New Weeks Hot action DCA on yet another week

Well hello I spend the better part of the week hunting looking and examining my current holdings to determine what is to be done this week for my sharebuilder tuesday investing day. I am still using the $12.00 per month 12 trade plan so my trading fees run approx. $144.00 a year, which includes 144 buy chances at $1.00 per trade try to beat that with a stick.

So first I am taking a initial plunge into TPZ Tortoise Power n Energy Infrastructure. Currently has approx 7 million shares outstanding. Was created on 07/29/2009, with average daily volume of 1.25 million a day. Inception price was $20.00 per share with a NAV of $19.50 per share, today the price is $23.62 witha  nav of $24.97. The thing the really knocked my socks off not the monthly dividend of 6.35% or 12.5 cents per month per share of stock owned, no not any of that it was the amazing fee of a mere .60 basis points oh my that is sweet. Go try and get a MLP (master limited partnership) for anywhere near that cost.

Top 10 Holdings (as of 10/31/10)
Percentage of
Holding(1) Investment Securities(2)
Kinder Morgan Management, LLC (equity) 8.6%
Enbridge Energy Management, L.L.C. (equity) 8.4%
Inergy, L.P. (equity) 3.8%
Midcontinent Express Pipeline LLC (fixed income) 3.3%
NRG Energy, Inc. (fixed income) 3.2%
PPL Capital Funding, Inc. (fixed income) 2.9%
TransCanada Pipelines Limited (fixed income) 2.9%
Source Gas LLC (fixed income) 2.8%
Energy Transfer Partners, L.P. (equity) 2.7%
Dominion Resources Inc (equity) 2.7%

So I will buy a single share to get warmed up in this name and will buy more along da way as I seem fit. I truly enjoy recieving many dividends each month sure makes compounding real easy to see working.

Buy #2  CTL CenturyLink, Inc. adding $15 to my Current Holding. Up 24.12% on this holding.

CenturyLink, Inc., together with its subsidiaries, operates as an integrated communications company. The company provides a range of communications services, including local and long distance voice, wholesale network access, high-speed Internet access, other data services, and video services in the continental United States. Its services include local exchange and long distance voice telephone services, as well as enhanced voice services, such as call forwarding, conference calling, caller identification, selective call ringing, and call waiting; network access services; data services, including high-speed Internet access services, and data transmission services over special circuits and private lines; and fiber transport, competitive local exchange carrier, security monitoring services, other communications, and professional and business information services.

The company also offers other related services, such as leasing, selling, installing, and maintaining customer premise telecommunications equipment and wiring; provides billing and collection services to third parties; participates in the publication of local telephone directories; and provides printing, database management, direct mail services, and cable television services. In addition, the company provides network database services, as well as switched digital video services and wireless broadband Internet services. As of December 31, 2009, it operated approximately 7.0 million telephone access lines. The company was formerly known as CenturyTel, Inc. and changed its name to CenturyLink, Inc. in May 2010. CenturyLink, Inc. was founded in 1968 and is based in Monroe, Louisiana.

Buy #3 IID Ing Intl High Div Equity Inc. adding $15 to my Current Holding. Up 10.46% on this holding.

The Fund seeks current income with long term capital appreciation by investment in dividend producing securities or derivatives and through utilizing an options strategy.

ing international High Dividend Equity Income Fund (the Fund) is a non-diversified, closed-end management investment company. The Fund's primary investment objective is to seek current income and current gains, with a secondary objective of long-term capital appreciation. The Fund seeks to achieve its investment objectives by investing at least 80% of its managed assets in dividend-producing equity securities of foreign companies and/or derivatives linked to such securities or indices that include such securities, and by selling call options on selected international, regional or country equity indices or futures, and/or on foreign securities.

Securities of foreign companies includes securities issued by companies that are organized under the laws of, or with principal offices in, a country other than the United States, or whose principal securities trading markets are outside the United States. The Fund's investment advisor is ING Investments, LLC.

4th and final purchase for the 16th is the etf PFF, also adding $15.00 to this one too. Currently up 2.49% to date,  iShares S&P U.S. Preferred Stock Index.

The investment seeks to track the price and yield performance, before fees and expenses, of the S&P U.S. Preferred Stock index. The fund invest at least 90% of assets in securities that comprise the index. The index measures the performance of a select group of preferred stocks listed on the NYSE, AMEX, or NASDAQ. It includes companies with a market capitalization over $100 million. The fund is nondiversified. Expense ratio is a mere .48 basis points.

FORD CAP TRST II	3.58%
BARCLAYS BANK PLC	3.36%
BANK OF AMERICA CORP	2.38%
WELLS FARGO & CO	2.35%
MERRILL LYNCH & CO INC	2.22%
METLIFE INC	1.93%
WELLS FARGO CAP	1.92%
JPMORGAN CHASE CAPITAL XXVI	1.84%
BARCLAYS BANK PLC	1.79%
HSBC HOLDINGS PLC	1.75%
Total	23.11%

Big dividend this week was KMP other dividends this week were JNK,ABT,IGD,IID,PG and the O. Finished out da week up 0.92% not including dividends. Also purchased one cd for $15.76 a 6 month 1.00% cd. That is it for da week.

Junk Bunks The Yield is Dynamite is it time to Dip ya toes??

Junk bond exchange traded funds (ETFs) have been on a tear this year. If you’ve been thinking about getting some exposure to high-yield debt, read on.

We’re in the midst of a full-blown junk bond bull market. From the market’s low on March 9, 2009 until Oct. 8, 2010, junk bonds have returned a cumulative average of 68%, reports Jeffry Kosnett for Kiplinger. That beats all other fixed-income categories.

High-yield returns have also beaten out investment-grade bond returns in the last three months. The last time that happened was during a five-month winning streak ending in July 2009, says Sapna Maheshwari for Bloomberg.

Junk bond ETFs have served to be an appealing way to get exposure to this market. They give investors a safe place to put their capital while providing yields that are tough to come by these days.

That’s why I own SPDR Barclays Capital High-Yield Bond (NYSEArca: JNK) for my accounts.

While junk bonds are riskier than other bond types, a strategy such as trend following can help you manage the risk by providing you with a sell point. If you think the junk bond rally is overheated, think again: you can’t fight the trend and right now, it’s up.

* iShares iBoxx $ High Yield Corporate Bond (NYSEArca: HYG): yields 7.97%
* SPDR Barclays Capital High-Yield Bond (NYSEArca: JNK): yields 8.44%
* PowerShares Fundamental High Yield Corporate Bond (NYSEArca: PHB): yields 6.77%

 Disclosure I am Long HYG,JNK shares.

Intel Announces 15 Percent Increase to Quarterly Cash Dividend

Intel Corporation today announced that its board of directors has approved a 15 percent increase in the quarterly cash dividend to 18 cents per share (72 cents per share on an annual basis), beginning with the dividend that will be declared in the first quarter of 2011.

"Intel remains on track to have our best year ever and we continue to generate strong cash flows," said Paul Otellini, Intel president and CEO. "Our ongoing operational performance and confidence in our business going forward provide the ability to return more cash to shareholders."

Intel began paying a cash dividend in 1992 and has paid out approximately $20 billion to its shareholders in dividends. Intel cash dividends for the first through third quarters of 2010 total approximately $2.6 billion.

Intel  (INTC 21.53) , the world leader in silicon innovation, develops technologies, products and initiatives to continually advance how people work and live. Additional information about Intel is available at www.intel.com/pressroom and blogs.intel.com.

Disclosure I am Long INTC shares.

5 Commodity ETFs That Are Beating Gold

We have all heard about how gold is hitting record highs, but other commodities, along with their exchange traded funds (ETFs), are posting higher gains so far this year.

Year-to-date, gold is up 21.91% while coffee is up 48.29%, silver is up 42.14% and corn is up 28.93%, according to Bespoke Invest. Oil slightly increased 4.08%, but natural gas plummeted 39.75%. Most commodities are trading at their upper ranges, with precious metals, coffee and copper nearing overbought territory, says Bespoke Invest.

* SPDR Gold Shares Fund (NYSEArca: GLD)
* iPath Dow Jones AIG Coffee TR Sub-Index ETN (NYSEArca: JO)
* iShares Silver Trust (NYSEArca: SLV)
* Teucrium Corn (NYSEArca: CORN)
* United States Oil Fund (NYSEArca: USO)

Corn and soybean harvest yields are even lower than most projections, according to PorkMag. The stock-to-use ratio for corn is at 6.7%, the lowest since 1995. Darrell Mark, University of Nebraska Extension livestock economist, says the market is very sensitive to “scares,” and corn prices can top up to $8 if enough pessimistic news comes in.

“In the October WASDE report, USDA actually increased feed demand, maintained ethanol demand, and slightly lowered export demand compared to last month,” Mark notes. However, the higher price for corn has reduced corn demand for livestock feed.

* PowerShares DB Agriculture (DBA)

The rally in coffee prices has kept the commodity at a 13-year high, writes Larry Baer for Benzinga. Brazil, the largest producer of coffee, and Costa Rica both reported that output may be lower-than-expected. Additionally, Vietnam’s crop may be smaller and harvested late. If the dollar continues to drop, it may add a bullish pump to coffee, that sends shivers down my spine. Gotta Have That Coffee!!

Disclosure I am long GLD and SLV shares.

The Benefits of Owning Commodity ETFs

At one time, long before exchange traded funds (ETFs) came into the picture, commodities were for institutions and others with the time and monetary resources to play the futures markets. Today, you (yes, you) can have commodities in your portfolio, too.

These days, commodities have a home in any well-diversified portfolio, Mitch Tuchman for U.S. News & World Report says. They offer several benefits:

* Commodities can be an important hedge against inflation. Because commodities prices usually rise when inflation is accelerating, they offer protection from the effects. Few assets benefit from rising inflation – particularly unexpected inflation.

* Commodities have offered superior returns in the past, but they carry a higher risk than most other equity investments. However, by adding commodities to a portfolio of assets that are less volatile, you can actually decrease the overall portfolio risk, because commodities have a low correlation to other asset classes.

* Commodities that are permanently limited in supply can reduce volatility in aggressive portfolios. Gold and energy are two examples.

* The long-term outlook for commodities is generally viewed as strong. The world’s population is growing and emerging markets are seeing the rise of their middle classes, who want more food, consume more energy and nicer clothes. The combination of finite supply and rising demand has the potential to keep commodities on a growth path for some time.

If you want to play commodities with ETFs, there are two primary ways:

* Buy an ETF that holds the stock of producers and tracks an index. Examples of these types of ETFs could be Market Vectors Global Agribusiness (NYSEArca: MOO) or SPDR S&P Oil & Gas Equipment & Services (NYSEArca: XES). The benefit of these funds is that you get exposure to the producers of commodities without the day-to-day price swings that might affect other funds. However, they don’t track the spot price, which can be a drawback if that’s something you’re seeking.

* You can look at funds that give closer exposure to the commodity itself, either physically or via futures. Physically-backed funds for now are restricted to precious metals, such as ETFS Physical Platinum (NYSEArca: PPLT) or iShares Silver Trust (NYSEArca: SLV). Futures-based ETFs include things like PowerShares DB Gold (NYSEArca: DGL) and United States Oil (NYSEArca: USO).

And, of course, there is always leverage, in the form of ETFs like ProShares UltraShort Gold (NYSEArca: GLL) and Direxion Daily Energy Bull 3x Shares (NYSEArca: ERX).

If you feel like you’ve missed the commodities run-up, it’s not too late. Most commodity ETFs are well above their long-term trend lines, and you can’t fight the trend. If you do decide to add commodities to your portfolio, just don’t get caught without an exit strategy.

Disclosure I am long SLV shares.

Knight Transportation Announces Quarterly and Special Cash Dividends

Knight Transportation, Inc.(KNX Quote) announced today that its Board of Directors has declared the company's quarterly cash dividend of $0.06 per share of common stock. This quarterly dividend is pursuant to a cash dividend policy approved by the Board of Directors. The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by the Board of Directors each quarter after its review of the company's financial performance.

The company's dividend is payable to shareholders of record on December 3, 2010 and is expected to be paid on December 23, 2010.

Knight also announced that its Board of Directors declared a special cash dividend of $0.75 per share of common stock. The company's special dividend is also payable to shareholders of record on December 3, 2010 and is expected to be paid on December 23, 2010.

The combination of the quarterly and special dividends will pay approximately $68.9 million on Knight's 85.0 million outstanding shares, including restricted stock units. After these dividends, Knight will have returned approximately $170.4 million to its stockholders through a combination of dividends and stock repurchases since January 2008.

Disclosure None

Siemens narrows loss and boosts dividends

The German industrial giant announced its net loss for final quarter of 2010, which was 65 per cent lower than the same period last year. As an industrial giant established since 1847, its performance is considered as economic barometer. 

The net loss of the fourth quarter is 396 million euros, 65 per cent lower than the 1.06 billion euros net loss last year. The basic loss per share is down from 1.31 euros to 0.54euro this year.
This year is also the first rise in dividends of the company since 2007, which will increase from 1.60 euros to 2.7 euros per share.

For the full year, net income of the company has climbed 63 per cent to 4 billion euros.
Energy sector was the sector with the fastest growth in new orders, which produces products and carries out research and development for power generators.

The company are generating more and more income from the emerging market, there is revenue growth from China and India, 25 per cent and 15 per cent respectively. 

”Siemens is no longer a restructuring story,”

”We are a normal company and a growth company. You should expect continuity from us.” Siemens AG Chief Executive Officer Peter Loescher said. The sales of fourth quarter increased 7.7 per cent to 21.23 billion euros. The high-speed trains, power turbines and factory automation equipment maker predicted a moderate revenue growth for the coming year.” 

The payout is a strong signal that Siemens will outgrow rivals and build up its presence in emerging markets, which generate a third of its business,” Loescher told Bloomberg.

Disclosure None

Sysco Corp. (SYY) Increases Quarterly Dividend 4% to $0.26

Sysco Corporation (NYSE: SYY) declares a quarterly cash dividend to $0.26 per share, $1.04 annualized. The dividend is a 4% increase from the current rate of $0.25.

The new dividend is payable on January 28, 2011, to common shareholders of record at the close of business on January 7, 2011. The ex-dividend date is January 5, 2011.

Yield on the dividend is 3.6%.

Disclosure I am long SYY shares.

Baxter Int'l (BAX) Increases Quarterly Dividend 7% to $0.31; Yields 2.4%

Baxter International Inc. (NYSE: BAX) today declared a quarterly dividend of $0.31 per Baxter common share, $1.24 annnualized. The dividend is a 7% increase over the current rate of $0.29.

The dividend is payable on January 5, 2011, to shareholders of record as of the close of business on December 10, 2010. The ex-dividend date is December 8, 2010.

Yield on the dividend is 2.4%.

Disclosure I am long BAX shares

3M (MMM) Declares $0.525 Quarterly Dividend; 2.5% Yield

3M (NYSE: MMM) today declared a dividend on the company's common stock of $0.525 per share, $2.10 annualized.

The dividend is payable December 12, 2010, to shareholders of record at the close of business on November 19, 2010. The ex-dividend date is November 17, 2010.

Yield on the dividend is 2.5%.

Disclosure I am long MMM shares

BlackRock (BLK) Declares $1.00 Quarterly Dividend; 2.3% Yield

BlackRock, Inc. (NYSE: BLK) today announced that its Board of Directors has declared a quarterly cash dividend of $1.00 per share of common stock, $4.00 annualized.

The dividend is payable December 23, 2010 to shareholders of record at the close of business on December 3, 2010. The ex-dividend date is December 1, 2010.

Yield on the dividend is 2.3%.

Disclosure None

Kauffman Scare Tactics On ETFs is flat INSANE

Kauffman’s newest report throws ETFs under the bus. Too bad it’s INSANE.

Yesterday’s report from Harold Bradley and Robert E. Litan of the Kauffman Foundation aimed to rock the indexing world, shatter the foundations of the industry and give ETF investors the heebie-jeebies. Even though it’s wrong, it could succeed.

The core argument of the report’s 84 pages, available from Kauffman’s site, is that exchange-traded funds have fundamentally altered the markets for the worse. It cites ETFs as a threat to market stability, negatively affecting stock prices through their structure and mechanics. It says ETFs are shrouded in a fog of mystery and in desperate need of further transparency. And it says that the rise of index trading has destroyed the prospect of IPOs.

All of this is wrong. It’s the ghost story investors might tell themselves around a campfire: an entertaining work of fiction. It might be helpful to take the key assertions from Bradley and Litan’s report and shine a light on them.

• ETFs pose serious threats to market stability in the future.

That’s a serious statement. Bradley and Litan’s report suggest that, in a high-volatility situation, ETFs will have liabilities they can’t fulfill. The worry is that investors will place huge buy orders for an ETF, flooding it with cash, and the ETF will have to chase stocks trying to put that cash to work.

Strangely enough, the place where this liability exists is in the world of traditional open-ended mutual funds, where investors can drop huge amounts of cash into the funds at the end of the trading day. The fund has a responsibility to grant them the NAV struck just moments later, but must go into the market and buy shares the following day.

ETFs work exactly the opposite way. When an authorized participants create new shares of an ETF, they must typically deliver to the ETF company the exact securities the ETF wants to hold. The ETF gives them an equal value in ETF shares in exchange. You can’t create new shares of an ETF if you can’t buy the underlying. That’s just the way it works, and to argue otherwise is to claim that up is down.

• ETFs are radically changing the markets, to the point where they—and not the trading of the underlying securities—are effectively setting the prices of stocks of smaller capitalization companies, or the potential new growth companies of the future.

There’s some truth to this, but only if you replace “ETFs” with “institutional money.”

Let’s look at the numbers: Traditional mutual funds have $11.2 trillion in assets, while ETFs have just $980 billion. The market cap of the S&P 500 is $10 trillion. One trillion dollars of that market cap is owned in indexes, and just $100 billion of that is in ETFs. That means that ETFs represent 1 percent of the market.
The Kauffman point argues that this doesn’t matter, because the constant trading in the baskets makes ETFs different, and in effect, “price setters.” I would counter that at least ETFs represent actual ownership of the underlying, unlike futures, which have been acting as the big-money price setters for decades. On any given day, the futures market trades 10 times the notional value of SPY: $100 billion a day vs. $10 billion. Who’s driving what?

From the beginning of the report, Bradley and Litan refer to ETFs as derivatives, throwing the label around like a scarlet letter the funds must wear. To call ETFs derivatives—any more than any other pooled vehicle—is simply wrong. To then paint them with a brush that should be reserved for true derivatives is simply a scare tactic.

• Short positions in ETFs are somehow magically different than short positions in any other security, and issuers should be forced to “create” shares for notional long exposure.

 Issuers don’t create—APs create. The Kauffman study, like all the other reports we’ve debunked this year, just doesn’t get how this works. You can’t present “shorted” shares for redemption—you have to present settled shares. And if I have lent my shares out, I can’t redeem them. And I won’t try to, because I know they’re on loan.

Yes, that means that if there’s a panic to cover shorts, people will have to buy up shares of the ETF on the open market, or make new shares through creation. Yes, that means you could get a lot of buying activity in the underlying. Yes, that means—just like in any stock that’s heavily shorted—prices will go up when everyone runs to cover their shorts. But this has nothing to do with the ETF structure.

The proposal that the issuer magically “create” extra shares for the notional short exposure is frankly impossible. How would that happen? With whose capital? With what stocks? I’m chalking this one up to a misunderstanding of the basics.

• Intra-asset correlation is killing the capital markets, and killing IPOs.

After a recent report from Hennessee cried foul in the name of hedge funds. But the points are worth repeating. Correlations between groups of stocks—say, small-caps and large-caps—are constantly shifting. Yes, we’re at a relative high in some cases. Yes, as more and more indexed money comes in—a trend we’ve seen since the ’70s—one would expect correlations to be high.

If, however, markets were becoming hugely inefficient, you would expect a huge upswing in private equity, where large companies would gobble up the “undervalued” small ones. We haven’t seen that. Private equity and M&A activity is down. We similarly haven’t seen small-cap active funds beating the indexes, which you would expect if there were gross misvaluations in the market.

Further, in times of crisis, all correlations go up, because investors become “risk on/risk off” investors, not stock pickers. This has happened in every bear market, and during every market crisis. Kauffman suggests that this can be cured by allowing small companies to “opt in” to indexes. Leaving out the legal implications of this, consider: You’re the CEO of a small-cap company and have to choose between Russell adding you or having a bazillion dollars of institutional money buy your stock.

Which answer lets you keep your job?

• ETFs have high fail rates.

The report actually hits this one square on the head. This is bad and shouldn’t be tolerated. Reporting requirements for fails on all equities, including ETFs, should be improved, and there should be more substantial consequences.

I understand that firms like Kauffman are nervous about the rise of exchange-traded funds in recent years. I get it—change is scary. But throwing all of indexing under the bus isn’t the solution to the problem.
The truth is there are any number of ways indexing has improved the market, adding a level of transparency and control that investors simply haven’t had before. The focus on index trading has put more importance on macroeconomic trends than individual securities, and while that changes the nature of investing, it’s a positive move forward.

It’s a brave new world and the less fear-mongering we have in it, the better.

Disclosure I am  long many etfs.

Vanguard Launches Non-US Version Of VNQ

Vanguard Group, the Valley Forge, Pa.-based pioneer of the indexing movement, today launched a real estate fund that canvasses property markets outside the U.S. in both the developed and developing worlds. The Vanguard Global ex-U.S. Real Estate ETF (NYSEArca: VNQI) will invest in real estate investment trusts (REITs) and real estate operation companies (REOCs). The new ETF amounts to a non-U.S. counterpart to its existing fund, the Vanguard REIT ETF (NYSEArca: VNQ), which had about $6.9 billion in assets as of last Friday, according to data compiled by IndexUniverse.com.

Domestic assets represent only 30 percent of the global real estate market, while overseas assets represent 70 percent. Investors wishing to hold a market-weighted global real estate portfolio could invest in the two funds proportionally, Vanguard said in a prepared statement.

“With international real estate securities representing a growing portion of the overall real estate market, a counterpart to our domestic REIT Index Fund is a natural addition to our index fund lineup,” Gus Sauter, Vanguard’s chief investment officer, said in the statement.

VNQI will attempt to replicate the S&P Global ex-U.S. Property Index, a free-float-adjusted, market-capitalization-weighted index that measures the equity market performance of 425 international real estate securities from 35 developed and emerging markets.

The ETF has an expense ratio of 0.35 percent.

Disclosure None

Global X Launches Norway ETF NORW

Global X, the boutique fund sponsor known for its emerging markets and metals strategies, launched a new fund today focused exclusively on the economy of Norway, an ETF industry first. The Global X FTSE Norway ETF (NYSEArca: NORW) seeks to replicate the performance of the FTSE Norway 30 Index, which comprises the largest publicly traded companies of Norway and is designed to reflect the broad-based equity market performance of that country. FTSE is an index provider jointly owned by the Financial Times and the London Stock Exchange.

Norway, along with Canada, is one of a handful of net energy exporters among the world’s industrialized nations, and Global X’s new Norway fund reflects this.

As of last month, the FTSE Norway 30 Index’s top holding was the state-run Norwegian energy company Statoil ASA, which would have accounted for 18.93 percent of assets invested in the index. Oil & gas was the top sector, at 41.42 percent.

Global X, which launched gold miners and uranium funds earlier this month, has been busy this year building its ETF lineup. When asked if there was an overarching strategic plan behind Global X’s recent launches, Bruno del Ama, the company’s chief executive officer, said that the long-term prospects of a new fund, along with customer need, largely dictate the launch schedule.

“We identify opportunities that we think will do well over the long term, at least 25 years. Then we look for really stable opportunities or thematic opportunities we think will do well and offer an ETF that makes sense. Finally, we obviously want products that will attract sufficient interest from investors.”
Del Ama added that his firm’s clients view Norway to some extent as other hard-asset-producing countries with stable currencies, like Canada, Australia and New Zealand.

The Timing Is Right

Given the problems in eurozone countries like Greece, Spain and Ireland, now may be an ideal time for a Norway fund. Unlike many of its European neighbors, Norway has not adopted the euro and instead uses the krone.

“It’s definitely part of the appeal of the fund,” said del Ama. “One of the problems for an economy like Germany is that it’s part of the euro and is part of the bailout effort for Greece. Norway doesn’t have that problem.

The new Norway fund is the first of a suite of ETFs for which Global X filed last year to hit the market. That group of filings includes Denmark, Finland and United Arab Emirates funds based on FTSE indexes as well as an “Emerging Africa” and a Pakistan ETF.

The new fund carries an expense ratio of 0.50 percent.

Disclosure None

Time for 100% Stock Allocation??

Every so often, a well-meaning individual or publication will come along and espouse the idea that long-term investors should invest 100% of their portfolios in equities. Not surprisingly, this idea is most widely promulgated near the end of a long bull trend in the U.S. stock market. Consider this article as a pre-emptive strike against this appealing, but potentially dangerous, idea.

The Case for 100% Equities

The main argument advanced by proponents of a 100% equities strategy is simple and straightforward:

"In the long run, equities outperform bonds and cash; therefore, allocating your entire portfolio to stocks will maximize your returns."

To back up their views, supporters for this view point to the widely used Ibbotson Associates historical data, which "proves" that stocks have generated greater returns than bonds, which in turn have generated higher returns than cash. Many investors - from experienced professionals to naive amateurs - accept these assertions without giving the idea any further thought. (For an in-depth view of this topic, see The Stock Market: A Look Back.)

While such statements and historical data points may be true to an extent, investors should delve a little deeper into the rationale behind - and potential ramifications of - a 100% equity strategy.

The Problem With 100% Equities

The oft-cited Ibbotson data is not very robust. It covers only one particular time period (1926-present day) in a single country - the United States. Throughout history, other less-fortunate countries have had their entire public stock markets virtually disappear, generating 100% losses for investors with 100% equity allocations. Even if the future eventually brought great returns, compounded growth on $0 doesn't amount to much. (To read more about Ibbotson's theories, see Investors Need A Good WACC.)

It is probably unwise to base your investment strategy on a doomsday scenario, however, so let's assume that the future will look somewhat like the relatively benign past. The 100% equity prescription is still problematic because although stocks may outperform bonds and cash in the long run, you could go nearly broke in the short run!

Market Crashes

For example, let's assume you had implemented such a strategy in late 1972 and placed your entire savings into the stock market. Over the next two years, the U.S. stock market crashed and lost about 40% of its value. During that time, it may have been difficult to withdraw even a modest 5% per year from your savings to take care of relatively common expenses, such as purchasing a car, meeting unexpected expenses, or paying a portion of your child's college tuition, because your life savings would have almost been cut in half in just two years! That is an unacceptable outcome for most investors and one from which it would be very tough to rebound. Keep in mind that the crash in 1973-1974 wasn't the most severe crash, considering the scenario that investors experienced during 1929-31. (To learn more about crashes, see The Greatest Market Crashes and How do investors lose money when the stock market crashes?)

Of course, proponents of all-equities-all-the-time argue that if investors simply stay the course, they will eventually recover those losses and earn much more. However, this assumes that investors can stay the course and not abandon their strategy - meaning they must ignore the prevailing "wisdom", the resulting dire predictions and take absolutely no action in response to depressing market conditions. We could all share a hearty laugh at this assumption, because it can be extremely difficult for most investors to maintain an out-of-favor strategy for six months, let alone for many years.

Inflation and Deflation

Another problem with the 100% equities strategy is that it provides little or no protection against the two greatest threats to any long-term pool of money: inflation and deflation.

Inflation is a rise in general price levels that erodes the purchasing power of your portfolio. Deflation is the opposite, defined as a broad decline in prices and asset values, usually caused by a depression, severe recession, or other major economic disruption (think Japan in the 1990s). (To learn more about inflation and deflation, see All About Inflation and What does deflation mean to investors?)

Equities generally perform poorly if the economy is under siege by either of these two monsters. Even a rumored sighting can inflict significant damage to stocks. Therefore, the smart investor incorporates protection - or hedges - into his or her portfolio to guard against these two significant threats. Real assets - real estate (in certain cases), energy, infrastructure, commodities, inflation-linked bonds, and/or gold - could provide a good hedge against inflation. Likewise, an allocation to long-term, non-callable U.S. Treasury bonds provides the best hedge against deflation, recession, or depression. (Read more about hedges in A Beginner's Guide To Hedging, Introduction To Hedge Funds - Part One and Part Two.)

Fiduciary Standards

One final cautionary word on a 100% stocks strategy: If you manage money for someone other than yourself, you are subject to fiduciary standards. One of the main pillars of fiduciary care and prudence is the practice of diversification to minimize the risk of large losses. In the absence of extraordinary circumstances, a fiduciary is required to diversify across asset classes. Would you like to argue before a judge or jury that your one-asset-class portfolio was sufficiently diversified shortly after it loses 40-50% of its value? "But, your honor, if you just wait eight to 10 years …" Odds are you would soon be wearing an orange jumpsuit and making new friends in an exercise yard.

Solution

So if 100% equities is not the optimal solution for a long-term portfolio, what is? An equity-dominated portfolio, despite my cautionary counter arguments above, is reasonable if you assume that equities will outperform bonds and cash over most long-term periods. However, your portfolio should be widely diversified across multiple asset classes: U.S. equities, long-term U.S. Treasuries, international equities, emerging markets debt and equities, real assets and even junk bonds. If you are fortunate enough to be a qualified and accredited investor, your asset allocation should also include a healthy dose of alternative investments - venture capital, buyouts, hedge funds and timber. (To learn more, read The Pros And Cons Of Alternative Investments.)

This more diverse portfolio can be expected to reduce volatility, provide some protection against inflation and deflation, and enable you to stay the course during difficult market environments - all while sacrificing little in the way of returns.

Disclosure I am long the stock market

Ask.com admits it isn't the answer

Its corporate parent will severely downsize the search engine, saying it can't compete against other search engines, especially Google.

Ask.com, the Internet search engine that media mogul Barry Diller acquired for $1.85 billion to compete with Google (GOOG), is cutting 130 engineering jobs and conceding much of its search business to competitors.

Ask.com, a unit of Diller’s IAC/InterActiveCorp (IACI), is firing engineers based in Edison, N.J., and Hangzhou, China. It's ceasing work on its algorithmic search technology, according to Ask.com President Doug Leeds.
 

IAC shares fell 1.3% to $28.30 in regular trading today but rallied 1.6% to $28.75 after hours.

Leeds said Google has become too powerful a competitor to justify Ask.com’s continued pursuit of those search users.

 

Disclosure None

Realty Income Declares 485th Consecutive Common Stock Monthly Dividend

Realty Income Corporation (Realty Income), The Monthly Dividend Company Stock Quote , today announced that its Board of Directors declared a common stock dividend of $0.1439375 per share, payable on December 15, 2010 to shareholders of record as of December 1, 2010. The dividend represents an annualized amount of $1.72725 per share.

Disclosure I am long O shares.

Baxter Raises Quarterly Dividend

DEERFIELD, Ill., Nov 09, 2010 (BUSINESS WIRE) -- The Board of Directors of Baxter International Inc. /quotes/comstock/13*!bax/quotes/nls/bax (BAX 51.63, -0.04, -0.08%) today declared a quarterly dividend of $0.31 per Baxter common share. This represents an increase of approximately 7 percent over the previous quarterly rate of $0.29 per share. The dividend is payable on January 5, 2011, to shareholders of record as of the close of business on December 10, 2010.

Baxter continues to generate strong cash flow and has returned significant value to shareholders in the form of dividends and share repurchases. Since the beginning of 2010, Baxter has returned approximately $2.0 billion to shareholders through dividends totaling $688 million and share repurchases of approximately $1.3 billion (or 26 million shares).

"Our disciplined capital allocation strategy and ongoing ability to generate strong cash flow allow us to continue to invest for the long-term while returning significant value to our shareholders," said Robert J. Hombach, chief financial officer.

Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.

This release includes forward-looking statements concerning the company's dividend. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: continued strength in the company's financial position, including cash flows; future decisions of the board of directors of the company to continue payments to shareholders in the form of a dividend on a quarterly or other basis relative to alternative uses of funds; and other risks identified in the company's most recent filing on Form 10-K and other SEC filings, all of which are available on the company's website. The company does not undertake to update its forward-looking statements.

SOURCE: Baxter International Inc.

Disclosure  I am long BAX shares