My High Dividend Stocks Blog

My High Dividend Stocks
This is my high dividend stocks site where I help site members find high dividend stocks with earning power and strong balance sheets.

Entrepreneurship with Fiat Property by Hans-Hermann Hoppe

Image001

[The following is the text of a speech first delivered at the Edelweiss Holdings Symposium held in Zurich, Switzerland, on September 17, 2011.]

Let me begin with a brief description of what a capitalist-entrepreneur does, and then explain how the job of the capitalist-entrepreneur is changed under statist conditions.

What the capitalist does is this: He saves (or borrows saved funds), hires labor, buys or rents capital goods and land, and he buys raw materials. Then he proceeds to produce his product or service, whatever it may be, and he hopes that he will make a profit.

Profits are defined simply as an excess of sales revenue over the costs of production. The costs of production, however, do not determine the revenue. If the cost of production determined price and revenue, everyone could be a capitalist. No one would ever fail. Rather, it is anticipated prices and revenues that determine what production costs the capitalist can possibly afford.

The capitalist does not know what the future prices will be or what quantity of his product will be bought at such prices. This depends on the consumers, and the capitalist has no control over them. The capitalist must speculate what the future demand for his products will be, and he can go wrong in his speculation, in which case he does not make profits but will incur losses instead.

To risk your own money in anticipation of an uncertain future demand is obviously a difficult task. Great profits may await you, but so also may total financial ruin. Few people are willing to take this risk, and even fewer are good at it and stay in business for any length of time.

In fact, there is even more to be said about the difficulty of being a capitalist.

Every capitalist stands in permanent competition with every other one for the invariably limited amounts of money to be spent on their goods and services by consumers. Every product competes with every other product. Whenever consumers spend more (or less) on one thing, they must spend less (or more) on another. Even if a capitalist has produced a successful product and earned a profit, there is nothing that guarantees that this will go on. Other businessmen can imitate his product, produce it more cheaply, underbid his price and outcompete him. To prevent this, every capitalist must thus continuously strive to lower his production costs. Yet even trying to produce whatever you produce ever more cheaply is not enough.

The set of products offered by various capitalists is in constant flux, and so is the evaluation of these products by consumers. Continuously new or improved products are offered on the market and consumer tastes constantly change. Nothing remains constant. The uncertainty of the future facing every capitalist never disappears. There is always the lure of profits but also the threat of losses. Again, then, it is very difficult to be continuously successful as a businessman and not to sink back to the rank of an employee.

In all of this there is only one thing that the businessman can count on and take for granted, and that is his real, physical property — and even that is not safe, as we will see.

His real property comes in two forms. First, there are the physical resources, the means of production, including labor services, that the capitalist has bought or rented for some time and that he combines in order to produce whatever he produces. The value of all of these items is variable, as already explained. It depends ultimately on consumer evaluations. What is stable about them is only their physical character and capability. But without this physical stability of his productive property the capitalist could not produce what he produces.

Second, besides his productive property, the capitalist can count on his ownership of real money. Money is neither a consumer good nor a producer good. It is the common medium of exchange. As such, it is the most easily and widely sold good. And it is used as the unit of account. In order to calculate profit and loss, the capitalist needs recourse to money. The input factors and the output, his products to be produced, are incommensurable, like apples and oranges. They are made commensurable only insofar as they can all be expressed in terms of money. Without money, economic calculation is impossible, as Ludwig von Mises above all has explained. The value of money, too, is variable, like the value of everything else. But money, too, has physical characteristics. It is commodity money, such as gold or silver, and money profits are reflected in an increase in the supply of this commodity, gold or silver, at the disposal of the capitalist.

What can be said, then, about both the capitalist's means of production and his money, is this: their physical characteristics do not determine their value, but without their physical characteristics, they would have no value at all, and changes in the physical quality and quantity of his property do affect the value of his property, whatever other factors (such as changing consumer evaluations) may affect the value of his property also.

Now let me introduce the state and see how it affects the business of the capitalist.

The state is conventionally defined as an institution that possesses a territorial monopoly of ultimate decision making in every case of conflict, including conflicts involving the state and its agents itself, and, by implication, the right to tax — i.e., to unilaterally determine the price that its subjects must pay to perform the task of ultimate decision making.

To act under these constraints — or rather, lack of constraints — is what constitutes politics and political action, and it should be clear from the outset that politics, then, by its very nature, always means mischief.

More specifically, we can make two interrelated predictions as to the effect of a state on the business of business. First, and most fundamentally, under statist conditions real property will become what may be called fiat property. And secondly and more specifically, real money will be turned into fiat money.

First, with the state being the ultimate arbiter in every case of conflict including those in which it is involved itself, the state has essentially become the ultimate owner of all property. In principle, it can provoke a conflict with a businessman and then decide against him by expropriating him and making itself (or someone of its liking) the owner of the businessman's physical property. Or else, if it doesn't want to go as far, it can pass legislation or regulations that involve only a partial expropriation. It can restrict the uses that the businessman can make of his physical property. Certain things the businessman is no longer permitted to do with his property.

The state cannot increase the quality and quantity of real property. But it can redistribute it as it sees fit. It can reduce the real property at the disposal of businessmen or it can limit the range of control that they are allowed over their property; and it can thereby increase its own property (or that of its allies) and increase its own range of control over existing physical things.

The businessmen's property, then, is their property in name only. It is granted to them by the state, and it exists only as long as the state does not decide otherwise. Constantly, the sword of Damocles is hanging over the heads of businessmen. The execution of their business plans is based on their assumption of the existence, at their disposal, of certain physical resources and their physical capabilities, and all of their value speculations are based on this physical basis being given. But these assumptions about the physical basis can be rendered incorrect at any time — and their value calculations vitiated as well — if only the state decides to change its current legislation and regulations.

The existence of a state, then, heightens the uncertainty facing the businessman. It makes the future less certain than would be the case otherwise. Realizing this, many people who might otherwise become businessmen will not become businessmen at all. And many businessmen will see their business plans spoiled — not because they did not correctly anticipate future consumer demand, but because the physical basis, on which their plan was based, was altered by some unexpected and unanticipated change in state laws and regulations.

Second, rather than meddling with a businessman's productive capital through confiscation and regulation, however, the state prefers to meddle with money. Because money is the most easily and widely salable good, it allows the state operators the greatest freedom to spend their income as they like. Hence the state's preference for money taxes, i.e., for confiscating money income and money profits. Real money becomes subject to confiscation and changing rates of confiscation. This is the first sense in which money becomes fiat money under statist conditions. People own their money only insofar as the state allows them to keep it.

But there is also a second, even more perfidious, way in which money becomes fiat money under statist conditions.

States everywhere have discovered an even smoother way of enriching themselves at the expense of productive people: by monopolizing the production of money and replacing real, commodity money and commodity credit with genuine fiat money and fiat or fiduciary credit.

On its territory, per legislation, only the state is permitted to produce money. But that is not sufficient. Because as long as money is a real good, i.e., a commodity that must be costly to produce, there is nothing in it for the state except expenses. More importantly, then, the state must use its monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly, quality money such as gold or silver, the state must see to it that worthless pieces of paper, which can be produced at practically zero cost, will become money.

Under competitive conditions — i.e., if everyone is free to produce money — a money that can be produced at zero cost would be produced up to a quantity where marginal revenue equals marginal cost. And since marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to be able to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into "real values") — and the more so the cheaper the money commodity.

Having monopolized the production of money and reduced its production cost and quality to virtually zero, the state has made a marvelous accomplishment. It costs almost nothing to print money and one can turn around and buy oneself something really valuable, such as a house or a Mercedes.

What are the effects of such fiat money, and in particular what are the effects for the business of business? First and in general, more paper money does not in the slightest affect the quantity or quality of all other, nonmonetary goods. Rather, what the additional money does is twofold. On the one hand, money prices will be higher than they would otherwise be and the purchasing power per unit of money will be lower. And secondly, with the injection of additional paper money existing wealth will be redistributed in favor of those receiving and spending the new money first and at the expense of those receiving and spending it later or last.

And specifically regarding the capitalist, then, paper money adds another dose of uncertainty to his business. If and as long as money is a commodity, such as gold or silver, it may not be exactly "easy" to predict the future supply and purchasing power of money. However, based on information about current production costs and industry profits, it is very well possible to come up with a realistic estimate. In any case, the task is not pure guesswork. And while it is conceivable that, with gold or silver as money, nominal money profits may not always equal "real" profits, it is at least impossible that a nominal profit should ever amount to nothing at all. There is always something left: quantities of gold or silver.

In distinct contrast, with paper money, the production of which is unconstrained by any kind of natural (physical) limitations (scarcity) but dependent solely on subjective whim and will, the prediction of the future money supply and purchasing power does become guesswork. What will the money printers do? And it is not just conceivable but a very real possibility that nominal money profits will turn out to represent literally nothing but bundles of worthless paper.

Moreover, hand in hand with fiat money comes fiat or fiduciary credit, and this creates still more uncertainty.

If the state can create money out of thin air it also can create money credit out of thin air. And because it can create credit out of thin air, i.e., without any previous savings on its part, it can offer cheaper loans than anyone else, at below-market rates of interest, even at rates as low as zero. The interest rate is thus distorted and falsified, and the volume of investment will become divorced from the volume of savings. Systematic malinvestment is thus generated, i.e., investment unbacked by savings. An unsustainable investment boom is set in motion, necessarily followed by a bust, revealing large-scale clusters of entrepreneurial errors.

Last but not least, under statist conditions, i.e., under a regime of fiat property and fiat money, the character of businessmen and of doing business is changed, and this change introduces another hazard into the world.

Absent a state, it is consumers that determine what will be produced, in what quality and quantity, and who among businessmen will succeed or fail. With the state, the situation facing businessmen becomes entirely different. It is now the state and its operators, not consumers, who ultimately decide who will succeed or fail. The state can keep any businessman alive by subsidizing him or bailing him out; or else it can ruin anyone by deciding to investigate him and find him in violation of state laws and regulations.

Moreover, the state is flush with taxes and fiat money and can spend more money than anyone else. It can make any businessman rich (or not). And the state and its operators have a different spending behavior than normal consumers. They do not spend their own money, but other people's money, and in most cases not for their own, personal purposes, but for those of some anonymous third parties. Accordingly, they are frivolous and wasteful in their spending. Neither the price nor the quality of what they buy is of great concern to them.

In addition, the state can go into business itself. And because it doesn't have to make profits and avoid losses, as it can always supplement its earnings through taxes or made-up money, it can always outcompete any private producer of the same or similar goods or services.

And finally, by virtue of its ability to legislate, to make laws, the state can grant exclusive privileges to some businesses, insulating or shielding them from competition, and by the same token partially expropriate and disadvantage other businesses.

In this environment, it is imperative for every businessman to pay constant and close attention to politics. In order to stay alive and possibly prosper, he must spend time and effort to concern himself with matters that have nothing to do with satisfying consumers, but with power politics. And based on his understanding of the nature of the state and of politics, then, he must make a choice: a moral choice.

$15.00 $14.00

He can either join in and become a part of the vast criminal enterprise that is the state. He can bribe politicians, political parties or public officials, whether with cash or in kind (including promises of future employment in the "private" sector as "board-members," "advisors," or "consultants"), in order to gain for himself economic advantages at the expense of other businesses. That is, he can pay bribes to secure state contracts or subsidies for himself and at the exclusion of others. Or he can pay bribes for the passing or maintenance of legislation that secures him and his business legal privileges and monopoly profits (and capital gains) while partially expropriating and thus screwing his competitors. Needless to say, countless businessmen have chosen this path. In particular big banking and big industry have thus become intricately involved in the state, and many a wealthy businessman has made his fortune more on account of his political skills than his abilities as a consumer-serving economic entrepreneur.

Or else, a businessman can choose the honorable but at the same time also the most difficult path. This businessman is aware of the nature of the state. He knows that the state and its operators are out to get him and bully him, to confiscate his property and money and, even worse, that they are arrogant, self-righteous, haughty, and full of themselves. Based on such understanding, this very different breed of businessman then tries his best to anticipate and adjust to the state's every evil move. But he does not join the gang. He does not pay bribes to secure contracts or privileges from the state. Instead, he tries as well as he can to defend whatever is still left of his property and property rights and make as large profits as possible in doing so.

Hans-Hermann Hoppe, an Austrian School economist and anarchocapitalist philosopher, is professor emeritus of economics at UNLV, a distinguished fellow with the Ludwig von Mises Institute, and founder and president of The Property and Freedom Society. Send him mail. See Hans-Hermann Hoppe's article archives.

This article, originally published at LewRockwell.com, is the text of a speech first delivered at the Edelweiss Holdings Symposium held in Zurich, Switzerland, on September 17, 2011.

You can subscribe to future articles by Hans-Hermann Hoppe via this RSS feed.

You can receive the Mises Dailies in your inbox. Subscribe or unsubscribe.


Link to original Mises Daily Article: http://mises.org/daily/5817/Entrepreneurship-with-Fiat-Property

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Investment Firm Shuts Down Operations Because Clients Money Isn't Safe Anymore

The founder of Barnhardt Capital Management has shut down her brokerage for a very good and moral reason.  Good for her and her clients.  They should buy some precious metal coins if they haven’t already.  The European soverign debt crisis will spill over to the US because it is a systemic banking crisis.

* * * * * * * * * *

BCM Has Ceased Operations (Part 1)

Posted by Ann Barnhardt - November 17, AD 2011 10:27 AM MST

Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,

It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.

Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.

I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.

Continued . . . .

BCM Has Ceased Operations (Part 2)

Posted by Ann Barnhardt - November 17, AD 2011 10:26 AM MST

. . . . Continued

Perhaps the most ominous dynamic that I have yet heard of in regards to this mess is that of the risk of potential CLAWBACK actions. For those who do not know, “clawback” is the process by which a bankruptcy trustee is legally permitted to re-seize assets that left a bankrupt entity in the time period immediately preceding the entity’s collapse. So, using the MF Global customers as an example, any funds that were withdrawn from MFG accounts in the run-up to the collapse, either because of suspicions the customer may have had about MFG from, say, watching the company’s bond yields rise sharply, or from purely organic day-to-day withdrawls, the bankruptcy trustee COULD initiate action to “clawback” those funds. As a hedge broker, this makes my blood run cold. Generally, as the markets move in favor of a hedge position and equity builds in a client’s account, that excess equity is sent back to the customer who then uses that equity to offset cash market transactions OR to pay down a revolving line of credit. Even the possibility that a customer could be penalized and additionally raped AGAIN via a clawback action after already having their customer funds stolen is simply villainous. While there has been no open indication of clawback actions being initiated by the MF Global trustee, I have been told that it is a possibility.

And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.

Remember, derivatives contracts are NOT NECESSARY in the commodities markets. The cash commodity itself is the underlying reality and is not dependent on the futures or options markets. Many people seem to have gotten that backwards over the past decades. From Abel the animal husbandman up until the year 1964, there were no cattle futures contracts at all, and no options contracts until 1984, and yet the cash cattle markets got along just fine.

Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.

To my clients, who literally TO THE MAN agreed with my assessment of the situation, and were relieved to be exiting the markets, and many whom I now suspect stayed in the markets as long as they did only out of personal loyalty to me, I can only say thank you for the honor and pleasure of serving you over these last years, with some of my clients having been with me for over twelve years. I will continue to blog at Barnhardt.biz, which will be subtly re-skinned soon, and will continue my cattle marketing consultation business. I will still be here in the office, answering my phones, with the same phone numbers. Alas, my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law.

As for me, I can only echo the words of David:

“This is the Lord’s doing; and it is wonderful in our eyes.”

With Best Regards-
Ann Barnhardt

http://barnhardt.biz/

* * * * * * * * * *

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

If Italy Defaults, The Euro Dies

Follow the link below to read a 40 second article and then watch the 6 minute video that accompanies it for the best summary of what is happening in Europe right now.

http://www.garynorth.com/public/8738.cfm

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.  Take refuge in precious metals until high dividend stocks become extreme value buys.

Be seeing you!

Why that corporate cash pile isn't so impressive

David Stockman, a former U.S. budget director, says, “The record cash story is bull market baloney.”  Stockman has credibility because he has been on a crusade against the massive deficit spending of the US government.  He knows big, false numbers.

Companies that were gaining cash from retained earnings and reducing debts would have their vectors on the graphic below look like this.

Image003

This would be the position of increased cash and decrease debts.  But what is actually happening is contrary to the myth that ignorant financial journalists publish.

Image004

Read the article here.  It is a good one:

http://www.google.com/hostednews/ap/article/ALeqM5i6tLiuurVg3WrOtzNjIlwT1_tscQ?docId=3fa6a9d085854d979a7e9b5abf45fe37

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheet.

Be seeing you!

Central Banks in Scramble to Buy Gold

Central banks around the world are buying gold to diversify the foreign exchange reserves. They are scared of the dominoes falling. Europe will likely be the first domino to fall, then the US, and then Asia. All central bankers are Keynesians by their nature. They believe that government deficits overcome recessions. They create fiat money out-of-thin-air to buy mostly government bonds. But this increases the money supply (inflation) which normally leads to higher prices of goods. When goods prices rises massively there is societal discord and strife.

Central bankers dislike gold, but they hold it to preserve some figment of monetary legitimacy. They hold it like a housewife holds a toilet brush; with nose pinched and at arms length. It is a hated but necessary tool. That is why John Maynard Keynes called gold "a barbarous relic". Gold can't created at the whim of some anti-capitalist central banker to fund the deficits of bankrupt socialist governments.

http://blogs.wsj.com/marketbeat/2011/11/17/central-banks-in-scramble-to-buy-g...

Some central bankers are positioning their country's for the post-US-dollar-as-the-world's-reserve-currency world. When the music stops they don't want to be holding a central bank full of US I.O.U.s.

You should have 20-30% of your net worth in physical precious metal coins. They will hold their purchasing power through crisis.

There will be a time many years from now when you should sell some to pay off your mortgage. When central bankers cease to inflate their money supplies for real, then a depression will ensue that will contract the money supply (deflation). All prices will fall. The purchasing power of the domestic will rise and fixed rate loans will be harder to pay back. Think of the US deflationary depression in 1930-1933.

Subscribe today at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets. You will also how to diversify out of fiat money investment into assets that are non-correlators to the US stock market.

Be seeing you!

Postal Service Logs $5.1 Billion Loss - The Wall Street Journal.

I thought you would be interested in the following story on WSJ.com.  The postal retirees will get stiffed.  This is foreshadowing what will happen to all retirees dependent on Medicare and Social Security. 

Postal Service Logs $5.1 Billion Loss

http://online.wsj.com/article/SB10001424052970204190504577040350312660374.html

Subscribe for free at www.myhighdividedstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

USB Analysts Cuts AGNC Earnings Estimates.

Image003

Some faceless, nameless analysts on Wall Street cut their earnings estimates for American Capital Agency Corp. (AGNC).  And they were nice enough to provide price targets.

http://localizedusa.com/2011/11/15/ubs-ag-ubs-analysts-cut-american-capital-agency-agnc-eps-estimates-2/

Of course, the analysts didn’t say how much they think AGNC earnings will suffer.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheet.

Be seeing you!

Teekay Tankers continues to tank. Expect more dividend cuts.

Image003

Teekay Tankers Ltd. (TNK)

Share price: $4.87

Shares: 61.88 million

Market capitalization: $300.10 million

This stock is SPECUATIVELY priced at almost 20 times average adjusted 3 year earnings

DIVIDEND RECORD

Teekay’s dividend record has been an a downward trend along with its stock price since 2008.

Image006

Dividend: Teekay cut its dividend on November 9th, 2011 from $0.21 per quarter to $0.15 per quarter  (note: the new dividend doesn’t show on the graphic above)

Dividend Yield: 12.26% ($0.60 annual dividend / $4.87 share price)

Dividend payout ratio: 240% ($0.60 annual DIV / $0.25 average adjusted EPS)  I’m confident that TNK will continue to cut its dividend.

EARNING POWER $0.25 per share @ 61.88 million shares from 2009-2011E

Consider contrarian buying below $2.00 per share (8x its three year average adjusted earnings)

Consider value buying below $3.00 per share (12x its three year average adjusted earnings)

Consider speculative selling above $5.00 per share (20x its three year average adjusted earnings)

Teekay Tankers currently trades at 19.48 times its three year average adjusted earnings

            EPS                   Net inc.             Shares               Adj EPS

2006     $2.68                $40.2 M             -                       $0.64

2007     $2.76                $40.6 M             13.38 M             $0.66

2008     $2.03                $58.1 M             25.00 M             $0.94

2009     $1.28                $38.9 M             28.64 M             $0.63

2010     $0.37                $14.7 M             42.33 M             $0.24

2011E   ($0.11 E)           ($6.8 M)            61.88 M             ($0.12 E)

2011 Estimated earnings using a low number on Q4:

   Q1     $0.12                $7.1 M              57.39 M             $0.11

   Q2     $0.02                $1.4 M              61.88 M             $0.02

   Q3     ($0.28)             ($17.1 M)          61.88 M             ($0.28)

   Q4     $0.03 low E       $1.8 M              61.88 M             $0.03 low E

---------------------------------------------------------------------------------

Total     ($0.11 E)           ($6.8 M)            61.88 M             ($0.12 E)

Wall Street estimates according to Reuters financial website appear below.  I used the most conservative Low for the quarter ending Dec-11 to complete my estimate above.

Image008

BALANCE SHEET

TNK’s balance sheet is not strong.  Teekay Tanker’s balance sheet has been shrinking for the past two quarters.  It will continue to erode as earnings decrease.

Image013

Book value per share: $8.06

Price to book value ratio: 0.60 (good)

Current ratio: 1.57 (over 2.0 is good)

Quick ratio: 0.60 (over 1.0 is good)

CONCLUSION

Teekay Tankers has been cutting its dividend instead of growing it.  Its earning power is diminishing.  The third quarter’s disappoint results continue the earnings trend down below zero into losses.  And its balance sheet is eroding.  Don’t even consider buying until the stock price drops to the $2.00 to $3.00 range.  Oh yeah, and there is a huge tanker ship glut from the boom times that ended in 2007.

Image014

DISCLOSURE

I don’t own Teekay Tankers Ltd.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Click here to download:
image001.emz (9 KB)

TIP OF THE WEEK - It's Official: Wall Street Firms May Legally Steal From Their Customers

It’s Official: Wall Street Firms May Legally Steal From Their Customers

Jason Brizic

November 11th, 2011

Desperate people do desperate things.  Don’t make it easy for them to fleece you.

Don’t put all your financial eggs in one basket.  You should own:

·         Your own business (to generate income even in retirement)

·         Physical precious metals (gold and silver coins from you country’s mint)

·         Rental real estate (3 bedroom, 2 bath houses in neighborhoods with good schools)

·         Currencies (US dollars in printed cash, Yen in printed cash)

·         Goods (all the commercial goods you can store that you will consume anyways)

·         High dividend stocks with earning power and strong balance sheets

Wall Street firms and commodities futures firms can legally steal from their customers.  Examine your terms and conditions that you have with your brokerage firm (e.g E*Trade, ScottTrade, etc..).  Minimize your stock holdings as a percentage of your net worth.  I’m targeting only 5%-10% of my net worth for my high dividend stock portfolio.  There are great risks that are going unnoticed by most investors in the world’s bond and equity markets.

I offer this article as proof: http://www.zerohedge.com/contributed/it%E2%80%99s-official-wall-street-firms-may-legally-steal-their-customers

For more tips, go here:

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

Never buy municipal bonds. ((State of the Economy))

Never buy municipal bonds.  They pay low yields and are much riskier than bond salesmen say they are.  Jefferson County, Alabama filed the biggest municipal bankruptcy in US history yesterday.  They won’t remain the biggest bankruptcy in two years time.  There are a lot of US counties that will default when the recession returns.  Jefferson County is the tip of the $3.7 trillion municipal bond iceberg.

http://news.yahoo.com/alabama-county-seeks-file-biggest-municipal-bankruptcy-001117903.html

Municipal bonds will suffer greatly when interest rates rise.

Buy high dividend stocks at attractive yields when their prices have be beaten down to around eight times average adjusted earnings.  Buying low allows you to guard against a loss of principal while enjoying the price gains and dividends along the way.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!