2012

North American markets were up about 0.7% today after ALco reported better-than-expected earnings.

Of note, Canadian Tire was up 3.0%, Toll Brothers 4.0% and Bank of America 3.7%. Melcor was down 2.7% to $14.37 which I think is a buying opportunity.

Dollarama was up 6.9% to $51.70. It released very strong earnings and raised its dividend 22%. It same store sales were up a very impressive 7.9% and it has increased the store count by (coincidently) also 7.9%, which suggest sales growth of about 16% as a run rate at the moment.

Perhaps I was too conservative thinking it was already fully valued at $43.49 in January. I am definitely impressed with it as a business. It appears to nbe extremely well managed. I just thought it looked too expensive. It is now valued at very close to $6 million per store. Clearly that value is not just for the existing stores but also reflects the ability to continue to open new stores. Dollarama has established itself as a brand in Canada. I must confess I completely missed it and I wish I had looked at it much earlier..

Despite all this performance (actually despite the growth performance but BECAUSE of the stock price performance) I cannot see it as a Buy.

In theory we would expect competition to erode their high margins. But to my knowledge other dollar stores have not posed a big challenge (they lack the scale and the management skill it seems). And the likes of Wal-Mart has not responded. And Zellers has decided to sell off its leases to a better operator (Target). So perhaps the best I can do is to copy those academics who refuse to admit that some people (like Buffett)  CAN beat the market and I am left to sniff that that “What Dollarama is doing might work in practice, but it will never work in theory!”

I am not going to worry much about missing out on Dollarama, it simply did not pass my screens. There will always be lots of stocks going up that I don’t hold. What is important is that the stocks I do hold and rate as Buys do well. And they have been.

I look forward to seeing the earnings from Shaw Communications on Friday. I also understand that Wells Fargo will report on Friday.

Speaking of Wells Fargo which is going to benefit from any housing recovery in the States, I notice Warren Buffett’s Home America company has been in the news buying up three fair sized real estate agencies in the past few months. Buffett has said he is absolutely confident houses will recover somewhat (new households are forming as teenagers come of age and this is happenings quite  a bit faster than houses are being built and so Buffett argues that house construction has to pick up at some point and prices too). Buffett also argues that when house construction recovers the impact on thee unemployment rate is going to be noticeable.

Liquor Stores N.A. Ltd (formerly Liquor Stores Income Fund) is added to the list above as a Buy at $17.01. Perhaps this can help quench the thirst for dividends with its 6.3% yield. I would not necessarily count on much growth here although we could get some.

Something to think about with EVERY investment is that even though it may be a Buy that does not necessarily means we should buy it. Ideally we place our money in the best investment we can find while maintaining some level of diversification. I am not sure if I will buy this one or not.

A couple of interesting things I learned. It’s bottom line profit as percent of sales is 3.8%, perhaps about what one might expect. But its gross margin is 25% implying a mark-up on the product that averages 33% and which is higher than I would have expected. For some reason I had the impression liquor had small mark ups at the retail level. But this makes sense. The fact is they need the 33% mark-up in order to arrive at a about 4% on the bottom line.

My pre-existing order to buy some Constellation software got filled today as the market dipped. I also picked up some Toll Brothers given the lower price. This rather rapidly uses up much of the cash I have in my accounts and perhaps I should have retained more cash in case we are unfortunate enough to get some real bargains. If that happens, which is always a possibility, I will scramble to find money to buy on dips as I am wont to do and have pretty much always done.

It will not likely be news to anyone that the U.S. markets were down about 1.7% today and Toronto was down 0.7%. Retail stocks did okay today with Canadian Tire and Couche-Tard up with Wal-Mart down only slightly. Also Canadian investors are helped on our U.S. investments by the decline in the Canadian dollar over the past few days. Unfortunately, the opposite is true for Americans who hold Canadian stocks (and that is the case even if the Cnadian stocks trade in New York). When it comes to currency impacts what matters (setting aside hedging) is the currency sales and costs are in. The reporting currency or the currency it trades in are not important with regard to currency movements.

Markets were down 1% on the Dow Jones and 0.7% Toronto.

I see where BMO Capital Markets is expected a flat quarter from Shaw Communications. We will see on Friday morning… I was hoping for better than that.

Markets as of Sunday night are predicted to open on Monday morning about 125 points down on the Dow. Personally, I don’t see that as cause for alarm at all. Of course markets could take a big drop, that is always the case. But over time as the economy grows so will stock prices.

Soon we will into the Q1 earnings season. It is earnings and interest rates and not emotions that ultimately drive stock prices in the longer term (but emotions rule the short-term)

Two important analysis articles are updated for 2011 year-end data.

The first shows what happened to portfolios  for all the possible 30-year savings periods from 1926 to 1955 all the way to 1982 through 2011 invested in either 1. 100% U.S. stocks (S&P 500 index fund in non-taxable account) or 2. Invested 60% in stocks, 35% in corporate bonds and 5% in cash.

The second shows what happened to one million dollar portfolios for all the possible 30-year retirement periods from 1926 to 1955 all the way to 1982 through 2011 invested in either 1. 100% U.S. stocks (S&P 500 index fund in non-taxable account) or 2. Invested 60% in stocks, 35% in corporate bonds and 5% in cash.

Barry Critchley at Financial Post has written an article about how the Ontario Municipal Employees Retirement System sold shares in Constellation Software and yet for some reason Constellation agreed to pay some of the costs. I had mentioned the situation to Barry Critchley. It’s not a big deal at all but it seems like a big shareholder took advantage of the little guys here.

The latest edition of our free newsletter was sent out today.

Stocks were down on Thursday. And today, Friday the jobs report in the U.S. was disappointing and could send stocks down on Monday.  Nevertheless, I feel good about holding stocks at this time.

The Financial Post’s Barry Critchley indicated to me that he is going to do a story on the share sale by Constellation Software that I have been mentioning. My only concern and it is not a huge concern given the size of the company is why the company should pay any of the costs involved for OMERs to sell shares. While it is small dollars, Constellation strikes my as an exceptionally shareholder friendly and rational company (no or few stock options issued for example). So it was disappointing to see Constellation paying any of the costs which does not seem like a shareholder friendly thing to do. I am looking forward to the story.

Markets were down again today… Everyday the market turns its attention to something new. Tomorrow, I believe tit will be the latest jobs reports. Next week of the week after the focus will be on Q1 earnings. It seems to me that the economy is still slowly improving… In fact the market was apparently down in part because the economy has improved enough that the FED will not likely need  another round of buying in bonds (quantitative easing).

The Dow was down 0.5% today and the Toronto index was down 1.5%. Our stocks picks were mostly down as well.

I have mentioned the secondary share offering of Constellation Software. This was a sale of shares by a major shareholder (OMERs private equity). Although it was offered under a prospectus filed by Constellation Software, the company received none of the money. No new shares were created. All that happened was that a large insider (OMERs) sold shares to the public.

That got me thinking; what was Constellation’s role in this? Why did Constellation have to file a prospectus and did the company incur any fees and was it reimbursed for its costs? So I emailed the company to ask and the CFO replied that the information I sought was in the prospectus. Sure enough, on page one it indicates that Constellation had fees of about $575,000 of which OMERs would reimburse $300,000. And I suspect that this does not include a lot of internal costs in terms of staff and executive time spent on this.

So, it’s interesting. A large inside holder wants to sell  a large block of stock and Constellation (meaning its other owners) gets to pay  much of the cost. And this is on top of the fact that last year OMERs effectively (as I understand it) forced the company to put itself up for sale. No doubt a lot of costs were incurred for that. AND, on top of that the sale by OMERs caused the share price to sink about 10% as they sold over 10% below the market price that prevailed just prior to their sale announcement. As someone who did not own shares, and who is interested in buying, I am okay with the price drop. As a continuing shareholder I would not be happy. And anyone who sold shares in the past couple of weeks, or probably the next period of time until the share price recovers, should not be too happy about this 10% price drop.

But I suspect this is all perfectly normal business. If I were more energetic about I might complain to “the authorities”. But I suspect I would be met by blank looks and arcane (at best) explanations. It’s probably not worth worrying about.

It was another good day in the markets. One of our favorites,  Canadian Tire was up 2.3%. Melcor has slipped a bit lately and is definitely worth considering at around $15.

Constellation Software’s secondary offering of shares (it was OMERs private equity and not the company itself that was selling shares) closed today. I understand the shares were sold at $87.50 as planned with net $84 to OMERs.  TD Securities was listed as one of the selling brokers but this offer did not show up on TD (at least not yet).

I know the brokers have bought the shares at $84 and I believe that the shares were quickly sold to investors at %$87.50. As a result of that Constellation did get as low as $87.75 today. It closed at $88.61. When I placed my order it was already a bit above $87.75, which I was prepared to pay. I then decided to get cute and place my order at $87.60 and as a result I did not buy any shares. And barring general market weakness there may be no reason for me to expect to get any at that price, but I will likely leave my order open for a while and see.

I thought better of buying more Shaw Communications since I have a good amount already.

In about two weeks Shaw Communications will release its Q2 earnings. No doubt they will report some loss of basic cable customers to Telus. On the other hand they will likely gain customers in total when phone and internet is considered. I would be surprised if they don’t report decent earnings growth. I suspect more people will have rented movies online from Shaw. Many movie rental stores have closed recently. Maybe the tech-savvy are downloading movies for free or at minimal cost but I suspect a lot of people will be renting movies from Shaw. And that has to be a high-margin business. I may add to my position in Shaw in anticipation of the earnings release.

Constellation Software returns to the list above rated (lower) Strong Buy at $89.35. I will likely buy some shares tomorrow. As noted below it may be possible to buy at $87.50.

Here is a bit of history on regarding our analysis of Constellation. This company was first introduced to our list on February 4, 2011 rated (lower) Strong Buy at $51.40. It’s price then rose unexpectedly rapidly to about $70 gaining 35% in just a few months. Then, in April 2011 it was announced that the company was looking to be bought out. This complicated matters as far as analysing the stock was concerned as its price then might be be “event driven” – more related to the buyout than the earnings.  Due to the pending buyout I did not further analyse it in 2011. At the end of 2011 (se January 2, 2012) I removed it (and several other companies) from the list due to the analysis being out of date. I stated then that ” I don’t think I would consider any of these (removed companies) to be Sells. If I held them I would be in no big hurry to sell. Then again, I have not looked at them recently.”  In March 2012, the company announced that it was not longer looking to sell itself. At this time the stock is up 74% since February 4, 2011.

The company had stellar earnings in 2011 and now appears to be worth considerably more than it looked to be worth a year ago. Company management appears to have identified a consistently profitable way to grow by acquisition. Their approach appears to be highly rational and credible. The only nagging concern would be the question of why OMERs private equity was eager to reduce its position selling shares to the public at $87.50 and receiving only $84 after fees payable. Another large institutional holder also reduced its position recently at $84. The share price recently dropped $10 on the news that OMERs would offer shares to the public at $87.50.

Overall I like the company and will likely buy some shares tomorrow. However, since the closing of the secondary offering at $87.50 was to be tomorrow Monday April 2, there may be an opportunity to buy these at no more that $87.50.

Today is the last trading day of Q1. It has been a very good quarter for out stock picks. U.S. markets are up 8% in the quarter. The Toronto market is up 3.6% but has been volatile.

With our stocks performing sell there is perhaps a danger of feeling complacent and a bit smug. Yesterday almost of all of our stocks were down and that was a reminder that stocks ALWAYS give us bad days as well as good days. And a reminder not to get too complacent, which I will try to heed.

While there are always dangers, it does seem that the U.S. economy continues to improve. Overall, I see some reason for optimism for the outlook for stocks.

Sino-Forest filed for bankruptcy protection today. I suspect shareholders will never see a dime out of this. They say they will sue Muddy Waters for defamatory statements that they were a fraud. Well, if they were a legitimate busienss why can’t they just keep operating and eventually return to trading.

Investorsfriend.com has been around since mid 1999 (at first we were called investment-picks.com) and Sino Forest was one of the first companies looked at here. By late 2005 I had lost not only patience but trust with this company. Subscribers to this web site were effectively warned about Sino-Forest at that time. I document the very early warning here.

Toll Brothers is up 3% this morning and was up a similar amount yesterday. This is the highest the stock has been since the financial crisis. It’s interesting to see the stock rise these two days as the news out of the U.S. housing market this week seemed to be moderately negative.

Canadian Tire is down 2.3% this morning after having done well in recent days. I don’t know anything to attribute this to other than basic market volatility. I continue to have confidence that this is a good investment.

Visa Inc. is added back to the list rated Buy at $119.35. I had removed it from the list in late December because the rating had gotten well out of date.

A search of the comments below will confirm that over the last couple of years I referred to VISA several times as being “monopolishious”.  With the recent share price rise it is no longer the bargain it was. But it is certainly a high quality company and worth considering for the long term. (What’s in YOUR wallet?, well probably a Visa card in most cases).

The Canadian market was down 0.8% today, apparently mostly due to weakness in “materials” stocks. The DOW was down 0.5%. So given that kind of day, it was pleasant to see Toll Brothers up 2.7% and Wells Fargo and Bank of America both up as well.

On Thursday Research in Motion will report earnings. This may draw more interest than the Federal Budget…

Speaking of budgets, the Ontario budget put certain corporate tax rate cuts on hold. I think that was completely appropriate. Corporate tax rates in Canada are significantly lower than they are in the U.S. and there is no reason to lower them. In fact, I think a large number of corporate tax breaks should first be taken away, and then perhaps the overall corporate tax rate can be lowered.

It was a strong day in the markets and for our Stock Picks.

Possibly I should be reducing risk by harvesting some gains. But overall I feel good about the markets and am content to let my investments ride (accepting that there is always a risk that prices will fall).

I expect to have updates reports for a couple of companies posted here over the next week.

Barring other surprise developments, the market will now turn its attention to the outlook for earnings reports for the first quarter.

I ran some numbers on Amazon today. I have been wanting to add some more well known companies like this to the list above. In part this is because I would enjoy learning more about the business fundamentals of additional companies. Also I could hopefully identify some additional good investments.

In the case of Amazon it’s clear that it is far from being any kind of value stock. It has a price earnings ratio of 142. It trades at 12 times book value. It is profitable but the ROE is only about 9%.  It’s sales have been increasing rapidly, with sales per share growth averaging 31% per year in the past four years. Earnings per share however have only grown at an average of 5% annually in the past four years. Even if analyst earnings growth projections for 2012 and 2013 are accurate, it trades at some 72 times 2013 earnings.

Basically the current share price is already pricing in quite a few years of very strong growth. If growth were to falter from the current lofty expectations then the share price could drop rapidly.

The stock compensation seems too high.

Possibly the earnings should be adjusted upwards to remove some amortization of intangible assets. But I could not see any obvious disclosure of this in the annual report on Form 10-K.

If I were to complete the analysis it would be rated Sell. I do not particularly see much value in adding this company to the list as I suspect very few subscribers would own it. Given its sales growth it is certainly possible that the share price will not drop and may even continue to rise. But I don’t see the support for that in its numbers.

Generally I like to find bargains “hiding in plain view”. If Amazon is a bargain, it is a well hidden bargain.

I have updated my article that examines whether stocks are really riskier than bonds. This article updates a graphical analysis that I first did back in 2001 when I first obtained the necessary data. At that time, based on holding investments for 30-years stocks were always the clear winner at the end of a 30-year holding period. However we have now had a decade where stocks have performed relatively badly and long-term bonds have had strong returns due to declining interest rates.

In fact an investment strategy of holding only 20-year U.S. government bonds started in 1982 and pursued for the 30 years ended 2011 has provided a return of 7.83% compounded annually and has beaten out stocks at 7.78%.

As a result, based purely on historical data it is no longer as clear that we should expect stocks to beat bonds. And certainly a partly balanced portfolio of say 70% stocks and 30% bonds has been a very good choice in recent decades.

Nevertheless when we consider that the reason that long-term bonds did so well was due to the dramatic drop in long-term interest rates, and that long-term interest rates are at historic lows and have little room to fall, then we can logically conclude that a portfolio of stocks can be expected with a high degree of certainty to outperform long-term bonds over the next 30 years.

However, for shorter investment horizons (such as 10 to 15 years) some allocation to bonds is likely appropriate. For very short time horizons such as within one year a high allocation to cash would be appropriate. (Don’t invest money that you really need for next month’s groceries money in stocks)

Our stock picks were mostly up of Friday. Notable winners were Bank of America up 2.6% Canadian Tire up 1.8% and Shaw Communications up 1.0%.

Stocks were mostly down today. But I don’t think there is any reason to get too worried about where stocks are headed.

I have just now updated my reference article on the (inflation adjusted) performance of Stocks, versus Bonds, Versus Gold and Treasury Bills. I consider this article which I first produced in 2001 to be very informative. It seemed particularly important to update this article to reflect the amazing 28% gain in value in 20-year U.S. government bonds in 2011. I will also soon be updating several other articles for 2011 data. I also added a new graph to the article to show how Gold has done much better than stocks since the year 2000. No, I have turned into a Gold bug, but I thought it was fair to the gold bugs to show the data that way. I tire of hearing that “no one has made money in stocks since the year 2000”. Firstly that would only apply if you put all your money in stocks at the peak in 2000 and failed to buy any stocks at lower prices since then. Secondly, we should not focus so much on the year 2000. It was no more important than any other year.

As for today’s markets… Most stocks were down. But we had a 2.1% gain in Shaw Communications. This stock has been a disappointment. It’s share price has not risen these past few years despite much higher earnings. The market fears competition will lower its earnings. Also it started out with  hefty P/E ratio a few years ago. I had thought that the accounting earnings were under-stating its true cash earnings and so I had thought the high P/E ratio was justified. So far, that has not proven to be the case. But I think it is doing well with its Global television stations that it bought from the bankrupt CanWest. Also it has some wireless spectrum that it can hopefully sell for a profit. And hopefully profits on its cable business can continue to grow despite the loss os some customers to Telus. It will release earnings next on about April 13 and I am hopeful to see some positive movement in the stock.

Boston Pizza and Couche-Tard were also up about 2% each today.

Most stocks were down today. Bank of America and to a lesser extent Wells Fargo were up however.

The take over of Viterra at a large premium supports the notion that stocks in general are not over-valued. I continue to expect that 2012 will be a good year in the markets.

Bank of America fell 2.8% today after initially being up about 2.5%. Apparently the fall was due to rumors it would issue more shares. However, the company has denied this. It’s fully diluted share count will however rise in its Q1 report as Buffett’s options to buy about 6% of the company have come into the money.

I added to my Berkshire Hathaway position today.

The latest edition of the free newsletter has been emailed out. You should have received it.

I am thinking of adding to my position in Berkshire Hathaway on the basis that it is likely having a good quarter. It’s book value should gain nicely on its 700 million options to Buy Bank of America shares and on its equity index derivatives (which tend to gain in value when the indexes rise, although there is also the impact of volatility and currency impacts. I expect that Berkshire’s various operating businesses are doing well as the economy recovers. It’s insurance operations however are not something I can predict at all.

Our article that calculates the fair value of the Tornoto Stock exchange index has been updated. It suggests that the index is about 6% under-valued as a point estimate.

It was yet another good day in the markets. Bank of America was up another 4.5%. Melcor was thinly traded and was up 6.8%. It’s still quite good value at $15.50.

It would be nice to finish out the week without giving any back, but we shall see…

I really should be thinking of trimming some positions but so far I more inclined to let things ride. None of the stocks I hold seems to be over-valued. (That does not mean they can’t fall but it does suggest I should not do too badly by holding.)

Our Stock Picks have been firing on all cylinders.

While Toronto was down 1.3% today our stocks did okay. Most notably, Bank of America was up 4.1%, adding to yesterday’s gains and Wells Fargo managed to hang onto yesterday’s big gains.

After the close Melcor released earnings. This stock closed today at $14.50. It’s earnings per share for 2011 were $2.70. On a GAAP basis that would be a P/E of just 5.4. However, much of the earnings were likely from gains in values on its rental buildings. And even its regular earnings from selling building lots tend to be highly lumpy. Nevertheless the earnings are good news. The book value of the company is now about $18.50 per share.

The full earnings have been released on SEDAR but I don’t think the public gets access until tomorrow. The full earnings are supposed to be on their web site but I don’t see them there.

The bottom line is that this appears to be quite good value at $14.50. It is thinly traded so be careful that way.

Tomorrow the stock may not open higher (it should) instead we may get a delayed reaction, or possibly no reaction at all. Melcor is my third largest position. I am not eager to sell any at this time. I would be tempted to buy more shares especially if it stays under $15 tomorrow.

In choosing between REITs like RIOCAN trading at about 150% of book value and Melcor trading at some 78% of book value, for me it is no contest. (Yes, there are other considerations involved than book value, but the bottom line is I would favor Melcor)

Beware of anyone bearing long term bonds

For literally years I have though long-term bond yields were too low and would not invest in them. And interest rates kept going lower and so bond investors did well. At some point that has to come to an end.

Possibly we are at that point. The yield on 10-year U.S. bonds has gone from 2.0% to 2.3% in the past ten days. That creates a capital loss of 2.7% on that bond. The yield on the 30-year has gone from 3.1% to 3.4% causing a quick capital loss of 5.6%.

People who invest in long bonds at these low rates usually intend to sell if rates rise. If so, I hope they sold.

Most commentary blames the U.S. FED for forcing long-term interest rates down to record lows. I have never been convinced it is only the FED since lots of other parties are investing in those bonds and buying them at low yields as well. I did recently find some data however that shows that the FED owns frightenly large proportions of most of the longer term bond issues. (like 20, 40 and even 60% of the total outstanding in some cases). That gives credence to the notion that the FED has indeed been the main buyer of long-term U.S. bonds. Can they continue to hold these rates down? No one knows, but the rates were certainly on the rise this week.

It was a VERY big day in the markets. The Dow was up 1.7%, the S&P 500 was up 1.8% and Toronto was up 0.9%.

For once, the market behaved just as I had talked about in terms of the stress tests on banks. The banks passed the tests and announced dividend increases and their prices rose. (See my comments about the stress test under march 10, March 5, and February 7).

It all happened a bit sloppily today, it was not supposed to be announced until Thursday but J.P. Morgan spilled the beans and then the FED released its report. (It’s unfair to release this kind of news during the trading day, but not unusual.)

Anyhow we enjoyed Wells Fargo up 5.8% and Bank of America of 6.6%. Just about everything was up today but it was the U.S. bank stocks that were the big winners (except poor Citi Group and a couple of smaller banks failed their tests).

This will confuse the heck out of all those doomers who read somewhere that “all the U.S. big banks are insolvent” and other nonsense. As they say a little knowledge is a dangerous thing and people need to watch whose opinions they believe.

And that is not to say that the doomers don’t have some legitimate concerns. Many countries are of course in too much debt. Unfunded liabilities are a problem. But when the doomers tip into the realm of thinking the U.S. (fiat) dollar is about to become worthless and when they start ranting that banks create money from thin air  (and that this is a bad thing) and that the FED is a private company and on and on then it is time to stop listening to those doomers because they are alarmists. I mean to each his own, let those people crawl into a bunker with water, tinned food guns and ammo and some Gold, just don’t follow them there. Hopefully they sold their stocks to us near the bottom in 2008 or early 2009.

Perhaps I am being over confident but I continue to feel good about the prospects for stocks.

Still, with my own very heavy exposure to equities I may look to take some profits and move some money into cash.

The Dow was up 0.3% while Toronto was down 0.6%.

It could be a big week for the U.S. bank stocks. The Fed will release results of stress tests on Thursday after the close. If the results are good then we could see Wells Fargo raise its dividend as early as Friday. On the other hand the results could disappoint. But I think the signs are pointing towards the banks coming through these stress tests pretty well.

Basically, the outlook for stocks seems good although bad news can always be lurking.

Bank of America is added to our list above as a Speculative Strong Buy at $8.05. For a variety of reasons (including that it is tough to value a company with approximately no earnings) this first report is a very preliminary and superficial analysis. As disclosed on this Site I have owned the stock since last spring and I bought it on speculation and was attracted by the very low price to book value ratio. I expect but there are of course no guarantees that the earnings will recover sharply in 2012 and the stock price should rise towards book value. I may add to my position here. (This price of this stock was as low as $4.92 this past Fall and so it has already staged a pretty good recovery, but there should be much more recovery to come).

Friday was a good day in the markets and our stock picks are pretty close to their high for the year. I believe my own portfolio is at its high for the year to date. I think there is a good chance that 2012 will be quite a good year in the markets.

So Greece finalised its managed or orderly default on its debt. As I said back on February 14 and other dates the idea that this was going to happen without triggering the credit default swaps was ridiculous. There was no way they were ever going to get 100% of the bond holders to agree to the swap and they did not. So they are forcing the hold-outs to accept and this is indeed a default. A welched debt by other name smells just as rotten. Anyhow it is not that big of a deal. Companies and individuals have been defaulting on debts for time immemorial and so in fact have countries.

Certain system problems that have plagued this site in the past month are mostly fixed.

Boston Pizza Royalty Income Trust raised its distribution by 6.5%. The units are now at $16.50 to yield 7.1%. Growth is driven largely by increases in same store sales and so we should not expect growth to be more than 2 or 3% longer term. But even at zero percent growth, the 7.1% yield seems attractive. I had not expected the distribution to rise this fast so soon.

Most stocks were up today, partly due to optimism that the Greek bond swap would go well.

As of right now it appears the swap went very well. There will be a few hold outs however. It now remains to se beseen whether Greece will force them to take the swap. If forced that would be a default and the credit default swaps would pay off. And interestingly enough they would pay off for all holders even those who took the swap. The credit default insurance is not “attached” to the bonds, one can own the default insurance without owning a bond. However according to recent reports there is only a small amount of these credit default swaps out there. Like $3 billion out of a bond total of $120 billion or so. The other choice Greece has is to just continue to pay the interest and eventually the principal to the hold outs. That might annoy those who swapped but so be it, a few clever hold outs would get paid in full.

Stocks of interest that rose today included Wells Fargo up 3.3%, Toll Brothers up 3%. Also Canadian Western Bank was up 2.8% after reporting earnings yesterday and no doubt assisted by the strong markets.

Futures as of about 10:45 eastern time are down 5 points for the Dow, so effectively they are flat.

I had thought Melcor was scheduled to release earnings today, but apparently that will happen next week. The earnings should be good. I’m not as sure if the outlook will be good, but it should not be too bad given the strong western economy.

A partial recovery today of yesterday’s losses…

After the close Canadian Western Bank came out with earnings. The report looked pretty good to me. Underlying growth was quite good. The actual adjusted earnings per share were only up 4% however and so that is not too hot. But I think the under lying growth in loans and deposits should still be looked at favorably. If it happens to fall on Thursday (especially if the market is not falling overall then I would judge that to be a buying opportunity.

I am also expecting earnings from Melcor tomorrow, Thursday and expect a good report.

Meanwhile there will be news as to whether Greece got enough big investors to accept its big haircut deal. If not judged to be enough then markets would likely fall. If enough then markets should do well

Well, as you will have noticed markets were down today (DOW down 1.6%, Toronto down 1.8%). It’s been a number of months since we had those kind of days. Remember last August and September? These kind of days are pretty normal really and I don’t see anything to get too worried about.

With the lower prices I decided to do a little buying and added to my Toll Brothers position.

In part markets are now worried about how this Greek “voluntary” debt swap will work out. There seem to be at least three possibilities.

1. Over 90% of the bonds will be voluntarily swapped and Greece may decide not to force the others. In which case no official default has occurred and the Credit Default Swaps (insurance against default) would then perhaps not pay off. (This scenario seems very unlikely). The clever holders who do not swap may in that scenario collect fully on their bonds.

2. Between 75 and 90% of the bonds will be swapped and Greece will force the remainder to swap in which case the Credit Default Swaps will pay off (as they certainly should)

3. Less than 75% of the bonds will be swapped voluntarily and Greece will throw a fit and decide to simply and completely default on these bonds. The Credit Default Swaps will pay off. Various officials will moan and wail and we will probably get some kind of mini panic in the market. Bizarrely this will include another flight to the “quality” of U.S. bonds.

President Obama has announced another program for Americas to refinance to even lower interest rates at almost no cost or fee.  Americans can borrow at a rate that their bank must honor for 30 years but which the homeowner can pay off with virtually no penalty at any time. The main stream financial press in Canada will again fail to notice or question why in Canada we can only lock in for 5 to 10 years and we can face HUGE penalties to get out. Refinancing for lower rates is basically impossible once you are locked in. But, don’t worry. Ottawa is “on” this. Just this week they announced that banks in Canada will have to better disclose the that these huge penalties exist.  The main stream press will not bother to ask why the Americans get such a better deal. As polite Canadians we must be content with better disclosure. (And I am not suggesting that the banks “eat” the penalty, in the U.S. it is basically investors in mortgage backed securities that allow the easy pre-payment terms.)

Well, I expect more volatility in the markets before this week is over…

U.S. markets were down modestly today but Toronto fell almost 1%.

I hold out high hopes for Wells Fargo. The FED is going to release results of a stress test analysis sometime this month. I suppose that will show that Wells would be hit hard in another major recession situation. That might temporarily push it and other bank stocks down. But overall I think the test will confirm that Wells has a lot of strength and it may be given permission to raise its dividend.

Ultimately banks will do well if mortgage delinquencies and bad loans improve. And they are improving.

The latest figures from the source I use (the FED) were just published for Q4, they show loan write-offs improving quite noticeably. Loan delinquencies are improving only slowly but at least are improving.

See http://www.federalreserve.gov/releases/chargeoff/

Strange Real Estate Developments

On Friday we had the news that Sears Canada has agreed to vacate the premises of three of its large stores and return them to the landlord in return for $170 million.

This immediately strikes me as odd. Normally a tenant is making rent payments to a landlord. Here, we have a landlord paying the tenant $57 million per store to vacate.

I understand that Sears may have had a below-market lease and I assume it must have had many years to run. But that is a staggering amount of money.

In a somewhat similar situation we had the story earlier this year that Zellers was going to collect $1,825 million in return for giving up its leases on up to 220 locations. That’s is $8.3 million per location. Given that Zellers appeared to be a struggling department store and that (from my observation) many of those locations were not that large and not that prime, that seemed like a lot of money.

I am a bit too stubborn to accept at face value that these transactions make sense for the payers of this money.

I am not smart enough or knowledgeable enough about lease rates involved to understand immediately how these transactions make sense.

I’d like to do some analysis and thinking about this and the implications for both the retail stores that have long-term leases and the owners of the properties. I understand that as interest rates have declined the value of retail properties rises since a given flow of rent will support payments on a larger mortgage.  I also understand that if lease rates have increased then the value of property rises. But it seems there is a sharing of these benefits depending on the lease.

If a retailer has a 50-year fixed price lease then I suppose that essentially all of the increase in value really “belongs” to the retailer, even though another company owns the property. Conversely if a store only has a one-year lease then the owner captures the full increase in value. Perhaps most situations are somewhere in between.

Given this information, perhaps we have to be cautious when a REIT states that its buildings have gone up in value. It may be that the tenant and not the REIT will capture that increase in value.

It’s interesting to consider that with Target paying Zellers so much money just to acquire leases, it may not exactly have cost advantages when it comes into Canada.

With these huge dollars at play, it may be necessary to understand the leasing arrangements for retailers. I know Dollarama leases all of its locations. I have not looked in detail to see if it has advantageous long-term leases.

Consider Canadian Tire. It owns 70% of the Canadian Tire store buildings (not sure about the land). From a balance sheet perspective there is certainly hidden value there. Canadian Tire does not mark its buildings to market whereas a REIT does. Canadian Tire may have vast opportunities to sell its properties to REITs. It could get a huge one-time gain. But then it would face high rent costs that would lower future profits. Selling and leasing back its stores might make sense if interest rates subsequently rise which would lower the value of the buildings and leases.

Financial statements may not clearly disclose the details of leases. If the information is there it may be relatively hidden.

My article on the valuation of the Dow Jones Industrial Average is updated and suggests that the DOW is probably about 15% under-valued as a best estimate. Of course, that does not mean it is going to jump up 15% any time soon.

Microsoft is updated and rated (higher) Buy at $32.08. This is a “downgrade” from its former Strong Buy rating at $25.06 from September and note that we confirmed the Strong Buy rating still applied at $25.96 to start 2012. In the past two months this stock has surprised many by rising 24%. We also liked it in 2011 and 2010 but it fell modestly in those years.

I noticed today that TD Waterhouse has an issue of Firm Capital for sale.

What caught my interest is that this is a Mortgage Investment Corporation. That means it has some characteristics similar to income trusts. It does not pay income tax if it distributes its earnings. This feature means it may be a good investment for an RRSP or Tax Free Savings Account.

The company trades at FC on Toronto, last at $13.65 and the offer is at $13.45 and a 52 week range of $12.00to (ever so briefly, $13.99. The yield appears to be about 6.9%.

This is not an Initial Public Offering it is a new issue from treasury.

Some things to think about:

Lending money is always a risky business.

This lender is into somewhat higher risk lending than banks typically do.

I don’t know who it is lending to but I would imagine there are some Toronto condos involved. And it is always possible that the Toronto values are about to take a dive.

Lenders are typically highly leveraged. This lender is not nearly as leveraged as a typical bank. Its equity appears to be 52%.

The fact that the shares are being issued at only a very small discount to the recent trading price seems positive. And it is a bought deal, TD must be confident that they can sell this at $13.65.

The company has not yet released its December 31, 2011 earnings. I find it odd that they can go to the market without releasing those.

Overall, while the 6.9% yield is tempting, I feel that it is too small and there are too many risks for my taste.

Money is the ultimate commodity, there is no reason to think this company has any competitive advantages (except for the non-payment of income taxes, but some others have that too). It would have a big disadvantage in that it does not have access to low-cost deposits like banks do. It generally has to pay interest on money it borrows and lends out. Also much of its lending is from its equity. It does not have the advantage (but nor the risk) of the very high leverage that banks “enjoy”. (well they usually enjoy their leverage until any bad times arrive in which case high leverage CAN be fatal)

I wanted to mention that I have looked at it but I am not very tempted.

Also, there seems to be no reason to rush to buy from TD Waterhouse. The stock trades and so if I did want to buy it I would prefer to wait for the 2011 earnings and generally wait until I read more of its financial reports to get at least some clue as to who it is lending to. All in all, I would sooner stock with Canadian Western Bank. The yield is much lower but the return ultimately may be higher and the risk may be lower.

In other developments…

Stocks edged up some more today. In particular Canadian Tire was up 2.4% (but this just makes up for some of the recent slippage there) and Canadian Western Bank was up 4.2%.

Overall I feel good about being heavily invested in stocks and particularly the ones I own. As always the market sentiment and can turn sour at any time. But overall I am comforted by the fact that P/E ratios are still reasonable and that Warren Buffett is telling people that stocks are the place to be for the long run. (He always says he has no opinion about where things will head in the short run, he sees the economy improving in the short run but does not predict the market).

We are into bank reporting season in Canada. It was interesting to read in today’s paper that analysts were having a very tough time interpreting Bank of Montreal’s earnings due to some unusual profit items. The report was described in the Financial Post as lengthy and complex and one analyst said the earnings were un-interpretable.

Those are the very reasons why I stopped looking at any of the large Canadian Banks years ago. I found their reports too lengthy and complex. I have never agreed with the idea that more disclosure is always a good thing. It’s not if it buries the reader in details especially if the overall picture is not well summarized.

I have always favored looking at a bank like Canadian Western Bank because it was not into more complex (and very cyclical) activities of helping large corporations sell bonds and stock.

The news about SNC Lavelin is interesting. It may or may not represent a buying opportunity. Since I am not familiar with the company it is best I just stay away from it.

Markets were a bit weak today with the Dow down 0.4% and the TSX down 0.8%. Nevertheless we had some winners today notably Toll Brothers up 4.6%, Couche-Tard up 2.0%.

In accordance with my note yesterday, I did buy some Canadian Western bank today and added to my Shaw Communications.

Some of our stocks did well today, notably Wells Fargo up 2.8%. Meanwhile Canadian Tire was down 1% to $63.27.

I sent an email to Couche-Tard today asking for a copy of their annual report. I own shares but apparently they did not send out the annual report you send in the card to Computershare, the stock transfer agent and ask for one.

Couche-Tard told me to download it from the web and thanked me for my interest in Couche-Tard. I find that annoying, I had told them I was an owner. But it is typical investor relations people treat share holders as just that, temporary fleeting holders and not really owners.  I try to gently and sometimes not so gently remind these IR types that I am an owner and not some mere total outsider. But maybe I should cut Couche-Tard some slack, after all I am up 50% on this holding (over about 19 months holding period).

A lot of companies no longer send out annual reports and some don’t even produce a bound version. It’s fine to say it is all on the internet but sometimes the documents on the net are not very printer friendly and they are certainly not bound. In the end it helps me, the fewer people that read annual reports the more likely that stock prices deviate from reasonable levels allowing more opportunities to pick up bargains.

Regarding Melcor. I mentioned under January 31 that I had entered an order to sell what amounted to 18% of my shares if it went to $14.25. By last week I had pretty much forgot taht order was sitting there. Checking my account I notice that sale went through.

One of my RRSP accounts now has around 35% in cash. I am thinking of deploying some of that tomorrow. I am thinking of buying Shaw Communication and Canadian Western Bank. I do want to keep some cash for bigger bargains.

The TMX Group (trading at $42.60) takeover by the Maple Group which is apparently worth about $50. I don’t have a current rating on the TMX but it might not be a bad speculation. It will rise if the Maple takeover goes through and fall somewhat if it does not. But long term TMX is probably a good investment without the takeover in any case.

We should be getting more Canadian company earnings reports in the next two weeks or so (including Melcor). About 95% of the S&P 500 had already reported Q4 earnings by the middle of last week, so their the earnings season is about over.

My popular article on the valuation of the S&P 500 index has been updated. With the surge in stock prices in the past few month that market now looks about fairly valued and no longer looks under-valued.

Today’s Financial Post reveals the sad story of First Leaside Group of Companies which with $370 million invested by some 1200 investors has gone into receivership. This is an investment company with very prominent Board members that has been around since the 1980’s. 

I note that investors were apparently targeted by cold calls and repeated sales pressure. 

There are many thousands of small investment outfits raising money in Canada. Often in real estate and oil and gas. Having listened to their advertisements for many years and having been solicited a few times, I have never invested a cent. (Well, except for about $1500 I put into the Canadian Property Investors Trust back in the early 1980’s which went insolvent shortly after). 

One I started investing through TD Waterhouse I have stuck to that 100%. I would not be very comfortable writing a cheque to some investment outfit. I prefer to buy only what trades online. Many small investment outfits are perfectly legitimate. But it would take a lot of effort to get comfortable with any of these. A good general rule of thumb in life is  that the harder (and more desperately) someone is trying to sell you something, the more cautious you should be. The best products, be they cars or investments do not need high pressure sales.

Warren Buffett’s annual letter to shareholders was released this morning. This wisdom-filled letter is in effect a gift to investors and is released in such a way that hundreds of thousands can download it all at the same time. Basically everyone on earth gets this gift at the same time (Who says there is no Santa Claus?).

http://www.berkshirehathaway.com/letters/2011ltr.pdf

Buffett has always said his job is to increase the ture or intrinsic value per share of Berkshire at a rate higher than the total return on the S&P 500 index. He uses accounting book value as an under-stated measure of progress. If he can do this the stock price will follow. In 2011 book value increase4.6% which beat the total return on the S&P 500 which was 2.1%.

Since Buffett took over Berkshire in 1965 its book value per share has increased at a compounded rate of 19.8% annually, which just over twice the compounded return on the S&P 500 (including dividends) which was 9.2%. By beating the S&P 500 by 10.6% per year Buffett has grown the book value per share of Berkshire by a staggering 513,055%. The S&P 500 total return over that period was 6,397%. A dollar of book value in Berkshire has grown to $5130 while a dollar in the S&P 500 has grown to $64.

However Buffett is quick to point out that we should account for inflation. The purchasing power of a dollar has decreased such that it takes over $7 (on average) to buy what $1 bought in 1965. Let’s assume it is exactly $7 for the sake of round numbers. Dividing by 7, the real return in purchasing power of the book value a Berkshire share has gown by 513,055% / 7 = 73,294%.

And the share price market value  has grown somewhat faster than its book value per share.

Remarkably, Berkshire shares that were about $15 in 1965 today sell for $120,000 each. A gain of an even 800,000%. It takes 1500 B shares to make an A share. Accordingly the B shares trade at $120,000 / 1500 or $80 per share. (I don’t have the exact price of Berkshire in 1965 and it would have fluctuated through the year, Buffett’s average cost to acquire control of Berkshire was under $15 but some of those purchases were prior to 1965).

Remarkably enough, the equivalent of a B share in 1965 would have cost about $15/1500 or 1 cent. So, each penny invested in Berkshire in shares in 1965 is now worth $80. Even after inflation that means each penny’s worth of real purchasing power has been transformed into $11.43 today. A gain of 114,300%.

I’d be surprised if any public company has EVER provided a return of over 100,000% in real after-inflation purchasing power since 1965. Perhaps Apple has, and if so, that would be over a shorter time.

And I am highly confident that we will see Berkshire’s shares continue to grow in terms of both booth value and market value over the next few years in particular.

Markers were moderately positive today. Very soon, I will be updating the report on the valuation of the S&P 500. I expect it will show that the market index still appears to be cheap.

Yesterday I mentioned AIMIA inc. (the former Group Aeroplan, and before that Aeroplan) which released earnings last night. I was bothered by the earnings release that seemed to be trying paint a very positive picture despite reporting a large loss. Perhaps the market was a bit confused by the release. The shares having closed yesterday at $13.08 before this news opened down only very slightly at $13.00. But they trended down all morning before stabilizing at around noon. They ended up down 7.5% at $12.10. Normally on bad news a stock would open down sharply at the open. The trading patter here suggests a delayed reaction to the press release.   It is neither here nor there if you don’t own these shares. But I don’t like to see this kind of confused presentation of results. It’s unfortunate for those who bought this morning before the market was able to digest the news properly.

The Canadian market was up 0.6% today but the U.S. markets were down modestly. Some of our key stock picks here and three that I own were whacked down today. Walmart fell for the second day after disappointing earnings. Toll Brothers was down 5%, Canadian Tire was down 2.2%. I am tempted to add to my position in these but instead am trying to have the discipline to hold onto my cash in case further bargains emerge. (One of my RRSP accounts is one third in cash, but the other RRSP account has only little cash and my non-registered account is leveraged (negative cash) so overall I have little net cash). Markets have been up a LOT in the past few months and it’s no surprise to see a pull-back. There are always things to worry about but on the other hand there are certainly positive signs in the U.S. economy as well.  And U.S. election promises may also have some positive effects.

Buffett’s annual letter will be out on Saturday morning. We already know, from the Fortune magazine article that I mentioned last week,  that in the letter he will suggest that Stocks are a better investment in the long run than is gold or bonds. This has prompted may to argue that he is wrong that Gold is a poor investment (which he did not even say!). He will be on CNBC on Monday morning. I would like to hear his views on the Greek debt swap charade.

A company that I used to have on this site has reported earnings tonight. This is Aimia which was formerly called Groupe Aeroplan and before that just Aeroplan. (I wonder why the name change?) They lost money in Q4 and in 2011 but they spin a story that they were profitable without goodwill impairments and breakage adjustments. Their accounting has always been complex by nature and subject to estimates. For a variety of reasons I have lost all trust in this company. I sold my shares some years ago. I would steer clear. They may in fact be a good investment and they may be entirely ethical. But the way they report things and the way they expire Aeroplan points after 7 years (and worse after one year of inactivity) all combined to give me a bad feeling. A few years ago I saw but excused somewhat similar red flags regarding Kingsway Financial and lost money as a result (and worse, we gave a rating here that proved far too optimistic that some subscribers followed, albeit at their own risk and albeit I did reveal the flags I saw). Once bitten, twice shy. (I will assume the rat I think I smell at Aimia is real, even if it might not be a real rat).

Searching back, I see that my last comment on Aeroplan was December 30,2010 when I mentioned the complex accounting, rated it Speculative Weak Buy at $13.75 and said I would not buy it. Today it closed at $10.97. (Update to comment, actually that was the price under the old stock ticker AER from October 6, the new ticker is AIM and it closed yesterday at $13.08).

U.S. markets finished only moderately higher but the Canadian market did very well today. It’s enough to make a person dizzy. But the point is to just buy individual stocks of good companies at good prices and not sweat the volatility too much. It’s a bit like a roller-coaster ride. Very scary but if you just hang in there it all works out in the end.

In an interesting development, after the close of trading, Telus announced that it will hold a vote to convert its non-voting shares to voting. I had thought that this might happen but did not know when.

The non-voting shares have traditionally traded at a lower price and in the case of Telus I have said we should favor the cheaper non-voting shares.

I don’t have Telus on the list above at this time. But the last update (Buy rated at $50.70 on May 22, 2011 for the non-voting shares) the last sentence in the summary cell was: “We prefer the non-voting shares since the voting shares
are costlier and in this particular case we do not place any value on the vote.”.

I searched back in the old comments since I was sure I said something about the non-voting shares eventually becoming voting. Back on June 27, 2007 the comment included: “In the very long run the non-voting are worth the same as the voting and someday the two classes will likely become one.”

And our article on Dual class shares (of February 6, 2006) states:

“Class merger may be another reason to purchase one class over the other. For example, if there is the possibility of the merger of the classes you may want to purchase the non-voting share because the premium on the voting class may evaporate.”

So, the point is that this Telus development was not unexpected, but it was certainly a long time coming.

Canadian Tire has a very wide gap between its very thinly traded voting shares ($73.50) and the much more numerous non-voting shares ($65.14). I would be very leery to buy the voting shares. I have said previously that I can’t see any justification for that gap. (I can speculate that maybe some party values that vote, but fundamentally I can’t see its value). My understanding is that in the event of any kind of change in control of Canadian Tire (say the founding Billes family sells out) then the non-voting shares become voting. With this development at Telus we may see the voting shares at Canadian Tire drop in price.  (In the case of Telus the non-voting should rise to close the gap tomorrow).

Walmart dropped about 4% today on the revelation that its low price strategy of late caused a drop in profit. My recollection is that back in the Fall analysts were loudly applauding lower prices as it would lead to higher sales and same-store sales. But for some reason they now seem surprised this hurt profits. At the end of the day Walmart still looks like good value. I was tempted to add to my position today but did not.

My understanding of the Greek debt swap deal is that it is still subject to each individual bond holder voluntarily turning in their binds for new long-term bonds at some 47 cents on the dollar. This will happen March 8 through 10th. I read today that they expect a 95% take-up rate. I suppose I am only guessing but I doubt that they will get to 95%. I would think that is a few bond holders refuse to go along with the voluntary swap then those bond holders might get their 100 cents on the dollar. Otherwise this swap that is not “officially” a default would have to be an official default. Also many of the bond holders apparently hold insurance against default. If so, I really can’t see how those parties can volunteer to take a loss and give up on their insurance. (Their stakeholders would sue). Meanwhile this deal may also require agreement of each and every member of the European Union. That is no small hurdle.

A Greek debt debt deal was worked of late Monday (early Tuesday in Europe). The next major step is to see if parties actually do show up on March 8 to trade in their former Greek bonds for some 47 cents on the dollar in longer dated Greek bonds. The whole thing looks like a giant charade. A ridiculous attempt to paint a default as being something other than that.

It’s really not impressive to see world leaders involved in this ridiculous matter. Greece was obviously loaned too much money.

Well we will stand by for the next act in this comedic/tragic play.

Meanwhile for the moment the U.S. stock futures suggest the Dow will open roughly 50 points higher on Tuesday morning. But really that is of little consequence as wherever it opens it will move off to some other level up, or dow..

In other matters I was reading Toll brothers annual report on Friday. Everything I read looks good. This company really seems to have been vary well managed through the real estate crash. It saw its sales fall by something like 70% but managed to raise its cash substantially by selling assets and not buying new land during most of the crisis and then finally starting to buy only more recently as the bottom started to near. There are obviously no guarantees but I feel quite good holding this company. I may even consider buying additional shares.

Well, it promises to be another exciting week in the markets…

The week ended nicely for stocks.

I have posted a new version of the free newsletter. However, due to system problems I am unable to email it out. The system problems that have occurred in the past two weeks have been partially but not completely fixed.

Here is the link to the latest free newsletterr, some interesting topics…

The Dow and the TSX were both up 123 points today, or 1.0% each. Bank of America was up 4.0%, Microsoft was up 4.1% and Boston Pizza was up another 1.7%. Stantec was up 5.0% today after instituting a dividend for the first time. And FirstService was up 5.3%.

As I have said in the past, to the brave go the spoils. Over the past few years a large percentage of people shunned the market due to their fears. But, as of now at least, it looks like it was yet another example that it was wise to follow Buffett’s advice and “be greedy when others are fearful” (and vice versa). Those who do nothing but moan about the markets and complain about it being manipulated and on and on tend to stay out of stocks and to not do nearly as well in the long term.

Basically I feel good about the markets right now, although of course it only takes a few days of losses of to add a tinge of nervousness to the equation. Markets are rewarding, but they are not for the faint of heart or those who can’t stomach losses, even temporarily.

Today’s markets ended to the down-side mostly. No one can say if this is the start of bigger decline. My strategy will be to hold through any decline and probably add to positions. Stocks still look cheap. I may enter some orders to trim positions a little if they rise and buy a little if they fall. But for the most part I will be standing pat.

Warren Buffett has a new article in Fortune Magazine, looking at cash, stocks and gold as investments:

http://www.cnbc.com/id/46328808?__source=RSS*blog*&par=RSS

This is REQUIRED reading. (Drop what you are doing and read it right now, if at all possible) The writing is so plain, the logic so clear. He says stocks are safer than cash, bonds or Gold in the long run. Nothing in the article surprises me because I have studied what Buffett has written and there is nothing fundamentally new here, although it is packaged up nicely. And it is nice to get the confirmation that nothing has changed that he sees stocks as better than bonds today (Gee, who’d a thunk it with stocks having dividend yields over 2% on average, (and constantly growing) and earnings yields of around 8% with growth potential and with even long term government bonds returning under 3% with zero growth and cash and short term bonds returning nothing. On top of that stock returns are taxed less heavily!)

One place where gold bugs go wrong is they view an investment in stocks as an investment in a paper fiat currency. Not true, stocks are measured in money but they represent investments in corporations that produce something of value. That value is largely independent of the currency it is measured in, especially in the long term. Gold bugs also fail to notice that Gold is also measured in dollars and not the other way around.

My own analysis has shown the same thing as Buffett notes — that stocks wallop gold and cash and bonds in the long term. It’s why I have “foolishly” been close to 100% allocated to stocks since I started invested. (It’s not for everyone, but it’s done well for me).

For example: Asset Performance and Asset Allocation Real Growth Scenarios

GREECE DEFAULT

The financial world is holding its breath waiting for some kind of Greek bond swap deal. The negotiations seem to go on forever.

And what is the point anyhow? It seems like we are trying to avoid an actual default which is considered “messy” by having a sort of soft-landing “orderly” default where investors “voluntarily” swap their bonds for new longer term bonds at some 50 cents on the dollar. It sure looks, walks and quakes like a default but they would try to dress it up as a voluntary thing. Apparently the idea is to avoid the triggering of credit default swaps (insurance against deault) since triggering those would have nasty ripple affects.

This seems to be madness for a number of reasons. 1. Greece is going to have some trouble borrowing in future either way. 2. If Greece obtains this voluntary 50% reduction in its debt it then gets bail out money that it presumably has to repay. 3. The European Union is requiring austerity measures that will shrivel Greek’s economy 4. The Greek people are mad as hell and not willing to take this. 5. It’s exceedingly unlikely that the actual owners of these bonds will voluntarily take the 50 cents at the end of the day. The bond holders are apparently represented by a finance industry group which I strongly suspect has no power to bind the actual bond holders. 6. The actual bond holders are corporate entities and pension funds that probably face fiduciary barriers from negotiating a voluntary hit like this outside of an actual bankruptcy process. 7. Hilariously enough event eh European Central Bank which has bought up a huge amount of the debt is not willing to take this voluntary reduction.

So, what should Greece do?

Here is my (possibly mis-informed) prescription:

Greece should immediately default on all bonds except those held by its own citizens and corporations. (If not an immediate default then consider something like a forced swap for perpetual bonds (at perhaps dollar for dollar or 50 cents on the dollar or whatever) and paying say 3% and redeemable by Greece at any time).

Basically Greece simply can’t afford to pay these bonds when due and so they gotta do something. Just like a peron sometimes has no choice but to go bankrupt.

These (like I guess all or nearly all sovereign bonds) were non-recourse bonds anyhow, too bad people did not read the fine print.

Then simply borrow new money by offering bonds backed by assets and future taxes. Investors world wide will lend to them when backed by assets and enforceable by some kind of world court or United Nations or something.

Sell bonds to its own citizens also backed by assets.

Paint the rest of the world as the villains and encourage Greeks to invest in Greek bonds.

Greece default is thought to harm Euro banks. So what?, the EU can bail those out. Some Greek bond holders will like this plan as credit default swaps will pay off. Too bad for the banks that issued that insurance. Anyhow EU can bail out the banks.

Take some austerity measures like pay cuts to government workers and later retirement ages but try to avoid killing the economy. Sell off assets as needed.

Do this very soon and stop all this nonsense about a voluntary default that is not called a default.

Other News:

It ended up being a “mixed” day in the markets.

I would not mind trimming some of my positions, but for the most part I feel like I would want to hold out for higher prices. And if we instead get a meaningful decline in any of the stocks I own (say 10% or more) I may just add to positions instead. (You know, buy low, sell high).

I almost wish Boston Pizza ($15.64 had not risen so soon after I bought it which was on December 28 at $14.00.
I like to think I would have bought more in January had it stayed at $14. I bought it for the dividend. It may still be a good pick but I always have a hard time buying more shares at a higher price since that seems like an admission that I should have bought more. This is basically an illogical thought pattern, but it is an emotional pattern that is a reality I have to deal with. I’ll try to update the report on this one shortly because after I update a report, that seems to act as a re-set switch in my brain and then I am often more prepared to pay the higher price if a fresh analysis indicates it is still a good buy.

Another point to consider is that just because a stock is expected to by a good buy does not automatically mean you should buy it. Perhaps you are already over-exposed to that stock. More importantly it almost certain that out there somewhere is a BETTER buy, so it can make sense to sit on cash and wait for a better opportunity. (Just as girl does not have to grab the first acceptable guy that comes along, she may want to wait and look for a better choice, and waiting is especially wise when applied to life-mates since it tends to be a one-time decision – If you think the cost to trade stocks is at all high — especially including capital gains tax, try trading in your spouse – not something I ever want to experience nor would I recommend you try it.)

I mentioned several times recently my doubt that the Greek bond holders could possibly agree to a voluntary reduction in the value of their bonds. I feel there is no way they would ever get the 100% agreement that one would think would be necessary to avoid a default on the bonds. Well laugh out loud I read this morning that the European Central Bank holds 55 billion face value of the bonds and it expects to hold to majority and get paid in full rather agree to the reduction. This is ludicrous. Why would any other bond holder agree to the reduction? In fact many other investors hold a type of insurance on these bonds that pays off in the event of default. The theory is that they will agree to a voluntary reduction so that the insurance (credit default swaps) will not pay off. This is preposterous. It is like asking you and I to have some one drive a large truck into our car causing damage equal to half the value of the car and then agreeing not to calim the insurance we paid for. Get real. How could any pension fund for example agree to this? It would be against their  duty to pensioners. Even for the good of the world economy, they cannot and I suspect will not ultimate do this.

P.S. With the market up today, it might be wise to shave a few positions. The difficulty though is always what to sell… (update, sorry when I wrote this this morning I thought the market was up, I must have been looking at the gain from yesterday)

Okay, I am back from my short vacation to Phoenix… Looks like the market took care of itself quite nicely while I was off line.

In particular Canadian Tire came out with good earnings on Thursday and was up quite nicely. I suspect (but certainly cannot guarantee) it will continue to do well in 2012, better than the market as a whole. Wells Fargo and Toll brothers should continue to do well as long as even a slow recovery continues.

There continue to be some technical problems with the log in system for this site. I had hoped it would be fixed by now and I will be attempting to get his resolved ASAP.

Note that the log in system has been by passed due to a server problem. This should be fixed in a few days. Meanwhile you can log in without a password.

I am off to Phoenix until Sunday and so will resume the comments here late on Sunday.

For the most part, the economic news continues to be positive. For example strong building permit growth in Canada in December and most company earnings reports have been positive.

Canadian Tire reports earnings tomorrow, Thursday and I am hopeful of a good report. The U.S. banks will get some kind of stress test reports next month and I am hopeful that Wells Fargo will increase its dividend by around the end of March. Bank of America may also resume some level of dividend.

Not too much happened in the markets today as we await some kind of a deal from Greece. As the week progresses we will get earnings reports to focus on.

Stocks are off to a roaring start in in 2012. The Dow is up 5.3%, the Toronto Stock index is up a similar 5.2% and the S&P 500 is up 6.9%. Our six Strong Buys are up an average of 7.4%. My own portfolio is up 4.7%. ( I have been taking some profits off the table and have some cash, but I am certainly not unhappy with a 4.7% return in five weeks.

Talks to voluntarily restructure Greece’s debt continue. I fully expect these talks to fail or at least to eventually lead to an official default by Greece. This will likely cause a temporary hit to North American markets. (Or it could cause a small rise if it is successful or even appears to be successful this week). I imagine that somewhere a hedge fund is accumulating Greek debt on the cheap and will refuse to accept the 50 cent offer and this will force Greece to officially default. I don’t see much up-side for any investment fund to voluntarily accept 50 cents. And also some of these investors have credit default options which will protect them from losses on the Greek bonds. But they apparently give up that protection if they agree to accept 50 cents. That seems like a ludicrous scenario.

U.S. markets were down modestly today while Canada was up modestly.

RIM was up 2.9% today to $17.17. This is nice gain from its recent low of $12.80 in December. We rated it Strong Buy at $13.44. But I did not expect it to rise so fast in the absence of a take-over. It does look like good value but could certainly be quite volatile.

On the European front it seems the Institute of International Finance is still trying to negotiate some “voluntary” Greek debt restructuring. I don’t see how it can happen since there is no possible way anything close to 100% of the bond holders will agree to this and unlike in a real default / bankruptcy there is nothing to compel anyone to accept the deal even if one is reached. I mentioned this also on October 30. I don’t see what would stop a hedge fund or strategic investor from buying bonds in the market now at 40 or 50 cents or less and then refusing to participate in any voluntary exchange. They would ultimately collect 100 cents unless Greece actually does officially default.

A strong day in the markets… notable winners were Wells Fargo up 2.8% and Toll Brothers up 3.0%.

Tomorrow is Ground Hog day. It’s interesting how the human mind gravitates towards patterns and sees patterns where none exist and no plausible relationship even exists. Like the length of winter based on a ground hog’s shadow, or such nonsense of January indicators, Superbowl indicator and so many more.

Okay, I’m back from my cruise. Excellent weather sunny and just over 80 degrees Fahrenheit most of the time (day and night). Lots of air conditioning to keep cool when that is wanted. It’s a good way to travel. Others to ALL the work. It’s affordable. We were on Royal Caribbean. At least on our late January cruise this is definitely an older crowd. Very few families with kids. Almost no college aged people. Just us wretched boomers spending our money. I am have absolutely no complaints about the trip and the service whatsoever.

I notice Royal Caribbean shares RCL on New York have a trailing P/E of 9.35 according to Yahoo. I may take a look at their annual report when it releases in a month or so. Many businesses could learn a lot about customer service from this company. I also found the four islands we visited work hard to keep tourists happy (and spending). Well trained and knowledgeable taxi drivers and tour guides for example.

The markets seemed to do okay during my trip. However Friday was down modestly  Monday was down modestly most of the day before a late recovery and today Tuesday the markets are again down a little. As always, there is certainly a chance that markets will decline at any moment due to world events. But meanwhile I am mostly holding. Noticing Melcor was up today I placed an order to sell what amounts to 18% of my Melcor shares at $14.25. As I have explained a number of times (and As indicated in my personal portfolio breakdown)  I have a large exposure to a few companies including Melcor. Also I bought additional Melcor and others on weakness this past Fall and it makes sense now to trim on strength.

I observe that the trimming I have done in the past couple of months on strength has cost me money as stocks kept rising. Still, it was definitely a good decision to trim. There is a difference between a good decision and a good outcome. Good decisions are bases on analysis, good outcomes — especially in the short term — are partly due to good analysis but with a huge measure of good luck thrown in.

We are about to enter the year-end earnings reporting  season in Canada. There will be lots of earnings reports in the next six to eight weeks. I am not sure if any Canadian companies have already report December 31 earnings.

There will not be any daily posts or updates here for the next ten days or so. I am off on vacation on a Royal Caribbean cruise ship that goes South from San Juan Puerto Rico. We will be stopping at St. Thomas, St. Kitts, Aruba and Curacao on this seven day cruise. Comments and updates will resume on January 30 or 31.

Markets were up a little today. These first three weeks of January have seen excellent market gains. Our average Strong Buy is up 6.2% and our average Buy rated stock is up 3.1%. It happens that our one Sell rated stock is down 2.5%, so that is a good start indeed.  (This excludes Dollarama which was added after the start of the year)

I sold the 300 shares of RIM from my wife’s RRSP today at $17.42. I had bought these on December 22 at $13.79, so there was a profit of $1089 less $20 in Commissions. I have always ran that account on a somewhat lower risk basis and I figured why not grab the quick profit. I also sold the options that I had on RIM for a profit. I kept the 300 RIM shares that I have in my own RRSP account. I did mention on December 17 that RIM might be a “real opportunity”. so maybe I should have really loaded up and then hung on. But I figured I would hedge my bets here, keep the 300 shares in my own account and sell the rest. It’s definitely a volatile stock, it will move up and down on rumor until we get some real news.

Today was a good day for our stock picks. Toll Brothers was up 4.8%. Bank of America which I don’t rate but which I have talked about a fair amount was up 4.9%. FirstService was up 4.4%.

Wells Fargo came out with earnings before the open today. I think the earnings were quite good and the company is growing. Still the stock did not rise much. I sold 300 shares at $30.40 based on an order I had placed a week or so ago. But I still hold over 6000 shares and it is my largest holding, so I am not exactly bailing out here. I am hopeful the market will take better notice of the good results over the next few days. Also it may increase its dividend before long. I may place another order to sell a few more shares if the price goes up to say $32.

I’ve revised the rating on Dollarama to Weak Sell instead of Weak Buy. The numbers would really say don’t buy. But it is a very strong company and I was somewhat reluctant to rate it as any kind of Sell. But really the numbers indicate it is very richly valued. While it could continue to rise, I think it would be wise to take profits if you own this or to stand aside if you don’t own it.

Canadian Tire share price has slid a bit to $63.07. If I did already own a lot of it I would be buying. On a value basis there is no comparison between Dollarama and Canadian Tire, Canadian Tire is the better value by miles. Dollarama share are pricing in very strong growth. Canadian Tire share are pricing in very little growth. I suspect Canadian Tire could “release value” at will by such moves as selling store real estate and leasing it back or perhaps selling its credit card division. But Canadian Tire chooses not to do that. Dollarama meanwhile has apparently fine tuned the ability to generate profits from its stores. But it does not own its real estate and so any sign of decline or slower growth in its profit could torpedo the share price. In other words Dollarama is priced for near perfection. Maybe it will continue to operate to near perfection. But there is a danger it will not.

I just made a few minor edits to the Dollarama report as I noticed a couple of cells were left incomplete. It’s numbers are rather interesting. It’s net profit margins are 9.8% which is I think the highest I have seen in a retail operation. More typical would be under 5%. The market capitalization is $3.3 billion which compares to Canadian Tire at $5.2 billion. Something is more than a little odd about that.

Dollarama is added to the list above as a Weak Buy at $43.49. This is a very nice business. It has surprisingly strong margins and excellent growth. However, the share price since its IPO in late 2009 at $17.50 has probably surpassed all expectations. It does not look like a buy to me. It could however continue to do well. If I owned it I would consider lightening my position.

Speaking of retail operations, I was in a Home Depot yesterday. The place was relatively empty and when I got to the register no one was in front of me. I am not familiar with the profitability of Home Depot. But I think it is clear to say that it is not as strong a business as Costco. When you are in a Costco the place is crowded, especially on a weekend. And Costco sells its inventory before it even has to pay the suppliers. The inventory in a Home Depot would likely move through MUCH slower. However Home Depot would have higher mark ups. We rated Costco a Weak Sell above which may have been too low a rating. It always looks expensive but Costco could probably increase its profits at will by raising prices (since its markups are so low) or by using more debt financing. I may need to take that into more consideration at the next update of Costco. The company has a new CEO now and just maybe it will focus a bit more on higher profits.

As of later on Sunday evening, markets are projected to open down slightly.

This coming week we should see some of our companies report Q4 earnings, I am looking forward to seeing the earnings at Wells Fargo.

Shaw Communications is updated and rated (higher) Buy at $19.83. Note the 4.9% yield. I will consider buying more Shaw by selling some of my larger positions but I will not likely do that until after my larger holding report their Q1 results.

Markets were a bit weak today, but the week overall was good. The year has started off well for our stock picks. The six stocks that are rated in the Strong Buy category are up an average of 3.4%, led by RIM at 12%. The 17 stocks in the Buy category are up an average of 1.3%. My own portfolio which is quite concentrated in a few stocks is up 3.1%.

Shaw Communications reported earnings before the open today. The market was not excited by the earnings and the shares were down 1.4%. To me, the earnings looked pretty good. There was a loss of 23,000 basic cable customers or 1.0%. But I figure that is not that bad considering the competition from Telus T.V. And Shaw gained another 23,000 digital phone customers and 11,000 internet customers, so still some growth. And lots of cable customers are upgrading to digital and I suspect more channels.

Dividend was raised by 5% and yield is 4.8%.

But there are some signs of weakness in that the media division revenue was down 3% (on a comparable basis — last year they did not own Shaw Media for the whole three months of the comparable quarter). Cable revenue also was only up 4% and that counts digital phone as well. Also it looks like competition with Telus is getting more intense – never a good thing for profits.

I plan to update the report soon. Our rating on the stock is currently (higher) Buy and so I suspect it will continue to be rated somewhere in the Buy range.

Research in motion was up 5.5% to $16.80, which is a nice recovery from its very recent low of $12.80 in mid December. On December 17 (below) I commented that this stock might represent a “real opportunity” and I bought some options in December being the first time I have bought options on anything in about four years or so. Still, with all the negative publicity I was not prepared to make a really large bet on it. And we don’t know yet where this company is headed. It’s always possible the price will plunge again with the Q4 results. But it sure looks cheap on a trailing earnings basis.

Markets overall were down a little today. However, our stock picks did well.

In particular Toll Brothers was up 2%. My Bank of America (talked about in these daily comments previously, but not rated) was up 3.6%. and Couche-Tard was up 2%. I did not do any transactions today or enter any orders.

I may trim a few positions…

It was a good day in the markets, Toll brothers was up 4.4%. Bank of America which I hold and have discussed but which is not in the list above was up 5.7%. Here in Canada, Boston Pizza which I bought for yield and not gains was up 1.7%. And Walgreen was up 2.7%.

My Portfolio…

The composition of my own portfolio was very recently updated. It shows that I am over 97% invested in equities and less than 3% in cash. And actually a little bit of money if borrowed outside of my investment accounts and so my net equity position is actually a bit over 100%.

By most any standards my portfolio is very aggressive. On top of the high equity exposure, I am concentrated in not very many stocks. So in that regard I am living dangerously.

So… from an asset allocation or risk management perspective it makes sense for me to trim my equity exposure and trim my exposure to certain companies.

But… I have trouble doing that because all my larger positions are stocks that I rate highly. So I am conflicted about selling a highly rated company.

However, I know that logically asset allocation and risk management should come first and logically i should trim some positions.

And recall that I added to Melcor and other positions as their prices dropped and so it makes perfect sense to reverse that as the price rises.

So… I did sell what amounted to 16% of my Melcor shares today (at $13.65).

I also have a previously disclosed order in to sell a bit more Wells Fargo at $30.40. This will sell only about 4% of my Wells Fargo.

My thinking is to enter a few more Sell order and trim some positions. Ideally I would trim while prices rise in the next few weeks, but certainly that may not be the case.

I really should trim fairly aggressively right now but I am inclined to go more slowly and see where we stand after the Q4 results come in. For example I am hopeful for good results from Canadian Tire in particular. And probably Wells Fargo, although for Wells Fargo the real catalyst I hope for is a dividend increase.

This risk if I don’t trim positions we get a leg down in the markets due to Europe or Iran and I won’t have money to take advantage of lower prices.

Adding to my risk is the fact that my portfolio has grown quite nicely and I have been investing for some 23 years now and I am at the point where new contributions from savings will not save the day if the market falls. Younger investors are in a better position to ride out don-turns since their new contributions from savings are material realtive to their portfolios (no longer necessarily the case for me).

Hopefully that is not too confusing. If it is, well, it is also honest and when we are being honest every investor must admit they have conflicting thoughts about the market. We all struggle with the extent to which greed or fear is going to guide our investment decisions at any point in time. My asset allocation and portfolio composition indicates I have been rather brave — but that does not mean I don’t have my moments of fear or at least moments of thinking I should lower my risks.

Having said all this, I do feel good about the markets right now. And, having said that, anything can happen at anytime. It’s the nature of the beast.

It was not a bad day in the markets as U.S. bank stocks rose. We are now into earnings season. Alcoa reported after the close and its results were apparently better than expected.

I am taking a look at Dollarama right now. Perhaps I am two years too late, I should have looked at it earlier. As always it is going to take a lot of analysis and work before I add it to the site here. If nothing else it will help me in my understanding of retail operations.

As of late Sunday evening, futures suggest the Dow will open down about 35 points. However there was some indication that certain bank liquidity rules are not going to be enforced as rigorously as earlier thought and this may be good for banking shares on Monday.

Our comprehensive reference article on Canadian Exchange Traded Funds is updated. This article contains current P/E ratios and dividends yields for a broad selection of ETFs. It also includes Gold, Silver, Oil and Natural Gas ETFs. Most of you may prefer individual stocks rather than ETFs. still, ETFs can be a good way to rapidly enter and exit the market it you wish to do that. They can also help you fill in any missing sectors. Some of the higher yield ETFs may be of particular interest.

Markets did not do much today. But some of our stock picks did quite well.

Wells Fargo was up 1.6% and Toll Brothers was up 2.1%. A stock that I hold but don’t have a rating on, Bank of America was up a hefty 8.6%. My investment in bank of America was detailed in the comments below (see July 26 and August 2 in particular). I ended up buying it at around $9.50. In retrospect I was at least too early. And I was too greedy as I grabbed quite a bit. Perhaps though time will rescue what seemed like a bad investment as 2011 closed.

So far 2012 has started off quite well for our stock picks and my own portfolio. It would be nice to finish off the week this way. However, as of tonight the futures suggest a down day in the market tomorrow. The fun never ends in this game.

Of interest today, Toll Brothers up 2.9%. So hopefully that bodes well for the U.S. home building industry.

Markets got off to a very strong start for 2012.

Most everything was up.

I sold what amounted to 9% of my Wells Fargo. I had continued to add to Wells Fargo at lower prices this past Fall. So I sold some today at $28.40. I also placed an order to sell a bit more at $30.40. In some ways I don’t want to sell any. But it is my largest holding and perhaps it makes sense to play the volatility a bit. Also I want to raise cash for other investments now or later.

markets seem confident at the moment. Of course things can always change quickly.

The composition of my own portfolio has been updated. It includes mainly Strong Buys and (higher) Buys from the list above but also one two that are Buy rated. My portfolio is by almost any standard over concentrated in a few stocks and I may work to reduce the concentration.

Trading for 2012 starts tomorrow. A few companies in the list above were well out of date. I have now removed these form the list. Some of these might return especially if I think that they would be good buys. I don’t think I would consider any of these to be Sells. If I held them I would be in no big hurry to sell. Then again, I have not looked at them recently. The removed companies are:

Staples, Telus Tim Hortons, Visa, Aeroplan, Bombardier, Constellation Software, Reitmans, and TMX Group.

So, we start the year with:

9 U.S. companies

5 Canadian companies that are also listed in the U.S. for a total of 14 U.S. listed

6 Canadian companies

7 higher yield Canadian entities

27 investment choices in total.

7 entities are rated in the Strong Buy category (but please consider the full report and the reasons why we think it is a Strong Buy and all the comments in the report)

5 are rated (higher) Buy and 10 are rated Buy.

I hope to add a few new companies before too long and some of those deleted from the list may return.

Generally speaking stocks appear attractive as we enter 2012. There are, as always, risks. World events could push the entire market lower at any time. And individual companies are always subject to negative developments. Stock investors tend to do well over time but it is not without periods of losses.

Walgreen Company inc., the largest U.S. drugstore chain is updated and rated (higher) Buy at $33.06. It’s price has dropped to quite an attractive level due to the loss of about 5% of its customers who are covered bor drugs through a drug plan management company called Express Scripts. Walgreen refused to lower its prices sufficiently for express scripts but feels this was best for Walgreen and it believes it can win back many of the customers. It may be an opportunity to buy a great company at a time when it has been somewhat wounded. I may buy some shares.

eBay is updated and rated Weak Buy / Hold at $30.33. This company is a sort of toll booth collecting fees on everything sold on eBay as well as fees for payments with PayPal. Both auction sites and payment systems benefit from “first-mover” advantages whereby an incumbent has competitive advantages and it is difficult to compete against an incumbent. Given these characteristics eBay could be considered as an investment. Personally I am bothered by its attitude toward stock options and would not buy unless the price were more compelling.

Happy New Year. Our Performance for 2011 has been updated. It was not a great year in the markets but we did easily beat the the market for the 10th year out of 12.

I feel good about the selection of Buys and Strong Buys (in the table above) as we enter 2012. World financial conditions could certainly throw a wrench into he works. But that is always the case. Stocks tend to be unpredictable in the short term but tend to do well over the long term. And if one can manage to hold better than average stocks then, all the better.

Our latest free newsletter was issued a few days ago and you should have received it if you are on the list for the free newsletter (If, not, add your email address to the list, you can also delete old email addresses at that link.)