The Immortal Words of the Intelligent Investor-Ben Graham 

1.  It requires strength of character in order to think and to act in opposite fashion from the crowd and also patience to wait for opportunities that may be spaced years apart.

DYI Comments:  Below is the Dow/Gold Ratio chart that shows very clearly that gold peaked in 1980 (and stocks on the give away table) and moved into a secular bear market lasting until July of 1999.  Stocks peaked at that time and then moved into a secular bear market.

 Fred's Intelligent Bear Site brought to you by Fred Filskov. Public, private, and commercial distribution of this material is permitted as long as a link to this site is attached.

Value players in the late 1970's and early 1980's were purchasing stocks on an aggressive basis while at the same time systematically selling off their gold/gold mining companies.  As months turned into years and as years turned into decades did our value player forget gold?  NO!  They continued to monitor the ratio for secular over valuation of stocks and under valuation of gold.  The trip from overvaluation to under was almost two decades!  THAT'S PATIENCE!

2.  If a company was so sound that its stock carried little risk of loss, the company also must present excellent chances for future gains. It is easier for a company to build a profitable empire on a solid foundation than on a shaky one.

That is the premise of DYI's  THE DIVIDEND ROOM.  I look for high quality blue chip companies that have an excellent dividend yield 50% greater than the S&P 500.  Then hold to these companies for years only selling when their financial rating goes below investment grade or the current dividend yield falls below the S&P 500.  Benjamin Graham's defensive investor at its best.

3. Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.

Greed and Fear is an immortal as time itself.  This is basic instinct for the value player who will look at the financials to determine after a drop to purchase additional shares or in the case of rise in price to make a sale.  Under no circumstances is he or she feels forced to buy or sell.  Mr. Market is not the value players enemy but his friend.  Wikipedia had to say about Ben's Mr. Market.

Mr. Market is an allegory created by investor Benjamin Graham. Graham asks the reader to imagine that he is one of the two owners of a business, along with a partner called Mr. Market. The partner frequently offers to sell his share of the business or to buy the reader's share. This partner is what today would be called manic-depressive, with his estimate of the business's value going from very pessimistic to wildly optimistic. The investor is always free to decline the partner's offer, since he will soon come back with an entirely different offer

4. Experience teaches that the time to buy stocks is when their price is unduly depressed by temporary adversity. In other words, they should be bought on a bargain basis or not at all. 

DYI'S THE DIVIDEND ROOM look's for beaten down companies for what ever reason.  Most of them are just on the basis of neglect.  Wall street has its fads and fashions of the moment to were the majority of investors (actually speculators) go galloping off riding the lasted hot stock(s) of the moment. Leaving great companies with great financials who's stock prices will become depressed in price over time simply due to neglect. Many of our stable of companies have yields double that of the S&P 500 with excellent prospects of increasing dividends.

5. People who habitually purchase common stocks at more than about 20 times their average earnings are likely to lose considerable money in the long run.

Amen to that Ben!  Currently today the majority of stocks on a value basis have been bid up to the moon.  Our worlds central banks sub atomic low interest rates have pushed our 1st world Boomer's seeking yield for their massive savings pool along with the U.S. budget deficits artificially pushing our economy forward.  Below is the Shiller PE10 going all the way back to 1871 it is easy to see that stocks on a whole sale basis are once again "jacked up" in price.

http://www.multpl.com/shiller-pe/

DYI's averaging formula for stocks has now pushed us out of the market.  Currently today the the price to dividend ratio is now 122% above their average going back to 1871.  Below is our aggressive portfolio.  Any wonder why I'm so defensive?

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION

Active Allocation Bands (excluding cash) 0% to 60%

83% - Cash -Short Term Bond Index - VBIRX

15% - Gold - Precious Metals & Mining - VGPMX

 2% - Lt. Bonds - Long Term Bond Index - VBLTX

 0% - Stocks - Total Stock Market Index Fund - VTSAX

[See Disclaimer] 

Most investors (speculators) will keep on dancing along as the music keeps on playing.  Most will not recognize a short term minor correction from the beginning of a major onslaught of the bear. They will not begin to sell until they are half or more through the bear's rampage.  Average John and Jane Doe will sell out at the bottom to never buy stocks again.  Once bitten twice shy.

6. On the other hand, investing is a unique kind of casino – one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor. 

7. In market analysis there are no margins of safety; you are either right or wrong, and if you are wrong, you lose money. 

8. It remains true that sound investment principles produced generally sound results. 

9. The disciplined, rational investor neither follows popular choice nor plays market swings; rather he searches for stocks selling at a price below their intrinsic value and waits for the market to recognize and correct its errors. It invariably does and share price climbs. When the price has risen to the actual value of the company, it is time to take profits, which then are reinvested in a new undervalued security.

Sound investment principals produce sound results!  At DYI I will trade with Mr. Market when the odds of success is in our favor.  I'm not forced by quarterly results in order to maintain my job as a money manager and hence forced to speculate.  I'll place my hard earned dollars, Pounds, Euros or Yen to work when Mr. Market offers me a bargain and only then.

10. Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.

Speculative operations are not part of my blog.

11. The determining trait of the enterprising investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. Over many decades, an enterprising investor of this sort could expect a worthwhile reward for his extra skill and effort in the form of a better average return than that realized by the passive investor. 

12. Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble to give way to hope, fear and greed. 

13. The stock investor is neither right nor wrong because others agreed or disagreed with him; he is right because his facts and analysis are right. 

14. An investment is based on incisive, quantitative analysis, while speculation depends on whim and guesswork.  

15. The intelligent investor is a realist who sells to optimists and buys from pessimists. 

Point 15 is what this blog is all about selling to the optimists and buying from the pessimists.

So, what has all this taught me? 

(a) People buy when others are buying and sell when everyone sells. 

(b) The greatest motivator isn’t profit, but fear. 

(c) We all misinterpret risk. It’s not losing money but lacking it. 

(d) Nobody invests when stuff is cheap. 

(e) Financial illiteracy is the norm.

DYI

CHINA ‘BLACK TUESDAY': STOCKS FALL 5%, DESPITE SUSPENDING 25% OF ISSUES

Despite the Chinese communist government’s efforts to hide the severity of the “Black Tuesday” stock crash by indefinitely suspending trading in over a quarter of the nation’s weakest stocks, the Shanghai B Share Index suffered a 9.1 percent loss, while the  Shenzhen Exchange plunged 5.8%.

With retail customers accounting for 85 percent of Chinese stock trading, there are reports in social media that a number of China’s “equity citizens,” who have suffered $2.9 trillion in losses over the last three weeks, are now committing suicide. 

The crash would have been epic, but suspensions in trading were called in what appeared to be the weakest 702 of the roughly 2,800 firms listed on China’s main Shanghai and Shenzhen stock exchanges. Officials said the “temporary suspensions” were linked to restructuring, planned share placements or the pending release of a “significant matter.” But they also acknowledged that the ten-day suspensions can be extended for three months. 

The market crash has fed doubts about the effectiveness of $200 billion in credit and price support measures unleashed by Beijing’s communist leadership to halt a waterfall in stock prices that have seen a 31 percent decline in major indexes since June, and a worse price drop for the average stock. With Tuesday’s painful loss, China’s stock crash has erased about $3.4 trillion of China’s wealth. 

The initial 150 percent straight-up move in prices through June 12 reinforced the public’s confidence in the “Party” and the “Leadership”. But the severity of the stock market crash and the government’s inability to stabilize the situation has now become a huge threat to the supposedly all-powerful China Communist Party.

DYI Comments:  China watchers such as myself have been anticipating a huge debt blow off that would spin off major parts of China especially their autonomous regions.
 
So far not enough damage has been done for China to fly apart only time will tell if this is the beginning of their 1930's style economic tsunami.

DYI 

Here is How The Next Crisis Will Play Out

In contrast, the current Crisis that we are facing involves bonds… the bedrock of the financial system. 

Every asset class in the world trades based on the pricing of bonds. So the fact that bonds are in a bubble (arguably the biggest bubble in financial history), means that EVERY asset class is in a bubble. 

By the time it’s all over, I expect: 

1)   Numerous emerging market countries to default and most emerging market stocks to lose 50% of their value. 

2)   The Euro to break below parity before the Eurozone is broken up (eventually some new version of the Euro to be introduced and remain below parity with the US Dollar). 

3)   Japan to have defaulted and very likely enter hyperinflation. 

4)   US stocks to lose at least 50% of their value and possibly fall as far as 400 on the S&P 500. 

5)   Numerous “bail-ins” in which deposits are frozen and used to prop up insolvent banks.

DYI Comments:  My model portfolio until July's update only invested in gold/precious metals mining companies.  Now that interest rates are moving up slightly DYI's long term bond portion has added a 2% position.  Higher rates go the bigger our position will grow and the faster you can compound your money plus your duration shortens reducing your risk.

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  7/1/15

Active Allocation Bands (excluding cash) 0% to 60%

83% - Cash -Short Term Bond Index - VBIRX

15% -Gold- Precious Metals & Mining - VGPMX

 2% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

This is a very awkward time for value investors as every of measurement for stocks and bonds have been shown to be very overvalued.  However, with oil prices way down this has embolden the Fed to goose the economy and financial markets.  The reflation trade was back into effect.  The past two years stocks and bonds have been way overvalued only to be pushed up higher.  As value investor those gains will be seen as transitory, as a trail of tears for those investing heavily during that time period.

Precious metals have come off a 70% decline and for those who need to rebalance this is a good time to do it.  Gold is pricey but NOT overvalued historically as shown by the DOW/GOLD RATIO.


  Fred's Intelligent Bear Site brought to you by Fred Filskov. Public, private, and commercial distribution of this material is permitted as long as a link to this site is attached. 

As you can see above the ratio is now at it's mean.  Based upon our weighted average formula DYI arrives at 15% of the portfolio.

My sentiment indicators show how up side down (except gold) every thing has become.

Market Sentiment

Smart Money buys aggressively!
Capitulation
Despondency
Max-Pessimism *Market Bottoms*Short Term Bonds
Depression MMF
Hope
Relief *Market returns to Mean* Gold

Smart Money buys the Dips!
Optimism
Media Attention
Enthusiasm

Smart Money - Sells the Rallies!
Thrill
Greed
Delusional
Max-Optimism *Market Tops* Long Term Bonds
Denial of Problem U.S. Stocks
Anxiety
Fear
Desperation

Smart Money Buys Aggressively!
Capitulation

The Great Wait Continues

DYI

EU Desperation....Rip Off Greek Depositor's!

Greek banks preparing possible "bail-in" of depositors

But citing bankers and businesspeople with knowledge of the measures, the Financial Times reported: "The plans, which call for a 'haircut' of at least 30 percent on deposits above 8,000 euros, sketch out an increasingly likely scenario for at least one bank". 

The report quoted a source as saying: "It (the haircut) would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme."

Whether Greece votes yes or no, the euro cannot survive in its current form

Best case scenario? The EU will undergo years of painful convulsions, precipitating a new treaty that imposes greater centralisation and restrictions on the fiscal independence of nation states

Whether Greece votes to back or reject austerity on Sunday, the euro in its current form is dead, and rightly so. The defective structures that underpin it have been shattered by the Greek nightmare, and trust within Europe is at a low ebb. Even a yes vote would not undo the damage, and a no vote would lead to an almost immediate Greek departure from the euro. 

Meanwhile, in Athens, the levels of hatred towards the Euro-establishment from supporters of the “No” side are remarkable; it is hard to see how any meaningful negotiations will ever be possible if Syriza remains in power. For all of those deluded Europhiles who believed that enforcing an artificial, imperfect currency on 19 different, divergent nations was a good idea that would help bring about peace, friendship and prosperity, the events of the past few weeks have surely been devastating.

DYI Comments:  This is reminiscent of all of the problems with our Articles of Confederation and the need to move to a more centralized federal system.  Just as back then it was unworkable today it is a disaster for the EU.  In their desperation they will likely resort to ripping off Greek depositor's. Taking a 30% haircut or just outright abscond with all the money Greece is simply broke and will never be able to pay these huge debts.

Greece will eventually and much sooner than later leave the European Union unless Germany and more importantly German banks are willing to take a massive haircut on Greek debt an unlikely event.  Federalization of the EU will take too long(if ever) the only possibility is a "wild card" with Russia or China offering very low interest loans for military naval bases in Greece.  If that was to occur then the U.S. would be very involved keeping this soap opera alive. Once the Greek issue is behind them by then Spain and Portugal will be in default and it all begins again.

Without federalization the Euro currency and the European Union is doomed.  I wish them the best of luck they are going to need it.

DYI

Generational Dynamics

The Shanghai stock exchange index fell 6% on Friday, 10% for the week, and nearly 30% since June 12. The China Securities Regulatory Commission (CSRC) has been desperately trying different measures, such as cutting interest rates and allowing more stocks to be purchased on credit (margin), but the measures have been ineffective. 

According to one Chinese analyst, "The government must rescue the market, not with empty words, but with real silver and gold. It's a disaster. If it's not, what is it?" What it is -- is a huge stock market bubble bursting. 

Over 100 million Chinese investors, including many older people who have invested their life savings, have been spending 6 hours a day staring glumly at their mobile phones, watching the stock market index fall, and watching their own savings be destroyed. This feeds into the Chinese Communist Party's greatest paranoia - a people's rebellion. 

Now the CSRC has set up a team to look at "clues of illegal manipulation across markets." This should be a laugh. Some poor slob who sold some stocks last week is going to be blamed and sent to jail. 

When I wrote last week that, "It's well to remember that we don't know to this day what triggered the 1929 panic and crash," a web site reader wrote to say that Milton Friedman had written extensively about it. Actually, Milton Friedman has written extensively about the 1930s Great Depression, but nobody knows why the stock market panic occurred on the particular day, October 28, 1929, rather than a few months earlier or later. 

Wall Street stocks are also in a large bubble, as I've described many times, with the S&P 500 Price/Earnings ratio at a historically high 21.3. What can happen in Shanghai can happen on Wall Street. If you have your life savings in stocks, it's not impossible that you too could lose 30% of your savings in three weeks.

DYI

Chinese State Official Hints Beijing May Bailout Greece

On Monday, after Greek PM Alexis Tsipras’ dramatic referendum call sparked a run on Greek ATMs, grocery stores, and gas stations, we did our part to help ameliorate the situation by sending a subtle message to Athens: Indeed, now may be an opportune time to tap Beijing for a few billion given that China officially launched the AIIB this week. As a reminder, the success of China’s AIIB membership drive was a political disaster for The White House, which expended considerable effort to discourage US allies from supporting the new China-led venture. 

As such, it would be difficult to imagine a more fitting pilot program for the world’s newest supranational lender than a rescue package for the birthplace of Western democracy which has been brought to its knees by that most Western of all multilateral institutions, the IMF. And while any funding to Greece from China would likely be channeled through the Silk Road fund (at least for now, given that the AIIB is just a few days old, officially), any aid from Xi Jingping’s deep pockets to Athens would represent a spectacular coup on both an economic and political level. 

While the world is by now likely incredulous about the prospects for a Greek “Eastern” pivot (around a half dozen Russian headfakes have made us somewhat numb to the idea), Chinese assistance might be more likely than Europe cares to admit. 

And while it's impossible to overstate how hilariously ironic it is that Communist China could be the world's best hope for preventing the birthplace of Western civilization from careening into the Third World, there's a more subtle joke here as well. We'll let readers discern what that joke is with the help of the following graphic:

 
DYI

Global Debt Time Bomb Ticks – Puerto Rico Is Next

With all eyes on Greece it would seem another crisis relating to unpayable debt is brewing in the Caribbean. The governor of Puerto Rico, Alejandro García Padilla, has warned that the island is unable to pay its debts of $72 billion. 

Puerto Rico has managed to rack up an astounding level of debt relative to the size of its economy. Moody’s estimates the small U.S. territory to have bond debts fifteen times greater than the median bond debt of the 50 U.S. states.

A complicated set of arrangements lulled investors into a false sense of security with regards to Puerto Rican bonds. For a start, the constitution “contains an unusual clause that requires general-obligation bonds to be paid ahead of virtually any other government expense,” according to the New York Times.The government then promised specific revenue streams to different groups of bondholders. 

A complicated set of arrangements lulled investors into a false sense of security with regards to Puerto Rican bonds. For a start, the constitution “contains an unusual clause that requires general-obligation bonds to be paid ahead of virtually any other government expense,” according to the New York Times.The government then promised specific revenue streams to different groups of bondholders. 

Dave Kranzler, from Investment Research Dynamics has warned that there are signs that the Puerto Rico situation may not remain a local crisis for much longer. 

He points out that share prices of MBIA, the bond insurers have been plummeting. MBIA are valued at $3.9 billion whereas their exposure to Puerto Rican debt is around $4.5 billion. Kranzler reckons their exposure could even be multiples of that figure. A default could wipe them out.

DYI

World’s largest ferris wheel takes shape in Dubai

The world’s largest ferris wheel is starting to take shape on the $1.6bn Bluewaters Island development, off the coast of Dubai’s Jumeirah Beach Residence. 

The 210 metre-high Dubai Eye, which is being developed on a manmade island by Meeras Holding, will overtake the new High Roller in Las Vegas (standing at 167.6m) as the world's tallest such attraction. The ferris wheel will include 48 luxury capsules capable of holding 1,400 visitors and offer views of Dubai’s iconic landmarks such as Burj Al Arab, Palm Jumeirah and Burj Khalifa, according to Meeras.

Computer generated image of how the Bluewater Island project is expected to look when complete in 2016

DYI Comment: WOW!

China shares tumble as Greece worries dog markets

China's benchmark share index plunged almost six percent, at the end of another torrid week for mainland investors

Chinese stocks capped their biggest three-week decline since 1992 as the country's $2.8 trillion rout deepend. 

The Shanghai Composite Index plunged almost 6pc, at the end of another torrid week for mainland investors, taking losses since June 12 to 29pc. 

The Shenzhen Composite Index slumped 6.9pc, with mainland markets pummelled by profit-taking and margin traders calling in their bets.

The Chinese government pledged to punish stock manipulation as markets continued to sell off, even after margin-trading rules were eased, interest rates were cut and pension funds were given permission to buy stocks. 

Many China-listed companies have also pledged to support prices through buying equities or halting new share sales.

DYI Comments:  The yellow highlighted portion is the Chinese government's total desperation to halt the decline.  This and other similar tactics were attempted by Japan in their vain endeavor to halt the slide.

 

The difference between Japan and China is the level of debt.  China is massively in debt private and government to unsustainable levels.

Many of us China watchers have been forecasting (for the past 5 years) an economic implosion with the potential to blow the empire apart.  Time will tell if this is the deflationary smash or just a correction as the Chinese government encourages further indebtedness to extend the illusion of economic growth.

DYI 

No Wrongdoing Here, Just 6,300 Corporate Fines and Settlements

Margin Debt Bubble: A Day of Reckoning is Nigh

Never before have investors racked up this much debt to fund their stock purchases. Moreover, that $507 billion is roughly 50% higher than right before the October 2007 market peak. 

The reasons for the jump in margin debt are simply investor overconfidence and speculation fueled by the Federal Reserve’s addiction to ZIRP (zero interest rate policy). 

The consequence of lowering the cost of money to nothing is that it promotes speculation and drives up the value of the stock market to nosebleed valuations. 

 

Worse yet, the stock market is two standard deviations away from that long-term average, and that is big trouble, according to Shiller, who wrote in a recent New York Times column: “The United States stock market looks very expensive right now. … [CAPE] is above 25, a level that has been surpassed since 1881 in only three previous periods: the years clustered around 1929, 1999, and 2007. Major market drops followed those peaks.”

‘Rats leaving a sinking ship’ as China’s equity bubble implodes

Margin lending and the stimulus that will never come spook China's stock markets into correction territory

When does a stock market correction become a crash? Right about now if you’re sat in Shanghai watching the value of your portfolio disappears down the Yangtze River. 

Since the beginning of the year China’s stock market bubble has inflated to epic proportions as speculators piled in by borrowing money to buy stocks in ever larger volumes. At the beginning of the year, the value of outstanding loans used by securities firms to fund investment had swollen to exceed $260bn. By the beginning of this month that figure had grown to $364bn. 

Many of those investments are now worth less than the value of the loan as more traders exit the market in order to cover margin calls on their outstanding debts. Given the scale of leveraging that underpins both the Shanghai and Shenzhen indexes, few experts are predicting that the current stocks rout will end until more of this debt is washed out of the system.

No Wrongdoing Here, Just 6,300 Corporate Fines and Settlements

I am honored to share a remarkable data base of Corporate Fines and Settlements from the early 1990s to the present compiled by Jon Morse. Here is Jon's description of his project to assemble a comprehensive list of all corporate fines and settlements that can be verified by media reports. 

 "This spreadsheet is all the corporate fines/settlements I’ve been able to find sourced articles about, mostly in the period from the 1990’s up to today (with a few 80’s and 70’s). This is by far the most comprehensive list of such things online. At least that I could find, because the lack of any decent list is what made me start compiling this list in the first place."

What struck me was the sheer number of corporate violations of laws and regulations--thousands upon thousands, the vast majority of which occurred since corporate profits began their incredible ascent in the early 2000s--and the list of those paying hundreds of millions of dollars in fines and settlements, which reads like a who's who of Corporate America and Top 100 Global Corporations. 

In other words, these were not wrist-slaps for minor oversights of complex regulations  

"These are blatant violations of core laws of the land." 

The settlements with the banks along with the ongoing investigations have shown that virtually every market is being manipulated; the stocks, metals markets, LIBOR, FOREX, everything. The companies would only break so many laws if they felt they would have a reasonable chance of getting away with it; they would also need a reason to do it, which is provided by the infinite growth model our economy is based on. 

DYI

Chinese Maternity Tourists and the Business of Being Born American

Inside the Homeland Security crackdown on deluxe services helping Chinese women have American babies

There are many reasons to have a baby in the U.S. The air is cleaner, the doctors generally are better, and pain medication is dispensed more readily. Couples can evade China’s one-child policy, because they don’t have to register the birth with local authorities. The main appeal of being a “birth tourist,” though, is that the newborn goes home with a U.S. passport. The 14th Amendment decrees that almost any child born on U.S. soil is automatically a citizen; the only exception is a child born to diplomats. He and her husband paid USA Happy Baby $50,000 to have an American son. If they had to, she says, they’d have paid more.

 After the birth, He observed yuezi, the traditional month of recovery for new mothers. She, her mother, and her 2-year-old daughter stayed in Rancho Cucamonga, a city about 40 miles east of Los Angeles. Her apartment, in a complex with a pool, fitness center, and mountain views, was rented by USA Happy Baby. Her nanny was supplied by USA Happy Baby. She ate kidney soup and pork chops with green papaya prepared by a USA Happy Baby cook. She secured her son’s U.S. birth certificate, passport, and Social Security card with USA Happy Baby’s assistance.

 He’s daughter was born in America as well. He and her husband, educated in Britain and from prosperous families, hoped to send their children to an international school in Shanghai that admits only foreign students. When the kids turn 21 they can petition for green cards for their parents, too.

Homeland Security and the IRS have been investigating the growing business of “birth tourism,” which operates in a legal gray area, since last June. The industry is totally unregulated and mostly hidden. Fiona’s apartment was one of more than 30 baby safe houses that HSI agents and local law enforcement searched in Southern California that day in March. They came with translators and paramedics, almost 300 people in all. The investigators focused on three agencies—USA Happy Baby, You Win USA Vacation Resort, and Star Baby Care—using a confidential informant, undercover operations, and surveillance, according to three affidavits. 

No one knows the exact number of Chinese birth tourists or services catering to them. Online ads and accounts in the Chinese-language press suggest there could be hundreds, maybe thousands, of operators. A California association of these services called All American Mother Service Management Center claims 20,000 women from China gave birth in the U.S. in 2012 and about the same number in 2013. These figures are often cited by Chinese state media, but the center didn’t reply to a request for comment. The Center for Immigration Studies, an American organization that advocates limiting the scope of the 14th Amendment, estimates there could have been as many as 36,000 birth tourists from around the world in 2012.

DYI Comments:  Nothing new here as Mexicans and Central/South Americans have been slipping across the border to have their children who will automatically become citizen's.  When they turn 21 petition for green cards for their parents.  We are a nation of immigrant's however this is nothing more than subversion of the 14th Amendment which has been going on way before the Chinese.  Until there is a change by constitutional amendment plugging this hole I don't see where this will be stopped anytime soon.

DYI
 

For your further study....DYI has added 3 new high quality dividend payers!

Updated 7-1-15

THE DIVIDEND ROOM

Just as the name Dividend Yield Investor indicates is my affinity with dividends; for they have never gone out of style as far as I'm concerned.  In the end they are the real reason investors, as opposed to speculators, purchase quality companies with increasing dividends.  In my mind these are the true growth stocks.  As the dividend is increased over time so will the stock price. As the legendary Charles Dow has written:

"To know values is to know the meaning of the market.  And values, when applied to stocks, are determined in the end by the dividend yield."  

The Dividend Room is a new addition to my blog showing a list of high quality dividend paying stocks for your further study.  All picks are basic time tested value approach. All companies have a reasonable low level of debt for their respective industry and a low PE multiple. Of course a competitive dividend yield 50% greater than the S&P 500.  Also screened companies that have increased their dividends on a regular basis (true growth stocks). Included is additional screens based upon the Benjamin Graham approach for the defensive investor.

Our attempt is to find ten or more high quality companies with a yield 50% greater than the S&P 500.  Recommend selling when the dividend yield is less than the S&P 500 or after 3 years the shares have failed to rise by 50% or future prospects are so dismal a sale is warranted.

For diversification purposes recommend building up to 40 to 50 companies.

     S&P 500 Dividend Yield 1.96%

7-1-2015

            

AT&T(T)  Yield 5.30%  $35.52  

World's largest Telecom holding company.

(When recommended)

Date    Price    Div.  Yield   

6-5-15  $35.27  $1.88  5.33%

TransCanada Corp.(TRP)  Yield 4.16%  $40.62  

Most extensive natural gas pipeline system in Canada; along with U.S. pipelines.

(When recommended)

Date    Price    Div.  Yield

6-5-15  $41.40  $1.67  4.00%

Canadian Imperial Bank(CM) Yield 4.77%  $73.72

Canadian global (20 other countries) Retail, Business, Wholesale Banking and Wealth Management.

(When recommended)

Date    Price     Div.  Yield

6-5-15  $76.01  $3.48  4.57%                                                 

ConocoPhilips(COP)  Yield 4.75%  $61.41
World's leading exploration and production company in 30 countries.
(When recommended)
Date    Price    Div.  Yield

6-5-15  $63.00 $2.92 4.60%

Anheuser-Busch InBev SA/NV (BUD)  Yield 3.71%  $120.67

Anheuser-Busch InBev SA/NV, a brewing company, engages in the production, distribution, and sale of beer, alcoholic beverages, and soft drinks worldwide.

(When recommended)

Date    Price     Div.    Yield

7-1-15  $120.67  $4.48   3.71%

McDonald's Corp. (MCD)  Yield 3.57%  $95.07

McDonald's Corporation operates and franchises McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America.
(When recommended)
Date    Price     Div.    Yield
7-1-15   $95.07   $3.40    3.57%

Public Service Enterprise Group Inc. (PEG)  Yield 3.97%  $39.28 
Public Service Enterprise Group Incorporated, through its subsidiaries, operates as an energy company primarily in the northeastern and Mid Atlantic United States. The company operates nuclear, coal, gas, oil-fired, and renewable generation facilities
(When recommended)
Date    Price     Div.    Yield
7-1-15  $39.28   $1.56     3.97%

        

DYI recommends that you use our stock allocation formula to arrive at your allocation of stocks to bonds.  Currently it is at 27% for stocks.  For your cash holdings Vanguard's Short Term Bond Index symbol VBIRX or for those in a high tax bracket Vanguard's Limited Term Tax Exempt VMLTX.

 This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.

This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!

The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.

The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.

Use this site at your own risk.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

The Coming Congressional War Over Social Security Disability

The immediate issue is the fate of the SSDI trust fund, which is expected to become exhausted in 2016. If new funding is not found, SSDI benefits will be cut by about 20 percent for 9 million workers, 2 million of their children, and about 160,000 spouses. 

Until recently, disability advocates were confident that Congress would address the problem simply by shifting funds from the retirement portion of Social Security to the SSDI program. This would hardly be unusual. Congress has transferred money between the Social Security funds frequently over the past half century, sometimes moving payroll tax revenues from the retirement program to the disability fund, sometimes shifting it the other way.  

But yesterday, the House moved to foreclose any transfer back to SSDI. An obscure package of procedural rules approved by a nearly party-line vote barred lawmakers from using retirement funds to support the disability program unless they accompany changes that stabilize the overall Social Security Trust Fund (by cutting benefits, raising taxes, or both). This isn’t the last word. House rules can always be waived and, in practice, often are. But it is a strong signal the GOP leadership wants to use SSDI’s coming insolvency as an opportunity to remake the program.

In recent years, more workers have gone on the rolls. In part, this is because changing demographics have made more people eligible: As the Baby Boomers age, they are more likely to become disabled, and more women have worked enough to be eligible for the program. Those trends should surprise no-one and need to be acknowledged. 

But it is also important to recognize that the program is poorly run. Many people who should not get benefits do. And many who should do not. It takes far too long for the program to process applications.  And the program is a powerful disincentive to work—a problem that should trouble both liberals and conservatives.

DYI Comments:  The entire Social Security program which includes SSDI and Medicare will begin to post massive deficits in the years to come.  Once the 2020's arrive it will begin the major fights over these programs and their costs.  Around 2025 it will be a bare knuckle brawl politically but in the end social security taxes will be raised and benefits reduced for future and current recipients.



DYI

Athens proposes third program as second lapses

As Greece’s second bailout program came to an abrupt end on Tuesday night, the Greek government made a new last-ditch proposal to its lenders amid disputes within the cabinet about what route the coalition should follow. 

Eurozone finance ministers are to convene by teleconference Wednesday morning after an emergency session on Tuesday to discuss a last-minute request by the Greek government for an extension to the country’s second bailout and a new aid package. The finance ministers rejected the request for the extension almost immediately, as the second bailout had been due to expire in just a few hours. But they are to hold talks again on Tuesday on Greece’s request for a two-year program with the European Stability Mechanism which foresees some 30 billion euros in funding. Greek Finance Minister Yanis Varoufakis promised to submit to his eurozone peers a document setting out specific economic measures that will be based on the proposals submitted by creditors.

Generational Dynamics

John J. Xenakis

Greece Joins Zimbabwe and Cuba in Missing IMF Payment

 At midnight on Tuesday, June 30, Greece became the first "developed" nation to miss a payment to the International Monetary Fund (IMF), joining the ranks of "undeveloped" nations, including Zimbabwe and Cuba, that have also missed IMF payments. 

Greece is now "in arrears" in payments to the IMF, but is not "in default." The three major credit-rating companies have said failure to pay the IMF doesn't constitute a default because that term is reserved for private-sector creditors. Greece has requested an extension for payment to the IMF, but it's thought to be unlikely that the IMF will grant the request. 

Earlier in the day, a panicky prime minister Alexis Tsipras made a desperate last gasp proposal to the Eurogroup to request a new 2-year bailout program. The Eurogroup rejected it immediately. 

It now appears that there will be several days of arguing and posturing on the part of both the Greek government and the European leaders. Right now, it seems the most significant next event will be the referendum on Sunday. 

Since the referendum refers to a bailout plan that no longer exists, no one knows what YES means or what NO means. So it's now being widely assumed that YES will mean that Greece will remain in the eurozone, and NO means that Greece should leave the eurozone. As I wrote yesterday, my personal opinion, not a Generational Dynamics prediction, is that one way or another Greece will remain in the eurozone, even if the referendum vote is NO.

DYI Comments:  Fireworks on Wall Street with a big down day and then followed by only a mild recovery the following day.  Is this the pin that will pop this bubble?  Only hindsight will tell us unfortunately.  The best thing to do is staying very defensive as stocks and bonds in the years ahead will deliver sub par returns (below inflation) at best and worst negative returns.  Prices are so bid up it is mathematically baked into the cake for sub par/negative returns.

The Future of the Stock Market

The above link is from Money Chimp.com their calculator (very easy to use) is outstanding for estimating future long term returns.  According to Professor Hussman this calculation has an average 92% correlation to the actual returns.  Estimating the Long-Term Return on Stocks  Professor Hussman's explanation a great read for the long term value player.

Estimated 10yr return on Stocks

Using 5.4% as the historical growth rate of dividends and 4.0% as the ending yield.

Starting Yield*---------return**
1.0%-----------------------(-5.7%)
1.5%-----------------------(-1.7%) 

2.0%------------------------1.3% YOU ARE HERE!

2.5%------------------------3.8%

3.0%------------------------5.9%
3.5%------------------------7.8%
4.0%------------------------9.4%
4.5%-----------------------10.9%

5.0%-----------------------12.3%
5.5%-----------------------13.6%
6.0%-----------------------14.8%
6.5%-----------------------15.9%

7.0%-----------------------17.0%
7.5%-----------------------18.0%
8.0%-----------------------19.0%

*Starting dividend yield of the S&P500-**10yr estimated average annual rate of return.

DYI's model portfolio remains the same as last month.  Please note that unfortunately I had to drop the REIT's from the model portfolio as I'm unable to find quality long term historical data.  The site I was using no longer updates their data.  If anyone knows of a quality site and it is free please place a link in the comment section.  Thank you!

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  7/1/15

Active Allocation Bands (excluding cash) 0% to 60%

85% - Cash -Short Term Bond Index - VBIRX

15% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

DYI