Market News

Since the first of the year, stock trading was in and the buy and hold strategy was out the window. It seems this trend may be reversing itself, with more investment managers giving their clients the old "dollar cost averaging" spiel and telling them to "invest for the long-term." Nothing wrong with any of this advice, but I think there will always be occasions when stock trading is more appropriate than a strict buy and hold strategy.

Speaking of buy and hold, the greatest buy and hold investor of all time, Warren Buffett, stands to gain a bundle off his investment in Goldman Sachs last September. Not only is Berkshire Hathaway benefiting from the special 10% dividend on their preferred shares, but they are also holding stock warrants from Goldman, currently worth a cool $3 billion. Not bad for a guy, who some were saying, had lost his touch.

There's been a lot of talk lately about weakness in the U. S. dollar. In the short term, this is not always a bad thing. Certain market sectors, such as technology, energy and materials, who get more than 50% of their revenues overseas, stand to benefit by the weakness in the dollar making their prices more attractive to foreign buyers. However, long term weakness in the dollar could lead to inflation woes here at home.

The market is static today, waiting for news from the Fed meeting and due to the drop in oil prices caused by a build up in inventories. I do think we'll see a move upward by the end of the week and September could prove to be better than expected for the year.

Interesting Post On the Commodities Rally

If you're interested in commodities and the current rally in oil and gas prices, you might like to check out this post:

http://briskycapital.blogspot.com/2009/06/commodity-rallyis-it-for-real.html

I recently made some quick cash trading in my shares of British Petroleum. I had intended to hold it long term, but the price skyrocketed soon after I bought in and I decided to take the profit. May buy back in if prices decline latter this summer.

Looks Like a Promising Week

Happy Monday Morning! Stock market futures are up and even with the bankruptcy of GM, it looks to be a promising day for the stock market. It would be nice to start the month off with some good news! Speaking of good news, I've found a new addition for my dividend stock portfolio.

Legacy Reserves LP (LGCY) Based in Midland Texas, their primary business is acquiring and developing oil and natural gas properties in the Permian Basin and Mid-continental United States. Their dividend is currently $2.08 which represents a yield of 16.88% at their recent price of $12.32 per share. With earnings of $5.89 per share, they should be able to maintain the dividend going forward. It would still be a good investment if they cut the dividend 50%.

I currently own shares of Copano Energy LLC (CPNO) and while I don't plan on adding additional shares to my position, I do plan on holding on for the dividend income. I think both companies could benefit from higher natural gas and oil prices later this year. Will see how it goes.

Have a great Monday morning and a great week!

Should You Be Buying Gold?

I just finished reading an article on one of the major news media sites talking about the recent decline in oil prices and the rise in the value of the dollar. Both of which I predicted back in October of last year. Overall, it was a very good and positive article, but of course they couldn't stop at that. They had guest commentary from an "economic expert" who said that high oil prices should not be the only consideration when addressing inflation. O.K., I agree with that, it should not be the only consideration. However, he then talked about the high food prices around the world and rising unemployment, both valid subjects for consideration in addressing inflation, but he somehow managed to segue that in to a justification for buying gold as an investment and hedge against inflation. What?

I'm no expert, but common sense would tell you that high oil prices and the low value of the dollar drive prices higher in food and gold. If oil and gas prices are dropping so are the costs of producing and transporting food. If the value of the dollar is rising, it makes our agricultural products more expensive to foreign buyers, leading to demand destruction in exports of our food products. Add to that the increasing unemployment in the U.S., which further reduces demand for high priced food items and the simple rule of supply and demand kicks in. Which all adds up to falling or stagnant food prices. All these things should lead to a halt to the inflationary spiral we've been in for the first 7 months of this year.

So, should it make any sense to anyone to be buying gold right now? Not as far as I'm concerned. When inflation begins to ebb, gold prices drop, as they have been doing recently. If you are considering any investment in precious metals, silver is a more likely candidate. Most of the gold that has been mined throughout human history is still in existence to this day. However, silver is being consumed at an ever increasing rate and as a non-renewable resource, this would present a much better investment opportunity than gold. Gold would have been a good investment when it was selling between $300 and $400 per ounce, that is, as long as you were selling when the price was over $900 an ounce. But now, I don't think so.

Oil Prices and A Few More Stocks I Like

I've written about oil prices before, saying it was all about price and demand. Well now everyone seems to be in agreement. When the price reached the point where most Americans had to start cutting back, the price is beginning to falter. Seems everybody is backing away from their predictions of $200 dollars a barrel for oil and $5 dollar a gallon gasoline. I truthfully never expected it to get to that price. Most of the people I know and work with simply could not afford it. They are struggling now at $4 per gallon, so add another $1 and they simply would be out of commission. When the public can no longer afford something, no matter what it is, the drive behind increasing prices is gone. The new catch phrase, "demand destruction" is occurring on a huge scale, just as I predicted it would. Will China and India continue to drive demand? Only if they can sell their products and how is that going to happen if everybody is spending their money on gasoline? Demand destruction is occurring, not only from consumers switching to smaller cars and driving less, but also from the shift to alternate energy sources, such as bio-diesel, solar and wind energy, all lessening demand for petroleum products. I wouldn't predict oil at $40 per barrel like the guy they interviewed on CNBC earlier this week, but I do see the prices dropping dramatically.

So how is this affecting my investments? Fortunately, since I'm mostly buying, the price drop in equities has been good for me. I'm searching for stocks that I feel have room for growth, solid earnings and pay current high dividends. While the share prices of my portfolio holdings have dropped, along with everyone else, my earnings from dividends have been increasing month after month. I am currently re-investing all dividend income in bargain priced dividend stocks. When the market starts to recover, I will re-evaluate my investment plan and possibly shift dividend income to fixed income opportunities or real estate investments. But while the prices are down, I'm being greedy and adding to my holdings as much as possible. Whether we're at the bottom or not, STOCKS ARE CHEAP! Buy when they're on sale.

My latest additions to my portfolio include Biovail Corporation (BVF), a pharmaceutical company with a whopping 15.10% dividend yield and Windstream Corporation (WIN), a small rural telecom with solid earnings and an 8.4% dividend yield. Both should fit nicely with my overall plan of building a portfolio of high dividend stocks and increasing monthly income from dividends. Any price appreciation on top of that is just icing on the cake. Since I have no intention of selling any stocks within the next several years, I can wait on price appreciation.

I currently don't need any of the income from my stock portfolio, but the ever increasing flow of dividends into my money market account make it a lot easier to afford new investment opportunities as they present themselves. Robert Kyosaki, one of my favorite writers, says to "look at a deal a day." I've made that my goal. I can't always afford the deals, but it keeps my mind active and on the lookout for my next investment.