Buying long term for yield

[prawn_86]

Hi all,

I have been away for a couple weeks, so im still not totally up to scratch with what has happened. Good time to go away by the looks...

Anyways, i was wondering if anyone out there is possibly considering buying some selected stocks for LONG TERM (10+ years) yeild.

Since i have got back its the first time i have seen the mainstream media media using terms like 'panic' etc. So that COULD mean we are getting close to a capitulation bottom. A few more months and a couple bank failures and then the average Joe will say "screw it i want some money left" and get out.

Obviuosly there are all the short term risks which i am aware of and dont really want this thread to discuss, but basically im looking for reasoning as to why/why not long term cashflow buying may be good now or in the near future.

 

[nioka]

Re: Buying long term for yeild

Hi all,

I have been away for a couple weeks, so im still not totally up to scratch with what has happened. Good time to go away by the looks...

Anyways, i was wondering if anyone out there is possibly considering buying some selected stocks for LONG TERM (10+ years) yeild.

Since i have got back its the first time i have seen the mainstream media media using terms like 'panic' etc. So that COULD mean we are getting close to a capitulation bottom. A few more months and a couple bank failures and then the average Joe will say "screw it i want some money left" and get out.

Obviuosly there are all the short term risks which i am aware of and dont really want this thread to discuss, but basically im looking for reasoning as to why/why not long term cashflow buying may be good now or in the near future.

I think that it is the time to buy stocks and I started buying on Friday. There are a good number of stocks that are oversold when you look at their cash position, their market cap and their prospects, in the menium term particularly, but for some, potential short term prospects. Maybe I have not picked the very bottom but I think I am close enough with the stocks I chose.

 

[doctorj]

Re: Buying long term for yeild

I don't know we're quite there yet. Every man and is dog is looking for a buying opportunity, everyone's calling capitulation.

So far we've seen fire and brimstone in the financials, but what about the follow on consequences? Richard Branson came out yesterday and said Virgin Atlantic nearly went under a month ago when HBOS wouldn't release the £1b+ they had on deposit. Businesses that now can't get credit to meet their expansion plans or even help their cashflow as now creditors are taking longer to pay.

People are getting laid off as companies revise their hiring plans, they're stopping buying cars, plasma tvs and overseas holidays. The scary thing about this is even once they fix the banks and 3 month LIBOR comes back, the real effects will be felt for a while.

The other side of the coin is there are only a handful of weeks like the one just passed that we;'ll have to endure before the Dow and every other index goes to zero.

If the (financial) world ends, you might as well go out fully invested, right?

 

[theasxgorilla]

Why the hurry? This is serious. Sit back, relax, and observe the responses to what is happening.

There will be a time to start collecting some solid, high yielding companies, but not just yet.

 

[nunthewiser]

Agrees , sit back and wait , plenny of time to pick the bones later ... PLUS how many of these high yield companys,going to actually keeep there divvys at current yields ? times are getting hard expect a few to cut them to save a few pennies , already a few that have cut them if not cancelled altogether .

patience will win this one

 

[nioka]

Re: Buying long term for yeild

If the (financial) world ends, you might as well go out fully invested, right?

Quote of the week. That's my thinking.



But it won't come to that.


Better to have loved and lost than never to have loved at all.

 

[prawn_86]

So, so far the consensus is that there is a bit further to go yet, which i dont doubt.

However i do think, as Nioka states, there are some co's which are offering good yeilds. In the long term even if yeilds are kept steady or cut back a little it still seems like we are getting close to some cheap long term picks.

Not buying, just watching closely for the moment.

Or as the good Doctor says, every index may go to 0 and then we wont need to worry about it... :

 

[justjohn]

Picked up some GMG last week which was really hammered at current price showing yield of over 20% payed quarterly and a few SUN but still extremely nervous about current climate and holding cash until this situation evens out

 

[Indie]

Absolutely no way this is the bottom.

Australian stocks are cheap based on yield and capital growth stats taken from a period of the greatest credit expansion in history. Going forward we will see a very different picture. Australians and Australian business are among the most leveraged in the world. The white elephant in the room is Australian banks. They too are among the most leveraged in the world and are heavily dependent on foreign capital. They are vulnerable despite all the usual empty reassurances of our government.

All this adds up to a tapped out consumer and less stock market participation for average Australians. Less participation means lower growth, lower growth means lower returns.

I look at the whole process that's taking place as a re-evaluation of stock prices. Once the bottom comes don't expect any sharp rebound to last and don't expect past price to earning ratios. If you are a long term investor I'd wait to see how the real estate card plays out in Australia first. Any significant price falls in that area will flow onto every part of the economy including stocks.

Plenty of brokers will tell you market always bounces back.

Google "nikkei yahoo" and click underneath the graph where it says "max". This shows the history of the Japanese stock exchange from before the heady days of "40,000" in 1990. Japan is a modern economy with high domestic savings and some of the biggest corporations in the world. We are 18 years past this high and still more than 75% off it.

 

[Tysonboss1]

I don't think it is a bad time to start drip feeding funds back into the market.

 

[nomore4s]

Why the hurry? This is serious. Sit back, relax, and observe the responses to what is happening.

There will be a time to start collecting some solid, high yielding companies, but not just yet.

I agree, plenty of time to get in when the new uptrend begins.

Also what I'm waiting for is to see how this will effect the earnings of some of these companies, and we won't know that for awhile.

 

[Julia]

I
Also what I'm waiting for is to see how this will effect the earnings of some of these companies, and we won't know that for awhile.

I agree. I can't see how one can realistically evaluate the yield from many companies until we see where the overall economy is going and how earnings will be affected.

I hear people saying "Oh, PE's are so low." Well, sure. But let's remember that the second half of this expression represents earnings and they could be well down if we enter a full recession.

Somewhat off topic, I was irritated by one of the talking heads on the 7.30 Report this evening declaring that retirees shouldn't worry about their capital values having declined 43%. No worries. "All retirees are interested in", said this wise chap, "is the yield". "That's all they need to live on". What a dumb statement. How can he possibly make such a generalisation.
I value the ABC enormously, but their credibility is much damaged when they present this rubbish on their leading current affairs programme. Grr!

 

[doctorj]

Nassim Taleb going a bit crazy on BBC, but he makes some valid points...

 

[chops_a_must]

Nassim Taleb going a bit crazy on BBC, but he makes some valid points...

Not sure what relevance he has here Doc, but I love him all the same.

Perhaps time for a separate Taleb thread?

Out of everyone I have read on the mathematical and finance side (so far) to do with probability and expectancy/ expectation, he is the only I have come across that actually 'gets it'.

They explain probability et al. with all these mathematical models and theoretical nonsense, seemingly completely unaware of the building blocks used in what they are creating.

Even here, you ask for an explanation of probability, expectation, whatever, and someone will spit out some numerical nonsense.

Blissfully unaware that the language used to create probability and all its developments, was no more than a substitution for the word "hope". And even then only meant to be applied to conditionals, or close ended applications.

And we wonder why we have a situation where our models of certainty, based on a concept inherently faith based, continue to blow up?

And it's this nonsense that is so pervasive all throughout the economics and finance industry, faculty and literature.

People in this area blissfully unaware of the roots of what they study, and the problems that are then overlooked, built upon and amplified.

You cannot have an economic solution from within the current economic framework, because it is flawed at the core. The sooner we realise, the better, because our castles built on sand are sinking rapidly.


/rant.

 

[chops_a_must]

And moar:

Taleb's `Black Swan' Investors Post Gains as Markets Take Dive

By Stephanie Baker

Oct. 14 (Bloomberg) -- Investors advised by ``Black Swan'' author Nassim Taleb have gained 50 percent or more this year as his strategies for navigating big swings in share prices paid off amid the worst stock market in seven decades.

Universa Investments LP, the Santa Monica, California-based firm where Taleb is an adviser, has about $1 billion in accounts managed to hedge clients against big moves in financial markets. Returns for the year through Oct. 10 ranged as high as 110 percent, according investor documents. The Standard & Poor's 500 Index lost 39 percent in the same period.

``I am very sad to be vindicated,'' Taleb said today in an interview in London. ``I don't care about the money. We're proud we protected our investors.''

Taleb's book argues that history is littered with high- impact rare events known in quantitative finance as ``fat tails.'' As the founder of New York-based Empirica LLC, a hedge- fund firm he ran for six years before closing it in 2004, Taleb built a strategy based on options trading to bullet-proof investors from market blowups while profiting from big rallies.

Mark Spitznagel, Taleb's former trading partner, opened Universa last year using some of the same strategies they'd run since 1999. Pallop Angsupun manages the Black Swan Protection Protocol for clients and is overseen by Taleb and Spitznagel, Universa's chief investment officer.

``The Black Swan Protection Protocol is designed to break even 90 to 95 percent of the time,'' Spitznagel said. ``We happen to be in that other 5 to 10 percent environment.''

Options Strategy

The S&P 500 dropped 18 percent last week, its worst week since 1933, on concern that the credit crunch would cripple the financial system and trigger a global recession.

``We got a lot of giggles when we said we're targeting 20 percent moves,'' Spitznagel said. He and Taleb declined to confirm the investment returns listed in the documents, which were reviewed by Bloomberg News.

Taleb's strategy is based on buying out-of-the-money options -- puts and calls whose strike price is either lower or higher than the market price of the underlying security. A put option gives the buyer the right, though not the obligation, to sell a specific quantity of a particular security by a set date. A call option gives the right to buy a security.

The Black Swan Protection Protocol bought puts and calls on a portfolio of stocks and S&P 500 Index futures, along with some European shares. The Black Swan Protocol doesn't rely on commodities, currencies or insurance on bonds known as credit default swaps, Taleb said.

``We refused to touch credit default swaps,'' Taleb said. ``It would be like buying insurance on the Titanic from someone on the Titanic.''

White Swan

The Black Swan strategies are designed to limit losses to a few percentage points. Some investors did better than others depending on when they decided to lock in profits, Taleb said. The returns have enabled Universa to line up more money from investors in the next month, Taleb said.

As a trader turned philosopher, Taleb has railed against Wall Street risk managers who attempt to predict market movements. Even so, Taleb said he saw the banking crisis coming.

``The financial ecology is swelling into gigantic, incestuous, bureaucratic banks -- when one fails, they all fall,'' Taleb wrote in ``The Black Swan: The Impact of the Highly Improbable,'' which was published in 2007. ``The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup.''

Taleb said the current crisis is a ``White Swan'', not a Black Swan, because it was something bound to happen.

``I was expecting the crisis, I was worried about it,'' Taleb said. ``I put my neck and money on the line seeking protection from it.''

Taleb is angry that Wall Street is continuing to use traditional tools such as value at risk, which banks use to decide how much to wager in the markets.

``We would like to society to lock up quantitative risk managers before they cause more damage,'' Taleb said.

To contact the reporter on this story: Stephanie Baker in London at stebaker@bloomberg.net

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDVgqxiT9RSg&refer=home

 

[bhutos]

``We refused to touch credit default swaps,'' Taleb said. ``It would be like buying insurance on the Titanic from someone on the Titanic.''

Heh. I bought Black Swan at the start of this year without even really knowing about Taleb or the book, it just looked like an interesting discussion on improbable events.

 

[johnnyg]

Checking over some figures of the big 4 banks tonight and all 4 are very close to a 10% yield.

(this dividends are calculated as of this year which very well could be downgraded in time)

CBA - $33.00 - $2.66 - 8%
WBC - $16.97 - $1.42 - 8.3%
ANZ - $14.05 - $1.36 - 9.6%
NAB - $19.40 - $1.94 - 10%

 

[Big_Daz]

Checking over some figures of the big 4 banks tonight and all 4 are very close to a 10% yield.

(this dividends are calculated as of this year which very well could be downgraded in time)

CBA - $33.00 - $2.66 - 8%
WBC - $16.97 - $1.42 - 8.3%
ANZ - $14.05 - $1.36 - 9.6%
NAB - $19.40 - $1.94 - 10%

I agree with your downgrade comment, being in the stage of the bear market we are in (starting to see a couple of big hits for companies going into voluntary liquidation) the yields look good on historical numbe, it can't be maintenened. And what I have been reading as the financial crisis bites, it is the middle market which will hurt the banks (eg: auto industry).

 

[prawn_86]

Dont forget a lot of larger companies are now doing capital raising which will have a dilutionary affect, meaning lower yeilds even if earnings stay at the same level