ITEMS WITH THE MOST HITS & MY FAVORITES - II

An eclectic blog (November, 2009, through December, 2012) with sections on Biography, Commentary (General, Economics and Investing), Fiction, Health Care, Oil and Gas, Politics, Photographs, and Poetry (Children's Poems, General, Health, and Space Poems): http://stopcontinentaldrift.blogspot.com/2011/07/reunite-gondwanaland-2009-june-2011.html  As of the end of 2012, the blog contains 200 items.

The items with the most hits continue to be: You Are So Lucky (Biographical) with 223 hits [http://stopcontinentaldrift.blogspot.com/2009/11/you-are-so-lucky.html] and Muammar Qadaffi And Me (Biographical) with 213 hits [http://stopcontinentaldrift.blogspot.com/2010/12/muammar-qaddafi-and-me-biographical.html]. The former was no doubt popular because of the Great Japanese Earthquake of 2011 and deals with my first three days in Japan in 1965. The latter was popular because of the overthrow of the Libyan dictator Qadaffi.  As for last year's report, there are six others with 100 to 199 hits , none of which are biographical and all from before 2012.  One came close, however, with 99 hits:  The Salt Content Of Foods from July 7, 2012: http://stopcontinentaldrift.blogspot.com/2012/08/salt-contents-of-foods.html which was closely followed by The Light from October 13, 2012, a biographical piece with 96 hits: http://www.blogger.com/blogger.g?blogID=112427639902898514#editor/target=post;postID=6263706723454027302

Each piece I have written is like a child and I love them all, but it is common that some children are loved more than others. My personal favorite continues to be the Effectiveness Of Taxes from May 7, 2010 with 57 hits [http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html] followed by Basics of Bureaucracy from July 26, 2011 with 124 hits [http://stopcontinentaldrift.blogspot.com/2011/07/basics-of-bureaucracy.html]. In the former, I point out why decreasing taxes on individuals is an inefficient way to stimulate the economy. I liked this so much that I refer to it in three other pieces. Alas the reading public did not agree as to its great value. In the latter that was written many years ago, I give some real rules of dealing with bureaucrats in a humorous fashion.


Let me give two Honorable Mentions. I wouldn't say this is a favorite of mine, but it can be important to some, i.e. Preferred Stock Investing from November 27, 2011 with 167 hits (picked up about 30 more hits in 2012) [http://stopcontinentaldrift.blogspot.com/2011/11/preferred-stock-investing.html]. I have invested for about 60 years, but never got involved in preferred stocks until the last decade. I would also like to mention one poem Upon the Second Anniversary Of Apollo 11 from January 9, 2010 with only 7 hits, the first landing on the Moon [http://stopcontinentaldrift.blogspot.com/2010/01/upon-second-anniversary-of-apollo-11.html]. Normally a couplet or more just pops into my mind and I construct a poem around it (An example is So How About An Asteroid from July 20, 2011 with 32 hits) that containes my favorite couplet: Who could possiboly be annoyed/About the study of an asteroid. The Second Anniversary of Apollo Eleven, however, was little noticed which I thought was terrible so this was the first time I sat down to compose a poem from scratch.

OUR LIQUIDITY TRAP

"A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels. http://en.wikipedia.org/wiki/Liquidity_trap

How did we get here? Excessive leveraging by the commercial and private sectors. Because of large Federal budget deficits, I had expected runaway inflation since 2001. Even now with Federal deficits shockingly high, I have read that the total debt (government plus companies plus private) in the country is decreasing because of rapid company and private debt deleveraging. I didn't recognize this and didn't understand why runaway inflation was not coming. Eventually I came to recognize that Federal deficits will have little effect on inflation because we are in a liquidity trap. In fact most of the developed world seems to be in a liquidity trap. Before that I invested in bonds and CDs nervously expecting their value to be consumed by inflation. I had avoided commercial bonds and preferred stocks my whole investing career of more than 50 years because of inflation fears. Once I became convinced that Federal pumping of money into the economy would have little effect, my fears were overcome and I entered all three investments with some gusto. At first I bought commercial bonds and preferred stocks timidly in the last decade, but as time went on I have become more bold. So far, so good. In fact our preferred stocks are often all above par,and some have gotten so far above par that I have sold a few for capital gains. (For preferred stock investing see: http://stopcontinentaldrift.blogspot.com/2011/11/preferred-stock-investing.html)

A problem with liquidity traps is that no one seems to know how to get out of them. Of course, I believe that at some time, some year, we will get out of it and have real, maybe even runaway, inflation, but I have no idea when that will be. I certainly don't have the feeling that we are close to it. In fact, the more austere we become in trying to lower our rapidly growing national debt, the more the liquidity trap probably will be prolonged. There are some encouraging signs, however, that our economy is slowly recovering, but I think that serious and runaway inflation is still some years off. When the company and private deleveraging is complete, then the situation may reverse?

ITEMS WITH THE MOST HITS & MY FAVORITES

Reunite Gondwanland was started in November of 2009 and grew to 114 items by the end of 2011. It is a eclectic blog with sections on Biography, Commentary (General, Economics and Investing), Fiction, Health Care, Oil and Gas, Politics, Photography, and Poetry (General and Space Poems). A table of contents can be found at: http://stopcontinentaldrift.blogspot.com/2011/07/reunite-gondwanaland-2009-june-2011.html. Though this Table has a June date it is kept up to date. As of the end of 2011 there was a total of 5,965 hits.

The items with the most hits are: You Are So Lucky (Biographical) with 222 hits [http://stopcontinentaldrift.blogspot.com/2009/11/you-are-so-lucky.html] and Muammar Qadaffi And Me (Biographical) with 212 hits [http://stopcontinentaldrift.blogspot.com/2010/12/muammar-qaddafi-and-me-biographical.html]. There are six others with 100 to 199 hits , none of which are biographical. The former was no doubt popular because of the Great Japanese Earthquake of 2011 and deals with my first three days in Japan in 1965. The latter was popular because of the overthrow of the Libyan dictator Qadaffi.

Each piece I have written is like a child and I love them all, but it is common that some children are loved more than others. My personal favorites are Effectiveness Of Taxes [http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html] with less than 100 hits and Basics of Bureaucracy [http://stopcontinentaldrift.blogspot.com/2011/07/basics-of-bureaucracy.html] with 114 hits. In the former, I point out why decreasing taxes on individuals is an inefficient way to stimulate the economy. I liked this so much that I refer to it in three other pieces. Alas the reading public did not agree as to its great value. In the latter that was written many years ago, I give some real rules of dealing with bureaucrats in a humorous fashion.

Let me give two Honorable Mentions. I wouldn't say this is a favorite of mine, but it can be important to some, i.e. Preferred Stock Investing with 131 hits [http://stopcontinentaldrift.blogspot.com/2011/11/preferred-stock-investing.html]. I have invested for about 60 years, but never got involved in preferred stocks until the last decade. I would also like to mention one poem Upon the Second Anniversary Of Apollo 11, the first landing on the Moon [http://stopcontinentaldrift.blogspot.com/2010/01/upon-second-anniversary-of-apollo-11.html]. Normally a couplet or more just pops into my mind and I construct a poem around it. The second anniversary of Apollo Eleven, however, was little noticed which I thought was terrible so this was the first time I sat down to compose a poem from scratch.

PREFERRED STOCK INVESTING

Yields on savings accounts and CDs less than 5 yrs to maturity do not cover inflation. You can find better yields among common stocks, though at best, at higher risk. Even better yields can be found among corporate preferred stocks at greater safety, though not as great as for savings accounts and CDs (http://www.money-zine.com/Investing/Stocks/Buying-Preferred-Stock/). Getting at least 6% dividends is easy among preferred stocks. Preferred stocks are usually issued in perpetuity but with a call provision after 5 yrs. Preferred stocks are thinly traded and some study should be done before buying them. Many issues are beyond their call date today so may be called at any time. The commonest price - par - for preferred stocks is $25/sh and, if called, you must be paid the $25/sh. During the crash of 2008-2009, some companies offered to buy your preferred stock at less than par, but you didn't need to accept that.

There are two main types of preferred stocks, those whose dividends are cumulative (where I am involved), and those for whom they are not (that I do not touch). An attractive feature of preferred stocks, however, is that so long as a dividend is paid on the common stock, the preferred stock dividend MUST be paid first. For cumulative preferreds, if a dividend is skipped, it must be made up before the company can issue dividends on their common stock. There are also those, mainly banks, who may skip the dividend for as much as 5 yrs, but they must be paid before maturity. If the company should go bankrupt, preferred stocks rank higher than common stock in the proceedings (Actually, I think this is not a very significant feature.).

Preferred stocks are thinly traded so in buying them, it is best to do so with limit orders so you don't pay too much for them. Selling preferred stocks can be a bit tricky, but you can get some protection by selling with stop orders. Because of the thinly traded nature of preferred stocks, in selling you may have orders filled below your stop order if that is the only bid around and sometimes you get your order filled in pieces over several trades. With brokerages such as Schwab, several trades during one day are covered by one fee charge, but, if the trading goes on to another day, you will be charged for each day.

There are a couple of things about preferred stocks that even the pros fear and that is if the company that has issued the preferred is bought out by another company. In this process, your preferred stock may be called at par (usually $25/sh), but, if not, the preferred may not be traded; however, you will continue to get your dividend payments. This is called "Waldenized" after a famous case. Sometimes a "Waldenized" preferred will be offered redemption below par, but you don't have to accept it. The second fear is of inflation. Inflation tends to push down the price of preferreds with their fixed dividend as the bond coupons increase. Thus you may only sell your preferred stock at a capital loss, but if you are happy with the dividend rate, this may not matter and you would keep it. Today with such low interest rates on bonds, savings accounts, and CDs, the dividends on preferred stocks is attractive and many preferred stocks are selling above par. For example, all our preferred stocks are selling at or above par right now, but this could change in a hurry if inflation showed its ugly head.

Preferred stocks may be rated by the rating agencies. To the best of my knowledge, the only preferred stocks getting a AAA rating by more than one rating agency are certain preferred CEFs (Closed End Funds) issued by Gabelli that guarantee a 10% payout of NAV on the ETF shares. Thus they have a mandatory dividend on their common stock so MUST pay the preferred dividend. For example, we have some GAB (Gabelli Equity Trust) with a AAA rating by two agencies. It is past its call date and has had a partial call for some reason.

Many people trading in preferreds, feel that the safest preferred is PSA (Public Storage a REIT - Real Estate Investment Trust investing in self storage). PSA raises money by selling preferreds (the better part of an alphabet's worth) and has no debt. Thus they are not beholden to the whims of the financial industry though they must service lots of preferred issues. We are overweight in PSA-D, for example, the lowest yielding preferred of PSA. It is past its call date so may be called at any time, but, as the lowest yielding preferred stock of PSA, it is likely that others may be called ahead of it. Also it is currently selling a bit above par so the company would call it at a premium to par, and we would get a small capital loss if we bought it at the premium price. If they should call the preferred below the call price, we would get a capital gain.

Much discussion of REIT preferreds and some others is given on: http://boards.fool.com/real-estate-inv-trusts-reits-100061.aspx?mid=29689949. You may look up individual preferred stocks at http://www.quantumonline.com/QuickStart.cfm. You will have to register, but it is free. Look under Income Tables/All Preferred Stocks. If you don't want to deal with the complexity of buying individual preferreds, you could buy a Exchange Traded Fund(ETF). One that I have owned in the past but happen not to at present is iShares PFF. It is a low cost way to acquire a basket of preferreds assembled by some pros.