Teck has announced that, once they retire their $2.5B in debt, they will reinstitute the dividend. In fact, the CEO would like to pay back the suspended dividends. One thing he noted is that mutual funds that are geared towards dividend payers obviously had to sell Teck when they suspended the dividend.

If I remember correctly, you got out of Teck after making about 20% on the stock. Could you see yourself getting into Teck if it reinstitutes its dividend (thus help diversifying your SM portfolio) even if it is in the $40’s?

It all comes down to the level of risk you are comfortable with and the level of confidence you have in your investments. Investing in individual companies is already more risky than broader portfolios.

Lotteries are not investing. With investing, the odds are in your favour in the long run. With the lottery, the odds are sharply against you.

Ed

Why is everyone focused on a small correction in a major recovery?

If you recall our article in March “Irrational Pessimism”, we expect that 2009 will be seen in the distant future as the best buying opportunity during our lifetime. There has been a huge runup since then, but this is only about 1/3 of the decline, so there is still lots of room to run.

We still need a gain of more than 50% to get back to the peak.If you look back to 1950, the longest the S&P500 has taken from the bottom to reach a new all-time high is 4 years. If you look at the mid-term, instead of the short term, the chance of well above average returns is very high.

Our fund managers are still telling us they are finding more, cheaper companies now than any time since 1974. This is not really true in Canada, but in the US and globally, value investors are still very excited about all the opportunities.

The talk of a correction has been all over the news. It is essentially obvious, since the markets don’t go straight up. However, nobody knows when it will happen. What makes you think we won’t get a 10% correction after the next 20% rise?

Focusing on the short term if usually not effective. We would suggest to make sure you are invested for the next 100% uptick, instead of trying to miss the next 10% downtick.

Ed

As Cannon pointed out, the very high P/E of 143 is not meaningful, since they are based on extremely depressed earnings. Based on forward earnings, the S&P500 is reasonably value at about 15, and based on normalized earnings, it is actually quite cheap.

Also, your comment: “There has not been an end of any recession in history where P/E ratios of major indices did not reach single digits.” is not accurate. In fact, almost 100% of recessions did NOT end with P/Es in single digits.

Single digit P/Es in stock market history have resulted only from extremely high inflation (because high interest rates are correlated to the inverse E/P) or from major depressions.

Ed

You’re all welcome. There is a US site with a slightly different spelling if you are interested in US equities.

http://www.dividendinvestor.com

Tom – yes, I’ve used Excel’s feature to get fresh data from the site and manage to create my own reports.

Matt, I couldn’t agree more with your pt. 5 in # 17.

Trying to be patient….just saving cash for some buying in the future :)

A quick and easy place to start is right here…

http://dividendinvestors.ca/?symbol=iag

They peg IAG at 8 years of consecutive increases. Like other insurers they’ve been hit harder than the banks.

They have a very high payout ratio like MFC so it may be worthwhile to wait and see if they cut their dividend.

Good points. Time will tell. “Earnings” have been beating expectations the real indicator – revenue – is down 20-30% y/o/y.

From http://www.investorsfriend.com/S%20and%20P%20500%20index%20valuation.htm dated August 5, 2009.

A quick indication of whether or not the S&P 500 index is fairly valued is normally available by simply looking at its P/E ratio. Unfortunately , at this time it is not clear what the P/E ratios on the S&P 500 is. As of August 5, the S&P 500 closed at 1003 and had a P/E ratio (based on actual reported earnings in the past year) of 130. This is extremely high. Therefore the quick indication is that the S&P 500 index is extraordinarily over-valued at this time at 1003.

However this would be jumping to conclusions.

Earnings on the S&P 500 index have recently been depressed by huge losses at a few major companies and may not represent the normal expected earnings level. Meanwhile the forecast operating P/E on the S&P 500 from Standard and Poors itself, based on eliminating all unusual gains and losses and based on the summation of such forecasts by individual companies is relatively low at 15.6 indicating that the index is reasonably valued.

I have IAG, IGM and MX. MX is a “specialty chemicals” play but I think of it as energy since it is concerned with methanol. It is a bit of a proxy on the price of oil and it has doubled from its 52 week low but is still far off its 52 week high.

At this point in time, my interest costs are about 55% of my dividend income before taxes.

As for the correction at some point, Sept is historically a bad month. I also have an article with an economics professor you might find interesting…

http://canadianfinanceblog.com/2009/08/06/is-the-current-market-a-return-to-normal.htm