BHP Billiton’s Incredibly Disappointing Management Decisions

I have been intrigued by BHP Billiton, the commodities producer with various interests in Australia, the United Kingdom, Chile, and South Africa. If you want to own an asset that produces oil, iron, nickel, copper, natural gas, diamonds, coal, and a wide assortment of minerals, you need look no further. It is walking, talking diversified commodities conglomerate.

It produces 68 million barrels of oil, 1.7 million tons of copper, and 635 bcf of natural gas each year. If John Neff of the old Vanguard Windsor Fund fame were managing this collection of assets, I would not hesitate to regard it as a top-ten lifetime holding.

But Mr. Neff doesn’t manage it. The company is run by Andrew MacKenzie, who I believe has one of the worst appreciations for the reality of the commodity business cycle out of any head of a major commodities-producing firm.

BHP Billiton’s capital allocation decisions are Read the rest of this article!

A Lifetime of Income Investing Is The Best Defense Against Job Loss


What is every employee’s worst fear? While I cannot answer that question with absolute certainty, I’d be willing to wager that a forced early retirement (be it due to layoffs or a forced termination due to poor performance) is on the short list of things that an individual likely fears. One of the appeals of income investing is that it is a measurable defense mechanism against job insecurity.

Let’s say that your annual salary is $50,000 and you manage to save $5,000 each year, or 10% of your pre-tax pay. At the time I am writing this, GlaxoSmithKline, BP, Royal Dutch Shell, and AT&T currently offer investors entry yields of 5%. That will give you $250 in annual income. With that single $5,000 investment, you have just replaced 0.5% of your total salary.

That may not sound all that impressive at first, but the key is to realize what you … Read the rest of this article!