Money and Investing Thoughts

Mark Hulbert has commentary on Market Watch.com concerning the steepening yield curve. To summarize his comments:

• A steepening yield curve historically reduces the probability of recession.
• The bond timing newsletters he tracks are not making a big deal of the change in the curve.

Overall, the impression is the change in the yield curve really hasn’t affected the pundit’s thinking.

Jeff at a Dash of Insight has a post concerning fears of the CNBC types, without seeing the big picture.

My thoughts:

The recent credit/mortgage scare will scare the majority of new mortgages to 30 year fixed for the main reason people have gotten 30 year fixed mortgages in the past: no surprises. If shorter term rates end up well below longer term rates, adjustable rate mortgages will have a significant advantage, however only the very sophisticated or more aggressive will be interested in the savings vs. future possible rate/payment increases.

If adjustable rate mortgages are sold/written without overly aggressive “teaser” rates as the start they can be less costly even with resets in a normal yield curve environment. Remember adjustables can be reset to lower rates also.

I think a higher demand for 30 year fixed mortgages could actually push up rates at the long end of the curve. And if the Fed cuts at the short end a few more times we could see a significantly higher spread between short and long rates.

The man known only by the single letter: T, writing his blog, Investing from the right, is always interesting and to the point. His blog is a great source of information and wisdom from one who has a lot of experience in investing. Today’s post is especially sharp on the value of the numerous investing systems that claim investment riches. Read it.

investingfromtheright: September 17, 2007: Investment review for most of us

As the market gyrates with the higher swings we have seen over the last couple of months, my thoughts turn to dividends. I like the thought of dividends for two reasons:

1. A dividend is a nice piece of good news when everything else is going in the crapper.
2. Dividends provide cash to buy some of those stocks you really like, and don’t believe they belong in said crapper.

My investing style for this blog (my personal investing style is evolving in a parallel universe) is what I think of as aggressive eclectic. I am looking for small cap, growth, value, international good ideas that few are following. I am not really interested in the large cap stocks every investor, guru, TV commentator and analyst knows every piece of information about worth knowing. So when I look for dividend stocks I want the outsize yields that the market thinks are unsustainable, thus driving down share prices.

My recent post on tanker stocks highlighted some of these stocks and I added (NAT: 14.14 +0.07 +0.50%) and (SFL: 12.11 +0.41 +3.50%) to my 20 Stock Portfolio (a paper stock portfolio for tracking what I think are good ideas). These stocks are currently taking a beating due to the current softness in spot tanker rates. The prudent investor would wait for a quarterly earnings report before making any decision on either of these companies.

Another high dividend payer (or was) is Thornburg Mortgage (TMA: 0.00 N/A N/A). I have written numerous posts on this company. (The REIT or high yield categories should take you to these posts). Historically this company has paid a 10% plus dividend, but the recent credit crisis has put it on the ropes. Check this recent post on up coming news that will give us an idea on the health of Thornburg. I am hoping to add TMA to my 20 Stock Portfolio after the conference call.

Another sector with excellent dividends is energy royalty trusts. I recently posted here on an ETF that hold Canadian royalty trusts and oil sands stocks (ENY: 18.03 +0.21 +1.18%). I am not impressed with the structure or payout of the ETF so would prefer to look at the royalty trusts directly. Kurt Wulf is a oil industry numbers guy with insights I admire. He recently recommended Penn West Energy Trust (PWE: 22.21 +0.32 +1.46%). I am not going to rehash his analysis, but it convinces me to add it to my 20 Stock Portfolio (a paper stock portfolio for tracking what I think are good ideas).

I am really enjoying the information being put out by Jeff at A Dash of Insight. I am more interested in looking at individual companies and try to ferret out how well their businesses are doing while Jeff has and “insightful” approach to the macro side of markets and often debunks the hysteria of the current moment. Here is an excerpt from today’s post, read it all:

The recession scare has power for three reasons:

1. The argument that problems in housing and credit markets will spill over into the general economy is eminently reasonable and generally understood.

2. Most market participants have memories of the 2000 bubble era. They connect the recession, which was actually quite mild, with a massive decline in stocks.

3. Investors and traders alike have no fundamental valuation measure. Many of them have calibrated their measures to the last few years, the period of skepticism. They do not realize that the stock decline in 2000 was mostly the result of excessive valuation, not the recession.

Yesterday I added Nordic American Tanker (NAT: 14.14 +0.07 +0.50%) to my 20 Stock Portfolio of well reviewed (by me) stocks. Today they released a letter concerning soft spot market tanker rates for the 3rd quarter, which has had a significant affect on the stock price. I recommend anyone interested in this company to read the letter in its entirety before making any investment decision.

This is a good time to review my disclaimer concerning the writing on this blog.

Nordic American Tanker Shipping Ltd. (the Company) – (NYSE: NAT) Letter to Shareholders from the Chairman & CEO: Financial News – Yahoo! Finance