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GMO's James Montier Explains Why To Shun Speculative "Churn-And-Burn" Trading And To Focus On Dividend Strategies

Tyler Durden's picture




 

For those who must allocate capital to stocks no matter what, here is a good and relatively safe strategy from James Montier of GMO.

 

h/t Adam

 

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Wed, 08/25/2010 - 09:08 | 542629 hellboy
hellboy's picture

I swear I saw him when I was walking to work this morning... proper english bulldog! In a good way...

Wed, 08/25/2010 - 09:10 | 542630 MrTrader
MrTrader's picture

Respect. Finally someone with some brains...

Wed, 08/25/2010 - 09:15 | 542641 deliciousirony
deliciousirony's picture

Can retail investors buy these divdend swaps?

Wed, 08/25/2010 - 13:51 | 543472 TreadwCare
TreadwCare's picture

+1.  Would like to investigate this more, how does the retail investor access the swaps?  Simple as a ticker symbol or other?

Wed, 08/25/2010 - 09:24 | 542662 Hungry For Knowledge
Hungry For Knowledge's picture

DIvidends are critical.

However, in times like these, short ETFs are MORE critical!

Go TZA!

Wed, 08/25/2010 - 09:31 | 542678 Bigger Dickus
Bigger Dickus's picture

Dividend strategies will go out the window as soon as we turn the deflationary corner and hyperinflation rips yield investors to shreds.

Wed, 08/25/2010 - 09:36 | 542688 Paper CRUSHer
Paper CRUSHer's picture

BP 'was once upon a time' a large cap primary holding of many long term pension funds,t'was yielding +5% dividend.

Now y'ain't gettin' a red cent.

How about we agree on that dividend swap then?

Wed, 08/25/2010 - 09:37 | 542689 dukeness
dukeness's picture

Dividends, bitchez!

Wed, 08/25/2010 - 10:04 | 542765 arm50
arm50's picture

div's are just cash flow, not yield.  

Wed, 08/25/2010 - 10:39 | 542891 Whatta
Whatta's picture

i guess i are a dum invester!!

i bawt me sum divvy stocks and stuff a year back and helt on to them, and now i are 'tween 15% (on pukey little gnma's) and 100% ahead (MLP's etal)

diverdinds helpt me.

Wed, 08/25/2010 - 10:55 | 542930 trav7777
trav7777's picture

as I expect yields to continue to decline, I expect capgains from MLPs.  Been playing these for a while.  Being paid to own something, you know like being an actual OWNER of a share of a venture, is nice.

The steals of the century were certain coal and pipeline MLPs during the 08 crash.

Wed, 08/25/2010 - 13:38 | 543428 Whatta
Whatta's picture

"The steals of the century were certain coal and pipeline MLPs during the 08 crash."

Amen to that. And during the Flash Crash if you were quick enough.

I figured, in early 2009, that if the end of the world was coming, owning solid energy names, MLP's and ciggie makers would be the way I would go. Turns out it was a good time for an old-fashioned Buy & Hold strategy. I have sold some names, but figure with ZIRP firmly embedded that MLP's will hold value for a good while longer.

Wed, 08/25/2010 - 10:52 | 542922 trav7777
trav7777's picture

The executive class systematically stole all cash flow for the past 20 years, swapping it for share price ponzis.

The supposedly conservative mooch fund and pensions that owned their shares LET them get away with it, as these are the true owners of the SP500.  I guess they got drunk with the "growth" returns and everyone drank the koolaid.  People actually have said dividends suck and you should go for the share price.  The ponzi makes next Q's share price all-important for execs to capture the real cash in terms of bonuses.  That is the game.

And they don't care if they wreck the fucking company.  A few years of ponzi followed by all-out collapse and BK is more lucrative to an executive than 20 years of well-run, sustainable, dividend producing operations.

Wed, 08/25/2010 - 18:11 | 544431 PurePyrite
PurePyrite's picture

+1

Wed, 08/25/2010 - 14:47 | 543737 Johnk
Johnk's picture

"Industrial stocks, the darling of the inflationary speculation, had a peculiar history.  At the height of the boom, stock prices had been bid up to astronomical price-earnings ratios while dividends went out of style.  Stock prices increased more than fourfold during the great boom from February 1920 to November 1921.  Then, however, shortly after the first upturn of price inflation and long before the inflationary engine faltered and business began to weaken, a stock market crash occurred.  This was the Black Thursday of December 1,1921.  Stock prices fell by about 25% in a short time and hovered for six months while all other prices were soaring.  The real value of stocks declined steadily because their prices lagged far behind the prices of tangible goods, until for example the entire stock ownership of the great Mercedes-Benz automobile manufacturer was valued by the market at no more than 327 cars.  Investors were extremely slow to grasp that stocks were poles apart from fixed obligations like bonds, quite wrongly thinking that if bonds were worthless stocks must be too.  Nearer the end in 1923, relative prices of stocks skyrocketed again as investors returned to them for their underlying real value.  Stocks in general were no very effective hedge against inflation at any given moment while inflation continued; but when it was all over, stocks of sound businesses turned out to have kept all but their peak boom values notably well.  Stocks of inflation-born businesses, of course, were as worthless as bonds were".

 

http://www.delanion.com/Dying%20of%20Money.htm

 

 

Wed, 08/25/2010 - 15:48 | 543994 iPood
iPood's picture


European dividend swaps offer an intriguing opportunity


to capture one of the main generators of returns...


 


 


What’s not to like?

 

Ummm...the level of counterparty risk they add? .

Wed, 08/25/2010 - 16:50 | 544218 RockyRacoon
RockyRacoon's picture

Cramer actually said something sensible today:

"Gold is not a trade, it is an asset classification."

Fri, 10/01/2010 - 03:08 | 617609 Herry12
Herry12's picture

Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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