WEEK IN REVIEW

Friday the 13th proved unlucky for the stocks as the markets closed lower for the week.  As for my personal portfolio, my cash balances ended up, thanks to good dividends from Clorox and a final dividend payment from British American Tobacco.  Managed to avoid the crash in commodities prices, mostly by avoiding commodities investments altogether.  Though I did auction off a collection of silver coins while the price of silver was near it's all time highs.  I've never been a coin collector and I'm kind of like Warren Buffett when it comes to gold and silver as investments.  Warren says gold is pretty to look at but not much else.  I much prefer investments that generate a steady stream of income through dividend payments over speculation in commodities prices.

According to a new report, Social Security is expected to run out of money by 2036, not good news for anyone in the U.S., but if I manage to live that long, I'll be in my mid 70's and should have enough dividend income to cover my expenses. 

Right now I'm enjoying the lower gas prices while they last.  Of course most everyone agrees that gasoline prices reach the demand destruction around $4 per gallon, so you kind of had to see it coming.  Volatility in the U.S. dollar, however, is causing price fluctuations in the oil market since oil is priced in U.S. dollars. 

I watched an interesting video on CNBC about manufacturing making a comeback in the United States.  I'd sure like to see it, but I'm a bit skeptical.  I can remember a time when factory jobs were plentiful and easy to get, now it seems they're few and far between.  I would like to see "Made in the U.S.A" make a comeback though.  What a great thing that would be!

IN THE NEWS

In the news this week, Ron Paul wants to create competition for the Federal Reserve by allowing U.S. citizens to use gold in place of the dollar.  I've a feeling that won't really catch on anytime soon, but I do agree with his thinking on the Fed's "monopoly" like control of U.S. currency and would like to see a little more restraint on the free wheeling printing of dollars.

Obama invited Bill and Melinda Gates and Warren Buffett to the Oval Office for a meeting to discuss their charitable giving.  Could it be that he's thinking we might all be in need of some charitable support by the time the Democrats are through spending?

Speaking of Warren Buffett, his company Berkshire Hathaway has done a great deal of selling in the past quarter.  There is speculation it is to raise cash for the incoming investment manager at Geico after the retirement of Lou Simpson at the end of this year.  I think it might just be a move to collect capital gains in an up market.

As for my own trading, I pulled out my original investment in Centerpoint energy (CNP:NYSE) and reinvested it in Invesco Mortgage Capital (IVR:NYSE).  My stake in CNP was up over 28%, so I kept the remaining shares and will continue to draw the dividends on those.  At the same time I'll triple the dividend income I was earning on my investment in CNP by putting the money in IVR shares which currently yield 17.77%.  Like Annaly Capital (NLY:NYSE) I do not consider this a long term holding, it's purely a dividend play as long as interest rates are low.  Since a rising interest rate could drastically affect earnings for REITs, I'll be watching this one closely and move to trade out if interest rates should begin to rise.  Not expecting that to happen anytime soon, so I'll collect the dividends in the mean time.

GE Showing Signs of Improvement

GE is one of the core holdings in my personal stock portfolio. Even though this past year has not been kind to their stock price or their investors, I still believe the company has a bright future (no pun intended). Recently they announced improvement in their Capital division, which was largely responsible for their poor performance of late. While loan losses are expected to continue into 2010, they're predicting the division will show a profit by 2011. In the mean time, I'm looking to add additional shares to my stake while the price is low ($15.66 currently). Their dividend yield of 2.55% is well below the average yield of my current investments, however I'm expecting to make up for that through growth in stock value. If Warren Buffett feels confident enough to loan GE $3 billion, then I feel pretty safe investing my money with them. Bottom line, it's a magnificent company with a fantastic pedigree, strong management, great product line and a franchise name. You can't really ask for much more than that.

On an entirely unrelated subject, Obama recently announced tax incentives for small businesses who hire new workers. I have to say I think this is the smartest move the man has made since being elected. Getting people back to work is the key to getting the economy moving again. When the government gives business incentives to put people back to work, it's a win win situation for everyone concerned. The businesses save money due to tax incentives, the workers gain jobs and paychecks which they spend, in turn benefiting other businesses. With sales of goods and services going up and more people working, tax revenues increase for local, state and federal governments. So jobs should be JOB 1 for our political leaders right now.

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.

Now Is The Time to BUY!

As a follow up on my post for October 15th, Crisis or Opportunity of a Lifetime, I thought readers might like to check out the post on CNBC titled:

Warren Buffett: Why I'm Buying U. S. Stocks Now.

In the article, Mr. Buffett makes many of the same arguments I made in my article. I like the way he puts it when he says, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors."

Read the entire article at: http://www.cnbc.com/id/27230391

It's always nice to know that someone who has done so well in the stock market shares my opinion.