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Dividends Are Sexier Than You Think by Addison Wiggin

Addison Wiggin demonstrates that much of the total return stocks provide comes in the form of dividends.  Also, I love this quote from the article:

“Better the common equity of an adaptive and profitable American enterprise than the inert emissions of the US Treasury” – James Grant

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Dec 7, 2011

Dividends Are Sexier Than You Think

from The Daily Reckoning

Last month, the dividend yields on American AAA corporations moved above the yield on 30-year Treasury bonds! That had never happened before.

Even after last week’s stock market rally (which pushed dividend yields lower), the stocks of America’s four AAA companies still yield about 3%, on average, which is not quite as high as the yield on 30-year Treasury bonds, but still much higher than the yield on every Treasury bond of 24 years or less.

So you’ve got an opportunity here to forgo the dubious promise of a bankrupt nation and to invest, instead, in some of the strongest companies on the planet — those that are most capable of expanding, those that are most able to respond to government caprice and move operations wherever they need to move them, those with the most cash on their balance sheets. These are the companies that are going to lead the global economy for the next 10, 20, 30 years.

The story is much the same throughout the developed markets of Europe and North America.

In England, the FTSE index yields almost 4%. Ten-year British government bonds yield less than 3%. In France, The CAC 40 index yields 5.0%. Ten-year French government bonds yield around 3%. In Germany, the DAX yields 4%. German 10-year bonds yield 2%. In the US the S&P 500 dividend yield — at 2.08% — is higher than the 10-year Treasury yield for only the second time since 1958.

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In fact, many, many world-leading American companies now pay dividend yields higher than long-dated Treasuries.

As James Grant framed this contrast in the Oct. 7, 2011 edition of Grant’s Interest Rate Observer, “Better the common equity of an adaptive and profitable American enterprise — say, Molson Coors (NYSE: TAP/A) — than the inert emissions of the US Treasury…Today, the stock is quoted at 39… at 11.1 times earnings with the yield of 3.25%. Meanwhile, the utterly unadaptive 10-year note of Timothy Geithner’s negative-cash-flow Treasury is quoted at 1.83% [now 2.03%].”

Grant also highlights Campbell Soup (NYSE:CPB) as a compelling alternative to long-term Treasury securities. At the current quote of $33, Grant observes, this blue chip stock is selling for about 13 times trailing earnings and yielding 3.5%. “Campbell, which traces its corporate ancestry back to 1869 and which incorporated in 1922, early on conceived the bright idea of draining the water from canned soup. The shipping expense thereby saved was enough to allow a price reduction to a dime per can from 30 cents.”

The company has flourished ever since. “From 1955 to the present,” Grant points out, “dividends have grown at an 8.9% compound rate.”

Now, I realize that dividends sound very boring — kind of like watching paint dry… I can almost hear you saying, “C’mon, Addison! This isn’t the Great Depression! I don’t want to invest for dividends, clip bond coupons and store canned peas in my basement. I want something that’s high-growth. Something sexy.”

My answer to that is: Sexy sometimes sneaks up on you.

What if I had told you on Jan. 1, 2000, to sell all your tech stocks — those highflying stocks that were doubling and tripling every few months — and to spread the proceeds equally across three very boring investments: gold, 10-year Treasury bonds and stodgy old dividend-paying stocks — like the ones inside the Vanguard Dividend Growth Fund (VDIGX), the mutual fund we highlighted in Apogee.

You would have looked at me as if I had lost my mind. You might have even felt sorry for me and tried to offer me some intelligent investment advice. But with the benefit of hindsight, we know what happened next.

The high-flying tech stocks that comprised the Nasdaq Composite Index crashed…and still have not recovered their losses, even after all this time. The Nasdaq is down 28% since the end of 1999. Even the “blue chip” S&P 500 stocks are down 15% during that time frame… until you add back those boring dividends.

With dividends included, the S&P 500’s 15% loss flips to a 6% gain. That’s still a miserable return for an entire decade, but it illustrates the point that dividends matter. In fact, for long periods of time in the stock market’s history, dividends have been the only thing that mattered.

Without dividends, the S&P 500 index would have produced a loss for the 25 long years from August 1929 to August 1954. Then again, without dividends, the S&P 500 produced a 5% loss during the 13 years from September 1961 to September 1974. But with dividends included, the S&P’s loss became a 46% gain.

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If you think that’s just a bunch of “ancient history”, think again. During the last 12 years — from early November 1999 until this very moment — the S&P 500 has produced a loss…unless you include dividends.

The moral of the story is simple: Dividends matter. In fact, they may even be a little bit sexy. Over the course of the last half-century, dividends have contributed more than half of the stock market’s total return — 56%, to be exact.

So what happened to all that boring stuff you could have purchased at the dawn of the new millennium? Well, the Vanguard Dividend Growth Fund delivered a total return of 50%, 10-year Treasuries produced a total return of 162% and the “barbarous relic” gold provided a dazzling total return of nearly 500%. Average return of the three investments: 236%!

We would expect the Vanguard Dividend Growth Fund to outperform their low-dividend or no-dividend counterparts over the next few years…and to greatly outperform the return of long-term government bonds. As James Grant observes, “Better the common equity of an adaptive and profitable American enterprise than the inert emissions of the US Treasury.”

Regards,

Addison Wiggin,
for The Daily Reckoning

Dividends Are Sexier Than You Think originally appeared in the Daily Reckoning. The Daily Reckoning provides over 400,000 readers economic news, market analysis, and contrarian investment ideas.

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Gold mining stocks day three: Newmont Mining (NEM)

It is crisis time in the Eurozone and elsewhere.  Stock markets will crash at least as hard as in 2008 when Europe goes into recession.  Gold is a crisis hedge, but it drops in a stock market crash also (just not a badly).  And gold mining stocks are a great performing asset, but only after most of the stock market crisis has passed because the world is dominated by Keynesian economics.  The financial media, government technocrats, and almost all PhD economists practice the voodoo economic religion of Keynesian economics.  Keynesian investors flee stock markets in a panic and run to US government bonds.  Bonds are bought in dollars.  Demand for dollars increases, demand for gold drops.  This is an opportunity of immense proportions if you keep your powder dry.

It is gold miners week at www.myhighdividendstocks.com, but not because gold miners are high dividend stocks.  Most are no or low dividend stocks.  However, gold mining stocks will offer some huge capital appreciation potential once the US and European stock markets crash again.  Every central bank in the world is printing money (Dollars, Euros, Yen, Pounds, and Yuan) and the commodity gold is priced in fiat currencies, so as more money is printed the price of gold expressed in fiat currencies goes up.  It really is that simple.  Gold mining companies can increase their profit margins when the cost of extracting gold from the Earth’s crust goes up a little and the price of gold goes up a lot.  But gold mining companies tend to be more volatile than the price of the underlying commodity.  They amplify gold’s gains and losses as you will see below.

So what is the best price for several of the gold majors that offers capital preservation and maximum opportunity for capital appreciation with maybe some dividends thrown in for good measure?  That’s what I hope to find out this week for you and I.

Next up is Newmont Mining (NEM)

Morningstar’s take: Newmont Mining is the world's second-largest gold producer. In 2010, the company had slightly below-average operating costs. However, we expect unit costs to increase materially in 2011, driven by lower production and increases for everything from energy to labor and royalties. The company has two major advanced-stage projects in its pipeline--Conga in Peru and Akyem in Ghana--but first production will not appear until 2013-15 at the earliest. Therefore, we believe Newmont will face slightly declining overall production for the next few years.

Newmont is the world's second-largest gold producer. In 2010, the firm produced 6.5 million ounces of gold (consolidated, equity: 5.4 million) and 600 million pounds of copper (consolidated, equity: 327 million). North America accounted for 30% of consolidated gold production, South America for 23%, Asia Pacific for 39%, and Africa for 8%. As of Dec. 31, 2010, Newmont had 92 million ounces of proven and probable gold equity reserves.

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Price: $67.62

Shares: 494.82 million (504 million fully diluted)

Market capitalization: $33.44 billion

Bonds outstanding: $4.2 billion

The circle near 2019 is $900 million dollars for scale purposes.

DIVIDEND RECORD – Steady dividend payer since at least 1987.  Last dividend cut was in 1997.  Newmont appears to be a decent dividend grower since 2010.

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Dividend: $0.35/quarter

Dividend Yield: 2.08% ($1.40 annual DIV/$67.62 share price)

Dividend Payout Ratio:   ($1.40/$4.72 recent EPS)

EARNING POWER – Six year average adjusted earnings is $1.35 per share @ 504 million shares

(Earnings adjusted for changes in capitalization)

                        EPS       Net Inc.             Shares               Adj EPS

2006                 $1.75    $791 M              452 M                $1.57

2007                 ($4.17) ($1,886 M)        452 M                ($3.74)

2008                 $1.83    $831 M              455 M                $1.65

2009                 $2.66    $1,297 M           487 M                $2.57

2010                 $4.55    $2,277 M           500 M                $4.52

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2011 Q1            $1.03    $514 M              501 M                $1.02

2011 Q2            $0.77    $387 M              501 M                $0.77

2011 Q3            $0.98    $493 M              504 M                $0.98

2011 Q4            $1.38 E $682 M  E          504 M                $1.35 E

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2011 E              $4.16 E $2,076 E           504 M                $4.12 E

Estimates come from Reuters.com consensus for the next quarter

Six year average adjusted earnings per share is $1.35

Consider contrarian buying at $10.80 (8 times average adj EPS)

Consider value buying at $16.20 (12 times average adj EPS)

Consider speculative selling at $27.00 (20 time average adj EPS)

Newmont Mining is trading at 50 times average adjusted earnings.  This stock’s price is highly speculative.

BALANCE SHEET – I don’t like the recent dip in Newmont’s shareholder equity.  And the stock price is way too high compared to book value.

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Book value per share: $27.50

Price to book value ratio: 2.45 (close to 1.0 or under is good)

Current ratio: 1.42 latest qtr (above 2.0 is good)

Quick ratio: 0.63 latest qtr (above 1.0 is good)

Debt to equity ratio: 0.26 (this is good)

CONCLUSION – Newmont Mining is a low dividend grower that is speculatively priced for its earning power.  The company’s balance sheet is okay, but its hard to tell if it is deteriorating without in depth analysis.  There is no need for this deeper analysis since the stock price is so speculative compared to earning power and price to book value per share.

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Newmont bottomed in the $23.82 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best investment entry into Newmont since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Newmont dropped even more than the broader market or gold.  It dropped almost 60% from $59.87 in January 2006 down to $23.82 by October 2008.  Don’t think that it happen again.  Wait for another bottom near value territory at $16.20 per share.  Newmont would be yielding about 8.6% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

DISCLOSURE – I don’t own Newmont Mining (NEM).

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(download)

Gold mining stocks day two: Barrick (ABX)

It is crisis time in the Eurozone and elsewhere.  Stock markets will crash at least as hard as in 2008 when Europe goes into recession.  Gold is a crisis hedge, but it drops in a stock market crash also (just not a badly).  And gold mining stocks are a great performing asset, but only after most of the stock market crisis has passed because the world is dominated by Keynesian economics.  The financial media, government technocrats, and almost all PhD economists practice the voodoo economic religion of Keynesian economics.  Keynesian investors flee stock markets in a panic and run to US government bonds.  Bonds are bought in dollars.  Demand for dollars increases, demand for gold drops.  This is an opportunity of immense proportions if you keep your powder dry.

It is gold miners week at www.myhighdividendstocks.com, but not because gold miners are high dividend stocks.  Most are no or low dividend stocks.  However, gold mining stocks will offer some huge capital appreciation potential once the US and European stock markets crash again.  Every central bank in the world is printing money (Dollars, Euros, Yen, Pounds, and Yuan) and the commodity gold is priced in fiat currencies, so as more money is printed the price of gold expressed in fiat currencies goes up.  It really is that simple.  Gold mining companies can increase their profit margins when the cost of extracting gold from the Earth’s crust goes up a little and the price of gold goes up a lot.  But gold mining companies tend to be more volatile than the price of the underlying commodity.  They amplify gold’s gains and losses as you will see below.

So what is the best price for several of the gold majors that offers capital preservation and maximum opportunity for capital appreciation with maybe some dividends thrown in for good measure?  That’s what I hope to find out this week for you and I.

Next up is Barrick Gold (ABX)

Morningstar’s take: Barrick is the world's largest gold producer. The company has middle-of-the-pack operating costs and is growing production by working on two megaprojects: Pueblo Viejo in the Dominican Republic and Pascua-Lama on the border between Argentina and Chile. Production is heavily weighted toward the Americas, where costs and political risks tend to be lower.

Barrick is the world's largest gold producer. In 2010 the firm produced 7.9 million ounces of gold and 368 million pounds of copper. North America accounted for 43% of gold production, South America for 27%, Australia/Pacific for 25%, and Africa for 9%. As of Dec. 31, 2010, Barrick had 140 million ounces of proven and probable gold reserves. Barrick's flagship Goldstrike property produced 1.24 million ounces of gold in 2010. The firm has 25 operating mines.

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Share price: $50.33

Shares: 999.80 million

Market capitalization: $50.32 billion

Bonds: Barrick has some big bonds coming due in 2013 although this miner is not overly indebted.

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DIVIDEND RECORD – Barrick has only started paying a quarterly dividend since the second half of 2010.  It just increased its quarterly dividend from $0.12 to $0.15 per share in its most recent quarter.

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Dividend: $0.15 per share quarterly ($0.60 annually)

Dividend yield: 1.2% ($0.60/$50.33 share price)

Dividend payout ratio: 12% - 50% depending on how you calculate ($0.60/$4.86 expected 2011 EPS = 12%) or ($0.60/$1.21 average adj. earnings = 50%)

EARNING POWER - Six year average adjusted earnings = $1.21 @ 999.8 million shares

(Earnings adjusted for changes in capitalization)

                        EPS       Net inc.             Shares               Adj EPS

2006                 $1.77    $1,506 M           851 M                $1.51

2007                 $1.28    $1,119 M           874 M                $1.12

2008                 $0.89    $785 M              903 M                $0.79

2009                 ($4.73) ($4,274 M)        903 M                ($4.27)

2010                 $3.28    $3,274 M           987 M                $3.27

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2011 Q1            $1.00    $1,001 M           999 M                $1.00

2011 Q2            $1.16    $1,159 M           1,001 M             $1.16

2011 Q3            $1.36    $1,365 M           1,001 M             $1.36

2011 Q4            $1.34 E $1,339 M E        999.8 M             $1.34 E

Six year average adjusted earnings = $1.21 @ 999.8 million shares

Source: 2011 Q4 consensus estimate $1.34 per share according to Reuters.com

Consider contrarian buying at $9.68 (8 times avg. adjusted EPS)

Consider value buying at $14.52 (12 times avg. adjusted EPS)

Consider speculative selling at $24.20 (20 times avg. adjusted EPS)

Barrick is trading at 41.6 times avg. adjusted EPS.  This is highly speculative pricing.

BALANCE SHEET – Barrick has a decent balance sheet, but I don’t like their rising debt.

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Book value per share: $22.38

Price to book value ratio: 2.24 (not so good; $50.33 share price/ $22.38 BV per share)

Current ratio: 2.27 latest quarter (over 2.0 is good)

Quick ratio: 1.18 latest quarter (over 1.0 is good)

CONCLUSION - Barrick bottomed in the $19.80 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best value entry into Barrick since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Barrick dropped even more than the broader market or gold.  It dropped almost 63% from $53.31 in March of 2008 down to $19.89 by October 2008.  Don’t think that it happen again.  Wait for another bottom near value territory at $14.52 per share.  Barrick would be yielding about 4.1% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

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DISCLOSURE – I don’t own Barrick Gold (ABX).

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Gold stock week day one - Goldcorp (GG)

It is crisis time in the Eurozone and elsewhere.  Stock markets will crash at least as hard as in 2008 when Europe goes into recession.  Gold is a crisis hedge, but it drops in a stock market crash also (just not a badly).  And gold mining stocks are a great performing asset, but only after most of the stock market crisis has passed because the world is dominated by Keynesian economics.  The financial media, government technocrats, and almost all PhD economists practice the voodoo economic religion of Keynesian economics.  Keynesian investors flee stock markets in a panic and run to US government bonds.  Bonds are bought in dollars.  Demand for dollars increases, demand for gold drops.  This is an opportunity of immense proportions if you keep your powder dry.

It is gold miners week at www.myhighdividendstocks.com, but not because gold miners are high dividend stocks.  Most are no or low dividend stocks.  However, gold mining stocks will offer some huge capital appreciation potential once the US and European stock markets crash again.  Every central bank in the world is printing money (Dollars, Euros, Yen, Pounds, and Yuan) and the commodity gold is priced in fiat currencies, so as more money is printed the price of gold expressed in fiat currencies goes up.  It really is that simple.  Gold mining companies can increase their profit margins when the cost of extracting gold from the Earth’s crust goes up a little and the price of gold goes up a lot.  But gold mining companies tend to be more volatile than the price of the underlying commodity.  They amplify gold’s gains and losses as you will see below.

So what is the best price for several of the gold majors that offers capital preservation and maximum opportunity for capital appreciation with maybe some dividends thrown in for good measure?  That’s what I hope to find out this week for you and I.

First up is Goldcorp (GG)

Image002

Market price: $51.10

Shares: 809.73 million

Market capitalization: $41.43 billion

Bonds: Goldcorp has very little bonds outstanding

Image006

DIVIDEND RECORD

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Dividend: $0.045/month ($0.54 annually).  Goldcorp just announced a dividend increase from $0.03/mo. to $0.045/mo.  http://www.marketwatch.com/story/goldcorp-increases-monthly-dividend-2011-12-05-73400 .  They have been paying dividends steadily since late 2003.

Dividend yield: ~1.0% ($0.54/$51.10 market price)

Dividend payout ratio:  23.8% to 52.4% depending on what you measure ($0.54/$2.26 latest EPS = 23.8% or $0.54/$1.03 avg adjusted EPS = 52.4%)

EARNING POWER

(Earnings adjusted for changes in capitalization)

                        EPS       Net inc.             Shares               Adj. EPS

2006                 $0.93    $408 M              441 M                $0.50   

2007                 $0.65    $460 M              709 M                $0.57

2008                 $2.06    $1,476 M           715 M                $1.82

2009                 $0.33    $240 M              735 M                $0.30

2010                 $2.13    $1,574 M           786 M                $1.94

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2011 Q1            $0.81    $651 M              809.73 M           $0.80

2011 Q2            $0.52    $489 M              809.73 M           $0.60

2011 Q3            $0.41    $336 M              809.73 M           $0.41

2011 Q4 (E)       $0.64 E $518 M E           809.73 M E        $0.64 E

Goldcorp’s six year average adjusted earnings* is $1.27 per share

Consider contrarian buying at $10.16 (8 times average adj. EPS)

Consider value buying at $15.24 (12 times average adj. EPS)

Consider speculative selling at $25.40 (20 times average adj. EPS)

Goldcorp is trading at 40.2 times average adjusted earnings.  This is highly SPECULATIVE despite the bull market in gold.

* includes 2011 4Q Reuters concensus earnings estimates of  $0.64 per share

BALANCE SHEET – That is a pretty good looking balance sheet

Image012

Book value per share: $25.76

Price to book value ratio: 1.98 (not bad, but closer to 1.00 is desirable)

Current Ratio: 3.82 (latest quarter; over 2.0 is good)

Quick Ratio: 2.65 (latest quarter; over 1.0 is good)

Debt/equity Ratio: 0.03 (awesome)

CONCLUSION – Goldcorp bottomed in the $17.00 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best value entry into Goldcorp since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Goldcorp dropped even more than the broader market or gold.  It dropped almost 65% from $48.29 in July of 2008 down to $17.01 by October 2008.  Don’t think that it happen again.  Wait for another bottom near value territory at $15.24 per share.  Goldcorp would be yielding about 3.5% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

DISCLOSURE – I don’t own Goldcorp (GG) now, but I did own it a few years ago.

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Visual evidence of the European soverign debt crisis and worldwide recession.

The New York Times employs a bunch of Keynesian socialists, but they do produce some quality interactive visual graphics.  They recently produced an excellent visualization of the European sovereign debt crisis that you should take a look at.

http://www.nytimes.com/interactive/2011/10/23/sunday-review/an-overview-of-the-euro-crisis.html

Italy will defalt along with Greece.  The French banks are doomed without central banker bailouts.  The bailouts will be inflationary.  Europe is back in recession.   The US is next.  Stock markets will fall.  There will be high dividend stock bargains.  Keep your powder dry until near the next bottom.

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TIP OF THE WEEK - Create a budget and stick to it

Create a budget and stick to it

Jason Brizic

December 2nd, 2011

Sticking to a realistic budget will allow you to save for retirement or to create an inheritance.  You will need capital to start your side business or to start a new career that will fund your retirement.  Social Security and Medicare are the biggest ponzi schemes in the history of the world.  You can’t rely on them to fund your retirement at all if you are under age 55 right now.  So, you must budget for success later in life so you don’t end up a ward of a dying nation-state.

If you create a realistic budget and stick to it, then you will accumulate saving/capital to achieve your life and retirement goals.  You will reduce your stress levels when you stop living paycheck to paycheck.  Marriage is hard enough without the additional pressures of monthly money problems.  You will also be able to buy goods on sale for cash when you have accumulated savings.  People sell quality assets online (Ebay, Craigslist, the local classifieds) for pennies on the dollar when they get into financial troubles.  The role of the capitalist entrepreneur is to buy these assets cheap and to put them to profitable use by satisfying customers desires.

A generic goal should be to save at least 10% of your pretax monthly income for retirement.  Some people will need to save more and some will need to save less to fund their goals.  However, there are several tasks to complete first before you begin saving for retirement that some people skip.

1.     Use this money to pay down credit card and other high interest debts now (this doesn’t include your house mortgage).

2.     Once those debts are extinguished you can save this money each month to build up your 3-6 month emergency fund.  Let’s face it – there ain’t no job security in corporate America or in the government sector either.

3.     After the emergency fund is filled up you can begin saving for retirement.  I discourage the use of 401(k) plans, IRAs, and other schemes that limit your access to your own property and that the government can confiscate easily to shore up their ponzi schemes.  Here is a taste of things to come: http://www.sovereignman.com/expat/how-the-us-government-will-seize-your-retirement-account/

4.     Use your savings to capitalize your business, purchase precious metals, buy positive cash flow real estate, invest in safe high dividend stocks, and/or buy stable foreign currencies

Go to www.mint.com and create a free account.  You can easily create a budget there and monitor your progress.

P.S. Here is a link to budget for living in California on a $46,000 per year income (now that is some austerity, but considering the median household income in the USA as of 2009 was $50,221 about half of Americans are in this boat) http://www.mybudget360.com/the-perfect-46000-budget-learning-to-live-in-california-for-under-50000/ .

For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week

Are Corporate Balance Sheets Really the Strongest in History?

Here is a good article on the myth that corporations are flush with cash and that their balance sheets are full of tangible assets.  I think I will begin reporting the percent of total assets in cash and the percent of tangible assets out of the total assets.  I like high dividend stocks with a high percentage of tangible assets.

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Are corporate balance sheets really the strongest in history?

by  John P. Hussman, Ph.D.

It is freely accepted by investors as fact that U.S. corporate balance sheets are the stronger than ever before in history. This view is largely driven by the significant amount of cash (checking deposits, savings deposits, money market funds, commercial paper holdings) on corporate balance sheets. Our difficulty with this view is that no single line item on a balance sheet is a sufficient indication of "strength." Most useful measures are derived from ratios at the very least, and ideally calculations across a variety of dimensions.

The best line item on corporate balance sheets today is typically "Cash and Equivalents." But while the amount of cash and cash-equivalents on U.S. (nonfinancial) corporate balance sheets has increased significantly, particularly relative to the cash-strapped lows of 2009, corporate cash is certainly nowhere near historical highs relative to debt. As a side note, probably the dumbest use of balance sheet data that we hear from time-to-time is when analysts talk about the P/E multiple of a stock "after you back out the cash," as if the cash line item can meaningfully be subtracted from the market cap of the equity. Really? If a company issues a billion dollars of debt, and then holds the proceeds in cash, does that suddenly make the stock "cheaper" because we can now back out that cash from the company's market cap? Um, no.

 
Read the rest of the article at http://www.hussmanfunds.com/wmc/wmc111128.htm
 
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Nigel Farage Nails the Eurocrats for the Disaster They Have Caused. He is the Ron Paul of Europe.

The Eurozone will breakup peacefully or there will be massive strife.  Neither outcome is good for the people who live in the USA, Europe, or Asia.  Nigel Farage is the Ron Paul of Europe.  He has been warning the Eurocrats for years about the disaster they are causing just like Ron Paul has in the USA.

There will be opportunities to buy high dividend stocks with safety of principal near the bear market lows.  The Euro will implode and take markets much lower than they are today.  Don’t believe the hype coming from the Eurocrat’s press releases and summits.  Don’t risk your savings on the ex-communist and present socialist pipedreams of a politically and fiscally unified Europe.

http://www.garynorth.com/public/8789.cfm

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62 Million Reasons Why Mortgage REIT Investors Should Be Scared

There are actually 62,000,001 reasons not to invest in mortgage REITs like American Capital Agency Corp. (AGNC) and Annaly Capital Management (NLY).  The first reason is that the USA and the world are slipping back into recession.  This will increase the speed of prepayments of mortgages.  Increase prepayment speeds destroys leveraged earnings in mortgage REITs.  Need proof, then check this out.  The ECRI has an amazing track record.  Ignore them at your financial peril.

http://www.advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php

Secondly, this article from Minneapolis attorney Bill Butler on LewRockwell.com should bring fear into the hearts of all mortgage REIT investors worldwide.  Here are the other 62 million reasons not to invest in mortgage REITs.  This is a long article, but it shows how nefarious Fannie Mae and Freddie Mac really are.  Mortgage REITs buy their agency securities from these crooks.

http://lewrockwell.com/butler-b/butler-b14.1.html

DISCLOSURE – I don’t own AGNC or NLY.

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Yet Another Reason Not to Buy Amazon.com (AMZN) Stock

More proof that Amazon.com (AMZN) needs beta-testers more than it needs to pay a dividend.

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Amazon Foul-Ups: Google Access
Gary North
Printer-Friendly Format

Nov. 26, 2011

To give you an example of why Amazon needs more full-time beta-testers to search the site daily, consider this.

Someone searches Google for Amazon. He gets this:


   

He then wants to find out about Amazon Instant Video. He clicks the link. He gets this:


   
This can't be right. So, he clicks again. The same. And again. He gets this:


   
Enough said.

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