DIVIDEND PORTFOLIO UPDATE

My Favorite Restaurant I couldn't resist showing you a picture of my favorite restaurant, The Tschoupitoulas Steak House. It's also in one of my favorite towns, Crockett, Texas, The home of the Camp Street Cafe and Store, which is neither on Camp Street nor is it a Cafe and store. It is the home of my favorite music venue and is owned by my favorite cowboy poets/musicians, The Gillete Brothers. One of the pioneers of country blues, Lightnin' Hopkins used to play on the streets there in the early 1900's. The picture next to the cafe is a sample of what's happening to small town America. Alan Greenspan would call it an example of "Creative Destruction" which describes how older/obsolete institutions are destroyed so that newer, more efficient institutions can take their place. I suppose I may also be an example of these old/obsolete intuitions that are being destroyed to make room for the youngsters. In any event, I am grateful for places like this and not sure every example of creative destruction is all that creative.

On The More Practical Side. I told you I would give you periodic updates of the portfolio I put together last December to illustrate alternatives to risk free examples. I am not sure how long I am going to keep publishing these updates. One of the advantages of portfolios like these is that you don't have to watch them every day. I hope you don't find these updates too boring.

1. Ameren Corporation (AEE). Investment amount was $17130 and current value is $16524. Dividends since January 31 are $234.

2. Bristol Meyers Squibb (BMY). Investment amount was $18360 and current value is $19103. No dividends were received this quarter.

3. Duke Energy. (Duk). Investment amount was $19,300 and current value is $19,602. Dividends of $275 were received this quarter.

4. Lockheed Martin (LMT). Investment amount was $20460 and current value is $24,111. Dividends received were $225.

5. Medical Properties Trust (MPW). Investment amount was $20240. Current value is $22140 with dividends of $400.

6. AT&T (T). Original investment was $17,526 and current value is $17310. Dividends received this quarter were $258.

7. Health Care Properties (HCP). Original investment was $19512 with current value of $22038. Dividends this quarter were $282.

8. Kinder Morgan Partners (KMP). Original Investment was $20777 and current value is $22137. Dividends this quarter were $339.

9. Fidelity National Financial (FNF). Original Investment was 19,570 and current value is $19,306. Dividends this quarter were $168.

10. Windstream Corporation (WIN). Original Investment was $26,860 and current value is $24,491. No dividends received this quarter.

The Bottom Line. As of today's date, the total value is $206,762 as opposed a total original investment of $199753, Dividends this quarter were $2181. Since our original investment four months ago, we have earned total dividends of $3,964. This is equivalent to an annualized return of 5.95%. Approximately 3 times as much as you would have earned on a one year CD. In addition, we would have received a preferential tax rate. Of course, you could sell out and get a capital gain of $7,000+ but I would prefer not to count that since it may disappear should the market correct in the future.

Just A Sample. This is the kind of portfolio I would recommend for conservative investors who want current cash flow. If you have a highly paid job, are several years away from retirement, and have a higher risk tolerance, I might recommend something more aggressive; however, I believe now is the time for most investors to be more conservative and, even if you don't need income to live on, you might want to collect cash flow to take advantage of better opportunities that may arise in the future.

IMPORTANT VISITOR ON IMPORTANT MISSION

Azaleas and Dogwoods. The picture at the left shows two of Betty's favorite flowers. The bright azaleas are easily visible in the lower left hand corner while on the right, near the middle is a dogwood tree. You have to strain to see it. Unfortunately, pictures by an amateur photographer seldom do it justice. It is sort of whimsical and graceful and adds a lot to the landscape. Legend has it that dogwood trees used to grow large until they were used to construct the cross on which Christ was crucified and thereafter they were never allowed to to grow large enough to construct an instrument of crucifixion again. It's an interesting story but, as far as I know, it doesn't appear anywhere in the bible.

On A More Serious Note. On March 4, a very important Admiral from Norway visited this country. Rear Admiral Trond Grytting, who had most recently served for several years as the key officer in charge of Norwegian-Russian military contacts, was on an important mission from the king of Norway. While our first guess might have been that this was in Washington DC, we would have been wrong. Instead he showed up at a convalescent center in Silsbee, Texas, a small town a few miles from Wildwood. His mission: To present a royal honor from the King of Norway to Leif Oistad, a longtime neighbor of ours here in Wildwood.

It Was Almost 70 Years Ago. Leif was recruited by the US Army to serve with the 99th Mountain Battalion on a highly secret mission behind enemy lines in German occupied Norway. In his first job, he instructed his fellow soldiers in skiing since he had been a skier practically since his birth in Norway. The second job was much more dangerous in that they parachuted behind enemy lines to conduct sabotage operations. Before traveling overseas, he requested that, since he was likely to give up his life for America, he would prefer to do it as an American citizen. The story has it that his citizenship papers were delivered within an hour.

Their Mission Was Successful. Leif received two bronze stars along with several other medals and awards too numerous to mention. Before retiring to Wildwood, he worked several years as a captain of several seismic research vessels for Shell Oil. While many details of their mission WWII mission are not known, I would venture a guess that the mission involved much more than blowing up a few rail lines since it justified a visit from an important representative on a mission from the King of Norway. I have heard rumors of an atomic energy related operation but can't justify repeating them since they are just that.

I Have Wanted To Pay Leif A Visit For Some Time. We visited a few times when we met outdoors but I never got around to visiting him to discuss some of his adventures. That's very unfortunate since Lief died last Thursday, March 17. This isn't the first time I have neglected to take the time to get to know someone that I could have learned a lot from. Our time here is so important and the most important thing we can do is interact with our fellow human beings. We are losing our heroes at an alarming rate and we must insure that their story lives on.

HURRY UP SPRING

Back In Texas. I'm back in Texas and it looks like spring is coming on fast. Azaleas blooming, yard turning green, and temperatures over the next 7 days are expected to be in the 80's. It can't come too fast for me. The weather is getting brighter but the economic environment seems pretty gloomy. Problems with nuclear reactors in Japan appear to be on the verge of disaster, union/government relations in Wisconsin are at a historic low point, and gasoline is predicted to hit four bucks a gallon. I remember a song in the 1970's called Goodbye Easy Street. That had to do with the Arab oil embargo and the anticipated demise of cheap energy. It appears that the pessimism of that era was 40 years early. Could we be in that situation again?





Ask The Energy Department. It was in the Jimmy Carter Administration that we founded the department of energy. They did a lot of really valuable measures such as lowering the speed limit to 55 mph, instituting full-time daylight saving time, and issuing bulletins advising us to stop using hair dryers and power lawnmowers None of these appeared to work too well so now we have the EPA empowered to help out in order to keep us from adding too much carbon dioxide to the environment and raising the average temperature a fraction of a degree. Of course, we have those curly light bulbs that we have to call out the national guard if we drop and break. Those are due to be mandatory in a couple of years. Just when we were about to ramp up our nuclear power plants to reduce greenhouse gasses, we have this huge earthquake to remind us that, nature has ways of surprising us with new disasters that we have absolutely no way of anticipating.



Bottom Line. Don't depend on the government to solve your problems. They would if they could but they don't know how. I just drove back and forth to Colorado and spent as much for gas as an airplane ticket. In addition, I spent two hundred bucks on motels. At least, I didn't have to sit two hours in a space the size of a linen closet and I could come and go as I please. Add the $165 I spent for a speeding ticket in Decatur, Texas and you can see that it cost me twice as much to drive than it would have to fly. There are ways to hedge against rising energy costs. One of those is to invest in companies in the energy business. If energy prices go up the price of your energy stock increases to help cover the cost of your increased gasoline.





What The Government Could Do. Our government wants us to do things to stop our dependence on foreign oil. So do I. They want us to look at hydrogen as an alternative source of energy. So do I. They want us to look at vegetable oil as a source of replacement for diesel. So do I. They want us to get energy from the sun, wind, and the tides. So do I. So how do we differ? I want us to improve our production of conventional energy via improved technology for exploration and production. They don't. I believe we can become energy independent while we develop these alternative fuels. They don't. I believe their regulations inhibit the production of fossil fuels forcing us to give money to countries who hate us. They don't. Until we make energy independence a priority, whatever the source, we might as well dissolve the Department of Energy and use the money to reduce the federal deficit. That department has squandered huge sums of money and we are just as dependent on OPEC as we were 40 years ago.

COLORADO TRIP ALMOST OVER.

About Time To Head Home. I have been in Colorado in excess of two weeks. I haven't cashed any checks as a result of my trip here but I have opened some new possibilities and I have rejuvenated my spirit as a result of some of the things I have done. I saw a number of friends that I have missed more than I thought. One of the high points was spending an afternoon with a cousin that I have not seen for 60 years. She was a bright teenager last time I saw her and she is just as interesting to be around now as she was 60 years. Her husband, who I never met is also related to me through another branch of the family. He is a fine gentleman. Say what you want about Facebook but I would never have found them otherwise.

Update On Intel. On January 18, I told you about a hedged investment I made in Intel. At the time I told you I would keep you informed as to the performance of that investment. To refresh your memory, I bought 1000 shares of the stock at 21.07 per share last November. At that time, I sold an option to buy those shares from me at 22 in mid-February. I got $630 for that option. The $630 went into my account and I was free to spend it however I wished. Just before exploration, the stock was selling for just over $22. If I had done nothing, I would have lost the stock at $22 a share for a net profit of $1630. That would have been a satisfactory result for a 3 month investment of $21,070. Not a barn-burner but still almost 8% for three months.

Another Alternative. I bought the option back for $195 leaving me a profit of $435 and I didn't have to sell the stock. I also sold another call at $520, this time with a strike of $23 and an expiration of April. This is just another example of what you can do to manage a covered call position once you establish it. Another factor, I received a dividend of $180 today. Granted, these aren't huge dollar amounts but they add up and with only $21,000 at risk it appears to be a prudent investment. I still think Intel is a great buy at the current price of $21.49 and I have generated $1135 in cash flow to buy groceries. I will let you know how things look on or before the Mid April expiration date of the stock.

This Is Not A Lot of Work. You can get by with checking this position once a day once you've established it. In my last post, I talked about information, analysis, and intuition. Establishing a position like this and monitoring it helps develop your intuition to make more money in the future. I am always glad to hear from my readers. Let me know what you think.