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Two examples for those who felt that a 7% return was not feasible


Right now Natural Resource Partners (NRP), which leases coal reserves to mining companies for royalties, is delivering an 8% annual dividend  (price around $26.70). They’ve raised their dividends steadily from $0.465 per quarter to $0.55 per quarter now. The stock price has gone down a few percentage points recently, as the price of metallurgical coal has gone down – or maybe because Jim Cramer recently said to sell all coal companies.

If you want more risk, look at Armour Residential REIT (ARR), which plays the mortgage securities game. It delivers around $0.12 per month and currently sells for $7.07, so the annual return is north of 18% – assuming it can sustain that kind of payout (it’s been dropping lately).

Yes there definitely are risks and he has to do his due diligence – which includes the kind of thoughtful analysis you mentioned. (Even gold has been a great investment, but it’s also followed an exponential growth curve and some deflationists believe it is in a bubble, so that’s also a risk – outweighed by the risk of money printing, of course.)  But I wouldn’t have just brought these two up if I wasn’t myself in them.

I did my due diligence and decided they were worth the risk. NRP was first brought to my attention by the writings of Joseph Schaefer on Seeking Alpha. It also falls in the kind of natural resource play that Dr. Martenson has been talking about.

ARR definitely is more risk – anything paying north of 18% (or even 9% these days) would definitely be considered high risk, which is why I informed Doug of caveats (“plays the mortgage securities game”, payout has “been dropping lately”). I have a much smaller amount invested in ARR - but for me, it is easy to buy a few hundred shares and not lose any sleep, because it is only a small portion of my overall portfolio. In the meantime, it’s nice to see extra money deposited in my 401(k) every month.

Thanks for bringing up ABV. Since the stock price has twice dropped more than 16% this year before rebounding each time, it may be a good idea to wait until a market panic before purchasing. That said, although ABV is a foreign stock, luckily Brazil doesn’t do dividend withholding tax.

It is not my duty (or your duty) to lay out a 10-page position paper on specific stocks or asset allocations to help protect anyone from himself or herself. Everyone knows by now that investments have risks and sometimes those risks will wipe a person out (as evidenced in living memory by the 2008 crash). I think we’re all adults here.

Besides, if people had to do that level of homework every time before they posted a comment here (whether on stocks or whatever), we’d have only a tenth of the post traffic here, and there would be far fewer participants willing to jump into the discussion.

Poet

 

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