Investment Common Sense

News & Views   

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October 6, 2019, 2019 RE Charles Schwab Zero Trade Price et al

Either I am missing something - likely - or the Schwab hyperactive programmers have removed the new confusing Stock Trade page from their web site and gone back to the perfectly useful one that all us customers understood. It could be that I clicked a different button when I did some trading a couple of weeks ago or maybe they got enough complaints but the old, easily understood, page is back.

Now I do not care to say thanks to the aforementioned hyperactive computer wizards because it still pisses me off that they fixed it when it wasn't broke. and it was almost the final straw in a series of unpleasant surprises. To Wit:

  • Changed the stock trading page
  • Changed the number and order of columns on the account download report
  • My favorite service rep quit
  • Frequently voice mail is the only response when I call the one and only local office, and calls may not be returned for several hours or days
  • In Schwab's defense, their 800 number reps always answer and are very helpful
  • That said, I think I have outsmarted the Schwab computer wunderkinds by writing a new algorithm that searches their latest download format for keywords that tell me where the data that I want is located every month. They could screw this up by changing the words they use for the column headings, but they can add and move columns to their hearts content and my computer won't care.

    About the new zero trading fee. I sure hope it does not hurt their profits too much. I did not mind the $4.95 fee, and I sure want the custodian of my meagre (uninsured) fortune to continue to enjoy good financial health.

    In the interests of full disclosure, I recently rolled one of my accounts and my results were not so good. Following the "Trending Value" rules in this account resulted in an annual yield of minus 1.85% while the S&P 500 was up 1.27% for the same period. Now that I have achieved a certain age and have no pension, I need a certain income to maintain my moderately lavish life style of dining out frequently, golf and tennis at public facilities, modest chairitable donations and ever increasing medical expenses.

    Bond yields and minus 1.85% just don't cut it. S&P 500 tracking funds don't cut it either. So, I invest in REITs and ETFs that pay better. I notice that my favorite investment authority, Travis @ StockGumshoe has some REITs in his portfolio. If you follow my comments and watch my - infrequently updated - Watch List, you know I do not strictly adhere to the "Trending Value" strategy. I publish the list and use it to find bargains that meet my requirements. But the "Trending Value" calculations generally do not fit the REIT business model very well. For example, the P/E ratio is generally high enough to disqualify an REIT because REITs trade based on Free Cash Flow rather than Earnings. So I use other criteria to evaluate REITs and try to stick to business sectors that I am comfortable with. Right now these are Health Care, Data Centers, Prisons, Mini Storage. I just cannot bring myself to invest in Pot production facilities. It's not a moral issue; I just think the valuations are too bubbelicious.

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    September 30, 2019

    Just checked the results of my wife's IRA account, and I'm not too proud of the result. Using my crude evaluation method, start (value) minus end plus withdrawals divided by start value shows a loss of 1.85% while the S&P 500 for the same period gained 1.27%. It's not too hard to figure that I lost 3.12% vs the S&P 500.

    I pretty much stuck to the "Trending Value" portfoli0 on this account. So, there is no excuse.

    I think that there is a bubble in the markets in stocks like Uber and others that have never made a profit, but are still selling at incredible valuations supported by "programmed trading" and Venture Capital. For an old fart like me, income is more importand and that is why I am buying high quality REITs. When the bubble pops, all boats will sink, - a rising tide floats all boats and vice versa - but I am pretty sure that a stock that pays 5% dividends will sink less than a stock that is selling at 40 times estimated earnings three years hence.

    This week's Weekly Table has some pretty good bets. I still do not like China or Russia stocks because their rules are different and their accounting is suspect. So if you want to buy Gazprom, I urge caution and due dilligence. Nothing more to report this week.

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    September 16, 2019

    This evening some of my friends reminded me that I forgot to update the web site this weekend. I think I forgot because Friday the 13th and the full "Harvest" moon occurred on the same day. That won't happen again until 2045 or some such year, and I won't be around for that. That is really not my excuse for forgetting. I had a lot of volunteer work and family celebration of one of our kids 40th wedding anniversary party. Do you know how old that makes me and my ever loving wife?

    But I digress. Last week was good to my portfolios. The news media seems fixated on forecasting a correction, but for the first time I can remember, the FED is talking about cutting rates in the face of soaring deficits, low unemployment, solid job growth and low inflation.

    I have some more thoughts, but it is too late tonight and I need to sort them out before making them public. Watch this space for more wisdom.

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    August 26, 2019

    Today, I updated my watch list; not because I plan any trades, I just have not updated it for a long time. After I updated it, I noticed that the "Sec Type" column contains numeric data rather than the data it should contain. The reason for this is because Charles Schwab's programmers have made another unnecessary change to the way their data is presented and downloaded on their Web site.

    I have pretty much had it with Chas Schwab. They do not answer the phone promptly at the one and only local office even though, when I drove out there, there were no customers and several employees doing nothing. The office is at a very inconvenient location for me, my former advisor is no longer there, and the receptionist who I liked is also gone.

    The final straw is that they keep changing the Web site. Just little things, but enough to be a pain in the neck for an old fart like me, and to cause my analysis programs to malfunction.

    Hey guys, "if it ain't broke, don't fix it".

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    July 22, 2019

    Well I think I should write something so you know that I'm still alive. I just got home from a trip to California's Central Coast where I had a reunion with my sister, brother and lots of nieces, nephews and their wives and kids.

    There does not seem to be a shortage of wealth in Cayucos, CA. A modest house on the beach that would sell for $3.2 Million and rents for around $2,800/week has plenty of parking for your Lexus, Cadillac, Tricked out GMC Yukon or Ferrari, and the best sticky cinnamon rolls you ever ate are available for only about $4.00 each.

    But, I digress. My experience so far this year is that the market is pretty flat and "value" stocks are not very popular. I have been straying from strict adherence to the Trending Value portfolio because I need more income than this strategy has provided recently to sustain my modestly lavish lifestyle - that included four days in Cayucos.

    If you are patient and have some time, there are bargains avialable. The Weekly List" includes over 70 stocks, a fair number of which are US companies. So far this year in the three portfolios where I generally follow the "Trending Value" strategy, I am making about 3%. Not great, but it's better than nothing. In my accounts where I am chasing income with some high yielding REITS I'm making about 5% on dividends and about even on capital gains. One of my REITs, - Core Civic - specializes in private prisons and other prpperties leased to governments. US congress has nothing better to do than second guess their contracts. So, it's selling at a price where the distribution yield is over 10%. I continu to think it's a good buy although I have a pretty good paper loss so far.

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    January 7, 2019

    There's not much to pick from if you have money to invest right now. The Weekly Table for this week has only 27 entries with postive or zero 6 month price momentum, and most of the comapnies listed there are not US companies. That means that of the more than 6 thousand stocks I screened this week, there are no more than 27 that meet the qualifications for investment in your "Trending Value" portfolio.

    I wish all my readers a prosperous 2019, and hope that you are keeping your powder dry. For an interesting and, I think, very insightful perspective RE the economy and markets, I recommend this article from "The Dismal Optimist" by Peter Treadway - my favorite economist.

    Sorry, I have not been keeping the site up-to-date. I got a new right knee for christmas and am not moving quite as fast as usual.

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    December 6, 2018 My Bad

    I rolled my November portfolio in late November and, using my admittedly crude evaluation system, I lost about 6% for the year. Here's how I did it: In February when the market made its first big break, I liquidated about 1/2 the portfolio in this account. I sold mostly stocks with a profit. That means I'll pay ordinary income tax on the gains. I kept the proceeds of the sales in cash until just now. I let the rest of the portfolio ride the rough waters of the market until now.

    Except for selling half - that probably kepy my loss from being 12% - I stuck to the O'Shaughnessy system for this portfolio. I have now re-invested about 85% of the money in this account in the last week or so. I used limit orders for about 1/2 of the re-investment, and most of these orders have been filled in the last two days. Therefore, it's now OK with me if the market starts going up again. I'll publish a new watch list tomorrow.

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    November 10, 2018 Another candidate for Fairy Tale of the year

    I notice Mallinckrodt (MNK) is at the top of the Weekly List this week. You probably remember I am very suspicious about Intangible assets, and MNK's intangibles are 82% of their assets. I'm no expert on the pharma manufacturing industry, and maybe 82% intangible assets is acceptable. But MNK's sudden ascendency to momentum leader combined with very high intangibles prompted me to read their financials (latest published 12/29/2017) from their web site.

    Their financials - that apparently conform to Irish accounting standards - are difficult for me to understand, but I particularly did not understand the long winded explanation of the change of fiscal year - nor do I want to. it just made my head hurt. Then items like negative $102 million of "Significant legal and enviromnental charges" that add to profit further baffles me. How do they have negative legal charges? Did their attorneys give them a refund? That hardly seems likely in my experience, and what exactly are environmental charges? If you would like some difficult reading, I recommend their most recent financial statements.

    Taking a look at my Supplement page shows rather high increase in accurals and a very low Altman Z Score.

    It does not take too long to find some negative information about the company on the web. I wonder what is driving the sudden Wall Street interest in this stock. Looks to me like a serious AVOID. Remember, I just provide carefully calculated numbers. You have to make your own decisions.

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    August 2, 2018 I should have seen it coming


    Triple S Management (GTS), is a self described "Managed Care" company based in Puerto Rico, and recent darling of the stock market ranking near the top of my Weekly Table. My most recent Supplement provides a clue that trouble might be lurking. Their most recent momentum was sharply down, but most compelling was that their Altman Z Score was right on the borderline and the Beneish M Score was missing.

    I thought it was too good to be true when I bought it anyhow. Now I have a bit over $4,000 of regret. I guess I should have paid more attention to the small note that they also are a property and casualty insurer in the wake of Hurricane Maria. Their explanation, "approximately $76.4 million of unfavorable prior period reserve development". I think what that means is management should be fired for not finding out what their exposure was, adequately reinsuring it, and then putting some boots on the ground to mitigate the losses. ------------------------------------------------------------------------------------------------------

    June 9, 2018 Lots of changes and one observation

    I am continuing to make what I hope are improvements to this web site. I moved the column explanations to the Information Page and plan to remove them from all the other pages to save space and make more room for scrolling tables with (semi) fixed headers on the information pages.

    My one observation is this: I notice "Century Link" on the last few weeks Weekly Table. Living as I do in one of Century Link's former home towns when it was Qwest and before that US West and before that Northwestern Bell. This is not an accurate history since, supposedly those former companies became part of Century Link through M&A

    But, one thing I know for sure from experience is that their service sucks. It has sucked for at least the last 20 years and still sucked the last time I had anything to do with it in 2016 when I waited over an hour for customer service to help a non-profit where I volunteer as the IT manager. Because they constantly advertise "gigibit" internet at a very cheap rate, I call them about every three months to verify that "that service is not available in my area". I would be damn surprised if it's available in any area.

    What does this have to do with investing you ask? A company that lies about their service will also lie about their financial statements. Take a look at the Supplement page and notice the Altman Z score is way below the cutoff and on the Weekly Table their delta debt is way over their Shareholder Yield. Their free cash flow is a measily 4.37% and the five year growth of free cash flow is -75.46%. My recollection is that a former CEO of Qwest, Joe Nacchio, was convicted for creative accounting. What do accounting records smell like when they are cooked?

    Make that two observations. I notice that SeaDrill was unable to convince their bankers to do that BS deal I mentioned last year and now trades around $3.40 down from $30+ following Chapter 11 proceedings. I'm glad I sold. But there are mitigating factors, the old management got a lot more control, but they had to put up a lot of money to do it. Prospects still do not look too good with oil prices bouncing around and electric cars getting more popular. Anyhow I bought some for the 11% yield with some of my gambling money. They are on this week's Top Ten list primarily because of their highly valued assets. Expensive drill ships are really not worth much if you cannot get somebody to rent them. It's not like they are a good place to take a vacation.

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    May 12, 2018 It's been too long since I made any comments

    My last comment was in February, and since then the market has performed better than I thought. Today, my January 2019 SPY $260 Puts are down 36%, the rest of my portfolio - including a lot of cash - is up 0.6%. So, the puts are working the way they are supposed to (I'm even for the year), but since options lose "leverage" the closer they get to exercise date, I have to start thinking about maybe closing they out.

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    February 5, 2018

    Lots to report today. Altho 6 days short of one year, I "rolled over" my February portfolio today. I did not exactly folow O'shaughnessy's formula because I sold everything in the portfolio regardless of whether or not it is on this week's buy list. I also did not wait for the full year to pass because the market seems headed into the dumper and I have always tried to apply the lesson from the old saying, better to fart and bear the shame than not to fart and bear the pain

    This wise saying can be paraphrased for investing as follows: Better to sell early and pay the tax than not to sell and lose the profit.

    Not only did I sell my Frbruary portfolio, I sold most of my other stock too, and bought some SPY $260 Jan 2019 puts. I learned about the puts from my favorite investing guru, Travis Johnson who writes the Stock Gumshoe newsletter and blog - absolutely the best investing value you can get for $49/year provided you read it consistently including the comments from his subscribers.

    Please understand, I still love the stock market, but my investment objectives and perspective may be very different than yours. I am 79 years old and have plenty of money to sustain a comfortable life style for me and my wife. If our retirement savings decrease it is going to be because we spend it, not because I lost it in the stock market. My time horizon is pretty short; maybe ten to fifteen more good years. I probably have enough money to last that long even without any income, but I do not have time or income to make up any large losses.

    On the other hand I like to invest so that we can continue or improve our life style - I still dream about that red and silver Cessna Citation - and if somebody discovers a miracle elixir so we can enjoy good health till we are 150, we will need more money, maybe even leave some for the kids.

    If not losing money in the stock market means I have to cash out from time to time to feel comfortable, that's OK with me. Wasn't it Ben Franklin who said, a man has three true friends: an old wife, an old dog, and ready cash?

    I have no obligation to any clients or investment advisors so if I feel like putting all my money in 2% CDs that's nobody's business but mine. Besides, it only costs me a maximum of about a thou to cash out and buy back in with my discount broker (Schwab).

    Because I feel no urgency to replace my investments with new ones, I can stay out of the market as long as it suits me. I do not expect to sell at the top - otherwise I'd be crying that I should have sold last Monday instead of yesterday. I also don't expect to buy back in at the bottom. Maybe there will not be a "correction" now and the last few days are just a hiccup, but I will not be sorry. I locked up some nice profits, and there's always some bargains lurking out there in the market.

    So, for now, I am going to be a spectator. I bet a little on the bear side with puts. The most I can lose is what I paid (about $24k), but a 20% decline in the S&P 500 between now and next January should net me around $60k. I think that's a good bet.

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