Note colors do not match from separate plot to aggregate plot.
Contest starts October 29 2007--the date Jimmy got in the market. Note th SPY (the S&P 500) index is included it each chart for comparisons. (Contest ends 5/10/08 with the winner receiving some number of quality Kubota hats)
Jimmy
GXP Great Plains Energy
BAC Bank for America
Turk
SPY Standard & Poors 500 Index
VWIGX Vanguard International Growth Fund
Bob
LG Laclede
SJI South Jersey
SJI South Jersey
PNY Piedmont Natural Gas
NFG National Fuel Gas
ATO and/or Atmos EnergyNFG National Fuel Gas
the middle
VICEX Vice fund
All of the above
All
All $
Jimmy's challenge:
I have $40K to invest. Stocks? CD? (I have plenty of treasury bills and bonds.) I am pretty much risk adverse. Winning pick gets a free Kubota hat. Any ideas?
Jimmy's choice:
Ishmael, call me stupid! Today (10/29) I increased my holdings of GXP (Great Plains Energy) and purchased 450 shares of BAC (Bank for America). Both of these have yields above five percent. As I type this I am trembling with fear because, when there is a good deal, there is always a mange infested dog playing foot tag with the CEO in the latter's private bathroom. Hopefully these two companies have the ability and the cash to overcome any present dilemmas. In the short run, Mr. Berneke may provide a shot in the arm to carry this smelly market up through a year-end rally. After that, we take our profits and then watch Hillary put restriction percentages on all coal-generated electricity.
Thank you for your ideas. I took them seriously, but my piggery over came any sense of reason.
Jimmy's response to the responses:
Yes it seems dumb to dump C in favor of BAC. As you point out, and from all I have read, BAC is participating in the MLEC, but (at this time) BAC itself seems to be separated from the SIV mess. I gave much thought to repurchasing C at the lower price, but to me C is too aggressive and prone to risk. When I worked for CINB 28 years ago, BAC had the reputation of being the largest bank in the US. It was spread out across the state of California. It had a very diverse loan portfolio. Today that has all blown away, since they are now a North Carolina based mega bank. Anyway, BAC's risks seem to be more seem scattered. Another negative piece of info on BAC is its $2 billion investment in Countrywide. Like why did they do that? Good neighbors? Maybe they know what they are doing.
Maybe the "good old boys" down south have a leg up on the New York hot shots. Stan O'Neal called Wachovia to see if they were interested in purchasing Merrill Lynch. Those New York bankers think they know everything. Now they are whining like babies.
After I made my choices, I remembered the Vanguard GNMA fund (VFIIX). That fund is yielding 5.30%. But then, on the other hand (an expression I use constantly these days) VFIIX is bonds, and I wanted to stay with stocks. Actually the tougher choice was buying more GXP. They are purchasing two other utilities, and the stock price is probably depressed because of further shareholder dilution. Hope they know what they are doing.
Hard to say without knowing how heavily you are in the market right now. They say that you subtract your age from 100 and that is the percentage you should be in the market. Use 110 if you are a risk-taker.
If your not in the market, for now I would be inclined to put the cash into the Vanguard prime or tax-exempt MMF as Bob suggests. I would wait until I felt I could guess the bottom of the market (that is if you don't feel it is already there) and then buy an index 500 fund (70%) and an international fund (30%). This way you avoid the risk of owning individual stocks. Vanguard and Harbor both have pretty good international funds. Putting say a 10K portion into these funds every three months or so may be less emotionally taxing in the event of a further downturn.
re Jimmy choice:
For what it's worth, today's Wall Street Journal reports that the profits of BAC or C would have to fall 50% before either would consider a dividend cut. Such a drop is highly unlikely. A consistent dividend taxed at only 15% should keep the stock price from tumbling.
Bob:
Advice:
For what it's worth, my suggestion is a variation upon what I did with the cash I inherited and reinvested during the first half of 2006. My strategy worked fine during the period of high short-term interest rates (one caveat), and stock-market exuberance (another caveat).
11-month CD 38%
Taxable money-market account 30%
Tax-free money market account 14%
Stocks* 18%
100%
*specifically: BP, Citigroup, & Con Ed.
I probably would repeat this strategy today, but with some modifications. Today, I would select a basket of gas utility stocks, such as:
Vectren (VVC),
Laclede (LG),
South Jersey (SJI),
Piedmont Natural Gas (PNY),
National Fuel Gas (NFG),
and/or Atmos Energy (ATO).
These all have nice yields and are off their 52-week highs. Gas distribution utilities, such as these, are stable, somewhat stodgy investments; however, all of these have a long history of annual dividend increases, a wonderful characteristic in the eyes of most retirees. There is a small chance of capital gains or losses, but the message here really is the dividend.
Also, I'd put more of the $40K into stocks, and less into money-markets, and none of it into CDs (given your stash of bonds). My favorite money mkt funds are Vanguard Prime, Vanguard Treasury, and Vanguard Tax-Exempt Money Market Funds. They all have zero exposure to SIVs!
Good luck,
I like both of these, especially GXP, but I'm a little bit surprised that you went for BAC after selling C. Do you think it has any less downside potential than C? Or is it relatively safe because of its limited exposure to SIV's, notwithstanding its deal with C & JPM to create a "superconduit"?Re Jimmy's choice
I like both of these, especially GXP, but I'm a little bit surprised that you went for BAC after selling C. Do you think it has any less downside potential than C? Or is it relatively safe because of its limited exposure to SIV's, notwithstanding its deal with C & JPM to create a "superconduit"?
The Middle:
VICEX: Welcome To ViceFund
I agree the volatility of the market makes me puke. I originally was going to recommend the vice fund as a joke, but it turns out to be a well performing fund--significantly outperforming all of the market indices. Also no load
Bob Brinker:
In each of his three model portfolios, Bob's most heavily weighted asset is the Vanguard Total Stock Market Fund VTSMX. This fund's performance is nearly identical the SPY (S&P 500). See charts
In his August and Septemeber newsletters, Bob recommended index purchase should the S&P 500 fall with the 1430-1470 range. This occurred on 11/9. Bob's results assume a purchase of SPY at 146 at this date.
