Month: September 2011

By DividendOpportunities.com

Forget Treasuries — Buy These 12% Yields Instead

Let’s be honest. When you hear about a stock that yields 12% or more, your first thought should be that the company is probably a basket case that can’t even turn a profit. If it’s offering a yield that sounds too good to be true, it probably is.

And you’d be right most of the time. Usually, yields are this high because a company’s share price is falling — signaling underlying problems in its business. A lower share price gives a higher dividend yield. That means profitable companies paying yields this high should be rare.

In fact, my staff and I recently ran the numbers. When we looked only at the companies that turned a profit over the last year, we found just 18 U.S. common stocks paying yields of more than 12%. Here, you can see them for yourself:

But did you know there are actually hundreds of 12%-plus yields out there from profitable companies? The difference is that many investors just don’t know where to find them.

That’s because the majority of the world’s highest yields aren’t being paid by U.S. companies. My recent search found 412 additional stocks out there yielding 12% or more… all coming from international-based companies.

That means many income investors are essentially missing out on 96% of the highest yields before they even get started.

That’s right, if you want high yields, you have to look at international companies.

I’ve researched this topic for years. And the fact is, foreign companies are simply paying higher yields across the board.

Take a look at the table to the right.

You can see the difference between what we get from U.S. companies and what’s available from international companies. Keep in mind that I only looked at the common stocks of companies that were profitable over the past year.

As Judy Sarayan, a fund manager at mega-investment firm Eaton Vance explained, “There’s a much stronger dividend culture abroad… individual investors play a larger role in those markets, and they have always demanded more dividends.”

On a macro scale, the difference is striking. While the average yield for all stocks in the S&P 500 is just 2.0%, Germany’s average yield is 3.6%… Brazil’s average yield is 4.1%… the United Kingdom yields 3.4%… Australia yields 4.5%… New Zealand pays 4.4%.

But where you really start to see a dramatic difference is when you look at some individual examples of higher yields abroad.

Take banks, for instance. Here at home, Bank of America (NYSE: BAC) used to pay investors $2.56 per share before the financial crisis. That represented a yield of more than 6.0%.

Of course, we all know what happened next. Today, BAC pays a laughable $0.01 (yes, one penny) each quarter.

But it’s a completely different story outside the United States.

Santiago, Chile-based CorpBanca SA (NYSE: BCA) is a perfect example.

Chile’s largest bank, CorpBanca offers commercial and retail banking through more than 100 offices. The bank also offers mutual fund management, insurance, and securities brokerages through a network of subsidiaries. Not only have the shares soared over the past five years, but dividends now total $1.66 per share each year. That gives the stock a yield of over 8.0% at recent prices, and you can buy the stock on the New York Stock Exchange.

It’s the same thing for utilities. They are some of the best places to search for yields in the U.S. North Carolina’s Duke Energy (NYSE: DUK) pays a yield of about 5.0%. But even that is topped by international utility stocks like Germany’s E.ON AG (OTC: EONGY).

E.ON AG is the world’s largest energy provider. It serves over 26 million customers and employs more than 75,000 people. Its shares pay investors $2.16 a year, for a yield of over 10.0%… that’s about twice as much income as the average utility here in the U.S.

Still, most U.S. investors are simply unaware that they’re missing out on high yields like these.

I want to make something clear, though. I don’t think you should drop everything and put every dollar you have into international high-yielders. Truth is, the size and scope of the U.S. market makes it a great place to search for income investments.

But limiting yourself to only U.S. stocks is like going to a restaurant and limiting your options to just one side of the menu. Sure you can find something you like… but wouldn’t you rather see all the options?

Now, not every one of the 412 is available stateside, but don’t worry, you can buy many of these without even leaving the U.S. markets.

I have more details — including several names and ticker symbols — in a presentation I recently put together. Visit this link to watch now.

All the best,

Paul Tracy
StreetAuthority Co-founder, Chief Investment Strategist — High-Yield International

P.S. — Remember, you can learn more about investing in high-yielding international stocks — including several names and ticker symbols — by watching this presentation.

Disclosure: StreetAuthority holds shares of ANH among its various model portfolios.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By The Sizemore Letter

It’s been a rough year for equity investors as fear of European sovereign-debt meltdown have ravaged world markets.  The S&P 500 is down 11% from its late-April highs and is in negative territory for the year.  Financials and other economically-sensitive sectors have taken much greater losses, and European markets have experienced what could only be called a bloodbath.

Yet in spite of the volatility roiling the markets, Visa (NYSE: V) has pushed through to fresh 52-week highs and is within striking distance of new all-time highs above $97.00.

Not even Damocles had Dodd-Frank hanging over his head.

Visa’s resiliency is somewhat ironic.  So much of the recent market turmoil was due to political uncertainty, first in the United States with the debt ceiling fiasco and then in Europe when it appeared that Germany might not step up and come to Greece’s rescue.  In Visa’s case, the political uncertainty that had been keeping a lid on credit-card stocks—the implementation of the Dodd-Frank Durbin Amendment—was finally resolved this summer.

With fears of the Fed’s fee cap no longer hanging over their heads like the Sword of Damocles, shares of both Visa and rival MasterCard have performed as you might expect.  While Visa is approaching a new all-time high, MasterCard surpassed its old high earlier this year and is up more than 50% year to date.

I remain bullish on credit-card stocks in general and Visa in particular.  If—as many fear—the United States slips again into recession, consumer spending will take a hit.  But there are a couple important points to remember:

1. Recession or not, the world is going cashless.  Every year a larger percentage of transactions is done electronically, yet even in the United States fully 40% of all transactions are still done with cash or paper checks.  So, even in an environment of stagnant retail sales growth, card usage should continue to grow, be it in the form of debit cards, credit cards, or even pre-paid cards.
2. Visa is not a “credit card stock,” per se.  It’s a brand-management company that controls a sophisticated—and highly profitable—electronic toll road.  Visa is not a bank and takes no credit risk; that is the job of the banks that issue cards branded with the Visa logo.  Visa makes its money by charging banks service fees for the use of its Visa brand and its global electronic-processing network for credit and debit cards.
3. Visa is what I consider an “Emerging Markets Lite” investment.  The company already gets 40% of its revenues from overseas, most of which are from the fast-growth markets of Asia and Latin America. Visa has a stated objective of having more than half of its revenue from overseas by 2015, and all indications are that the company will reach this goal.  The rise of the new emerging market middle class is real, and Visa is uniquely positioned to profit from this trend.

Given the outsized profits to be earned from the “Plastic Revolution,” it’s not surprising to see new competition nipping at Visa and MasterCard’s heels.  EBay’s (Nasdaq: EBAY) PayPal recently made a splash by expanding beyond its core internet payments business into physical “bricks and mortar” retail.

PayPal account holders will soon be able to pay using their mobile phone and a pin number, and they can already use PayPal-issued cards that work in traditional point-of-sale terminals.

It remains to be seen what kind of market share PayPal will be able to grab, but I remain somewhat skeptical.  PayPal does not replace your traditional bank account or credit card; it simply acts as a middle man between your financial institution and the merchant.  And while PayPal is indeed popular, it lacks many of the account security features of traditional card issuers.

Furthermore, many of the innovations attracting the most attention—such as paying with your mobile phone—can be copied by banks.

In any event, the market for electronic payments is large enough and has enough growth potential to accommodate newbies like PayPal.  And in the meantime, Visa should continue to hum along nicely.  Use any corrections as an opportunity to accumulate more shares.

Related posts: Sizemore Insights’ commentary on Visa

If you liked this article by Sizemore Insights, you’d probably enjoy The Sizemore Investment Letter, our premium members-only newsletter. Click here for more information.

The Hong Kong Monetary Authority kept its base interest rate unchanged at 0.50% following the decision of the US Federal Reserve to leave the fed funds rate unchanged at 0-0.25%, and $400B portfolio rearrangement.  Norman Chan, HKMA Chief Executive, said of the FOMC announcement: “This time the Fed’s new policies will not have any impact on Hong Kong’s interbank (HIBOR) interest rate,”.  Chan did however note discomfort with the Hong Kong housing market: “We can’t relax. We must continue to prevent the Hong Kong housing market from the risk of overheating. If necessary we will be ready to push out policies to safeguard Hong Kong’s banking stability.”

The HKMA also previously held its base interest rate unchanged at 0.50%, after the FOMC met in August this year and announced rates would stay low until mid 2013.  The Hong Kong Monetary Authority generally tends to follow the monetary policy decisions of the US Federal Reserve’s Federal Open Market Committee as the Hong Kong Dollar is fixed against the United States Dollar.  Hong Kong reported consumer price inflation of 7.9% in July, up from 5.6% in June, 5.2% in May and 4.6% in April this year.  The Hong Kong dollar is fixed against the U.S. currency at an exchange rate of between HK$7.75 and HK$7.85 per dollar.

Iceland’s Sedlabanki held its seven-day collateral lending rate at 4.50%.  The Bank also held the deposit rate at 3.50% and overnight lending rate at 5.50%.  The Bank said: “inflation prospects suggest that, over the medium term, it is appropriate to continue the gradual withdrawal of monetary accommodation begun in August.  The risk that a modest interest rate hike will derail the economic recovery is low.  However, somewhat more favourable than expected inflation figures in August, continued strengthening of the króna, and a weaker outlook for the global economy allow the Committee to keep rates on hold at present.”

At its August meeting the Bank increased its lending rate by 25 basis points to 4.50%.  Iceland reported headline inflation of 5% in July, up from 4.2% in June, 3.4% in May, and 2.3% in March; inflation had previously been forecast to peak just above 3.0% around the middle of this year, meanwhile the Bank’s inflation target is 2.5%.  On inflation Sedlabanki said: “in the absence of a significant appreciation of the króna, inflation will remain well above the Bank’s inflation target for some time but return  to target over the medium term.”

AUDUSD continued its downward movement from 1.0764, and the fall extended to as low as 1.0019. Further fall towards 0.9927 (Aug 9 low) is still possible after a minor consolidation. Resistance is at the downtrend line on 4-hour chart, only a clear break above the trend line could indicate that the fall from 1.0764 is complete.

Written by Jared Levy, Editor, Option Strategies Weekly, taipanpublishinggroup.com

The Black Swan Theory describes unpredictable events of extraordinary magnitude. The meltdown of 2008/2009 would be a perfect example of a major Black Swan event.

This theory, developed by Nassim Nicolas Taleb, describes a Black Swan event as one of three things:

1. The disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology
2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)
3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

In essence, a Black Swan event is something that has such a small chance of happening that it’s not accounted for in the models that the quants (quantitative analysts) use to predict risk.

These quants use statistics to figure out just how probable a trade is going to be. Being a bit of a math junky myself, I use these same calculations. But being a trader, which many quants are not, I know there is a human element that NO model can predict.

What most of us don’t realize is that Black Swans happen much more often than we think.

In fact, we could be on the precipice of another…

Usually the worst Black Swan events in the market occur when people are off guard or beginning to feel like a major problem has been solved.

When markets are emerging from what appears to be a bottom and major catastrophe seems to be averted, our defenses are down. Black Swan events occur just when everyone is feeling comfortable, not vulnerable.

This was exactly what happened at the end of 2008, right around the time the world’s investment guru Warren Buffett injected $5 billion into Goldman Sachs (GS:NYSE). Shares were trading at around $125.

During the week of Sept. 19, Goldman Sachs (and the S&P 500) moved six standard deviations to the downside… It traded all the way down to $85. This is a big deal… Standard deviation is a measurement used to determine normal movements in the stock market. Super savvy investors use these types of measurements.

In plain English, the chances of a six standard deviation move occurring in a day’s time are one in 506,797,346. Which means it should occur once every 1.388 million years.

Goldman Sachs’ move happened over a week’s time, so perhaps the chances of this happening are a little greater, but you get the picture. This seemed like a once-in-a-lifetime event. Many investors thought it was, and started to buy along with Mr. Buffett.

A couple months later, the market and Goldman Sachs fell another 50%… What were the odds of that?

Two Black Swans in four months!

And more trouble could be brewing.

Paper Optimism

Poring over the economic data of the past weeks, I can’t find a single reason to buy stocks right now. I sure as heck can’t rationalize the rallies we saw these past couple days in the face of negative news.

Perhaps the poor data will be the impetus for QE3 or whatever our Fed friends decide to call it. For some reason, the equity markets think that will save us.

I disagree.

The seemingly positive news yesterday that pushed markets 1.5% higher isn’t really good news. The European Central Bank and several reserve banks will “create” dollar liquidity for Europe’s dried-up financial system. It doesn’t make sense to me. Where are these dollars coming from? They will either have to be paid for or printed, neither of which is an attractive option.

When the market starts to react in a completely abnormal and almost irresponsible way, my ears perk up and my stomach starts to churn. To me, the happy-go-lucky attitude the market has scares me. It has no reason to be.

From my perspective, I see the recent sell-off as the first leg down with more to come.

Formations Point to Movement

To confirm my thesis, I’ve started tracking Flag and Pennant formations developing in the major indexes: the S&P 500 (SPX) and Dow Jones (DJX).

Flags and Pennants are short-term continuation patterns that mark a small consolidation before the previous move resumes. These patterns are usually preceded by a sharp advance or decline with heavy volume, and mark a mid-point of the move.

These pennant formations could spell trouble or at least volatility in the near future.

Here’s what I am seeing:

Dow Jones

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S&P 500

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Charts and sentiment can be powerful motivators. If millions of technical analysts are sitting at their desks with sell orders armed and ready and the market witnesses a real crisis, selling will come sharp and swift. Be prepared! Use these rallies to take profits.

P.S. You can also use options strategies like the covered call to protect yourself. This week, I talk about covered calls and the coming week’s data in our new FREE podcast series; check it out here.

No one ever went broke taking profits. This is a market where being proactive is a necessity, not an option.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed.

Written by Jared Levy, Editor, Option Strategies Weekly, taipanpublishinggroup.com

Over the weekend, we held our annual investors survival summit in Las Vegas. Aside from the libations and excitement surrounding us, we focused on the world’s economies.

But more specifically we looked at what’s ahead here at home.

Employment and consumer confidence are the main drivers of economic growth. Without them, America’s small-business growth — the core of our stability — would stagnate.

While some unemployment is actually tolerated and generally acceptable, a continued increase in unemployment when the stock market is recovering is bad.

Excessive unemployment (over 8%) hammers the equity markets.

Below is a chart of the unemployment rate going back to 1970 (in blue) compared to the S&P 500 (green and red).

Generally speaking, when unemployment is dropping sharply, the market rallies. You will also see that sometimes markets surge even when unemployment is rising (1990-1992, for example).

This is because the employment rate is a lagging indicator, while the stock market is the ultimate leading indicator.

Think about it as a rubber band. As the market rallies, it stretches the rubber band between the two, creating more tension. If unemployment begins to drop after this rally, the tension on the stock market is released. If unemployment continues to rise, tension also rises. Eventually, it will snap the stock market back down.

With every reason to expect higher unemployment, that’s the case today. The rubber band is stretched to record tension levels. It’s starting to feel a lot like the late ’70s, sans bell-bottoms, of course…

View larger chart

Job Killer in Your Mail

Have you noticed delays in your mail? Letters and packages taking longer and getting misrouted? Recently, I have seen major changes in my postal service. It started a couple months ago. I wasn’t getting mail in a timely fashion, sometimes not at all.

My renters were complaining to me that they haven’t been getting their mail… including their paychecks. Just yesterday my neighbor came back from vacation and called me to tell me that he has been getting bits of my mail for weeks.

I asked a few attendees at our conference over the weekend, and they had been noticing the same. Obviously this is anecdotal, but these signs should not be ignored and I suspect my small sample is not alone.

It could be due to the fact that the 235-year-old U.S. Postal Service — which happens to be America’s second largest employer next to Wal-Mart — is in deep trouble.

The USPS is a nearly bankrupt, antiquated albatross that is wrapped tightly around the neck of our highly indebted nation.

As it stands now, the poorly run entity is running a $9 billion annual deficit and there is the potential for it to miss a $5.5 billion payment on retiree benefits at month’s end.

Saving the agency will come at a huge cost of jobs, taxes and service.

Right now about 3,700 offices are targeted for possible closure, which would eliminate over 100,000 jobs (they shed 105,000 jobs last year).

In 2010 the USPS carried 6 billion fewer pieces of mail compared to 2009. Fifty-nine percent of the average mailbox was filled with junk mail. First-class mail, like personal letters, bills and payments, has traditionally generated more than half the postal service’s total revenue, but that is on the way down as our culture continues to move into the electronic age.

Invitations, cards, bills and checks are all going digital.

Companies like Rpost (who joined us at our recent conference) provide electronic, registered email that could eliminate the need for registered snail mail, which we all know is expensive and takes days.

What’s worse is that job cuts, postage rate increases and the elimination of Saturday delivery will make the USPS even less of an attractive option when it comes to mail. This will further provide ammunition for private competitors like Rpost and others to doom the USPS to the same fate as the Yellow Pages and TV Guide.

It is a vicious cycle that will bring the postal service to its knees.

The Verdict

In a time when faith in America and our government is being tested and scrutinized, this is just another example of too little, too late. Even if the USPS were to be given more autonomy to operate like a private sector company, I don’t see the way out.

Companies like UPS and FedEx could benefit from the demise of the USPS. Unlike most regular mail, parcels of goods cannot be digitized or sent over the Internet. Both companies have extremely efficient logistic systems that can be scaled.

Consumer frustration with the postal system will result in a diversion in business to both companies.

While I don’t believe the USPS will be allowed to die, the part that it plays in our daily lives, especially for the younger generations, is no doubt going to become less and less. The inevitable consequences of post office closures, delays and increased costs will unfortunately mean more job losses and another kick in the head for the small-business owner.

Publisher’s Note: We had a slew of top-notch speakers at our conference over the weekend. But Jared was the best of the best. Maybe it’s from his time on TV. Or it could be the confidence that comes with earning a lucrative career in the trading pits. No matter what the cause, Jared’s 45-minute “how to” session on options trading was a flat-out hit.

If you missed him in Vegas, all is not lost. Jared recently wrote a report that details how to use other people’s money to wrap up double-digit gains no matter which way the markets head.

In today’s ultra-volatile market… it’s the perfect strategy.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. 

The “Big If” in U.S. Imported Oil Suppliers

by David Fessler, Investment U Senior Analyst
Wednesday, September 21, 2011

The United States has excellent trade relations with our neighbors, Canada and Mexico.

After all, they’re two of our largest economic trading partners. They’re the top two suppliers of foreign crude oil to the Unites States.

Saudi Arabia, our number three supplier, continually lies about its remaining reserves… And as the country that produced the terrorists who masterminded the 9/11 tragedy, it’s not exactly on our top 10 list of most-favored nations.

In terms of oil…

• Canada’s likely to remain our number one foreign supplier. The country continues to increase output from the Alberta oil sands (expected to reach three million barrels per day by 2020). New pipelines are being constructed to transport the oil to U.S. refineries.

• Mexico will likely drop to number three in just a couple of years, as its Cantarell field – once the world’s third largest – saw its output peak at 2.1 million barrels per day (bpd) back in 2004. Less than a decade later, that field’s annual production is a paltry 464,000 bpd. Most of Mexico’s foreign oil exports head north of the border to the United States. It provides us with about 1.25 million bpd.

As you can see from the graph below, courtesy of the Energy Information Administration (EIA), Saudi Arabia provides us with just over 1.2 million bpd.

So let’s review U.S. oil import dynamics:

• Canada is stable, politically and friendly to the United States, and its exports of oil are on the rise.

• Mexico is also friendly, but its level of exports is continuing to drop.

• We don’t care much for Saudi Arabia, but at 1.2 million bpd, they’re a key foreign supplier of crude.

But the real wild card in U.S. crude import supplies is supplier number four. Its future output could have a real impact on what you pay at the pump.

Nigeria: The U.S. Crude Oil Supplier No. 4

Last year, Nigeria, our number four supplier of crude oil (see graph), exported just over one million bpd of crude and petroleum products to the United States. That amounted to about 9 percent of total U.S. crude imports and about 40 percent of Nigeria’s 2010 exports.

Nigeria’s crude is especially desirable, since it’s of the light, sweet variety. That makes it easy to process into gasoline. Given the problems in Libya (also a light, sweet crude supplier), Nigeria’s crude prices have been on the rise.

Oil exports are the main GDP generator for the country. Its oil is seen as a replacement for Libya’s until it can get its oil export act together again.

Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC) and as such is subject to production quota limits. Currently, they’re set at 1.673 million bpd.

But the real problem with Nigeria’s production has nothing to do with production limits. The unrest in the Niger Delta is the real obstacle with Nigerian crude oil production, and subsequent exports.

The country’s actual production capacity is about 2.9 million bpd. But constant attacks on oil infrastructure keep production well below that figure. This past July, output hit 2.17 million bpd. For all of 2010, it averaged 2.15 million bpd.

Since 2005, oil production in Nigeria has been fraught with risk. Kidnappings of oil company workers for ransom, serious pipeline vandalism and military takeovers of oil facilities have been the norm.

The Gulf of Guinea has also experienced significant piracy activity. All this instability has an average of 800,000 bpd of capacity offline at any given time. In spite of all of this, exports to the United States have remained relatively constant over the past few years.

How to Invest in Nigerian Oil

One of the best ways to play the future oil boom in Nigeria is via Royal Dutch Shell plc (NYSE: RDS.A). Shell is Nigeria’s largest oil producer, accounting for over 50 percent of Nigerian oil production.

It has active exploration activities ongoing in the country as well as offshore, and its production comes from over 80 oil fields.

The second-largest player in Nigeria is Chevron Corporation (NYSE: CVX) through its Chevron Nigeria Limited subsidiary. It operates in the Warri region and in offshore shallow water areas.

Should we even care about Nigerian oil? You bet. As our number four supplier, Nigeria is a key component of the American crude oil supply chain. With an estimated 37.2 barrels of proven reserves, Nigeria is a big player in the world’s crude supply.

Nigeria has the potential to increase its output despite the ongoing political instability in the country. The two companies mentioned above are relatively safe ways to play the upside of Nigerian oil, while limiting downside risk.

Good investing,

David Fessler

Article by Investment U

The US Federal Open Market Committee (FOMC) held the fed funds rate unchanged at 0 to 0.25 percent, and announced a refocus of its quantitative easing program (the so-called 'twist').  The Fed announced: "The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest ratesand help make broader financial conditions more accommodative."