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The Stingy News Weekly (02/21/2010)


"Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."
- Warren Buffett


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The trillion dollar gap
"A $1 trillion gap. That is what exists between the $3.35 trillion in pension, health care and other retirement benefits states have promised their current and retired workers as of fiscal year 2008 and the $2.35 trillion they have on hand to pay for them, according to a new report by the Pew Center on the States. In fact, this figure likely underestimates the bill coming due for states. public sector retirement benefit obligations: Because most states assess their retirement plans on June 30, our calculation does not fully reflect severe investment declines in pension funds in the second half of 2008 before the modest recovery in 2009."


Basically, it's over
"Of course, the most effective political opposition to change came from the gambling casinos themselves. This was not surprising, as at least one casino was located in each legislative district. The casinos resented being compared with cancer when they saw themselves as part of a long-established industry that provided harmless pleasure while improving the thinking skills of its customers."


Inflation won't solve our debt problems
"The more powerful argument against inflating away debt is that it will not work, says Alan Auerbach, an economics professor at the University of California, Berkeley. Why? Because so much of our long-term spending obligations are indexed to inflation."


ETFs were off the mark in 2009
"In 2009, ETFs missed their targets by an average of 1.25 percentage points, a gap more than twice as wide as the 0.52-percentage-point average they posted in 2008, according to a study of ETF returns released this week by Morgan Stanley."


Money just a shared illusion
"The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct."


Was it all just a bad dream?
"This is where we encounter a lot of the pseudoscience of finance, e.g., measures such as Value-At-Risk (VaR). The idea that if we can quantify risk we can control it is one of the great fallacies of modern finance. VaR tells us how much you can expect to lose with a given probability, i.e., the maximum daily loss with a 95% probability. Such risk management techniques are akin to buying a car with an airbag that is guaranteed to work unless you crash! Talk about the illusion of safety."


Elders favor more regulation
"Put aside for a moment the populist pressure to regulate banking and trading. Ask the elder statesmen of these industries - giants like George Soros, Nicholas F. Brady, John S. Reed, William H. Donaldson and John C. Bogle - where they stand on regulation, and they will bowl you over with their populism."


When do smart prices get dumb?
"Tomorrow's power will come from renewables via a $7-billion deal with Samsung to install wind turbines in the Great Lakes, and to provide solar energy as well. Many will applaud the addition of this clean and renewable source of power to the grid. Fewer will applaud the 19-cent-per-kilowatt-hour price tag that'll come along with it. As they say in stock brokerage, find a strong enough wind, and even pigs can fly. Pay 19 cents per kilowatt hour for power, and you can let the wind turn on the lights. But at that price, how long will you leave them on?"


Greek tax-dodgers
"The government is seeking to tap more revenue from a society in which 95 percent of taxpayers declare annual income of less than 30,000 euros. The Bank of Greece estimates a campaign against evasion and corruption could glean as much as 5 billion euros a year."


Flaherty's mortgage changes
"On Tuesday, the Department of Finance announced three changes to the standards governing government-backed mortgages, that come into force April 19. Here are a summary of the changes." [Too little too late]


Canadian family finances
"Average debt loads climbed to $96,100 in 2009 - In contrast to past recessions, households continued to borrow more this time. The debt to income ratio jumped to a new high of 145%."


Bad timing eats away at investor returns
"In U.S. equities, the average investor earned a scant 0.22% annualized, compared with 1.59% for the average fund. As I noted above, two bear markets and two snap-back rallies made for a really challenging time for many fund investors. Interestingly, balanced fund investors did manage to beat the averages. They earned a 3.36% annualized return, compared with 2.74% for the average fund. A mix of bonds and stocks leads to moderate results, and more investors stick with these funds through the down periods. In theory, it shouldn't matter if you hold a stock fund and a bond fund separately or get the same exposure through an allocation fund, but in practice it seems that boring balanced funds don't push fear or greed buttons that throw people off. As Jack Bogle says, emotion is the enemy of the investor."


Foreclosures seen still hitting prices
"Some borrowers are catching up on payments after having their loan terms modified, but S&P says current trends suggest that 70% of such borrowers eventually will redefault."


U.S. housing aid winds down
"Over the next six months, the federal government plans to wind down many of its emergency programs for housing. Then it will become clear if the market can function on its own. People here are pretty sure the answer will be no."


The new cash cows
"In other words, enrolling in college is a bit like joining a health club. And as with a health club, the revenue comes from signing people up, not from encouraging them to use the services."


Greece's Goldman Sachs swaps
"EU regulators have blessed the use of derivatives contracts to let countries curb their deficits. In 2001, the Commission, the EU's regulatory arm, approved Italy's use of derivatives that helped to reduce its budget deficit in 1997. Italy swapped fixed payments on a three-year, yen-denominated bond in 1996, for a floating rate, allowing it to temporarily cut the amount of interest paid on the debt." [Yikes!]


Low savings are the problem
"The average contribution to a RRSP was $5,412 but the median contribution was only $2,780. The contributions used up just 6.0% of total contribution room available. The data suggests that the vast majority of Canadians have accumulated vast amounts of RRSP contribution room. Only a tiny fraction of Canadians have used up all their contribution room and would benefit from any boost in RRSP limits."


Your banking may be more expensive
"When you lose your job, the last thing you need is for your expenses to increase. Yet, at some banks, that's exactly what can happen with your checking account."


Greece: our debt, your problem
"So here's the deal: No matter what happens, the debt is now at a level where its growth has reached escape velocity. Even if Greece were to run zero deficit, ultimately we are heading to default. We can default now or we can default later."



DOW 30 Value Screens

High Dividend Yield StocksP/EP/BP/SP/DYield
AT&T (T)55355
Verizon (VZ)14555
EI DuPont (DD)21455
Merck (MRK)52155
Pfizer (PFE)44255
Kraft (KFT)44444
Chevron (CVX)54544
McDonald's (MCD)31144
Johnson & Johnson (JNJ)42244
Intel (INTC)13144
Notes | More Info...


Value Ratio StocksP/EP/BP/SP/DVR
AT&T (T)55351.77
Merck (MRK)52152.40
Travelers (TRV)55323.34
Verizon (VZ)14553.48
Kraft (KFT)44443.56
Pfizer (PFE)44253.67
EI DuPont (DD)21453.67
Chevron (CVX)54543.82
McDonald's (MCD)31144.63
Johnson & Johnson (JNJ)42244.68
Notes | More Info...


Graham-Lite StocksP/EP/BP/DG$dG$(%)
Travelers (TRV)55286.8064.15
AT&T (T)55528.6113.98
JP Morgan Chase (JPM)25144.9112.20
Notes | More Info...


Top US StocksYieldV.R.Graham
AT&T (T)YYY
Chevron (CVX)YY
EI DuPont (DD)YY
Johnson & Johnson (JNJ)YY
Kraft (KFT)YY
McDonald's (MCD)YY
Merck (MRK)YY
Pfizer (PFE)YY
Travelers (TRV)YY
Verizon (VZ)YY
Intel (INTC)Y
JP Morgan Chase (JPM)Y
Notes...



S&P/TSX60 Value Screens

High Dividend Yield StocksP/EP/BP/SP/DYield
BCE (BCE)34455
Telus (T)55455
CIBC (CM)12355
Bank of Montreal (BMO)33355
Transalta (TA)23455
Sun Life (SLF)15555
Husky Energy (HSE)34455
TransCanada (TRP)34255
National Bank of Canada (NA)53355
Bank of Nova Scotia (BNS)42344
Notes | More Info...


Value Ratio StocksP/EP/BP/SP/DVR
Telus (T)55451.88
Enbridge (ENB)52442.67
National Bank of Canada (NA)53352.79
Bank of Montreal (BMO)33353.41
Weston George (WN)55533.44
Bank of Nova Scotia (BNS)42343.54
BCE (BCE)34453.55
TransCanada (TRP)34253.91
Husky Energy (HSE)34454.07
Shaw Comm Cl.B (SJR.B)41244.23
Notes | More Info...


Graham-Lite StocksP/EP/BP/DG$dG$(%)
Weston George (WN)553110.0655.10
Encana (ECA)45345.4030.51
Canadian Tire (CTC.A)45264.3124.38
Telus (T)55540.8221.86
Talisman Energy (TLM)54220.8212.04
Canadian Pacific Rail (CP)45358.0911.98
Biovail (BVF)53316.998.74
Inmet Mining (IMN)54167.228.44
National Bank of Canada (NA)53560.844.16
Notes | More Info...


Top Canadian StocksYieldV.R.Graham
National Bank of Canada (NA)YYY
Telus (T)YYY
BCE (BCE)YY
Bank of Montreal (BMO)YY
Bank of Nova Scotia (BNS)YY
Husky Energy (HSE)YY
TransCanada (TRP)YY
Weston George (WN)YY
Biovail (BVF)Y
CIBC (CM)Y
Canadian Pacific Rail (CP)Y
Canadian Tire (CTC.A)Y
Enbridge (ENB)Y
Encana (ECA)Y
Inmet Mining (IMN)Y
Shaw Comm Cl.B (SJR.B)Y
Sun Life (SLF)Y
Talisman Energy (TLM)Y
Transalta (TA)Y
Notes...



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