The Catch-22 Of Investing

I’ve been digging through the financial commentary archives of The Wall Street Journal and The New York Times to compare the tone of investment commentary in the late 1990s to the financial news in the immediate aftermath of 1987’s Black Monday in which the value of the Dow Jones dropped by 22% in a single day.

It leaves an impression to see how quickly investor attitudes changed in under ten regarding the same exact companies. On October 20th, 1987, few people were talking about the inherent quality of enterprises like Coca-Cola, Colgate-Palmolive, and Johnson & Johnson, which had been paying out annual dividend increases of almost thirty years by that time. And had been reporting steadily growing profits as well. No one cared.

Just about all common sense was abandoned. The initial prints from The Wall Street Journal and The New York Times compared the fall to the … Read the rest of this article!

Kimbell Royalty Partners Will Go Bankrupt Due To COVID-19 Oil Glut

Few things infuriate me as much as companies that advertise themselves to mom and pop investors as safe places to put money when, in realty, they can feel bankruptcy knocking on the door. When I was writing for Seeking Alpha in the early 2010s, there was a company called Linn Energy that billed itself as a monthly dividend income company for retirees that paid out dividends of 12-15%.The idea was, “Hey, give us $10,000, and you’ll collect $125 every month.” For retirees starved for income in the low-interest environment, it sounded tempting. And for those who were tempted, they got burned and lost all of their investment when Linn Energy filed for bankruptcy on May 11, 2016.

But the same story repeats itself every boom and bust cycle in the oil industry. In November 2019, the Wall Street Journal profiled Kimbell Royalty Partners and several other mineral/oil royalty stocks in … Read the rest of this article!

Where Small Businesses and the Rich Keep Their Excess Cash

According to the Small Business Administration, there are over 1.59 million businesses and 257,430 households in the United States that are currently sitting on more than $250,000 in cash. This amount is significant because the FDIC only guarantees a particular account type at an individual bank for $250,000. For entities that exceed this amount, the risk of bank failure is absorbed by the depositor. 

Obviously, this is an unnecessary and avoidable risk. It is not just a hypothetical risk. In 2013, during the banking crisis in Cyprus, a man had roughly $1,000,000 in a checking account of a Cyprus bank that went bankrupt. It was his life savings. He was left with only $100,000 because that was the limit of the Cyprus government’s insurance limits. As the article stated, “I went to sleep on Friday a rich man. I woke up Monday a poor man.” Because it is … Read the rest of this article!