Tuesday, March 30, 2010


"You can't have capitalism without capital. You can't love the employee and hate the employer." Jack Kemp


It's earnings season again and as I've been reading through the annual reports from some of the companies I am a shareholder of, I can't believe some of the pay packages and incentive programs the corporate boards are asking shareholders to vote for. Don't get me wrong, if you do an honest days work I truly believe you should be adequately compensated. However, is there truly any individual in any corporation in the world who contributes so much to the success of the company that they deserve untold millions of dollars in salary and compensation? Well maybe Warren Buffett or Bill Gates, but they've proven their worth to shareholders by making a great deal of them rich beyond their wildest dreams. Otherwise, I can't think of any good reason why anyone in their right minds would vote to increase compensation to corporate executives who already make obscene amounts of money.

I still believe in corporate America, but I think some of the people in charge of our corporations need to be reminded, without shareholders they wouldn't have a job or a business to run.

In one of the companies I've invested in, board members are paid a retainer of $70,000 a year, well above the average take home pay of most U.S. citizens. On top of their "retainer" they are paid an additional $50,000 per year for each committee on which they serve, plus expenses for all meetings they attend and you better believe their not staying at cut rate motels and eating fast food. This is not their normal job. Most of these people serve in highly paid positions with other companies while serving as members of the board of directors with this particular corporation. In addition, they may also serve on any number of additional boards and are most likely receiving similar compensation from those companies as well. So if they serve as a board member and on at least one committee, they are already taking home $120,000 per year, plus expense reimbursement for very little time spent on actual company business. For these same people to ask me, as a shareholder, who earns maybe 3 to 6% per year in dividends on my investment, to vote for an increase in executive compensation and increased retirement benefits is absolutely ludicrous!

I am from Missouri. If any of these people think they actually contribute enough to their company to justify a salary of a million dollars a year or more, then they have to "Show Me". As far as I'm concerned, corporate boards are way out of touch with the average shareholder and shareholders interests and I for one vote against any and all compensation proposals. As far as I'm concerned, when you expect something for nothing, that's call welfare! So when I see their contributions to the company in the form of increased earnings, increased dividend payouts to shareholders and increasing shareholder equity, then maybe they can talk to me about compensation. Frankly I feel that I've contributed enough towards their wealth and retirement programs, it's time the average shareholder started getting paid.

Wednesday, March 24, 2010


Yesterday I purchased shares in British Petroleum Trust (BPT) and Campbells Soup (CPB). I also added shares of Clorox (CLX). BPT I added for their great dividend payout and CPB and CLX for their long-term prospects. The way I look at it, they always tell you to invest in what you know and I know that even when I had very little money, I always bought Clorox products and Campbells Soup. I figure I'm far from being the only one. When you talk about franchise names, you can't find any better than those two.

The market was not too kind today. However, I was kind of hoping for prices to drop some, so I can take advantage of lower share prices and add more franchise names to my portfolio. You can never go wrong with quality stocks, especially when you're thinking long-term. Corporate America is operating in a very difficult environment right now and it doesn't look to get any better real soon, so I'm thinking high quality investments are the way to go. Won't be making too many speculative investments this year.

Monday, March 22, 2010


While it comes as no surprise the Democrats pushed through healt care reform, I have to say I am shocked by the arrogant and downright stupid attitudes of the politicians involved in the passage of the bill. Just the day before the bill passed I saw yet another poll showing 75% of respondents opposed to the health care reform package and yet it still passed? Protesters were surrounding the steps of the Capital building, shouting, "Kill the Bill," as Nancy Pelosi, carrying her oversize gavel and grinning like the Cheshire cat, paraded up the steps with a crowd of Democratic leaders. While I'm sure they intended to create an air of a historical moment, they really gave me the impression of thumbing their noses at the American people.

Now that they have passed the bill, I expect to see a lot of changes come the November elections. Any politician losing re-election in November has only themselves to blame. Obama claimed to be an admirer of Benjamin Franklin, one of the country's wisest founding fathers. Perhaps he should go back and read what Franklin had to say about arrogant kings who felt no need to listen to the wishes of their subjects. It bears a striking resemblance to the performance of his administration thus far.

I believe what got me the most, when I was watching yesterdays news reports about the vote in Washington, was one Democratic spin Dr. who said that most people just don't "understand" and you have to "explain it to them in the right way." I can't recall the guys name, but if he happens to read this, I want to assure him, I understand perfectly what the government is saying and what it wants to do. I simply don't believe them when they say it will reduce the deficit. I believe it will increase the national debt and increase personal income taxes to unsustainable levels. It will seriously affect businesses and their profitability and reduce jobs. Increased taxes will lead to more money fleeing the country for investments in lower tax havens. In the end, it is a self defeating bill, since the government will end up collecting less taxes than it does now and be even less able to fund health care.

Wednesday, March 17, 2010


When I did my taxes this year, I came across something that I hadn't noticed before. I knew the value of my investments had increased dramatically, but given the fact that I was busy looking for work and preoccupied with trying to get by on unemployment, I really didn't give it too much thought. While preparing my taxes I noticed something that made me realize how truly amazing the past year was, when it came to my investments.

When I went through my records and figured my total stock sales for last year, I was amazed to find, the amount I sold, was almost twice the value of my total portfolio at its lowest point last year. What I found even more amazing is, the current value of my investments is 203% greater than the lowest value during the recession and is more than 50% above the highest balance I'd ever held in my accounts. All of this occurred during a year when the country was faced with the worst economic downturn in decades and at a time when I experienced some of the harshest financial setbacks of my entire life.

So I found myself asking how this could have happened, when I knew that I hadn't invested much in additional funds. Of course I know about the changes I made in my investments and I did make small monthly deposits to my IRA. I guess I just never realized at the time, how effective those changes were. It reminded me of something I read in one of my investment books. The author of the book had a theory that people who actively manage their cash flow, and invest in income producing investments, sometimes benefit from sudden quantum leaps in their level of wealth. I'm not sure what his idea of a quantum leap in wealth is, but to my way of thinking, anytime your total investments increase 203% in a little over a year that's quite a jump!

While I think it's doubtful that I'll see such an increase again anytime soon, I do think it's worthwhile for me to go back and take a closer look at what I did during the past year. After all, if there is such a thing as quantum leap investing, then I'd like to know how to repeat the process if at all possible.


Tuesday, March 16, 2010


Seems a lot of people, around this time of year, find themselves asking where the money went from their tax refunds. If they were lucky enough to get a nice refund, chances are good that it's gone before they know it and they have little or nothing to show for it. I know because I used to do the same thing. I used to look at a tax refund as an opportunity to go on a spending spree. Then I'd suddenly find myself out of money and wondering where it all went.

This year I invested one quarter of my tax refund in Altria Group (MO:NYSE). With their dividend close to 7% and their price per share a little over $20 I think it will make another good source of dividend income for my portfolio. While I still believe that the Obama Administrations tax hike on tobacco products earlier this year has created an unfriendly environment for tobacco companies, I expect the Democrats to lose a great deal of power in the fall elections. With a recent NBC/WSJ poll showing Congress with only a 17% approval rating, it's most likely the Democratic party will lose congressional seats come election day. With their tax and spend approach to solving the nations problems it's my opinion that we'd be much better off with a more balanced, or even a Republican led congress, than the current Democratic majority.

Anyway, back to the tax refund. After investing 25% of the money, I took another 30% and paid off some high interest credit card debt. The remaining 45% I deposited in my savings account at my bank. I'm using that as a cash reserve for work I'll be needing to have done on my car soon.

While most of this may be of no interest to anyone other than myself, the point I'm trying to make is you should know exactly where your money is going all the time. Tax refunds, inheritances, rebates, lottery winnings or any type of windfall should be put to good use building future income and reducing debt, so you won't find yourself asking, "Where did the money go?"

Thursday, March 11, 2010


In my last post, I talked about my plan for building up my cash positions. While I'm wanting to have a little more cash on hand due to ongoing economic turmoil, I'm not really putting aside money to add to my emergency fund. I've heard a lot of people ask just how much they should keep in cash for emergencies and from my personal study, the consensus seems to be 3 to 6 months worth of living expenses in cash or cash equivalents.

However, I'm the type of investor that likes to see my money earning as much as possible. I do keep some cash on hand in a regular passbook account and an interest bearing checking account, but I don't keep no where near 3 to 6 months worth of expenses. When I lost my job at the first of last year, I only had a little over $1,000 in the bank. That proved to be a sufficient amount to see me through until my unemployment started and I not only managed to get by, but I also continued adding to the investments in both my regular stock account and my IRA on a monthly basis. Everyones' finances are different, so it's really what you would feel comfortable with. I personally think 3 months worth of expenses should be tops for emergency cash, but truthfully it's what makes you feel comfortable. How much do you need in cash on hand so you can get a good nights sleep? That's what you need to ask yourself and then set a goal to put that money aside for a rainy day.

Wednesday, March 10, 2010


Yesterday I wrote about wealth building being a simple process. The process I've chosen for building wealth involves investing in dividend paying stocks. In previous posts I wrote about my investment plan for 2010 and how I'd changed my strategy to increase cash and reduce investment costs. It seems to be working out well so far. I directed my online broker to reinvest dividends on some of my core stocks like Clorox, British Petroleum, Merck and a few others. This has helped reduce my costs, since there are no commissions on reinvested dividends, while allowing me to increase my holdings. I've also continued to invest monthly in my IRA account to help reduce taxable income and continued increasing my investments in limited partnerships, which are also tax advantaged, in my regular investment accounts.

My cash levels continue to increase from dividend income building up in my money market accounts. I also received a nice raise at work and will be adding extra cash to my savings and checking accounts as well.

So overall my investment plan for 2010 is working out quite well so far. I'll make adjustments along the way, but the basic plan is in place and it looks as though I'll be able to reach most of my goals for the year, even if there are some setbacks along the way.

Tuesday, March 9, 2010


Do you sometimes think it a cruel twist of fate that some people build great wealth while others have so little and can never seem to get ahead? It simply is not true. Wealth building is a process, much like baking a cake. When you want to bake a cake, you get out your favorite cookbook or go online or search favorite family recipes for the cake that your wanting to prepare. Then it's a simple matter to follow the recipe and directions until you've prepared the finished product.

Building wealth is basically the same. You do your research, find out how others have made their money work for them and you do the same. Once you've found a recipe or plan for making your work for you and earn more money, it's a simple matter to keep repeating the process or plan until you've made yourself wealthy.

Some good starting points: Live below your means. Pay yourself first. Learn to make your money work for you, instead of always working for money. Realize that there is truly "nothing new under the sun" in the sense that what others have accomplished can be learned and duplicated. So search out a process for making money that works for you and keep repeating it. It's as simple as that.

Monday, March 1, 2010


While revising my investment plan at the first of this year, I wanted to cut investment costs while increasing stakes in some of my long term holdings. At the same time, I set a goal to increase cash holdings as well. To attain both goals, I instructed my investment company to re-invest dividends on 6 of my top long term investments and had them pay the dividends from the other 22 stocks in my regular portfolio to my money market account.

By doing this, I'll be increasing my stakes in the my top 6 long term holdings, while keeping investment costs low. (My investment company charges no commissions for re-invested dividends). This still leaves me with an income stream of dividend payments from 8 to 12 stocks each month. The dividends from those stocks will build cash holdings in my money market account, with or without any additional money invested on my part.

I do plan to invest additional funds in some of the energy partnerships. I've been doing quite well with those as far as price appreciation and dividend income. Considering energy prices are still relatively low, I would expect these investments to do quite well as the overall economy begins to recover and energy prices go up.


I finally got the last 1099 form I was waiting on and sat down to do my taxes yesterday. It took about 5 hours to complete, but I was surprised to find I actually have a small refund coming. I'm already planning on putting that to work by investing it in additional shares of one of the limited partnerships I currently hold.

This year's taxes were a little more difficult than usual to prepare. I had several stock trades to report, dividend and partnership income and foreign taxes. Then I had unemployment compensation, which I had never collected before last year, so that was a first for me as well. I used an online tax preparation program and everything went smoothly. It really helps to have all your records together before you begin the process. Toward the end of each year, I always set up a file to collect all of my tax paperwork in, so when it comes time to prepare my taxes, it's all right there. Really simplifies the process.

I received an email notification that my return has been accepted by the IRS, so now it's just a matter of time before the refund rolls in. It's nice to actually get a refund for a change, instead of having to pay in. It will be even nicer to put the money to work and generate additional income for 2010 and beyond.