As I post this at 1 a.m., it still doesn’t seem to have hit the wires – VENEZUELA PRESIDENT BACK IN POWER reads the CNN headline – so in case you day-trade oil stocks or have relatives in Venezuela:
I am told that President Hugo Chavez is in an undisclosed location, and may or may not remain in power. Sunday, he allegedly rounded up 120 generals, along with journalists who had criticized him, including four women – the Venezuelan equivalent of Woodward & Bernstein – who may have been tortured. Unverified rumors were that one had died. The Navy may be fighting the Army. Fuerte Tiuna has been fired upon. The American Embassy is the site of angry protests. It is totally chaotic — which is why it’s hard to be completely sure what of all this is accurate. My source was aware of the first coup plans, but says they went badly awry – the good guys were not where the TV cameras were; instead, and at the last minute, their long-planned coup got, in effect, hijacked by an ultra-conservative group. And now it is a huge, tragic mess. Add to the mix thousands of Cuban advisors and – well, chances are this story will not quietly fade from view.
Today’s the last day to file Form 4868 requesting an automatic extension to file until August 15. (A good estimate of any money owed is still due today, just not the return.) Supposedly, you can do it over the phone by calling 888-796-1074. I wouldn’t place a large bet on getting through on the first ring. If you do get through, have last year’s tax return handy.
For those with significant income not automatically subject to withholding tax – a large taxable gain, say, or income from self-employment – your first quarterly estimated tax is due today, also.
TAKE STOCK – NOVEMBER 27, 2000
It was on that day that I predicted Al Gore would be president – wrong – and that I offered three ‘income’ situations. With the NASDAQ down from 5000 to under 3000 (it is around 1750 today), some people were ready to consider investments that promised actual income.
Free advice is worth what you pay for it, but on that day, we could have done worse. The ‘Criimi Mae preferred G’ – CMM_G – I suggested has fallen by about 20% but paid out stock dividends that would have largely covered the drop. The B.F. Saul real estate investment trust – BFS – has risen from $16 to about $23.50 and paid nearly $1.95 in dividends, for a total pre-tax return of about 60% in about 16 months. Better than a CD. The Ameritrade (AMTD) 5.75% bonds, then 56, show up on my last month’s brokerage statement at 82, up about 45%, while yielding about 10% in cash on the original purchase price. Combining the three, it works out to about a 40% gain. The S&P 500, meanwhile, has fallen about 15%, after allowing for dividends.
If taxes and sloth were no factor here, I might sell the BFS shares and AMTD bonds; not because I know anything, but because the big fun is over. Then again, BFS seems to have improved its financial situation over the last few years, so that its $1.56 annual dividend is no longer quite the cliffhanger it once was. And if Ameritrade doesn’t default on its bonds before they mature in August, 2004, then even from today’s price of 82 the yield to maturity works out to around 15%. That is both a reason to consider holding on and a warning that the market regards these as very risky bonds.
As to CMM and its various preferred series, I have long since given up trying to figure these out – as have, I think, most other investors. Which is one very small, entirely non-analytical reason to hang on. Because when investors get so fed up with a stock they don’t even want to think about it – which is exactly how I feel about CMM – that sometimes . . . sometimes . . . signals an opportunity.
(On the bearish side, I’ve been no fan of AOL, even as, to the derision of many of my faithful readers, I have been its happy customer. Several times in April, 1999, with the stock at 80, and most recently last November, with the stock at 38, I suggested you stay clear. Today, at 20, it’s obviously a lot less overvalued, if overvalued at all. A similar success was GE. Thanks to Joe Cherner for prompting me to suggest that short this past July at 52, now 34 nine months later.)
But if I have been lucky with some of the individual stocks, I seem to be living proof that humans can’t ‘time’ the market. Over and over in this space something bad has happened that’s led me to urge caution at the very moment when – at least with hindsight – you should have been buying. One savvy reader even e-mailed to thank me for my most recent gloomy missive, back when the Dow was around 9000, saying that I had proved a highly reliable counter-indicator, and that, based on my gloomy column, he planned to plunge back in. If he did, he made good money and I am pleased to have been so reliably of service.
PS – It is in the nature of things, as any seasoned investor will confirm, that I remember primarily the recommendations that have done well, while you would remember primarily the ones that did not. So if there’s one particularly bad recommendation I made that you’d like to remind me of, use this site’s ‘search’ feature to find it (bottom left) and then by all means send me an e-mail to complain.
Quote of the Day
Guys, just remember: if you get real lucky, if you make a lot of money, if you go out and buy a lot of stuff, it's gonna break. You got your biggest, fanciest mansion in the world. It has air conditioning. It has a pool. Just think of all the pumps that are going to go out. Or go to a yacht basin any place in the world. Nobody is smiling and I'll tell you why: something broke that morning. The generator's out, the microwave oven doesn't work, the cook's gay. Things just don't mean happiness.~Ross Perot to Harvard B-School students, quoted in Forbes
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