"I've learned that all a person has in life is family and friends. If you lose those, you have nothing, so friends are to be treasured more than anything else in the world." (Quote from unknown Source)
I Can't Resist a Picture Now and Then. The old guy in the middle is me. Every one of these guys has been my friend for almost 40 years. We have gone through much together from divorces to job losses to market crashes but we have never outgrown our zest for life. Forty years ago we were all relatively poor but we have all done well in the interim. At this point, we have suffered setbacks, but we still have the things we care for most. Our love for the land, the water, the trees, and each other. As long as we stay alive we an rely on these.
My Biggest Investing Mistake. Now that you've permitted me a bit of sentiment, I'll get back to money issues. I devoted a fair amount of space to telling you of three investments that I've made that have done relatively well. Now I'll tell you about one of my assumptions that has not served me well. About 7 years ago, I decided that owning stocks with the sole purpose of selling at a higher price in the future was a poor strategy. I reasoned that none of us know what value the market will place on these assets several years from now. I decided that the important thing was cash flow and reasoned that companies that pay dividends to their shareholders would by far less risky than those that didn't. Further, I figured I could rely on the fact that company executives were extremely reluctant to cut dividends once a policy had been established. I still believe those assumptions were correct.
The problem was that I thought I could virtually ignore the price the market placed on these assets as long as the dividends kept coming. That was a not bad assumption; however, it was far more simple for these companies to cut dividends than I thought. In fact, not cutting dividends would have been totally irresponsible in many cases. Companies like Pfizer, Dow, Bank of America, and Citigroup, all of which have been solid dividend payers in the past have made drastic dividend cuts. The recent cut by Dow spoiled a 75 year record of no dividend cuts.
To cite a specific example of let me tell you of my investment in Bank of America. When I bought it, it was $53.00 a share. I still own it today at $2.84. I had no clue that the second largest bank in the country could do so poorly. I even thought that their purchase of Countrywide and Merril Lynch were good investments and examples of their optimistic view of the future. While Bank of America has been a horrible investment, some of my losses were offset by option premiums and dividends received. These have lowered my costs by $22 per share; however, option premiums and dividends will be harder to come by in the future since dividends are now 4 cents a share annually and option premiums on a 2.8 stock are small. I don't know what I will do with this investment in the future, but for now, I guess I'll just hold on and see what happens.
Politics and Economics. I have been very reluctant to discuss political issues in the past; however, it is becoming more and more obvious that you can never totally separate the two. Over the past few months, I have read large books on American history, economic theory, and the great depression. Some of the political controversies we see now have been around since our country started. While I will try to stay away from strictly partisan issues, I will let you know some of the things I have learned in my reading.
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