Dividend Growth Investing, Retirement Income, Stock Market Investing, Stock Market Timing, Uncategorized

Getting Back to Business!

Everyone knows that I tried to steer everything toward a corporate bond strategy and was even going to quit this blog. Sadly, for me anyway… I totally misread my own audience. As I sought to ramp up a corporate bond blog site, and post convincing essays that investing in the right corporate bonds, at the right time… both the selection and timing of which would be far simpler than stocks, and would result in a pre-calculated return that would be safer, more probable and even greater than with stocks… I was convincing NOBODY!

That’s right. Readership went away, and the personal contacts to me with questions were indicative that those who were reading, were not comprehending the basic ‘rules’ that were being laid down. The first of which was… this was no time to be a buyer of corporate bonds, but that they were setting up for a great opportunity, which should come our way beginning in 2017. The second was that this could not be done with any bond funds, as they are going to get crushed when the demands for redemption of shares ramps up and they can’t sell enough bonds quickly enough to meet those demands.

There’s a third, lesser, but personal reason, as well. The brokerage I work with, eOption, has made it clear to me that through their bond desk, they will not acquire for account holders corporate bonds that are less than investment-grade. Now, I knew there were firms that had such a rule, so it did not surprise me too terribly when I learned of that. But, the aggravation to me is that I will have to move my accounts if I want to participate in the very corporate bond strategy I had been posting about. It’s not that I am not willing to do that, it’s just that I’m currently aggravated at the thought of it, and don’t want to deal with any such thing as that at this present time.

So, I said all that to say, I’m going to get back to the business I’d been writing about here, and had specialized in and doing well with since its inception. I can find, with the program I employ, the “Safe-Dividend Growers;” those stocks that are growing their business at a rate that allows them to safely raise their dividend to shareholders at a rate that handily beats inflation.

If I’ve upset you at all by my trying to switch from this to that, and back again, please understand that I have only been trying to bring that which is in the very best interest of you all. I’ll make mention of matters, as they pertain to the corporate bond market, right here, and maybe even re-start a new blog about them later on, as circumstances might warrant.

For now, I want to update the timer. We were so close to signaling. I knew it was aiming at the election as a low-risk entry point. That was side-lined when FBI Director Comey shut down the Clinton email investigation in a news release Sunday the 6th. The result of which was a market reversal to the upside that began the next day. And, then, of course, the Trump win Tuesday night, Wednesday morning, really set things aboil for a spell. The timer is likely signaling high risk, but, as I said, I need to update it. Then, get back to finding great safe-dividend growing stocks.

Look for immediate updates shortly…..

Here’s to your successful investing!
Harold F Crowell

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5 thoughts on “Getting Back to Business!

  1. Robert Smith says:

    Harold,

    I read each of the essays on Bonds, with interest, even though Stansberry tended towards redundancy, but I didn’t know how to add a comment to the board. I have three thoughts that I wanted to contribute, so I will write three separate comments to keep them from being too long. My own experience in Corporate Bonds was (is) a dismal failure.

    First, I want to say that the process described in the essays is quite a bit more involved than the “average” investor gives to being invested in the stock market, so it is not, IMHO, a method that most ordinary people should use for investing. The essays never, as I recall, went so far as to require subscriptions to get this special evaluation and timing information, but you know that is what was coming. Since they were written by Porter Stansberry, who heads up an Investment Consulting service, this was the end goal. We would need to be subscribed to get the benefit of both the “selection and timing”.

    In a way, it would be similar to the Options board you were running – the selections of the Options trades you made and reported to us, was made by a couple of “experts”, one of whom I believe works in the Stansberry organization. The trade example that you gave that failed, was one you selected. I appreciated your honesty, and I wish you continued success with the selling of Puts.

    There is another well-known Investment Service company based in Baltimore to which I subscribed for one year. Each month I would receive a “Letter” (Income based on Dividend paying stocks), but it also carried articles from several of the other investment services they provided. One of these was their Bond Recommendations. In August 2014, he wrote about Walter Energy, a coal mining company, which had come upon hard times because the Obama administration was pushing “Climate Control” measures. It’s stock had fallen 78% and the Bond had also fallen to $580 per bond. He then projected a 25% income for the next 6 years (matured Dec 2020) because of the 9.875% interest. Less than a year later, the company defaulted and filed bankruptcy and this past August, I received absolutely ZIP on my “Senior Bonds” and only one interest payment. There was no mention in the article about how “un” Senior these bonds turned out to be.

    One month later, September 2014, he recommended another bond, by Colt Defense, a gun manufacturer. It paid 8.75% Interest and matured in Nov 2017. In May 2015, it postponed its interest payment for 30 days, then filed for bankruptcy when the 30 days was over – no interest payment! When he recommended the purchase, it was selling for about $795 per bond and 9 months later it defaulted at $300 per bond. This one hasn’t finalized as yet, but I think it is unlikely to get me anything, considering how much debt it owes that is senior to my senior bonds. You never know though, it might pay out the 30% to 40% that seems to be referred to. Then I would break-even or have a small profit.

    I don’t report this to “cry on your shoulder”, only to suggest that the “unsophisticated” stock buyer wouldn’t be any better off doing this than simply putting their money in an Index Fund. I haven’t checked, but it is entirely possible that the bonds he recommended in the other months have all been “winners” – I hope so.

    More to come.

    Bob

  2. Robert Smith says:

    Harold,

    Part II

    Since you closed down the Corporate Bond site, I can no longer look at the essays to check my memory, but I remember that Stansberry recommended at least 10 different bonds being purchased and held for a maturity period of 2 ½ to 3 years and purchased at a price discount of around 50% ($500 per bond), and that they would be paying about 5% interest. He also stated that the “cycle” usually lasted about 8 to 10 years and referred to bonds they recommended back in 2008 to 2010. A third aspect was that these would be “high quality” company bonds (Investment Grade) that were having their “rating” reduced mostly because of the “bottom of the cycle”, rather than company difficulties. I am not certain that this “math” adds up.

    For simplicity’s sake, let’s pretend that I buy 10 Bonds from 10 diversified companies when they have fallen to that 50% area. That would be $500 per bond times 10 bonds, equals $5,000, times 10 companies, equals a total investment of $50,000. I believe he stated that there was approximately a 30% default rate, so 3 of the companies would default. That means there would be a loss of $15,000, leaving $35,000 invested in surviving companies. At the end of the three years, those companies would payoff those bonds and we would receive $70,000 as the bonds doubled. Add to this 10% interest payments for the three years (bonds bought at half price) and we receive another $3,500, for a total profit of $23,500 on the original $50,000 investment. Is this accurate enough?

    My question becomes, now what? Am I going to be sitting on my cash for 5 years drawing 1% in CDs until the next “crisis cycle”? Using my figures above, we made almost a 50% gain in 3 years, which is really nice. But that same 50% gain spread out over 8 years is not all that great.

    Bob

  3. Robert Smith says:

    Harold,

    Part III

    Finally, I want to say that I agree with everything Stansberry wrote. To quote from an article by Lance Roberts, “…What is interesting is the way stock buyers are told to buy stocks after big corrections, yet it works EXACTLY the same way with bonds…”. What I didn’t know was the “diversity” aspect spread over 10 to 12 Bond issues. I purchased bonds in two unrelated companies, but not in 10 or 12, nor did I wait until the entire Bond market was suffering. Fortunately for me, I also did not buy those bonds at the recommended price range, nor did I buy very many bonds, so my actual losses are minimal. I will consider looking at bonds again, but will be more “careful” of what I am doing.

    I made some really good money in stocks at the March 2009 bottom, because of what Bart DiLiddo wrote at the time, and I anticipate similar “good times” if I can get this “bond” thing close to right.

    Thanks for bringing it up and I am sorry there was not much interest in the subject.

    Regards,

    Bob

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