Saturday, December 31, 2016

Happy New Year!

Wishing you a happy, healthy, and profitable New Year from the wonderful shores of Santa Barbara, CA! Below, the traditional year-end song to remember long-standing friendships sung the world-over written by the Scot Robert Burns.

Auld Lang Syne

Should Old Acquaintance be forgot,
and never thought upon;
The flames of Love extinguished,
and fully past and gone:
Is thy sweet Heart now grown so cold,
that loving Breast of thine;
That thou canst never once reflect
On old long syne.

On old long syne my Jo,
On old long syne,
That thou canst never once reflect,
On old long syne.

Wednesday, December 28, 2016

Dow 20,000

     So close you can almost taste it...Dow 20,000! Will we hit this milestone before the end of 2016 as I predicted 3 years ago? Maybe. Maybe Not. But what's the story behind the story? The impetus that drove a tepid market up 2,000 points over the past 80 days? Behavioral Economics fellow investors explains it all.

     Never underestimate the power of the psyche in market movements, especially ones centered on signifiant social, political, and economic events.  The reality over the coming 120 days is probably even brighter than sobbing, dour progressive pundits could possibly imagine...prosperity is at hand again. You can bet the farm that the proposed policy changes implemented beginning in January 2017 will have massive positive effects benefiting millions of Americans across the entire socioeconomic spectrum. Lower taxes across the board for the Middle Class, repatriation of TRILLIONS in overseas corporate cash, and...hold your breath here...a pro-growth administration hell-bent on restoring American industry in such hated sectors as manufacturing, energy, and finance. My fellow farmers,  Dow 20,000 is already here.

Sunday, December 25, 2016

In Hoc Anno Domini

This editorial was written in 1949 by the late Vermont Royster.

     When Saul of Tarsus set out on his journey to Damascus the whole of the known world lay in bondage. There was one state, and it was Rome. There was one master for it all, and he was Tiberius Caesar.

     Everywhere there was civil order, for the arm of the Roman law was long. Everywhere there was stability, in government and in society, for the centurions saw that it was so.

     But everywhere there was something else, too. There was oppression--for those who were not the friends of Tiberius Caesar. There was the tax gatherer to take the grain from the fields and the flax from the spindle to feed the legions or to fill the hungry treasury from which divine Caesar gave largess to the people. There was the impressor to find recruits for the circuses. There were executioners to quiet those whom the Emperor proscribed. What was a man for but to serve Caesar?

     There was the persecution of men who dared think differently, who heard strange voices or read strange manuscripts. There was enslavement of men whose tribes came not from Rome, disdain for those who did not have the familiar visage. And most of all there was everywhere a contempt for human life. What, to the strong, was one man more or less in a crowded world?

     Then, of a sudden, there was a light in the world, and a man from Galilee saying, Render unto Caesar the things which are Caesar's and unto God the things that are God's.

     And the voice from Galilee, which would defy Caesar, offered a new Kingdom in which each man could walk upright and bow to none but his God. Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me. And he sent this gospel of the Kingdom of Man into the uttermost ends of the earth.

     So the light came into the world and the men who lived in darkness were afraid, and they tried to lower a curtain so that man would still believe salvation lay with the leaders.

     But it came to pass for a while in diverse places that the truth did set man free, although the men of darkness were offended and they tried to put out the light. The voice said, Haste ye. Walk while you have the light, lest darkness come upon you, for he that walketh in darkness knoweth not whither he goeth.

     Along the road to Damascus the light shone brightly. But afterward Paul of Tarsus, too, was sore afraid. He feared that other Caesars, other prophets, might one day persuade men that man was nothing save a servant unto them, that men might yield up their birthright from God for pottage and walk no more in freedom.

     Then might it come to pass that darkness would settle again over the lands and there would be a burning of books and men would think only of what they should eat and what they should wear, and would give heed only to new Caesars and to false prophets. Then might it come to pass that men would not look upward to see even a winter's star in the East, and once more, there would be no light at all in the darkness.

     And so Paul, the apostle of the Son of Man, spoke to his brethren, the Galatians, the words he would have us remember afterward in each of the years of his Lord:

     Stand fast therefore in the liberty wherewith Christ has made us free and be not entangled again with the yoke of bondage.

Monday, December 12, 2016

Yield On Cost

     One of the most fascinating concepts of compounding interest is the concept of Yield On Cost. For those who aspire to Invest Like A Farmer it could be said that this is THE fundamental concept. Yield On Cost is calculated by dividing a company's current annual dividend payment by the original purchase price. It is expressed as a percentage; so for example if you bought Altria at $30 a share 5 years ago and the stock now pays a $0.61 per quarter dividend the Yield On Cost is 8.13%.

     Yield On Cost differs from a dividend yield in that a dividend yield is the current annual dividend divided by the current share price; so in the above example of MO, the dividend yield is ($0.61 X $ =$2.44/yr divided by $66/share) is 3.69%. The significant difference here is that Yield On Cost factors in the benefits of reinvested dividends over time.

     For financial farmers this is particularly important because ad believes in Dollar Cost Averaging and selecting stocks that Pay You To Own Them, the Yield On Cost is a favorite barometer over time of the true success of an investment in your portfolio.

     A carefully constructed portfolio ultimately takes on a life of its own; dividends are typically paid quarterly and reinvest. Over multiple years, and even decades, these dividends provide a healthy backstop to inevitable stock market cycles and economic booms and busts; ultimately the "farm" generates recurring income that seeds additional investments which generate additional cashflow themselves and so forth. This virtuously cycle compounds and should reveal a very, very positive Yield On Cost over time.