Hello. Happy Friday! I have two recommendations for you today.
The first is a book, 'The Million Dollar Portfolio: How to Build and Grow a Panic-Proof Investment Portfolio' by David and Tom Gardner, the guys behind Fool.com (http://www.amazon.com/Motley-Fool-Million-Dollar-Portfolio/dp/B002M3SOZ6/ref=sr_1_1?ie=UTF8&s=books&qid=1253897791&sr=1-1). I think it is a reasonably easy to read text regarding investing as an individual investor. I am about a third of the way through, and already feel like it has been worth the read.
Sometimes it is important to go back and reread things you think you know. I never dismiss opportu reinforcement and reminders of sound ideas.
The second rec comes from the reading and a piece of news flow that hit the tape yesterday - McDonald's (ticker: MCD) raised its quarterly dividend from 50 cents to 55 cents. That means the MCD annual dividend is now set at $2.20. At the current share price that results in a dividend yield of 3.9% ($2.220/$56.99).
At today's valuation of 13.3x FY10 earnings, net debt to total capital of 40%, a return on capital of 27% and a top five global brand, I think you could be happy purchasing MCD stock without the dividend yield. However, with the dividend yield, this is a no-brainer. You need to keep up with market developments and what is going on operationally at the company, but generally speaking this stock can be tucked away in your portfolio. If the stock manages just 2% capital appreciation per year over the next seven years, you would have made almost 50%. Slow and steady wins the race!
I know the fries kind of suck and the Angus Burger doesn't stack up to an In and Out Double Meat, but MCD has made some good menu adjustments and the drinks franchise is slowly coming to dominate as the value-oriented alternative to SBUX. That McCafe thing is tasty! For a stock, you could do a lot worse than MCD.
Have a good weekend!
-2outof4
Friday, September 25, 2009
Friday, September 18, 2009
Codifying Thoughts on Gold
I have chatted with several goldbugs recently - one can hardly escape their infomericals - and I have had questions regarding my own position on Gold.
Over the past couple of weeks I have had the chance to codify my thoughts on Gold. I also went to a coin store the other weekend to familiarize myself with the buying process.
In conclusion, I think it makes a lot of sense to own gold. The primary reason is that I do not see how we avoid inflation given the constantly churning dollar printing press. Most people agree gold holds its value during times of inflation. Therefore, the question then becomes how should I hold gold and how much of it.
This is where the codification of my thoughts comes in. I think it makes sense to look at Gold as an insurance policy. If it goes up in value then you will have been successful in your battle against inflation. If it goes down in value, oh well, you did not lose a lot of value from other assets.
When I was speaking to a family member who was going to test the waters, I said that if you want to buy some, buy an amount that you would not be upset about if you lost half the value. If you cannot be comfortable with the idea of insurance or paying something for protection that you may never benefit from, then Gold is probably not for you. Also, if for whatever reason Gold does drop precipitously, then you have the opportunity to buy more if you have not blown your spending power up (assuming you still see the inflation or other threat that caused you to buy it in the first place).
There are several ways to own Gold. The easiest for you and me are through the exchange traded fund ticker GLD, which you can buy just like a stock, or physical. Physical is a lot easier to buy than I had expected. A reputable coin store that I went to sold Krugerrands and US Eagle coins. They were one ounce coins quoted as the spot price (about $1,010/oz) plus a premium. The premium was $55/coin for Krugerrands and $65/coin for Eagles, which if you think about it, is a damn high commission.
The argument for the higher Eagle premium is that Americans still like to buy American. I was somewhat wary of the authentication "process." I was just told that the shop eyeballs them and there are very few frauds. So one would need to shop around and make sure this is in fact true. However, if I had a couple of thousand dollars on me, I could walk out with a couple of coins. The shops are far less intimidating than I thought. The staff should be happy to educate you.
I would love to hear your thoughts on inflation protection and Gold specifically. Have a great weekend!
-2outof4
Over the past couple of weeks I have had the chance to codify my thoughts on Gold. I also went to a coin store the other weekend to familiarize myself with the buying process.
In conclusion, I think it makes a lot of sense to own gold. The primary reason is that I do not see how we avoid inflation given the constantly churning dollar printing press. Most people agree gold holds its value during times of inflation. Therefore, the question then becomes how should I hold gold and how much of it.
This is where the codification of my thoughts comes in. I think it makes sense to look at Gold as an insurance policy. If it goes up in value then you will have been successful in your battle against inflation. If it goes down in value, oh well, you did not lose a lot of value from other assets.
When I was speaking to a family member who was going to test the waters, I said that if you want to buy some, buy an amount that you would not be upset about if you lost half the value. If you cannot be comfortable with the idea of insurance or paying something for protection that you may never benefit from, then Gold is probably not for you. Also, if for whatever reason Gold does drop precipitously, then you have the opportunity to buy more if you have not blown your spending power up (assuming you still see the inflation or other threat that caused you to buy it in the first place).
There are several ways to own Gold. The easiest for you and me are through the exchange traded fund ticker GLD, which you can buy just like a stock, or physical. Physical is a lot easier to buy than I had expected. A reputable coin store that I went to sold Krugerrands and US Eagle coins. They were one ounce coins quoted as the spot price (about $1,010/oz) plus a premium. The premium was $55/coin for Krugerrands and $65/coin for Eagles, which if you think about it, is a damn high commission.
The argument for the higher Eagle premium is that Americans still like to buy American. I was somewhat wary of the authentication "process." I was just told that the shop eyeballs them and there are very few frauds. So one would need to shop around and make sure this is in fact true. However, if I had a couple of thousand dollars on me, I could walk out with a couple of coins. The shops are far less intimidating than I thought. The staff should be happy to educate you.
I would love to hear your thoughts on inflation protection and Gold specifically. Have a great weekend!
-2outof4
Inflation Backfiring
On the commute in this morning I was reading one of my favorite investment newsletters - The High Tech Strategist by Fred Hickey. It is a worthwhile monthly publication and affordable to the average retail investor, not just institutions.
One of the interesting points he made, which ties to my current puzzlement regarding the recent surge in the stock market, is that we are experiencing inflation. Sure it is not in consumer goods prices. In fact, there may be a case we are experiencing deflation in consumer goods. But we are seeing inflation within other asset prices, see commodities, like gold and oil, as well as, stocks.
When money is dumped on the global economy at the rate the various global printing presses have been running, it is logical to see and fear inflation. A cynic might say our government's plan is to inflate our way out of all the debt we've piled on. But we are not seeing it in consumer prices because of job losses and wage deflation.
This phenomena has the exact opposite effect the Administration desires. It makes the rich richer and the poor poorer. The wealthy have assets that can benefit from the inflation while the poor do not. Therefore, in a time of asset inflation, the gap widens.
Maybe the US should check its misguided fiscal policy before clamoring for higher taxes on the wealthy and limits on pay. When you bow to populism without taking the outcomes into account, bigger problems can ensue.
-2outof4
One of the interesting points he made, which ties to my current puzzlement regarding the recent surge in the stock market, is that we are experiencing inflation. Sure it is not in consumer goods prices. In fact, there may be a case we are experiencing deflation in consumer goods. But we are seeing inflation within other asset prices, see commodities, like gold and oil, as well as, stocks.
When money is dumped on the global economy at the rate the various global printing presses have been running, it is logical to see and fear inflation. A cynic might say our government's plan is to inflate our way out of all the debt we've piled on. But we are not seeing it in consumer prices because of job losses and wage deflation.
This phenomena has the exact opposite effect the Administration desires. It makes the rich richer and the poor poorer. The wealthy have assets that can benefit from the inflation while the poor do not. Therefore, in a time of asset inflation, the gap widens.
Maybe the US should check its misguided fiscal policy before clamoring for higher taxes on the wealthy and limits on pay. When you bow to populism without taking the outcomes into account, bigger problems can ensue.
-2outof4
Tuesday, September 8, 2009
Edu Costs to Infinity
This article puts some interesting numbers around a topic discussed many times on 2outof4:
http://online.wsj.com/article/SB10001424052970204731804574388682129316614.html
As we've said before, as long as money is made available for what seems like no cost at the time, it will be spent!
The solution: if the institution is depending on these Title IV funds from the government, the government has every right to protect the consumer and limit tuition increases.
-2outof4
http://online.wsj.com/article/SB10001424052970204731804574388682129316614.html
As we've said before, as long as money is made available for what seems like no cost at the time, it will be spent!
The solution: if the institution is depending on these Title IV funds from the government, the government has every right to protect the consumer and limit tuition increases.
-2outof4
Wednesday, September 2, 2009
The Captain Doesn't Want to Pay Taxes Either
This goes back to the FairTax and the kinds of distortion that a convoluted tax system can cause.
If the US tax structure was flatter/more simplified the good folks of Puerto Rico may be keeping these jobs:
http://www.latimes.com/business/la-fi-rum2-2009sep02,0,4042398.story
Lord knows the 2outof4 family will be contributing to the Diageo boon over the next three months!
-2outof4
If the US tax structure was flatter/more simplified the good folks of Puerto Rico may be keeping these jobs:
http://www.latimes.com/business/la-fi-rum2-2009sep02,0,4042398.story
Lord knows the 2outof4 family will be contributing to the Diageo boon over the next three months!
-2outof4
More Unnecessary Healthcare Costs
I know readers probably don't want to hear the nitty gritty of my medical issues, but I have further detail on some of the excess costs related to my knee surgery and subsequent rehabilitation.
First as I've mentioned before, the surgery and hospital stay was $4,000, for which I paid nothing. Then there was the brace that cost $1,200, for which I paid $176 - strangely the approximate cost I found on the net for the brace itself. Finally, I have just been billed for some of my therapy sessions.
If I'm reading the bill right, it was about $1,000 for five sessions (I've had 22), for which I paid $20 a session. The bill I received was for $20 because I indeed did not pay one of the earlier co-pays. The eye catcher on the PT bill was of the $1,000, $130 was for ice packs. That is correct, ice packs!
So in conclusion, if I was paying for all of this myself with some combination of High Dollar insurance and medical savings account, I can tell you right now I would not need the medical supply company coming to deliver and fit my brace, and I sure as heck would ice my own knee! That alone would save $1,130.
Unbelievable! Price discovery is key to reducing healthcare costs. If prices were made available and there was a true market for these goods and services, paying our own way would seem far less daunting than it does today. The doctors and insurers make the market one of the most opaque in the world.
I'm not convinced the technological leap toward price discovery and a consumer market for healtchare is the chasm the pols claim!
-2outof4
First as I've mentioned before, the surgery and hospital stay was $4,000, for which I paid nothing. Then there was the brace that cost $1,200, for which I paid $176 - strangely the approximate cost I found on the net for the brace itself. Finally, I have just been billed for some of my therapy sessions.
If I'm reading the bill right, it was about $1,000 for five sessions (I've had 22), for which I paid $20 a session. The bill I received was for $20 because I indeed did not pay one of the earlier co-pays. The eye catcher on the PT bill was of the $1,000, $130 was for ice packs. That is correct, ice packs!
So in conclusion, if I was paying for all of this myself with some combination of High Dollar insurance and medical savings account, I can tell you right now I would not need the medical supply company coming to deliver and fit my brace, and I sure as heck would ice my own knee! That alone would save $1,130.
Unbelievable! Price discovery is key to reducing healthcare costs. If prices were made available and there was a true market for these goods and services, paying our own way would seem far less daunting than it does today. The doctors and insurers make the market one of the most opaque in the world.
I'm not convinced the technological leap toward price discovery and a consumer market for healtchare is the chasm the pols claim!
-2outof4
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