beyondthemba

"I Will Never Cut The Dividend"

Dow Chemical CEO says, in October, "This CEO will never cut the dividend". Well, on February 12th, that all changed. 

Lesson: 1) Never say never  2) What happens to a CEO who effectively promised something to investors and then reneged?

Go to about minute 8 on this interview:

The Failure of XM/Sirius Radio

I was looking back on my notes from the summer and saw that I had predicted the demise of XM/Sirius. This was not due to any great financial acumen but due to the fact that I saw the CEO on "Mad Money" with Jim Cramer. The CEO said they were doing, "Everything right". Well I guess not. 

See my original post at "When A CEO Says He is Doing Everything Right, I say Run for the Hills".

The XM/Sirius Chart

And, see the demise of XM/Sirius

State Pensions Are Likely to Be Bankrupt When You Want to Collect

We have all read of, and experienced, the collapse of the markets in 2008. We are focused on credit markets and the stock market along with the housing crisis. However, I submit there is a far bigger issue brewing which is receiving scant attention: State and Federal Pensions.

The pension funds of the states (and the Federal Government for that matter however they can at least "print" money) are essentially broke. This article discusses the outlandish risks Florida has taken to try to juice up their pension fund returns. Of course, as always, this has ended in a catastrophic collapse. 

What will the states do? How will they pay these pensions? Will they have to tax the already poor people to pay for outlandish promises? Will the Feds "nationalize" state pension funds? 

This issue should be watched closely.

Treasury Inflation Protected Securities (TIPS) - A Good Buy Still?

Was wondering if anyone is buying TIPS (Treasury Inflation Protected Securities)?  I have always kept some and some i-bonds (until recently when they went to crap with a 0% inflation payment and limit to $5K purchase).  Turns out with the inflation kicking in these have become "portfolio savers" and have really balanced my portfolio nicely (TIPS Vanguard Fund has returned 15% in the last year). I chose to use the Vanguard Fund due to all the tax consequences and nuances of holding the TIPs as actual bonds.

So, it was and is good to have in the overall portfolio. Business Week called it in 2005 , and MSNBC called it back in 2002 when inflation was but a whisper (I like what he says, "The best time to buy flood insurance is during a drought) but my question now is, do you buy more? I guess you do if you believe we are on the front end of the inflationary spiral (as I do) or do you think, with oil prices recently receding, we are on the back end of the inflationary spiral?

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Tags: TIPS, TreasuryInflation Protected Bonds, Investing, IBond

Investors' anxiety builds as retirement nest eggs show cracks - The Boston Globe

An interesting article showing the strain on the "do it on your own" retirement system we have in the United States. The key question now is do you "take advantage" of this huge dip and continue buying or do you pull back? It appears, in the aggregate, the US Investor is pulling back in a big way (Net flows were actually negative in April and far less in May than January / February).

Of course this flies in the face of the "buy low / sell high" basic Mantra of investing. In my mind, unless you think you need the money right now, this is precisely the time to be investing in a big way; of course, only through good Total Stock Index funds.

Read: Investors' anxiety builds as retirement nest eggs show cracks - The Boston Globe.

Yahoo CEO on hot seat after rebuffing Microsoft's $47.5B bid - Yahoo! News

Link: Yahoo CEO on hot seat after rebuffing Microsoft's $47.5B bid - Yahoo! News.

This was precisely my reaction when I first read about this early this morning and I posted as such here. I think Yang's Ego got far ahead of him and he is going to pay for it dearly with shareholder lawsuits and dumping of stock.

Further, I was not aware of the major impact to employees. Between the wealth they will lose and the retention bonuses they will no longer get from Microsoft, many will lose a lot. There are now a lot of "1 month millionaires" at Yahoo thanks to Yang.

Warren Buffett at annual Berkshire meeting: Think small - May. 3, 2008

Link: Warren Buffett at annual Berkshire meeting: Think small - May. 3, 2008.

Warren Buffet asks investors to lower their expectations which I agree with. This idea of 10% returns lasting forever is a pipe dream, and I believe, very few people ever see. Most people who claim this do two things:  1) They conveniently "forget" the losers and... 2) They selectively choose their "start" and "stop" dates to make the number look great.

I think the other piece of advice Buffet has is the best one for the average individual investor:  Buy very low cost index funds, own the market and "get back to work and not worry about it".

Market Ends With a Roar - Housing Market??

According to the Vanguard Week in Review, the market is ending with a roar (Up 16% as measured by the S&P 500) and the housing market even showed signs of strength. So, what gives? how can this happen?

Well, I think the housing market thing is a blip or it is driven by very specific locations. Living in the midwest, I can assure you the housing market here is weak.

But, the stock market continues to be awesome. I think that balance sheets are flush with cash and people are playing the "buyout game". Meaning that private equity firms are on a tear to buy companies and everyone is betting on the next buy. Therefore, there is some speculative money entering the market which means it is a good time for long term investors to park some money awaiting the rookies to cash out.

The bet on the street right now: Home Depot gets bought either by a private equity firm or, the long shot, Sears Holdings buys them and adds the retail name to the Sears and KMart names.