Good Economic Data Is Pushing Up Equity Markets, Let’s Also Talk About Dividends
Posted by blodmell in Uncategorized on September 3rd, 2010
Let’s patiently watch to see if this rally actually finds its footing or if it is another false start. On another note, clients may wonder why I email them every little dividend payment? It’s because they add up! Buttonwoods noted in the Economist this week that, “DIVIDENDS do not get the respect they deserve. Over the long run they provide the bulk of equity investors’ returns. Work by Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School* found that over the period from 1900 to 2005, the real return from global equities averaged 5%. The mean dividend yield over that period was 4.5%. Despite this, stockmarkets devote a lot more time to forecasting and analysing profits than they do to thinking about payouts. Profits can be easily manipulated and come in a bewildering variety of forms (operating, reported, post-tax, pre-exceptional, etc). Dividends are (mostly) paid in cash and so are hard to fake. ”
I agree.
Benjamin Reid Lodmell, “The Volatility Knife Cuts Down and Up”
Posted by blodmell in Uncategorized on September 2nd, 2010
The markets had a stunning rally yesterday and it looks like they are set to be flat today. The volatility is unpredictable and the talking heads can´t even call anything right. Pessimism followed by optimism followed by confusion and so on. We must stick to the plan or get lost in the daily plot twists of economic data and commentary.
Brasil Foods
Posted by blodmell in Uncategorized on September 2nd, 2010
This company is now officially on our watch list as we look for a promising entry point for our clients to begin considering building positions.
BRF-Brasil Foods SA is a food processor in Latin America. The Company raises chickens to produce poultry products. Brasil Foods also processes frozen pastas, soybeans and their derivatives, and distributes frozen vegetables. The Company’s core business is chilled and frozen food. The Company has offices in the Middle East, Asia, and Europe.
It Was An Awkard Month. It´s An Awkward Moment For Global Equities. Stick To The Plan
Posted by blodmell in Uncategorized on August 31st, 2010
May and June were a sell-off. July was a rally. August was like watching the markets slowly bleed. Now, the world is watching central bankers promise they can save the world again if they have to but there is a lot of skepticism. If September shapes up to take back the summer gains while throwing global indices into bear territory what will we do? Slowly buy. That is why we keep cash on hand folks. We build positions and lower our average price per share. I think an excellent example is Petrobras. This company has a very bright long term story but it continues to be clobbered. The preferred shares are sitting around 28 bucks. We make money in markets not just because the share price grows but we make the volatility work in our favour.
Benjamin Reid Lodmell, “Even High End Retail Investors Are Expecting Another Crisis.”
Posted by blodmell in Uncategorized on August 28th, 2010
I am on the phone all day with high net worth families and they are being bombarded with the notion that another crisis is immiment. “The emerging market boom is going to bust, ” or “China´s books are cooked and they aren´t really doing as well as they say” or “Europe is falling apart.” or, “The USA is too deep in debt and isn´t willing to make the sacrifices to pull out.” Even I suspect that the USA might be the weakest link in the new global production-consumtion change. There are a lot of reasons to be concerned, indeed. Heck, some argue that it is going to be fine until it isn´t…that´its just a matter of when it all falls apart.
I simply disagree. I think we are in a shift. Change is uncomfortable but, for me, a production and demand boom in emerging markets lies in the future. This transformation is awkard given a few rich countries have run the show for the last few centuries. But it takes patience. We need to buy the companies that are well positioned for the long run and build positions while lowering average price per share.
Paul Krugmans Thoughts About What Bernanke Probably Means By Doing “All We Can”
Posted by blodmell in Uncategorized on August 27th, 2010
“So what should officials be doing, aside from telling the truth about the economy?
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.”
Contextualize the US dilemna with that fact that China is purposely trying to slow down double digit GDP growth. India is right behind. Brazil is cooling off inflation they are growing so fast and now have an unemployement rate of 6.9 percent.
It´s Reassuring That Bernanke Affirmed That The Fed Will Maintain An Active Posture
Posted by blodmell in Uncategorized on August 27th, 2010
Global equity markets are so touchy right now that Bernanke´s announcements today are good news. The United States economy is suffering the negative consequences of long term trends that began decades ago. The emerging markets will continue on their trend towards more independence from US Fed policy however. There is a fantastic article on Brazilian agricultural policy in the Economist this week, “Brazil´s Agricultural Miracle”, which clarifies one more way that nation, for example, is solidifying financial independence and prosperity. The whole world won´t be hanging of the Federal Reserve Chairman´s every utter forever. The stoic American consumer coming to the rescue is already a phenom of the past.
Pictet Research On China, ” Tight monetary and loose fiscal policies”
Posted by blodmell in Uncategorized on August 26th, 2010
China’s economy is slowing down… but it looks like a moderation rather than a crash or double dip. Central government should not push anymore social and economic responsibilities on local governments. If necessary, China has room to expand fiscal policy rather than monetary policy. Public works and especially social housing can be financed through sovereig bond issuance at low cost to public. We do not expect any reversal in property tightening measures or a lift in 2010credit quota which seems sufficient to cushion any severe slowdown “tight monetary and loose fiscal policies” should be the new slogan
We Are Entering The Fifth Day Of Downward Pressure On Global Equities
Posted by blodmell in Uncategorized on August 25th, 2010
We´ve been here before. It should get easier every time to deal with market volatility. Clients, cooly cost average down as opportunities arise. I noticed since the copper prices have been under pressure that several low ball limit orders for Sterlite Industries in India ticked off. This is the strategic approach.
Benjamin Reid Lodmell, “The Emerging Market ‘Story’ Is The Most Rational One Around”
Posted by blodmell in Uncategorized on August 24th, 2010
In the world of communication and sales, everything is a “story”. Behind the sale of any product or vision, someone framed a “story”. Hollywood has one story: hope, loss and redemption. Politicians live with “storytellers” whom are constantly trying to keep one step ahead of the “story” in order to shape it. That’s spin. Archetypes and cliches are stories: the hero, the villian, the victim, the martyr. Product designers in the world of finance are just modeling “stories”. Notice every mutual fund has some theme and there is a story behind it. The problem with stories is that only some of them are true. I often joke that investors can’t afford to buy stories that sound good but fail. I learned that the hard way when the bank back in the early 90’s told all of us private bankers a “story” and then we told the clients the story: shift your time deposits into bond funds. They make more interest. We converted millions and then the whole portfolio dropped 15% in a few months as the Fed starting raising rates. I try to really get honest with clients about the reality behind all these stories running around. Most of them are, frankly, half baked. The emerging market story is actually comprised of several stories such as the emerging consumer boom, the disruptive innovation, the commodity story. I and a lot of smarter folks have thought carefully about whether we really believed the emerging market story. The skeptics had some good points but the evidence is growing. It’s like watching a case being built in front of our eyes. If you scroll through the entries in the last year of this blog it is the evolution of the emerging market story. I keep reminding clients that their are many ways to make money and buying the new global blue chip corporate titans (PetroChina, Vale, Itau, China Aluminum, State Bank of India e.g.) in core sectors (Financials, Energy, Materials) of fast growing marketplaces (China, India, Brazil, frontier markets) is not the only answer. I simply think it’s the most likely one to become true as a winning strategy, especially if we manage the market volatility to build positions by buying on dips. In other words, I invest in this story and advise on millions of dollars of good people to do the same. It’s a sober responsibility and not for the faint hearted. It’s our best chance to grow wealth. These emerging market blue chips are still priced as “risk assets” and trade with a lot of volatility. Nevertheless, I think that is where the momentum lies, emerging and frontier markets, and I believe the evidence is confirming that assessment each day a little more. I encourage clients to be critical minded in your own common sensical analysis. Does this story contradict experience and logic? Does this story and strategic approach make common sense to you? It’s a good question to think about.
Recent Comments