The major U.S banks have finished up their Federal Reserve stress tests. Nearly every bank passed, though a few (BB&T, JP Morgan, Goldman, Ally) didn’t pass or got a conditional pass which requires some changes to their financial plans.
Most of these banks are flush with cash and are wanting to increase dividends, buy back stock and retire debt. This stress test gives the banks the green light to move forward. If you are invested in corporate debt, this means more of the same: high interest rate debt will be retired plus newer issues will be at lower interest rates. The low interest rate policy of the Federal Reserve has helped to force all kinds of interest rates down. Even though everyone currently thinks that the economy is getting stronger, the interest rate picture still is the same story: debt interest rates are trending down. Unfortunately, this might mean that some of the debt I own now will be called.
This is still playing out, we will likely continue to see low interest rates even after the Fed starts to pull the punch bowl.
What are the highest quality companies that you can invest in on Wall Street and how can you find them? It’s a question that doesn’t have a consensus answer, you would think it would be easy to answer. The reason is that Wall Street tells you one thing about what you should invest in based upon your emotions, but the investments that actually make money won’t necessarily be recommended because they are ‘boring’ or don’t create wealth fast enough.
We all know how that can go. You can make fast money investing in stocks, but it is hard to do for a sustained period of time. The record holder for making money fast is Dan Zanger who turned $10K into $42M during a short stint in the first Internet Bubble (he says his return was professionally audited to be true).
There is so much chatter about Apple (AAPL) in the blogosphere and financial media, it’s getting ridiculous. I read some of the headlines and I cringe at how dumb some of them are. Look, I’m a writer in a sense as they are. A very valuable company with broad ownership is gonna attract a lot of interest, they are simply supplying what the market wants: talk about Apple.
I’m done with talk, how about some action to make money with Apple?
As a value investor, it is difficult to convince people how cheap Apple is because the average investor who buys Apple isn’t a value investor and looks to make money through ‘growth’ or ‘momentum’. Right now, there isn’t any catalyst foreseeable that will offer these investors their opportunity so they have simply disappeared and have moved on to other prey. Without such a case, the market has simply abandoned the stock, waiting. Fortunately, there are financial instruments that you can use to make money when the market is overlooking a clear undervaluation story (or an overvaluation story as the the case may be) at any given time.
Don’t catch a falling knife. Don’t write articles about how cheap Apple is (or any other company is). Put your thesis into action to make money. Here’s how you can make money with Apple, read on.
I wrote a couple of articles previously that talked about how to borrow cheap money from the Federal Reserve to buy stocks on margin. These articles were just talk and theory, today I will talk about a portfolio that I setup that puts this into action. It’s been active for about 3 months and has a return of 9.4% so far. This return was earned taking far less risk than a pure equity portfolio since it partially invests in corporate debt. Also, the equity investments have relatively high, but sustainable yields from quality companies.
You can do this, too, but likely not at the broker you currently use because their margin rates are too high.
Berkshire Hathaway (BRK.A) always gets a lot of attention when it make investments or does other kinds of deals. The latest investment by Berkshire in Heinz (HNZ) to take this company private offers some insight that it worth noting. What can be learned about this deal? My overall conclusion is that BRK.A got involved because the terms were OK, but not a screaming deal. Here’s why.