what stocks you own/depends on where you live

[selkirk]

have considered (also would be a good study for some academics, they do studied anything), if your attitude towards cash, debt and what stocks you own depends on certain factors.

1. for instance, let us look at debt.

my grandparents passed away while I was a child 9-12, final one 18. they lived 74 years old and the other two 79. anyways they saw the some incredible things in their lives that shaped how they would look on money.

because of the two world wars some items could be rationed or increase sharply in price. this would have an effect, also the biggest impact probably was the great depression of the 1930s....

when they would be young adults, trying to get by, many commentators often throw around the word depression and sometimes interchange it with recession.

the depression of the 1930s was brutal. unemployment at 25% or greater (much higher it is thought) and in general pay declines. also financial disasters of financial systems collapsing, along with a sharp drop in agricultural prices.

so this generation probably because of this the wars and the depression, lived well below their means.

most everything was paid off in cash, they would do without if they could not afford an item. not sure if my grandparents ever owned a credit card. even if they were poor they tried to never run up debt....and their home and land were always paid off.

generaton 2, parents generation.
these people were born during (or just before), just after the war. the baby boomers give or take 5-10 years.

they do live within their means for the most part, would say that though they were not born or babies, during the depression it was taught to them over and over again about the importance of money, and how to not overspend.

though they spend more (their generation has had great economic wealth, compared to others, before), they still are for the most part carefull with their money.

they do own credit cards, but only a few, in general do not like large amount of debt, however will tolerate more than the previous generation.

3 rd generation

my generation has credit cards more than 2, actually probably 3-5 is common. they are used to financing their car, not buying it.

longer mortagages with less money down than the previious generations.

will spend and take trips, will at times live beyond their means.

will have large debt out, and have no concern, household, car, ect.

4th generation (next)

this one is in their early 20s, and (late teens).

they live beyond their means. they will use debit and credit cards more than cash.

they will finance more items than any other generation in history. home, car, cosumer goods,
(heard an add you could pay off your furniture over 5 years.)

they will not wait to accumulate the items they wish, simply buy on credit, at least until that is run out.... putting money down is shunned even if it means reduced payments.

believe it just gets worse, until a large event. not sure but maybe if someone could go back and study what a large economic decline had on the spending habits of the current and then next genearations... and how long until looser credit came into the picture.

must have happened before.

thanks
selkirk

 

[selkirk]

by the way their is diffences some people in a generation could be better than another, however do believe people willing to drive up their credit more in general.

went to a store to buy bags of sunflowers seeds (for birds, feed them durning the winter). anyways turned around and there was some bags of wood chips (pellets), for people to start a fireplace going (and are to lazy to split some small pieces). Anyways on the bag it said do not feed to animals or humans. must have read that 20 times.

they do this because of a legal issue, threat of a lawsuit. however if you went back 40-20 years this would have never seen a court and would have been thrown out. generations before probably would need counselling after seeing that warning....times change....

Stocks

if I turn on CNBC or bloomberg, or most US networks most often hear how oil is going down to 70 a barrel. it may hit 100 but will drop to 70.

in Canada hard to find an expert who does not believe oil is not going (to stay roughly where it is) or go higher, $150.

most cdn. probably own double the amount of resource stocks than the average US investor.

a US investor will own more retail, and (drug) health care related stocks.
this has to do with the large companies that exist in a country and are reflected in the index.

I will probably always own more resource stocks than retail, health (drug ) stocks combined. just what you are used to and follow.

note: now with the cdn. dollar at 1.03 to the US is a good time for cdn. investors to diversify and buy US and Int. stocks in sectors that they can not find on Toronto.

by the way overall bullish on commodities still, most US commentators are bearish and do not realize the demand for these going forward.


hope this made some sense.
thanks
selkirk

 

[Dizzayton]

Thanks for your insight. What do you think of PDS? Many American "experts" are high on this stock.

 

[DOGS THAT BARK]

Great read Kirk--at work now--will add my 2 cents this evening.

 

[baby johnson]

sell, which commodities and what is the smartest way to purchase them

thanks

 

[DOGS THAT BARK]

--on issue of debt--my parents both mid 80's so similiar to your grandparents kirk

Never owned a credit card--worked at shoe factory for years--then got much better job at Chrysler--they would car pool 80 miles one way to work and then farm when he got home--with exception of laying foundation,built our house by himself after he got off work--was/is a very "thrifty" person. Owns 2 farms now--one pretty large on small-lives off his ssn and banks his retirement and farm proceeds--

sorry for being long winded--but today is diff world-
who in their wildest dreams 40 years ago would have thought there would be such a things as consoilidate debts loans. Yep thats people taking out loans (paying interest) to pay off other loans and interest that they can't pay. The double wammy!!! Its not what you make it what you do with it-interest can be ones friend or ones enemy
Show me a person who lives below his means and chances are you'll find a a person with stress free retirement--but where it was norm years ago-quite a rarity today--and gov doesn't help matters as they tax you on what you save--and tax you again at death--to subsidize the spendthrifts of next generation.

Stocks--resources my fav also--and probablly rubbed off from following Kirk through the years.
In fact way to top heavy in them right now--as over 40% of portfolio--however 60% in cash.
Don't like to be that cash heavy even at my age
(58) but just the way things turned out for now.
After elections in 06 sold most my U.S. stocks by mid july of 07.
Have 3 left. Was very lucky as credit crunch followed and most dropped dramatically.
Surely didn't foresee credit debacle but sold them primarily for several reasons--
Mostly the way future is moving in U.S. IMO
The only thing that kept stocks going forward was our productivity--aside from that there are too many obstacles giving other countries big advatages--litigation (as Kirk mentioned) is a biggie--but mostly the attitude of many U.S. citizens who think it is a crime for corp to make money--and media drills it into them daily. Classic example Exxon--all you see is media/people harping that they made billions but don't stop to think they are largest corp in the world and these record earnings only reflect a modest % gain--however take a 50 mill company that makes 25 mill profit gets no press.
The theme in 08 could be dictate wages-set limits on earnings--and take away tax advantages.
Not what I'd call market friendly.

Flip side (while always looking for silver lining) i expect to see 15 to 20 % interest rates in next decade--and that will also provide a tidy retirement--if the $ is worth anything

Till then I'll look to other markets--llike tangibles things like resources and companys making real products. especially at my age like div paying stocks--Try my best to stick to rule of buying only those with debt to equity and less than 1 and payout ratio under 90%.

I do break the rules sometime and generally pay the price--classic example Thornburg Mortgage--down over 50% today-while only modest position was still a $2,000 lick "ouch"

 

[selkirk]

Dizzayton if you want to buy a land driller then this would be a good selection.

I have been bearish on the drillers (land drillers for the last couple of year) mainly follow some cdn. companies. these work in a cycle....

1. first strong prices and everyone and their dog want to drill for oil and natural gas.

2. never enough rigs so the price per rig goes much higher, people are willing to pay almost anything, rig utilization is at 100% and the daily fees just keep climibing, better than printing cash.

3. the companies begin to build more rigs, more rigs= more money. and train new crews.

4. after prices have declined the producing companies cut back on drilling, the costs are just to high and the returns become marginal.

5. then you have to many rigs some not being used, and day rates dropping quickly, better than not working at all....

6. at some point prices should recover,go back to number 1, and start the process all over.

for the most part I do not invest in drilling stocks for this reason ( referring to land drillers, the offshore drillers have done much better, do not follow them to close, though).

these are very volatile stocks for instant PDS (listed on Toronto under PD.un) went from 30 in may 07 to 16, to now at 21.40. up sharply since December.

if you want a volatile way to play natural gas, this is a good option. natural gas has rallied on demand/supply concerns and well mainly the cold winter. compare the two. in western Cdn. and (US 10% of revenues 12 rigs ? ) most of the drilling is to find natural gas.

the stock trads around 8X earnings and yields 7%. the income trust structure ends in 2011, so the div, and yield will drop sharply, also the company may decide to convert to a company and speed up the prcocess, so do not count on the income.

the company is one of the biggest (in Cdn. it is the biggest services company) land drillers in North America. well run, however it will come down to what natural gas prices do, going forward. if they drop you lose money or have dead money.

if they rise PDS should be a good leveraged investment.

for the most part I prefer the producers such as ECA, CNQ, Devon, when the prices drop they just back on the drillng. their prices will go down however not as much.

earlier in the year at 7 natural gas, ECA and CNQ cut back on their drilling programs. in western Cdn. at that price is quickly becuase a marginable business.

in the spring natural gas prices sometimes sell off and is often a weak time, though not sure this will repeat this year. may not put on a full position just in case it does get weaker. spring can be weak.

so PDS is a leveraged way to play natural gas.
hope this helps

thanks
selkirk

 

[selkirk]

Saxon energy which is listed on Toronto, and is much smaller is also one to look at, slighly more expensive but is also well run and good growth prospects, especially if the drilling sector holds up.

Aljoah you can play it through etf (exchange traded funds), these follow the commidity or the companies in the sector. they even have them now for agriculture.

will review them in an etf thread, there are just so many of them, so good to see each one and maybe track them.

also you can buy mutual fund (however the fees often eat away the returns for the most part). in Cdn. there are some funds that buy into jr. and mid caps in the gold sector. this is probably worth the cost since these stocks are very volatile and need a basket. and large amount of time to follow.

shares are also not a bad way to buy into the sector will review some of these later however some I own :

all trade in Cdn. and the US.

1. CNQ cdn. natural resources, gas, and oil, think of this as manily natural gas, however they have a large oil sand project coming on stream, they reported overuns (cold weather) and the stock still went up on this news. would track this

2. ECA, NXY Devon
gold Barrick many other srs.
agriculture, own Agrium with covered calls, and looking at potash on pullbacks.

will go over these stocks they are very volatile. along with the etf threads.

etf you are taking less a company risk, I have some resource companies have just done great, others have been close to dead money.

thanks
selkirk

 

[selkirk]

DTB I agree with most of your thoughts, for the most part have always had a small cash position.

currently close to 20% which is high becauce often would be at 2% or less. often I hedge a trade with options, calls and puts, so most of the time believe there is always a trade at some point.

have a friend who always has more than 40-60% cash at all times, we debated this, I believe it lowers overall returns over time. probably safe to say in the middle would be correct, sometimes a company goes on sale and cannot take full advantage, or a trade.

believe the fed will try to re-inflate the economy out of this mess, it might work. what you do is lower rates, do not worry as much about inflation (now non core at 5% and with oil and food the last three weeks rising :scared )

you lower rates, and also your currency. the debt is then easier to service. the downfall is if inflation goes up, would argue that 5% non core is to high, and hurts the standard of living the most.

also hope your 10-15% is wrong though time will tell, I actually believe rates will be kept lower than they should for the simple reason is the average person now has so much debt. if rates are in the 15% that would imply heated inflation, or a currency crisis.....hope both do not happen. do not believe this fed cares about lowering inflation.

the fed probably hope oil goes lower, or else cannot see how they can continue lowering rates without stoking inflation, (now there is talk they will do 75 basis points)...time will tell.

thanks
selkirk

 

[Dizzayton]

Thanks for the good info. I will hold off on PDS for now. I've got about 50% of my money in stocks right, now, and I am ready to pounce another 25% or so after the FED finishes rate cuts and the economy tanks. I thinks the DJIA will go into the low 11000s at some point this year. We will see.