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Capitulation?

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July 08, 2008 – Comments (3)

Man it has been such a roller coaster ride.  I like my "thesis" still but looking at the actual short term results, I am about to throw my hands into the air.  It really does get tiresome seeing my picks go down and down every darn day. Am I really that off base? Today I was up nice then wammo, April fools, down again.

I figured get the dividend stocks since they are paying more than bank accounts.  Yet those stocks keep declining.  I figure get the Ag/oil stocks since they actually are showing earnings increases year over year, yet they are declining too.  Correction I think, but when they ALL go down doubt just starts to sink in.

I stopped listening to the analysts since they flip flop day to day. The worse is Jim Cramer.  I simply can't watch his show any more, despite my owning GE (which owns CNBC).

So is it time to surrender and short the lot?  Or stick it out and let the dividends start to add up at least?

3 Comments – Post Your Own

#1) On July 08, 2008 at 2:36 AM, Collin757 (< 20) wrote:

Watch DUNE, when he puts his hand in the box..

The Pain!

 Feel kinda like that?

 

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#2) On July 08, 2008 at 3:24 AM, saunafool (98.66) wrote:

awallejr,

You are early in the game. Your strategy is somewhat sound, but you've got to keep working at the investment game/CAPS. Here are my comments from a brief look at your picks:

Dividend plays take a while to show up as positive in your CAPS score. The way it works is that as the dividends are paid each quarter, the cost basis for your pick will go down by the amount of the dividend. So, if your original starting price for a pick is $40 and they pay a dividend of $1, your starting price drops to $39. It takes a while for this to have an impact, but if you've got a company paying 6% dividends, after 2 years, your cost basis will be lower by 12%. In a market like this, the price can be flat or even down a bit and you will score CAPS points.

You need to discriminate between dividends that are sustainable and those which might be cut. You've got a lot of financial companies like BAC and NLY. Sure, the dividends look juicy, but these companies are getting killed by the market because no one knows what monsters lurk on their balance sheets. If they maintain the capital to continue to pay dividends, it might be by issuing shares or going deeply into debt. It won't be because the mortgage business returns to 2005 levels.

You are green thumbing a lot of the hot ag and energy stocks. You've got the right idea here. These companies are really making money, and it appears it will continue for some time. Yet, the shares are very volatile, so just like investing with real money, try to find what you consider to be a reasonable value of the companies and give the green thumb when the price is right.

Finally, keep working at it. The great thing about CAPS is that you have unlimited supplies of new capital--you can always make new picks, and a lot of time. Good luck. 

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#3) On July 15, 2008 at 12:54 AM, blade5adj (< 20) wrote:

I agree with saunafool.  One of the predominant theories with a value stock (i.e. dividend payer) when it's getting beaten is snap it up at a good price and let the dividends keep you afloat until the market re-evaluates it (presuming it deserves to be re-evaluated).  Although the price may fluctuate, once you have a dividend, they can't take that away from you.  But I definitely do agree with you awallejr.  I always have my thesis, but it just hurts when you see your pick getting pounded lols.

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