out all of their income one thing to take note is that in order to build capital projects they rely on borrowed money. Consequently, many have very high debt to equity ratios. In other words some are very highly leveraged.<br /><br />There are somewhere in the neighborhood of about 80 publicly traded MLP and their general partners which also qualify as limited partnerships themselves.<br /><br />Since this blog format does not allow publishing data in columnar format, I am limited in that data that I can publish in an understandable manner. I will describe two of the MLP so the reader can become familiar with these investments.<br /><br />The largest two MLP are Enterprise Product Partners LP ticker EPD with a market cap of about $11 billion and Kinder Morgan Energy Partners LP ticker KMP with a market cap of about $10 billion. In other words most are mid cap companies and some are small cap companies. The median market cap of the pipeline segment is a little less than $3 billion so indeed the average MLP is a small cap company.<br /><br />EPD operates over 30,000 miles of natural gas, oil, and petrochemical pipelines. In additon they have natural gas processing plants and natural gas storage facilities. They have $18.4 billion in assets and $9.3 billion in debt or about 52% of capitalization. Their revenue is about $20 billion. The current dividend is $2.15 pershare or about 8.6% based on the current stock price of $24.85. The current PE ratio is about 14.2. During the past 10 years the company has increased the dividend annually at a rate of about 8%. EPS however have not increased at so steady a rate although over that period they did increase at about 9% annually. To be noted is that EPD has grown significantly due to acquistions. Their most significant being a $6 billion merger with GulfTerra in 2004. The company has a DRIP plan with a 5% stock discount which is also available through broker held shares.<br /><br />KMP operates about 24,000 miles of natural gas pipelines also natural gas processing plants and storage facilities. They have $17.5 billion in assets and $10+ billion in debt or about 57% of capitalization. Their revenue is about $10.8 billion. The current dividend is $4.20 or about 8.3% based on the current stock price of $50.75. The current PE ratio is about 31. During the past 10 years the company has increased the dividend annually at a rate of about 12.4% but recently the dividend increase has been at a more modest rate of 8%. EPS has not had so great an increase over that time increasing only 4% annually. Cash flow has however increased more significantly growing at 14% annually.<br /><br />Other notable pipeline MLP and general partners are BWP, BGH, CPNO, ETE, EPE, EPD, MGG, MMP, NS, OKS, PAA, SXL, TPP and WPZ. Among coal are ARLP, NRP, PVR. Among marine transport are CPLP, NMM, OSP, KSP, TOO, TGP. Among propane are APU, FGP, NRGY, SPH.<br /><br />If you should choose to invest in a MLP, check carefully their debt load and their track record.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-69629720006576058422009-03-01T13:10:00.000-08:002009-03-01T13:41:34.134-08:00Oil Company ValuationOne method available to value oil company stocks is according to their proved reserves. One thing to keep in mind though when doing so is that those proved reserves are an estimate. What I thought would be interesting is to see what the value of the proved reserves are for a few oil companies. What I have done is to take their stated proved reserves as BOE equivalents and determined what they are currently being sold for based on the market price of the stock as of Feb 27, 2009.<br /><br />So here we go.<br /><br />Anadarko APC $7.17/barrel<br />Apache Oil APA $8.04/barrel<br />Chesapeake CKH $4.41/barrel<br />Chevron CVX $15.65/barrel<br />Conoco COP $8.40/barrel<br />Devon DVN $7.99/barrel<br />EOG EOG $8.63/barrel<br />Exxon Mobil XOM $26.40/barrel<br />Hess HES $12.40/barrel<br />Marathon MRO $13.81/barrel<br />Noble Energy NBL $9.11/barrel<br />Occidental OXY $14.66/barrel<br />Talisman TLM $5.71/barrel<br />XTO Energy XTO $7.94/barrel<br /><br />Of course there is more to evaluating an oil company than the cost of their reserves. There is also the cost of delivering that oil to market. I have not addressed that cost here. There are some interesting things to note here. A couple of the integrated oil companies are considerably more expensive per barrel of reserves than are the production companies. Of course they have a much larger invested capital than the production companies. But one must wonder whether they are perhaps over valued currently. The other thing of note is that the cost per barrel currently is between $8.00 and $9.00 a barrel for the majority with two notable exceptions--TLM and CHK. TLM is a Canadian company which has recently become subject to increased taxation. CHK has had some interesting problems including a CEO who unwisely leveraged his company stock and got it yanked out from under him by margin calls. Perhaps that is not the only unwise move he has made.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com1tag:blogger.com,1999:blog-2678146113301816233.post-38441250276543189582009-02-21T07:53:00.000-08:002009-03-04T06:55:24.224-08:00Blue Chip StocksWhat stocks are in fact Blue Chip Stocks? I searched the internet but did not find a list of blue chips.<br /><br />Let's first define attributes that a blue chip should have.<br /><br />1. They should have a minimum market capitalization. I will say a minimum of $4 billion dollars.<br />2. They should have a history of increased sales and earnings going back at least 20 years. It can be somewhat difficult to find financial information for more than 10 years though but not completely impossible. Earnings growth should be significantly greater than the inflation rate.<br />3. They should have a sound balance sheet with a long term debt/equity ratio no greater than 0.50<br />4. They should pay a dividend although this could be argued perhaps passionately.<br />5. Return on equity of at least 15%<br /><br /><br />One important fact that needs to be stated is that a blue chip stock does not necessarily remain a blue chip stock. One such example would be U S Steel. For many years this company was one of the top blue chips. Not any longer.<br /><br />Now for my list of what I would consider to be blue chip stocks.<br /> <br />JNJ Johnson and Johnson has a consistent history of increased earnings, sales, and dividends.<br /><br />BDX Becton Dickinson ditto my comments on JNJ.<br /><br />WMT Walmart has a consistent history of increased earnings, sales, and dividends except for last year when it did not increase its dividend.<br /><br />PG Procter & Gamble There are several problems with PG. One is that it has had a history of borrowing lots of money and its d/e has often exceeded 0.50. It has also had more than a couple of earnings stumbles. But it does meet the criteria currently.<br /><br />NKE Nike is a consistent performer with steady sales and earning growth. It has only in the past few year begun to increase its dividend on an annual basis. The company has virtually no debt. We will have to see how the recession impacts NKE. It may not be too pretty.<br /><br />KO Coca-Cola has not had so consistent an increase in earnings as the companies above. 1999 and 2000 were disappointing years for KO but it did increase its dividend even in those years.<br /><br />SYK Stryker has been consistent for the past 8 years but it had stumble in 1999. It has also had problems with anti-competitive behavior.<br /><br />MCD McDonalds had a couple of stumbles back in 2001 and 2002 and during those years its roe and roa were not too good, but the company did increase its dividend during both years and has performed like a blue chip since.<br /><br />And acouple of smaller cap stocks:<br /><br />EXPD Expeditors International has been a steady performer in earning, revenue, and dividends. We will have to see how well it does during this recession. It will be tough.<br /><br />FDO Familiy Dollar Stores does not quite meet the $4.0 billion market cap criteria. In general it has been a steady performer. It is a steady raiser of its dividend and although its earnings trend has had a few minor bumps along the way and its roe has not been consistantly above 15%, the company nevertheless on average has performed at blue chip standards.<br /><br />How about some stocks that are on their way to becoming blue chips?<br /><br />GOOG Google is a company that might eventually make the list. It has not been around long enough to have a decent track record. It has been growing revenue at a steady and remarkable rate and appears to be putting newspapers out of business. Also importantly it has been increasing shareholder equity at a remarkable pace.<br /><br />And how about a few stocks that fall just a little short of being blue chips?<br /><br />MSFT Microsoft would be by most standards a blue chip company, but not by mine. They have had a habit of wasting shareholder value by repurchasing company stock. Equity per share has remained constant for the last 10 years, actually has declined during the last 5 years.<br /><br />Just because a stock might be considered a blue chip does not necessarily mean that it is a good investment. But currently the above stocks are certainly better investments than they have been for many years.Muncie Birderhttp://www.blogger.com/profile/02249777804247479013noreply@blogger.com2